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

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Petition
- **Published:** January 1, 1980
- **Citation:** 449 U.S. 974

## Text

80-185
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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
er Cr THR CAME... ... occ cc cacscevenseveveces 3

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
es ce nek cone as cb aeE Ae Rede e he eRe RTS 15
ccc diseadoictecdevdoreecietescentwees la
EE Sin aie 500-0 6040504 4064006 600000 Hedda ee Eee 16a

RG ascend esneedendoeecessaresesveeresh 24a

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;

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385007_0207%3A1. Public record. Not legal advice.