Kearney & Trecker Corp. v. Cincinnati Milling Machine Co.

• Decision Date: 15 April 1966
• Docket Number: No. 65 C 1575.,65 C 1575.
• Citation: 254 F. Supp. 130
• Parties: KEARNEY & TRECKER CORP., Plaintiff, v. The CINCINNATI MILLING MACHINE CO., and Cincinnati Milling and Grinding Machines, Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

254 F. Supp. 130

KEARNEY & TRECKER CORP., Plaintiff, v. The CINCINNATI MILLING MACHINE CO., and Cincinnati Milling and Grinding Machines, Inc., Defendants.

No. 65 C 1575.

United States District Court N. D. Illinois, E. D.

April 15, 1966.

Anderson, Luedeka, Fitch, Even & Tabin, Chicago, Ill., Lester S. Clemons, Adrian L. Bateman, Jr., and Thomas W. Ehrmann, of Quarles, Herriott & Clemons, Milwaukee, Wis., Elroy J. Wutschel, West Allis, for plaintiff.

Hume, Groen, Clement & Hume, Chicago, Ill., for Cincinnati Milling & Grinding Machines, Inc.

MEMORANDUM OPINION

MAROVITZ, District Judge.

Motions of defendant Cincinnati Milling Machine Co., to dismiss and of defendant Cincinnati Milling & Grinding Machines, Inc., to stay proceedings.

This is a patent action brought by plaintiff, a Wisconsin corporation, against The Cincinnati Milling Machine Co., and Cincinnati Milling & Grinding Machines, Inc., to enjoin further infringement of U. S. Letters Patent No. 2,901,927, No. 3,031,902, No. 3,052,011, and No. 3,099,873, and for damages.

Defendant Cincinnati Milling Machine Co., a manufacturing concern incorporated in the State of Ohio, having its principal place of business in Cincinnati, has moved for an order of dismissal, on the ground that venue is improperly laid in the Northern District of Illinois, and, alternatively, that this Court lacks jurisdiction over its person. In addition, its co-defendant has moved for an order staying proceedings herein pending final decision by the United States District Court for the Southern District of Ohio, Western Division in a prior suit filed by Defendant Cincinnati Milling Machine Co., against plaintiff herein involving the same patents and issues.

Venue in patent proceedings is governed exclusively by Section 1400(b), Title 28, U.S.C., the terms of which are not modified or supplemented by the general venue provisions applicable to other civil actions. Fourco Glass Co. v. Transmirra Products Co., 353 U.S. 222, 77 S.Ct. 787, 1 L.Ed.2d 786 (1957). That section reads:

"Any civil action for patent infringement may be brought in the judicial district where the defendant resides, or where the defendant has committed acts of infringement and has a regular and established place of business."

It is clear, initially, that "residence" under the above section must be defined classically as state of incorporation, for to impose the mere "doing business" standard of Section 1391(c) would be to make absurd the alternative provision requiring infringement and a regular and established place of business.

We are satisfied from the affidavits of Mr. James A. D. Geier, Vice President of Movant, and Mr. Sam Redrow, Secretary thereof, that defendant Cincinnati Milling Machine Co., is incorporated in Ohio, has its principal place of business therein, is not registered to do business in Illinois and has not, by itself, conducted business of any nature whatsoever in Illinois since 1931.

Thus, if Movant is to be amenable to suit in this District, venue must be based on its relationship with co-defendant, a wholly-owned subsidiary sales company, which admittedly maintains a permanent office in Berwyn, Illinois.

In Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634 (1925), the Supreme Court of the United States held that the presence of a wholly-owned Alabama subsidiary in North Carolina did not subject the parent corporation to suit therein where the existence of the subsidiary as a distinct corporate entity was in all respects observed, where its books were separately kept, and where all transactions between the two corporations were represented by appropriate entries in their respective books in the same way as if the two were wholly independent corporations. Thus, the Court upheld a corporate fiction despite the fact that the parent owned all the stock of its subsidiary, dominated it "immediately and completely," and exerted "its control both commercially and financially in substantially the same way, and mainly through the same individuals," as it did, "over those selling branches or departments of its business not separately incorporated."

"Congress has not provided that a corporation of one state shall be amenable to suit in the federal court for another state in which the plaintiff resides, whenever it employs a subsidiary corporation as the instrumentality for doing business therein." 267 U. S. 333, at p. 336, 45 S.Ct. 250, at p. 251.

Upon review of the affidavits and depositions filed herein with respect to this motion, this Court is convinced that the moving defendant has satisfied the standards set down in Cannon, supra. See Cook et al. v. Bostitch, Inc. (2d Cir., 1964), 328 F.2d 1; Stetson China Co. v. D. C. Andrews & Co., Inc. (D.C.Ill., 1948), 9 F.R.D. 135.

The substantially uncontroverted facts set out in the depositions herein reveal that the two corporations in question are separately incorporated, and, while there is overlap of directors, each has its own set, including some not present on the other's Board. Board meetings are held separately, and separate minutes are kept. Each corporation bears an individual name, and conducts its business under forms and letterheads bearing its own title only. The sales company purchases all machines from its parent in Ohio, takes title in Ohio, and maintains its own inventory of almost a million dollars. In addition, the sales company leases its own Illinois office, pays its own personnel, and files corporate tax forms in states outside of Ohio. Further, and of substantial importance, under the Supreme Court ruling in Cannon, supra, the record reveals that the sales company keeps separate minute books and account books, and all transactions between the two companies are formally entered in separate ledgers as if the two corporations were wholly independent of each other, including sales, and payment for services performed by one for the other.

While it is clear that the sales corporation is wholly dependent upon its parent, deals solely in the parent's products, is managerially controlled thereby, has many services performed for it by the parent, and is, to a great extent,...