Waters v. Deutz Corp.

Decision Date11 April 1983
PartiesNoland WATERS and Elsie R. Waters, Plaintiffs, v. DEUTZ CORPORATION, a corporation of the State of Florida, and Klockner-Humboldt-Deutz AG, a foreign corporation, Defendants. . Submitted:
CourtDelaware Superior Court

Alan T. Boyd and Neal J. Levitsky, Bayard, Brill & Handelman, P.A., Wilmington, for plaintiffs.

Edmund N. Carpenter, II, and L. Susan Faw, Richards, Layton & Finger, Wilmington, for defendant Klockner-Humboldt-Deutz AG.

F. Alton Tybout, Tybout, Redfearn, Casarino & Pell, Wilmington, for defendant Deutz Corp.

O'HARA, Judge.

Plaintiff, Noland Waters, was injured on May 17, 1981, while employed as a longshoreman at the Port of Wilmington when a tractor that he was unloading tipped over and pinned him beneath. He initiated an action against the German manufacturer of the tractor, Klockner-Humboldt-Deutz AG ("KHD"), as well as the Florida corporation which is the exclusive distributor of this product in the United States, Deutz Corporation ("Deutz"), alleging negligent manufacture and design, breach of warranty, and strict liability in tort. On defendant KHD's motion to dismiss, the issue confronting this Court is whether it may exercise in personam jurisdiction over a German corporation pursuant to the Delaware long-arm statute.

10 Del.C. § 3104, the statute authorizing personal jurisdiction over non-domiciliaries, provides in relevant part:

(c) As to a cause of action arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or his personal representative, who in person or through an agent:

(1) Transacts any business or performs any character of work or service in the State;

(2) Contracts to supply services or things in this State;

(3) Causes tortious injury in the State by an act or omission in this State;

(4) Causes tortious injury in the State or outside of the State by an act or omission outside the State if he regularly does or solicits business, engages in any other persistent course of conduct in the State or derives substantial revenue from services, or things used or consumed in the State;

* * *

* * *

(j) When jurisdiction over a person is based solely upon this section, only a cause of action arising from any act enumerated in this section may be asserted against him.

Plaintiffs suggest that in personam jurisdiction over KHD can be sustained under subsections (1), (2) or (4) of § 3104(c). KHD counters that its contacts with this forum are, at best, indirect and are far too tenuous to place it within the purview of the statute or comport with the constitutional notions of due process and fundamental fairness which must accompany any jurisdictional inquiry.

The record presently before the Court indicates that the tractor in question was manufactured by KHD in Germany, where title was transferred on April 27, 1981 to co-defendant Deutz, a wholly owned subsidiary of KHD. From there, the tractors were shipped to this country and arrived at the Port of Wilmington on May 16, 1981. As KHD's exclusive distributor, Deutz is the sole conduit through which the German corporation's tractors enter the United States; it is uncontroverted that Deutz has imported approximately 40 percent of these products via the Port of Wilmington. Wilmington's port was designated for receipt of these shipments due to its prime location for distribution to the northeastern and midwestern parts of the United States. Additionally, the port was deemed a favorable arrival site because of the presence there of Volkswagen roll-on/roll-off ships.

In attempting to divest this Court of personal jurisdiction thereover, KHD offers the following factual assertions: KHD has neither advertised nor solicited business in this forum; it maintains no employees, agents, offices or showrooms in the State, nor has it established a Delaware bank or credit account; KHD further denies having derived substantial revenue from the sale of its product in this State.

However, although the aforementioned contacts may not exist directly between KHD and this forum, many of them do characterize the relationship of Deutz to this State. Specifically, Deutz has solicited business in Delaware over the last five years, having sold a total of five tractors during that period. The subsidiary has called upon Delaware farm equipment dealers and sells its tractors directly to a local retailer, Draper Equipment. As the sole distributor of tractors manufactured by KHD, the wholly owned subsidiary also retained a district manager to perform services in the State, who verifies floor plan inventory, assists in training functions and assists dealers at the sales level. In addition, the wholly owned subsidiary has engaged in an advertising program to promote the sale of tractors manufactured by KHD, a campaign which has extended to this State. In particular, Deutz has used the Delta & Southeast Farm Press, Farm Industry News, Pennsylvania Farmer and Progressive Farmer as advertising mediums for the sale of Deutz farm tractors and parts in Delaware for the past five years.

Thus, the issue before this Court reduces itself to whether or not the activities of a wholly owned subsidiary in this forum render the parent corporation amenable to the jurisdiction of this Court under 10 Del.C. § 3104 and consistent with the tenor of Fourteenth Amendment due process.

Yet to be construed by the Delaware Supreme Court, 10 Del.C. § 3104(c)(1) authorizes service of process on a foreign corporation which "[t]ransacts any business ... in the State." Derived from the Illinois Long Arm Statute, the Delaware statute may be similarly construed by recourse to the legislative and decisional law of Illinois. Wilmington Supply Co. v. Worth Plumbing & Heating, D.Del., 505 F.Supp. 777 (1980). 1 This aid in interpretation of § 3104 evolves from the presumption, well-established in Delaware, that when our Legislature adopts a statute directly modeled upon that of a foreign state, the Legislature likewise intended to adopt the judicial construction accorded the statute by the courts of the foreign state. Stauffer v. Standard Brands Incorporated, Del.Ch., 178 A.2d 311 (1962), aff'd Del.Supr., 187 A.2d 78 (1962); Opinion of the Justices, Del.Supr., 181 A.2d 215 (1962).

The Illinois Legislature, in enacting its long-arm statute, has manifested the intent that the expansive concept of "transacting business" be afforded the maximum extraterritorial jurisdiction permitted by the Constitution. Nelson v. Miller, Ill.Supr., 11 Ill.2d 378, 143 N.E.2d 673 (1957); Koplin v. Thomas, Haab & Botts, Ill.App., 73 Ill.App.2d 242, 219 N.E.2d 646 (1966); Colony Press, Inc. v. Fleeman, Ill.App., 17 Ill.App.3d 14, 308 N.E.2d 78 (1974); Cook Associates, Inc. v. Colonial Broach & Mach. Co., Ill.App., 14 Ill.App.3d 965, 304 N.E.2d 27 (1973). In that vein, the constitutional considerations do not posit a distinct inquiry but are also a factor in determining the breadth of the statute. Buckeye Boiler Co. v. Sup.Ct. of Los Angeles County, Cal.Supr., 71 Cal.2d 893, 80 Cal.Rptr. 113, 458 P.2d 57 (1969); Lamprecht v. Piper Aircraft Corporation, Md.App., 262 Md. 126, 277 A.2d 272 (1971).

Initially, however, this Court must determine whether the marketing arrangement existing herein between parent (KHD) and subsidiary (Deutz), in fact, constitutes "transacting business" on the part of the parent under § 3104. Although this issue is one of first impression, the courts have considered and commented upon similar issues presented under 8 Del.C. § 382, 2 the long-arm provision of the corporate code. As with § 3104, precedent uniformly dictates a liberal construction of § 382 favoring the exercise of jurisdiction. 3

In Gentry v. Wilmington Trust Company, D.Del., 321 F.Supp. 1379 (1970), the Court confronted the question of whether the activities of a manufacturer's representative subjected the manufacturer to suit in the states where the representative solicits. The Gentry Court acknowledged that the jurisdictions were split between a liberal and restrictive approach, 4 but determined that the Delaware statute indicated an intent to adopt a liberal interpretation of "doing business." Under this interpretation, the Court found relevant the following inquiry:

The more liberal standard ... is satisfied if the representative is performing services beyond "mere solicitation", and if the services are sufficiently important to the foreign corporation that if it did not have a representative to perform them, its own officials would perform substantially similar ones. 5

Adopting this analysis, the Court notes that the services Deutz performs for its parent KHD in the marketing of its product are all inclusive. As the exclusive distributor of KHD tractors in the United States, Deutz solicits business in this forum, handles all advertising, supplies local retailers, and has established a district manager to perform services in Delaware. This arrangement accords with the pivotal observation in Gentry that "[the manufacturer's] products could not find their way to Delaware customers without [the representative]."

In Perry v. American Motors Corporation, Del.Super., 353 A.2d 589 (1976), this Court considered the dilemma of a wholly owned subsidiary purportedly insulating the parent from service of process through discharge of certain of its commercial activities. The parent therein, American Motor Corporation ("AMC"), was a foreign corporation with no offices, factories, assembly plants, storage facilities or terminals in Del aware. AMC had no salesmen nor agents present in the forum, nor was there any pattern of visitation by the aforementioned in this State. As in the case sub judice, all marketing activities were performed by a wholly owned subsidiary, American Motors Sales Corporation ("AMSC"), which existed exclusively for this purpose. 6

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