Kenny v. Alaska Airlines, No. 16979.

CourtUnited States District Courts. 9th Circuit. United States District Court (Southern District of California)
Decision Date13 June 1955
Docket NumberNo. 16979.
PartiesRobert W. KENNY, Plaintiff, v. ALASKA AIRLINES, Inc., et al., Defendants.

132 F. Supp. 838

Robert W. KENNY, Plaintiff,
v.
ALASKA AIRLINES, Inc., et al., Defendants.

No. 16979.

United States District Court S. D. California, Central Division.

June 13, 1955.


132 F. Supp. 839
COPYRIGHT MATERIAL OMITTED
132 F. Supp. 840
Theodore R. Coomber and J. Howard Sullivan, Los Angeles, Cal., for plaintiff

Edward W. Allen, Stuart G. Oles, Seattle, Wash., and McLean, Salisbury, Petty & McLean, Los Angeles, Cal., for defendant, Alaska Airlines Inc.

JAMES M. CARTER, District Judge.

This case presents the recurring problem of solicitation as "doing business." We plowed the solicitation field in Perkins v. Louisville & N. R. Co., D.C. Cal.1951, 94 F.Supp. 946, and in deciding that the foreign corporation was doing business in California and subject to the jurisdiction of a federal court, we held state law was controlling as to what constitutes "doing business." But that case was a diversity case, removed from the state court. On removal of a diversity case to a federal court, unless the state court had jurisdiction over the defendant, none thereafter exists in this court. Employers Reinsurance Corp. v. Bryant, 1937, 299 U.S. 374, 381-382, 57 S.Ct. 273, 81 L.Ed. 289; Hassler, Inc., v. Shaw, 1926, 271 U.S. 195, 46 S.Ct. 479, 70 L.Ed. 900; Cyc. of Fed. Procedure, 3rd Ed. § 3.11, p. 201-2.1

The present action was commenced in this court under its diversity jurisdiction. It raises the interesting problem of whether a foreign corporation engaged in operating an air line, elsewhere than in California, is doing business in this district solely because passenger tickets are sold in this district by other air lines and ticket agencies, providing transportation in this district by such other air lines and connected passage on defendant's air line on routes outside this district. We again consider the "solicitation — doing business" problem, this time in an action originally filed in this court and with particular attention to the question above stated.

Plaintiff Kenny, owner of ten shares of stock of defendant, Alaska Airlines Inc., seeks to enforce certain proprietary

132 F. Supp. 841
rights which he conceives arise out of and are incident to such ownership. These alleged rights, are the creatures of the law under which the defendant was incorporated, the Territory of Alaska

The facts of the complaint outline part of the history of Alaska Airlines Inc., (hereafter referred to as Alaska), from 1942. Certain transactions are described, involving the acquisition by Alaska of the business and assets of certain competing air carriers. The transactions are described as the product of the claimed fraud of one, R. W. Marshall, who is alleged to be the dominant stockholder and director of the corporation. As a result of this fraud, plaintiff asserts that he has been damaged by the issuance of watered stock and said R. W. Marshall has been enriched at his expense.

Kenny alleges that it is "impracticable" to bring a derivative stockholder's suit under Sec. 803, Corporation Code of California, or under Rule 23(b) Fed.Rules Civ.Proc. 28 U.S.C.A.; and that he "elects to bring this action to protect and enforce his personal rights incident to stock ownership and on behalf of other stockholders who may care to join him in this action."2

Kenny demands, among other things; an accounting to him by the corporation of all corporate transactions since 1942; nullification of stock issues set forth in the complaint; cancellation of entries incident thereto on the corporate books; reference of the matter to a master to determine the profits made by said Marshall and a money judgment in favor of the corporation in such sum if any; and finally, an order to Alaska to distribute such proceeds as dividends.

Alaska has not appointed an agent for service of process in California as provided for by the California statute. The only process which has issued from this court was served upon the Secretary of State of California, under Rule 4(d) (7) F.R.C.P., which incorporates by reference "the manner prescribed by the law of the state in which the service is made for the service of summons or other like process" in state actions.

Alaska moves, (1) to quash service of summons and to dismiss the action for insufficiency of service of process; (2) to dismiss the action for lack of jurisdiction over the person of defendant; and (3) to dismiss the action on the ground of improper venue. The first two motions are based generally upon the contention that Alaska was not doing business in California where this court sits.

Alaska is incorporated under the laws of the Territory of Alaska, and is an air transport company engaged in carrying passengers and mail. All of its flight routes use airways in and over Alaska, Washington, Oregon and Canada. It has terminals in Alaska, Washington and Oregon but none anywhere else. It transacts its principal business only in these jurisdictions. The principal offices of the corporation are located in Seattle, Washington.

Alaska has entered into contracts with ticket brokers, agents and travel bureaus throughout North America for the sale of tickets entitling the purchaser to passage in its aircraft over the routes it operates. These ticket outlets are compensated on a commission basis only. Some outlets are located in this district in the state of California. The defendant also has reciprocal interline agreements with at least two interstate airlines which operate within this district, whereby they sell connecting tickets on Alaska's Airlines and transport passengers

132 F. Supp. 842
as a connecting carrier over their routes, and for which they receive certain pro rata revenues. These latter carriers, United Airlines and Western Airlines, admittedly are present and doing business in California

Alaska has no employees in California. It retains no one to adjust claims in the state. The sole activity carried on in California in its behalf is the sale of tickets for passage from points originating and terminating outside the state of California through either the ticket agencies or the connecting carriers.

Pulson v. American Rolling Mill Co., 1 Cir., 1948, 170 F.2d 193, at page 194, has become a leading case on the problem of "doing business." "There are two parts to the question whether a foreign corporation can be held subject to suit within a state. The first is a question of state law: has the state provided for bringing the foreign corporation into its courts under the circumstances of the case presented? * * * If the state has purported to exercise jurisdiction over the foreign corporation, then the question may arise whether such attempt violates" federal constitutional provisions.

Judge Learned Hand in Bomze v. Nardis Sportswear, Inc., 2 Cir., 1948, 165 F.2d 33, 35, had succinctly stated the two questions as follows: "thus the first question is whether the service was valid under the New York decisions. If we conclude that it was not, of course the case ends; but, if we conclude that it was, there arises the second question: i. e. whether the service was valid under the Constitution."

I

Does state or "general" federal law apply

In determining whether a foreign corporation is doing business in a state, in a diversity action, should a court apply state law or "general" federal3 law?

We note at the outset that district courts "shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $3,000 exclusive of interest and costs, and is between * * * Citizens of

132 F. Supp. 843
different States". 28 U.S.C.A. § 1332(a) (1). This is jurisdiction over the subject matter of the case. 28 U.S.C.A. § 1391 provides for venue in diversity cases, and does not concern jurisdiction over the person

Barrow Steamship Company v. Kane, 1898, 170 U.S. 100, at page 111, 18 S.Ct. 526, at page 530, 42 L.Ed. 964 is still the law when it states, "The jurisdiction so conferred upon the national courts cannot be abridged or impaired by any statute of a state." And we accept Judge Biggs addition thereto of "`or of any decision by a state tribunal'", Partin v. Michaels Art Bronze Co., 3 Cir., 1953, 202 F.2d 541, 545 (concurring opinion). But again, the jurisdiction considered is that of subject matter.

When we consider jurisdiction over the person, a different problem is presented and this hornbook distinction must be borne in mind in considering our problem. The question of "doing business" and the "presence" of a foreign corporation in a state leads to a problem of jurisdiction over the person.

To further orient our precise problem, it should be noted that the appointment of an agent by a foreign corporation to receive service, whether voluntarily or under statutory compulsion, removes all question as to jurisdiction over the person where service is duly made on that agent. Mississippi Publishing Corp. v. Murphree, 1946, 326 U.S. 438, 443, 66 S.Ct. 242, 90 L.Ed. 185. Cyc. 3rd Ed. § 11.71; comment in 50 Harvard Law Review 1133, 1134. But in the case at bar, no agent was appointed and service was made on a statutory agent, the Secretary of State, pursuant to the state statute; no office or officer of the defendant was present in the state, nor were any managers or agents of any kind. Ours is purely a case of substituted service. There is not before us the problem of the scope of the authority or the capacity of the agent served, nor whether notice to such agent is notice to the foreign corporation.

Specifically our problem is this — what law, state or "general" federal law, do we apply in determining if the corporation is doing business?

Rule 4(d) Rules of Civil Procedure, provides in part: — "Summons: Personal Service. The summons and complaint shall be served together. The plaintiff shall furnish the person making service with such copies as are necessary. Service shall be made as follows: * * * (3) Upon a domestic or foreign corporation or upon a
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19 practice notes
  • Arrowsmith v. United Press International, No. 73
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • June 11, 1963
    ...see Electrical Equipment Co. v. Daniel Hamm Drayage Co., 217 P. 2d 656, 661 (8 Cir. 1954); Ninth: Kenny v. Alaska Airlines, Inc., 132 F.Supp. 838, 842-849 (S.D. Cal.1955) ("Our first reference then in determining the `doing business\' question, must be to the law as declared by the legislat......
  • Circus Circus Hotels, Inc. v. Superior Court
    • United States
    • California Court of Appeals
    • June 17, 1981
    ...by the Supreme Court to be the law applicable. The Archibald court went on to say "An analogy occurs in Kenny v. Alaska Airlines, 132 F.Supp. 838. There a federal court held that the defendant airline was not 'doing business' in California by selling tickets through ticket agencies or conne......
  • Stanga v. McCormick Shipping Corporation, No. 17491.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • July 24, 1959
    ...v. Peninsular & Oriental Steam Navigation Co., 1950, 202 Misc. 838, 113 N.Y.S.2d 360; Kenny v. Alaska Airlines, Inc., D.C.S.D.Cal.1955, 132 F. Supp. 838; Ericksson v. Cartan Travel Bureau, Inc., D.C.D.Md.1953, 109 F. Supp. 315; Pike v. New England Greyhound Lines, Inc., D.C.D.Mass.1950, 93 ......
  • Jaftex Corporation v. Randolph Mills, Inc., No. 346
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • August 22, 1960
    ...F.2d 485; Steinway v. Majestic Amusement Co., 10 Cir., 179 F.2d 681, 18 A.L.R.2d 179. Compare Kenny v. Alaska Airlines, D.C.S.D.Cal., 132 F. Supp. 838. 10 There are of course Supreme Court precedents sustaining various of the rules in diversity cases, as in, e. g., Sibbach v. Wilson & Co., ......
  • Request a trial to view additional results
19 cases
  • Arrowsmith v. United Press International, No. 73
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • June 11, 1963
    ...see Electrical Equipment Co. v. Daniel Hamm Drayage Co., 217 P. 2d 656, 661 (8 Cir. 1954); Ninth: Kenny v. Alaska Airlines, Inc., 132 F.Supp. 838, 842-849 (S.D. Cal.1955) ("Our first reference then in determining the `doing business\' question, must be to the law as declared by the legislat......
  • Circus Circus Hotels, Inc. v. Superior Court
    • United States
    • California Court of Appeals
    • June 17, 1981
    ...by the Supreme Court to be the law applicable. The Archibald court went on to say "An analogy occurs in Kenny v. Alaska Airlines, 132 F.Supp. 838. There a federal court held that the defendant airline was not 'doing business' in California by selling tickets through ticket agencies or conne......
  • Stanga v. McCormick Shipping Corporation, No. 17491.
    • United States
    • United States Courts of Appeals. United States Court of Appeals (5th Circuit)
    • July 24, 1959
    ...v. Peninsular & Oriental Steam Navigation Co., 1950, 202 Misc. 838, 113 N.Y.S.2d 360; Kenny v. Alaska Airlines, Inc., D.C.S.D.Cal.1955, 132 F. Supp. 838; Ericksson v. Cartan Travel Bureau, Inc., D.C.D.Md.1953, 109 F. Supp. 315; Pike v. New England Greyhound Lines, Inc., D.C.D.Mass.1950, 93 ......
  • Jaftex Corporation v. Randolph Mills, Inc., No. 346
    • United States
    • United States Courts of Appeals. United States Court of Appeals (2nd Circuit)
    • August 22, 1960
    ...F.2d 485; Steinway v. Majestic Amusement Co., 10 Cir., 179 F.2d 681, 18 A.L.R.2d 179. Compare Kenny v. Alaska Airlines, D.C.S.D.Cal., 132 F. Supp. 838. 10 There are of course Supreme Court precedents sustaining various of the rules in diversity cases, as in, e. g., Sibbach v. Wilson & Co., ......
  • Request a trial to view additional results

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