Lippa & Co. v. LENOX INCORPORATED
| Decision Date | 02 September 1969 |
| Docket Number | Civ. A. No. 5347. |
| Citation | 305 F. Supp. 175 |
| Court | U.S. District Court — District of Vermont |
| Parties | LIPPA & CO., Inc. v. LENOX INCORPORATED. |
R. Allan Paul, Paul, Frank & Collins, Burlington, Vt., for plaintiff.
Guy M. Page, Yandell & Page, Burlington, Vt., and Andrew C. Hartzell, Jr., Debevoise, Plimpton, Lyons & Gates, New York City, for defendant.
This is a private treble damage antitrust suit by Lippa & Co., Inc., a New York retail jewelry and china dealer against Lenox Incorporated, a manufacturer and distributor of china dinnerware. The action was instituted on September 13, 1968, and service was made on the Vermont Secretary of State in accordance with 12 V.S.A. §§ 855, 856. On October 7, 1968, defendant filed a motion to dismiss on the basis that service by the method attempted was improper. Argument was heard on this motion, and memoranda of law were submitted. While the decision was still pending, plaintiff served the complaint again by sending it to the United States Marshal in Newark, New Jersey, for service on defendant's general counsel in accordance with Section 12 of the Clayton Act, 15 U.S.C. § 22 (1964). Defendant renewed its motion to dismiss on two grounds. First, under the provisions of section 12 of the Clayton Act there was no venue in this district. Second, the statute of limitations had run. An affidavit of defendant's general counsel was submitted in support of this motion. In accordance with the agreement of the parties, plaintiff was allowed to submit interrogatories to the defendant on the limited question of whether there was venue over the defendant in this district. The answers to these interrogatories together with the facts alleged in the affidavit comprise the factual basis of this decision.
First, I shall treat the question of venue. The affidavit and answers to the interrogatories show the following to be the relevant facts.
Defendant, Lenox Incorporated, produces and sells to retail outlets "fine china dinnerware" under the trade names of Lenox and Oxford Bone China. All sales are made to independent retail dealers F.O.B. Pomona, New Jersey. There are no contracts between Lenox and the retailers it deals with except the individual sales contracts for china shipped to these retailers. Although it does not expressly appear, it can be assumed that all of these contracts are made in New Jersey.
For the years 1964-1968, the following represents the total sales of Lenox china in the district of Vermont:
YEAR AMOUNT
1964 $ 5,328.00
1965 $ 5,270.00
1966 $ 8,625.00
1967 $10,169.00
1968 $15,632.00
At the present time, Lenox sells china to nine Vermont retail outlets spread throughout the State. These retail outlets have dealt with Lenox between one and forty-six years. There are no franchise agreements between Lenox and the retailers but retailers are chosen on the basis of a number of criteria: (1) they presently carry a selection of leading sterling, crystal and fine china lines; (2) they have sufficient working capital to carry stock in a representative assortment of china patterns; (3) they have a well trained, full time bridal consultant; (4) they have a constant advertising program aimed at the bridal market; (5) they have an atmosphere conducive to displaying and selecting fine china; (6) they have a well trained and aggressive sales force and (7) they are located close to a principal shopping area. Retailers are solicited by agents of defendant—so-called district managers. All of the retailers are regular customers of Lenox. They order and stock inventory and place additional orders when the inventory is depleted.
Defendant sends district managers into the State of Vermont. The responsibility of the district managers is to sell china to the authorized dealers and to develop their territory by increasing sales to established accounts and by adding new accounts. The district managers have the duty of explaining defendant's price maintenance policy. They also have the duty to advise the dealers on efficient merchandising, inventory control, proper display, technical characteristics of Lenox china, advertising and new additions to the Lenox china line. Orders are taken by district managers and sent to Pomona, New Jersey, for acceptance.
A district manager for Lenox has visited retailers in the State of Vermont at least twice each year since 1964. In 1964, a district manager spent an aggregate of two days in Vermont visiting twice each authorized retailer. In 1968, the Vermont retailers were also visited twice by two separate district managers. The aggregate time spent in Vermont by the district managers was eight days. Although the evidence does not indicate this directly, it can be assumed that in carrying out their job function, the district managers make periodic telephone calls to Vermont and send and receive mail from Vermont retailers.
In addition to the advertising material distributed by the district managers, Lenox sends advertising and promotional material directly to Vermont retailers. Lenox also advertises in national media aimed at the consumer.
The evidence shows no other contacts between the defendant and the State of Vermont except those enumerated above. The defendant owns no real or personal property in Vermont; has no subsidiary in Vermont; maintains no office, place of business, storage or manufacturing facility or inventory in Vermont; has no bank accounts in Vermont; keeps no business or corporate records in Vermont; has no officer or director who is a resident of Vermont; holds no directors' or stockholders' meetings in Vermont; files no tax returns in Vermont; maintains no address in Vermont and does not list its name in any telephone book in Vermont.
The requirements for venue in a private antitrust action are set out in section 12 of the Clayton Act, 15 U.S.C. § 22 (1964):
Any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found.
Defendant does not contend in this case that service of process on its general counsel at its principal place of business in New Jersey was improper. It does contend, however, that venue in this district is improper because it is not an inhabitant of Vermont; it is not found in Vermont; and it does not transact business here. Plaintiff admits that defendant is not an inhabitant of Vermont and is not found here as those terms are used in the statute. Therefore, the issue is whether defendant transacts business in this district.
Any analysis of the meaning of the term "transacts business" in section 12 of the Clayton Act must start with the case of Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 47 S. Ct. 400, 71 L.Ed. 684 (1927). That case involved a private antitrust suit brought in the Northern District of Georgia. The defendant was a corporation with a principal place of business in New York. It was not registered to do business in Georgia; it had no office, place of business or agent in Georgia. It had, however, for many years carried on a substantial volume of interstate trade with distributors in Georgia. Much of this business was obtained through defendant's salesmen during their periodic visits to Georgia. In addition, defendant sent demonstrators into Georgia to explain and exhibit defendant's products.
In deciding that the defendant transacted business in Georgia, the Court defined a standard:
A corporation is engaged in transacting business in a district, within the meaning of this section, in such sense as to establish venue of a suit * * * if in fact, in the ordinary and usual sense, it "transacts business" therein of any substantial character.
Id. at 373, 47 S.Ct. at 403. The Court went on to state that a corporation may "transact business" even if the business is entirely interstate and is carried on through agents who do not reside in the district. According to the Court, the purpose of section 12 of the Clayton Act was:
to relieve the injured person from the necessity of resorting for the redress of wrongs committed by a non-resident corporation, to a district, however distant, in which it resides or may be "found"—often an insuperable obstacle—and enabling him to institute the suit in the district, frequently that of his own residence, in which the corporation in fact transacts business * * *.
Id. at 373-374, 47 S.Ct. at 403.
The construction of section 12 set out in Eastman Kodak was further developed in United States v. Scophony Corp., 333 U.S. 795, 68 S.Ct. 855, 92 L.Ed. 1091 (1948). The Court in Scophony described the effect of Eastman Kodak in these words:
Id. at 807-808, 68 S.Ct. at 862.
Since the Supreme Court decisions in Eastman Kodak and Scophony, the issue of whether a particular corporation is transacting business in a district has been determined many times in the lower federal courts. See, e.g., Commonwealth Edison Co. v. Federal Pac. Elec. Co., 208 F.Supp. 936 (N.D.Ill. 1962). No strictly defined test of transacting business has arisen in these cases. However, the cases do call for both a qualitative and a quantitative analysis of the contacts between the district and the corporation over which venue is sought.
In this case, Lenox cannot seriously dispute that the character of...
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