Echeverry v. Kellogg Switchboard & Supply Co.

• Citation: 175 F.2d 900
• Decision Date: 29 June 1949
• Docket Number: Docket 21302.,No. 241,241
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
• Parties: ECHEVERRY v. KELLOGG SWITCHBOARD & SUPPLY CO.

175 F.2d 900 (1949)

ECHEVERRY v. KELLOGG SWITCHBOARD & SUPPLY CO.

No. 241, Docket 21302.

United States Court of Appeals Second Circuit.

Argued May 11, 1949.

Decided June 29, 1949.

Diamond & Elkind, New York City, for Plaintiff-Appellant, Leonard W. Diamond, New York City, of Counsel.

Tenney, Sherman, Rogers & Guthrie, Chicago, Ill., Choate, Mitchell & Ely, New York City, for Defendant-Appellee, S. Ashley Guthrie, Chicago, Ill., William H. Crawford, New York City, of Counsel.

Before CHASE, CLARK, and DOBIE, Circuit Judges.

DOBIE, Circuit Judge.

Plaintiff, Jesus Echeverry, a citizen of the Republic of Colombia (who was thus an alien), instituted, in the United States District Court for the Southern District of New York, a civil action against Kellogg Switchboard and Supply Company (hereinafter called Kellogg), a corporation organized under the laws of the State of Illinois. The District Court granted Kellogg's motion to dismiss on two grounds: (1) The venue was improperly laid in the Southern District of New York; (2) Service of process in this District on Willard L. Jones was not valid and binding on Kellogg. The ground of each of these holdings was that Kellogg was not doing business in the Southern District of New York in so far as the term "doing business" constituted a basis for either the propriety of the venue or the validity of the service of process. Plaintiff has duly appealed to us.

Since we agree with the District Court that Kellogg was not doing business in New York, as that term is used above, this makes it unnecessary for us to discuss any of the other questions in the case. We are, accordingly, required, by the same token, to affirm the judgment below.

There is practically no dispute here as to the facts, which were derived from the affidavit of James Kellogg, president of Kellogg, and the affidavit and deposition of Willard Jones, vice-president of the Telephone Sales and Service Corporation (hereinafter called Telephone), a New York corporation and a wholly owned subsidiary of Kellogg.

Jones was paid partly by Kellogg, partly by Telephone. Every other employee of Telephone was paid solely by Telephone. Neither Telephone nor Jones is in any sense the agent of Kellogg. Indeed, neither Jones nor Telephone was even empowered to solicit orders for Kellogg. Of the merchandise sold by Telephone, about 60% is manufactured by Kellogg and first sold outright to Telephone, which services equipment sold by Telephone to its customers; but Telephone does not service equipment sold by Kellogg directly to its customers in New York. Kellogg has never qualified to do business in New York, pays no occupational tax there and has never appointed an agent for service of process in New York.

Kellogg maintains no office, warehouse or inventory in New York. Kellogg's name, however, does appear in the directory of the building at 16 Hudson Street, New York City, in which is located the office of Telephone. The name of Kellogg is in the New York City Telephone directory under the number of Telephone. Just when and by whom these arrangements were made, does not appear. Calls over this telephone for Kellogg are switched to Jones, who directs the callers, who might be possible purchasers from Kellogg, to the latter's home office in Chicago. When, as is only occasionally the case, mail directed to Kellogg is delivered to Telephone's office, this is opened by Jones and is forwarded to Kellogg in Chicago.

The duties to be performed by Jones on behalf of, and for which he receives compensation from, Kellogg are rather limited and somewhat nebulous. According to the affidavit of Jones:

"His sole duty and authority as an employee of Kellogg Company is to periodically call upon certain designated customers of Kellogg Company located in the New York area and to discuss with them such problems as may arise from time to time in their use of equipment purchased from Kellogg Company. His efforts in this connection are designed to maintain customer good-will and satisfaction with the use of Kellogg Company products. His employment does not include the solicitation, nor does it authorize the acceptance, of orders from such customers for Kellogg Company."

In this same affidavit, Jones, as to the relations between Kellogg and Telephone, stated:

"Telephone Corporation has been engaged from the date of its organization to the present date in the sale of telephone and communications equipment to industrial users and the servicing of such installations. In its normal course of business it purchases telephone and communications equipment from various manufacturers thereof, including Kellogg Company, which it sells at retail. On May 15, 1944, nearly 3 years before acquisition of its stock by Kellogg Company, Telephone Corporation entered into a contract with Kellogg Company whereby it agreed to buy certain products from Kellogg Company for resale in a prescribed territory including portions of Delaware, New Jersey, Connecticut and New York. Said contract provides that it shall continue in force for a period of three (3) years and from month to month thereafter until cancelled by either of the parties. Said contract remains and is now in full force and effect. Telephone Corporation pursuant to said contract is allowed the same discounts as are allowed by Kellogg Company to other jobbers and dealers on similar purchases of its products. Telephone Corporation also buys, sells and deals in telephone products bought from other manufacturers who are in competition with Kellogg Company. * * *

"Telephone Corporation is operated wholly independently of Kellogg Company. Telephone Corporation has no power or authority to act for Kellogg Company, or to represent Kellogg Company, in any manner, or for any purpose, as agent or otherwise."

And the president of Kellogg, in his affidavit of like effect, stated:

"Willard L. Jones, is, and has been, since April 1, 1947, a part-time employee of Kellogg Company. He has not, and never had, authority to accept orders for Kellogg Company in New York. His only duty as such employee of Kellogg Company in New York is, and always has been, to call on certain customers to get information from them with respect to their present and prospective use of products made or sold by Kellogg Company, and to transmit that information to Kellogg Company in Chicago."

Incidentally, none of the transactions which are alleged to have given rise to the claims or causes in action herein involved (which were assigned to the plaintiff), arose or took place in the State of New York.

The published decisions on what constitutes "doing business" in a State by a foreign corporation are literally legion. Yet, in spite of this vast array of judicial authority, border-line cases still have to be decided each on its own peculiar set of facts, which too often cannot be fitted into a stereotyped pattern. In this field, realism, not formalism, should be dominant; the problem must be solved in the light of commercial actuality, not in the aura of juristic semantics. In United States v. Scophony Corporation, 333 U.S. 795, 810, 68 S.Ct. 855, 863, 92 L.Ed. 1091, Mr. Justice Rutledge spoke of "the practical, nontechnical, business standard."

It seems clear that the business of Telephone in New York is not the business of Kellogg, for the purposes of the question before us, merely because Telephone was the wholly owned subsidiary corporation of Kellogg. Mr. Justice Brandeis was quite emphatic on this problem in Cannon Manufacturing Co. v. Cudahy Packing Co., 267 U.S. 333, 336-337, 45 S. Ct. 250, 251, 69 L.Ed. 634, where he said:

"The defendant wanted to have business transactions with persons resident in North Carolina, but for reasons satisfactory to itself did not choose to enter the state in its corporate capacity. It might have conducted such business through an independent agency without subjecting itself to the jurisdiction. Bank of America v. Whitney Central National Bank, 261 U. S. 171, 43 S.Ct. 311, 67 L.Ed. 594. It preferred to employ a subsidiary corporation. Congress has not provided that a corporation of one state shall be amenable to suit in the federal court for another state in which the plaintiff...