Goldstein v. Chicago, RI & PR Co.

• Decision Date: 10 October 1950
• Docket Number: Civ. A. No. 4650,4651.
• Citation: 93 F. Supp. 671
• Parties: GOLDSTEIN et al. v. CHICAGO, R. I. & P. R. CO. GOLDSTEIN v. CHICAGO, R. I. & P. R. CO.
• Court: U.S. District Court — Western District of New York

93 F. Supp. 671

GOLDSTEIN et al. v. CHICAGO, R. I. & P. R. CO.

GOLDSTEIN v. CHICAGO, R. I. & P. R. CO.

Civ. A. Nos. 4650, 4651.

United States District Court W. D. New York.

October 10, 1950.

Julius H. Michaels, Rochester, N. Y., for plaintiffs.

Brown, Kelly, Turner & Symons, Buffalo, N. Y. (Franklin R. Brown, Buffalo, N. Y., of counsel), for defendant.

KNIGHT, Chief Judge.

Each of the two actions above noted involve the same questions of law, and they will be considered together.

This is a motion by the defendant for dismissal of the action upon the ground that the service was ineffective to secure jurisdiction of said defendant, and that the court lacks jurisdiction of defendant; that the service of the summons and complaint was not made on a person authorized either by law or otherwise to receive such process in behalf of defendant.

This is an action in negligence, brought to recover damages alleged to have arisen from injuries sustained by plaintiffs resulting from a train derailment occurring on the line of defendant near Meade, Kansas, on October 10, 1949. The plaintiffs are residents of this Western District of New York. Service of the summons and complaint was made on July 31, 1950, on one Frank Zadach, claimed by plaintiffs to be "the General Passenger Agent" for defendant.

The defendant is a corporation, organized and existing under the laws of the State of Delaware, not authorized to do business in this state, engaged in business of operating lines in interstate commerce wholly without the State of New York.

This action is based only on diversity of citizenship.

28 U.S.C.A. § 1391 provides in part:

"(a) A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in the judicial district where all plaintiffs or all defendants reside.

* * * * * *

"(c) 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."

The first inquiry is whether it is "doing business" in this judicial district within the meaning of 28 U.S.C.A. § 1391, supra. It has three employees in this district, one of whom solicits passenger business, another freight business, and the third is a stenographer. The duties of the solicitors as described by the defendant are to "* * have passenger and freight traffic move and be transported over the railroad lines of said railroad (which lines are wholly without the State of New York); to merely turn over prospective movements of passengers and freight to some other railroad * * *; to merely keep advised of the movement of such traffic by such other railroads and to endeavor to have such traffic routed so that ultimately such passengers or freight will be transported over the lines of the defendant * * *."

Defendant has no bank account in the district. Salaries of these employees, as well as rent, are paid by check from the main office of defendant. These solicitors do not sell passenger tickets, issue bills of lading, make contracts for carriage, make any collections or handle any claims.

The question of what constitutes "doing business" in a state has been the subject of judicial consideration in almost a myriad of cases.

Green v. Chicago, Burlington & Quincy Railway Co., 205 U.S. 530-533, 27 S.Ct. 595, 596, 51 L.Ed. 916, is a case directly in point and has been for many years the leading case on the question of whether soliciting business, as here, constitutes "doing business" by a foreign corporation in a district where action has been brought against a foreign corporation. As will be seen certain later decisions of the courts have shown a somewhat more liberal interpretation of the expression "doing business". These cases have generally described the facts as showing "solicitation plus" or "slight additions" to solicitation.

It was said in the Green case: "The business of the agent was to solicit and procure passengers and freight to be transported over the defendant's line. For conducting this business several clerks and various traveling passenger and freight agents were employed, who reported to the agent and acted under his direction. He sold no tickets and received no payments for transportation of freight. When a prospective passenger desired a ticket, and applied to the agent for one, the agent took the applicant's money and procured from one of the railroads running west from Philadelphia a ticket for Chicago and a prepaid order, which gave to the applicant, upon his arrival at Chicago, the right to receive from the Chicago, Burlington and Quincy Railroad a ticket over that road."

The instant case shows stronger support for a finding that defendant was not "doing business" in New York State than does the Green case, supra. This is definitely shown by the above quoted part of the opinion there.

In Philadelphia & Reading Ry. Co. v. McKibbin, 243 U.S. 264, 269, 37 S.Ct. 280, 281, 61 L.Ed. 710, it appeared that no part of that railroad was situate in the State of New York. The railroad had no dock or freight or passenger ticket office or any other office or any agent or property therein. It sent into New York over connecting carriers loaded freight cars, and carriage was performed wholly by connecting carriers therein. This carrier was the Central Railroad of New Jersey which had a ferry in New York. It issued tickets over its own and connecting lines, including the plaintiff. Plaintiff had no office or employee at the terminal. This seems even a much weaker case in which there was denial of jurisdiction than the one at bar. The significance of the decision is found in certain language of opinion by Judge Brandeis. He said: "The defendant transacts no business there; nor is any business transacted there on its behalf, except in the sale of coupon tickets. Obviously the sale by a local carrier of through tickets does not involve a doing of business within the state by each of the connecting carriers. If it did, nearly every railroad company in the country would be `doing business' in every state. Even hiring an office, the employment by a foreign railroad of a `district freight and passenger agent * * * to solicit and procure passengers and freight to be transported over the defendant's line,' and having under his direction `several clerks and various traveling passenger and freight agents,' was held not to constitute `doing business within the state.' Green v. Chicago, Burlington & Quincy Ry. Co., 205 U.S. 530, 27 S.Ct. 595, 51 L.Ed. 916."

In People's Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 38 S.Ct. 233, 235, 62 L.Ed 587, the plaintiff brought action against defendant in the Eastern District of Louisiana. The defendant was organized under the laws of New Jersey. It was selling goods in Louisiana and sending drummers into the state to solicit orders of retail trade to be turned over to jobbers, charges being made by jobbers to retailers. It also appeared defendant owned stock in companies carrying on tobacco business in Louisiana. The Supreme Court sustained the decision of the District Court, in maintaining the exception filed by defendant company as to the question of the defendant doing business in Louisiana and also as to insufficiency of service of process. It said: "The question as to what constitutes the doing of business in such wise as to make the corporation subject to service of process has been frequently discussed in the opinions of this court, and we shall enter upon no amplification of what has been said. Each case depends upon its own facts. The general rule deducible from all our decisions is that the business must be of such nature and character as to warrant the inference that the corporation has subjected itself to the local jurisdiction, and is by its duly authorized officers or agents present within the state or district where service is attempted."

It was held that defendant was not "doing business" in the state of Louisiana.

In Davis v. Farmers Co-Op Equity Co., 262 U.S. 312, 43 S.Ct. 556, 557, 67 L.Ed. 996, the question considered was the constitutionality of a Minnesota statute relating to the service of a summons on an agent of a foreign corporation. Not that the subject matter of the suit has any bearing here, but certain language in the opinion by Judge Brandeis is significant. "Solicitation of traffic by railroads, in states remote from their lines, is a recognized part of the business of interstate transportation. McCall v. People of State of California, 136 U.S. 104, 10 S.Ct. 881, 34 L.Ed. 391. As construed by the highest court of Minnesota, this statute compels every foreign interstate carrier to submit to suit there as a condition of maintaining a soliciting agent within the state. Jurisdiction is not limited to suits arising out of business transacted within Minnesota." In invalidating the statute, the court in part said: "It is asserted, whatever the nature of the cause of action, wherever it may have arisen, and although the plaintiff is not, and never has been, a resident of the state. * * * This condition imposes upon interstate commerce a serious and unreasonable burden, which renders the statute obnoxious to the commerce clause. * * * That the claims against interstate carriers for personal injuries and for loss and damage of freight are numerous; that the amounts demanded are large; that in many cases carriers deem it imperative, or advisable, to leave the determination of their liability to the courts; that litigation in states and jurisdictions remote from that in which the cause of action arose entails absence of employees from their customary occupations; and that this impairs efficiency in operation, and causes, directly and indirectly, heavy expense to the carriers — these are matters of common knowledge."

In Cancelmo v. Seaboard Air Line Ry., 56...