288 F.2d 579 (2nd Cir. 1961), 27, Goldlawr, Inc. v. Heiman

Docket Nº:27, 28, Dockets 26211, 26212.
Citation:288 F.2d 579
Party Name:GOLDLAWR, INC., Plaintiff-Appellant, v. Marcus HEIMAN, Select Operating Corporation and United Booking Office, Inc., Defendants-Appellees, and Milton Shubert, William Klein and Sylvia W. Golde, Defendants.
Case Date:February 21, 1961
Court:United States Courts of Appeals, Court of Appeals for the Second Circuit

Page 579

288 F.2d 579 (2nd Cir. 1961)

GOLDLAWR, INC., Plaintiff-Appellant,

v.

Marcus HEIMAN, Select Operating Corporation and United Booking Office, Inc., Defendants-Appellees, and Milton Shubert, William Klein and Sylvia W. Golde, Defendants.

Nos. 27, 28, Dockets 26211, 26212.

United States Court of Appeals, Second Circuit.

February 21, 1961

Argued Oct. 3, 1960.

Page 580

Harold E. Kohn, Philadelphia, Pa. (Curtis, Mallet-Prevost, Colt & Mosle, New York City, Dolores Korman and Dilworth, Paxon, Kalish, Kohn & Dilks, Philadelphia, Pa., on the brief), for plaintiff-appellant.

Aaron Lipper, New York City (Lipper, Shinn & Keeley, and Richard B. Dannenberg, New York City, on the brief), for Morgan Guaranty Trust Co. and Asher Levy, executors of the estate of Marcus Heiman, deceased.

C. Russell Phillips, Philadelphia, Pa. (Gerald Schoenfeld, Bernard B. Jacobs, Lipper, Shinn & Keeley, New York City, Hugh G. Moulton and Montgomery, McCracken, Walker & Rhoads, Philadelphia, Pa., on the brief), for defendants-appellees, Select Operating Corp., and United Booking Office, Inc.

Before HINCKS, WATERMAN and MOORE, Circuit Judges.

MOORE, Circuit Judge.

Pursuant to leave granted by this Court (March 7, 1960; 28 U.S.C. § 1292(b)), plaintiff, Goldlawr, Incorporated (Goldlawr), appeals from an order (January 27, 1960) dismissing the complaints in two actions filed jointly in the Southern District of New York against Select Operating Corporation (Select) and United Booking Office, Inc. (UBO) 'for lack of jurisdiction over the persons of such defendants.' Goldlawr also appeals from the order as to the defendant, Marcus Heiman, deceased, which dismissed for lack of personal jurisdiction and denied its motion to substitute the Executors of the Estate of Marcus Heiman as defendants.

By orders entered in the United States District Court for the Eastern District of Pennsylvania (the Pennsylvania court), these two cases against Select, UBO and certain individuals originally filed in Pennsylvania 1 were transferred 'in the interest of justice' to the Southern District of New York (the New York court) 'conformably to 28 U.S.C.A. 1406(a).' 2 Thereafter, Select, UBO and four individual defendants, appearing specially, moved to dismiss for five reasons: (1) that there had been no service of process on Select or UBO subsequent to the transfer; (2) that there had been no valid service of process on Select or UBO prior to transfer; (3) that without jurisdiction over Select or UBO the Pennsylvania court had no power to order the transfer; (4) that the New York court did not acquire jurisdiction because the transfer was illegal; and (5) that the Pennsylvania court had failed to rule on the motions there made to dismiss for lack of jurisdiction.

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The court below held that it 'lacks personal jurisdiction over the defendants since effective service of process has never been accomplished.' However, it recognized that if transfer were authorized, plaintiff might make proper service in New York, hence determination of the validity of the transfer was necessary on the theory that 'if the transfer to this District were authorized, plaintiff might still be in a position to avoid dismissal by making proper service upon defendants without further delay.' 175 F.Supp. 793, 796. It is appropriate therefore for the transferee court or the Court of Appeals of the transferee district to inquire into the propriety of the transfer. See Hoffman v. Blaski et al., 1960, 363 U.S. 335, 80 S.Ct. 1084, 4 L.Ed.2d 1254, by implication; Arrowhead Co., Inc. v. The Aimee Lykes, 2 Cir., 1951, 193 F.2d 83.

Goldlawr, operating a theatre in Philadelphia, sued Select, UBO, the individual defendants and others not involved in this appeal under Sections 1 3 and 2 4 of the Sherman Act and Sections 4 5 and 16 6 of the Clayton Act, alleging a conspiracy to restrain and monopolize interstate commerce, demanding treble damages and seeking an injunction against the continuance of defendants' allegedly unlawful acts.

Section 12 of the Clayton Act, 7 15 U.S.C. § 22, 15 U.S.C.A. § 22, specifies where suit against a corporation under the antitrust laws may be brought, namely, in a district where it is an inhabitant and also where 'it may be found or transacts business.' Conversely, it should follow that if a corporation is not an inhabitant of, is not found in, and does not transact business in, the district, suit may not be so brought. By statutory grant if suit is brought as prescribed in this section 'all process in such cases may be served in the district of which it (the corporation) is an inhabitant, or wherever it may be found.' Thus, 'in such cases, ' Congress has seen fit to enlarge the limits of the otherwise restricted territorial areas of process. In other words, the extraterritorial service privilege is given only when the other requirements are satisfied.

Upon a motion to dismiss in the Pennsylvania Court, the court held that Select and UBO were not inhabitants of the district or found or transacting business there. However, instead of ruling that therefore the suit could not be brought in the Pennsylvania district, the court, relying on Section 1406(a), 28 U.S.C., treating the motions as 'Motions To Dismiss For Improper Venue, ' ordered the suits transferred to New York (Goldlawr, Incorporated v. Shubert, D.C.E.D.Pa.1958, 169 F.Supp. 677, 680).

The substance of the decision appealed from is that 'the privilege of extraterritorial service is expressly confined to actions brought in a district in which the corporation is an inhabitant, found, or transacting business' (175 F.Supp. 796); that these conditions have not been met and therefore personal jurisdiction was not achieved by serveice of the alias summonses in New York; that Section 1406(a) which 'speaks to defective venue only, cannot be made to do service when there is also a jurisdictional defect'; that proper jurisdiction is a basic requirement; and that a Congressional

Page 582

intent to cure jurisdictional defects cannot be found in a mere venue transfer provision. 175 F.Supp. 793, 797. Goldlawr has not here, either in the brief or on oral argument, challenged the determination that the transferor court did not have personal jurisdiction over appellees.

The motion to substitute the heirs of Marcus Heiman was denied and the cross-motion to dismiss for lack of jurisdiction was granted because no personal jurisdiction had ever been obtained as to Heiman before or after the transfer order and because of doubt that Rule 25(a)(1), Fed.R.Civ.P., 28 U.S.C. authorized executor substitution under such circumstances.

It has long been established that federal courts should not assume jurisdiction to decide cases merely because it would be constitutional for Congress to have given them the jurisdiction they seek to exercise. See generally Hart and Wechsler, The Federal Courts and the Federal System, 1953, pp. 288-340. 'Courts created by statute can have no jurisdiction but such as the statute confers.' Sheldon v. Sill, 1850, 8 How. 441, 49 U.S. 441, 449, 12 L.Ed. 1147. Jurisdiction, over the subject matter and over the person, has been a basic concept of our jurisprudence. Athough a defendant may have full knowledge that an action has been commenced against him, a court, nevertheless, lacks jurisdiction to enter a judgment against him unless jurisdiction over his person has been obtained in strict compliance with a statute designating the method of obtaining such jurisdiction. Wuchter v. Pizzutti, 1928, 276 U.S. 13, 48 S.Ct. 259, 72 L.Ed. 446. The balancing of competing interests which is involved in determining jurisdiction issues has been repeatedly emphasized by the Supreme Court. Pennoyer v. Neff, 1877, 95 U.S. 714, 24 L.Ed. 565; McDonald v. Mabee, 1917, 243 U.S. 90, 37 S.Ct. 343, 61 L.Ed. 608; Hess v. Pawlowski, 1927, 274 U.S. 352 47 S.Ct. 632, 71 L.Ed. 1091; Milliken v. Meyer, 1940, 311 U.S. 457, 61 S.Ct. 339, 85 L.Ed. 278; Mullane v. Central Hanover Bank & Trust Co., 1950, 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865. Because the concept of the power of a court to act and affect the rights of a party is so fundamental, jurisdiction of courts to act should be based on clear legislative pronouncements. And just as their jurisdictional authority is given to the courts by the legislature, so also must legislative limitations be expanded or removed by the same process. Section 1406(a) provides for the transfer of cases when venue is improper. It does not mention jurisdictional defects. Whatever be the desirability of a rule that a district court may transfer a case when venue is mislaid and jurisdiction over the person of the defendant is lacking, it is an unwarranted exercise of judicial interpretation to find that a statute, expressly providing for transfer to cure a venue defect, impliedly provides for a transfer to cure a more basic jurisdictional defect. The lesser does not by implication include the greater.

The legislative history of Section 1406(a) indicates that the draftsmen never disclosed any belief that in promulgating a provision for transfer in the event of improper venue, they also intended their creation to make transfer possible where jurisdiction is lacking. Section 1406(a) 'radically altered prior law' (Moore's Commentary on the Judicial Code, p. 195). Prior to its enactment when venue was found defective, dismissal of the action was mandatory. Camp v. Gress, 1919, 250 U.S. 308, 316, 39 S.Ct. 478, 63 L.Ed. 997; Schoen v. Mountain Producers Corp., 3 Cir., 1948, 170 F.2d 707, 713, 5 A.L.R.2d 1226. Considering the revolutionary character of the change, courts ought to demand a plain expression of the innovation and ought not extend it any further than the statutory language clearly warrants. See Robertson v. Railroad Labor Board, 1925, 268 U.S. 619, 627, 45 S.Ct. 621, 69 L.Ed. 1119;

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Foster Milburn Co. v. Knight, 2 Cir., 1950, 181...

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