Jeffrey-Nichols Motor Co. v. Hupp Motor Car Corporation, 3591.

• Decision Date: 06 June 1930
• Docket Number: No. 3591.,3591.
• Citation: 41 F.2d 767
• Parties: JEFFREY-NICHOLS MOTOR CO. v. HUPP MOTOR CAR CORPORATION.
• Court: U.S. District Court — District of Massachusetts

41 F.2d 767 (1930)

JEFFREY-NICHOLS MOTOR CO. v. HUPP MOTOR CAR CORPORATION.

No. 3591.

District Court, D. Massachusetts.

June 6, 1930.

Butzel, Levin & Winston, of Detroit, Mich., and Sherman L. Whipple, Lothrop Withington, and Edward C. Park, all of Boston, Mass., for plaintiff.

Albert A. Schaefer and Ropes, Gray, Boyden & Perkins, all of Boston, Mass., for defendant.

BREWSTER, District Judge.

In this suit, brought under the anti-trust laws (USCA, title 15, § 18), a motion has been filed by the defendant which assails the jurisdiction of this court.

The defendant is described in the writ as a Virginia corporation with a principal place of business in Detroit, in the state of Michigan, and transacting business in this district.

In a pleading, entitled a "Motion," the defendant denies that it ever transacted business in Massachusetts and asks to have the writ abated and the action dismissed.

Section 22 of said title 15 provides that, "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. * * *"

Concededly, the defendant is not an inhabitant of this district. The issue raised by defendant's motion, therefore, is whether the venue of this action is laid in a district wherein the defendant corporation may be found or transacts business.

Before proceeding to a consideration of this issue, however, it is necessary to dispose of objections, more or less technical, which the plaintiff has made respecting the manner in which the defendant has raised the question of jurisdiction.

I concur with the plaintiff when it argues that the cause of action falls within the general jurisdiction of the District Courts and that the provisions of section 22, above cited, relate to venue only. But the plaintiff cannot invoke that jurisdiction in this district unless the defendant is found, or transacts business, within the territorial limits of the district. The question relates, not to the general jurisdiction, but to the local jurisdiction, of the court.

According to the allegations of the writ, the defendant transacts business in this district. This averment was necessary in order to give this court jurisdiction over this particular suit, in the absence of waiver by the defendant. This allegation is denied by the defendant, who appeared specially for the purpose of attacking the jurisdiction of the court.

If it should be made to appear that the defendant was not, at the time of the bringing of this action, transacting business in Massachusetts, it is of little consequence how the issue of fact is raised, especially in view of the provisions of Judicial Code, § 37 (USCA, title 28, § 80). Morris v. Gilmer, 129 U. S. 315, 9 S. Ct. 289, 32 L. Ed. 690; Gilbert v. David, 235 U. S. 561, 35 S. Ct. 164, 59 L. Ed. 360; Bjornquist v. Boston & Albany R. Co. (C. C. A.) 250 F. 929, 5 A. L. R. 951.

There can be no objection to treating the pleading as a plea in abatement. Bjornquist v. Boston & Albany R. Co., supra.

According to the rules of this court, answers in abatement, grounded on facts not apparent upon the record are heard upon affidavits and counter affidavits. The rule leaves it discretionary with the court to determine whether evidence shall be taken on any issue of fact raised by the pleadings. District Court Rule No. 12.

Pursuant to this rule, the defendant, in support of its motion, filed affidavits, and the plaintiff filed counter affidavits. The issue of fact was heard upon these affidavits, the court declining to take other evidence. The court was led to this course because it was quite apparent that the question turned upon facts which, so far as material, were not seriously in dispute, and upon the legal effect to be given to a contract which was annexed to one of the affidavits.

I am satisfied that the course of procedure adopted by this court was in accordance with the established practice obtaining in the federal courts. Morris v. Gilmer, supra, at page 326 of 129 U. S., 9 S. Ct. 289, 32 L. Ed. 690; Hill v. Walker (C. C. A.) 167 F. 241; Anderson v. Bassman (C. C.) 140 F. 10.

So far as the provisions of the Judicial Code and the rules of this court are in conflict with the state practice, the former must control, notwithstanding the Conformity Act (28 USCA § 724). Hill v. Walker, supra; Munter v. Weil Corset Co., Inc., 261 U. S. 276, 43 S. Ct. 347, 67 L. Ed. 652.

For the purposes of the case I will accept the dictum of the Circuit Court of Appeals in this circuit, that the burden of proof rests upon the defendant. Bjornquist v. Boston & Albany R. Co., supra. See also Hill v. Walker, supra.

We now come to a consideration of the facts, as established by the affidavits and counter affidavits, in order to determine whether the defendant was transacting business in this district, within the meaning of section 22.

The defendant was incorporated under the laws of Virginia. It obtained a license to do business in the state of Michigan, and in no other state. It is engaged in the business of manufacturing and selling automobiles, all of which are manufactured at Detroit and sold f. o. b. Detroit. The defendant has never maintained any office or place of business in Massachusetts, and at the time this suit was brought it had no resident agent therein unless the contract hereinafter considered created an agency.

On August 1, 1928, the defendant entered into a contract with the Boston Hupmobile Company, Inc. (hereinafter called the Boston Company). The defendant owns or controls no stock in the Boston Company and has no financial interest therein. Nor has the Boston Company any stock ownership in the defendant. The contention of the plaintiff that the defendant is transacting business in this district rests upon three grounds: (1) The contract between the defendant and the Boston Company, which the plaintiff claims creates the relationship of principal and agent; (2) the activities of district managers of the defendant in this state; and (3) the method of conducting its advertising campaign in Massachusetts.

The contract is designated a "Distributor's Territory Agreement." By its terms the defendant, referred to in the contract as the "manufacturer," grants to the Boston Company, referred to in the contract as the "Distributor," the right to sell Hupmobiles in the territory described therein which included, together with other territory, all of Massachusetts except the county of Berkshire, which county is covered by a similar agreement, entered into between the defendant and a New York distributor.

The contract is too long to warrant a full recital of its elaborate terms in this opinion, but it will be necessary to summarize its provisions in order that we may get a clear idea of the purposes of the contract, the relationship created, and the rights and duties of the parties thereto.

It is the obvious purpose of the contract not to deal with specific transactions, but to create a relationship between the defendant and the so-called distributor, which would continue during the life of the contract. It is equally apparent that this relationship is created in order that the defendant may develop a market for its product in the territory assigned. Pursuant to the terms of the contract, business is carried on in Massachusetts which results in the sale of defendant's product to the ultimate owner. The difficulty lies in determining whether the defendant is to be regarded as participating in it in such a manner as to justify the conclusion that it is engaged in the transaction of that business. The contract in effect practically confers upon the distributor the exclusive right to sell Hupmobiles in Massachusetts, except in the county of Berkshire. There are reservations in the contract giving the defendant a right to sell repair parts direct to owners, and to sell automobiles to persons who purchase them in large numbers through a central organization, but these rights have never been exercised. Whatever of defendant's products have been sold in Massachusetts have been sold by the distributor, presumably in accordance with the terms of the contract. The essential terms of the contract and the method of carrying on business under it, stated as briefly as practicable, are as follows: A certain number of cars are allotted to the distributor according to a schedule annexed. The manufacturer is not bound to deliver all of these cars, nor is the distributor under obligations to take and pay for them.

Section 8 of the agreement is in part as follows: "This Agreement shall not be construed or held to be a contract for the sale of any automobiles or other products of the Manufacturer. * * *" The manufacturer agrees to ship to the distributor on orders accepted by the manufacturer in accordance with the conditions of the contract f. o. b. cars Detroit, and the distributor agrees to pay the invoice price for cars shipped to him or his dealers, remitting in advance bank drafts or certified check or by paying manufacturer's sight draft with order bill of lading attached. I infer that the regular course of business was to meet drafts with bill of lading attached as they were presented in Boston. The responsibility of the manufacturer for damage to the goods ordered ceases upon delivery to the common carrier. It is expressly provided that the "purchase and sale of Hupmobiles and other products is understood to be made at Detroit, Michigan."

Under the conditions of the agreement modifying the defendant's obligation to ship cars, the defendant apparently has the discretion of determining whether and to what extent it will ship each month the distributor's requirements supported with definite noncancelable orders.

Paragraph 12 of the agreement contains this provision: "If for any reason, the manufacturer does not ship during the month any orders specified...