Delaware

Warning: The following opinion is provided for purposes of discussion only. We have not Shepardized™ this opinion, and do not know the subsequent disposition of this case nor whether the effect of the opinion has been overruled or superceded by other law.

Chaplake Holdings v. Chrysler Corporation,
No. 94C-04-164 (DE. 08/11/1995)

SUPERIOR COURT OF DELAWARE, NEW CASTLE

C.A. No. 94C-04-164

1995.DE.

August 11, 1995

CHAPLAKE HOLDINGS, LTD., VEHICLISE LTD., PORTMAN LAMBORGHINI, LTD. AND DAVID T. LAKEMAN, PLAINTIFFS,

v.

CHRYSLER CORPORATION, ET AL. (DELAWARE) AND AUTOMOBILI LAMBORGHINI S.P.A. A/K/A NUOVA AUTOMOBILE FERRUCCIO LAMBORGHINI S.P.A., DEFENDANTS.

Laurence V. Cronin, Esquire, Wilmington, Delaware. Attorney for Plaintiffs.

Thomas C. Marconi, Esquire, Wilmington, Delaware. Attorney for Defendant Chrysler Corporation.

R. Karl Hill, Esquire, Wilmington, Delaware. Attorney for Automobili Lamborghini S.p.a.

John E. Babiarz, Jr., Judge

The opinion of the court was delivered by: Babiarz

OPINION AND ORDER

Babiarz, Judge.

This action involves allegations of fraud and breach of contract arising out of a written concession contract governing the sale of Lamborghini automobiles in Great Britain, the Channel Islands and Ireland. The complaint identifies four plaintiffs: Vehiclise Ltd. ("Vehiclise"), Portman Lamborghini Ltd. ("Portman"), Chaplake Holdings Ltd. ("Chaplake"), and David T. Lakeman ("Lakeman"). Plaintiffs seek relief against two defendants: Automobili Lamborghini, S.P.A. ("Lamborghini") and Chrysler Corporation [Delaware] ("Chrysler"). Lamborghini has filed a Motion to Dismiss for lack of personal jurisdiction, insufficiency of process and insufficiency of service of process. At oral argument, Lamborghini waived its defenses based upon insufficiency of process and insufficiency of service of process. However, as an alternative ground for dismissal from this litigation, Lamborghini relies upon a forum selection provision contained in the concession contract. This is the Court's decision on Lamborghini's motion.

Vehiclise and Portman are limited liability companies organized under the laws of the United Kingdom with principal offices located in London, England. Plaintiffs represent that Portman has been in receivership since 1992. Both Vehiclise and Portman are wholly-owned by Chaplake, a Channel Islands company with principal offices in Saint Peter Port, Guernsey, Channel Islands. David Lakeman, a personal guarantor of many of the debts of Portman, is a citizen of Great Britain with a principal residence in Southampton. The complaint states that Lakeman and David Jolliffe, who is not a party to this litigation, formed Vehiclise in 1984. Chrysler is a Delaware Corporation with its principal place of business in Michigan. Lamborghini is an Italian corporation with a principal place of business in Sant Agata, Bolognese, Italy.

The facts alleged in the complaint are as follows. In June 1984, Vehiclise and Lamborghini entered into a written concession contract pursuant to which Vehiclise was appointed the sole agent for the sale of Lamborghini-manufactured automobiles in the United Kingdom, the Channel Islands and Ireland. In or about 1987, Chrysler purchased 100% of the shares of Lamborghini. *fn1 Thereafter, Chrysler participated in the development of a five-year plan for Lamborghini, pursuant to which Lamborghini was to increase its production of automobiles by over 300% and design a new line of automobiles (the "Bravo" line) for sale at the low end of Lamborghini's competitive range. The Bravo line was to be ready for delivery in 1989.

According to the complaint, Chrysler caused the five-year plan to be delivered to Vehiclise and Portman (Vehiclise's appointed trading agent under the concession contract). The five-year plan required substantial expansion of existing Lamborghini dealerships. Employees of both Chrysler and Lamborghini assured Vehiclise that the expansion, and the financial investment associated therewith, would be justified by deliveries of adequate supplies of Bravo and Diablo automobiles. Employees of Chrysler and Lamborghini indicated that Vehiclise would lose its dealership rights if it did not expand. Based upon defendants' representations, plaintiffs borrowed in excess of $: 1 million to expand their facilities in Great Britain.

Furthermore, the complaint states that Vehiclise received in excess of 50 orders for new Diablo automobiles from 1989 through 1991. Each such order was confirmed by a deposit of $: 25,000.00. Pursuant to an agreement between Portman and Lamborghini, 60% of each deposit was forwarded to Lamborghini, and the balance of each deposit was retained by Portman.

Plaintiffs assert that Lamborghini breached the concession contract by, inter alia, failing to deliver Diablos in a timely manner, misusing deposit monies, and requiring full payment for each Diablo prior to release from the factory. According to the complaint, Lamborghini also failed to increase its production of Diablos and failed to deliver any Bravos. Plaintiffs allege that Chrysler is liable for breach of implied contract as a result of such failures. Additionally, the complaint alleges fraud against both Chrysler and Lamborghini for, inter alia, misrepresenting the delivery status of Diablo and Bravo automobiles at a time when defendants knew that technical and financial difficulties precluded timely delivery of such vehicles. Finally, the complaint seeks a declaration that the concession contract has not been terminated and that it remains a valid and enforceable contract.

I. PERSONAL JURISDICTION

When in personam jurisdiction is challenged on a motion to dismiss, the plaintiff bears the burden of showing a basis for the exercise of long-arm jurisdiction. Harmon v. Eudaily, Del. Super., 407 A.2d 232, 233 (1979), aff'd, Del. Supr., 420 A.2d 1175 (1980). The plaintiff can satisfy this burden by making a prima facie showing that jurisdiction is proper. Id. In order to determine whether this Court can exercise personal jurisdiction over a nonresident defendant such as Lamborghini, a two-step analysis must be undertaken. LaNuova D & B, S.p.A. v. Bowe Company, Inc., Del. Supr., 513 A.2d 764, 768 (1986). First, the Court must consider whether the Delaware long arm statute, 10 Del.C. § 3104, confers jurisdiction. Id. If so, the Court must consider whether the exercise of such jurisdiction would violate the Due Process Clause of the Fourteenth Amendment. Id. In making these determinations, the record must be construed "most strongly against the moving party." Harmon, 407 A.2d at 233.

A. The Delaware Long Arm Statute

In the instant case, plaintiffs assert that Lamborghini is subject to personal jurisdiction in Delaware under 10 Del.C. § 3104(c)(4), which provides as follows:

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

***

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

10 Del.C. § 3104(c)(4). Subsection (c)(4) is a "general" (as opposed to "specific") jurisdiction provision; i.e., it provides a basis for exercising jurisdiction over a nonresident defendant for tortious conduct which is unconnected with such defendant's activities in Delaware. See Applied Biosystems, Inc. v. Cruachem, Ltd., D. Del., 772 F. Supp. 1458, 1469 (1991). Although this provision authorizes jurisdiction where, as alleged here, both the tortious act and the injury occurred outside of Delaware, it applies only where the defendant or its agent is "generally present" in this State. Id. at 1469; see also LaNouva, 513 A.2d at 768 (under subsection (c)(4), jurisdiction may be asserted where plaintiff's claim is unrelated to the nonresident defendant's Delaware activities).

In the instant case, plaintiffs argue that Lamborghini is subject to in personam jurisdiction in Delaware because it has engaged in a "persistent course of conduct," 10 Del.C. § 3104(c)(4), in this State. According to plaintiffs, Lamborghini's persistent course of conduct in Delaware is demonstrated by the following. Lamborghini has availed itself of the protections of Delaware law by creating an entity, Automobili Lamborghini U.S.A., Inc. ("Lamborghini U.S.A."), and incorporating that entity in the State of Delaware. Additionally, plaintiffs aver that the officers and directors of Lamborghini U.S.A. have addresses at 12000 Chrysler Drive, Highland Park, Michigan. This, plaintiffs contend, constitutes substantial evidence that such officers and directors are employees of Chrysler, a Delaware corporation. Plaintiffs conclude that Lamborghini has engaged in a persistent course of conduct in Delaware by and through its relationship with Chrysler.

In the Court's view, the fact that Lamborghini was at one time owned by Chrysler, a Delaware corporation, does not show that Lamborghini engaged in a persistent course of conduct in Delaware. There is no indication that Lamborghini engaged in any activities in Delaware in connection with its relationship with Chrysler. Furthermore, the Court rejects the notion that a nonresident corporation engages in a persistent course of conduct in Delaware merely because its parent is a Delaware corporation.

Additionally, the corporate existence of Lamborghini U.S.A., standing alone, does not permit this Court to exercise personal jurisdiction over Lamborghini. It bears mention that Lamborghini U.S.A. is not a party to this action, and the record is silent on the legal relationship between Lamborghini U.S.A. and Lamborghini. However, assuming arguendo, that Lamborghini U.S.A. is a wholly-owned subsidiary of Lamborghini, that fact, standing alone, is insufficient to show that Lamborghini has engaged in a persistent course of conduct in Delaware under 10 Del.C. § 3104(c)(4). Sears, Roebuck & Co. v. Sears plc, D. Del., 744 F. Supp. 1297, 1306 (1990) (ownership of a single resident subsidiary that is not the alter ego or general agent of the parent corporation is not sufficient to establish general jurisdiction over the parent under 10 Del.C. § 3104(c)(4)); Applied Biosystems, 772 F. Supp. at 1469 (same).

The instant case is not similar to Waters v. Deutz Corp., Del. Supr., 479 A.2d 273 (1984). In Waters, the Supreme Court found that KHD, a German corporation which manufactured tractors, was subject to personal jurisdiction in Delaware under 10 Del.C. § 3104(c)(4). The plaintiff in Waters was injured while operating a KHD tractor while working at the Port of Wilmington. 479 A.2d at 274. The tractor in question was imported by KHD's wholly-owned subsidiary, Deutz, a Florida corporation which was the "sole conduit" through which KHD-manufactured tractors entered the United States. Id. Title to the tractor in question had passed to Deutz in Germany. Id. Approximately 40% of the tractors imported by Deutz arrived through the Port of Wilmington. Id. Additionally, Deutz maintained a district manager in Delaware and targeted Delaware residents in its advertising scheme. Id. Based upon these facts, the Supreme Court found that KHD was "doing business" in Delaware under § 3104(c)(4) even though KHD had no showrooms, offices or employees within the State. See id.

In contrast, there is no allegation in the instant case that Lamborghini-manufactured automobiles are imported through Delaware. Likewise, there is no assertion that Lamborghini automobiles are offered for sale anywhere within the State. Rather, plaintiffs assert only that Lamborghini automobiles are available for sale in the United States. There is no assertion that either Lamborghini or Lamborghini U.S.A. conducts any business activities in the State. Plaintiffs state only that Lamborghini U.S.A. has applied for authorization to transact business in the States of Florida and Georgia. Also, plaintiffs assert that Lamborghini has constructed a corporate headquarters in Jacksonville, Florida. *fn2 Lamborghini's alleged activities in Florida, Georgia, and the United States generally have no bearing on whether Lamborghini is subject to personal jurisdiction in Delaware. Under 10 Del.C. § 3104(c)(4), the nonresident's contacts must be with Delaware, not with the United States generally, in order to be subject to general jurisdiction in this State. Personal jurisdiction may not be based upon the nonresident's aggregated contacts with the United States as a whole. See Applied Biosystems, 772 F. Supp. at 1462. Unlike the plaintiff in Waters, plaintiffs in the instant case have failed to make a prima facie showing that Lamborghini has engaged in a persistent course of conduct in Delaware.

Plaintiffs suggest that Lamborghini may be subject to personal jurisdiction in Delaware under an alter ego theory. This theory, also recognized as the 'piercing the corporate veil' doctrine, permits courts to ignore the corporate boundaries between parent and subsidiary where fraud or inequity in the use of the corporate form is shown. Sears, 744 F. Supp. at 1304; Applied Biosystems, 772 F. Supp. at 1463. The alter ego theory has no application in the instant case for at least two reasons. First, although Chrysler and Lamborghini U.S.A. are Delaware corporations and therefore are subject to this Court's jurisdiction, plaintiffs make no allegations that either company ever acted as Lamborghini's alter ego in Delaware. *fn3 Second, assuming arguendo that the alter ego doctrine somehow applies in the instant case, this Court lacks jurisdiction to pierce the corporate veil. Park Oil, Inc. v. Getty Refining and Marketing Co., Del. Supr., 407 A.2d 533, 535 (1979); John Julian Constr. Co. v. Monarch Builders, Inc., Del. Supr., 324 A.2d 208, 210 n.1 (1974); Sonne v. Sacks, Del. Supr., 314 A.2d 194, 197 (1973). Accordingly, the Court concludes that plaintiffs cannot establish jurisdiction over Lamborghini under the alter ego doctrine.

Plaintiffs also suggest that Lamborghini may be subject to general jurisdiction in Delaware under an agency theory. Plaintiffs apparently wish to assert general jurisdiction over Lamborghini on the theory that either Chrysler or Lamborghini U.S.A. was Lamborghini's agent. To succeed on this theory, plaintiffs must show that either Chrysler or Lamborghini U.S.A. engaged in at least one of the jurisdictional activities delineated in § 3104(c)(4) as Lamborghini's general agent in Delaware. See Sears, 744 F. Supp. at 1305. In the instant case, plaintiffs have failed to make any assertions--much less a prima facie showing--that either Chrysler or Lamborghini U.S.A. ever acted as Lamborghini's general agent in Delaware. Thus, plaintiffs cannot establish jurisdiction under an agency theory.

Based on the foregoing, the Court concludes that Lamborghini is not subject to general personal jurisdiction in the State of Delaware under 10 Del.C. § 3104(c)(4). It is undisputed that remaining provisions of Delaware's long arm statute, 10 Del.C. § 3104, have no applicability under the facts of the case sub judice. Thus, there is no statutory authorization for this Court to exercise in personam jurisdiction over Lamborghini.

B. Due Process

In light of the Conclusion reached above, it is not necessary for the Court to address the question of whether the exercise of general jurisdiction over Lamborghini would comport with constitutional due process. Having nonetheless considered this issue, the Court notes that the exercise of such jurisdiction would be unconstitutional.

In order for an exercise of jurisdiction to satisfy due process, the defendant must have certain "minimum contacts" with the forum state such that maintenance of the suit does not offend "'traditional notions of fair play and substantial Justice.'" International Shoe Co. v. Washington, 326 U.S. 310, 316, 90 L. Ed. 95, 66 S. Ct. 154 (1945) (citations omitted). In considering whether such minimum contacts exist, the Court must look to the nature and quality of the defendant's activities in the forum state. See id. at 319. It is generally recognized that "the casual presence of the corporate agent or even his conduct of single or isolated items of activities in a state in the corporation's behalf are not enough to subject it to suit on causes of action unconnected with the activities there." Id. at 317 (emphasis supplied). Rather, "in order to assert general jurisdiction, the defendant's activity in the forum must be continuous and substantial." Sears, 744 F. Supp. at 1304.

In the instant case, the Court has already ruled that Lamborghini's activities in Delaware do not satisfy the "persistent course of conduct" standard of 10 Del.C. § 3104(c)(4). For the same reasons expressed in reaching that Conclusion, the Court finds that Lamborghini has not engaged in sufficient activities in Delaware to be subject to the jurisdiction of this State's courts in the instant litigation. As discussed earlier, plaintiffs have failed to make a prima facie showing that Lamborghini has engaged any activities in Delaware which could even arguably be labeled as continuous and substantial. Accordingly, the Court concludes that Lamborghini does not have sufficient minimum contacts with the State of Delaware to be subject to personal jurisdiction on a claim unrelated to its Delaware activities. The instant litigation does not arise out of, or otherwise have any connection with, any alleged activities of Lamborghini within the State of Delaware. Thus, the exercise of general jurisdiction over Lamborghini would violate the Due Process Clause of the Fourteenth Amendment.

II. FORUM SELECTION PROVISION

Although plaintiffs' complaint alleges the existence of a written concession contract, no such contract was attached to the complaint. Rather, the concession contract was made part of the record in this case by defendant Lamborghini shortly after the Court heard oral argument on Lamborghini's Motion to Dismiss. Article 10 of the contract submitted by Lamborghini includes a forum selection provision which provides as follows:

The Italian Magistrate and the Forum of Bologna will be exclusively competent in any controversy that may arise upon the interpretation or execution of the present charge, either during its course or after its cessation, as well as for any other controversy.

Lamborghini asserts that this provision presents an independent and alternative basis for the Court to dismiss Lamborghini from the instant litigation.

In considering the enforceability of forum selection provisions, Delaware courts have followed the approach adopted by the United States Supreme Court in M/S Bremen v. Zapata Off-Shore Company, 407 U.S. 1, 32 L. Ed. 2d 513, 92 S. Ct. 1907 (1972). See Process & Storage Vessels, Inc. v. Tank Service, Inc., D. Del., 541 F. Supp. 725, 732-34 (1982) ("Process"), aff'd, 3rd Cir., 760 F.2d 260 (1985); Elia Corp. v. Paul N. Howard Co., Del. Super., 391 A.2d 214 (1978) ("Elia"); see also E.I. du Pont de Nemours & Co. v. Admiral Ins. Company, Del. Super., 577 A.2d 305, 307 (1989) (citing M/S Bremen with approval). In M/S Bremen, the Supreme Court held that forum selection clauses are "prima facia valid," 407 U.S. at 10, and should be "specifically" enforced unless the resisting party "could clearly show that enforcement would be unreasonable and unjust, or that the clause was invalid for such reasons as fraud and overreaching." Id. at 15. Moreover, the Court held that:

it 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 practical purposes 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 patty to his bargain.

M/S Bremen, 407 U.S. at 18. Accord Process, 541 F. Supp. at 733; Elia, 391 A.2d at 216.

In the instant case, plaintiffs do not dispute that the concession contract submitted by Lamborghini is the contract which was executed by Lamborghini and Vehiclise in 1984. Nonetheless, plaintiffs contend that the Court should not give effect to the forum selection provision contained therein. In support of this contention, plaintiffs state that their cause of action is inextricably linked to the joint actions of Lamborghini and Chrysler. According to plaintiffs, litigating against Lamborghini in Italy while simultaneously litigating against Chrysler in Delaware would be so gravely difficult and inconvenient that plaintiffs would for all practical purposes be denied their day in court. While superficially appealing, this argument carries little weight because it is far from self evident that plaintiffs will be forced to litigate in two separate fora if Lamborghini is dismissed from this action. No reason has been offered by plaintiffs as to why they would be unable to pursue their claims against both Lamborghini and Chrysler in the contractual forum, Italy. In the Court's opinion, plaintiffs have failed to satisfy their "heavy burden" of showing that the contractual forum would be so "manifestly and gravely inconvenient" that plaintiffs would effectively be deprived of a meaningful day in court. See M/S Bremen, 407 U.S. at 19.

Plaintiffs have similarly failed to demonstrate that Italy would be an unreasonable forum for the instant litigation. In assessing the reasonableness of the contractual forum, plaintiffs encourage the Court to consider such factors as ease of access to proof, availability of witnesses, and other practical concerns. However, plaintiffs make no assertions as to why such factors render Italy a gravely inconvenient forum for litigating the instant case. The contract at issue in this case was drafted in Italian. *fn4 The vehicles which were the subject of the contract at issue in this case were manufactured in Italy by defendant Lamborghini, which is an Italian corporation. These undisputed facts establish that Italy is a reasonable forum in which to conduct the instant litigation.

Finally, plaintiffs point out that the English translation of the concession contract, upon which the Court relies, was not executed by the parties. Rather, the contract was executed in Italian only. Relying upon these facts, plaintiffs assert that the Court should not enforce the forum selection provision because defendants have failed to demonstrate that plaintiffs understood that in executing the contract they were agreeing to a serious limitation upon their ability to enforce its terms and conditions. This argument must be rejected because its premise--that the defendants must affirmatively prove the enforceability of the forum selection provision--is incorrect. The party attempting to enforce a forum selection provision does not bear the burden of proving its enforceability. On the contrary, the party resisting enforcement must demonstrate why the provision should be disregarded. See M/S Bremen, 407 U.S. at 15; Process, 541 F. Supp. at 733.

In the instant case, plaintiffs make no allegations which call into question the enforceability of the forum selection provision contained in the concession agreement. Plaintiffs do not dispute the accuracy of the English translation relied upon by the Court. Nor do plaintiffs allege that the concession contract was the result of fraud or overreaching. In short, plaintiffs have failed to satisfy their burden of proving that the forum selection provision is unenforceable. Accordingly, the Court concludes that Lamborghini is entitled to be dismissed from this action in order to give effect to the forum selection clause contained in the concession contract.

III. JURISDICTIONAL DISCOVERY

Plaintiffs have requested that the Court defer ruling on Lamborghini's motion until such time as the parties have had the opportunity to engage in discovery of jurisdictional facts which will demonstrate, one way or the other, whether Lamborghini is subject to personal jurisdiction in Delaware. Plaintiffs' request for jurisdictional discovery will be denied because, as discussed above, the concession contract which forms the basis of the instant litigation contains an enforceable forum selection provision. Thus, assuming arguendo that jurisdictional discovery might reveal facts which show that Lamborghini is subject to general jurisdiction in Delaware under 10 Del.C. § 3104(c)(4), Lamborghini would nonetheless be entitled to dismissal from this action based upon the forum selection provision. The forum selection provision constitutes a separate and independent basis for granting the instant motion.

IV. CONCLUSION

The Court concludes that it lacks authority to exercise general personal jurisdiction over Lamborghini under both Delaware's long arm statute, 10 Del.C. § 3104, and the Due Process Clause of the Fourteenth Amendment. Alternatively, the Court concludes that Lamborghini is entitled to dismissal from this litigation under the forum selection provision contained in the concession contract. The Court's decision regarding the enforceability of the forum selection provision renders moot any need for jurisdictional discovery. Therefore, plaintiffs' request that the Court defer ruling on Lamborghini's motion in order to allow plaintiffs an opportunity to conduct such discovery is hereby DENIED. Defendant Lamborghini's Motion to Dismiss is hereby GRANTED.

IT IS SO ORDERED.

John E. Babiarz, Jr., Judge

Opinion Footnotes

*fn1 Having sold all of its shares of Lamborghini stock in 1993, Chrysler no longer owns any interest in Lamborghini.

*fn2 It is unclear whether the corporate headquarters is owned by Lamborghini, Lamborghini U.S.A. or some other related entity. For present purposes, it makes no difference which entity owns the corporate headquarters because such ownership does not evidence activity within the State of Delaware.

*fn3 While the complaint may be read as suggesting that Chrysler ignored corporate boundaries in controlling Lamborghini's activities, that assertion doesn't support a finding that Chrysler was Lamborghini's alter ego in the State of Delaware. Rather, such an assertion only tends to show the reverse, that Lamborghini was Chrysler's alter ego in Italy.

*fn4 The Court has been provided with an English translation.

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