AE - Chaplake Holdings v. Chrysler Corporation (8/11/1995)

[Riser Adkisson LLP]

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.