Opposition — Walker v. Newgent

FILED

MAR 20 1979

MUA. BODAK, JR., CLERK

In THE

Supreme Court of

the United States

Octoser TERM, 1978

No. 78-1190

Ranpau O. WALKER,

Petitioner,

Vv.

GaLz 8. NewGentT anpD GENERAL Motors CorPorATION

AND Its Opet Drvision, Its Sussm1ary

Apam Ope. Aa,

Respondents.

RESPONSE IN OPPOSITION TO

PETITION FOR A WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

Joun T. GoLpEN

Joun E. KENNEDY

ELEANOR Swirt Guiass

2100 First City National

Bank Building

Houston, Texas 77002

Attorneys for Respondents

Of Cownsel:

| Vinson & ELKINS

| 2100 First City National

Bank Building

Houston, Texas 77002 ‘

Bowne of Houston, Inc. Printed in U.S.A.

QUESTION RESTATED ..........................5... 1

STATEMENT OF THE CASE ........................ 2

REASONS FOR DENYING THE PETITION ............ 3

1. Opel Itself Had No Contacts with Texas and Its Conduct

Had No Foreseeable Effects in Texas ............. wae

2. The Mere Fact That General Motors Owns 100% of

Opel’s Stock Is an Insufficient Basis for In Personam

Jurisdiction Over Opel .............0....00 000000005. 5

CONCHIONS FPP KA SG 9

CERTIFICATE OF SERVICE ......................... 10

TABLE OF AUTHORITIES

CASES

Cannon Manufacturing Co. v. Cudahy Packing Co., 267

hr i ee Ge ale Noe Maat Malan atin oss « 6,7

Crucible, Inc. v. Stora Kopparbergs Bergslags AB, 403 F.

Sem: © WE Ae a US oss eves ha cect veg secseae. 7

Energy Reserves Group, Inc. v. Superior Oil Co., 460 F.

Supp. 483 (D. Kan. 1978) .............. 0.0.00. 0 005. 7

Gibbs v. Buck, 307 U.S. 66 (1989) ...................... 4

Great Western United Corp. v. Kidwell, 577 F.2d 1256 Neg

Cir. 1978), prob. juris. noted, 47 U.S.L.W. 3463 (USS.

Fam: DO TOTO Bea TUCO vse: een gdies cs cece eens 3,4

Hanson v. Denckla, 357 U.S. 235 (1958) ................ 5

Hitt v. Nissan Motor Co., 399 F. Supp. 838 (S.D. Fla. 1975) 7

International Shoe Co. v. Washington, 326 U.S. 310 (1945) 3, 6,8

Jetco Electronic Indus., Inc. v. Gardiner, 473 F.2d 1228

CR RS Cn ics ca irk es peso em Cee isees 3

Murdock v. Volvo of America Corp., 403 F. Supp. 55 (N.D.

PN ED hate CORSE WBE. Bates ioe Meteo Pais 33

Product Promotions, Inc. v. Cousteau, 495 F.2d 483 (5th Cir.

RETR MOREE RR eae IER OMNES er ea oa een Cane 4,5,7

Page In THE

U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760 (Tex. |

Be aman ate POmEE Lee 63s W's 8's 8 VA hss, ke ans 8 3 | Supreme Court of

Weoeh re © * . v. Wells Fargo Express Co., 556 F.2d 406 i ;

SR ee ee ates heb ate b's whe cd ee vod , the United = f ten

STATUTES ! Ocroser Term, 1978

Tex. Rev. Crv. Stat. Ann. art. 2031(b) (Vernon 1964) ..... 3 |

BOOKS | No. 78-1190

4C. Waicut & A. Mitten, Feperat Practice AND PROCEDURE |

fSRRG Nes GSI REY for (Sa a 5

1 RestaTEMENT (Seconp) or Acency (1958) .............. 5 | Ranpauy O. WALKER,

RESTATEMENT (Seconp) or Conriict or Laws (1971) ..... 5 Petitioner,

V.

Gate S. NewGent anp Genera Motors CorPoraTION

AND Its Opet Drvision, Its Sussip1ary

Apvam Ope. Aa,

Respondents.

— ——

| RESPONSE IN OPPOSITION TO

| PETITION FOR A WRIT OF CERTIORARI

| TO THE UNITED STATES COURT OF APPEALS

| FOR THE FIFTH CIRCUIT

QUESTION RESTATED

| Whether the petition should be granted to review the

‘ finding of both the Court of Appeals and the District

Court that petitioner failed to sustain his burden of prov-

ing the facts necessary for assertion of personal jurisdic-

tion over respondent Adam Opel AG.

2

STATEMENT OF THE CASE

The “Statement of Case” in the petition, and the peti-

tioner’s outline of the facts upon which he relies for his

argument (Petition at 8-10), are substantially correct apart

from two inaccuracies discussed below. The evidence of

record in this case is well summarized in the opinions of

the District Court and the Court of Civil Appeals (Appen-

dices A and B to Petition).

Petitioner’s statement that the Opel Rekord involved in

this case “was designed, manufactured, and marketed by”

General Motors Corporation (General Motors) and Adam

Opel AG (Opel) (Petition at 4) is false. General Motors

had nothing to do with the design, manufacture; or distribu-

tion of this automobile. The evidence of record as recited

in the opinions of both the District Court and the Court of

Appeals establishes beyond question that the Opel Rekord

in which petitioner Walker was riding in Germany was

designed, manufactured, and sold by Opel in Germany; that

it was purchased secondhand in Germany; and that the

model in question was not at that time being exported to

or marketed in the United States.' (Appendix A at 16, 17,

19-20, 21, 22, 24; Appendix B at 27, 30, 32.)

Petitioner has also attempted to mischaracterize the

“customer-manufacturer” relationship between General

Motors and Opel. He states that Opel intended its auto-

mobiles to be exported into the United States “on the

orders of the parent, General Motors Corporation.” (Peti-

tion at 9.) Opel did sell some automobiles to the Buick

1 Petitioner this misstatement in the summary of facts upon

which he relies to sustain his argument for personal jurisdiction

peta 5 Poi mame cet Bea Ale hone © hoes mee Both

courts found that the Opel Rekord model involved in this

case was not marketed for export to or sale in the United States,

but was manufactured solely for Opel’s European market. (Ap-

pendix A at 17, 24; Appendix B at 30.)

3

Motor Division of General Motors, which exported them to

the United States. (Appendix A at 17, 19, 20-22; Appendix

B at 30, 32.) However, there is no evidence that Opel was

under “orders” from General Motors to sell or to export its

automobiles. '

REASONS FOR DENYING THE PETITION

This case turns on petitioner’s failure to establish suffi-

cient facts in support of his jurisdictional argument. There

is no dispute that Opel is a German corporation, with its

principal place of business in Germany. There is also no

dispute that Opel does not maintain an office, place of busi-

ness, agents, servants, employees, or assets within the

State of Texas or within the United States. (Appendix A

at 16-17; Appendix B at 30.) Petitioner therefore attempts

to bring Opel, a nonresident foreign corporation, within the

reach of the Texas long-arm statute, article 2031(b), Tx.

Rev. Crv. Star. Ann. (Vernon 1964).

To do so, petitioner must prove facts which show either

(1) that Opel itself had “minimum contacts” with Texas;

or (2) that the due process requirements of “minimum

contacts” and “fairness” are met because of the relation-

ship between Opel and its parent, General Motors. Inter-

national Shoe Co. v. Washington, 326 U.S. 310, 316-17

(1945).2, The Court of Appeals and the District Court

2It has been held that the Texas long-arm statute extends personal

jurisdiction over nonresidents to the limits of due process. Thus

the Texas statutory and the federal constitutional standards of

“minimum contacts” and “fairness” are ordinarily equivalent. See

Great Western United Corp. v. Kidwell, 577 F 256 (5th Cir.

1978), prob. juris. noted, 47 U.S.L.W. 3463 (U.S. Jan. 9, 1979

(No. 78-759 ; Jetco Electronic Indus., Inc. v. Gardiner, 473 F

1228 (5th Cir. 1973); U-Anchor Advertising, Inc. v. Burt, 553

S.W.2d 760 (Tex. 1977).

4

determined that petitioner failed to sustain his burden of

showing either set of facts.®

1. Opel Itself Had No Contacts with Texas and Its Conduct

Had No Foreseeable Effects in Texas.

Petitioner states that a potential defendant’s contacts

“need not arise from actual physical activity in the forum

state; activities in other forums with foreseeable effects in

the forum state will suffice.” Great Western United Corp. v.

Kidwell, 577 F.2d 1256, 1266-67 (5th Cir. 1978), prob. juris.

noted, 47 U.S.L.W. 3463 (U.S. Jan. 9, 1979) (No. 78-759).

Petitioner contends that Opel’s activities in Germany

resulted in penetration of American markets and had

“foreseeable effects” in Texas. (Petition at 13.)

This is precisely the argument considered and rejected

by the Court of Appeals below. (Appendix A at 24-25.)

The petition adds nothing new. This case did not arise

from activities which had any effect whatsoever in Texas,

foreseeable or unforeseeable. The accident in which peti-

tioner Walker was injured. did not take place in Texas

but in Germany. The accident was unrelated to sales of

Opel automobiles in American or Texas markets since the

car which petitioner now claims was defective was designed,

manufactured, and sold in Germany and would not have

been exported to the United States.

The only fact which links this case to the State of Texas

is that petitioner is currently residing in Texas. This is

not even a “contact” between Opel and the forum, and

personal jurisdiction over Opel cannot constitutionally be

3 Petitioner concedes that, as plaintiff, his burden was to make a

ima facie showing of the facts — which jurisdiction over

endant 1 was predicated. (Petition at 7.) See Gibbs v.

Buck, 307 U.S. 66, 72 (1939); Product Promotions, Inc. v. Cous-

teau, 495 F.2d 483, 490-91 (5th Cir. 1974).

= 2

5

based on this fact alone. A plaintiff cannot, by his own

unilateral conduct, produce the “minimum contacts” neces-

sary to satisfy the requirements of due process. Hanson v.

Denckla, 357 U.S. 235, 253 (1958).

As the Court of Appeals held below, the contacts between

Opel itself and Texas are simply “too attenuated to support

in personam jurisdiction.” (Appendix A at 25.)

2. The Mere Fact That General Motors Owns 100% of Opel’s

Stock Is an Insufficient Basis for In Personam Jurisdiction

Over Opel.

If a nonresident corporation makes sufficiently appro-

priate contacts with a forum state through an agent or

through a corporate alter ego, constitutional standards of

“minimum contacts” and “fairness” are satisfied and asser-

tion of personal jurisdiction over the nonresident can be

sustained. See Product Promotions, Inc. v. Cousteau,

supra, 495 F.2d at 492-94; 4 C. Wricnhr & A. Miuier, Fep-

ERAL PRACTICE AND ProcepurE § 1069 at 256, nn. 78 and 79

(1976).

Petitioner does not even contend that the facts of this

case establish the traditional elements of an “agency” or

an “alter ego” relationship between General Motors and

Opel.* Both the Court of Appeals and the District Court

4 An agency relationship requires that General Motors act with

either actual or apparent authority on behalf of Opel in Texas,

such authority having been created by words or conduct of the

rincipal, 1. 1 RESTATEMENT (SECOND) or AcENcy $§ 26, 27

1958): Product Promotions, Inc. v. Cousteau, supra, 495 F.2d at

493. The agent must act at the behest of, and under the control

of, the principal. Wells iy Co. v. Wells Fargo Express Co.,

556 F.2d 406, 419 (9th Cir. 1977).

An alter ego relationship requires that the parent, General Motors,

so control and dominate the subsidiary, Opel, as to disregard the

subsidiary’s independent corporate existence. RESTATEMENT

Seconp) or Conruicr or Laws § 52 (1971). See also Wells

argo & Co. v. Wells Fargo Express Co., supra, 556 F.2d at

425-26.

6

held that the facts were insufficient to establish either

relationship. (Appendix A at 22-23; Appendix B at 31-33.)

Thus, petitioner concedes that those courts were correct

insofar as they applied the established law to the proven

facts.

Petitioner seeks instead a rule that proof of a parent-

subsidiary relationship alone is sufficient to justify personal

jurisdiction over the nonresident corporation if its affiliate

conducts activities within the forum state, whether or not

such activities are related to the case against the nonresi-

dent. (Petition at 12-13.)5 This would be exactly the kind

of mechanical and unfair rule governing in personam juris-

diction, the use of which this Court condemned in Jnter-

national Shoe Co. v. Washington, supra, 326 U.S. at 319.

See also Shaffer v. Heitner, 433 U.S. 186, 204 (1977). Use

of the single fact of stock ownership to create both “mini-

mum contacts” and “fairness” ignores the teaching of Inter-

national Shoe® and would violate the requirements of due

process.

Petitioner contends that its proposed rule is sound

because this Court’s opinion in Cannon Manufacturing Co.

v. Cudahy Packing Co., 267 U.S. 333 (1925), needs to be

reexamined in the light of International Shoe. This Court

held in Cannon that where the formal indicia of separate

corporate organization and existence were maintained

between a parent and its subsidiary, the physical corporate

“presence” of the nonresident corporation required by state

law to sustain personal jurisdiction did not exist. The

5 Clearly, in this case General Motors’ activities in Texas were

wholly unrelated to petitioner's claim against Opel, since the

allegedly defective 1 automobile was not manufactured for

export into the United States and the accident itself took place in

Germany.

6 After International Shoe, “the relationship among the defendant,

the forum, and the litigation . . . became the central concern of

= a —_ personal jurisdiction.” Shaffer v. Heitner, supra,

». at

7

opinion did not reach the due process question, and did not

utilize the concepts of minimum contacts and fairness

developed under International Shoe. Cannon thus is no

restraint on a court’s finding that if sufficient indicia of

identity and control exist between a parent and its sub-

sidiary, the activities of one may satisfy the requirements

of due process for assertion of personal jurisdiction over

the other.

The holding in Cannon has already been reexamined and

confined to its proper statutory context. It is now recog-

nized that maintenance of the traditional formalities of

separate corporate existence between a parent and its sub-

sidiary will not in and of itself preclude the assertion of

jurisdiction over the nonresident corporate entity.’

The Court of Appeals below did not premise its due pro-

cess analysis on Cannon or on organizational formalities.’

Rather, the court looked for facts which might indicate

functional corporate control of Opel by General Motors.

It found such facts wholly lacking. The court therefore

determined that jurisdiction could not, consistent with due

process, be asserted over Opel in Texas through its parent

corporation.

The Court of Appeals’ decision does not conflict with the

decision of any other court of appeals on this matter.

7 See, e.g., Energy Reserves Group, Inc. v. Superior Oil Co., 460 F.

Supp. 483, 490 (D. Kan. 1978); Hitt v. Nissan Motor Co., 399 F.

Supp. 838, 849-50 (S.D. Fla. 1975); Crucible, Inc. v. Stora og

parbergs Bergslags AB, 403 F. Supp, 9, 12-13 (W.D. Pa. 1975).

See also Pr Promotions, Inc. v. Cousteau, supra, 495 F.2d at

492.

8 Petitioner's assertion that Cannon is the law in Texas is belied by

the case cited. (Petition at 10.) The district court in Murdock v.

Volvo of America Corp., 403 F. Supp. 55 (N.D. Tex. cage found

that the meccecy beg endant was beyond the reach of Texas’

long-arm statute because the elements of control or agency

between parent and subsidiary had not been proven, 403 F. Supp.

at 57, and did not premise this holding on the Cannon rationale.

Petitioner has cited no case holding that the single fact

that a parent-subsidiary relationship exists allows a court

to extend the reach of its jurisdiction to the nonresident

affiliate which itself has no contacts with the forum. Courts

which have considered the question have determined that

such an extension of personal jurisdiction would violate

the standard of fairness inherent in due process.®

Petitioner has advanced no constitutional basis for a

rule that the single fact of stock ownership by General

Motors is a sufficient predicate for Texas to assert personal

jurisdiction over Opel. Nor has petitioner shown that Gen-

eral Motors exercised sufficient control over Opel, or that

Opel conveyed sufficient authority to General Motors as its

agent in Texas, to satisfy the constitutional standards of

International Shoe.

® See, e.g., Mizokami Bros. of Ariz., Inc. v. Baychem Corp., 556 F.2d

975, 977 (9th Cir. 1977), cert. denied, 434 U.S. 1035 (1978);

Peterson v. Crown Financial Corp., 435 F. Supp. 901, 904 (D.

Neb. 1977); and cases cited in note 7, supra.

9

CONCLUSION

This case was correctly decided on the facts and law by

both lower courts. The question presented by the petition

provides no basis for the exercise of this Court’s powers

of review, and the petition for a writ of certiorari should

accordingly be denied.

Respectfully submitted,

Joun T. GoLpEN

Joun E. Kennepy

ELeaNnor Swirt Gass

2100 First City National

Bank Building

Houston, Texas 77002

Attorneys for Respondents

Of Counsel:

Vinson & ELKINS

2100 First City National

Bank Building

Houston, Texas 77002