Johnson Creative Arts, Inc. v. Wool Masters, Inc.Johnson Creative Arts, Inc. v. Wool Masters, Inc.
- Reporters:
- ,
- Before:
- Hunter
Appellant brought suit to enjoin false representations in violation of the Trademark Laws of the United States,
Appellant contends that the test for “doing business” under the venue statute should be the same as the test for determining whether a corporation is amenable to service of process. This view is not without well-respected authority. Professor Moore wrote:
And although the matter is not free from doubt, . . . we believe that if a corporation is amenable to service of process it should be held to be “doing business” for venue purposes ____ If it is not unfair to subject the corporation to the court’s jurisdiction by service of process, it seems wise and not unfair to hold that there is a proper venue, particularly when the case can be transferred to another venue, if convenience warrants.
1 Moore’s Federal Practice 11 0.142 [5.-1-3], at 1411. Professors Wright, Miller, and Cooper appear to agree:
There is much to be said for the view that if a corporation is doing enough business in a district to satisfy the constitutional tests on when it may be subjected to process there, that district should be a proper venue.
What is thought to be the better view, although many courts disagree, is that it should be enough that the corporation has such contacts with the district as would satisfy the constitutional tests on when it may be subjected to process there.
15 Wright, Miller & Cooper, Federal Practice and Procedure, Jurisdiction § 3811, at 65-69.
While such authority cannot lightly’ be rejected, we cannot accept the argument because the considerations underlying personal jurisdiction are not the same as those underlying venue. The minimum contacts test for personal jurisdiction is based on the minimum amount of “fairness” required in order to comport with due process. Venue limitations generally are added by Congress to insure a defendant a fair location for trial and to protect him from inconvenient litigation.
Since due process would allow a federal court in a federal question case to issue service of process nationwide, and does not require that a corporation have any contact with a particular district in order to be sued there, we cannot accept the proposition that venue is proper in any district in which a corporate defendant constitutionally could be subjected to service. Under this argument, venue would be proper in any district in the United States in a case wherein a defendant has had “minimum contacts” with any part of the United States. 4
Even if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another state . . . [and] even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.
World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 294, 100 S.Ct. 559, 565, 62 L.Ed.2d 490 (1980); see Insurance Corp. v. Compagnie’ des Bauxites, 456 U.S. 694, 702 n. 10, 102 S.Ct. 2099, 2104 n. 10, 72 L.Ed.2d 492 (1982). Conversely, inconvenience to the defendant will not defeat a finding that the defendant is amenable to service of process. See McGee v. International Life Insurance Co., 355 U.S. 220, 224, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957). “The test to determine whether a defendant may be brought before a state’s courts, say the courts of Rhode Island, is not different whether the defendant is found in Connecticut or in Hawaii.” Driver v. Helms, 577 F.2d at 156 n. 25.
Venue, though a statutory requirement, is based on Congress’ decision concerning where a ease should be heard. It is a privilege given to the defendant primarily as a matter of convenience and is not based on an inherent power of a particular court over the parties. Neirbo v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 168, 60 S.Ct. 153, 155, 84 L.Ed. 167 (1939). In general, the purpose of statutorily specified venue is to protect the defendant against the risk that a plaintiff will select an unfair or inconvenient place for trial. Leroy v. Great Western United Corp., 443 U.S. 173, 183-84, 99 S.Ct. 2710, 2716-17, 61 L.Ed.2d 464 (1979). Longarm statutes, and extraterritorial service through the concept of minimum contacts, on the other hand, allow a defendant to be haled into a distant court to allow a state to protect its interests, see Hustler, — U.S. -, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984), and the interests of plaintiffs, see McGee, 355 U.S. at 222, 78 S.Ct. at 200, to the extent that doing so is not so unfair as to deny a defendant due process of law.
The business contact required under language in state longarm statutes, as restricted by the fourteenth amendment, to subject a corporation to service and which determines where a case
may
be brought has no necessary connection with the busi
In addition to equating due process minimum “fairness” and congressional notions of convenience, appellant’s argument fails to take into consideration that the “minimum contacts” personal jurisdiction formula generally requires that the obligation sued on “arise out of or [be] . . . connected with the activities within the state.”
See International Shoe,
326 U.S. at 319, 66 S.Ct. at 160.
After deciding that the test for “doing business” under
Before the 1948 revision of the Judicial Code, there was no special provision for venue in suits against corporations. 15 Wright, Miller & Cooper, Federal Practice and Procedure § 3811 at 54. Under the general provision allowing suit against a defendant in the district in which “he is an
In Neirbo, the Supreme Court held that a corporation could be sued in the federal courts in any state in which the corporation had designated an agent for service of process in voluntary compliance with that state’s foreign corporation laws. The Neirbo rule, which was based on consent to be sued, left many questions unanswered and led to some legal anomalies. See 15 Wright, Miller & Cooper, Federal Practice and Procedure § 3811, at 56. For example, it was held that venue was improper as against a foreign corporation doing business within the state if it had not designated an agent for service of process even though the extent of business done there by the corporation was such that state law required such a designation. Moss v. Atlantic Coast Line R. Co., 149 F.2d 701 (2d Cir.1945). Thus, law abiding corporations waived their venue privilege while corporations that refused to obey state law could assert a venue defense. Remington Rand, Inc. v. Knapp-Monarch Co., 139 F.Supp. 613, 616 (E.D.Pa.1956). Another anomaly arose in Suttle v. Reich Brothers Const. Co., 333 U.S. 163, 68 S.Ct. 587, 92 L.Ed. 614 (1948). In Suttle the Court made it clear that the Neirbo decision was based on waiver of privilege and not on an expansion of the term “residence.” 7 Id. at 164, 68 S.Ct. at 589. “Residence” of a corporation under the venue statute was still only in the “State and district in which it has been incorporated.” Id. at 166, 68 S.Ct. at 589. If the residence requirements were to be changed it was a task to “be undertaken by Congress.” Id. at 168, 68 S.Ct. at 590.
The following year, upon revision of the Judicial Code, Congress in effect wrote the
Neirbo
rule into the venue statute, and extended “the philosophy of that case to the act of doing business.”
Ruth v. Eagle-Picher Co.,
225 F.2d 572, 577 (10th Cir.1955). It also made clear that the place of licensing and doing business was to be considered the residence of the corporation in cases such as
Suttle. See
The search for a uniform test has led some courts to decide that a corporation is “doing business” for purposes of
As discussed above, the purpose of including “doing business” under
The Commerce Clause places a limitation on when a state may require a foreign corporation to obtain a license to do business in that state.
Allenberg Cotton Co., Inc. v. Pittman,
419 U.S. 20, 31-32, 95 S.Ct. 260, 266-267, 42 L.Ed.2d 195 (1974). A state may not require a foreign corporation to qualify to do business absent some kind of intrastate activity or localization
10
of the business in that state.
Id.
at 33, 95 S.Ct. at 267, 42 L.Ed.2d 195. The purposes of the Act will be fulfilled and uniformity will be achieved if “doing business” in a district for purposes of
In the case before us the appellant claims that Wool Masters is “doing business” in the District of Massachusetts in that it solicited business there by mail, received orders from there both by phone and by mail, regularly shipped goods to Massachusetts retailers for resale there to consumers, and received payment for the shipped goods. At the time the complaint was filed Wool Masters had sold approximately $8,800 worth of goods to Massachusetts retailers. Appellant also adds that Wool Masters’ president had recently attended a trade show in Massachusetts.
There can be no doubt that no state could require Wool Masters to qualify as a foreign corporation in order to distribute its goods in this manner. This is precisely the type of activity that does not amount to “doing business” in the solicited forum.
See Allenberg Cotton,
419 U.S. at 33, 95 S.Ct. at 267. Wool Masters had no office or warehouse in Massachusetts. Neither did it have employees working there on a regular basis. As far as we can determine, all of the orders from Massachusetts were taken and solicited by phone or mail. All of Wool Masters’ operations are located in New York. A finding of proper venue under the “doing business” provision of
The district court also found that venue was not proper under the “claim arose” provision of
[I]t is absolutely clear that Congress did not intend to provide for venue at the residence of the plaintiff or to give that party an unfettered choice among a host of different districts____ In our view, therefore, the broadest interpretation of the language of§ 1391(b) that is even arguably acceptable is that in the unusual case in which it is not clear that the claim arose in only one specific district, a plaintiff may choose between two (or conceivably even more) districts that with approximately equal plausibility in terms of the availability of witnesses, the accessibility of other relevant evidence, and the convenience of the defendant (but not of the plaintiff) may be assigned as the locus of the claim.
Id. at 185, 99 S.Ct. at 2717 (emphasis in original). We take this as indicating that residence of the plaintiff should be of little consequence to a finding of where the claim arose in this case. We also see no reason why the fact that two other defendants reside in Massachusetts should have any bearing on the dismissal of the claim for lack of venue as to Wool Masters and Keyes.
Furthermore, although Wool Masters did sell goods to retailers in Massachusetts, it sold goods to many retailers in many states; Massachusetts sales amounted to only six to fourteen percent of total sales. The complaint is based on Wool Masters’ sales throughout the country, and the requested relief includes a blanket injunction and damages with respect to those sales. The claim on which appellant seeks relief from Wool Masters arose no more in Massachusetts than in any one of the many
The judgment of the district court is affirmed.
Notes
.
(b) A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law. (c) A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes. Although§ 1391(c) speaks only to when ven-
ue is proper for corporate defendants, appellants do not make any distinction between the corporate and individual defendants. Our discussion of “doing business” pertains only to the corporation, Wool Masters.
. We express no view on the exercise of personal jurisdiction in a case where the basis of subject matter jurisdiction is diversity of citizenship. See National Equipment Rental v. Szuk-hent, 375 U.S. 311, 330-31, 84 S.Ct. 411, 422-23, 11 L.Ed.2d 354 (1964) (Black, J., dissenting).
. The minimum contacts concept is grounded upon notions of territorial limitations on the power of the courts of a particular state to subject a nonresident to its jurisdiction and thereby infringe upon that person’s individual liberty interest. See Insurance Corp. v. Compag-nie des Bauxites, 456 U.S. 694, 702 n. 10, 102 S.Ct. 2099, 2104 n. 10, 72 L.Ed.2d 492 (1982). The traditional, historical basis of personal jurisdiction was the court‘s de facto power over the defendant‘s person. International Shoe Co. v. Washington, 326 U.S. 310, 316, 66 S.Ct. 154, 158, 90 L.Ed. 95 (1945). If a defendant was present within the territory of the sovereign represented by the court, the court could issue a writ to the sheriff, directing him to take the body of the defendant and keep him in custody to answer the plaintiff‘s charges. See id.
In International Shoe, the Court determined that since the capias ad respondendum has given way to personal service of summons or other form of notice, even a person not present within the territory of the forum may be subjected to a judgment in personam if he has such contacts with the forum that the maintenance of the suit does not offend “traditional notions of fair play and substantial justice.” Id. This allows a court validly to effect extraterritorial service. If a person is served within the territory of the sovereign represented by the issuing court, there is no question that maintenance of the suit against him will not offend traditional notions of fairness. Indeed, the “minimum contacts” concept does not seem particularly relevant in evaluating the validity of service that was not extraterritorial. Mariash v. Morrill, 496 F.2d 1138 (2d Cir.1974). The United States does not lose sovereignty when a state’s border is crossed. Driver v. Helms, 577 F.2d 147, 156 (1st Cir.1978), rev‘d on other grounds, Stafford v. Briggs, 444 U.S. 527, 100 S.Ct. 774, 63 L.Ed.2d 1 (1980) (reversed on statutory construction, constitutional issue not reached); United States v. Union Pacific R.R. Co., 98 U.S. 569, 603-04 (8 Otto 569), 25 L.Ed. 143 (1878). Thus Congress can “provide for service anywhere in the United States.” Mississippi Publishing Corp. v. Mur-phree, 326 U.S. 438, 442, 66 S.Ct. 242, 245, 90 L.Ed. 185 (1946).
. Even under existing rules, a corporation may be subject to service in a district in which it conducts no business whatsoever. In a multi-district state, a corporation with “contacts” with only one district of the state may be subject to
the process of a district court of another district. Under any interpretation of “doing business” under
. While this statement is superficially appealing, it is merely a tautology. The test for whether it is “fair” to subject a corporation to service of process is whether it is “fair” to require the corporation to defend a suit there. See International Shoe, 326 U.S. at 319, 66 S.Ct. at 160.
. Substantially greater contacts are required to allow a state to take jurisdiction over a corporation on causes of action unrelated to the corporation’s activity within the state. Perkins v. Ben-guet Consolidated Mining Co., 342 U.S. 437, 446-47, 72 S.Ct. 413, 418-19, 96 L.Ed. 485 (1952). If a “minimum contacts” type of test is to be used to determine whether a corporation is “doing business” in a district, this test would appear to be more appropriate than the test for whether exercise of jurisdiction under a longarm statute is valid. However, if this “version” of the minimum contacts formula were to be used to determine when a corporation is “doing business” in a district for venue purposes, it is possible that problems similar to those attending the “Neirbo Rule,” see infra, could arise.
. In Suttle, a suit based on diversity was brought in the Eastern District of Louisiana against a Texas corporation and individual parties whose residence was in the Western District of Louisiana. Venue would have been proper for all parties if the Texas corporation could be considered a “resident” of the Eastern District. Although the Texas corporation had qualified to do business under Louisiana law and was thus subject to suit in any district in Louisiana under the Neirbo rule, this fact did not make the Eastern District of Louisiana the “residence” of the Texas corporation. Thus, venue was improper for the noncorporate defendants.
. If appellant’s argument were accepted, it would mean that “or is doing business” changed the place of “residence” of a corporation from the “state and district in which it has been incorporated,” see Suttle, 333 U.S. at 164, 68 S.Ct. at 588, to any state or district with which the corporation has had as little contact as mailing a reinsurance contract there. See McGee, 355 U.S. at 221, 78 S.Ct. at 200.
. “Doing business” was not a new term. By the time
. The Supreme Court rejected a state court finding that a corporation was “doing business” in Mississippi when it had no offices or warehouses there, no employees soliciting business or operating there on a regular basis, and when the transactions in question were in the stream of interstate commerce and conducted primarily through the mail. Allenberg, 419 U.S. at 33, 95 S.Ct. at 267.
. Appellants could argue that the Commerce Clause is an inappropriate source for the test to be applied since it is not as directly concerned as the Due Process provision is with “fairness” to a defendant. Our investigation, however, is into what Congress meant by “doing business,” not into what would be a marginally fair test for venue if we were writing on a clean slate, or whether Congress’ designation of venue comports with constitutional mandates of “fairness.” In