In re Mid-Atlantic Toyota Antitrust Litigation

• Decision Date: 14 October 1981
• Docket Number: Y-81-805 and Y-81-1880.,Y-81-650,Y-81-726,MDL No. 456-Y,Civ. A. No. Y-80-3238
• Citation: 525 F. Supp. 1265
• Parties: In re MID-ATLANTIC TOYOTA ANTITRUST LITIGATION. MARYLAND ex rel. SACHS v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al. DELAWARE ex rel. GEBELEIN v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al. WEST VIRGINIA ex rel. BROWNING v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al. DISTRICT OF COLUMBIA ex rel. ROGERS v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al. COMMONWEALTH OF PENNSYLVANIA on Its own Behalf and as Parens Patriae v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al.
• Court: U.S. District Court — District of Maryland

525 F. Supp. 1265

In re MID-ATLANTIC TOYOTA ANTITRUST LITIGATION.

MARYLAND ex rel. SACHS v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al.

DELAWARE ex rel. GEBELEIN v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al.

WEST VIRGINIA ex rel. BROWNING v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al.

DISTRICT OF COLUMBIA ex rel. ROGERS v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al.

COMMONWEALTH OF PENNSYLVANIA on Its own Behalf and as Parens Patriae v. MID-ATLANTIC TOYOTA DISTRIBUTORS, INC., et al.

MDL No. 456-Y, Civ. A. Nos. Y-80-3238, Y-81-650, Y-81-726, Y-81-805 and Y-81-1880.

United States District Court, D. Maryland.

October 14, 1981.

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Michael F. Brockmeyer, Asst. Atty. Gen., Baltimore, Md., for plaintiffs.

Raymond W. Bergan, Williams & Connolly, Washington, D. C., for defendants.

Edward F. Kafader, Deputy Atty. Gen., Dept. of Justice, Wilmington, Del., for State of Delaware.

Donald L. Darling, Asst. Atty. Gen., Charleston, W. Va., for State of West Virginia.

Timothy J. Shearer, Asst. Corp. Counsel, Washington, D. C., for District of Columbia.

Eugene F. Waye, Deputy Atty. Gen., Harrisburg, Pa., for State of Pennsylvania.

Bertram M. Long, Asst. Atty. Gen., Richmond, Va., for State of Virginia.

MEMORANDUM OPINION AND ORDER

JOSEPH H. YOUNG, District Judge.

The above-captioned actions represent five of the seven lawsuits consolidated in the Mid-Atlantic Antitrust Litigation and assigned to this Court by the Judicial Panel on Multidistrict Litigation. The cases at issue here are all those filed by state attorneys general, and the Corporations Counsel of the District of Columbia pursuant to the parens patriae provisions of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the Act), 15 U.S.C. §§ 15c-h (1981). The complaints allege certain violations of the federal antitrust laws, particularly price-fixing. The parens plaintiffs are seeking treble damages, declaratory and injunctive relief, and costs and fees from the defendants on behalf of state residents who purchased Toyota vehicles with a protective finish and certain accessories collectively referred to as "polyglycoat." Plaintiffs allege that the defendants¹ conspired with one another to fix an artificially high price for this polyglycoat finish in violation of § 1 of the Sherman Act, 15 U.S.C. § 1, and seek treble damages under 15 U.S.C. § 15c(a)(2).² Defendants' motion to dismiss based on Illinois Brick v. Illinois, 431 U.S. 720, 97 S.Ct. 2061, 52 L.Ed.2d 707 (1977), was denied in In re: Mid-Atlantic Toyota Antitrust Litigation, 516 F.Supp. 1287 (D.Md., 1981). Defendants have also raised various other grounds for dismissal, including lack of personal jurisdiction over certain defendants, improper venue, failure to state a claim upon which relief can be granted, failure to comply with Rule 11, and the unconstitutionality of the Hart-Scott-Rodino Antitrust Improvements Act. The Court will deal with these contentions seriatim.

I. PERSONAL JURISDICTION

A. DEFENDANT WEISMAN

Frederick R. Weisman, one of the defendants and a California resident, challenges personal jurisdiction in all pending cases — Maryland, Delaware, District of Columbia, Pennsylvania and West Virginia.

1. Maryland

The Maryland long arm statute, Md. Cts. & Jud.Proc.Code Ann. § 6-103(b)(3), provides that a court may exercise personal jurisdiction over a person who "causes tortious injury in the State by an act or omission in the State." It is clear that a civil antitrust action is an action in tort. Simpson v. Union Oil Co. of California, 311 F.2d 764, 768 (9th Cir. 1963), rev'd on other grounds, 377 U.S. 13, 84 S.Ct. 1051, 12 L.Ed.2d 98 (1964); Albert Levine Assoc. v. Bertoni and Cotti, 314 F.Supp. 169, 171 (S.D.N.Y.1970). The tortious injury resulting from a price-fixing conspiracy occurs when a consumer pays the artificially inflated price to purchase the item. Therefore the conspiracy alleged here resulted in tortious injury in Maryland when Maryland Toyota dealers sold Toyotas with the polyglycoat finish in Maryland.

The complaint alleges that Weisman participated in a series of meetings, three of which took place in Maryland, in furtherance of the price-fixing conspiracy. Weisman argues that plaintiff has not shown he committed an act causing tortious injury because there is no allegation that he actually entered into the price-fixing agreement in Maryland. However, even if the final agreement were reached in another state, that agreement would not have been possible without the series of meetings in which the plan's details were negotiated. The meetings in Maryland were an integral part of the alleged price-fixing conspiracy. Therefore, by participating in the Maryland meetings, Weisman committed acts in Maryland that caused the alleged tortious injury in Maryland.

Weisman also argues that, to the extent that he participated in meetings concerning a price-fixing conspiracy, he did so in his capacity as a corporate director, so those acts cannot serve as a basis for personal jurisdiction over him in his individual capacity. However, the holding in Merkel Associates, Inc. v. Bellofram Corp., 437 F.Supp. 612 (W.D.N.Y.1977), explains why this principle of distinguishing individual from corporate acts does not apply to Weisman. In that case, the court found that jurisdiction over individual defendants, officers of the corporate defendants, could not be based upon their corporate activities. The court stated that when a corporate officer enters New York on corporate business, he should not be deemed to have "transacted business" or to have engaged in a "persistent course of conduct" in New York for purposes of personal jurisdiction over him in his individual capacity. However, the court noted that:

the purpose of such a `fiduciary shield' from long-arm jurisdiction is to protect such corporate officers from unreasonable and unjust subjection to personal jurisdiction, not to protect them from liability. This shielding should not be unlimited.

Id. at 618. The "fiduciary shield" does not apply where a corporate officer has allegedly committed a personal or business tort within the state. Id. at 619. In such a situation, there would be personal jurisdiction over the defendant in his individual capacity, under the section of the long arm statute providing for personal jurisdiction over a person who commits a tortious act within the state. Id. In the instant case, it is alleged that Weisman committed a business tort in Maryland by participating in meetings in furtherance of a price-fixing conspiracy. Therefore, there is personal jurisdiction in Maryland over Weisman in his individual capacity under Mt.Cts. & Jud. Proc.Code Ann. § 6-103(b)(3). Other courts have found jurisdiction proper in similar circumstances. See, e. g., Ohio-Sealy Mattress Manufacturing Co. v. Kaplan, 429 F.Supp. 139 (N.D.Ill.1977).

2. Delaware

Plaintiff properly bases personal jurisdiction over Weisman in Delaware on 10 Del. Code § 3114 which provides:

Every nonresident of this State who after September 1, 1977, accepts election or appointment as a director, trustee or member of the governing body of a corporation organized under the laws of this State or who after June 30, 1978, serves in such capacity and every resident of this State who so accepts election or appointment or serves in such capacity and thereafter removes his residence from this State shall, by such acceptance or by such service, be deemed thereby to have consented to the appointment of the registered agent of such corporation (or, if there is none, the Secretary of State) as his agent upon whom service of process may be made in all civil actions or proceedings brought in this State, by or on behalf of, or against such corporation, in which such director, trustee or member is a necessary or proper party, or in any action or proceeding against such director, trustee or member for violation of his duty in such capacity, whether or not he continues to serve as such director, trustee or member at the time suit is commenced. Such acceptance or service as such director, trustee or member shall be a signification of the consent of such director, trustee or member that any process when so served shall be of the same legal force and validity as if served upon such director, trustee or member within this State and such appointment of the registered agent (or, if there is none, the Secretary of State) shall be irrevocable.

Weisman is president and sole director of MAT and Carecraft, both Delaware corporations. Weisman, as director of MAT and Carecraft, has been served pursuant to 10 Del. Code § 3114.

Thus, if the statute applies and is constitutional, the district court in Delaware has personal jurisdiction over Weisman.

Weisman contends that 10 Del. Code § 3114 is unconstitutional in light of the due process requirement of minimum contacts. The Court in Shaffer v. Heitner, 433 U.S. 186, 97 S.Ct. 2569, 53 L.Ed.2d 683 (1976), rejected an argument that the acceptance of a directorship in a Delaware corporation established minimum contacts with Delaware and could therefore serve as the basis for personal jurisdiction over the defendants. However, when the Delaware legislature drafted 10 Del. Code § 3114 in response to Shaffer, see Armstrong v. Pomerance, 423 A.2d 174, 179 n.8 (Del.1980), the legislature specifically addressed the issues that had troubled the Court in Shaffer. As a result, the Delaware Supreme Court has held 10 Del. Code § 3114 constitutional. Armstrong, supra, at 174 (minimum contacts test met even though defendants' only contact with Delaware was their acceptance of directorships in a Delaware corporation). This Court agrees with that holding.

In Shaffer, the plaintiffs sued officers and directors of the Greyhound Corporation, a Delaware corporation, for breach of fiduciary duty. The action was brought in Delaware. Plaintiffs pleaded quasi...