Defendant Chemstrand Corporation moves to dismiss the complaint pursuant to Federal Rules of Civil Procedure 12(b) (1, 6) and 12(h) (2), 28 U.S.C.
Plaintiff instituted a suit consisting of three causes of action, the first and third being asserted against Chemstrand Corporation alone and the second being asserted against both Chemstrand and Fabrex Corp. jointly. The first cause of action charges Chemstrand with a violation of the Robinson-Patman Act (15 *312 U.S.C.A. § 13 (d, e)) for alleged discrimination against plaintiff and in favor of Fabrex in sales promotions and advertising allowances, and services and inventory financing. The second cause of action charges the defendants with a violation of Sections 1 and 2 of the Sherman Act (15 U.S.C.A. §§ 1 and 2), alleging the existence of a conspiracy to increase defendant Fabrex’s position in the sportswear, dress and coat market and concurrently to eliminate plaintiff as a substantial competitor. The third cause of action consists of a claim for breach of contract against Chemstrand.
Chemstrand has moved, pursuant to Rule 12(b) (6), to dismiss the first cause of action on the grounds that neither рlaintiff nor Fabrex was a “purchaser” or “customer” of Chemstrand within the meaning of the Robinson-Patman Act and that plaintiff’s and Fabrex’s fabrics were not “commodities of like grade and quality” within the meaning of the act.
Plaintiff and Fabrex are “converters” who are engaged in аcquiring “greige goods” or unfinished textiles, manufactured to their specifications, from mills, converting these greige goods into finished textiles and selling them to manufacturers of “consumer goods.” Chem-strand is a manufacturer of an acrylic fiber which is sold under the trademarks Aerilan and A-Acrilan to mills. This fiber has been made known to the public in general and to members of the trade specifically by extensive advertising and promotional activity carried on by Chem-stand.
Plaintiff alleges that Chemstrand solicits converters in order to induce them to use Aerilan fiber in their greige goods. In this solicitation Chemstrand discusses and agrees upon the price of the fiber to be charged the mill. In addition, Chem-strand contracts directly with some converters by way of standard contract forms and license agreements to furnish them advertising and sales promotion, including the right оf the converter and its customers to utilize the Chemstrand trademarks. The said license agreements provide for quality control by Chemstrand over the finished goods of the converter.
Plaintiff alleges that after extensive negotiation Chemstrand represented that it would furnish advertising and other such promotional help to plaintiff and its customers in exchange for plaintiff’s agreement to order from the mills greige goods made in part from Aerilan and furnished to the mill by Chemstrand at agreed upon prices. After plaintiff placed its order for greige goods containing Acrilin fibers, Chemstrand refused to. make available to plaintiff the promotion and advertising which it had promised.. Plaintiff further alleges that Chemstrand' agreed to furnish and did in fact furnish Fabrex the type of promotion and advertising which plaintiff had negotiated for as well as “services and inventory financing.”
Contrary to plaintiff’s contention, the term “customer” used in Section 2(d) of the Robinson-Patman Act is to be given the same meaning as “purchaser” in Sections 2(a) and 2(e) of the act, in order to harmoniously effectuate the purpose of the parallel provisions. Atty. Gen.Nat’l Comm. Antitrust Rep. 189 (1955).
Privity of contract between the manufacturer (Chemstrand) and a converter (plaintiff) is not a necessary condition for the converter to be considered a “purchaser” within the meaning of the Robinson-Patman Act. An indirect purchaser may come within Section 2 when the manufacturer deals directly with him in promoting the sale of his product and exercises control over the terms upon which he buys. Union News Co., Trade Reg.Rep. (F.T.C. Complaints, Orders, Stipulations, 1960-61) ¶29,335 (1961); Champion Spark Plug Co.,
In Union News Co., supra, sufficient control by the manufacturer was held to exist because the prices chаrged by the wholesaler and the retailer were fixed in negotiations between the manufacturer and the retailer, the manufacturer bore the cost of unsold magazines and specified the dates on which new copies were sold and old ones returned. In Kraft-Phenix Chеese Corp., supra, the manufacturer solicited orders from the retailers, issued suggested price lists to the wholesalers, which prices were usually adhered to, and exchanged directly with the retailer fresh cheese for stale cheese.
When the manufacturеr lacks sufficient contact with the indirect purchaser and/or sufficient control over the terms upon which he buys, the latter will not qualify as a “purchaser” within the meaning of the act. Klein v. Lionel Corp., 3 Cir., 1956,
Similarly, the question as to whether the fabrics bought by plaintiff and Fa-brex were “commodities of like grade and quality” cannot be decided on this motion. Whether the acrylic fiber was what the converters were purchasing or whether the greige goods were the object of the purchase must await further development through proof.
The motion to dismiss the first cause of action is denied.
Chemstrand has moved, pursuant to Rule 12(b) (6), to dismiss the second claim upon the ground that it fails to allege any aсts constituting a violation by the defendant of Sections 1 and 2 of the Sherman Act, and further that it fails to allege that public injury resulted from the alleged unlawful acts committed by the defendant.
The claim alleges that Fabrex was and is a major supplier of cloth used in the manufacture of women's and children’s sportswear, dresses and coats and that Chemstrand’s trademark, by virtue of extensive advertising and consequent consumer acceptance, was a desirable adjunct to the sale of such cloth. It is then alleged that Chemstrand and Fabrex entered into a conspiracy to increase the position of Fabrex in the market of selling cloth containing this acrylic fiber and to prevent plaintiff from becoming a substantial competitor therein and to eliminate plaintiff from the market. In furtherance of this сonspiracy several acts of a discriminatory nature are alleged, including the giving by Chemstrand to Fabrex of certain advertising and promotional allowances, and permission to use Chemstrand’s trademark, all on the understanding that they would not be furnished plaintiff. In addition, it is alleged that the defendants, pursuant to the conspiracy, induced manufacturers to cease doing business with the plaintiff and secured business secrets from the plaintiff, which information has been used for the benefit of Fabrex to the detriment of plaintiff.
The complaint is sufficient tо defeat defendant’s motion. The question of whether the alleged conspiracy amounts to an unreasonable restraint of trade or monopolizes any part of the trade or
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commerce within the meaning of the Sherman Act must await a full disclosure of the fаcts. Defendant’s attack on the complaint overlooks the fact that the overt acts alleged are part of an overall conspiracy between the defendants. At this point such discriminatory practices, if proved, might well sustain a recovery for thе plaintiff. United States v. Paramount Pictures, Inc., 1948,
Chеmstrand has placed great reliance upon the failure of the plaintiff to allege “public injury” in this second claim. Violations of Section 1 of the Sherman Act may flow from “per se illegality” or conduct violative of the “rule of reason.” Standard Oil Co. of New Jersey v. United States, 1911,
In Klor’s, Inc. v. Broadway-Hale Stores, Inc. et al., 1959,
Chemstrand moves to dismiss the third causе of action, pursuant to Rules 12(b) (1), 12(b) (6) and 12(h) (2), on the ground that the court does not have jurisdiction over the subject matter because of the absence of diversity of citizenship. The third cause of action is based upon an alleged breach of contract.
Sectiоn 1332(c), 28 U.S.C., provides that for the purposes of diversity jurisdiction
“a corporation shall be deemed a citizen of any State by which it has been incorporated and of the State where it has its principal place of business.”
Plaintiff is a New York corporation and asserts that Chemstrand, incorporated in Delaware, has its principal place of business in Alabama. Chemstrand contends that its principal place of business is in New York. The question as to where a corporation has its principal place of business is not always an easy one to decide because of the variable factors presented in each situation. The Report of the Senate Committee on the Judiciary which accompanied the proposal that became Section 1332(c) suggests thаt the Bankruptcy Act (11 U.S.C.A. § 11) provides criteria to guide the courts in determining this question. 2 U.S.Code Cong. & Adm. News 1958, pp. 3099-3102. The cases decided under the Bankruptcy Act indicate that the issue is resolved by determining the location of the corporate personnel who direct the daily оperations of the business, such as the executive and administrative vice presidents, the house counsel, the personnel department and the purchasing department. In re Hudson River Nav. Corp., 2 Cir., 1932,
It is settled that the person alleging jurisdiction in the federal courts has the burden of proving the facts upon which such jurisdiction rests. Thomson v. Gaskill, 1942,
Chemstrand has plants located in Alabama, Florida and South Carolina. 'The only exeсutive officer of Chemstrand found outside of New York is a vice president and assistant secretary located in Alabama. The entire policy-making function and personnel are located in New York and consist of the president, the vice presidents in charge of manufacturing, engineering and development, finance, industrial development and the •overseas division, and the treasurer, secretary, comptroller, assistant treasurer, assistant comptroller and assistant secretary. The board of directors holds five of its six meеtings during the year in New York City. The various documents submitted by the plaintiff to prove that Chemstrand’s principal place of business is in Alabama do not negative the fact that Chemstrand’s principal place of business for the purpose of Section 1332(c) is in New York.
Chemstrand’s objection can be overcome only on the theory of pendent jurisdiction. The theory of recovery on the third claim for breach of contract is not based upon the same facts upon which theories of recovery could be predicated under the Robinson-Patman Act or the Sherman Act. The third claim alleges a simple contract and the breach thereof on or about October 20, 1959. Recovery under the first and second claims alleged in the complaint may be had upon facts completely foreign and irrelevant to those necessary to predicate recovery on the third claim. Hurn v. Oursler, 1953,
So ordered.