Grappone, Inc. v. Subaru of America, Inc.

• Citation: 403 F. Supp. 123
• Decision Date: 12 November 1975
• Docket Number: Civ. A. No. 74-119.
• Parties: GRAPPONE, INC. v. SUBARU OF AMERICA, INC., and Subaru of New England, Inc.
• Court: U.S. District Court — District of New Hampshire

403 F. Supp. 123

GRAPPONE, INC. v. SUBARU OF AMERICA, INC., and Subaru of New England, Inc.

Civ. A. No. 74-119.

United States District Court, D. New Hampshire.

November 12, 1975.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

Howard B. Myers, Ingram & Myers, Hanover, N.H., for plaintiff.

John C. Ransmeier, Sulloway, Hollis, Godfrey & Soden, Concord, N.H., for defendant Subaru of America.

John W. Barto, Orr& Reno, Concord, N.H., for defendant Subaru of New England.

OPINION

BOWNES, District Judge.

Plaintiff, a New Hampshire corporation, is a retail automobile dealer engaged in the business of selling new and used Subarus to the consuming public. Defendant Subaru of America, Inc. (Importer), a Pennsylvania corporation having its principal place of business in Pennsauken, New Jersey, is the sole importer and manufacturer's distributor of Subaru motor vehicles in the United States. Defendant Subaru of New England, Inc. (Distributor), a Massachusetts corporation having its principal place of business in that State, is the regional wholesale distributor of Subarus for the New England area.¹

Plaintiff's complaint contains five separate causes of action. Counts I and II allege violations of the Sherman Antitrust Act, 15 U.S.C. § 1, as amended, and Section 3 of the Clayton Act, 15 U. S.C. § 14, in that the defendants have forced the plaintiff to purchase a "parts kit" and a "substantial amount of" advertising services as a condition to receiving any Subaru automobiles. Plaintiff alleges that the "parts kit" was developed by Importer and Manufacturer and that it "consisted of a number of parts, including various items that are occasionally used by Subaru dealers, a number of parts that are rarely if ever replaced on Subaru automobiles, and a number of parts which are available to Subaru dealers from other sources." (Pl's. Complaint, Count I ¶ 12 at 6.) In addition, plaintiff alleges that these advertising services have been of little or no benefit. Plaintiff alleges that it refused to purchase these "services" from the defendants and, as a consequence, was denied the opportunity to sell Subarus in 1974, thereby causing it a loss in revenues. Counts III and IV allege violations of the Dealers' Day in Court Act, 15 U.S.C. § 1221 et seq., and reiterate the factual allegations which support the antitrust claims. Count V alleges that Distributor has "failed to act in good faith in performing and complying with the terms of plaintiff's dealer agreement in that it has coerced plaintiff into paying freight charges in excess of actual freight charges incurred" and that this conduct constitutes a violation of the Dealers Day in Court Act (Act). (Pl.'s Complaint ¶ 6 at 29.)

Plaintiff seeks both injunctive relief and monetary damages.

Importer has moved to dismiss Counts I and II on the ground that, under 15 U.S.C. § 22, venue in this district is improper. Importer seeks to dismiss Counts III, IV and V on the ground that this court cannot, consonant with the due process clause of the Fourteenth Amendment, exercise personal jurisdiction over it. In addition, both Importer and Distributor move to dismiss Counts III, IV and V on the grounds that (1) they are not automobile manufacturers as defined in 15 U.S.C. § 1221(a) and this court, therefore, lacks subject matter jurisdiction over them, and (2) venue in this court, under the Act, is improper.

It is clear that Count V of the complaint does not apply to Importer. So that there will be no confusion on this point, it is hereby ordered that Count V be dismissed as against Importer.

ISSUES

1. Whether Importer "transacts business" in New Hampshire as defined in 15 U.S.C. § 22;

2. Whether this court has personal jurisdiction over Importer;

3. Whether Importer or Distributor is a "manufacturer of automobiles" as defined in 15 U.S.C. § 1221(a);

4. Whether venue in this court is proper under the Dealers' Day in Court Act.

FACTS

The facts not covered here will be treated as part of the legal analysis.

Subaru automobiles and parts are manufactured in Japan by Fuji Heavy Industries, Ltd., a Japanese corporation. (Manufacturer) Manufacturer has granted Importer the exclusive right to import Subarus into the United States, Puerto Rico, and the Bahama Islands. (Pl.'s Ex. 1 at 2.) Prior to this grant to Importer, Fuji did not export or distribute Subarus to America.

When Importer first commenced its operations, it accomplished the wholesale distribution of Subaru vehicles and parts through a wholly-owned subsidiary, Subaru of Pennsylvania, Inc.

In 1970, Importer changed its legal method of distribution by abolishing the wholly-owned subsidiary and establishing fourteen independently owned regional distributorships and one other distributorship in which it presently retains an ownership interest. (Stipulation No. 7)²

The general method of operation and distribution now works as follows: (1) Manufacturer sells the vehicles to Importer FOB Japan; (2) Importer ships the vehicles to various ports of entry where they are sold to the regional distributor; (3) the regional distributor, in turn, determines at the port of entry how the cars are to be distributed amongst the retail dealers; (4) after the regional distributor has allocated the cars to the various retail dealers, the dealers then transport the vehicles, via common carrier, from the port of entry to their showrooms where they are offered to the public.

Distributor is the regional distributor for the New England area and Importer has no ownership interest in it. It is Distributor's responsibility to recruit prospective retail dealers who will sell directly to the public.

VENUE UNDER 15 U.S.C. § 22

Venue in a private antitrust action against a corporation is governed by 15 U.S.C. § 22 which provides:

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.

The law provides that a corporation is an inhabitant of the state of its incorporation. Aro Manufacturing Co. v. Automobile Body Research Corp., 352 F.2d 400 (1st Cir. 1965), cert. denied, 383 U.S. 947, 86 S.Ct. 1199, 16 L.Ed.2d 210 (1966). Importer is not incorporated in New Hampshire and, therefore, not an inhabitant of this State.

The term "found" refers to activities which are "continuous and local." Stern Fish Co. v. Century Seafoods, Inc., 254 F.Supp. 151, 153 (E.D. Pa.1966); Fox-Keller, Inc. v. Toyota Motor Sales, U.S.A., Inc., 338 F.Supp. 812, 815 (E.D.Pa.1972). In order to be "found" within this district, a corporation must be present by "its officers and agents carrying on the business of the corporation." Aro, supra, 352 F.2d at 404. Importer does not have any officers or agents within this district who engage in "continuous local activity." I, therefore, find that Importer is not "found" in this district. The tests which determine whether a corporation is "found" within a district, however, are more stringent than those which are used to determine whether it "transacts business." The phrase "transacts business" provides "a much broader meaning for establishing venue" than the word "found." United States v. Scophony Corp., 333 U.S. 795, 807, 68 S.Ct. 855, 861, 92 L.Ed. 1091 (1948). The question is whether Importer "transacts business" within this district.

Under Section 7 of the original Sherman Antitrust Act of 1890, a defendant could only be sued in the district in which it "resides or is found." People's Tobacco Co. v. Am. Tobacco Co., 246 U. S. 79, 38 S.Ct. 233, 62 L.Ed. 587 (1918).

In enacting the Clayton Act, which supplemented the former laws against unlawful restraints of monopolies of interstate trade, Congress chose to expand a plaintiff's choice of venue by adding the phrase "transacts business." By choosing this language, Congress intended to broaden the venue requirement so as to give an aggrieved plaintiff "the right to bring suit and have it tried in the district where the defendant had committed violations of the Act and inflicted the forbidden injuries." United States v. Nat. City Lines, 334 U.S. 573, 583, 68 S.Ct. 1169, 1175, 92 L.Ed. 1584 (1948); Eastman Co. v. Southern Photo Co., 273 U.S. 359, 373-374, 47 S.Ct. 400, 71 L.Ed. 684 (1927); Scophony, supra, 333 U.S. at 807, 68 S. Ct. 855. As a consequence of Congress' action, "the practical, everyday business or commercial concept of doing or carrying on business `of any substantial character' became the test of venue." Scophony, supra, 333 U.S. at 807, 68 S. Ct. at 862. What constitutes "transacting business" for venue purposes under the antitrust laws must be decided by examining the particular facts involved and "an appraisal of the unique elements of a particular situation." Rhode Island Fittings Co. v. Grinnell Corp., 215 F. Supp. 198, 200 (D.R.I.1963); Courtesy Chevrolet, Inc. v. Tennessee Walking Horse Ass'n, 344 F.2d 860, 863 (9th Cir. 1965); Aro, supra, 352 F.2d at 403. See generally, Note, Venue in Private Antitrust Suits, 37 N.Y.U.L.Rev. 268 (1962).

In assaying the facts, the court should bear in mind that the broadening of the antitrust venue provision "was designed to aid plaintiffs by giving them a wider choice of venues, and thereby to secure a more effective, because more convenient, enforcement of antitrust prohibitions." United States v. Nat. City Lines, supra, 334 U.S. at 586, 68 S.Ct. at 1176. Nevertheless, the burden is on plaintiff to prove that venue in New Hampshire is proper. Aro, supra, 352 F.2d at 403.

An examination of Importer's contacts with this State and its relationship with Distributor, therefore, is imperative. The following facts have been stipulated to by the parties:³

1. Importer's "mailings, bulletins and materials" are intended for dealer usage and...