Dunham's, Inc. v. Nat. Buying Syndicate of Texas, 84-CV-3331-DT.

• Decision Date: 28 March 1985
• Docket Number: No. 84-CV-3331-DT.,84-CV-3331-DT.
• Citation: 614 F. Supp. 616
• Parties: DUNHAM'S, INC., Plaintiff, v. NATIONAL BUYING SYNDICATE OF TEXAS, a Texas Corporation, Michigan Sporting Goods Distributors, Inc., a Michigan Corporation, Figgine International Company, an Ohio Corporation, jointly and severally, Defendants.
• Court: U.S. District Court — Western District of Michigan

614 F. Supp. 616

DUNHAM'S, INC., Plaintiff, v. NATIONAL BUYING SYNDICATE OF TEXAS, a Texas Corporation, Michigan Sporting Goods Distributors, Inc., a Michigan Corporation, Figgine International Company, an Ohio Corporation, jointly and severally, Defendants.

No. 84-CV-3331-DT.

United States District Court, E.D. Michigan, S.D.

March 28, 1985.

William J. Lamping, Birmingham, Mich., Robert V. Seymour, Southfield, Mich., Carl F. Erickson, Birmingham, Mich., for plaintiff.

Michael H. Jacobson, McShane & Bowie, Grand Rapids, Mich., John G. Truelson, Fort Worth, Tex., John J. Lynch, Birmingham, Mich., Walter O. Koch, Bodman, Longley & Dahling, Troy, Mich., Kenneth Peterson, Akron, Ohio, for defendants.

MEMORANDUM OPINION AND ORDER

PHILIP PRATT, District Judge.

The question presented is whether this court has personal jurisdiction over a nonresident corporate defendant—National Buying Syndicate of Texas (NBS).

I.

This is an antitrust case. The plaintiff here, Dunham's Inc., a Michigan corporation, is a retail seller of sporting goods. Three separate defendants are named: NBS, a Texas corporation; Michigan Sporting Goods Distributors, Inc. (MC Sporting Goods), a Michigan corporation; and Figgie International Company, an Ohio corporation.¹

Plaintiff commenced this action on July 19, 1984, alleging violations of the Sherman Act, 15 U.S.C. §§ 1, 4, 5, the Clayton Act, 15 U.S.C. § 16, and the Robinson-Patman Act, 15 U.S.C. § 13. It is alleged that the defendants conspired and participated in unlawful price discrimination and restraint of trade.

II.

NBS operates a syndicate or buying group composed of various sporting goods retailers throughout the United States. NBS advertises that it has members in 47 states. The buying syndicate operates in the following manner. It purchases, or arranges for purchases, of sporting goods merchandise between manufacturers or wholesalers and members of the NBS buying syndicate. These purchases are made in large quantity at discounted prices. Therefore, NBS members are able to buy these goods at prices less than what they would have to pay wholesalers in the normal course of their business. By obtaining merchandise at discount prices, NBS members are able to sell their goods at more competitive prices while still making an attractive profit. In short, NBS's operation apparently offers members the opportunity to buy merchandise at lower than normal prices and thereby gain a competitive advantage in the marketplace over non-NBS member retailers.

It is essential to understand NBS's mode of operation insofar as it can be gleaned from the parties' submissions. A letter and brochure sent to plaintiff by NBS on December 28, 1983 explains the NBS membership requirements and operations. Plaintiff's Exhibit A. NBS members are required to pay a one-time initiation fee of $1,000. In addition to this, members must pay monthly dues of $175. There are also certain registration fees of $150 per member.

In addition to the dues obligations of a member, NBS has established financial criteria which must be satisfied before NBS membership is granted. These include a satisfactory Dun & Bradstreet financial rating, a minimum level of retail sales in sporting goods merchandise and several other requirements. NBS members purchase most of their merchandise during semi-annual buying markets held in Fort Worth, Texas. Vendors that represent manufacturers and wholesalers of sporting goods equipment exhibit and sell their goods at these shows.

When NBS members order merchandise, they are required to use "NBS purchase orders for all Syndicate orders." According to NBS procedures, the NBS office in Fort Worth must be sent a copy of all purchase orders on a weekly basis. Additionally, copies of all correspondence or letters "related to Syndicate orders" must be sent to the NBS office once a week. Plaintiff's Exhibit E.

With standard NBS sales, the vendor bills all merchandise to NBS. The merchandise itself, however, is drop-shipped to the ordering member. In turn, the member then pays the vendor directly rather than going through NBS. Plaintiff's Exhibit E. On occasion, with what NBS calls "exceptional deals," merchandise will be shipped to one of the NBS warehouses.² When this is done, the merchandise is then reshipped to NBS members which have ordered the goods. NBS itself must pay for these "exceptional deals" with its own check. Members must then reimburse NBS for these goods directly instead of paying the vendor.

Plaintiff applied for NBS membership in December of 1983. Its application was denied. Plaintiff contends:

Acting pursuant to Defendant Syndicate's policies and practices ... and in combination and conspiracy with other persons including, without limitation, retailers who are members of Defendant Syndicate, Defendant Syndicate denied, excluded and barred Plaintiff Dunham's from membership in Defendant Syndicate.

As a direct and proximate result of being denied, vetoed and barred from membership in Defendant Syndicate, Plaintiff Dunham's has been denied the benefits of such membership, including without limitation, the extremely large and extraordinary price and volume discounts, reduced prices, favorable terms and other benefits ... and Plaintiff Dunham's has been limited, restrained and injured in its ability to compete.

Plaintiff seeks both money damages and equitable relief for defendants' alleged antitrust violations.

III.

This matter is now before the court on defendant NBS's motion to dismiss, pursuant to Fed.R.Civ.P. 12(b)(2), (5), on the ground that this court lacks personal jurisdiction over it because the requisite minimum contacts do not exist with the forum state.³

It is plaintiff's position that the requirement of "minimum contacts" is irrelevant when subject matter jurisdiction is based on a federal statute rather than on diversity of citizenship. International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1956). Defendant, on the other hand, contends that this court must engage in some type of "minimum contacts" analysis to determine whether NBS is amenable to suit in the forum state.

In International Shoe and its progeny, McGee v. International Life Insurance Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), Hanson v. Denckla, 357 U.S. 235, 78 S.Ct. 1228, 2 L.Ed.2d 1283 (1958), and World-Wide Volkswagen v. Woodson, 444 U.S. 286, 100 S.Ct. 559, 62 L.Ed.2d 490 (1980). The U.S. Supreme Court articulated the constitutional due process limitations on in personam jurisdiction. These cases state that a nonresident defendant's contacts or ties with the forum state must make it "reasonable and just" to permit that state to exercise jurisdiction over the defendant. International Shoe, 326 U.S. at 320, 66 S.Ct. at 160. The fourteenth amendment's due process clause limits a state's jurisdiction over nonresident defendants to those situations in which exercise of jurisdiction does not offend "traditional notions of fair play and substantial justice." 326 U.S. at 316, 66 S.Ct. at 158 (quoting Milliken v. Meyer, 311 U.S. 457, 463, 61 S.Ct. 339, 343, 85 L.Ed. 278 (1940)).

If jurisdiction in this case had been predicated on diversity of citizenship pursuant to 28 U.S.C. § 1332, there would have been no argument from counsel that an International Shoe "minimum contacts" analysis would be necessary. But jurisdiction here is based on federal antitrust statutes, supra. The parties' disagreement on the "minimum contacts" question is further complicated by the fact that in an antitrust action, nationwide service of process is permitted on corporate defendants. 15 U.S.C. § 22. Therefore, the question this court must decide is whether an International Shoe minimum contacts analysis must be undertaken when jurisdiction is predicated on federal antitrust statutes and nationwide service of process is provided for over the corporate defendants.

This question has generated much debate among the courts and scholars. See generally, Hovenkamp, Personal Jurisdiction and Venue in Private Antitrust Actions in the Federal Courts: A Policy Analysis, 67 Iowa L.Rev. 485, 487 (1982). Note, Alien Corporations and Aggregate Contacts: A Genuinely Federal Jurisdictional Standard, 95 Harv.L.Rev., 470 (1981).⁴ The Supreme Court has not addressed this issue. In United States v. Scophony Corp., 333 U.S. 795, 68 S.Ct. 855, 92 L.Ed. 1091 (1948), the Court noted that it would not define the outer limits of Congress' authority to compel a defendant to defend a suit in a distant forum. Id. at 804, 68 S.Ct. at 860. The Court said:

The government, however, suggests that, in view of our recent decision in International Shoe citation omitted which was concerned with the jurisdiction of a state over a foreign corporation for purposes of suit ..., and in view of aspects of similarity between that problem and the one now presented, we extend to this case and to § 12 Clayton Act the criteria there formulated and applied. There is no necessity for doing so ... We are not concerned here with finding the utmost reach of Congress' power.

Id. at 804 n. 13, 68 S.Ct. at 860 n. 13.

In the years following Scophony, federal courts have faced this issue with considerable uncertainty. The results, understandably, have been inconsistent. See generally, Superior Coal Co. v. Ruhrkohle, A.G., 83 F.R.D. 414, 418 (E.D.Pa.1979); Logiurato v. Action, 490 F.Supp. 84, 89-90 (D.D.C. 1980); Edward J. Moriarty & Co. v. General Tire & Rubber Co., 289 F.Supp. 381, 390 (S.D.Ohio 1967); Lone Star Package Car Co. v. Baltimore and Ohio Ry. Co., 212 F.2d 147, 155 (5th Cir.1954).

The Sixth Circuit Court of Appeals spoke to the personal jurisdiction issue in federal question cases in Haile v. Henderson National Bank, 657 F.2d 816 (6th Cir.), cert. denied, 455 U.S. 1172, 102 S.Ct. 1450, 71 L.Ed.2d 663 (1981). The court determined that the International Shoe minimum contacts analysis "becomes inapposite" when Congress has provided for...