Athletes Foot of Delaware v. Ralph Libonati Co.

• Decision Date: 28 November 1977
• Docket Number: Civ. A. No. 76-386.
• Parties: ATHLETES FOOT OF DELAWARE, INC., a Delaware Corporation, Sport Shoe of Newark, Inc., a Delaware Corporation, Harold Jarin, Gerald S. Jarin, Alvin Meizell and Morton H. Goldberg, Plaintiffs, v. RALPH LIBONATI CO., INC., a New Jersey Corporation, Libco, Inc., a New Jersey Corporation, Ralph Libonati, Athletes Foot Marketing Associates, Inc., a Pennsylvania Corporation, and Robert N. Lando, Adidas Corporation, a corporation of the Federal Republic of Germany and Gerald M. Cavall, t/a Girard Sporting Goods, Defendants.
• Court: U.S. District Court — District of Delaware

445 F. Supp. 35

ATHLETES FOOT OF DELAWARE, INC., a Delaware Corporation, Sport Shoe of Newark, Inc., a Delaware Corporation, Harold Jarin, Gerald S. Jarin, Alvin Meizell and Morton H. Goldberg, Plaintiffs, v. RALPH LIBONATI CO., INC., a New Jersey Corporation, Libco, Inc., a New Jersey Corporation, Ralph Libonati, Athletes Foot Marketing Associates, Inc., a Pennsylvania Corporation, and Robert N. Lando, Adidas Corporation, a corporation of the Federal Republic of Germany and Gerald M. Cavall, t/a Girard Sporting Goods, Defendants.

Civ. A. No. 76-386.

United States District Court, D. Delaware.

November 28, 1977.

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David Roeberg of Roeberg & Agostini, Wilmington, Del., for plaintiffs.

E. Dickinson Griffenberg, Jr. of Potter, Anderson & Corroon, Wilmington, Del., and Rose, Schmidt, Dixon, Hasley & Whyte, Pittsburgh, Pa., for defendants Athlete's Foot Marketing Associates, Inc. and Robert N. Lando.

Henry N. Herndon, Jr. and David H. Williams of Morris, James, Hitchens & Williams, Wilmington, Del., for defendants Ralph Libonati Company, Inc., Libco, Inc. and Ralph Libonati.

Edward J. Sobolewski, Jr., Newark, Del., for defendant Gerald M. Cavall, t/a Girard Sporting Goods.

OPINION

LATCHUM, Chief Judge.

Two Delaware corporations, Athlete's Foot of Delaware, Inc. and Sport Shoe of Newark, Inc., and four individuals¹ identified only as stockholders, officers and directors of those corporations, have brought this private action² against the defendants for alleged violation of § 1 of the Sherman Act, 15 U.S.C. § 1. The complaint asserts that the defendants "combined and conspired among themselves" to restrain interstate trade or commerce and eliminate competition by restricting the sale or delivery of Adidas sport shoes to plaintiffs, all contrary to the Sherman Act's prohibition.³ The complaint also charges that as a result of this combination or conspiracy, plaintiffs had to abandon plans to open a retail athletic footwear store and were thereby deprived of the opportunity to enjoy the profits they expected to derive from the operation of such a store.⁴ Treble damages in the amount of $600,000, together with suit costs and reasonable attorneys fees, are sought under 15 U.S.C. § 15.⁵

The corporate defendants are: (1) Adidas Corporation, a corporation of the Federal Republic of Germany engaged in the manufacture of a popular athletic shoe and other apparel (hereinafter referred to as the "Adidas line") which it advertises and promotes throughout the United States;⁶ (2) Athlete's Foot Marketing Associates, Inc. ("AFMA"), a Pennsylvania corporation whose principal activity is the franchising and promotion of its federally registered trademark ("THE ATHLETE'S FOOT") as a marketing concept in the sale of athletic footwear and other accessories through franchised retail stores;⁷ (3) Ralph Libonati Company, Inc. ("RLCo"), a New Jersey corporation which serves as a sales representative in the northeastern states for manufacturers and distributors of athletic merchandise, including the Adidas line;⁸ (4) Libco, Inc. ("Libco"), a New Jersey corporation which imports and distributes the Adidas line to retail stores in the northeastern states.⁹ The individual defendants are: (1) Robert N. Lando ("Lando"), a citizen and resident of Pennsylvania and the president of AFMA;¹⁰ (2) Ralph Libonati ("Libonati"), a resident and citizen of New Jersey and the primary officer, director and stockholder of RLCo and Libco;¹¹ (3) Gerald M. Cavall ("Cavall"), a citizen and resident of Delaware who owns and operates Girard's Sporting Goods, a retail sporting goods store which sells athletic footwear and other accessories, including the Adidas line.¹²

The material allegations of the complaint can be summarized, and the factual background of the case set forth, as follows. Athlete's Foot of Delaware, Inc. and Sport Shoe of Newark, Inc. were organized for the purpose of owning and operating retail athletic footwear stores in northern Delaware.¹³ Pursuant to a "license agreement" dated November 12, 1975, the plaintiffs were authorized by AFMA to use its "Athlete's Foot" trademark to identify retail athletic footwear stores which the plaintiffs intended to open in the area of New Castle County, Delaware.¹⁴ In February, 1976, plaintiffs opened the first "Athlete's Foot" store in the Branmar Shopping Plaza on Marsh Road (the "Marsh Road Store"). Defendants RLCo and Libco supplied the Marsh Road store with the Adidas line according to its needs.¹⁵ With the opening of the Marsh Road store, plaintiffs also decided to open a second "Athlete's Foot" store in the City of Newark, as authorized by the license agreement. After an unsuccessful attempt to obtain a store location in the Newark Shopping Center, the plaintiffs were able to lease premises on Main Street in Newark (the "Newark store").¹⁶ The Newark store, however, was located less than three stores away from an existing retail athletic footwear store owned and operated by defendant Cavall. Like both the Marsh Road and proposed Newark store, Cavall's store is supplied by RLCo and Libco with the Adidas line.¹⁷ The complaint then alleges that Cavall complained to Libonati, RLCo and Libco about the location of plaintiffs' Newark store; thereafter, Libonati, on behalf of RLCo and Libco, advised AFMA that the Adidas line would not be sold to plaintiffs at their proposed Newark store and that shipments to the Marsh Road store would also be terminated unless plaintiffs abandoned the plan to open the Newark store so near to Cavall.¹⁸ Moreover, it is alleged that AFMA refused to allow plaintiffs to exhibit its trademark at the Newark store because Libonati threatened to suspend shipments of the Adidas line to other AFMA-franchised athletic footwear stores. It is further claimed that after Libonati advised plaintiffs not to open the Newark store, Libco and RLCo refused to sell or deliver the Adidas line to the plaintiffs' Marsh Road store for over nine months.¹⁹ The plaintiffs subsequently filed this suit claiming that the defendants conspired and combined to restrain trade "by preventing shipment in interstate commerce of the Adidas line from Libco and RLCo in New Jersey" to plaintiffs' Newark and Marsh Road stores, all with the unlawful purpose of restricting or eliminating competition.²⁰

In response to the complaint the defendants have filed a plethora of motions seeking its dismissal on grounds of lack of personal jurisdiction, improper venue, defective service of process and failure to state a claim upon which relief can be granted. In addition, several defendants have moved to have the individual plaintiffs dismissed from this action on the ground they lack standing to sue on an antitrust claim for injuries allegedly suffered by the corporate plaintiffs. The Court, having considered the oral and written arguments of opposing counsel, concludes that (1) service of process should be quashed and the complaint dismissed as to the individual defendants Lando and Libonati because the Court lacks in personam jurisdiction of them, (2) the complaint should also be dismissed as to the corporate defendant AFMA because venue is improperly laid in this district and the extraterritorial service of process effected upon it was defective, (3) venue properly lies in this district with respect to RLCo and Libco and the extraterritorial service of process effected upon them will be sustained, (4) the complaint adequately states a claim against the remaining defendants upon which relief can be granted, and (5) the individual plaintiffs will be dismissed from this action for lack of standing to sue on the claims alleged under the Sherman Act.

THE AFMA, RLCo AND LIBCO MOTIONS TO DISMISS FOR IMPROPER VENUE AND DEFECTIVE SERVICE OF PROCESS

AFMA, RLCo and Libco have filed motions to dismiss based on a myriad of grounds which can be reduced to one fundamental question: Whether or not venue of this antitrust action properly lies in this district? The determination of the propriety of venue here will also control another basic question raised by the defendants: Whether or not extraterritorial service of process was correctly effected upon them?²¹

To determine whether venue of this action properly lies within the District of Delaware primarily depends upon the construction and effect of § 12 of the Clayton Act, 15 U.S.C. § 22, which reads as follows:

"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."

Numerous authorities have stated that a corporation is considered an "inhabitant" of the state in which it is incorporated, e. g., Aro Manufacturing Co. v. Automobile Body Research Corp., 352 F.2d 400 (C.A.1, 1965), cert. denied, 383 U.S. 947, 86 S.Ct. 1199, 16 L.Ed.2d 210 (1966); Grappone, Inc. v. Subaru of America, Inc., 403 F.Supp. 123 (D.N. H.1975); Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp., 291 F.Supp. 252 (E.D.Pa.1968). AFMA, RLCo and Libco are not incorporated in Delaware.²² Accordingly, they are not inhabitants here for venue purposes under § 12.

To be "found" in a district within the meaning of § 12 a corporation must have duly authorized "officers and agents carrying on the business of the corporation" within the district and "the nature and character of its business must be such as to warrant the inference that it is engaged in continuous local activity" there. Eastman Kodak Co. of New York v. Southern Photo Materials Co., 273 U.S. 359, 371, 47 S.Ct. 400, 402, 71 L.Ed. 684 (1927); Aro Manufacturing Co. v. Automobile Body Research Corp., supra, 352 F.2d at 404; Fox-Keller, Inc....