WELLS FARGO & COMPANY, a corporation, and Baker Industries,
Inc., a corporation, Plaintiffs-Appellants,
v.
WELLS FARGO EXPRESS COMPANY, a corporation, and Wells Fargo
Express Company, AG, a Liechtenstein Corporation,
Defendants-Appellees.
No. 74-2109.
United States Court of Appeals,
Ninth Circuit.
April 22, 1977.
Richard E. Backus, argued, Flehr, Hohbach, Test, Albritton & Herbert, San Francisco, Cal., for plaintiffs-appellants.
Wiener, Goldwater, Galatz & Raggio, Las Vegas, Nev., Albert L. Jacobs, Jr., Jacobs & Jacobs, New York City, for defendants-appellees.
Appeal from the United States District Court for the District of Nevada.
Before WRIGHT and CHOY, Circuit Judges, and EAST,* District Judge.
CHOY, Circuit Judge:
A show-down over rights to the storied name "Wells Fargo" is the subject of this trademark infringement and unfair competition action. Two American corporations challenge the use of the name, in the United States and abroad, by two other corporations, one of which is foreign.
In a lengthy opinion appearing at
Facts and Proceedings Below
Plaintiff Wells Fargo & Company, a California corporation, is engaged in various businesses in the United States and abroad, most notably as Wells Fargo Bank. In addition to world-wide banking and trust services, the company is also involved in toy manufacture, the restaurant trade, and the travel agency business. In each of these endeavors, it makes use of trade names, trademarks, and service marks which consist in whole or in part of the name "Wells Fargo," and which are registered in the United States under the Lanham Act, 15 U.S.C. §§ 1051-1127, and in various foreign countries. The other plaintiff, Baker Industries, Inc., is a Delaware corporation which owns and has registered the "Wells Fargo" trademark for use in its business of providing armored car and other protective services.
At the heart of plaintiffs' allegations1 is the claim that a group headed by Herman Heymann, a German national who resides in Gibraltar, has deliberately and wrongfully attempted to appropriate the "Wells Fargo" name both in Europe as well as in the United States. Defendant Wells Fargo Express Company, A.G. ("A.G."), a Liechtenstein corporation, was incorporated in 1967 by Heymann to engage in the business of loaning money and is the foreign defendant dismissed by the district court below. In the course of its activities, A.G. had acquired various European and American subsidiaries. While none of the European subsidiaries has been named in the instant action,2 an American subsidiary, Wells Fargo Express Company ("Express"), is a named defendant.
Express was originally incorporated in Nevada in 1961 for the purpose of providing traveler's checks under the name "Wells Fargo" by K. F. Wilkinson, Sr., a business associate of Heymann, but from that date until 1968 it lay dormant. In 1968, the only capital stock of Express was issued to A.G. for a consideration of $50,000. What business Express has done appears to be in the area of research and development, including the invention and marketing of electronic protective devices.
Express was the only defendant named when plaintiffs filed their original complaint on September 18, 1970, seeking damages as well as injunctive relief. Approximately three weeks later, its name was changed to Modern Research, Inc. On November 2, 1970, A.G. transferred all of its outstanding shares in Express to Albert L. Jacobs, Jr., Express' attorney in this case, for a consideration of $100.3 The Nevada district court found that it had both in personam jurisdiction over Express and subject matter jurisdiction over plaintiffs' trademark infringement and unfair competition claims against Express. See
A.G. was not named as a defendant until plaintiffs filed their amended complaint of December 22, 1971, seeking the same relief. Service was made on A.G. in Liechtenstein pursuant to Fed.R.Civ.P. 4(e) & 4(i)(1)(D), and the Nevada "long-arm" statute, Nev.Rev.Stat. § 14.065. A.G. received the summons as shown by the return of service required by Rules 4(g) & 4(i)(2). Through a letter from its Belgian counsel, however, A.G. notified the Nevada district court of its intention not to appear, maintaining that the court lacked jurisdiction over it and its activities.4
In its opinion of April 10, 1973, the district court held that its previous order giving plaintiffs leave to add A.G. as a party had been improvidently granted.
I. IN PERSONAM JURISDICTION OVER A.G.
The district court held that Express, which was incorporated and doing business in Nevada, was clearly present in that state and was, therefore, subject to service of process under Fed.R.Civ.P. 4(f).5 The court, however, denied personal jurisdiction over A.G., ruling only that under Cannon Mfg. Co. v. Cudahy Packing Co.,
In International Shoe Co. v. Washington,
International Shoe itself required that a non-resident defendant's "operations establish sufficient contacts or ties with the state of the forum to make it reasonable and just, according to our traditional conception of fair play and substantial justice, to permit the state to enforce the obligations which (defendant) has incurred there," and that the form of "substitute service adopted there gives reasonable assurance that the notice (to defendant) will be actual."
(t)he unilateral activity of those who claim some relationship with a nonresident defendant cannot satisfy the requirement of contact with the forum State. The application of that rule will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposely avails itself of the privilege of conducting activities within the forum State, thus invoking the benefits and protections of its laws.
Id. at 253,
In a parallel development, the Supreme Court decided Perkins v. Benguet Consol. Mining Co.,
The rules which emerge from these cases may be summarized as follows: If the defendant corporation has sufficient deliberate "minimum contacts" with the forum state, a court may acquire in personam jurisdiction over it in actions which arise from those forum contacts. If, however, a corporation's activities in the forum are so "continuous and systematic" that the corporation may in fact be said already to be "present" there, it may also be served in causes of action unrelated to its forum activities.6 See O'Neal v. Hicks Brokerage Co.,
In addition to not violating these due process limits, however, a court's exercise of in personam jurisdiction must, of course, be affirmatively authorized by the legislature. See Amba Marketing Systems, Inc. v. Jobar Int'l, Inc.,
Thus, the federal district court of Nevada may, reading Rules 4(d)(7) & 4(e) together, also service out-of-state defendants by availing itself of the in personam jurisdictional statutes of Nevada. Cook v. Fox,
1. Personal service of summons upon a party outside this state is sufficient to confer upon a court of this state jurisdiction of the person of the party so served if:
(a) Such service is made by delivering a copy of the summons, together with a copy of the complaint, to the party served in the manner provided by statute or rule of court for service upon a person of like kind within this state; and
(b) Such party has submitted himself to the jurisdiction of the courts of this state in a manner provided by this section.
2. Any person who, in person or through an agent or instrumentality, does any of the acts enumerated in this subsection thereby submits himself and, if an individual, his personal representative to the jurisdiction of the courts of this state as to any cause of action which arises from the doing of such acts:
(a) Transacting any business or negotiating any commercial paper within this state;
(b) Committing a tortious act within this state;
(c) Owning, using or possessing any real property situated in this state;
(d) Contracting to insure any person, property or risk located within this state at the time of contracting; or
(e) Living in the marital relationship within this state notwithstanding subsequent departure from this state, as to all obligations arising for alimony, child support or property settlement, if the other party to the marital relationship continues to reside in this state.
3. Only causes of action arising from these enumerated acts may be asserted against a defendant in an action in which jurisdiction over him is based on this section.
4. The method of service provided in this section is cumulative, and may be utilized with, after or independently of other methods of service.
This statute is in the broad, modern pattern of so-called "long-arm " statutes. Although there is not an extensive body of state law construing its reach, it is clear that the Nevada Supreme Court has read the statute liberally as affording jurisdiction to the fullest extent consonant with the due process limits of the United States Constitution. Abbott v. Second Judicial District Court,
Several distinct theories may be gleaned from plaintiffs' many arguments concerning how A.G. can be subjected to the in personam jurisdiction of the federal district court in Nevada, and they may conveniently be grouped into two broad categories. First, plaintiffs contend that A.G., both by itself and through Express acting as its "agent," had sufficient "minimum contacts" with Nevada to be reached under that state's long-arm statute, at least as to causes of action which arise from those contacts. Second, they seem to argue that A.G. itself is already "present" in Nevada and, thus, is subject to the general personal jurisdiction of the district court there regardless of where the activities giving rise to their causes of action took place because Express is clearly "present" there. We take up these arguments in turn.
A. A.G.'s "Minimum Contacts" with Nevada
Plaintiffs suggest that the district court may have confused the significance of "contacts" with the forum required, on the one hand, to satisfy the general jurisdictional standard for "presence" within the state with those necessary, on the other hand, to meet the less-stringent "minimum contacts" test for limited long-arm jurisdiction. They argue that, even if A.G.'s activities within Nevada were not so "continuous and systematic" as to lead to the conclusion that it was "doing business" there, these activities were sufficient to meet the requirements of due process and the "transacting any business" or "committing a tortious act" tests of Nev.Rev.Stat. § 14.065(2) (a) & (b). They further maintain that trademark infringement, unfair competition, and other causes of action clearly arise from these "minimum contacts" with Nevada.
1. A.G.'s Own "Minimum Contacts" with Nevada
First, plaintiffs point to a $10,000 loan to Express from A.G., which is in the business of making loans under the name Wells Fargo Express, A.G. They claim that the loan contract was negotiated and consummated by agents of A.G. who traveled to Nevada for that purpose, and that such in-state activity gives rise to one count of the instant causes of action. See, e.g., Republic Int'l Corp. v. Amco Engineers, Inc.,
Such a purposeful single contact is clearly sufficient to satisfy the constitutional test for "minimum contacts" when the cause of action arises from that contact. McGee v. International Life Ins. Co.,
2. Aggregation of A.G.'s United States Contacts
Next, plaintiffs argue that where, as here, the court is to determine whether it has personal jurisdiction over an alien defendant who is being sued on a claim arising under federal law, it may appropriately consider not only the alien defendant's contacts with the forum state, but also the aggregate contacts of the alien with the United States as a whole. See 2 J. Moore, Moore's Federal Practice P 4.25(5), at 72 n. 1 (Supp.1976). In this regard, plaintiffs point to two substantial loans made by A.G. in California. Although it is somewhat unclear, plaintiffs apparently hope to have the court consider these California transactions not only to buttress their argument that A.G. may be served from Nevada and sued there on the one Nevada loan, but also to establish their right to sue A.G. in Nevada for its two California loans as well.
Given our holding that a single act within Nevada is a sufficient "minimum contact" on which to base service on A.G. from Nevada for an action which arises out of that Nevada activity, we need not discuss the validity of plaintiffs' aggregation theory for the former purpose. Since, however, plaintiffs also seem to demand that they be allowed to sue A.G. in Nevada on claims growing out of the California loans, it is necessary to discuss their contentions.
It might very well be neither unfair nor unreasonable as a matter of due process to aggregate the nonforum contacts of an alien with his forum contacts or to require an alien to litigate in one state both those causes of action which originate in that forum state and those arising elsewhere in the United States.7 Considering the relative distances between Liechtenstein and Nevada, on the one hand, and Nevada and California, on the other, due process may indeed not be a barrier to the adoption of plaintiffs' aggregation theory in the instant suit. What plaintiffs overlook, however, is that, not only must the requirements of due process be met before a court can properly assert in personam jurisdiction, but the exercise of jurisdiction must also be affirmatively authorized by the legislature. It is because of this factor that one case relied upon by the plaintiffs to support their aggregation theory, Engineered Sports Prods. v. Brunswick Corp.,
In Engineered Sports, plaintiffs sued various European manufacturers of ski boots for patent infringement in the federal court in Utah. The court held that it could consider all United States contacts of defendants in determining whether to exercise in personam jurisdiction over them (apparently for all their American activities) under Utah's long-arm statute. Although the court's language is expansive, the rationale for its holding was not simply that defendants were aliens and that plaintiffs' cause of action was federal. Rather, the court relied on Utah Code Ann. § 78-27-24(3), which confers long-arm jurisdiction over a defendant who caused "any injury within the state" when claims "arising from" that in-state injury were sued upon, to hold that plaintiffs, "whose business is relatively localized" in Utah, suffered injury there through defendants' worldwide activities.
The Nevada long-arm statute involved in the instant suit contains no such "causing of injury within the state" provision. Nev.Rev.Stat. § 14.065 clearly contemplates that only causes of action "arising from" enumerated " acts" which took place "within" Nevada may be reached. There is no indication that any "acts" material to A.G.'s two California loans took place in Nevada. Moreover, even though a clause identical to Utah's commission of a "tortious act within the state" provision has been read to cover tortious conduct which results in economic injury in the forum state, Honeywell, Inc. v. Metz Apparatewerke,
In Cryomedics, Inc. v. Spembly, Ltd.,
The problem of lack of statutory authorization is clearly pointed up by Edward J. Moriarity & Co. v. General Tire & Rubber Co.,
Unfortunately, this course has not been left open to us by the federal rules or statutes. That is, neither Congress nor the Supreme Court has provided statute or rule whereby substituted service may be made (in a Sherman Act suit) upon an alien corporation having minimum contacts with the United States. And when substituted service is made pursuant to a state long-arm statute, as it was in this case, then the rules provide that service be made "under the circumstances and in the manner prescribed by the statute * * *," Rule 4(e)(2) (sic 4(e)(1)), F.R.Civ.P. (emphasis added).
We take the italicized portion to mean that when service is made pursuant to a state long-arm statute, it is only proper when the corporation served meets the qualifications for service set out in that statute.
If policy considerations do indeed dictate that an alien defendant's contacts with the entire United States should be aggregated, and if the Constitution does not forbid such a practice at least where the plaintiff is suing in federal court on a federal cause of action, the Federal Rules should be amended to authorize such a practice. Such a step is, however, not ours to take. See AG-Tronic, Inc. v. Frank Paviour, Ltd.,
Finally, such aggregation of an alien's American contacts may already be proper when a federal statute authorizes world-wide service of process, see, e. g., 15 U.S.C. §§ 22, 25, 77v, 78aa; 28 U.S.C. § 1655, and, therefore, the only relevant constraint is fifth amendment due process rather than statutory authorization. See, e. g., Leasco Data Processing Equip. Corp. v. Maxwell,
Since the district court's power to exercise in personam jurisdiction is limited here to that provided by the Federal Rules of Civil Procedure and, through them, the laws of the state of Nevada, plaintiffs may not, absent defendants' "presence" in Nevada or a waiver of the objection by them, litigate in the Nevada district court their trademark infringement and unfair competition claims arising out of A.G.'s two California loans.
3. Express as the Nevada "Agent" of A.G.
In addition to reaching A.G. through Nevada's long-arm statute for its own activities as discussed above, plaintiffs maintain that A.G. may be served under that statute for the actions of Express. They allege that the Nevada activities of Express11 out of which their claims for trademark infringement and unfair competition arise were conducted by Express at the behest, and under the control, of A.G. and are, therefore, imputable to it. Thus, they conclude, for purposes of those activities, Express was the "agent" or "instrumentality" of A.G. in Nevada and, therefore, A.G. may be served pursuant to the express language of Nev.Rev.Stat. § 14.065(2).12
While Nevada courts do not appear to have attempted to define the statutory terms "agent" and "instrumentality," several other courts have recognized the existence of such a relationship as a basis on which, consistently with due process and the long-arm statutes before them, the principal may be served for the in-state actions of the agent. Corporations, of course, can only act through agents, and either an individual person, see, e. g., Davis H. Elliot Co., Inc. v. Caribbean Utils. Co., Ltd.,
4. A.G. as the Shareholder of Express
Finally, plaintiffs appear to argue that, although A.G.'s acquisition and ownership of the stock of Express would probably not alone be sufficient to establish A.G.'s "presence" in Nevada, those activities do in themselves qualify as the transaction of business or the commission of a tort under the Nevada long-arm statute. Although it is unclear from plaintiffs' incomplete argument, they may be advancing one or both of the following theories: First, plaintiffs may be arguing that the very acts of acquiring and owning a corporation which is incorporated and operates in Nevada under an infringing name are sufficient to give rise to trademark infringement and unfair competition causes of action against A.G. in Nevada. If valid causes of action do indeed arise from such activity "in" Nevada issues which we do not here decide, Nevada's long-arm statute would seem to be strong enough to reach A.G.14
Second, given plaintiffs' repeated emphasis on Express' "undercapitalized" condition, it seems that they are concerned that any recovery against Express for its own wrongful activities will go unsatisfied. They argue that Express is a mere shell with figurehead officers, and that the shareholders of Express should be held liable on an "alter ego" theory for any liability that Express itself incurs.15
Under this theory, A.G. would be subject to service under the Nevada long-arm statute not for the infringing and unfair acts of Express as it would be according to the agency rationale discussed in Part I.A.3. supra, but rather for any unmet judgment liability of Express resulting from plaintiffs' suit based on those acts. A.G.'s stock ownership could once the "corporate veil" raised by Express is "pierced" thus be said to "give rise" to its alter ego liability as the shareholder of Express. Cf. Threlkeld v. Tucker,
Although plaintiffs have been unable to find authority which recognizes this latter theory because most "alter ego" cases in the jurisdictional context ultimately impute the acts of the corporation to the shareholders under an agency rationale, there may indeed be something to commend it. A foreign shareholder should not be permitted to own a shell American corporation that engages in wrongful conduct for which the foreign shareholder may potentially be held liable on an alter ego theory, but for which he cannot be reached because he claims that the corporation did not act as his agent to further his business affairs. Common sense dictates that it would be neither unreasonable nor unfair to reach the shareholder in those circumstances, for he has presumably entered into the ownership and control of the offending corporation intentionally.
Given the facts as currently established, however, A.G. would not be the shareholder reached by a piercing of the corporate veil raised by Express. It is Jacobs who is now the professed owner of all of Express' shares, and it may be anticipated that he will continue to be the owner until the time when alter ego liability is sufficiently established. Plaintiffs do, however, challenge the stock sale to Jacobs as a sham because it occurred after Express was served in the instant suit albeit before A.G. was named as a defendant and involved a consideration of only $100.17 In any event, the contention that the sale to Jacobs was a sham need not be reached in this case unless if and when the corporate form of Express is in fact ignored and its shareholders reached Jacobs is found to be unable to bear Express' liabilities.
It goes without saying that the district court considered neither of the theories presented under our reading of the plaintiffs' stock ownership argument. A remand is necessary to enable it to do so.
B. A.G.'s Amenability to Process for its Foreign Activities
Plaintiffs are not satisfied with the substantial but limited possibilities for securing personal jurisdiction over A.G. under Nevada's long-arm statute. They seek to reach A.G. not only for the wrongs which may have arisen from its "minimum contacts" with the state, but also for all injuries allegedly sustained by them through the activities of A.G. no matter where conducted. In other words, plaintiffs want to sue A.G. in the federal district court of Nevada for the alleged instances of trademark infringement and unfair competition committed by A.G. abroad and in American states other than Nevada.18 To do so, they must demonstrate as they have succeeded in doing for Express that A.G. is "doing business" and is, therefore, "present" in Nevada so as to be subject to that state's general jurisdiction.
Plaintiffs allege that A.G. has certain Nevada contacts which, although they may not in themselves provide a basis for service because they may be unrelated to plaintiffs' causes of action, see, e. g., Fulghum Indus., Inc. v. Walterboro Forest Prods., Inc.,
1. Express as the "General Agent" of A.G.
First, plaintiffs' contentions may be interpreted as suggesting that Express, even though it may have been an independently-managed corporation, was acting in Nevada as the "general agent" of A.G. Their previous "agency" theory was aimed at establishing that Express was A.G.'s agent for the special purpose of transacting that business in Nevada or committing the torts there so that those activities would be imputed to A.G., thus opening A.G. to long-arm service for actions arising from those activities. Plaintiffs' "general agency" argument is somewhat different. It apparently is an attempt to show that Express was the "general agent" of A.G. so that Express' "presence" in Nevada may, so to speak, be imputed to A.G., thus opening A.G. to service under Fed.R.Civ.P. 4(d)(3) & (4)(f) and to the general jurisdiction of the Nevada district court for suits on all of A.G.'s activities wherever conducted. Under the former "agency" theory, plaintiffs need to show only a special agency for the purpose, and at the time, of the complained of acts of Express. Under the latter theory, however, a "general agency" must be shown at the time suit was filed against Express, thus demonstrating that A.G. itself was present and personally served in Nevada at that time so that it is not unfair or unreasonable to have A.G. answer to the general jurisdiction of the Nevada district court.
By providing for personal service on the in-state "general agent" of a "domestic or foreign corporation," Fed.R.Civ.P. 4(d)(3) & (4)(f) clearly evince a legislative authorization to serve a foreign corporation by serving its in-state "general agent." The common law requirements of a "general agency" demand that such substantial activities be carried on for the benefit of the principal that, in some cases, those same activities may indeed be sufficient to render the principal himself "present" under the "continuous and systematic" test of Perkins v. Benguet Consol. Mining Co.,
In Gottlieb v. Sandia American Corp.,
One occuping (sic ) this position typically will perform duties which are "sufficiently necessary" to the corporation's operations. He should be "a responsible party in charge of any substantial phase" of the corporation's activity. In brief, it is reasonable to expect that such an agent will have broad executive responsibilities and that his relationship will reflect a degree of continuity. Authority to act as agent sporadically or in a single transaction ordinarily does not satisfy this provision of the Rule.
(A) foreign corporation is doing business in New York "in the traditional sense" when its New York representative provides services beyond "mere solicitation" and these services are sufficiently important to the foreign corporation that if it did not have a representative to perform them, the corporation's own officials would undertake to perform substantially similar services.
Accord, Sunrise Toyota, Ltd. v. Toyota Motor Co.,
Although it has not always been designated as such in the cases, there is much authority for such a "general agency" theory of "presence," and it is clear that whether the alleged general agent was a subsidiary of the principal or independently owned is irrelevant. See, e. g., Scanapico v. Richmond, Fredericksburg & Potomac R. Co.,
Given the legislative authorization, and if plaintiffs can establish that A.G. was carrying on "continuous and systematic" activities in Nevada through Express acting as A.G.'s "general agent,"19 we see no reason why A.G. itself should not be said to have been present there and served at the time Express was served.202. Express as a "Division" of A.G.
Second, plaintiffs maintain that Express is in fact not an independent corporation but a mere veil for its owner, A.G.; that that veil should be pierced; that Express should be viewed as a part of the resulting single corporate entity; and that, since Express is clearly "doing business" within Nevada, A.G. itself is present within the state and may, therefore, be reached under Rules 4(d)(3) & 4(f). They seem to argue that, if Express were not separately incorporated but a mere "division" or "branch" of A.G., A.G. itself would be held to be "present" in Nevada if the activities of the "Express division" there were sufficiently "continuous and systematic" to meet the due process test. They thus hope to sue A.G. in Nevada for the non-Nevada activities carried on by all parts of A.G. including Express.
Clearly, a corporation may be "present" in several jurisdictions by operating "divisions" there so that it may not, in some instances, be unreasonable or unfair to subject to the corporation to the general jurisdiction of any one of these forums regardless of where the cause of action arose or which of the corporation's division's activities gave rise to it. See, e. g., Rebozo v. Washington Post Co.,
Here, factors different from those which were relevant to deciding whether Express was the otherwise independent "general agent" of A.G. may be at issue. Some courts have stressed the "undercapitalized" condition of a subsidiary in this context, as do plaintiffs here. But it appears that this criterion, which is important to deciding whether to pierce the veil raised by a subsidiary corporation in order to hold the parent corporation liable for failure of the subsidiary to meet its debts, may not be relevant to a showing that the two corporations are in fact one so as to establish that the out-of-state corporation be it parent or subsidiary is present within the forum for jurisdictional purposes. See McPheron v. Penn Central Transp. Co.,
whether the officers and directors of the two are the same; whether the subsidiary pays cash for products sold or service rendered to it by the parent; whether separate books, bank accounts, tax returns, financial statements and the like are kept; and whether the parent corporation holds the subsidiary out as an agent, either expressly or impliedly as by representing it is doing business in, or has an office in the state, when only the subsidiary is present.
2 J. Moore, Moore's Federal Practice P 4.25(6), at 1175-76 (2d ed. 1976) (footnotes omitted) (looking to "alter ego" factors both to "pierce the corporate veil" to reach the parent corporation and to establish an "agency" relationship).21
C. Conclusion as to In Personam Jurisdiction over A.G.
The court below considered none of these "minimum contacts" or "presence" theories as possible bases on which to hold A.G. subject to its in personam jurisdiction. The court's holding that the mere stock ownership by A.G. of Express was insufficient to confer personal jurisdiction over A.G. may have been correct in itself, but it does not begin to address the complex though apparently well-recognized theories outlined by us.
While we have attempted carefully to organize the various legal theories which may be derived from plaintiffs' arguments and the case law in this area, it must be cautioned that questions of personal jurisdiction admit of no simple solutions and that ultimately due process issues of reasonableness and fairness must be decided on a case-by-case basis. Perkins v. Benguet Consol. Mining Co.,
II. SUBJECT MATTER JURISDICTION OVER A.G.'s ACTIVITIES
The Lanham Act grants a registrant a civil right of action against "(a)ny person who shall . . . use in commerce," in any improper manner detailed therein, a registered trademark. 15 U.S.C. § 1114(a)(1). For purposes of the Act, "commerce" is sweepingly defined as "all commerce which may lawfully be regulated by Congress." Id. § 1127. Section 1121 provides the federal courts with subject matter jurisdiction over causes of action arising under the Act.
As the district court below correctly noted, see
In the instant case, the district court held that, because the business of both plaintiffs was interstate in character, even the purely intrastate activities of Express could be reached if those activities had the requisite substantial, adverse effect on plaintiffs' interstate business. A fortiori, the court ruled, Express' interstate activities were covered.
A. A.G.'s Foreign Activities
The district court ruled that the Lanham Act was generally limited to causes of action arising out of American activities. It held that foreign activities could be reached only if the following three factors were present:
(1) Defendant's conduct must have had a substantial effect on United States commerce; (2) defendant must be a United States citizen, as the United States has broad powers to regulate the conduct of its citizens in foreign countries; (3) there must be no conflict with trademark rights established under the foreign law.
In so holding, the district court carefully analyzed the three cases which have discussed whether foreign activities may be reached under the Lanham Act. Steele v. Bulova Watch Co.,
Our review of the cases on which the district court relied,22 and the extensive analysis of extraterritoriality undertaken by us in Timberlane, see
Next, although foreign activities must of course have some effect on United States foreign commerce before they can be reached, we disagree with the district court's requirement that that effect must be "substantial." Bulova contains no such requirement. And, as we noted in Timberlane, since the origins of the "substantiality" test apparently lie in the effort to distinguish between intrastate commerce, which Congress may not regulate as such, and interstate commerce, which it can control, it may be unwise blindly to apply the factor in the area of foreign commerce over which Congress has exclusive authority. See Timberlane,
Finally, while we agree with the district court that each of the three factors which it cited degree of effect on United States commerce, the citizenship of defendants, and the existence of a conflict with foreign trademark registrations are indeed relevant to the resolution of the jurisdictional issue, contrary to the apparent view of the district court, the absence of one of the factors is not necessarily determinative of the issue. Rather, each factor is just one consideration to be balanced in the "jurisdictional rule of reason" of comity and fairness adopted by us in Timberlane:
The elements to be weighed include the degree of conflict with foreign law or policy, the nationality or allegiance of the parties and the locations or principal places of business of corporations, the extent to which enforcement by either state can be expected to achieve compliance, the relative significance of effects on the United States as compared with those elsewhere, the extent to which there is explicit purpose to harm or affect American commerce, the foreseeability of such effect, and the relative importance to the violations charged of conduct within the United States as compared with conduct abroad. A court evaluating these factors should identify the potential degree of conflict if American authority is asserted. A difference in law or policy is one likely sore spot, though one which may not always be present. Nationality is another; though foreign governments may have some concern for the treatment of American citizens and businesses residing there, they primarily care about their own nationals. Having assessed the conflict, the court should then determine whether, in the face of it, the contacts and interests of the United States are sufficient to support the exercise of extraterritorial jurisdiction.
In the instant case, it appears that plaintiffs have been successful in securing the invalidation of some, but not all, foreign registrations held by A.G. and its European subsidiaries.23 While A.G. and its affiliates are alien corporations, they may indeed be conducting some commercial activity in the United States either themselves or through the Express entity. Moreover, A.G.'s activities may have some effect on both plaintiffs' domestic business and Wells Fargo Bank's heavily-advertised international affairs, and plaintiffs do maintain that A.G.'s scheme has all along been purposeful and deliberate.
We are, however, not prepared to say that some or all of A.G.'s foreign activities may be reached under the Lanham Act. Therefore, we vacate the dismissal of the district court and remand the issue to it for the opportunity to apply the Timberlane test to the jurisdictional facts which plaintiffs can establish.
B. A.G.'s Domestic Activities
Plaintiffs suggest that, while A.G.'s foreign activities may indeed test the extraterritorial reach of the Lanham Act, A.G.'s American infringing activities including its one Nevada loan, its two California loans, and whatever actions of Express may be imputable to it should be analyzed as would any case involving purely interstate activities. We note, however, that, when faced with both Mexican and United States activities of an American citizen that were part of one infringing scheme, this court adopted an analysis which at least in part was premised on the need to deal with the extraterritorial nature of defendant's activities. See Ramirez & Feraud Chili Co. v. Las Palmas Food Co., Inc.,
In the instant case, the funds loaned by A.G. in America presumably came from abroad into the United States, much the same as did the chili cans in Ramirez. Loan negotiations took place here, and in Ramirez the printing of the counterfeit labels was done in the United States. However, unlike the principal defendant in Ramirez, A.G. is an alien. On the other hand, if Express' activities are imputed to A.G., those actions all took place within the United States and involved an American agent, Express.
We find it unnecessary to offer an extended discussion of the conceptual problem posed here by plaintiffs. Whether A.G.'s alleged American activities are to be tested separately from the foreign activities or together under the Timberlane standard, we hold that the American portion is clearly covered. That such interstate commerce is carried on by an alien may present service of process problems, but we fail to see how the fundamental "territorial" reach of the Lanham Act noted both in Ramirez,
If anything, judging A.G.'s American activities as part of its overall infringing scheme under the test of Timberlane which was fashioned in the context of activities that were primarily foreign and were carried out by defendants of both American and foreign nationalities, see
arising therefrom. C. Conclusion as to Subject Matter
Jurisdiction over A.G.'s Activities
Since the court below did not have before it our recent decision in Timberlane when it ruled on the extraterritorial reach of the Lanham Act and does not appear to have considered possible Lanham Act violations growing out of A.G.'s domestic activities, we vacate the district court's ruling and remand both issues for consideration in light of our opinion and those jurisdictional facts which plaintiffs may be able to develop.24III. FORUM NON CONVENIENS
Finally, the district court did recognize that subject matter jurisdiction over an unfair competition suit based on A.G.'s foreign activities could be bottomed on diversity. It nevertheless dismissed such a suit. The court held that it did not have in personam jurisdiction over A.G. and that, even if it could reach A.G., it would dismiss a diversity suit because, under conflict of law principles, the law of the place of the "passing off" would govern, Vanity Fair Mills v. T. Eaton Co.,
Since we have held that the court may be able to reach A.G. for both its foreign and domestic activities and that subject matter jurisdiction and a cause of action may be possible for even A.G.'s foreign activities under the Lanham Act, we vacate the district court's forum non conveniens dismissal. In doing so, however, we note that considerations integral to both the due process test for in personam jurisdiction and our own Timberlane "jurisdictional rule of reason" are also relevant to a ruling on the forum non conveniens issue, and that a close finding of jurisdiction in either sense still does not foreclose the district court from deciding anew on remand that, in its discretion, Nevada is not a convenient forum in which to litigate part or all of the possible actions against A.G. See generally Gulf Oil Corp. v. Gilbert,
VACATED AND REMANDED.
Notes
The Honorable William G. East, Senior United States District Judge for the District of Oregon, sitting by designation
At this stage of the proceedings, we of course accept plaintiffs' allegations as true. Steele v. Bulova Watch Co.,
Among the alleged European subsidiaries of A.G. are the following: Wells Fargo Express, Ltd. is an Irish corporation organized in 1967. This wholly-owned subsidiary of A.G. owns an interest in a printing company and has a banking charter as well. Wells Fargo Express, S.A., a Spanish company, was also organized in 1967. It is a partially-owned subsidiary of A.G. and engages in the shoe and furniture manufacturing business, operates a Madrid boutique, and is part owner of La Manga Compania de Golf. Finally, there is Wells Fargo of Gibraltar. Organized in 1968, this corporation was apparently associated with a gambling casino which Heymann owned in Gibraltar
According to plaintiffs, Jacobs, when deposed, refused to state whether he held the stock as a nominee for another or whether $100 was the sole consideration. Before this sale, ownership of both the stock of Express and its assets had been shuffled around through various other subsidiaries of A.G., but A.G. apparently remained the ultimate parent, at least until the sale to Jacobs. See
A.G. neither submitted a brief nor appeared for oral argument before us. Its counsel did, however, file a status report on foreign litigation to supplement a similar report filed by plaintiffs in response to our request at argument. See note 23 infra
Although the court did not make its basis for exercising in personam jurisdiction over Express explicit, we are assuming that Express' clear "presence" within Nevada obviated the need to make use of the state's long-arm statute. This theory also explains why the court had personal jurisdiction over Express for Express' out-of-state as well as Nevada activities. See
Following the clear weight of authority, we thus answer the question regarded as open in Aanestad v. Beech Aircraft Corp.,
Alien defendants are, of course, entitled to due process. See Galvan v. Press,
Nationwide contacts were highlighted in the opinion because, while all of defendants' world-wide activities caused plaintiffs' Utah injuries, the court held that federal patent legislation gives a cause of action in "tort" only for United States, not foreign, activities. See
Yet another case relied on by the Cryomedics court may not properly be read to support it. In Holt v. Klosters Rederi A/S,
The Seventh Circuit in Honeywell appears to be the only other circuit court to have been confronted with the aggregation theory. That court expressly declined to pass on it. See
Our consideration here is limited to Express' in-state activities. Once again, even if Express' out-of-state acts were to be imputed to A.G., that would not be a basis for reaching A.G. from Nevada under that state's long-arm statute. See Part I.A.2. supra. Express itself may be sued in Nevada even for out-of-state activities because it is "present" in Nevada. See note 5 supra. In order to sue A.G. in Nevada on the non-Nevada activities of Express that are imputable to it on an agency theory, plaintiffs would have to show not that Express is present in Nevada, but that A.G. itself is present there. Plaintiffs do attempt to demonstrate that fact. See I.B. infra. But that is a separate matter
See page 414 supra for the complete text of Nev.Rev.Stat. § 14.065(2)
Plaintiffs apparently do not claim that either the Federal Rules or the Nevada long-arm statute permits service on a corporate parent in any case arising out of the in-state acts of the subsidiary. While such a statutory rule might, if enacted, be constitutional, see Cannon Mfg. Co. v. Cudahy Packing Co.,
While most of the cases in this area talk also in terms of "piercing the corporate veil" when a parent and subsidiary are involved, the existence of an intercorporate agency is as highlighted by those cases involving corporations without common ownership an independently sufficient basis for long-arm jurisdiction. See 2 J. Moore, Moore's Federal Practice P 4.25(6), at 1174-76 (2d ed. 1976). This is not to say, however, that the "alter ego" theory itself may not be an additional ground for service. But if the veil between the subsidiary and parent is pierced so that each is found to be a "branch" or "division" of a larger whole, not only would the acts of the part be imputed to the whole, as in any case of agency, but also the in-state "presence" of one part may render the out-of-state part present in the forum as well. For this reason, the discussion of whether Express and A.G. are separate corporations is reserved until the analysis of plaintiffs' "presence" theories. See Part I.B.2. infra
Even if ownership of a subsidiary corporation does constitute the transaction of business within the state for purposes of the state long-arm statute, the cause of action has to "arise from" that stock ownership. But compare Wilshire Oil Co. v. Riffe,
Plaintiffs cite the following factors as demonstrating that Express was the "alter ego" of A.G.: Directors and officers of Express also served A.G. in some capacity or were mere "figureheads." Heymann was a director of both corporations and sole owner of A.G., which in turn owned Express; Gregory Peters was a director of Express and financial advisor to A.G.; Wilkinson, Jr. was a director and president of Express while holding a written employment contract with A.G., the precise nature of which he would not disclose when deposed. Anthony Germano, a barber by trade, served as vice-president and director of Express; his only duties were to sign checks for the corporation and "sweep up the office."
Express was grossly undercapitalized, and its funds were dissipated in unbusinesslike ways. The $50,000 paid in by A.G. in 1968 went towards the "wining and dining" of A.G.'s officers and directors who visited Las Vegas; personal loans were made to the officers and directors of both Express and A.G. Funds were commingled between the two corporations. The salaries and expenses of Express' directors and officers were paid directly by A.G., never by Express itself. When Express negotiated to purchase some property in Las Vegas, it did so as agent for A.G., and the check was signed by Peters and issued by the Meilis Establishment of Liechtenstein, of which Peters was president. Express made no profits during its entire existence. By the time the instant suit was filed against it, it had to borrow $10,000 from A.G. at 10% interest to finance the litigation; that loan has never been repaid. A.G. directly hired and paid the retainer for Jacobs, Express' lawyer in the instant action.
Corporate formalities were minimally complied with by Express. Only pro forma records were kept; no Corporate Minutes Book was used; only one shareholder meeting was held up to the date of suit; and only one federal tax return was ever filed by Express, and that showed a loss.
Given that Express is incorporated in Nevada, has its principal place of business there, and if pierced will be pierced under Nevada law, North Arlington Med. Bldg., Inc. v. Sanchez Const. Co.,
As a practical matter, it may be difficult for plaintiffs to demonstrate that the sale was a sham. Occurring as it did before A.G. was served and without the possibility of A.G.'s foreseeing our acknowledgement of plaintiffs' stock ownership theory, there may have been little reason for A.G. to have rid itself of ownership. But see note 20 infra. Moreover, if Express is indeed a grossly undercapitalized corporate shell facing tremendous liabilities as plaintiffs maintain, a consideration of $100 may in fact be more than nominal
As already noted, see Part I.A.2. supra, plaintiffs allege that A.G. directly made two loans in California. The list of infringing and unfair activities allegedly carried on by A.G. and its European affiliates abroad is apparently much more extensive
In Arrowsmith v. United Press Int'l,
Some of the cases cited in this section of our opinion were, however, bottomed on diversity jurisdiction and, therefore, dealt with state statutes under the Arrowsmith doctrine and the due process clause of the fourteenth amendment. But, given the broad reach of most of these modern state statutes, the fourteenth amendment ultimately became the only binding constraint; and, given that no case has interpreted the due process clause of the fifth amendment differently from that of the fourteenth in the context of interpreting the International Shoe line of authority, we rely on those cases also. In the final analysis, we are forced to agree that, "(i)n terms of actual results, Arrowsmith is much ado about nothing in the bulk of cases . . . ." 2 J. Moore, Moore's Federal Practice P 4.26, at 1183 (2d ed. 1976). See also 4 C. Wright & A. Miller, Federal Practice and Procedure: Civil § 1075 (1976).
Service on the in-state "general agent" is, of course, effective at that time against the principal. See Stanley Works v. Globemaster, Inc.,
It would seem, however, that the only causes of action of which any defendant received notice from plaintiffs' first complaint were those arising out of Express' activities. But, even if A.G. no longer owned Express at the later time when A.G. itself was actually served, such lack of ownership would not be a barrier to a finding that, even at that late date, Express was still a general agent of A.G., thus rendering A.G. present in Nevada at that time. It may, however, prove to be a barrier to suing on activities other than those of Express under the "alter ego" theory of presence discussed in Part I.B.2. infra. Plaintiffs do, of course, attack the bona fides of the sale. See Part I.A.4. supra.
Although we note that Professor Moore may be remiss not stressing the possibility of a common law agency even as between totally independent corporations, see Part I.A.3. & note 13 supra, and in focusing on reaching an out-of-state parent rather than the absent part be it parent or subsidiary of the larger whole, we find that most cases do turn on the factors enumerated by him. Plaintiffs' allegations in this regard are detailed in note 15 supra. See also note 20 supra
In Steele v. Bulova Watch Co.,
In Vanity Fair Mills, Inc. v. T. Eaton Co.,
The facts of Ramirez & Feraud Chili Co. v. Las Palmas Food Co.,
At last report of plaintiffs, the tally in foreign encounters stood as follows: Plaintiff Wells Fargo & Company has met with great success in West Germany and Austria against A.G., and in Italy and France against A.G.'s wholly-owned Irish subsidiary. Lesser success is reported in Liechtenstein against A.G. itself, and proceedings in Great Britain and South Africa against A.G., and in Spain against A.G.'s partially-owned Spanish subsidiary, were still awaiting resolution. Plaintiff Baker Industries has seemingly fared less well, losing to A.G. in Great Britain and to A.G.'s Spanish subsidiary in Spain
Even in those instances in which a conflict may still exist between plaintiffs' and A.G.'s registration, the jurisdiction of the district court to issue an injunction is not necessarily foreclosed. See Ramirez & Feraud Chili,
Plaintiffs have not, however, briefed or argued the question of what impact relevant international trademark conventions or treaties may have on this point. See 15 U.S.C. § 1126.
Plaintiffs argue here that the trial court's refusal to grant a default judgment against A.G. was an abuse of discretion if it was based on jurisdictional grounds. Citing United States ex rel. Motley v. Rundle,
Neither case supports plaintiffs' argument. Both involved a subsequent proceeding in which the defendant attacked the entry of a default judgment against it, not the issue of when a default should be entered in the first instance. It is clear that plaintiffs bear the burden both of making an initial, prima facie showing of jurisdictional facts at the pleading stage and of proving those facts by a preponderance at trial. Milligan v. Anderson,
Plaintiffs also challenge the district court's refusal to grant further discovery against A.G. Since we have vacated the district court's judgment on the issues of in personam jurisdiction over A.G. and subject matter jurisdiction over A.G.'s foreign activities, we also vacate the district court's refusal to grant discovery.
We note, however, that a trial court does have jurisdiction to determine its own jurisdiction. United States v. United Mine Workers,
The matter is generally left to the discretion of the trial court. H. L. Moore Drug Exch., Inc. v. Smith, Kline & French Lab.,