308 U.S. 165 (1939), 38, Neirbo Co. v. Bethlehem Shipbuilding Corp., Ltd.

Docket Nº:No. 38
Citation:308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167
Party Name:Neirbo Co. v. Bethlehem Shipbuilding Corp., Ltd.
Case Date:November 22, 1939
Court:United States Supreme Court
 
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Page 165

308 U.S. 165 (1939)

60 S.Ct. 153, 84 L.Ed. 167

Neirbo Co.

v.

Bethlehem Shipbuilding Corp., Ltd.

No. 38

United States Supreme Court

Nov. 22, 1939

        Argued October 17, 18, 1939

        CERTIORARI TO THE CIRCUIT COURT OF APPEALS

        FOR THE SECOND CIRCUIT

        Syllabus

        1. Section 51 of the Judicial Code, as amended, which provides that

no civil suit shall be brought in any district court against any person by any original process or proceeding in any other district than that whereof he is an inhabitant; but, where the jurisdiction is founded only on the fact that the action is between citizens of different States, suit shall be brought only in the district of the residence of either the plaintiff or the defendant,

        merely accords to the defendant a personal privilege of objecting to the venue of suits brought against him in districts wherein, under the section, he may not be compelled to answer. P. 168.

Page 166

        2. The privilege accorded by § 51 may be lost by failure to assert it seasonably, by formal submission in a cause, or by submission through conduct. P. 168.

        3. Such surrender of the privilege may be regarded negatively as a waiver or positively as a consent to be sued. P. 168.

        4. A designation by a foreign corporation, in conformity with a valid statute of a State and as a condition of doing business within it, of an agent upon whom service of process may be made, held an effective consent to be sued in the federal courts of that State. Pp.170, 174.

        5. Prior to the amendment of 1887, the provision was that

no civil suit shall be brought before either of said courts against any person by any original process or proceeding in any other district than that whereof he is an inhabitant or in which he shall be found. . . .

        Held, the omission by that amendment of the words "in which he shall be found" was not intended to affect the implications of a consent to be sued, and was not directed toward any change in the status of a corporate litigant. Ex parte Schollberger, 96 U.S. 369, and Southern Pacific Co. v. Denton, 146 U.S. 202, reconciled. P. 171.

        6. A State constitutionally may require a foreign corporation, as a condition of doing a local business, to designate an agent upon whom service of process may be made. P. 175.

        7. The finding in this case that the foreign corporation, by its designation under the state law of an agent for the service of process, had consented to be sued in the courts of the State, federal as well as state, is not a subjection of federal procedure to the requirements of state law, but a recognition that state legislation and consent of parties may bring about a state of facts which will authorize the federal courts to take cognizance of a case. P. 175.

        103 F.2d 765 reversed.

        Certiorari, 307 U.S. 619, to review the affirmance of an order of the district court quashing service of process on the respondent corporation and dismissing as to it the petitioners' bill.

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        FRANKFURTER, J., lead opinion

        MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

        The case is here to review the affirmance by the Circuit Court of Appeals for the Second Circuit of an order of the District Court for the Southern District of New York setting aside service of process upon Bethlehem Shipbuilding Corporation, Ltd. (hereafter called Bethlehem) and dismissing as to it petitioners' bill, 103 F.2d 765. The suit was based on diversity of citizenship, and was not brought "in the district of the residence of either the plaintiff or the defendant." (§ 51 of the Judicial Code, Act of March 3, 1887, 24 Stat. 552, as corrected by Act of August 13, 1888, 25 Stat. 433, 28 U.S.C. § 112).1 We took the case, 307 U.S. 619, because of the uncertainties in application of § 51, emphasized by conflict between the views below and those of the Circuit Court of Appeals for the Tenth Circuit. Oklahoma Packing Co. v. Oklahoma Gas & Elec. Co., 100 F.2d 770. The sole question in the case is whether § 51 is satisfied by the designation by a foreign corporation of an agent for service of process in conformity with the law of a state in which suit is brought against it in one of the federal courts for that state.

        The jurisdiction of the federal courts -- their power to adjudicate -- is a grant of authority to them by Congress, and thus beyond the scope of litigants to confer. But

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the locality of a lawsuit -- the place where judicial authority may be exercised -- though defined by legislation, relates to the convenience of litigants, and, as such, is subject to their disposition. This basic difference between the court's power and the litigant's convenience is historic in the federal courts. After a period of confusing deviation, it was firmly reestablished in General Investment Co. v. Lake Shore Ry., 260 U.S. 261, [60 S.Ct. 155] and Lee v. Chesapeake & Ohio Ry., 260 U.S. 653, overruling Ex parte Wisner, 203 U.S. 449, and qualifying In re Moore, 209 U.S. 490. All the parties may be nonresidents of the district where suit is brought. Lee v. Chesapeake & Ohio Ry., supra. Section 51 "merely accords to the defendant a personal privilege respecting the venue, or place of suit, which he may assert, or may waive, at his election." Commercial Ins. Co. v. Stone Co., 278 U.S. 177, 179.

        Being a privilege, it may be lost. It may be lost by failure to assert it seasonably, by formal submission in a cause, or by submission through conduct. Commercial Ins. Co. v. Stone Co., supra. Whether such surrender of a personal immunity be conceived negatively as a waiver or positively as a consent to be sued, is merely an expression of literary preference. The essence of the matter is that courts affix to conduct consequences as to place of suit consistent with the policy behind § 51, which is "to save defendants from inconveniences to which they might be subjected if they could be compelled to answer in any district, or wherever found." General Investment Co. v. Lake Shore Ry., supra, 260 U.S. at 275.

        When the litigants are natural persons, the conceptions underlying venue present relatively few problems in application. But, in the case of corporate litigants, these procedural problems are enmeshed in the wider intricacies touching the status of a corporation in our law. The

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corporate device is one form of associated enterprise, and what the law in effect has done is to enforce rights and duties appropriate for collective activity. Cf. United Mine Workers v. Coronado Coal Co., 259 U.S. 344; Puerto Rico v. Russell, 288 U.S. 476. It has done so largely by assimilating corporations to natural persons. The long, tortuous evolution of the methods whereby foreign corporations gained access to courts or could be brought there is the history of judicial groping for a reconciliation between the practical position achieved by the corporation in society and a natural desire to confine the powers of these artificial creations.2

        It took half a century of litigation in this Court finally to confer on a corporation, through the use of a fiction,3 citizenship in the chartering state for jurisdictional purposes. Compare Lafayette Ins. Co. v. French, 18 How. 404, with Hope Ins. Co. v. Boardman, 5 Cranch 57. Throughout, the mode of thought was metaphorical. The classic doctrine was that a corporation "must dwell in the place of its creation, and cannot migrate to another sovereignty." Bank of Augusta v. Earle, 13 Pet. 519, 588. Logically applied, this theory of nonmigration prevented suit in a nonchartering state, for the corporation could not be there.4 And such was the practice of the circuit courts5 until the opinion of Chief Justice Waite in Ex parte Schollenberger, 96 U.S. 369, displaced metaphor with common sense. The essential difference

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between the practice which Mr. Justice Nelson6 initiated at circuit and the decision in Schollenberger's case was not a matter of technical legal construction, but a way of looking at corporations. Men's minds had become habituated to corporate activities which crossed state lines. The fact that corporations did do business outside their originating bounds made intolerable their immunity from suit in the states of their activities. And so they were required by legislatures to designate agents for service of process in return for the privilege of doing local business. That service upon such an agent, in conformity [60 S.Ct. 156] with a valid state statute, constituted consent to be sued in the federal court, and thereby supplanted the immunity as to venue, was the rationale of Schollenberger's case.

        To be sure, that case arose under the Judiciary Act of 1875, 18 Stat. 470, the language of which differed from the Act of 1887, now § 51 of the Judicial Code. The earlier provision was as follows:

And no civil suit shall be brought before either of said courts against any person by any original process or proceeding in any other district than that whereof he is an inhabitant, or in which he shall be found. . . .

        The Act of 1887 omitted the words "in which he shall be found." But, of course, the Phoenix and the Clinton Insurance Company in Ex parte Schollenberger, supra, were not geographically "found" in Pennsylvania, and Chief Justice Waite so recognized. They were "found" in the Eastern District of Pennsylvania only in a metaphorical sense, because they had consented to be sued there by complying with the Pennsylvania law for designating an agent to accept service. Not less than three times does the opinion point

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out that the corporation gave "consent" to be sued, and, because of this consent, the Chief Justice added that the corporation was "found"...

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