Petition — Klippan, GmbH v. Volkswagen of America, Inc.

80-185

ee a oe

IN THE

Supreme Court of the Gnited States

OCTOBER TERM, 1980

KLIPPAN, GmbH, Petitioner,

VOLKSWAGEN OF AMERICA, INC., Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE SUPREME

COURT OF THE STATE OF ALASKA

KENNETH P. JACOBUS

DAVID H. THORSNESS

HUGHES, THORSNESS,

GANTZ, POWELL &

BRUNDIN

509 West Third Avenue

Anchorage, Alaska 99501

Attorneys for Petitioner

CSE REEL SECRETE: TNE I TERA AREER AURA TS

PRESS OF BYRON S. ADAMS PRINTING, INC., WASHINGTON, D.C.

i

QUESTIONS PRESENTED

Did the decision of the Court below violate the

Petitioner’s right to due process of law?

Did the Alaska Supreme Court fail to comply with

the recent decision of this Court in Wofld-Wide

Volkswagen Corporation v. Woodsen?

Should the decision below be reversed to ensure

that international commerce is not burdened by a re-

quirement that a product constitute its manufacturers

worldwide agent for service of process, at least in a

commercial context where no local citizen is a party and

where the merits of the dispute are being litigated in an

appropriate forum freely chosen by the parties?

TABLE OF CONTENTS

3 PAGE

CUBTIONS PRESENTED 20... cc cccccccescccscscsccceees l

PET PECETT ET CTE CR TC Teas 2

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CONSTITUTIONAL PROVISIONS AND STATUTES INVOLVED .... 2

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REASONS FOR GRANTING THE WRIT:

I. The Decision Of The Court Below Violated The

Petitioner’s Right To Due Process Of Law .... 7

Il. The Alaska Supreme Court Failed To Comply

With The Recent Decision Of This Court In

World-Wide Volkswagen Corporation v.

Woodsen, 100 S.Ct. 559 (1980)..........0005. 9

III. The Decision Below Must Be Reversed To En-

sure That International Commerce Is Not

Burdened By A Requirement That A Product

Constitute Its Manufacturers Worldwide Agent

For Service Of Process, At Least In A Com-

mercial Context Where No Local Citizen Is A

Party And Where The Merits Of The Dispute

Are Being Litigated In An Appropriate Forum

Freely Chosen By The Parties....,........... 12

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EE Sin aie 500-0 6040504 4064006 600000 Hedda ee Eee 16a

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TABLE OF AUTHORITIES

PAGE

International Shoe Company v. Washington, 326 U.S.

OT Be ee ee Fee errr r rT eh ee

Hanson v. Denckla, 375 U.S. 235 (1958) ........0e0ee

McGee v. International Life Insurance Company, 355

ip Ge. J) ren ree rer pri rer

Shaffner v. Heitner, 433 U.S. 186 (1977) ........-0 005

World-Wide Volkswagen v. Woodsen, 100 S.Ct. 559

CHIN obo 8 co chin nnn cp vcnneakeds dccadepaneusenys

Minichiello v. Rosenberg, 410 F.2d 106, (2d Cir. 1968)

adhered to en bank; 410 F.2d 117, cert. denied, 396

U.S. 844, 24 L.ed. 2d 94, 90 S.Ct. 69 (1969).......

Randal Rush et al. v. Jeffrey D. Savchuk, 100 S.Ct. 571

tA ee rrvrrnrT tie fe ree ee rey e

INDEX TO APPENDIX

APPENDIX A Supreme Court, Order, dated May 9,

1980, in Volkswagenwerk, A.G. and

Volkswagen of America, Inc., v. Klip-

pe RP ae eee ee ee re

APPENDIX B Superior Court, Decision, dated

September 15, 1978, in Volkswagenwerk,

A.G. and Volkswagen of America, Inc.,

v. Klippan, GmbH, Allied Chemical

Corporation and Everett Dale Vaughn ..

APPENDIX C Constitutional Provisions and Statutes ..

13

14

14

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16a

24a

IN THE

Supreme Court of the Anited States

OCTOBER TERM, 1980

No.

KLIPPAN, GmbH, Petitioner,

VOLKSWAGEN OF AMERICA, INC., Respondent.

PETITION FOR WRIT OF CERTIORARI TO THE SUPREME

COURT OF THE STATE OF ALASKA

Petitioner, Klippan, GmbH, respectfully requests

that a writ of certiorari issue to review an order of the

Supreme Court of the State of Alaska dated May 9,

1980 (App. A) a final decree with respect to the question

involved. |

2

OPINIONS BELOW

The relevant opinions are both unreported, and are

attached as appendices as follows:

APPENDIX A — Supreme Court, Order, dated

May 9, 1980, in Volkswagenwerk, A.G. and Volkswagen

of America, Inc., v. Klippan, GmbH.

APPENDIX B — Superior Court, Decision, dated

September 15, 1978, in Volkswagenwerk, A.G. and

Volkswagen of America, Inc., v. Klippan, GmbH,

Allied Chemical Corporation, and Everett Dale Vaughn.

JURISDICTION

The opinion of the court below was entered on May

9, 1980 and is a final decree rendered by the highest

court of the State of Alaska.

The jurisdiction of this Court is invoked pursuant

to 28 U.S.C. § 1257(3).

CONSTITUTIONAL PROVISION AND STATUTE

INVOLVED

The relevant provision of the United States Con-

stitution in this suit is Amendment XIV, §1. The rele-

vant statutory provision is the Alaska Long-Arm

Statute, AS 09.05.015. These provisions are set forth in

Appendix C.

This petition seeks review of a judgment of the

Supreme Court of the State of Alaska filed May 9, 1980

affirming (with respect to the jurisdictional aspects) a

decision by the Superior Court of the State of Alaska,

Third Judicial District at Anchorage, based upon

Alaska’s long-arm statute extending jurisdiction of that

state’s courts Over non-residents.

3

STATEMENT OF THE CASE

The Petitioner, Klippan, GmbH (hereinafter ‘‘Klip-

pan’’), is a company incorporated in the Federal

Republic of Germany with its principal offices in Ham-

burg, West Germany. Klippan is a manufacturer of seat-

belt restraint systems that are used in automobiles by

automobile manufacturers, including Volkswagenwerk,

A.G. (hereinafter ‘‘Volkswagenwerk’’). The seat-belt

restraint system which is central to this litigation was

manufactured in Germany in 1966 and acquired by

Volkswagerwerk, from Klippan, pursuant to

Volkswagenwerk purchase order No. 4644 dated April

28, 1966.

Volkswagenwerk and its wholly owned American

subsidiary, Volkswagen of America, Inc. (hereinafter

“‘Volkswagen of America’’) marketed in the United

States automobiles that incorporated the subject seat-

belt restraint system manufactured by Klippan using a

buckle mechanism manufactured by and purchased from

Broderna Holmbergs Fabriks, A.D., a Swedish corpora-

tion. The development of the subject seat-belt buckle

was the result of over a year of concentrated negotia-

tions between Klippan and Volkswagenwerk. Klippan

contends that the entire seat-belt restraint system for use

in the subject automobile involved collaboration be-

tween Klippan and Volkswagenwerk and was done in

strict accordance with the specific demands of

Volkswagenwerk. Though Volkswagenwerk admits its

involvement in the preparation of drawings of the seat-

belt restraint systems, it disclaims involvement with the

development process.

The relationship between Klippan and

Volkswagenwerk was one of contract, and that contract

was negotiated, executed and performed in the Federal

4

Republic of Germany. The contract is written in Ger-

man and specifies that all disputes arising out of

Volkswagenwerk’s orders must be brought before the

competent German court designated therein. Moreoever,

the contract between Volkswagenwerk and Volkswagen

of America whereby title was transferred in Germany to

Volkswagen of America provides that all disputes are to

be resolved in the same German forum. Further, those

involved in the design of the seat-belt buckle, the

manufacture of the seat belt, the installation of the seat

belt, Volkswagenwerk inspectors and engineers involved

in the evaluation of the seat belt and buckle, and the

companies with patents on it and other buckles are

European nationals not present within the United States.

The mechanism by which Volkswagen automobiles

reach the United States involved sales. by

Volkswagenwerk, to Volkswagen of America in Ger-

many and subsequent resales by Volkswagen of America

to any of its fourteen (14) regional United States

distributors which, in turn, marketed the vehicles to

their local dealers. The subject vehicle was originally

sold at retail in Ogden, Utah and eventually arrived in

Alaska.

On December 24, 1972, Dr. Charles R. Munns

allegedly sustained severe injuries when he was involved

in an automobile accident while driving his type one

1967 Volkswagen Beatle. On September 6, 1974, Dr.

Munns brought suit against Volkswagenwerk,

Volkswagen of America and the driver of the other vehi-

cle involved in the collision, Everett Dale Vaughn. Trial

commenced on or about September 6, 1976, and led to a

jury verdict rendered on October 22, 1976 in which the

three defendants were found liable for the injuries of

Dr. Munns. That decision was appealed to the Alaska

5

Supreme Court but settled prior to argument there.

Thus, the claims of Dr. Munns have been totally

satisfied.

The action below was brought by Volkswagenwerk

and Volkswagen of America against Klippan and Allied

Chemical Corporation, its parent corporation, seeking

contribution and/or indemnity for amounts paid by the

plaintiffs to Dr. Munns. Plaintiffs contend that a seat-

belt restraint system acquired by Volkswagenwerk from

Klippan was the sole cause of the alleged injuries sus-

tained by Dr. Munns and forms the sole basis upon

which the jury rendered the verdict against

Volkswagenwerk and Volkswagen of America in Oc-

tober of 1976. They further allege that Allied Chemical

Corporation, as the present parent corporation of Klip-

pan, is responsible for the actions of its subsidiary. This

despite the fact that Allied Chemical did not acquire

Klippan until 1971, some five years after the sale of the

subject seat belt.

Defendants Klippan and Allied Chemical Corpora-

tion have denied plaintiffs’ allegations that the seat-belt

restraint system was defective, and further have con-

tended that Volkswagenwerk dominion over the design

process was sO pervasive as to render Volkswagenwerk

responsible and liable for any defects that may have ex-

isted in that design. While the other driver, Mr.

Vaughn, was originally a defendant in this suit, it was

voluntarily dismissed as to him when Dr. Munns’ claim

was settled and thus he, too, has no further interest in

the case.

It should be noted that Klippan, relying upon the

forum selection clause in purchase order 4644, instituted

an action against Volkswagenwerk in the designated

German forum asking that court, applying German law,

"7 6

to decide what obligations, if any, Klippan may have to

Volkswagenwerk in connection with the very dispute

which is the subject matter of this litigation. Since Klip-

pan contends that it has a right of indemnification

against the Swedish company which manufactured and

sold the principal components of the buckle, it has im-

pleaded that company into the pending German action.

On July 27, 1978, Klippan filed motions in the

Superior Court, Third Judicial District, State of Alaska,

seeking an order dismissing the complaint against Klip-

pan on the basis of (1) lack of personal jurisdiction over

Klippan, (2) pursuant to a forum selection clause pro-

viding exclusive venue in the Federal Republic of Ger-

many for disputes between Klippan and

Volkswagenwerk and on the basis of (3) forum non con-

veniens. By a decision rendered on September 15, 1978,

the Superior Court determined that jurisdiction over

Klippan existed, but dismissed the action on the basis of

the forum selection clause. A decision on the forum non

conveniens issue was not reached in that opinion.

Volkswagenwerk and Volkswagen of America ap-

pealed the Superior Court decision on the forum selec-

tion clause and Klippan cross-appealed the decision with

respect to its jurisdictional determination. In an opinion

dated May 9, 1980, the Supreme Court of the State of

Alaska affirmed with respect to jurisdiction over Klip-

pan in Alaska, and also affirmed the dismissal of the

claims of Volkswagenwerk on the basis of the forum

selection clause. However, the claims of Volkswagen of

America against Klippan, were allowed to remain in

Alaska on the grounds that the allegedly forseeable

presence there of one of Klippan’s products, sold and

resold in Germany, entered into the United States as a

component part of a vehicle, sold again to a consumer

7

in Utah and present in Alaska due to the fortuitous

choice of the purchaser, was sufficient contact to justify

the exercise of jurisdiction over Klippan in:a suit not in-

volving the person allegedly injured by the product or

any other citizen of Alaska.

Klippan brings this appeal from the decision that

jurisdiction can be asserted over it consistent with the

due process clause of the Fourteenth Amendmient to the

United States Constitution.

REASONS FOR GRANTING THE WRIT

I. The Decision Of The Court Below Violated

The Petitioner’s Right To Due Process Of Law

This litigation is not a typical products-liability ac-

tion in which an injured consumer is attempting to en-

force a remedy against the distant manufacturer without

the burden of traveling to a distant forum. Rather, it is

an action in which a large German corporation and its

wholly owned American subsidiary have attempted to

assert jurisdiction over another German corporation in a

distant forum unconnected with any of the present par-

ties or the transactions underlying the dispute between

them. The court below found that Klippan had suffi-

cient minimum contacts with the State of Alaska by

reason of the sale in Germany of the subject lap-

restraint system to Volkswagenwerk with knowledge that

Volkswagenwerk would market vehicles incorporating

the system within the United States.

It should be emphasized that this seat-belt restraint

system did not reach Alaska or the United States by way

of direct commerce involving Klippan; rather, it reached

the United States by way of Volkswagen’s own distribu-

tion network and the random activities of a subsequent

8

purchaser of the vehicle. Jurisdiction is, thus, asserted

over Klippan based on the chance presence of one of its

buckles in this state as one component of the Munns’

vehicle.' Volkswagen would apparently subject Klippan

to personal jurisdiction in any country in the world that

it chooses as a market for automobiles that incorporate

a component part manufactured by Klippan.

However minimal the burden of defending in a

‘forum court, a defendant may not be called upon to do

so unless he has the requisite minimum contacts. Han-

son v. Denckla, 375 U.S. 235 (1958); Shaffer v. Heitner,

433 U.S. 186 (1977). In order to establish those

minimum contacts, the defendant must have done some

act by which he purposefully availed himself of the

privilege of conducting activities within the forum state,

thus invoking the benefits and protections of the laws of

that state. Hanson v. Denckla, supra. The Supreme

Court of Alaska conceded in its opinion that Klippan

had no direct contacts with the State of Alaska but held

that minimum contacts existed nonetheless. Certiorari

should be granted to correct the decision of the court

below and to emphasize that a state may not compel

jurisdiction in a case where none of the parties have any

contact whatsoever with the forum state.

The extent to which a long-arm statute can be

utilized to assert jurisdiction over an alien defendant in

a case in which none of the parties have even qualified

to do business is important not only in the State of

Alaska but for international commerce generally since

' Volkswagen failed to establish in the action below that any

Klippan seat belts other than the one involved in this action ever

reached the State of Alaska. Thus, the record is barren of any pro-

of that any Klippan product was ever sold or marketed in Alaska.

9

other states have similar long-arm statutes. This Court

has in the past looked to the interests of the state in

providing a remedy for an injured party as an important

factor in jurisdictional determinations. McGee v. Inter-

national Life Insurance Company, 35th U.S. 220 (1957).

Compelling state interests as described in McGee are not

present when the litigation involves neither an injured

person nor any resident of the state in which jurisdiction

is asserted.’ Klippan does not suggest that it should not

be subject to jurisdiction here merely because it is a

foreign corporation but, rather, argues that the cir-

cumstances under which these plaintiffs are asserting

jurisdiction go tar beyond the limits permitted by due

process. Alaska does not have the constitutional power

to assert jurisdiction in this case.

Il. The Alaska Supreme Court Failed To Comply

With The Recent Decision Of This Court In

World-Wide Volkswagen Corporation vy.

Woodsen. .

The decision of the Supreme Court of the State of

Alaske would permit jurisdiction over a non-resident

defendant in cases where the defendant performed no

purposeful act by which he availed himself of the

privilege of conducting activities within the forum state.

The court below, while recognizing that Klippan has not

performed a single act within the State of Alaska, con-

cluded that jurisdiction could be asserted by virtue of its

sale, in Germany, of seat belts to a giant corporation

* Indeed, the Volkswagen entities themselves are not even

qualified to do business in the State of Alaska, and each asserted

lack of personal jurisdiction as a defense to the Original action of

Dr. Munns.

10

that distributed its vehicles worldwide. That proposition

goes too far, and would permit the plaintiffs themselves

to subject Klippan to jurisdiction anywhere in the world

by virtue of their own marketing decisions.

This Court’s decision in World-Wide Volkswagen

Corporation v. Charles S. Woodsen, 100 S.Ct. 559

(1980), requires a reversal of the court below. In that

case, this Court stated (100 S.Ct. at 566):

Yet ‘‘foreseeability’’ al-ne has never been a suffi-

cient benchmark for personal jurisdiction under the

due process clause ...

This is not to say, of course, that foreseeability is

wholly irrelevant. But the foreseeability that is

critical to due process analysis is not the mere

likelihood that a product will find its way into the

forum state. Rather, it is that the defendant’s con-

duct in connection with the forum state is such that

he should reasonably anticipate being held into

court there... .

It is foreseeable that purchasers of automobiles sold

by World-Wide and Seaway may take them to

Oklahoma. But the mere ‘‘unilateral activity of

those who claim some relationship with a non-

resident defendant cannot satisfy the requirement of

contact with the forum state.’’ [emphasis added]

The court beiow attempted’ to distinguish the

World-Wide Volkswagen case by determining that Klip-

pan knew or had reason to know (tut its seat belts could

be distributed and sold for use in Alaska. That deter-

* The Munns vehicle was never sold in Alaska. Nor does the

record reflect that any product of Klippan was ever sold in Alaska.

The Alaska Supreme Court’s decision is, thus, grounded on a mere

use Of one product within that State.This constitutes the appoint-

ment of the product as agent for service of process — a practice

specifically condensed in World-Wide Volkswagen and a fundamen-

tal error of law.

11

mination disregards this Court’s requirement that the

defendant’s conduct be such that ‘‘he should reasonably

anticipate being held into court [in Alaska].’’ Klippan

had no basis to know that a single one of its seat-belt

restraint systems would in fact reach the State of

Alaska, just as it had no reason to know that its prod-

ucts would be used in all of the states of the United

States if, in fact, that were true.

The assertion of long-arm jurisdiction against Klip-

pan in this case would impose an extreme burden upon

it by compelling it to defend in a distant forum, indeed,

on a distant continent. Surely that burden outweighs the

interest of non-resident plaintiffs in suing locally and the

interest of the State of Alaska in providing a remedy in

a suit in which no Alaska party is involved. Adequate

remedies are available and are now being pursued in a

more convenient forum in Germany. Due process re-

quires that the assertion of jurisdiction be reasonable

and, where a non-resident defendant has performed no

act to avail itself of the protection of the laws of the

state, it is unreasonable for jurisdiction to be required in

that State. Certainly, the fundamental, constitutional

dimensions of this requirement should not be lightly

glossed over by after the fact pronouncements as to

whether or not a particular hypothetical was foreseeable

some fourteen years ago.

The World-Wide Volkswagen opinion reaffirmed

that assertions of jurisdiction must be reasonable con-

sidering the burdens imposed upon the defendant. Peti-

tioner has raised significant issues of German law

relating to a contract negotiated, executed and perform-

ed in Germany. Trial of the suit below will involve the

examination of numerous German nationals raising

questions as to the power of the courts of the State of

12

Alaska to compel attendance. It is a suit that involves

consideration of numerous documents written in the

German language and located in the Federal Republic of

Germany. The problems with translation are significant

and, aside from the expense, there have already been

disputes concerning the accuracy of translations submit-

ted to the courts in Ala-ka. By applying Alaska’s long-

arm statute to Klippan in this case, the Supreme Court

of Alaska has violatec the Petitioner’s constitutional

right of due process of law and placed it in a position in

which it may not be able to adequately defend itself nor

gain access to the witnesses and information required

for its defense.

III. The Decision Below Must Be Reversed To En-

sure That International Commerce Is Not

Burdened By A Requirement That A Product

Constitute Its Manufacturers Worldwide Agent

For Service Of Process, At Least In A Com-

mercial Context Where No Local Citizen Is A

Party And Where The Merits Of The Dispute

Are Being Litigated In An Appropriate Forum

Freely Chosen By The Parties.

Some thirty-five years ago, in /nternationa’ Shoe

Company v. Washington, 326 U.S. 310 (1945), this

court established the basic principles that have since

guided judicial inquiry in jurisdictional cases.

Refinements were necessary Over the years to insure that

lower courts did not exceed the constitutional re-

quirements necessary in order to preserve due process

for non-resident defendants held to jurisdiction in

various states. Hanson v. Denckla, supra. Nonetheless,

courts continued to expand the basis on which they

would permit assertion of jurisdiction, and statute after

13

statute was construed to extend jurisdiction to the full

extent permissible consistent with due process.

In Shaffer v. Heitner, supra, this court reaffirmed

the requirements set forth in /nternational Shoe, and

made clear that due process required that the requisite

minimum contacts with the forum § state’ be

demonstrated. The state courts, however, remained

reluctant to accept the continuing validity of jurisdic-

tional limits, and soon exceptions were engrafted upon

the rule. The United States Court of Appeals for the Se-

cond Circuit gave its approval to one such exception in

Minichiello v. Rosenberg (CA2 1968), 410 F.2d 106,

adhered to en banc, 410 F.2d 117, cert. denied, 396 U.S.

844, 24 L.Ed.2d 94, 90 S.Ct. 69 (1969). This court acted

to correct that situation in Randal Rush et al. v. Jeffrey,

100 S.Ct. 571 (1980).

Now this court must again reaffirm the fundamen-

tal principles set forth in World-Wide Volkswagen v.

Woodsen, supra. Almost immediately, lower courts have

attempted to make exceptions to such principles. This

court must act and reverse the decision below to

preserve the fundamental constitutional rights involved

and avoid allowing exceptions so broad that states are

effectively without constitutional limits in their exercise

of jurisdiction over foreign component parts manufac-

turers which are not sold in the state but which may

happen to be used there.

If a foreign manufacturer of a component of a

mobile product destined for the United States market

thereby submits to the jurisdiction of all fifty states

(since it could be used in any one of them) then that

principle should be clearly established. Petitioner sub-

mits, however, that this is not the law.

14

The distinction between sales or marketing and use

is important since proponents of expansive jurisdictional

rules often seek to justify unfair applications by arguing

that the manufacturer could have avoided the result by

refraining from sales to a particular forum. Whatever

the merits of that argument in some domestic situations,

it is without force in a context where a manufacturer

supplies a component for sale to another manufacturer

who independently selects appropriate markets in dif-

ferent countries. Moreover, here the parties have actual-

ly utilized that rationale in another way. Rather than

resorting to unrealistic attempts to impose marketing or

use restrictions on the product they have agreed, bet-

ween themselves, that wherever a dispute might arise

they would resolve it in the West German Court so

familiar to all of them. Rather than restrict the sales or

use Of the products they have restricted the available

forum.

It is apparent upon analysis that the gravamen of

this dispute — the design, development and manufacture

of the subject seat belt — involves only the parties to

the ongoing German litigation. Courts in both Germany

and Alaska have ruled that the forum selection clause

requires that dispute to be litigated there and that is

precisely what is being done. Any litigation elsewhere is

clearly derivative in nature as well as redundant. Peti-

tioner submits that the totality of these circumstances re-

quire a finding that the exercise of jurisdiction over

Klippan in this case is unreasonable, and therefore un-

constitutional, as a matter of law.

15

CONCLUSION

This case presents to the Court an opportunity to

rule on the constitutional dimensions of the area in

which a long-arm statute can be utilized in international

commerce to assert jurisdiction over a foreign defendant

where none of the parties to the suit are residents in the

state in which the suit is filed and where the parties have

previously made their own, venue choices. Misuse of the

long-arm statutes in this area can result in greater un-

fairness to a foreign defendant, and can be used as a

tactic by which an adequate defense can be inhibited

and/or prevented. The expense and hardship imposed

upon the foreign defendant in this case has resulted in a

situation requiring correction by this Court, and pro-

vides an opportunity to set fundamental guidelines in

the increasingly important area of international trade.

This Court should grant the writ in order to avoid the

deprivation of due process imposed upon Klippan and

to establish a uniform policy for the exercise of interna-

tional jurisdiction in similar cases.

For the foregoing reasons, this petition for a writ of

certiorari should be granted.

Respectfully submitted

DAvID H. THORSNESS

HUGES, THORSNESS, GANTZ,

POWELL & BRUNDIN

Attorneys for Petitioner

APPENDIX

la

APPENDIX A

THE SUPREME COURT OF THE STATE OF ALASKA

File No. 4336, 4368

VOLKSWAGEN WERK, A.G. and VOLKSWAGEN OF AMERICA,

Appellants and Cross-Appellees,

.

KLIPPAN, GmbH,

Appellee and Cross-Appellant.

Opinion

[No. 2080 - May 9, 1980]

Appeal from the Superior Court of the State of Alaska,

Third Judicial District, Anchorage, Peter J. Kalamarides,

Judge.

Appearances: David H. Thorsness, Hughes, Thorsness,

Gantz, Powell & Brundin, Anchorage, for Appellants and

Cross-Appellees. Joseph L. Young, Atkinson, conway,

Young, Bell & Gagnon, Inc., Anchorage, and Theodore R.

Dunn, Dunn, Bailey & Mason, Anchorage, for Appellees and

Cross-Appellants.

Before: Rabinowitz, Chief Justice, Connor, Boochever,

and Burke, Justices and Dimond, Senior Justice. [Matthews,

Justice, Not Participating]

RABINOWITZ, Chief Justice.

On December 24, 1972, Dr. Charles R. Munns suffered

injuries in an automobile accident while driving his 1967

model Volkswagen Beetle. Dr. Munns subsequently brought

suit to recover for his injuries against the offending driver,

the manufacturer of the Munns vehicle, Volkswagenwerk,

A.G. (VWAG) and its importer, Volkswagen of America,

Inc. (VWOA).

The only claim submitted to the jury against the defen.

dants was that the original equipment seat belt in the vehicle

2a

was defective and that the defect was a proximate cause of

Dr. Munns’s injuries. The manufacturer and supplier of the

seat belt, Klippan, GmbH (Klippan), was eventually asked by

VWAG to participate in the defense of the case following

pretial conference, but Klippan refused. Klippan also rejected

a tender of the defense of the Munns case by VWAG and

VWoOA. One of Klippan’s safety engineers did assist VWAG

and VWoOA in the preparation of the Munns case and served

as an expert witness, although Klippan maintains he did not

do so as a representative of Klippan.

The jury awarded a verdict against all three defendants in

the Munns case, and judgment in the amount of approx-

imately $9,300,000 was entered. While the case was on appeal

to this court a settlement in the amount of $5,015,000 was

negotiatied between the defendants and Dr. Munns.

After entry of the judgment in the Munns case, the in-

stant action was brought in Alaska by VWAG and VWoA

against Klippan and its parent corporation, Allied Chemical

Corporation, seeking payment of all or part of the judgment

on contractual grounds and under statutory and equitable

principles' of indemnity and contribution. Klippan then filed

a declaratory judgment action against VWAG in Germany in

which it sought a determination of what obligations, if any, it

owed to VWAG under German law as a result of the Munns

accident. Among the affirmative defenses which Klippan

asserted in the Alaska action were that the superior court

lacked personal jurisdiction over Klippan, and that a forum

selection clause contained in the contract by which Klippan

supplied seatbelt restraint systems to VWAG limited litigation

exclusively to a German forum. The superior court determin-

ed that jurisdiction over Klippan existed, but dismissed the

contribution and indemnity action on the basis of the forum

' Everett D. Vaughn, driver of the other vehicle in Dr. Munns’s

accident, was originally joined as a defendant but was dismissed

from the action with prejudice by stipulation of the parties, after

settlement with Dr. Munns.

3a

selection clause. On cross-appeal, Klippan challenges the

superior court’s jurisdictional determination.

I. Superior Court’s Jurisdiction as to Klippan

We affirm the superior court’s ruling regarding its

jurisdiction as to Klippan. Personal jurisdiction over a foreign

or out-of-state defendant whose products cause injury to per-

sons or property within this state is conferred by AS 09.05.15,

Alaska’s ‘‘long-arm’’ statute. We have construed this statute

to extend Alaska’s jurisdiction to the maximum reach consis-

tent with the guarantees of due process under the Fourteenth

Amendment, Jonz v. Garrett/Airsearch Corp., 490 P.2d 1197

(Alaska 1971). Thus the sole question which must be address-

ed in regard to this specification of error is whether the ap-

plication of Alaska’s ‘‘long-arm’ statute to Klippan in the cir-

cumstances of this case is in violation of due process.

In order to meet due process standards personal jurisdic-

tion over a non-resident defendant requires certain minimum

contacts with the state ‘‘so that maintenance of the suit does

not offend traditional notions of fairplay and substantial

justice.’’ International Shoe Co. v. Washington, 326 U.S.

310, 90 L. Ed. 95 (1945). When a manufacturer voluntarily

places its product in the general stream of commerce without

restriction, the ‘‘minimum contact’’ requirement is satisfied in

all forums where it is foreseeable to the manufacturer that the

product may be marketed. Commodities World Int’l. Corp.

v. Royal Mile, Inc., 440 F. Supp. 1373, 1378-79 (D.C. Puerto

Rico 1977); Gray v. American Radiator & Standard Sanitary

Corp., 176 N.E.2d. 761 (Ill. 1961). The ‘‘stream of com-

merce’’ doctrine has been adopted by the majority of

American jurisdictions having long-arm statutes.? In Modern

* See, e.g. Duple Motors Bodies, Ltd. v. Hollingsworth, 417 F.2d

231, 235 (9th Cir. 1969) (applying Hawaii law); Sells v. Interna-

tional Harvester Co., Inc., 513 F.2d 762, 763 (Sth Cir. 1975)

(Alabama law); Thorton v. Toyota Motor Sales U.S.A., 397 F.

Supp. 476, 482 (N.D. Ga. 1975), (Georgia law);. Look v. Hughes

Tool Co., 367 F. Supp. 1003, 1006 (D.N.H. 1973) (New Hampshire

4a

Trailer Sales, Inc v. Traweek, 561 P.2d 1192, 1196 (Alaska

1977), quoting Jones Enterprises, v. Atlas Service Corp., 442

F.2d 1136, 1140 (9th Cir. 1971) we indicated our approval of

the stream of commerce rule.

In our view Klippan has sufficient minimum contacts

with the State of Alaska, by deliberately placing their seat

belt restraint system in the general stream of commerce, to

meet due process standards for personal jurisdiction. Klippan

has sold millions of seat belt assemblies for incorporation into

automobiles it knew were destined for purchase by consumers

throughout the United States. Alaska law required installation

of lap belts in all automobiles sold in this state during 1967,

the model year of the Munns car.’ Klippan represented by a

label sewn on the belt involved in the Munns accident that its

restraint systems were ‘‘approved for sale in all states,’’ and

took steps to insure that the belts complied with standards

established by the American Society of Automotive

Engineers. Klippan thus knew or had reason to believe that

its seat belts could be distributed and sold for use in Alaska,

and did not limit the sale or marketing of the restraint system

in the United States. See Keckler v. Brookwood Country

Club, 248 F. Supp. 645, 649 (N.D. Ill. 1965); Commodities

World Int’l. v. Royal Mile, Inc., 440 F. Supp. 1373, 1379

(D.C. Puerto Rico 1977); Mann v. Frank Hrubetz & Co.,

Inc., 361 So.2d 1021, 1025 (Ala. 1978).

Klippan argues that the stream of commerce doctrine

should not apply to the manufacturer of a component part of

law); Benn v. Linden Crane Co., 326 F. Supp. 995, 997 (E.D. Pa.

1971) (Pennsylvania law); Alliance Clothing Ltd. v. District Court,

532 P.2d 351, 354 (Colo. 1975) (en banc); Edmundson v. Miley

Trailer Co., 211 N.W.2d 269, 272 (lowa 1973); Cole v. Doe, 258

N.W.2d 165, 168 (Mich. 1977); Ehlers v. U.S. Heating & Cooling

Mer. Corp., 124 N.W.2d 824, 827 (Minn. 1963); Certisimo v.

Heidelberg, 298 A.2d 298, 303 (N.J. Super. 1972); aff'd. sub. nom.

Van Eeuwen v. Heidelberg Eastern, Inc., 306 A.2d 79 (N.J. App.

1973).

> 13 AAC 04.270.

Sa

a product which is widely distributed by another entity. The

modern trend of case law indicates otherwise where, as here,

the component manufacturer deliberately designs its product

in anticipation of it being widely marketed in American

jurisdictions, and sells the component directly to several ma-

jor auto producers with the knowledge that the component

will be incorporated into their products and sold throughout

America.‘ The fact that Klippan did not directly engage in

business dealings in Alaska does not relieve it from answering

for injuries which may result from use of its product in this

state. It was entirely foreseeable to Klippan, from its own

conduct, that a number of its restraint systems would be pur-

chased by consumers in Alaska through normal sales and

distribution patterns in the United States.’ In this regard we

have previously pointed out that the chain of distribution is

not a significant factor in determining jurisdiction:

We hold, as did . . . [Gray] . . . that the fact that some

of the purchases were made from independent mid-

dlemen or that someone other than the manufacturer

caused the product to be shipped into the state are not

controlling factors.

* As stated in Dotterweich v. Yokohama International Corp., 416

F. Supp. 542, 550 -n.11 (D. Minn. 1976):

A party’s status as a component part manufacturer does not in

all instances foreclose the exercise of jurisdiction. Such an exer-

cise Of jurisdiction does not offend due process if minimum

contacts are established.

‘An affidavit submitted by VWoA states that about 600

Volkswagen vehicles were sold in 1967 by authorized dealers in

Alaska ‘‘which would have been equipped with a seat belt of the

type designed and manufactured by Klippan.’’ Klippan asserts that

VWAG procurred seat belts from more than one manufacturer dur-

ing 1967, and so disputes that it is proven any Klippan-equipped

“‘olkswagen actually reached Alaska other than Dr. Munns’s car,

which was originally purchased in Utah. This dispute does not alter

Our opinion with regard to the foreseeability to Klippan that a

number of Klippan-equipped vehicles would be sold directly for use

in Alaska through dealerships here and in other states.

6a

Stephenson v. Duriron Co., 401 P.2d 423, 429 (Alaska 1965),

cert. denied, 382 U.S. 956, 15 L. Ed. 2d 360 (1965).°

We likewise reject Klippan’s argument that the stream of

commerce theory should not apply where the party attempt-

ing to assert jurisdiction is a non-resident corporation bring-

ing an indemnity or contribution action separate from the

original products liability lawsuit. Where a party is

answerable in damages for injury occurring in this state, it is

* We take note that a very recent United States Supreme Court

case, World Wide Volkswagen Corp. v. Woodson, 48 L.W. 4079

(January 21, 1980), has indicated that ‘‘ ‘foreseeability’ alone has

never been a sufficient benchmark for personal jurisdiction under

the Due Process clause.’’ /d. at 4082. In that case, plaintiffs who

had bought an Audi automobile in New York attempted to sue the

automobile retail dealer and its wholesaler as well as the importer

and manufacturer of the car (VWoA and VWAG) in Oklahoma,

where they had an accident in the vehicle. The Supreme Court held

that for Oklahoma to assert personal jurisdiction over the retail

dealer and wholesaler would violate their due process rights,

because both were New York corporations which had no business

contacts with Oklahoma and which had not attempted in any way

to market any cars in Oklahoma or otherwise derived benefit from

Oklahoma’s laws. To hold otherwise, stated the court, would mean

‘‘fe]very seller of chattels would in effect appoint the chattel his

agent for service of process.’’ /d. This is not in conflict with the

principle we assert here, though. Klippan, in contrast to the local

distributors sued in the World Wide case, has deliberately designed

and placed its product with a manufacturing and sales organization

which it knew would market its product throughout the fifty states.

The World Wide opinion explicitly recognizes this distinction:

Hence if the sale of a product of a manufacturer or distributor

such as Audi or Volkswagen is not simply an isolated occur-

rence, but arises from the efforts of the manufacturer or

distributor to serve, direct!y or indirectly, the market for its

products in other states, it is not unreasonable to subject it to

suit in one of those states if its allegedly defective merchandise

has there been the source of injury to its owner or to others.

The forum state does not exceed its powers under the Due Pro-

cess Clause if it asserts personal jurisdiction over a corporation

that delivers its products into the stream of commerce with the

expectation that they will be purchased by consumers in the

forum state.

7a

no more burdensome for that party to defend a separate in-

demnity action than to appear in the original suit.’ The fact

that the party seeking indemnity or contribution is a foreign

corporation rather than the original injured plaintiff is not a

justification for immunizing an ultimately responsible party

from liability under the laws of the state where the injury oc-

curred, see, e.g., Washington v. U.S. Suzuki Motor Corp.,

390 A.2d 1339, 1341 (Pa. Super. Ct. 1978); Rovin Sales Co.

v. Socialist Republic of Romania, 403 F. Supp. 1298, 1302

(N.D. Ill, 1975); See Stephenson v. Duriron Co., 401 P.2d

423, 429 (Alaska 1965). Inconvenience to at least some parties

will probably be associated with litigation in either this

jurisdiction or the German forum which Klippan prefers. It

appears that legal doctrine, documents, exhibits, witnesses,

and counsel from both Germany and Alaska may be involved

in the action. Of the named parties, two are German and two

’ This conclusion holds true where the original defendant

distributor of a defective product settles with the injured plaintiff

and then seeks indemnity against the manufacturer after the

Originally injured party has been dismissed from the action. This

situation occurred in Ross v. Spiegel, Inc., 373 N.E. 2d 1288 (Ohio

App. 1977), where the court stated:

It is unfair that a defendant be able to insulate itself against

personal jurisdiction in a state where an injury is caused by its

product and where the goods were actually sold and used by

selling its goods to a middleman distributor and washing its

hands of any knowledge of where the goods are actually sold

and used. For this reason, the ‘stream of commerce’ theory has

evolved for holding a foreign manufacturer subject to personal

jurisdiction in the state where a sale is made and a claim oc-

curs, if that defendant places a substantial amount of goods in-

to the flow of commerce in the United States so that it can

reasonably be anticipated that part of the goods will be sold in

the forum state. (citation) The due process test of fair play and

substantial justice is satisfied where the defendant, a large com-

pany, derives substantial sales revenues from the United States

market place even though its sales are made outside the state of

Ohio for distribution whereever the immediate purchaser of its

preduct deems best.

Id. at 1293 (emphasis added). Accord, Sells v. International

Harvester, Inc., 513 F.2d 762, 764 (Sth Cir. 1975); Beetler v. Zotos,

388 F.2d 243, 246 (7th Cir. 1967), rehearing denied, 11968.

8a

are American corporations. The original injury and underly-

ing litigation occurred in this state. Under these cir-

cumstances, Alaska’s jursdictional power must be upheld

despite claims of inconvenience and unreasonableness by Klip-

pan.

II. Forum Selection Clause and VWAG

We also affirm the superior court’s enforcement of the

forum selection clause against VWAG. The clause in question

was drafted by VWAG, and incorporated as a part of the

purchase order which served as the contractual agreement be-

tween Klippan and VWAG for the sale of Klippan’s seatbelt

assemblies to VWAG. The clause in translation reads:

Venue for all disputes that may result from our orders

is the court of competent jurisdiction for Wolfsburg.

The validity and interpretation of a forum selection

clause is a question of first impression in Alaska. These

clauses provide for the designation of a specific forum for the

litigation of disputes between the parties to the agreement.

They may take either of two forms generally. One type of

clause denotes a consent to personal jurisdiction by the par-

ties to a particular forum, but not to the exclusion of other

forums; the other form of clause designates a forum as the

mandatory, exclusive arena for the resolution of all disputes

to which ihe clause applies, even though other courts might

have personal jurisdiction over the parties. Gilbert, Choice of

Forum Clauses in International and Interstate Contracts, 65

Ky. L. J. 1, 5-7 (1976).

At common law, forum selection clauses were generally

considered per se invalid on the grounds that a court’s

jurisdiction could not be contravened by an agreement be-

tween litigating parties or that they were against public policy.

See, Reese, The Contractual Forum: Situation in the United

States, 13 Am J. Comp. L. 187, 188 (1964). While many

9a

courts still adhere to the common law rule,’ the recent and

favored trend is to apply a ‘‘reasonableness’’ test in determin-

ing whether to enforce such a clause, once it is concluded that

it truly specifies a mandatory, exclusive forum for the litiga-

tion of the dispute in question.’ This test has been expressed

according to varying formulas.'® The current status of the law

* See e.g., Fidelity Union Life Ins. Co. v. Evans, 477 §.W.2d 535

(Tex. 1972); Cartridge Rental Network v.Video Entertainment Inc.,

“209 S.E.2d 132 (Ga. App. 1974); Fidelity and Deposit Co. of Md.

v. Gainevile iron Works, Inc., 189 S.E.2d 130 (Ga. App. 1972).

* E.g., M/S Bremen v. Zapata Offshore Co., 407 U.S. 1, 32 L.

Ed. 2d 513 (1972); Coppeweld Steel Co. v. Demag-Mannesmann-

Bohler, 578 F.2d 953, 964-966 (3rd Cir. 1978); Leasewell, Lid. v.

Jake Shelton Ford, Inc., 423 F. Supp. 1011, 1015-1016 (S.D. W.Va.

1976). See Gilbert, Choice of Forum Clauses in International and

Interstate Contracts, 65 Ky. L. J. 79 (1976); Collins, Choice of

Forum and the “xercise of Judicial Discretion, The Resolution of

an Anglo-American Conflict, 22 Int. and Comp. L.Q., 332, 338-343

(1973); Restatement (Second) of Conflict of Laws §80 (1971).

'° The Model Choice of Forum Act, adopted in few states, pro-

vides the following criteria:

SECTION 3. [Action in Another Place by Agreement]. If the

parties have agreed in writing that an action of a controversy

shall be brought in a court of another state and it is brought in

a court of this state, the court will dismiss or stay the action,

as appropriate, unless

(1) the court is required by statute to entertain the

action;

(2) the plaintiff cannot secure effective relief in the

other state, for reasons other than delay in bring-

ing the action;

(3) the other state would be a substantially less con-

venient place for the trial of the action than this

state;

(4) the agreement as to the place of the action was

obtained by misrepresentation, duress, the abuse

of economic power, or other unconscionable

means; or

(5) it would for some other reason be unfair or

unreasonable to enforce the agreement.

17 Am. J. Comp. 1. 293-96 (1969). See also, Gilbert, supra, at

30 n.164.

10a

with respect to forum selection clauses in international com-

mercial agreements, however, centers around M/S Bremen v. °

Zapata Offshore Co., 407 U.S. 1, 32 L. Ed. 2d 513 (1972).

The United States Supreme Court in that case stated:

There are compelling reasons why a freely negotiated

private international agreement, unaffected by fraud, un-

due influence, or overweening bargaining power, such as

that involved here, should be given full effect

Manifestly much uncertainty and possible great inconven-

ience to both parties could arise if a suit could be main-

tained in any jurisdiction in which an accident might oc-

cur .... The elimination of all such uncertainties by

agreeing in advance on a forum acceptable to both par-

ties is an indispensable element in international trade.

* * *

[I]t should be incumbent on the party seeking to escape

his contract to show that trial in the contractual forum

will be so gravely difficult and inconvenient that he will

for all practicable purpose be deprived of his day in

court. Absent that there is no basis for concluding that it

would be unfair, unjust or unreasonable to hold that

party to his bargain.

407 U.S. at 12-13, 18 32 L.Ed. 2d at 522-23, 525 (emphasis

added). After placing this heavy burden in a party attempting

to show that a forum selection clause is unreasonable, the

Supreme Court in Bremen approved of voiding such a clause

on public policy grounds:

A contractual choice-of-forum clause should be held

unenforceable if enforcement would contravene a strong

public policy of the forum in which suit is brought,

whether declared by statute or by judicial decision.

407 U.S. at 15, 2L. Ed. 2d at 523.

We conclude that the forum selection clause to which

VWAG §s secured Klippan’s agreement unambiguously

designates the Wolfburg court of competent jurisdiction as

the sole and exclusive forum to which either party must sub-

mit ‘‘all disputes that may arise’ from the purchase orders

for the seat belt assemblies at issue. The language is man-

lla

datory. ‘‘Venue... is... the court’’ (emphasis added). This

language compares closely with the mandatory and exclusive

clause in Bremen, which states ‘‘[a]ny dispute arising must be

treated before the London Court of Justice.’’ 407 U.S. at 2,

32 L. Ed. 2d at 516. It is quite distinguishable from the per-

missive, nonexclusive clauses cited by VWAG. In Engel v.

Shubert Theatrical Co., 151 N.Y.S. 593, 594 (App. Div.

1915), the parties stated that they ‘‘agree to submit to the

jurisdiction of the Vienna courts’’ in case of dispute. In

Reavis v. Exxon Corp., 396 N.Y.S.2d 774, 777 (App. Div.

1977), the city of Caracas was designated as ‘‘a special

domicile . . . subject to the jurisdiction of the Courts of the

Federal District.’’

We also conclude that the instant forum selection clause

encompasses the subject matter of this dispute. VWAG

characterizes its action as one for indemnity and contribution

arising solely from Alaska statutory law and equitable prin-

ciples rather than from contract. Yet VWAG’s complaint in

this action also alleges breach of express or implied warranties

of merchantability and fitness for ordinary purposes. In

Bremen the United States Supreme Court fully enforced a

forum selection clause in the contract applicable to ‘‘any

disputes arising’’ in an action alleging negligence in tort as

well as breach of contract. 407 U.S. at 4, 32 L.Ed. 2d at 517.

We further agree with the superior court’s conclusion that

any ambiguity in the clause in this regard should be resolved

against the maker of the contract, VWAG. See Zapata

Marine Serice v. O/Y Finnlines Ltd., 571 F.2d 208, 209 (Sth

Cir. 1978).

VWAG also argues that the issue of the validity of the

forum selection clause should not have been determined prior

to its submission of affidavits as to the intent in drafting the

provision. From the record it is clear that the question of am-

biguity was raised and argued before the superior court prior

to its dismissal of the action. VWAG had an opportunity at

that time to present extrinsic evidence to aid interpretation of

the clause, of which it did not take advantage.

12a

Enforcing the forum selection clause against VWAG will

not be unreasonable or against any public policy under the

Bremen criteria. No evidence has been shown of unequal

bargaining power or fraud which worked to the disadvantage

of VWAG in negotiating the agreement. 407 U.S. at 12, 32

L.Ed. 2d at 522. VWAG contends that it is unlikely to obtain

a remedy in the German forum, based on allegations in Klip-

pan’s complaint in its action in a German court that no right

of contribution or indemnity based on strict liability exists.

Yet VWAG has not denied that it has an opportunity to fully

present its legal position in the German forum. The scanty

materials on German law submitted to this court leave us un-

convinced that a remedy will be unavailable to VWAG in

Germany. VWAG’s own pleadings in the pending German ac-

tion maintain that Klippan is liable under German and Alaska

law to indemnify VWAG for the amount of settlement with

Dr. Munns. The only direct citation to German law furnished

to this court provides for a right of contribution between

‘‘ioint debtors.’? German Civil Code, Sec. 426, par. 1. Given

this record we cannot conclude that VWAG has met its

burden under Bremen of showing that enforcement of the

clause will for all practicable purpose deprive it of its day in

court.'' And while we have determined that litigation of this

case in Alaska would not be so unreasonable as to violate due

process of law, it is not apparent to us that forcing VWAG to

submit to German jurisdiction in a location convenient to the

main parties in the action would be sufficiently inconvenient

to allow VWAG to escape from the forum for which it

originally bargained. Finally, because the record we have been

furnished does not indicate a lack of an indemnity or con-

'' The bare pleadings and single citation to the German Civil

Code in this case fall short of the evidence submitted in Chem. Car-

riers Inc, v. L. Smit & Co.’s Internationale Sleepdienst, 154 F.

Supp. 886 (S.D.N.Y. 1957), cited by VWAG. In that case an opi-

nion letter from counsel ‘‘stated to be learned in the Netherlands

Law’’ explained that the remedy sought in the American jurisdic-

tion would not be available in the foreign forum. 154 F. Supp. at

888-89.

l3a

tribution remedy in the German forum, we also conclude that

the policy in favor of these remedies embodied in Alaska law

will not be contravened by enforcement of the forum selec-

tion clause.

lil. Forum Selection Clause and VWoA

We hold that the superior court erred in enforcing the

forum selection clause against VWoA, however. VWoA was

not a party to the purchase order contract between VWAG

and Klippan. That an identical forum selection clause was

agreed to by VWoOA in its purchases of autos from VWAG is

of no consequence. That forum selection clause applies to

disputes concerning transactions between VWAG and VWoA,

not VWAG and Klippan or VWoA and Klippan. Likewise,

VW0OA’s status as a wholly-owned subsidiary of VWAG does

not justify binding VWoA to VWAG’s separate contractual

agreement with Klippan. A subsidiary corporation is normally

considered an entity separate and distinct from its parent.

Berger v. Columbia Broadcasting Systems, Inc., 453 F.2d

991, 994 (Sth Cir.), cert. denied, 409 U.S. 848, 34 L. Ed. 2d

89 (1972). The fact that the parent corporation owns all of

the stock issued by its subsidiary is not reason enough alone

to disregard the separate legal identities of subsidiary and

parent. See Jackson v. General Elec. Co., 514 } .2d 1170

(Alaska 1973); Edgar v. Fred Jones Lincoln Mercury, 524

F.2d 162, 166 (10th Cir. 1975); Berger v. Columbia Broad-

casting Systems, Inc., supra, at 994; York Chrysler-Plymouth,

Inc. v. Chrysler Credit Corp., 447 F.2d 786, 791 (Sth Cir.

1971); Royal Indus. v. St. Regis Paper Co., 420 F.2d 449, 453

(9th Cir. 1969); Hanson Southwest Corp. v. Dal-mac Constr.

Co., 554 S.W.2d 712, 716 (Tex. Civ. App. 1977); Unijax, Inc.

v. Factory Ins. Ass’n, 328 So.2d 448, 454 (Fla. App. 1976).

In Jackson v. General Elec. Co., supra at 1173, an action

seeking to hold a parent corporation responsible for the tort

of its subsidiary, this court described the limited cir-

cumstances which do warrant ‘‘piercing the corporate veil:”’

A parent corporation may be held liable for its sub-

sidiary’s conduct when the parent uses a separate cor-

l4a

porate form to defeat public convenience, justify wrong,

commit fraud, or defend crime. The parent corporation

may also be liable for the wrongful conduct of its sub-

sidiary when the subsidiary is the mere instrumentality of

the parent. Liability is imposed in such instances simply

because the two corporations are so closely intertwined

that they do not merit treatment as separate entities.

See also Elliot v. Brown, 569 P.2d 1323 (Alaska 1977); Ben-

dix Corp. v. Adams, P.2d , Op. No. 2042

(Alaska, March 14, 1980). The party seeking to have the in-

demnity of parent and subsidiary corporation treated as one

has the burden of proof to show that the necessary cir-

cumstances exist. /n Re Beck Industries, 479 P.2d 410, 417

(2d Cir.), cert. denied. 414 U.S. 858, 38 L. Ed. 2d 108 (1973).

Klippan has failed to present evidence that VWoA is a mere

instrumentality of VWAG. Evidence in the record on the con-

trary shows that VWoA purchases autos outright from

VWAG under contractual agreement and resells them to other

distributors under separate contracts, as well as purchasing

and selling on its own account autos and other products from

manufacturers other than VWAG. VWoOA is incorporated in

a separate jurisdiction from VWAG, maintains its own

separate records, owns property in its own name, conducts its

own legal and financial affairs and in short carries on

business as a separate entity from VWAG. WVoA con-

tributed one-half of the settlement sum paid to Dr. Munns

from its own funds. These factors — independence of the

subsidiary in the conduct of its business, contractual defini-

tion of its relationship to the parent corporation, and ade-

quate capitalization of the subsidiary — were considered im-

portant criteria in the determination of whether the subsidiary

should be treated as a mere instrumentality of its parent cor-

poration in Jackson, supra.'? Thus Klippan has not met the

'2 §14 P.2d at 1174. In Jackson, the following criteria to consider

in determining whether a subsidiary corporation should be treated

as an instrumentality of its parent were listed:

(a) The parent corporation owns all or most of the capital

stock of the subsidiary.

lSa

burden of proof required to subject VWoA to the forum

selection provision of a contract entered into by VWAG and

Klippan. See, e.g. York Chrysler-Plymouth, Inc., v. Chrysler

Credit Corp., 447 F.2d 786, 791 (Sth Cir. 1971), Berger v.

Columbia Broadcasting Systems, Inc., 453 F.2d 991 (5th

Cir.), cert. denied, 409 U.S. 848, 34 L. Ed. 2d 89 (1972).

The decision of the Superior Court is Affirmed with

respect to dismissal of VWAG’s action and Reversed with

respect to dismissal of VWoA’s action. This case is remanded

to the superior court for further proceedings in accordance

with this opinion.

(b) The parent and subsidiary corporations have common

directors or officers.

(c) The parent corporation finances the subsidiary.

(d) The parent corporation subscribes to all the capiial stock

of the subsidiary or otherwise causes its incorporation.

(e) The subsidiary has grossly inadequate capital.

(f) The parent corporation pays the salaries and other ex-

penses or losses of the subsidiary.

(g) The subsidiary has substantially no business except with

the parent corporation or no assets except those conveyed

to it by the parent corporation.

(h) In the papers of the parent corporation or in the

statements of its officers, the subsidiary is described as a

department or division of the parent corporation, or its

business or financial responsibility is referred to as the

parent corporation’s own.

(i) The parent corporation uses the property of the subsidiary

as its Own.

(j) The directors or executives of the subsidiary do not act in-

dependently in the interest of subsidiary but take their

orders from the parent corporation in the latter’s interest.

(k) The formal legal requirements of the subsidiary are not

observed.

514 P.2d at 1173. Another basis for treating parent and subsidiary

as One, mentioned in Jackson, is when the subsidiary actsd as an

agent of the parent for some purpose. 514 P.2d at 1173 n.8. This

situation is not present in this case.

l6a

APPENDIX B

IN THE SUPERIOR COURT FOR THE STATE OF ALASKA

THIRD JUDICIAL DISTRICT

No. 77-4255

VOLKSWAGEN WERK, A.G., a/k/a VOLKSWAGEN WERK, AK-

TIENGESELLSCHAFT, a foreign corporation, and VOLKSWAGEN

Or America, INcC., a New Jersey corporation, Plaintiffs,

V.

KLIPPAN, GmhM, ALLIED CHEMICAL CORPORATION, and

EVERETT DALE VAUGHN, Defendants.

Decision

September 15, 1978

Plaintiffs, Volkswagenwerk, A.G. and Volkswagen

of American, Inc., had judgment entered against them as

defendants in prior cause No. 74-5870. The special jury ver-

dict in that case found strict liability in tort, based upon

plaintiff’s use, in the manufacture and sale of their vehicles,

of a seatbelt buckle which released due to a defect and that

the release of the buckle during an accident proximately caus-

ed injuries suffered by one Dr. Charles R. Munns, plaintiff in

that action.

Plaintiffs in this action seek indemnity and contribution

from defendants Klippan and Allied Chemical as manufac-

turer and supplier of the defective seat belt restraint systems.

Volkswagenwerk A.G. (VWAG) purchased the components

from Klippan in Germany for use in their automobiles.

Volkswagen of American (VWoA) subsequently purchased

the completed automobile from YVWAG in Germany for

distribution in the United States. (Note: The claim against

defendant Everett Dale Vaughn was dismissed with prejudice

by stipulation of the parties and order of this court, dated

May 25, 1978.) Plaintiffs base their claim in this action on

breach of implied or express warranty of merchantability or

fitness for purpose, defective or negligent design, and

17a

negligence or strict liability for failure to warn of any risks or

danger posed by the produce provided. Defendant Klippan

now moves to dismiss based on three affirmative defenses

asserted by defendant in its answer to plaintiff’s complaint:

Defendant’s first afirmative defense is that this court

lacks the requisite jurisdiction over this answering defendant.

Personal jurisdiction over a foreign or out-of-state defendant

whose products cause injury to person or property within this

State is conferred by AS 09.05.015 et seq, Alaska’s so-called

‘‘long-arm’’ statute. The Alaska long-arm statute has been

construed to extend to the maximum reach consistent with the

guarantees of due process under the Fourteenth Amendment.

Jonz v. Garett/Airesearch Corp., 490 P.2d 1197 (Alaska

1971).

The issue for decision is whether the application of

Alaska’s long-arm statute to the defendant, Klippan, in this

case world violate due process principles. It is well established

that a state may not render judgment against a non-resident,

consistent with due process, in the absence of personal

jurisdiction. Pennoyer v. Neff, 95 U.S. 714 (1877). Personal

jurisdiction over a non-resident defendant, through a state’s

long-arm statute, requires certain minimum contacts with the

State ‘so that maintenance of the suit does not offend tradi-

tional notions of fair play and substantial justice.’’ Interna-

tional Shoe Co. v. Washington, 326 U.S. 310(1945). General-

ly, to establish those minimum contacts, the defendant must

have done some act by which he purposely availed himself of

the privelege of conducting business within the forum state,

thus invoking the benefits and protections of that state. Han-

son v. Denkla, 375 U.S. 235 (1958).

Defendant Klippan argues that they have engaged in no

conduct directly with Alaska for the Purpose or with the

result of involving the benefits and protections of Alaska law.

Klippan suggests that their only contact with the state of

Alaska can be that it manufactured one component part of a

product that ultimately happened to enter the State of Alaska

18a

and allegedly caused injury here. Klippan, however, was

aware that certain of their products might reach the United

States as evidenced by the fact that they communicated with

federal and state agencies in order to obtain issuance of pro-

duct approval certification for its belts.

The ‘‘stream of commerce’’ theory recognizes that it is

reasonable for a manufacturer who has placed its product in

commerce to defend actions in forums where it is foreseeable

that the product may arrive. Thus, as in Commodities World

Int’l. Corp. v. Royal Milc., Inc., 440 F. Supp. 1373 (D.C.

Puerto Rico 1977) at 1378:

Foreseeability that a shipped product may eventually

reach a state satisfies the requirement that a defendant

puposely avails itself of conducting business activities

within the forum state. (Emphasis added)

The Alaska Court has indicated approval of the stream

of commerce theory in Modern Trailer Sales, Inc. v.

Traweek, 561 P.2d 1192 (Alaska 1977), wherein the court us-

ed the following language from Jones Enterprises, Inc. v.

Atlas Service Corp., 442 F.2d 1136,1140 (9th Cir. 1971):

It is sufficient that, as here, the defendant purposefully

sets his product or his design into the stream of com-

merce, knowing or having reason to know that they will

reach the forum state and that they create a potential

risk of injury.

561 P.2d 1196. See also Duple Motor Bodies Ltd. v. Holl-

ingsworth, 417 F.2d 231 (9th Cir. 1969).

Though defendant Klippan relies on a three step analysis

suggested in Amba Marketing Systems, Inc. v. Jobar Interna-

tional, Inc., 551 F.2d 784 (9th Cir. 1977), we feel that the

analysis merely outlines the existing guidelines as developed

by prior cases evidenced by the fact that the court made

specific reference to the stream of commerce theory as prece-

dent without any suggestion that it was overruled or

superceded by Amba.

19a

Klippan implies that, as a supplier of a component part,

it is Outside the reach of the stream of commerce theory. This

argument is not supported by modern theories of products

liability. It is not offensive to fair play or substantial justice

to require a manufacturer to defend his product wherever he

himself ‘has placed it, either directly or through the normal

distribution channels of trade. Duple, supra, at 235. A

manufacturer should not be able to insulate himself from

liability by using a complex network of distribution and

thereby claim to direct contact. The use of a middleman must

clearly indicate to a manufacturer that he is not selling to a

user and, in fact, unless he imposes restrictions on his mid-

dlemen he expands his horizons of amenability to any state,

since he willingly and knowingly enters into such an arrange-

ment. Commodities, supra, at 1379. In addition, in Dot-

terweich v. Yokohama International Corp., 416 F. Supp. 542

(D. Minn. 1976), the court stated in footnote 11 at 550:

A party’s status as a component part manufacturer does

not in all instances foreclose the exercise of jurisdiction.

Such an exercise of jurisdiction does not offend due

process if minimum contacts are established.

See also Sells v. International Harvester Co., Inc., 513 F.2d

762 (Sth Cir. 1975). Duple, supra.

We find that defendant, Klippan, has sufficient

minimum contacts with the State of Alaska through the plac-

ing of their seat belt restraint system in the general stream of

commerce. It was altogether foreseeable that the seat belts

would be employed in Volkswagens being shipped to the

United States and was thus, not unforeseeable that they might

eventually reach the State of Alaska. The fact that defendant

was merely a component part manufacturer and did nuvi

directly engage in dealings with Alaska does not relieve them

from answering in this state for injuries allegedly resulting

from the use of their products here. These minimum contacts

are sufficient to exercise personal jurisdiction over Klippan in

the pending action consistent with the principles of due pro-

cess.

20a

Defendant’s second affirmative defense is that this

answering defendant and plaintiff, VWAG, entered into a

contractual relationship whereby the plaintiff, VWAG, for

itself and for VWoA, specified that all disputes would be

determined under German law and in a specific German

court. That parties are free to negotiate and contract the

terms of their business dealings is the nature of the law of

contracts. The parties to this action are both corporations

who deal frequently with one another and there is offered no

evidence that their dealings are anything but at arm’s length.

By the terms of the agreement between them, in the form

of a purchase order drafted by VWAG, venue for all disputes

that result from VWAG’s orders is the court of competent

jurisdiction for Wolfsburg. It should be noted that the

English translation of their agreement was provided by defen-

dant, Klippan, but that plaintiffs do not contest its accuracy

or offer the original into evidence. There is thus, no room to

dispute the existence or content of the forum selection clause.

The current status of the law with regard to forum selec-

tion clauses centers around M/S Bremen v. Zapata Offshore

Co., 407 U.S. 1 (1972). The United States Supreme Court

stated at 12:

There are compelling reasons why a freely negotiated

private international agreement, unaffected by fraud, un-

due influence, or overwhelming bargaining power, such

as that involved here, should be given full effect.

...Manifestly such uncertainty and possible great

inconvenience to both parties could arise if a suit could

be maintained in any jurisdiction in which an accident

might occur. ... The elimination of all such uncertain-

ties by agreeing in advance on a forum acceptable to

both parties is an indispensable element in international

trade.

And it further stated, at 18:

...It should be incumbent on the party seeking to

escape his contract to show that trial in the contractual

2la

forum will be so greatly difficult and inconvenient that

he will for all practicable purpose be deprived of his day

in court. Absent that, there is no basis for concluding

that is would be unfair, unjust or reasonable to hold that

party to his bargain. (Emphasis added)

Plaintiffs argue that the forum selection clause does not

apply to this action as it arose by operation of Alaska law,

and is independent of any contractual relationship between

VWAG and Klippan. In deed, there appears some dispute as

to the actual scope of the clause with relationship to the pres-

ent dispute. It must be noted, however, that VWAG drafted

the forum selection provision as part of their purchase order.

It is well established that when a contract provision is subject

to Opposing, yet reasonable interpretations, an interpretation

is preferred which operates more strongly against the maker.

Zapata Marine Service v. O/Y Finnlines Ltd., 571 F.2d

208,209 (Sth Cir. 1978). Thus, any ambiguity found to exist

in that provision must be construed so as to prevent VWAG

from avoiding the obligations of its own contract.

Plaintiffs further argue that application of the forum

selection clause is against public policy and should not be en-

forced. The Bremen court suggests that questions of enforce-

ment due to contravention of public policy are not controlling

in international commercial agreements and cited with ap-

proval from the dissenting opinion in the Court of Appeals

by Judge Wisdom:

Two. concerns underlie the rejections of exculpatory

agreements (on public policy grounds): that they may be

produced by overwhelming (sic) bargaining power; and

that they do not sufficiently discourage negligence. . . .

After discussing the absence of any evidence in that case of

overwhelming (sic) bargaining power, Judge Wisdom conclud-

ed:

We should not invalidate a forum selection clause unless

we are firmly convinced that we would thereby

22a

significantly encourage negligent conduct within the

boundaries of the United States.

488 F.2d at 907-908. As stated previously, there exists no

evidence in this case that one of the parties possessed any

overwhelming bargaining power as against the other. In addi-

tion, there is no evidence offered supporting the conclusion

that to uphold this forum selection agreement would in any

way significantly encourage negligent conduct within this state

or the boundaries of the United States as a result. We,

therefore, find no basis for rejection of the agreement on

public policy grounds.

Plaintiffs’ final argument is that application of the forum

selection clause would be unjust and unreasonable. As noted

previously in a quote from Bremen at 18, the only basis for

concluding that a clause would be unjust, unfair or

unreasonable would be by a showing that the contractual

forum will be so greatly difficult and inconvenient that for all

practical purpose a party will be deprived of their day in

court.

Plaintiffs’ contention that they have no adequate remedy

under German law is without merit. Litigation of these par-

ties’ rights is currently underway in the German courts. Both

parties have appeared there and argued their respective posi-

tions. Regardless of any allegations or speculation regarding

the outcome of that action, plaintiff may not claim that

dismissal of this action will effectively deprive them of their

day in court. We find that due to the ongoing litigation in

Germany, application of the forum selection clause in this

case is not unjust and unreasonable.

Therefore, the forum selection clause as drafted by

VWAG and made a part of the purchase agreement between

VWAG and Klippan is binding and must be given effect. The

agreement is further applicable to VWoA as a wholly owned

subsidiary of VWAG.

Because the second affirmative defense alleged by defen-

dant, disposes of this case, we make no determination as to

23a

the merits of defendant’s third affirmative defense. The case

is dismissed on the ground that the appropriate forum in this

instance is the court of competent jurisdiction of Wolfsburg

in accordance with the terms of the contract between the par-

ties.

SO ORDERED.

Dated at Anchorage, Alaska this 15th day of September

1978.

/s/ PETER J. KALAMARIDES

Peter J. Kalamarides

Superior Couri Judge

I certify that on this 15th

day of September 1978 |

mailed copies of the

foregoing documents to

Mr. David Thorsness and

Mr. Joseph Young at

their addresses of record.

/s/ SCARLETT O. Watts

Scarlett O. Watts

Secretary

I hereby certify that the an-

nexed instrument is a true

and correct copy of the

original on file in my of-

fice.

ATTEST: 9/18/78

/s/DONNA HOLMAN

Donna Holman

Clerk—Trial Courts

State of Alaska At

Anchorage

24a

APPENDIX C

Constitutional Provisions

Fourteenth Amendment To United States Constitution

Section 1. ...No state shall make or enforce any law

which shall abridge the privileges or immunities of citizens of

the United States; nor shall any State deprive any person of

life, liberty, or property, without due process of law; nor

deny to any person within its jurisdiction the equal protection

of the law.

Statutes

AS 09.05.015

(a) A court of this state having jurisdiction over the

subject matter has jurisdiction over a person served

in an action according to the rules of civil pro-

cedure. ...

(4) in an action claiming injury to person or prop-

erty in this state arising out of an act or omis-

sion out of this state by the defendant, provid-

ed, in addition, that at the time of the injury

either.

(A) solicitation or service activities were carried

on in this state by or on behalf of the

defendant; or

(B) product, materials or things processed,

serviced or manufactured by the defendant

were used or consummed in this state in the

ordinary course of trade;