French v. Gibbs Corporation

• Decision Date: 07 June 1951
• Docket Number: Dockets 21968,21969.,No. 231,232,231
• Citation: 189 F.2d 787
• Parties: FRENCH v. GIBBS CORPORATION. HENRY v. GIBBS CORPORATION.
• Court: U.S. Court of Appeals — Second Circuit

189 F.2d 787 (1951)

FRENCH v. GIBBS CORPORATION.

HENRY v. GIBBS CORPORATION.

Nos. 231, 232, Dockets 21968, 21969.

United States Court of Appeals. Second Circuit.

Argued May 1, 1951.

Decided June 7, 1951.

Gallop, Climenko & Gould, New York City, George Trosk, Jesse Climenko, New York City, of counsel, Martin I. Shlefstein, Brooklyn, N. Y., argued for plaintiffs.

Kirlin, Campbell & Keating, New York City, Louis J. Gusmano, New York City, Edwin S. Murphy, New York City, of counsel for defendant.

Before L. HAND, CHASE and FRANK, Circuit Judges.

L. HAND, Circuit Judge.

These appeals come up from orders vacating the service of the summonses and complaints, and from judgments dismissing the complaints for lack of jurisdiction over the person of the defendant, in two actions, each of which was the same except for a different plaintiff. The complaints alleged that the defendant, a Florida corporation, had made a contract with the plaintiffs by which five per cent of all "gross sales originated or substantially assisted by defendant's New York office would be credited to said office for its profits," and that these would be divided between the two plaintiffs, who were to manage the office. The summonses and complaints were served upon the chairman of the defendant's board of directors on August 9th, 1950, after the defendant's activities within the State of New York had on July 6th, 1950, been reduced to so few that, taken by themselves, they would not support a finding that it was "present" within the state after that date. Until that date the corporation's activities in New York had been ample to support such a finding; moreover, the contract in suit had been made, performed and broken in that state. Again, although after July 6th, 1950, the activities had been reduced, as we have said, they did not altogether cease. The defendant still retained under lease an apartment in the Hotel Park Lane, Park Avenue, for the convenience of its representatives "while in New York on solicitation of business or financing or for their own pleasure." This was occasionally used among other purposes "for certain interviews with banks as to financing arrangements for defendant's business outside the State of New York"; and the defendant continued to keep an account in a New York bank. The defendant argues that, since its activities had become so few that it was not "present" when the summonses were served, the court got no jurisdiction. The plaintiffs argue that, since it had been subject to suit in personam until a month before, since the claim arose out of its local activities, and since it had not wholly withdrawn from the state, it remained liable to service. That was the issue and the judge decided it in the defendant's favor.

As everyone knows, the first notion was that a corporation, being a fictitious jural person, could not be recognized as existing at all outside the borders of the state which chartered it.¹ The next step was that, when a corporation sent agents to execute contracts in a state, whose laws made it conditional upon his representing that he should "be deemed its agent to receive service of process in suits founded on such contracts," his appointment "clothed him with power to receive notice * * * as effectually as if he were designated in the charter as the officer on whom process was to be served."² In Baltimore & O. R. Co. v. Harris, 12 Wall. 65, 83, 20 L.Ed. 354, without discussion the Court extended this "presumption" of consent to actions upon liabilities arising in other states; but in Old Wayne Mutual Life Association v. McDonough, 204 U.S. 8, 22, 23, 27 S.Ct. 236, 51 L.Ed. 345, it reverted to the original theory that the consent was limited to liabilities arising out of transactions in which the corporation had authorized the agent to act for it. On the other hand in Green v. Chicago, Burlington & Quincy Railway, 205 U.S. 530, 27 S.Ct. 595, 51 L.Ed. 916, although the court vacated the process, the entire discussion presupposed that, if the corporate local activities had been greater, the plaintiff might have sued in Pennsylvania for injuries suffered in Colorado; yet in Simon v. Southern Railway, 236 U.S. 115, 130, 35 S.Ct. 255, 59 L.Ed. 492, it again fell back upon the limitation laid down in Old Wayne Mutual Life Association v. McDonough, supra, 204 U.S. 8, 27 S.Ct. 236, 51 L.Ed. 345. This being the confused state of the authorities, the Court in Philadelphia & Reading Railway v. McKibbin, 243 U.S. 264, 37 S.Ct. 280, 61 L.Ed. 710, laid it down that the question was always whether the corporation was "doing business within the state in such manner and to such extent as to warrant the inference that it is present there", although the opinion reserved the question whether even then it was subject to process in actions upon liabilities arising outside the state. This obviously helped no more to a solution than frankly to beg the question as was done in People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 87, 38 S.Ct. 233, 62 L.Ed. 587; and it is not strange that the lower courts were more or less baffled. However, in International Shoe Company v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, at page 158, 90 L.Ed. 95, Chief Justice Stone said of a corporation that, "unlike an individual its `presence' without, as well as within, the state of its origin can be manifested only by activities carried on in its behalf by those who are authorized to act for it." Such an approach was toto coelo different from that of Bank of Augusta v. Earle, supra, 13 Pet. 519, 10 L.Ed. 274; it regarded the corporation, not as a fabricated jural person, but as a confederative venture to which, like all concerted activities, one can ascribe...