Schlunk v. Volkswagenwerk Aktiengesellschaft

• Decision Date: 17 June 1986
• Docket Number: No. 85-3169.,85-3169.
• Parties: HERWIG J. SCHLUNK, as Adm'r of the Estates of Franz J. Schlunk, Deceased, et al., and Sylvia Schlunk, Deceased, Plaintiff-Appellee, v. VOLKSWAGENWERK AKTIENGESELLSCHAFT, Defendant-Appellant, (Dennis J. Reed et al., Defendants).
• Court: United States Appellate Court of Illinois

145 Ill. App.3d 594

503 N.E.2d 1045

HERWIG J. SCHLUNK, as Adm'r of the Estates of Franz J. Schlunk, Deceased, et al., and Sylvia Schlunk, Deceased, Plaintiff-Appellee, v. VOLKSWAGENWERK AKTIENGESELLSCHAFT, Defendant-Appellant, (Dennis J. Reed et al., Defendants).

No. 85-3169.

Illinois Appellate Court — First District (2nd Division).

Opinion filed June 17, 1986.

Ross & Hardies, of Chicago (James K. Toohey and David C. Bohrer, of counsel), for appellant.

Jack Ring & Associates, of Chicago (Jack Ring and Judith E. Fors, of counsel), for appellee.

Judgment affirmed.

JUSTICE SCARIANO delivered the opinion of the court:

Defendant Volkswagenwerk Aktiengesellschaft (hereinafter VWAG), a West German corporation, appeals, with certification of the circuit court under Supreme Court Rule 308(a) (87 Ill.2d R. 308(a)), from the denial of its motion to quash service, which was had in Illinois upon its wholly owned subsidiary, Volkswagen of America (VWoA), a New Jersey corporation. We affirm.

On June 4, 1984, plaintiff, Herwig Schlunk, filed suit against VWoA and Dennis Reed, stemming from the death of his parents in a head-on collision that occurred on December 17, 1983, in Cook County, Illinois. Reed was served by a special process server and an order of default was later entered against him. VWoA was served through its registered agent for service of process in Illinois, C.T. Corporation System, and has filed a timely appearance and answer to the complaint.

On October 16, 1984, plaintiff obtained leave to file his first amended complaint, in which he alleged that design defects in the decedents' 1978 VW Rabbit rendered it uncrashworthy and joined VWAG as a defendant. The car was designed and manufactured in West Germany by VWAG and shipped to VWoA for sale in the United States. The judge then ordered that a summons issue against VWAG. Plaintiff attempted to effect service upon VWAG through C.T. Corporation System, but the latter refused to accept it. On November 19, 1984, an alias summons was issued to C.T. Corporation System, whereby plaintiff attempted to serve VWoA "as Agent for" VWAG.

VWAG filed a special and limited appearance on December 18, 1984, for the purpose of quashing service of process. In support of its motion to quash, VWAG submitted an affidavit from Robert Cameron, manager and product liaison of VWoA, which asserted that VWoA is a separate and independent corporation that operates as an agent of VWAG only for the purpose of receiving notices under the National Traffic and Motor Vehicle Safety Act (15 U.S.C.A. sec. 1399(e) (West 1982)). In response to plaintiff's discovery requests, VWAG and VWoA produced documents reflecting, in part, the relationship between the two companies. In addition both submitted answers to interrogatories.

After a hearing, the circuit court, in a written opinion, denied the motion to quash. The court found:

"1. VWoA is a New Jersey corporation with its principal place of business in Michigan and registered to do business in Illinois * * *.

2. VWAG has not appointed VWoA as its agent for service of process in common law actions brought against it in Illinois or any other state * * *.

3. VWoA is a wholly-owned subsidiary of VWAG, a majority of the members of the board of directors of VWoA are members of the board of management of VWAG, and VWoA is the exclusive importer and distributor of VWAG products sold in the United States pursuant to a manufacturer-importer agreement entered into between VWAG and VWoA."

Based on the above findings the judge concluded:

"VWoA and VWAG are so closely related that VWoA is an agent for service of process as a matter of law, notwithstanding VWAG's failure or refusal to have made such a formal appointment of VWoA as its agent."

The court concluded that plaintiff's service of process was effective under the supreme court rules and Illinois code, and was not in conflict with "The Convention On the Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters" (Hague Convention), which, the court ruled, applied only to service of process outside the United States. Upon the application of VWAG, the court certified two questions of law to this court pursuant to Supreme Court Rule 308(a): (1) whether the service in this case violated the Hague Convention, and (2) whether VWoA and VWAG are so closely related that VWoA is VWAG's agent for service of process. This court granted VWAG's petition for leave to appeal on November 26, 1985.

• 1 VWAG first argues that service on VWoA was ineffective as to it because the Hague Convention provides the exclusive method of service on residents of signatory nations. West Germany became subject to the treaty in 1979 (79 Department of State Bulletin 71 (July 1979), the United States in 1969 (20 U.S.T. 361, T.I.A.S. 6638). VWAG correctly points out that, under the supremacy clause, this court is bound by treaties of the United States, if applicable, even in the face of contrary State laws. (U.S. Const., art. VI, cl. 2.) However, nothing done in this case pursuant to State law violated the Hague Convention. Article I of the convention provides in relevant part: "The present Convention shall apply in all cases, in civil or commercial matters, where there is occasion to transmit a judicial or extrajudicial document for service abroad." (Emphasis added.) Hague Convention, opened for signature November 15, 1965, 20 U.S.T. 361-73, T.I.A.S. 6638, 658 U.N.T.S. 163, reprinted in 28 U.S.C.A. Fed. R. Civ. P. 4, at 92-107 (West Supp. 1986); VII Martindale & Hubbell Law Directory, Pt. VII, Selected International Conventions, at 1-8 (1986).

VWAG apparently has difficulty with the phrase "service abroad," and implies that it is ambiguous. We do not find it so. Under Illinois law, if the target for service can be found within the State there is simply no occasion for service abroad. Since there is no occasion for service abroad in this case, the Hague Convention, by its own terms, does not apply. See report of the Senate Committee on Foreign Relations on the Convention on the Service Abroad of Judicial and Extrajudicial Documents, S. Exec. Rep. No. 6, 90th Cong., 1st Sess. 9 (Apr. 12, 1967), (statement of Joe C. Barrett: "This convention does not invade the domain of state law in the United States," as quoted in DeJames v. Magnificence Carriers, Inc. (3d Cir.1981), 654 F.2d 280, 289 n. 5, cert. denied (1981), 454 U.S. 1095, 70 L.Ed.2d 620, 102 S.Ct. 642).

• 2 VWAG asserts that regardless of whether VWoA was its agent for service of process, service must be had according to the procedures set out in the convention. VWAG seems to suggest that, under the convention, one cannot serve West German residents pursuant to Illinois law even when they are in Illinois. VWAG contends, in essence, that the convention is a shield protecting foreign nationals from Illinois legal process while they are in the State. This simply does not survive scrutiny. Even if the intended recipient is standing right next to him, a process server, according to VWAG, would have to send a summons off to West Germany. VWAG has cited no cases explicitly holding that the treaty was intended to work such a drastic interference with orderly State procedure. On the other hand, there are numerous cases rejecting such an argument. For example, in Lamb v. Volkswagenwerk Aktiengesellschaft (S.D. Fla. 1985), 104 F.R.D. 95, the court stated:

"The purpose of the Hague Convention is to simplify the procedure for serving judicial documents abroad to ensure that the party to be served in the foreign country will receive notice in timely fashion. There is nowhere among the provisions of the Hague Convention any indication that it is to control attempts to serve process on foreign corporations or agents of foreign corporations within the State of origin. * * * If the service of process in the instant case had been attempted directly on VWAG in the Federal Republic of Germany, then the provisions of the Hague Convention would have to be complied with. In this case, however, service of process was entirely accomplished within the United States by serving the agent of the Defendant VWAG; the provisions of the Hague Convention are simply inapplicable." (Lamb v. Volkswagenwerk (S.D. Fla. 1985), 104 F.R.D. 95, 97. See also Zisman v. Sieger (N.D. Ill. 1985), 106 F.R.D. 194, 199-200; McHugh v. International Components Corp. (N.Y. Sup. Ct. 1983), 118 Misc.2d 489, 491, 461 N.Y.S.2d 166, 167.) Indeed, Article 10 of the convention itself says:

"Provided the State of destination does not object, the present Convention shall not interfere with —

* * *

(c) the freedom of any person interested in a judicial proceeding to effect service of judicial documents directly through the judicial officers, officials or other competent persons of the State of destination." (Hague Convention, opened for signature November 15, 1965, 20 U.S.T. 361, T.I.A.S. 6638, 658 U.N.T.S. 163, reprinted in 28 U.S.C.A. Fed. R. Civ. P. 4, at 92-107 (West Supp. 1986), and VII Martindale & Hubbell Law Directory, Pt. VII, Selected International Conventions, 1-8 (1986).)

If VWoA, which is located in this country, is an agent of VWAG here, then the United States is the "State of destination" under the treaty, and the treaty allows plaintiff to effect service using American procedure.

VWAG cites Low v. Bayerische Motoren Werke, A.G. (N.Y. App. Div. 1982), 88 A.D.2d 504, 449 N.Y.S.2d 733, and argues that the court held that mailing process to West Germany and serving it upon the wholly owned subsidiary of the German defendant in New York both violated the Hague Convention. In fact, the court held that the mailing violated the Hague Convention, and that the record did not support a finding that the wholly owned subsidiary was, as a matter of New York law, an agent for service of process of the West German defendant. (88 A.D.2d 504, 505-06, 449 N.Y.S.2d 733, 735.) Similarly, in Cipolla v. Picard...