Plaintiff Sheets sought sanctions under Rule 11 of the Federal Rules of Civil Procedure against defendants, the Yamaha Motor Co. Ltd. (Yamaha Japan) and its wholly owned American subsidiary, Yamaha Motors Corp., U.S.A. (Yamaha U.S.A.), for misconduct in discovery and frivolous insistence that service on the foreign parent be made in conformity with the Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters, better known as the Hague Service Convention. Plaintiff had effected service under the Louisiana long-arm statute, which permitted service on the subsidiary as involuntary agent for the defendant parent company in an action arising out of business transacted or tortious conduct occurring in the state. The U.S. District Court for the Eastern District of Louisiana initially awarded $25,000 in sanctions to the plaintiff. On appeal, the U.S. Court of Appeals for the Fifth Circuit remanded the decision for further findings by the district court on the grounds for imposing sanctions. The district court held (per Schwartz, J.): in light of the decision of the Supreme Court in Volkswagenwerk Aktiengesellschaft v. Schlunk, involving a state service statute virtually identical to that of Louisiana, the defendants’ failure to waive service under the Hague Convention needlessly increased the cost of litigation and was properly the subject of Rule 11 sanctions.
