342 F.2d 393 (9th Cir. 1965), 18961, Mechanical Contractors Ass'n of America, Inc. v. Mechanical Contractors Ass'n of Northern California, Inc.

Docket Nº:18961.
Citation:342 F.2d 393
Case Date:February 08, 1965
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit

Page 393

342 F.2d 393 (9th Cir. 1965)




No. 18961.

United States Court of Appeals, Ninth Circuit.

February 8, 1965

Page 394

Edgar H. Rowe, Charles A. Legge, Bronson, Bronson & McKinnon, San Francisco, Cal., Edward J. Ross, Breed, Abbott & Morgan, New York City, for appellant.

John J. Vlahos, Schofield, Hanson, Bridgett, Marcus & Jenkins, M. Maroni Smith, San Francisco, Cal., for appellee.

Harold T. Halfpenny, James F. Flanagan, Mary M. Shaw, Halfpenny, Hahn & Ryan, Chicago, Ill., for Natl. Assoc. of Wholesalers as amicus curiae.

Donald M. Counihan, John T. McMahon, Carretta & Counihan, Washington, D.C., for American Society of Assoc. Executives as amicus curiae.

Joseph R. Grodin, Neyhart & Grodin, San Francisco, Cal., for Local No. 38, United Assoc. of Journeymen & Apprentices of the Plumbing and Pipefitting Industry of the U.S. and Canada as amicus curiae.

Before JERTBERG, KOELSCH and DUNIWAY, Circuit Judges.

DUNIWAY, Circuit Judge.

Mechanical Contractors Association of America, Inc., (the National), appeals under 28 U.S.C. § 1292(b), and pursuant to our permission, from an order denying its motion to quash service of a summons and complaint and other accompanying documents, and to dismiss the complaint and the action. The action was brought by Mechanical Contractors Association of Northern California, Inc., (the Local), in the California Superior Court at San Francisco. The complaint alleges that the National is a New York corporation, having its principal office in New York; that it has no agent appointed for the service of process in California, and that the Local is a California corporation, having its principal office in San Francisco.

Service of process upon the National was first made by serving one of its officers in California. The National then removed the action to the United States District Court on grounds of diversity of citizenship, and there moved to quash the service on the ground that it had not been made in the manner prescribed by the California statute (Cal. Code Civ. Proc. §§ 410-411). This motion was

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granted. The Local then obtained an order that service of the summons and complaint be made upon the National by delivering a copy of the process by hand to the Secretary of State of the State of California, and that the Secretary of State make service upon the National at 666 Third Avenue, New York, New York. This was based on the ground that the National was not qualified to do business in California, and on the representation that the National has been 'doing business' in California.

Section 411, subdivision 2 of the Code of Civil Procedure of California provides for service of summons upon '* * * a foreign corporation * * * doing business in this State; in the manner provided by Sections 6500 to 6504, inclusive, of the Corporations Code.' The sections of the Corporations Code that apply here are sections 6501-6503. Section 6501 provides for service of process upon the Secretary of State, when ordered by the judge, if the corporation has not designated an agent in the state for service of process and if certain named officers or agents (listed in section 6500) cannot be found in the State of California. The section requires that the order of the court shall set forth an address to which process shall be sent by the Secretary of State. Section 6502 requires the Secretary of State to forward a copy of the process and of the order of the court by registered air mail, charges prepaid, to the corporation at the address given. Section 6503 allows the corporation thirty days after delivery of the process to the Secretary of State within which to appear. The statutory procedure was followed, and there is no claim that the process was not duly mailed and received.

We first summarize the allegations of the complaint, which is verified by the Local's president. The National is an association made up of members located throughout the United States, consisting of individual business entities and of state, national and local groupings called affiliate associations. All of the members are engaged in the mechanical contracting industry. The Local is made up of thirty Northern California members and is an affiliate member of the National. The National has the customary purposes of a trade association and encourages its members to form affiliated local associations. It cooperates with the local associations in building their programs and providing a forum for discussion of association and industry matters in what is called the secretaries' conference. Among other activities, the Local has been acting as a collective bargaining agent for its members.

In 1962, in connection with collective bargaining activities in Northern California, certain of the Local's members, disagreeing with its activities, withdrew its authority to bargain for them and disrupted the established pattern of collective bargaining. As a result of this dispute, the National advised the Local that on March 6, 1963 the National's board would meet in Chicago to consider the 'disaffiliation' of the Local. The meeting was attended part of the time by some of the board members of the Local. The next day, March 7, 1963, the National advised the Local that it was disaffiliated unless its board would immediately agree to the election of a new board, at which election the members of the Local who had resigned would be permitted to vote, with all questions as to eligibility to vote vested in the National, which would supervise and control eligibility and voting. The Local rejected this disaffiliation. The National then sent communications to the members of the Local and to other members of the mechanical contracting industry in Northern California stating that on March 27, 1963, a new mechanical contractors association was to be formed in San Francisco under the sponsorship of the National. A new corporation was formed for that purpose.

Unless the National's activities are restrained, the Local will be forced to breach its contracts with its members, will lose its members, will lose it collective bargaining rights and numerous rights arising out of collective bargaining

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contracts, and will be destroyed. The Local will also be compelled to breach its collective bargaining contracts and such contracts as leases, insurance contracts, and others. An injunction is sought which would require the National to affiliate the Local, recognize it as a member in good standing of the National and restore to it the privileges of membership. Damages in an unnamed amount are sought and exemplary damages of $100,000 are asked. A declaratory judgment as to the respective rights and obligations of the Local and the National is also requested.

The motion to quash was heard upon affidavits and counter-affidavits, the testimony of the executive manager of the Local, and certain exhibits. From these we glean the following facts:

The nature of the business of the National is described in its constitution and by-laws. Its objects are stated to be to develop the mechanical contracting industry, to promote the interests and welfare of its members, to standardize the materials and methods used in the industry, to improve the character of work done and labor employed, to contribute by better public service to the advancement of the industry in all of its branches, to unify and make effective the work of local, state and regional associations within the declared objects of the National. The territory in which the National is to conduct its operations is the United States of America and its possessions, or territory under its control, and the Dominion of Canada. Members are corporations, firms and individuals who are regularly engaged in the mechanical contracting industry.

Affiliated associations are provided for. One type of affiliated association, a local association, is composed of individual memberships whose principal activities are limited to a particular city or a local district. Where members are organized into an affiliated association, membership in the National shall be held only through such affiliated association. The consent of the National is required for use of the words 'mechanical contractor' or 'mechanical contractors' as part of the name of any affiliated association, and in the event of 'disaffiliation,' the name of the local must be amended to eliminate such words. The constitution and by-laws of a local must conform 'in general' to the constitution and by-laws of the National and must have the approval of its board of directors. All members of the National who, either themselves or through an affiliate, maintain an established branch within the jurisdiction of a local must make application for membership in the local. Where an affiliated local exists, a business applying for membership in the National must also be elected to the local. Dues are fixed on a graduated scale based upon the volume of business done by a member, and the affiliated local must assume the duty of collecting and forwarding to the National the dues of all of its members who are qualified for membership in the local. Termination of membership in a local also terminates membership in the National. Every local must file with the National copies of all current labor agreements to which it is signatory or which cover the employment of labor by its members.

An annual convention is to be held at a...

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