Commonwealth Edison Co. v. Federal Pacific Electric Co., 61 C 1285.

• Citation: 208 F. Supp. 936
• Decision Date: 11 May 1962
• Docket Number: No. 61 C 1285.,61 C 1285.
• Parties: COMMONWEALTH EDISON COMPANY, Commonwealth Edison Company of Indiana, Inc., Central Illinois Electric and Gas Co., Northern Indiana Public Service Company and Public Service Company of Indiana, Inc., Plaintiffs, v. FEDERAL PACIFIC ELECTRIC COMPANY, General Electric Company, I-T-E Circuit Breaker Company, Joslyn Mfg. and Supply Co., H. K. Porter Company, Inc., Schwager-Wood Corporation, Southern States Equipment Corporation and Westinghouse Electric Corporation, Defendants.
• Court: U.S. District Court — Northern District of Illinois

208 F. Supp. 936

COMMONWEALTH EDISON COMPANY, Commonwealth Edison Company of Indiana, Inc., Central Illinois Electric and Gas Co., Northern Indiana Public Service Company and Public Service Company of Indiana, Inc., Plaintiffs, v. FEDERAL PACIFIC ELECTRIC COMPANY, General Electric Company, I-T-E Circuit Breaker Company, Joslyn Mfg. and Supply Co., H. K. Porter Company, Inc., Schwager-Wood Corporation, Southern States Equipment Corporation and Westinghouse Electric Corporation, Defendants.

No. 61 C 1285.

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

May 11, 1962.

Charles A. Bane, Robert W. Bergstrom, Seymour F. Simon, Thomas C. McConnell, Lee A. Freeman, William J. Froelich, Chicago, Ill., Van B. Wake, Milwaukee, Wis., Daniel P. Ward, State's Attorney of Cook County, Illinois, Barnabas F. Sears, James O. Smith, Chicago, Ill., for plaintiff.

John T. Chadwell, Hammond E. Chaffetz, Holmes Baldridge, Edward R. Johnston, W. Donald McSweeney, John Paul Stevens, Earl E. Pollock, Robert C. Keck, Roland D. Whitman, Timothy G. Lowry, Harold T. Halfpenny, Lloyd M. McBride, Neil McKay, Jacob H. Martin, Edward R. Adams, Brainerd Chapman, Chicago, Ill., for defendants.

ROBSON, District Judge.

Schwager-Wood Corporation,¹ one of eight defendants in this two-count treble damage antitrust cause, has moved to quash the return of service on it and to dismiss the cause,² on the ground it is not subject to service in this District. It is an Oregon corporation, and assertedly transacted no business here and maintained no office in the District.

The affidavit of A. C. Schwager, its president, states the corporation was organized in Oregon, April 9, 1946, and dissolved November 6, 1959. Its successor corporation is Schwager-Wood Company, Inc. Service was had on William Maxwell Wood, vice president and secretary, on August 9, 1961, in Portland, Oregon.

The affidavit further states that:

"Schwager-Wood Corporation at all times has maintained its offices and manufacturing facilities only in Portland, Oregon, and at no time has had any such offices or facilities in the State of Illinois.

"Schwager-Wood Corporation has not ever been registered to do business in Illinois and has never sought or been obliged to so register. It has not done or transacted business in Illinois, has not ever based any of its employees, in Illinois and has not ever authorized any person in Illinois to accept service on its behalf. It has not ever had any subsidiary or controlled corporation in Illinois or elsewhere. It has not ever had any employees who periodically or regularly called on customers or prospected in Illinois.

"Schwager-Wood Corporation has not ever sold anything in the State of Illinois * * *."

"Schwager-Wood Corporation has never been controlled by or in any way affiliated with any corporation engaged in the manufacture of any electrical products.

"Schwager-Wood Corporation at all times was a distinctly `small business.' Its entire operations were conducted in and from leased premises consisting of an old one-story building * * *. It never employed more than approximately 50 to 60 people, including all executive, engineering, sales and production personnel. In 1958 the last full calendar year of its existence, its gross billings for all products totaled $2,321,077; its total sales of `power switching equipment' for that year amounted to $1,887,460, representing approximately 4.3% of the total national output during the first half and 4.4% during the last half of the year."

The affidavit sets forth six letters in an appendix³ to show the only contractual relationships between Schwager-Wood Corporation and anyone in Illinois, and that the "arrangements" reflected in the letters never produced any sales of its products in Illinois, or any negotiations in Illinois to which it was a party. The correspondence is claimed to show on its face that the persons to whom the letters were addressed were independent contractors, and that Schwager-Wood Corporation had no control or authority whatsoever over these persons except to terminate the agreements, and the power to terminate was the only authority which it ever exercised or attempted to exercise over those persons.

The affidavit points out that the first of the relationships was terminated by it because "The response in the two years * * * does not justify any continuation of expense * * * in promoting our products." The second relationship was terminated because the other party stated he was not getting "the kind of co-operation from your company that I expect and that is necessary to get results. * * *" The writer stated that he had tried many times to contact and procure information from Schwager-Wood Corporation with no success, and concluded his letter by asking for instructions on immediate disposition of the sample switches that he had.

The supplemental affidavit of Mr. Schwager, filed January 4, 1962, also reveals that the business which defendant, Schwager-Wood Corporation, had conducted prior to its dissolution on November 6, 1959, is now conducted by Schwager-Wood Company, Inc., also an Oregon corporation, of which he is president and Mr. William Maxwell Wood is vice president and secretary. He states that there was received between November 6, 1959, and the present time at Portland, Oregon, four unsolicited orders from the Milwaukee, Wisconsin, office of Line Materials Industries, of an aggregate invoice value of $1,812.80, less than 1/12th of 1% of Schwager-Wood's 1960 gross sales; during the same period it also received from the same Company's Melrose Park office, two unsolicited orders totaling $1,268.10 (less than 1/17th of 1% of said gross sales). The shipments were delivered f. o. b. Portland for consignment into the Northern District of Illinois, in accordance with instructions from the Line Materials Industries. He believed the said company to be a subsidiary or division of McGraw-Edison Company, that the Schwager Company itself had no corporate affiliation with McGraw-Edison, or any other electrical manufacturer. He specifically stated that the Schwager Company received no other orders from and made no other shipments to, or for the account of any customer in the Northern District of Ilinois.

The pertinent statutes provide:

"Any person who shall be injured in his business or property by reason of anything forbidden in the anti-trust laws may sue therefor in any district court of the United States in the district in which the defendant resides or is found or has an agent, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the cost of suit, including a reasonable attorney's fee." 15 U.S.C.A. § 15. (Italics supplied.)

"Any suit, action, or proceeding under the anti-trust 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." 15 U.S.C.A. § 22. (Italics supplied.)

"A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes." 28 U.S.C. § 1391 (c). (Italics supplied.)

The Court is of the opinion that the defendant's motion to dismiss for lack of venue has sound legal foundation for the reasons (1) that the isolated, unsolicited sales of relatively unsubstantial amounts by defendant to one customer did not constitute the transaction of business; (2) that membership in a civil conspiracy does not ipso facto render a member subject to the jurisdiction of the forum of any other member, and (3) that the contracts of exclusive representation granted to residents of this area had been terminated long before the instant service was made, and were of small significance businesswise.

The six sales by defendant in Milwaukee and this District were unsolicited, and constituted but a fraction of one percent of its total 1960 gross sales. This is not a "substantial" amount under the precedent cited infra. True, the six sales totaled $3,080.90, not an inconsequential amount, but when that sum is viewed in the perspective of defendant's total business and also of the overall sales of the entire industry,⁴ it is readily apparent that the sales were of a very negligible proportion.

While the phrase "transacts business" in the venue provision of the statute (15 U.S.C.A. § 22) has been held to have the broadest connotation of all the antitrust statutes for venue purposes,⁵ still it embraces elements of substantiality of business done,⁶ with continuity in character,⁷ regularity,⁸ contemporaneousness with time of service,⁹ and not looking toward cessation of business.¹⁰ The phrase was said to have been included in the statute to "increase the number of districts in which a corporation might be sued for violation of the antitrust laws,"¹¹ and relieve "persons injured from the `often insuperable obstacle' of resorting to distant forums for redress of wrongs. * * *"<sup>12</sup> The term "transacting business" is to be construed in the ordinary and practical, everyday, usual commercial sense,<sup>13</sup> instead of the previous "hair-splitting legal technicalities encrusted upon the `found,' — `present' — `carrying-on-business' sequence."¹⁴ It "relieved persons injured through corporate violations of the anti-trust laws from the `often insuperable obstacle' of resorting to distant forums for redress of wrongs done in the places of their business * * *."<sup>15</sup> But the Congressional purpose has been held to "enlarge the jurisdiction of the district courts to establish the venue of a suit under the antitrust laws not only where a corporation resides or is `found',"¹⁶ a much "broader meaning for establishing venue than the concept of `carrying on business'...