Arnold v. SMITH MOTOR CO., BROOKFIELD, MO.

• Decision Date: 19 December 1974
• Docket Number: No. C 74-50.,C 74-50.
• Citation: 389 F. Supp. 1020
• Parties: Guy C. ARNOLD, Plaintiff, v. SMITH MOTOR COMPANY, BROOKFIELD, MISSOURI, Defendant.
• Court: U.S. District Court — Northern District of Iowa

389 F. Supp. 1020

Guy C. ARNOLD, Plaintiff, v. SMITH MOTOR COMPANY, BROOKFIELD, MISSOURI, Defendant.

No. C 74-50.

United States District Court, N. D. Iowa, Cedar Rapids Division.

December 19, 1974.

Brent G. Harstad, Cedar Rapids, Iowa, for plaintiff.

Ernest F. Pence, Cedar Rapids, Iowa, James P. Williams, Brookfield, Mo., for defendant.

ORDER

McMANUS, Chief Judge.

This matter is before the court on defendant's resisted motion filed November 12, 1974, under Rule 12(b)(3), FRCP, to dismiss for improper venue.

Plaintiff, a resident of Cedar Rapids, Iowa, commenced this action under Section 409 of the Motor Vehicle Information and Cost Savings Act, 15 U.S.C. § 1989¹ (Supp. III 1973). Subject matter jurisdiction is granted by 15 U.S.C. § 1989(b).

The complaint alleges that defendant, a Missouri corporation, acquired a 1969 Dodge van with 74,229 miles recorded on the odometer. Subsequently, during July of 1973, plaintiff claims that defendant altered the odometer to read 54,209 miles and certified this figure as the accurate mileage for the vehicle in contravention of 15 U.S.C. §§ 1984 and 1988² (Supp. III 1973). This same van was assertedly then sold to a Cedar Rapids auto dealer at an auction in Kirksville, Missouri, and later purchased by plaintiff from the Iowa dealer.

Defendant's motion presents a question of first impression to this court. The Act relied upon contains no special venue provision, and hence proper venue must be determined under the general venue statute, 28 U.S.C. § 1391.

Subsection (a) of that statute is inapplicable because jurisdiction in this lawsuit is not founded solely on diversity, there being less than $10,000 in controversy and a federal question involved here. See 1 Moore's Federal Practice ¶ 0.1423 (1974). Plaintiff does not allege that defendant maintained sufficient contacts with the Northern District of Iowa to be "doing business" within the purview of § 1391(c). Venue must therefore be established under § 1391(b),³ and in particular must be derived from where the "claim arose" since defendant is not a resident of this district.

No reported cases have been found by this court or cited by the parties which deal with the question of where a claim arises for venue purposes when the action is founded on the recently enacted Motor Vehicle Information and Cost Savings Act.⁴ In fact, a paucity of judicial interpretations exists generally with respect to the clause "or in which the claim arose," the clause having been added by amendment to § 1391 (a) & (b) in 1966.

In construing the clause as added to § 1391(a) for diversity cases, several courts have relied on the Erie principle in holding state law as determinative of where the claim arose. Geodynamics Oil & Gas, Inc. v. U. S. Silver & Mining Corp., 358 F.Supp. 1345 (S.D. Tex.1973); Ryan v. Glenn, 52 F.R.D. 185 (N.D.Miss.1971); Philadelphia Housing Authority v. American Radiator and Standard Sanitary Corp., 291 F. Supp. 252 (E.D.Pa.1968). However, these decisions incorporating state law have been criticized, see C. Wright, Law of Federal Courts § 42 at 152 n. 23 (2nd ed. 1970), and in any event federal substantive law is applied to test "where the claim arose" in nondiversity cases under § 1391(b). Philadelphia Housing, supra at 260.

Most analogous to the instant situation are those few reported decisions in private antitrust, securities, and trademark cases where the claims were based at least in part on a cause of action created by federal statutes. As discussed below, the rule emerging from these cases is to decide where the claim arose by viewing the weight of the defendant's contacts with any given district.

In private antitrust actions, the general venue statute supplements the specific venue provisions in the Clayton Act. Philadelphia Housing, supra. involved allegations of a conspiracy to fix prices, and the plaintiff contended the action could be brought under § 1391(b), as amended, in any district where the defendant sold fixtures at an elevated price. The court rejected the mechanical "place of injury" test for determining where a claim arises in tort cases as too simplistic for antitrust actions and announced instead the "weight of contacts" approach. 291 F.Supp. at 260.

The concept of examining the significance of a defendant's contacts to determine where a claim arises for venue purposes has been followed in several subsequent antitrust cases. Redmond v. Atlantic Coast Football League, 359 F. Supp. 666 (S.D.Ind.1973); Fox-Keller, Inc. v. Toyota Motor Sales, U.S.A., Inc., 338 F.Supp. 812 (E.D.Pa.1972); California Clippers, Inc. v. United States Soccer Football Ass'n, 314 F.Supp. 1057 (N.D.Cal.1970); ABC Great States, Inc. v. Globe Ticket Co., 310 F.Supp. 739 (N.D.Ill.1970).

Two cases brought under the Securities and Exchange Act of 1934, 15 U.S. C. § 78a et seq., discuss venue under § 1391(b), primarily in the context of pendent claims for alleged breach of common law fiduciary duties. Alameda Oil Co. v. Ideal Basic Industries, Inc., 313 F.Supp. 164 (W.D.Mo.1970); Travis v. Anthes Imperial Ltd., 331 F.Supp. 797 (E.D.Mo.1971), rev'd, 473 F.2d 515 (8th Cir. 1973). In Alameda, the court implied in dictum that venue was not proper in Missouri because the overt acts by corporate officials occurred in Colorado, even though stockholders in Missouri were thereby damaged. 313 F.Supp. at 168.

The district court dismissed the action in Travis because, as an alternative basis, the court found the most substantial activity and hence proper venue to lie in Canada. 331 F.Supp. at 806. But the Court of Appeals reversed, finding the only significant contacts with the United States to lie in Missouri and holding venue proper in the Eastern District there since it was the only district where plaintiff could vindicate his statutory rights in an American court. 473 F.2d at 529.

A recent decision in an action brought to redress trademark infringement phrased the question of venue under the "claim arose" clause of 28 U.S.C. § 1391(b) as whether "claim" means the largest part, a substantial part, or any part of a claim. Honda Associates, Inc. v. Nozawa Trading, Inc., 374 F.Supp. 886, 890 (S.D.N.Y.1974). Reviewing the antitrust and securities cases, the court adopted the weight of contacts approach. Applying this test, venue was held improper because only a small fraction of the total infringements occurred through catalog sales in New York compared to approximately 90 percent of the infringements which occurred in California through direct and mail order transactions. The court noted that its decision was not intended to preclude suit in any district other than the one with the most activities, but only to eliminate suits in a district wherein contacts with the action were minuscule. 374 F.Supp. at 891-92.

It is the opinion of this court that balancing the contacts involved in a given action is a reasonable manner of determining "where the claim arose" for venue purposes. However, the process of weighing the contacts should be performed with an eye to the purpose of venue — convenience of the litigants.

Venue has been considered as the place where jurisdiction may be exercised, and while it affords some protection to defendants, it is designed to facilitate the maximum convenience for all the litigants. 1 Moore's Federal Practice ¶ 0.1401.-1, 1317 (1974). The 1966 Amendment to § 1391 evidenced a concern for a forum convenient to the aggrieved party as well as the defendant. Gardner Engineering Corp. v. Page Engineering Co., 484 F.2d 27, 33 (8th Cir. 1973). Modern means of transportation and the availability of a motion for transfer under 28 U.S.C. § 1404 in a case of extreme inconvenience have obviated the need for a strict venue rule based on a theory of geographic hardship to the defendant. See Gardner, supra at 33; 1 Moore's, supra at ¶ 0.1401.-1, 1318; 5 C. Wright and A. Miller, Federal Practice and Procedure § 1352 at 572 (1969).

In the instant action, the court finds substantial contacts with this district to render venue appropriate under 28 U.S.C. § 1391(b). The injury, the sale to plaintiff which precipitated it, and the alleged consequential damages which flowed therefrom all occurred here and will require proof by plaintiff.

While the injury and damages may not be a significant portion of an antitrust claim involving a sophisticated conspiracy between several corporations, they may well form a substantial part of the total operative facts which give rise to a claim...