Hadden v. Barrow, Wade, Guthrie & Co.

• Decision Date: 23 May 1952
• Docket Number: No. 28609.,28609.
• Citation: 105 F. Supp. 530
• Parties: HADDEN v. BARROW, WADE, GUTHRIE & CO.
• Court: U.S. District Court — Northern District of Ohio

105 F. Supp. 530

HADDEN v. BARROW, WADE, GUTHRIE & CO.

No. 28609.

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

May 23, 1952.

B. B. Fensterstock, New York City, L. C. Wykoff, Cleveland, Ohio, for plaintiff.

Maurice F. Hanning, Cleveland, Ohio, for defendant.

FREED, District Judge.

Plaintiff, as Trustee in Bankruptcy of the Manufacturers Trading Corporation, brought this action against defendants, a firm of public accountants, for alleged breach of contract to perform services for plaintiff. Plaintiff is a corporation organized and existing under the laws of Delaware, licensed to do business in Ohio and doing business in Ohio. Defendant is a partnership composed of many partners, each of whom is a citizen of the United States, but none of whom is a citizen or resident of the State of Delaware. Defendant has moved to dismiss the action on the ground that the venue is improperly laid.

Determination of the question presented turns on the construction of 28 U.S.C.A. § 1391(c). Do the provisions of that section pertain solely to actions against a corporation, or do they also grant residence to a corporation in this state so that, as plaintiff, it may lay the venue of a suit predicated on diversity in this district? The section reads, as follows:

"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."

In Freiday v. Cowdin, D.C.1949, 83 F. Supp. 516, 517, the court, when faced with the identical inquiry, commented:

"To give full effect to the words `and such judicial district shall be re-regarded as the residence of such corporation for venue purposes,' one must conclude that they refer to both plaintiff and defendant corporations. To conclude otherwise one would have to attribute to Congress the anomalous intent to define the residence of corporate defendants but not that of corporate plaintiffs."

The records of the Congressional hearings on the Judicial Code (of which the section under consideration is a part) shed no light nor disclose any indication of the intent of the debated language.

Two text writers¹ as well as a district court² took views directly contrary to that stated in the above case. The contention giving rise to their position, that Section 1391(c) is merely a codification of the doctrine announced in Neirbo Co. v. Bethlehem Shipbuilding Corp., 1939, 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167, is neither borne out by an analysis of the statute nor by its legislative history. The Neirbo case clarifies and restates the proposition of law first announced in Ex parte Schollenberger, 1877, 96 U.S. 369, 24 L.Ed. 853, that the designation of an agent for service of process by a corporation in a state where it is engaged in business is an effective consent to be sued in the federal courts of that state. That decision may have impelled the enactment of...