In re Magnetic Audiotape Antitrust Litigation

• Decision Date: 25 April 2001
• Docket Number: No. 00 CIV. 1982(LMM).,No. 99 CIV. 1580(LMM).,99 CIV. 1580(LMM).,00 CIV. 1982(LMM).
• Citation: 171 F.Supp.2d 179
• Parties: In re: MAGNETIC AUDIOTAPE ANTITRUST LITIGATION Texas International Magnetics, Inc., f/k/a Hix Recording, Crown Magnetics, Inc. and Premier Multimedia, Inc., Plaintiffs, v. BASF AG Aktiegesellschaft, Defendant.
• Court: U.S. District Court — Southern District of New York

171 F.Supp.2d 179

In re: MAGNETIC AUDIOTAPE ANTITRUST LITIGATION Texas International Magnetics, Inc., f/k/a Hix Recording, Crown Magnetics, Inc. and Premier Multimedia, Inc., Plaintiffs, v. BASF AG Aktiegesellschaft, Defendant.

No. 99 CIV. 1580(LMM).

No. 00 CIV. 1982(LMM).

United States District Court, S.D. New York.

April 25, 2001.

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

COPYRIGHT MATERIAL OMITTED

MEMORANDUM AND ORDER

MCKENNA, District Judge.

Texas International Magnetics, Inc., Crown Magnetics, Inc. and Premier Multimedia, Inc. ("plaintiffs") have filed complaints alleging antitrust conspiracy against BASF Aktiegesellschaft ("BASF AG") and SKM, Ltd (collectively "defendants"). BASF AG now moves to dismiss the complaint brought against it pursuant to Fed.R.Civ.P. 12(b)(2) and for summary judgment pursuant to Fed.R.Civ.P. 56; SKM moves to dismiss the complaint brought against it pursuant to Fed. R.Civ.P. 12(b)(2). For the reasons set forth below BASF AG's motion to dismiss is granted, its motion for summary judgment is denied as moot and SKM's motion to dismiss is granted.

Background

Plaintiffs have filed two lawsuits alleging a conspiracy to fix the price of magnetic audiotape in the United States during the period 1991 to 1999. Plaintiffs first filed suit against a number of companies, including SKM ("the original action"), and later filed a second suit against BASF AG alone ("the second action"). BASF AG is organized under the laws of the Federal Republic of Germany with its principal place of business located in Ludwigshafen, Germany. It is the parent company of BASF Magnetics Corporation ("BASF Corp."), located in Bedford, Massachusetts and of BASF Magnetics GmbH ("BASF GmbH"), located in Mannheim, Germany, both of which are defendants in the original action. SKM is a corporation organized under the laws of Korea and its principal place of business is located in Seoul, Korea. SKM is the parent corporation of SKMA, Inc., a Delaware corporation with its principal place of business in Long Beach, California, and is a defendant in the original action.

Legal Standard

Plaintiffs bear the burden of establishing this Court's jurisdiction over the defendants. See Metro. Life Ins. Co. v. Robertson-Ceco Corp., 84 F.3d 560, 566 (2d Cir.1996). Prior to discovery, a motion to dismiss pursuant to Rule 12(b)(2) may be defeated if the plaintiffs' complaint and affidavits contain sufficient allegations to establish a prima facie showing of jurisdiction.¹ Id. Moreover, the Court must assume the truth of the plaintiffs' factual allegations, PDK Labs., Inc. v. Friedlander, 103 F.3d 1105, 1108 (2d Cir.1997), even in light of defendants' "contrary allegations that place in dispute the factual basis of plaintiff[s'] prima facie case." Pilates, Inc. v. Pilates Inst., Inc., 891 F.Supp. 175, 178 (S.D.N.Y.1995).

Discussion

Jurisdiction Under Section 12 of the Clayton Act

Plaintiffs' primary argument for jurisdiction over BASF AG and SKM rests on Section 12 of the Clayton Act, 15 U.S.C. § 22. The parties, however, dispute the interpretation and jurisdictional requirements of Section 12. Section 12 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 in which it is an inhabitant, or wherever it may be found.

15 U.S.C. § 22. The first clause of Section 12 relates to venue, the second to service of process, and therefore, jurisdiction. The dispute centers on whether the jurisdiction provision operates independently from the venue provision, specifically, whether "in such cases" in the second clause refers to "any suit, action, or proceeding under the antitrust laws against a corporation" or only to antitrust actions against corporations brought in a judicial district in which the corporation is either an "inhabitant," "may be found" or "transacts business." If the first interpretation is adopted, plaintiffs can rely on 28 U.S.C. § 1391(d) which provides for venue in antitrust actions against foreign corporations "in any district" and on the second clause of Section 12 for personal jurisdiction over defendants based on a minimum contacts analysis considering their contacts with the United States as a whole. If the second interpretation prevails the service provision is only effective when, pursuant to Section 12's first clause, the action is brought in a district where the defendant resides, is found or transacts business. The Court agrees with the several district courts in this Circuit that have addressed this issue and held that the first, and more expansive, interpretation of Section 12 is the proper one, see Daniel v. Am. Bd. of Emergency Med., 988 F.Supp. 127 (W.D.N.Y.1997); Gen. Elec. Co. v. Bucyrus-Erie Co., 550 F.Supp. 1037 (S.D.N.Y. 1982); Scriptomatic, Inc. v. Agfa-Gevaert, Inc., No. 72 Civ. 4482, 1973 WL 830 (S.D.N.Y. June 28, 1973), and is unpersuaded by BASF AG's reliance on a recent opinion by the Court of Appeals for the District of Columbia that held to the contrary.

In GTE New Media Services, Inc. v. BellSouth Corp., 199 F.3d 1343 (D.C.Cir. 2000), the Court of Appeals for the District of Columbia held that the "invocation of the nationwide service clause rests on satisfying the venue provision." Id. at 1350. In so holding, the Court stated that "we align ourselves with the position taken by the Second Circuit [in Goldlawr, Inc. v. Heiman, 288 F.2d 579 (2d Cir.1961), rev'd on other grounds, 369 U.S. 463, 82 S.Ct. 913, 8 L.Ed.2d 39 (1962)]." However, the Goldlawr Court does not appear to have been squarely presented with this issue. The case originated in the Eastern District of Pennsylvania, where the court, finding no jurisdiction, transferred the case to the Southern District of New York pursuant to 1406(a). The defendants argued they had not been served and the plaintiff did not "challenge the determination that the transferor court did not have personal jurisdiction over [plaintiffs]." 288 F.2d at 582. Thus, the question presented appeared to be whether transfer was appropriate while jurisdiction was still lacking, not whether jurisdiction, under Section 12 or any other provision, had been properly found.

With respect to the merits of the argument that the proper interpretation of Section 12 is that the extraterritorial service provision is not predicated upon satisfaction of the venue provision, this Court agrees with General Electric Co. v. Bucyrus-Erie Co., 550 F.Supp. 1037 (S.D.N.Y. 1982), where the court found that:

when "such" precedes a noun it is assumed to refer to a particular antecedent noun and any dependant adjective or adjectival clauses modifying that noun, but not to any other part of the preceding clause or sentence. Applying this rule to section 12, "in such cases" would refer to "any suit, action, or proceeding under the antitrust laws against a corporation," and not to anything else in section 12's first clause.

Id. at 1042 n. 7 (citing Webster's Third International Dictionary (unabr. ed.1963)). Further, the Court agrees with the conclusion of the Court of Appeals for the Ninth Circuit that there is nothing in Section 12 "which renders its venue provision exclusive and precludes the application of any other federal venue statute."² Go-Video, Inc. v. Akai Elec. Co., Ltd., 885 F.2d 1406, 1410, 1410-13 (9th Cir.1989). Further supporting the conclusion that the proper interpretation of Section 12 is to permit § 1391(d) to enlarge the scope of venue, both the Go-Video and Bucyrus-Erie decisions also relied on the Supreme Court decision in Brunette Machine Works, Ltd. v. Kockum Industries, Inc., 406 U.S. 706, 92 S.Ct. 1936, 32 L.Ed.2d 428 (1972), where the Court held that 28 U.S.C. § 1400(b) which provided for venue in patent infringement actions was not exclusive and did not preclude the application of § 1391(d). Id. at 707, 92 S.Ct. 1936. The Court found that § 1391 reflects the rule that suits against aliens are "outside the scope of all venue laws" and that the application of § 1391(d) could not be precluded by any specific venue provision, including the one contained in § 1400(b). Id. at 711, 713-14, 92 S.Ct. 1936.

This Court therefore holds that plaintiffs can rely on § 1391(d) for venue and on Section 12's extraterritorial service and personal jurisdiction provision to the "bounds permitted by the due process clause of the Fifth Amendment."³ Leasco Data Processing Equip. v. Maxwell, 468 F.2d 1326, 1340 (2d Cir.1972) (interpreting a similar venue and service provision of the Securities Exchange Act of 1934).

Due Process Analysis⁴

"The due process test for personal jurisdiction has two related components: the minimum contacts' inquiry and the `reasonableness' inquiry." Metro. Life Ins., 84 F.3d at 567. The Court must first review defendants' contacts with the United States and if the "constitutionally necessary" minimum is lacking, the inquiry ends. Id. (quoting Donatelli v. Nat'l Hockey League, 893 F.2d 459, 465 (1st Cir.1990)). Plaintiffs claim that defendants are subject to both general and specific jurisdiction in the United States. General jurisdiction arises if the defendants' business contacts with the United States have been "continuous and systematic." Helicopteros Nacionales de Colombia v. Hall, 466 U.S. 408, 416, 104 S.Ct. 1868, 80 L.Ed.2d 404 (1984). "This is a fact-specific inquiry that requires courts to assess the defendant's contacts `as a whole.'" Aerogroup Int'l, Inc. v. Marlboro Footworks, Ltd., 956 F.Supp. 427, 439 (S.D.N.Y.1996) (quoting Metro. Life Ins., 84 F.3d at 570).

Specific jurisdiction will be found if the litigation results from alleged injuries that "arise out of or relate to" defendants' activities in the United States, Burger King Corp. v. Rudzewicz, 471 U.S. 462, 472, 105 S.Ct. 2174, ...