Delagi v. Volkswagenwerk AG

Nicholas Delagi (plaintiff) was a United States soldier doing a tour of duty in Germany. While Delagi was stationed in Germany, he purchased a Volkswagen car from an authorized dealer. Delagi alleged that while he was driving the car in Germany, the front-wheel suspension and other parts collapsed and broke, causing the front wheels to cave in and sending the car out of control and into a bridge abutment. Delagi sustained serious injuries in the crash. When Delagi returned to the United States, he filed suit in New York state court against the car’s German manufacturer, Volkswagenwerk AG (VWAG) (defendant). Delagi alleged that VWAG conducted sufficient business in New York to be subject to the jurisdiction of New York state courts. VWAG manufactured and sold cars in Germany, but it was not qualified to do business in New York, nor did it have an office in the state. VWAG exported its cars to the United States through its subsidiary, Volkswagen of America, Inc. (VWoA), a New Jersey corporation. VWoA was also not qualified to do business in New York and did not have an office in the state. Once VWoA imported the vehicles, it resold them to regional franchise distributors. The franchise distributor in New York, World-Wide, was independently owned by investors wholly unrelated to VWoA and VWAG. Under its distributor agreement, World-Wide purchased the cars directly from VWoA and took possession of the cars in New Jersey before bringing them to New York. Delagi claimed that even though VWAG did not directly transact business in New York, jurisdiction was still proper because VWAG engaged in a systematic and regular course of business in the state through the activities of its distributors such as World-Wide. The Appellate Division of the New York Supreme Court agreed that jurisdiction over VWAG was proper. VWAG appealed the Appellate Division’s decision.