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Yamaha Motor Co., Ltd. v. Superior Court of Orange County

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA FOURTH APPELLATE DISTRICT DIVISION THREE


May 26, 2009

YAMAHA MOTOR COMPANY, LTD., PETITIONER,
v.
THE SUPERIOR COURT OF ORANGE COUNTY, RESPONDENT;
JACK R. CONNORS, A MINOR, ETC., ET AL., REAL PARTIES IN INTEREST.

Original proceedings; petition for a writ of mandate to challenge an order of the Superior Court of Orange County, Thierry Patrick Colaw, Judge. Petition denied. (Super. Ct. No. 30-2008-00105389).

The opinion of the court was delivered by: Sills, P. J.

CERTIFIED FOR PUBLICATION

OPINION

This court issued an OSC in response to this petition for writ of mandate because it presents an issue of some public importance that has not yet been squarely faced by a California state court, in a published opinion, in this particular context: The question of whether a Japanese manufacturer can be served under California law simply by serving the Japanese manufacturer‟s American subsidiary. The trial court ruled that a Japanese manufacturer could indeed be validly served that way. The method just seemed too easy a way to get around the Hague Service Convention and we scheduled an OSC on the petition to give us the chance to study the issue.

On review, however, it turns out that, yes, it really is that easy.*fn1 And not only that, there is nothing this court, as a matter of California common law, can do about it. We are a court under authority, and there is a non-overruled, non-distinguishable California Supreme Court case, Cosper v. Smith & Wesson Arms Co. (1959) 53 Cal.2d 77, that makes service on the California representative of a foreign parent valid -- that is, valid as to the foreign parent -- under California law. And not only that, but there is a 1988 federal United States Supreme Court case, Volkswagenwerk Aktiengesellschaft v. Schlunk, supra, 486 U.S. 694 (Schlunk), that says when service is valid under state law on the American subsidiary of a foreign manufacturer, there is no need to serve papers in accord with the Hague Service Convention. Accordingly, we have no choice but to deny the petition for writ of mandate.

I. BACKGROUND

The plaintiff was allegedly injured when he was out riding on a 2005 Yamaha Rhino on his 12th birthday. His complaint includes two defendants which we will call "Yamaha-Japan"*fn2 and "Yamaha-America."*fn3

Plaintiff served Yamaha-America and also sought to serve Yamaha-Japan by serving Yamaha-America through Yamaha-America‟s agent for service of process. His theory was (and is) that Yamaha-America is Yamaha-Japan‟s "general manager in this state."

Yamaha-Japan filed a motion to quash service, arguing that Yamaha-America is only a subsidiary of Yamaha-Japan, not Yamaha-Japan‟s general manager in California, and therefore service should have been made through the Hague Service Convention. (At the very least, serving Yamaha-Japan through the Hague Service Convention would have meant incurring the expense of translating the pleadings into Japanese. (See Honda Motor Co. v. Superior Court (1992) 10 Cal.App.4th 1043, 1049 ["Petitioner correctly points out that the service is also flawed by the omission of a Japanese translation. Plaintiff admits that the Central Authority for Japan requires that documents served under the convention be accompanied by a Japanese translation."].))

Here are the undisputed facts about Yamaha-America‟s relationship to Yamaha-Japan: Yamaha-America is Yamaha-Japan‟s wholly owned domestic subsidiary in the United States. Yamaha-America‟s principal business is to act as the exclusive importer and distributor of Yamaha vehicles, including the Rhino in this case, manufactured by Yamaha-Japan. Yamaha-America provides the warranty and owner manuals for Yamaha vehicles. Yamaha-America conducts testing, including suitability testing, for Yamaha vehicles. Yamaha-America provides marketing for Yamaha vehicles and receives all customer complaints and accident reports for the United States involving Yamaha vehicles. Finally, Yamaha-Japan‟s 2007 annual report describes Yamaha-America as Yamaha-Japan‟s "Regional Headquarters for North America."

The trial court denied the motion, reasoning that Yamaha-America is Yamaha-Japan‟s general manager in this state. Yamaha-Japan then filed this petition for writ of mandate, and it is supported by a brief from the Association of International Automobile Manufacturers.

II. DISCUSSION

A. Federal Law Makes the Validity of the Service Dependent on State Law

Rarely do lower courts have a precedent from a higher court as close on the facts as the United States Supreme Court of Schlunk to the case before us. In Schlunk, a plaintiff sued both Volkswagen-America ("Volkswagen of America" or "VWoA" as described in the opinion) and Volkswagen-Germany ("Volkswagen Aktiengesellschaft" or "VWAG" as described in the opinion) in Illinois state court for defects in the automobile that contributed to the plaintiff‟s parents‟ deaths in an accident. More specifically, the plaintiff successfully served Volkswagen-America, got back an answer denying that Volkswagen-America had designed or assembled the car in question, so he then amended his complaint to add Volkswagen-Germany as a defendant. The plaintiff then "attempted" to serve the amended complaint on Volkswagen-Germany by serving Volkswagen-America as Volkswagen-Germany‟s "agent." (Schlunk, supra, 486 U.S. at pp. 696-697.)

Volkswagen-Germany made a special and limited appearance to quash service. The Illinois state trial court denied the motion on the ground that, under Illinois state law, the fact that Volkswagen-America and Volkswagen-Germany were so "closely related" that Volkswagen-America was Volkswagen-Germany‟s "agent for service of process as a matter of law," even though Volkswagen-Germany had not appointed Volkswagen-America as its agent. (Schlunk, supra, 486 U.S. at p. 697.) The Illinois intermediate appellate court agreed, holding that, under Illinois law, Volkswagen- America was Volkswagen-Germany‟s involuntary agent for service of process. It further held that serving Volkswagen-Germany by serving Volkswagen-America did not violate the Hague Service Convention. (Ibid.) When the Illinois state supreme court refused to take the case, Volkswagen-Germany petitioned the United States Supreme Court, and it granted certiorari to address the issue, which the federal high court noted had "given rise to disagreement among the lower courts." (Id. at pp. 697-698.)

The federal supreme court framed the issue as whether "an attempt to serve process on a foreign corporation by serving its domestic subsidiary which, under state law, is the foreign corporation‟s involuntary agent for service of process" was "compatible with the Convention on Service Abroad of Judicial and Extra-judicial Documents in Civil and Commercial Matters, Nov. 15, 1965 (Hague Service Convention)." The federal high court then agreed with the Illinois state courts and answered: Yes. (See Schlunk, supra, 486 U.S. at pp. 696 [the issue] and 707-708 [the answer].)

The Hague Service Convention applies "where there is" -- and this is the precise language from the treaty -- "occasion to transmit a judicial or extra-judicial document for service abroad."*fn4

Now, one might think that in any case where a foreign person had an agent for service of process in another country that there would still be "occasion to transmit" the complaint -- which is a "judicial document" to the foreign person in his, her or its home country -- after all, he, she or it is going to have read the document there, so the convention should still apply.

No. The United States Supreme Court rejected that precise argument in Schlunk, reasoning that if service, under state law, did not necessarily require transmittal of the relevant documents, the Hague Service Convention simply was not implicated.

Because, under Illinois law, there was no necessity to send any documents abroad to complete service (even though, as a practical matter, they would be sent anyway), the convention did not apply, and the service on Volkswagen-America as agent for Volkswagen-Germany was "proper."*fn5

If California law were the same as Illinois law, we could end this opinion here. We have a United States Supreme Court case construing federal law, on all fours. But, of course, the two states do not have identical statutes and common law construing those statutes, so we now turn to whether California law, like Illinois law in Schlunk, provides for proper service of "process on a foreign corporation by serving its domestic subsidiary which, under state law, is the foreign corporation‟s involuntary agent for service of process." (Schlunk, supra, 486 U.S. at p. 696.) As we shall see, the answer is yes.

B. California Law Allows Service On a Foreign Corporation By Serving Its Domestic Subsidiary

1. The Relevant Statutes

The first of California‟s service of process statutes is section 413.10 of the Code of Civil Procedure, which expressly contemplates that the rules governing summonses "are subject to" the provisions of the Hague Service Convention.*fn6

We pause for a moment to note that "subject to" does not mean "pursuant to the rules of." If the Legislature wanted all service on foreign nationals to be pursuant to the procedures of the Hague Service Convention, it could have said so. It didn‟t; it merely recognized that treaties trump conflicting state law. (U.S. Const., art. 6; e.g., Mitsubishi Materials Corp. v. Superior Court (2003) 113 Cal.App.4th 55 [state law allowing former POWs to sue successors of Japanese companies who exploited them as slave labor in World War II conflicted with treaty that ended hostilities between the two countries].)

Code of Civil Procedure section 416.10 governs how to serve corporations. It says that service on a corporation may be made if "authorized by any provision in Section . . . 2110 . . . of the Corporations Code" or "Sections 6500 to 6504, inclusive, of the Corporations Code, as in effect on December 31, 1976, with respect to corporations to which they remain applicable."*fn7

Corporations Code section 2110 says that delivery by hand of a copy of any process to the "general manager in this state" of a foreign corporation "shall constitute valid service on the corporation."*fn8

We pause again to recognize a non-issue for what it is: Corporations Code section 6500 was repealed in 1975 (see Stats. 1975, ch. 682, § 6, p. 1516), while Corporations Code section 2110 was added in the same legislation that repealed section Corporations Code section 6500 (see Stats. 1975, ch. 682, § 7, p. 1516), and which also amended section 416.10 of the Code of Civil Procedure to read as it reads today. The replacement of Corporations Code section 6500 with Corporations Code section 2110 was part of a wholesale recodification of the Corporations Code. However, these changes did not become effective until January 1, 1977. (Stats. 1975, ch. 682, § 2300, p. 1622.)

That is, under section 416.10 of the Code of Civil Procedure, as it stands today, a summons may be served on a corporation "by delivering a copy of the summons and the complaint" to "the person designated as agent for service of process as provided by . . . Section[] 6500 . . . as in effect on December 31, 1976."

Which is all by way of saying that an authoritative construction of Corporations Code section 6500 by a 1959 decision of our state‟s highest court is still binding on this intermediate appellate court. There is no basis by which we may tease out an intervening change in the statutory law. (Particularly when one realizes that the 1975 legislation was enacted in light of the 1969 Hague Service Convention. If, in 1975, the Legislature wanted to change the method of service provided for by Corporations Code section 6500 as previously construed by California courts it had the perfect chance to do so; it didn‟t.)

2. The Relevant Supreme Court Decision

In Cosper v. Smith and Wesson, supra, 53 Cal.2d 77 (Cosper), a police officer whose revolver exploded on him sued the Massachusetts corporation that manufactured the firearm. The Massachusetts corporation, however, had no agents, salesmen, or other employees in California. (Id. at p. 80.) But it did have a contract with a California representative to promote, on a ""non-exclusive basis‟" the sale of its products on the West Coast. Basically, he was a sporting goods salesman. (Ibid.) The Supreme Court held that service on this representative was sufficient to serve the Massachusetts corporation because the representative was the ""general manager in this State.‟" (Id. at pp. 79, 83-84.)

To be sure, the bulk of the Cosper decision is devoted to the due process minimum contacts problem on which first year civil procedure professors usually spend too much time. (The court held that, yes, Smith and Wesson had done enough business in California that it would not be a denial of due process to have the firm sued in this state.) Even so, the court also clearly held that service on the sales representative was valid service on the corporation itself, reasoning that the representative had "ample regular contact" so that it was ""reasonably certain‟" that the representative would apprise the manufacturer of the service. (Cosper, supra, 52 Cal.2d at p. 83.)*fn9

Cosper applies a fortiori to this case -- that is, the relationship between the manufacturer‟s representative and the manufacturer in Cosper was far less intimate, far less connected, and far less interrelated than the relationship between Yamaha-America and Yamaha-Japan in the case before us. If, in Cosper, a sporting goods oriented non- exclusive purveyor of Smith and Wesson guns on the West Coast was a "general manager in this State" under Corporations Code section 6500, how much more so is Yamaha-America the "general manager in this State" here, where (unlike Cosper), Yamaha-America is the American face of the Japanese company: Here, Yamaha-America does have an exclusive arrangement to sell the manufacturer‟s products, provides warranty service, English owner manuals, does testing, marketing, and receives complaints about the manufacturer‟s products. Probable contact between the domestic representative and the foreign corporation leading to actual notification is far more present here than in Cosper. If it was reasonably certain that a relatively casual sporting goods representative would apprise the "foreign" manufacturer of service in Cosper, it is doubly reasonably certain Yamaha-America will apprise Yamaha-Japan of any service in California.

C. Service on Yamaha-America Was Good Enough to Serve Yamaha-Japan

As an intermediate appellate court, we are bound by Cosper. (See Auto Equity Sales, Inc. v. Superior Court (1962) 57 Cal.2d 450, 455-456 [intermediate appellate courts have no jurisdiction to refuse to follow binding precedent of state supreme court].) Given that there has been no change in the relevant statutory structure governing service of a foreign corporation in California since Cosper (see part II.B.1 above), there is no basis to say Cosper has been abrogated by statute, and there is certainly no basis to distinguish it factually (far from it, see part II.B.2 above). So we have to follow it.

General Motors Corp. v. Superior Court (1971) 15 Cal.App.3d 81, primarily relied on by Yamaha-Japan, is distinguishable. In General Motors Corp., the plaintiff attempted to sue GM by serving the customer relations manager for Pontiac, a GM division. The appellate court distinguished Cosper by noting that GM already had "designated an agent whose identity was easily ascertainable to accept service of process." (General Motors Corp., supra, 15 Cal.App.3d at p. 85.) To the degree that General Motors Corp. contains dicta suggesting Cosper only applies when a foreign corporation tries to "maintain a rather low silhouette" or has "sought to avoid its accountability in the State of California" (ibid.), that dicta actually favors application of Cosper here. As Smith and Wesson did in Cosper, but in contrast to GM in the General Motors Corp. case, Yamaha-Japan has not made it easy to be served directly by having an "easily ascertainable" designated agent for service of process in California.

Following our Supreme Court, we have no choice but to deny the writ seeking the vacation of the order denying the motion to quash.

D. The Supreme Court is Welcome to Revisit Cosper

The Cosper court‟s discussion of Corporations Code section 6500 is abbreviated.*fn10 The high court never really grappled with the anomaly that a mere non-exclusive sales representative could not really be described as a general manager in this state. To be a manager, much less a general manager, implies a measure of formal control. Neither the sales representative in Cosper, nor Yamaha-America here, have any real control over their principals -- they simply did (or do) their master‟s bidding. (And, as we have noted, the leash is, if anything, tighter around Yamaha-America than it was around the sporting goods sales representative in Cosper.) The phrase "general manager in this state" implies a real presence in the state of a person who has some real control over the corporation being served. The ordinary person would think of the phrase "general manager in this state" as somebody or something more than just a satellite outpost or sales rep only bound to another entity by contract. But we respect stare decisis, so our comments cannot change the required result.

III. DISPOSITION

The petition for writ of mandate is denied. Costs will be borne by each party.

WE CONCUR: ARONSON, J., IKOLA, J.


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