Roorda v. VOLKSWAGENWERK, AG, Civ. A. No. 76-2237.

Decision Date20 December 1979
Docket NumberCiv. A. No. 76-2237.
Citation481 F. Supp. 868
CourtU.S. District Court — District of South Carolina
PartiesRalph Earl ROORDA, Plaintiff, v. VOLKSWAGENWERK, A. G., a/k/a Volkswagenwerk Aktiengesellschaft, a corporation, Defendant.

Ellis I. Kahn, Charleston, S. C., James H. Toms, Hendersonville, N. C., Herbert Resner, San Francisco, Cal. for plaintiff.

Joseph R. Young, Charleston, S. C., for defendant.


BLATT, District Judge.

Ralph Earl Roorda, the plaintiff herein, is a paraplegic, paralyzed from the waist down, and without sight in one eye. He alleges that these injuries were caused by a defective Volkswagen automobile which had been manufactured by defendant, Volkswagenwerk, A.G., — (hereinafter referred to as VWAG) — in West Germany. The vehicle was sold by VWAG to a dealer in West Germany, who then sold it to a purchaser there. Several transactions later, plaintiff purchased this automobile in Arizona, and while driving it in California in 1970 it overturned, and plaintiff was critically injured. Immediately prior to the institution of this suit, plaintiff changed his domicile from California to South Carolina, and he instituted suit here on November 26, 1976, alleging negligence, breach of warranty, and strict liability in tort. Plaintiff has remained to this date a citizen of South Carolina, residing in Charleston County. Defendant VWAG questions the jurisdiction of this court to hear the merits of this controversy.

The issue confronting this court is whether VWAG was "present" in South Carolina for jurisdictional purposes, when suit was instituted, i. e., whether VWAG's contacts with South Carolina were sufficient to make it amenable to suit in this state and not offend traditional notions of fair play and substantial justice within the meaning of International Shoe Company v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945).

VWAG is a corporation organized and existing under the laws of the Federal Republic of Germany. It manufactures Volkswagen automobiles and parts and accessories for such automobiles. Volkswagen of America — (hereinafter referred to as VWOA) — is a New Jersey corporation and is the sole "importer" of Volkswagen products in the United States. Neither VWAG nor VWOA is "registered" to do business in South Carolina within the meaning of Sections 15-9-240 and 33-23-10, S.C.Code 1976.

Initially, plaintiff brought suit against VWAG, VWGMBH — (a predecessor of VWAG) — and VWOA. Plaintiff has agreed that he has no cause of action against the latter two entities and they have been dismissed. Service of process was accomplished on VWAG by service on the Secretary of State of South Carolina pursuant to Section 15-9-240, S.C.Code 1976, and such service was completed by forwarding a copy of the process by registered mail to Toni Schmucker, Chairman of the Board of Management of VWAG, in Wolfsburg, West Germany. Additionally, service of process was made under the same statute on VWOA as agent for defendant, VWAG, and a copy thereof sent by registered mail to VWOA in New Jersey, where VWOA is domiciled.

VWAG does not contest the fact that service was made on it and on VWOA in accordance with the method provided by Section 15-9-240, S.C.Code 1976; VWAG urges, however, that such service is not sufficient to confer jurisdiction upon the court in South Carolina because it transacts no business here. Furthermore, VWAG urges that while its wholly owned subsidiary, VWOA, may be subject to jurisdiction of the South Carolina courts, that fact does not give the courts here jurisdiction over VWAG as plaintiff admittedly has not attempted to pierce the corporate veil of the two corporations so as to make them one and the same and to hold VWAG here under the "alter ego" theory. (Cf., Dewitt Truck Brokers, Inc. v. W. Ray Fleming Fruit Company, 540 F.2d 681 (4 Cir. 1976)). Plaintiff, on the other hand, contends that the absolute control exercised by VWAG over VWOA mandates a finding that VWOA is the "agent" in South Carolina for VWAG, that VWAG was "present" and "doing business" in South Carolina, and that the service on VWAG directly and on VWOA as its agent in South Carolina has brought VWAG into the jurisdiction of this South Carolina federal court.

This court has received able briefs from counsel, and has heard extensive arguments on the jurisdictional question here involved, and discovery material addressed to this issue has been reviewed. Before deciding the jurisdictional issue raised by the defendant, VWAG, this court must view the entire record to determine the quantity and quality of the contacts which VWAG has had with South Carolina, the forum state. To sustain jurisdiction, plaintiff relies on the relationship between VWAG and VWOA. It is admitted that VWOA, though not "registered" in South Carolina, is present in this state for jurisdictional purposes. A good example of the reason for VWOA's admitted presence in South Carolina is the fact that in the years 1974-76 it had sales here as hereinafter listed:

                1974  —                     $21,512,926.00
                1975  —                     $14,710,414.00
                1976  —                     $ 8,340,730.00

There are thirteen franchised VW dealerships in South Carolina, said dealers being licensed by VWOA, and VWOA's representatives frequently visit the state transacting business and servicing these dealerships, and, thus, indirectly servicing consumers as well. VWOA's advertising permeates the media in South Carolina; there are other indicia of its admitted "presence" for jurisdictional purposes as well.

Although VWAG contends that it is not "present" in South Carolina for jurisdictional purposes, the record and the reasonable inferences to be drawn therefrom clearly prove the contrary. VWAG is "present" in South Carolina, in this court's opinion, in the intimate and complete control which it exercises over VWOA, so as to make VWOA its South Carolina agent, and, thereby, VWAG may be required to defend this suit in South Carolina without offending the "fair play and substantial justice" rule of International Shoe, supra. As sole importer of VW products, VWOA is subject to many direct and indirect controls from VWAG. This corporation is wholly owned by VWAG; its Board of Directors holds practically all of its meetings in Wolfsburg, West Germany, the situs of the corporate headquarters of VWAG; many of the board members of VWOA are on the board of VWAG. Under the agreement between VWAG and VWOA, which agreement is a part of the record herein, VWOA appoints dealerships at locations which must have the approval of VWAG, and VWOA must communicate to all dealers the directives and suggestions made by VWAG. In this manner, VWOA is agent for VWAG to communicate with South Carolina dealers and consumers. Additionally, VWOA must comply with VWAG procedures for ordering and shipping VWAG's products; VWOA must use forms prescribed by VWAG; orders can be rejected only by VWAG and VWOA cannot sue VWAG for delay in delivery; VWAG is not required to observe set installment for delivery of VWOA's orders. Such facts reveal VWAG's complete control over VWOA and control is a fundamental element of agency. Burriss v. Texaco, Inc., 361 F.2d 169, 172 (4 Cir. 1965). VWAG substantially directs the daily business of VWOA; the very place of business of VWOA must be "located, installed and equipped in a manner reasonably satisfactory" to VWAG; VWOA can only use stationery and business forms printed in accordance with VWAG's specifications; the trademark "VW", and the word "Volkswagen", can only be used from matrices supplied by VWAG; the number of VWOA's office employees and field men for servicing dealers are subject to VWAG's approval, and these VWOA field men have been engaged in systematic contacts with South Carolina in a substantial sense over a period of many years. VWAG has the right to inspect VWOA's records and accounts, including the right to have VWOA's report on market conditions, sales performance, inventories and estimates of requirements. VWOA and VWAG have the same counsel in this case as the affidavits of record reveal. VWOA must submit its yearly and interim financial statements to VWAG. The contract between the parties even provides that delays by VWOA in fulfilling its obligations will compel a penalty payment to VWAG of 1,000 Deutsch Marks per day. Germany is the place of performance of the contract, indicating again VWAG's pervasive role in the relationship between VWOA and VWAG. In fact, VWOA is admittedly the service agent designated by VWAG pursuant to Section 110(e) of the National Traffic and Motor Vehicles Safety Act. (See, also, Bollard v. Volkswagenwerke A. G., 313 F.Supp. 126 (W.D.Mo.1970).

The above discussion convinces this court that there is a sufficient evidentiary basis in this record to support the assertion of jurisdiction over VWAG based on the intimate relationship between VWAG and VWOA and the contacts with this jurisdiction by VWOA. The control VWAG exercises over VWOA is so complete that to find VWOA "present" in South Carolina for jurisdictional purposes — (a finding which the defendant does not contest) — it is necessary to find that VWAG has the same status. Such a conclusion is mandated for the reasons so ably and logically expressed by Judge Robert W. Hemphill, now Chief United States District Judge for the District of South Carolina, in Szantay v. Beech Aircraft Corp., 237 F.Supp. 393 (E.D.S.C.1965). Judge Hemphill reviewed in great detail the relationship found there between the manufacturer, Beech, and its distributor, Hawthorne, and held that such relationship was sufficient to confer jurisdiction over the manufacturer. The court determined that defendant, Beech, a Delaware corporation with its principal place of business in Wichita, Kansas, was present in South Carolina for all purposes because of its relationship with Hawthorne, a South Carolina corporation, despite its assertion that it was...

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