INDEPENDENT PNEUMATIC T. CO. v. CHICAGO PNEUMATIC T. CO.

• Decision Date: 07 October 1947
• Docket Number: No. 47C855.,47C855.
• Citation: 74 F. Supp. 502
• Parties: INDEPENDENT PNEUMATIC TOOL CO. v. CHICAGO PNEUMATIC TOOL CO.
• Court: U.S. District Court — Northern District of Illinois

74 F. Supp. 502

INDEPENDENT PNEUMATIC TOOL CO. v. CHICAGO PNEUMATIC TOOL CO.

No. 47C855.

District Court, N. D. Illinois, E. D.

October 7, 1947.

Davis, Lindsey, Hibben & Noyes, of Chicago, Ill., for plaintiff.

Clarence J. Loftus, of Chicago, Ill., and Darby & Darby, of New York City, for defendant.

SULLIVAN, District Judge.

This is a suit for a declaratory judgment declaring that two patents owned by defendant are invalid and not infringed. The complaint sets out that Plaintiff is a Delaware corporation, but for the last fifty years has maintained its principal manufacturing plant in Aurora, Illinois, and for over twenty-five years has maintained its principal executive and business offices in Chicago, Illinois. The impact wrench, which defendant claims infringes its Amtsberg and Fitch patents, has been and is being manufactured and assembled only at its Aurora, Illinois, plant, and has been sold in Chicago and vicinity. Defendant is a New Jersey corporation and has its principal office in New York, and its manufacturing plants in Cleveland, Ohio, and Detroit, Michigan. Defendant also maintains a regular place of business at No. 3655 South Iron Street in Chicago, Illinois, and has registered in Illinois as a foreign corporation and is licensed to do business in the State of Illinois and has designated Corporation Trust Company, 208 South LaSalle Street, Chicago, as the statutory agent upon whom summons may be served, and upon which agent summons was served in the instant case.

These facts are set out also in the affidavit of Neil C. Hurley, Jr., president of plaintiff company, and are not denied by defendant.

It is agreed that this cause of action arises under the patent laws of the United States.

Defendant has moved to quash service of process and to dismiss the complaint for insufficiency of service and lack of proper venue on the grounds:

"(a) The venue requirements of Sec. 48 of the Judicial Code (Sec. 109, Title 28, U.S.C.A.) are not met because defendant is not an inhabitant of this District and has not committed any acts of infringement of its own patents.

"(b) The venue requirements of Sec. 51 of the Judicial Code 28 U.S.C.A. § 112 are not met as this case does not come within any exception to the rule that suit must be brought in the District in which the defendant is an inhabitant.

"(c) By registering to do business in the State of Illinois defendant did not waive the venue privilege, since jurisdiction is not founded on diversity of citizenship.

"(d) Service on Corporation Trust Company was not a proper service in this suit arising under the patent laws and brought under the Declaratory Judgment Act 28 U.S.C.A. § 400."

Defendant relies principally upon the case of American Chemical Paint Co. v. Dow Chemical Co., 161 F.2d 956, decided by the Circuit Court of Appeals for the 6th Circuit on May 26, 1947, which was a declaratory judgment action under the patent laws, brought in Michigan by a Michigan corporation against a Delaware corporation which had appointed an agent in Michigan for the service of process. The defendant moved to dismiss the complaint for improper venue, and plaintiff moved to enjoin the prosecution of a suit subsequently filed by the defendant for infringement of the patent in the Southern District of New York. The District Court denied the motion to dismiss and granted the injunction, which was reversed by the Court of Appeals, that court holding that defendant by registering its agent for service of process in Michigan did not waive its right to insist on venue as provided by Sec. 51. Defendant insists that this case is decisive of the instant case under the rule of comity. I have carefully read and considered all of the cases cited in the briefs by both parties to this suit on the subject of venue under Sec. 51, and I do not agree with defendant's contention. The real issue before me for disposition is whether plaintiff may maintain this declaratory judgment action on the ground that defendant, having registered to do business in the State of Illinois and maintaining a regular and established place of business in this district, therefore waived the first portion of Section 51 of the Judicial Code, which provides:

"No civil suit shall be brought in any district court against any person by any original process or proceeding in any other district than that whereof he is an inhabitant."

In the case of Penn Electric Switch Co. v. United States Gauge Co., 129 F.2d 166, 167, decided by the Circuit Court of Appeals for the Seventh Circuit in 1942, the plaintiff, an Iowa corporation, brought a declaratory judgment suit in Illinois, seeking to have declared defendant's patent invalid and not infringed, defendant having asserted infringement by means of letters. Defendant was a Pennsylvania corporation with an established and regular place of business in Chicago, Illinois, and was licensed to do business in Illinois. Defendant moved to quash service on its designated agent and to dismiss the complaint on the ground that it had not waived venue by being licensed to do business in Illinois and maintaining a place of business in this district. In the trial court District Judge Barnes, in his order, referred to the Neirbo case, infra, as controlling, and denied the motion. The Circuit Court of Appeals, in affirming the decision, said:

"Defendant objected to the jurisdiction of the United States District Court for the Northern District of Illinois, wherein the suit was brought. Its motion to quash service and dismiss the suit raised two questions, both of which were ruled against it.

"As a basis of this motion defendant alleged, and, by accompanying affidavits, endeavored to prove that it was not an inhabitant of the district wherein the suit was brought; that the offices maintained by it in the City of Chicago were not to make sales contracts, to grant credit, or perform other corporate acts, but were merely to receive orders which were forwarded to its principal office in the city of New York. It likewise argued that the venue of a declaratory judgment suit was fixed by Sec. 51 of the Judicial Code, 28 U.S.C.A. § 112, and the necessary jurisdictional facts were absent in the instant case, to give the District Court jurisdiction.

"We are however, not here reviewing a case of alleged abuse of discretion. We are considering a ruling on a motion to dismiss, for want of jurisdiction. We affirm the action of the District Court in refusing to dismiss the suit.

"(4) The motion to quash the service was also properly denied, because, on the facts shown, defendant was subject to service of process in Illinois. Defendant was licensed to do business in Illinois. It maintained a place of business in Chicago, which, under the facts, was `a regular and established place of business.' The status of its place of business was recently considered by us in the case of James P. Marsh, a corporation, v. United States Gauge Co., 7 Cir., 129 F.2d 161, decided June 11, 1942."

This holding by the Circuit Court of Appeals for the Seventh Circuit follows the law announced by the Supreme Court of the United States in the case of Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 60 S.Ct. 153, 154, 84 L.Ed. 167, 128 A.L.R. 1437, where it was held that venue section 51 may be waived by registration of a foreign corporation to do business in a state where suit is brought. In that case, to be sure, as defendant argues, the jurisdiction of the court was based upon diversity of citizenship, but suit was not brought in the district or residence of either plaintiff or defendant as is provided for by the second portion of Sec. 51. Justice Frankfurter, who handed down the opinion for the court, broadly stated the question to be decided as follows:

"* * * The sole question in the case is whether § 51 is satisfied by the designation by a foreign corporation of an agent for service of process, in conformity with the law of a state in which suit is brought against it in one of the federal courts for that state."

"The jurisdiction of the federal courts — their power to adjudicate — is a grant of authority to them by Congress and thus beyond the scope of litigants to confer. But the locality of a lawsuit — the place where judicial authority may be exercised — though defined by legislation relates to the convenience of litigants and as such is subject to their disposition. This basic difference between the court's power and the litigant's convenience is historic in the federal courts. * * * All the parties may be non-residents of the district where suit is brought. Lee v. Chesapeake & Ohio Ry. Co., supra 260 U.S. 653, 43 S.Ct. 230, 67 L.Ed. 443. Section 51 `merely accords to the defendant a personal privilege respecting the venue, or place of suit, which he may assert or may waive, at his election.' Commercial Casualty Ins. Co. v. Consolidated Stone Co., 278 U.S. 177, 179, 49 S. Ct. 98, 73 L.Ed. 252.

"Being a privilege, it may be lost. It may be lost by failure to assert it seasonably, by formal submission in a cause, or by submission through conduct.

* * * * * *

"In conformity with what is now § 210 of the General Corporation Law of New York (Consol. Laws, c. 23), Bethlehem designated `William J. Brown as the person upon whom a summons may be served within the State of New York.' The scope and meaning of such a designation as part of the bargain by which Bethlehem enjoys the business freedom of the state of New York, have been authoritatively determined by the Court of Appeals, speaking through Judge Cardozo: `The stipulation is therefore a true contract. The person designated is a true agent. The consent that he shall represent the corporation is a real consent. He is made the person "upon whom process against the corporation may be served" * * * The contract deals with jurisdiction of the person. It does not enlarge or diminish jurisdiction of the subject-matter. It means that, whenever jurisdiction...