Vehicles with automatic level control that ride harshly in the rear (no give in the suspension) may have one or both dampening actuators which have failed. It is commonly recommended the actuators be replaced in pairs.Google+
Car Problem Reports
Mercedes-Benz E320 Bad Dampening Actuators Can Cause Rough Ride in Rear
Mercedes-Benz E320 Problem
Average Mileage: 159,811 mi (130,000 mi - 214,434 mi)
Visitor, 1995 Mercedes-Benz E320, 135,000 mi
My solution as the parts were too expensive to replace is to use it for only short distances and on smooth roads. I also keep tylenol for the headaches the bouncing can cause.
Visitor, 1994 Mercedes-Benz E320, 214,434 mi
Very rough ride, bouncing and semi-erratic sways from rear end of wagon. Tried adding self-leveling fluid from dealer, no improvement. Mechanic recommended new accumulators which are specific to the car, very hard to replace when it came to tightening lines so as to not strip the threads. Turned in to a four hour repair but so worth it. As soon as car was started the new suspension was charged and it rides like a dream.