Johnson Creative Arts, Inc. v. Wool Masters, Inc.

• Citation: 743 F.2d 947
• Decision Date: 06 September 1984
• Docket Number: No. 83-1927,83-1927
• Parties: JOHNSON CREATIVE ARTS, INC., Plaintiff, Appellant, v. WOOL MASTERS, INC., et al., Defendants, Appellees.
• Court: United States Courts of Appeals. United States Court of Appeals (1st Circuit)

Page 947

743 F.2d 947

JOHNSON CREATIVE ARTS, INC., Plaintiff, Appellant, v. WOOL MASTERS, INC., et al., Defendants, Appellees.

No. 83-1927.

United States Court of Appeals, First Circuit.

Argued April 3, 1984.

Decided Sept. 6, 1984.

Robert M. Newbury, Chicago, Ill., with whom Maureen O. Hurley, Chicago, Ill., John M. Kahn, Boston, Mass., Pattishall, McAuliffe & Hofstetter, Chicago, Ill., and Hill & Barlow, Boston, Mass., were on brief, for plaintiff, appellant.

John J. Jones, Hightstown, N.J. with whom Stuart T. Rossman, and Gaston Snow & Ely Bartlett, Boston, Mass., were on brief, for defendants, appellees Wool Masters, Inc., Robert M. Keyes, and Cesar H. Guerrero.

Before BOWNES and ALDRICH, Circuit Judges, and HUNTER, ^* Senior District Judge.

ELMO B. HUNTER, Senior District Judge.

Appellant brought suit to enjoin false representations in violation of the Trademark Laws of the United States, 15 U.S.C. Sec. 1125(a), and for breach of contract and unfair competition. The complaint alleged that defendants Wool Masters, a New York Corporation, and Robert Keyes, part owner of Wool Masters, individually, encouraged and enabled retail outlets to substitute or pass off Wool Masters' yarn on calls or orders for plaintiffs' yarn. Two Massachusetts retailers were also made defendants. The district court dismissed the case against Wool Masters and Keyes for improper venue. The Court allowed plaintiff thirty days to move for a transfer. Plaintiff failed to so move and now appeals the dismissal. Appellant claims the district court erred in finding the defendants were not "doing business" in the district of Massachusetts for purposes of 28 U.S.C. Sec. 1391(c) ¹ and in finding that the claim did not arise there under 28 U.S.C. Sec. 1391(b).

Appellant contends that the test for "doing business" under the venue statute should be the same as the test for determining whether a corporation is amenable to service of process. This view is not without well-respected authority. Professor Moore wrote:

And although the matter is not free from doubt, ... we believe that if a corporation is amenable to service of process it should be held to be "doing business" for venue purposes .... If it is not unfair to subject the corporation to the court's jurisdiction by service of process, it seems wise and not unfair to hold that there is a proper venue, particularly when the case can be transferred to another venue, if convenience warrants.

1 Moore's Federal Practice p 0.142 [5.-1-3], at 1411. Professors Wright, Miller, and Cooper appear to agree:

There is much to be said for the view that if a corporation is doing enough business in a district to satisfy the constitutional tests on when it may be subjected to process there, that district should be a proper venue.

* * *

What is thought to be the better view, although many courts disagree, is that it should be enough that the corporation has such contacts with the district as would satisfy the constitutional tests on when it may be subjected to process there.

15 Wright, Miller & Cooper, Federal Practice and Procedure, Jurisdiction Sec. 3811, at 65-69.

While such authority cannot lightly be rejected, we cannot accept the argument because the considerations underlying personal jurisdiction are not the same as those underlying venue. The minimum contacts test for personal jurisdiction is based on the minimum amount of "fairness" required in order to comport with due process. Venue limitations generally are added by Congress to insure a defendant a fair location for trial and to protect him from inconvenient litigation.

At the outset it must be understood that "minimum contacts" with a particular district or state for purposes of personal jurisdiction is not a limitation imposed on the federal courts in a federal question ² case by due process concerns. The Constitution does not require the federal districts to follow state boundaries. Driver v. Helms, 577 F.2d 147, 156 (1st Cir.1978); rev'd on other grounds, Stafford v. Briggs, 444 U.S. 527, 100 S.Ct. 774, 63 L.Ed.2d 1 (1980) (reversed on statutory construction, constitutional issue not reached). The limitation is imposed by the Federal Rules of Civil Procedure. It is clear that Congress can provide for nationwide service of process in federal court for federal question cases without falling short of the requirements of due process. ³ Rule 4(f) generally limits the service of process of federal district courts to the territorial limits of the state in which the court is held. Rule 4(e) allows for service outside the state when authorized by a statute of the United States or when a statute or rule of court of the state in which the district court is held provides for such service. The state statutes referred to cannot provide for service of process on a defendant outside the respective states unless the defendant has had the contact with that state that is required by the fourteenth amendment. Hanson v. Denckla, 357 U.S. 235, 251, 78 S.Ct. 1228, 1238, 2 L.Ed.2d 1283 (1958). It is the reference to the "longarm" statutes of the various states that incorporates the requirement of minimum contacts as a precondition for extraterritorial service of process.

Since due process would allow a federal court in a federal question case to issue service of process nationwide, and does not require that a corporation have any contact with a particular district in order to be sued there, we cannot accept the proposition that venue is proper in any district in which a corporate defendant constitutionally could be subjected to service. Under this argument, venue would be proper in any district in the United States in a case wherein a defendant has had "minimum contacts" with any part of the United States. ⁴

Appellant's authorities are probably more properly read to espouse the more limited view that the test for whether a corporation is "doing business" in a district for venue purposes should be the same as the standard for determining whether a corporation is amenable to service under "transacting business" language in state longarm statutes as limited by the fourteenth amendment. The rationale for this view appears to be that if a corporation's activities within a district make it "fair" (viz., not offensive to traditional notions of fair play and substantial justice) to subject a corporation to service of process of the state in which the district is located, it is not "unfair" to require the corporation to defend a suit there. ⁵ See Houston Fearless Corporation v. Teter, 318 F.2d 822 (10th Cir.1963). However, the concept of "fairness" involved in the jurisdictional analysis involves considerations other than the convenience of the defendant. Part of the due process equation involved in the minimum contacts standard is whether a defendant's activities relating to a particular state are such as to give that state a legitimate interest in holding a defendant answerable on a claim related to those activities. Keeton v. Hustler Magazine, Inc., --- U.S. ----, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984). Convenience of location is not determinative.

Even if the defendant would suffer minimal or no inconvenience from being forced to litigate before the tribunals of another state ... [and] even if the forum State is the most convenient location for litigation, the Due Process Clause, acting as an instrument of interstate federalism, may sometimes act to divest the State of its power to render a valid judgment.

World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 294, 100 S.Ct. 559, 565, 62 L.Ed.2d 490 (1980); see Insurance Corp. v. Compagnie des Bauxites, 456 U.S. 694, 702 n. 10, 102 S.Ct. 2099, 2104 n. 10, 72 L.Ed.2d 492 (1982). Conversely, inconvenience to the defendant will not defeat a finding that the defendant is amenable to service of process. See McGee v. International Life Insurance Co., 355 U.S. 220, 224, 78 S.Ct. 199, 201, 2 L.Ed.2d 223 (1957). "The test to determine whether a defendant may be brought before a state's courts, say the courts of Rhode Island, is not different whether the defendant is found in Connecticut or in Hawaii." Driver v. Helms, 577 F.2d at 156 n. 25.

Venue, though a statutory requirement, is based on Congress' decision concerning where a case should be heard. It is a privilege given to the defendant primarily as a matter of convenience and is not based on an inherent power of a particular court over the parties. Neirbo v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 168, 60 S.Ct. 153, 155, 84 L.Ed. 167 (1939). In general, the purpose of statutorily specified venue is to protect the defendant against the risk that a plaintiff will select an unfair or inconvenient place for trial. Leroy v. Great Western United Corp., 443 U.S. 173, 183-84, 99 S.Ct. 2710, 2716-17, 61 L.Ed.2d 464 (1979). Longarm statutes, and extraterritorial service through the concept of minimum contacts, on the other hand, allow a defendant to be haled into a distant court to allow a state to protect its interests, see Hustler, --- U.S. ----, 104 S.Ct. 1473, 79 L.Ed.2d 790 (1984), and the interests of plaintiffs, see McGee, 355 U.S. at 222, 78 S.Ct. at 200, to the extent that doing so is not so unfair as to deny a defendant due process of law.

The business contact required under language in state longarm statutes, as restricted by the fourteenth amendment, to subject a corporation to service and which determines where a case may be brought has no necessary connection with the business contact required by Congress for proper venue. Although both the due process requirement of minimum contacts and the statutory venue provision are concerned, to some extent, with "fairness" to the defendant, the minimum contacts formula only measures the minimum amount of "fairness" required by the Constitution for a state to exercise extraterritorial jurisdiction. The fact that a particular court's assertion of personal jurisdiction is not so "unfair" as to deny a defendant...