King v. Johnson Wax Associates, Inc.

• Decision Date: 01 June 1983
• Docket Number: Civ. A. No. N-82-2267.
• Citation: 565 F. Supp. 711
• Parties: Dan KING, et al. v. JOHNSON WAX ASSOCIATES, INC., et al.
• Court: U.S. District Court — District of Maryland

565 F. Supp. 711

Dan KING, et al. v. JOHNSON WAX ASSOCIATES, INC., et al.

Civ. A. No. N-82-2267.

United States District Court, D. Maryland.

June 1, 1983.

COPYRIGHT MATERIAL OMITTED

H. Kenneth Kudon and T.J. Pantaleo of Pantaleo & Kudon, Washington, D.C., and Barry L. Steelman of Melnicove, Jaufman, Weiner & Smouse, Baltimore, Md., for plaintiffs.

John B. Wyss of Kirkland & Ellis, Washington, D.C., and John Henry Lewin of Venable, Baetjer & Howard, Baltimore, Md., for defendants.

MEMORANDUM

NORTHROP, Senior District Judge.

Presently before the court are the venue-related motions of the defendants, Johnson Wax Associates, Inc. (hereinafter referred to as "JWA") and Undersea Industries, Inc. (hereinafter "USI").

This treble damages antitrust suit was filed as a class action by three individual plaintiffs, two of whom are residents of Alabama, with the third residing in Los Angeles County, California.¹ USI is a Delaware corporation with its principal place of business in Compton, California. It is engaged in the business of manufacturing and distributing scuba diving equipment, specifically the "Scubapro" line. JWA is a Delaware corporation, with its principal place of business in Racine, Wisconsin. JWA is primarily a holding company, owning 100% of USI's stock and nine other subsidiary companies. Additionally, through its "Special Markets Group," JWA directly sells certain products made by subsidiaries to various buyers throughout the United States.² Some of these sales have been made to buyers within this District.

Plaintiffs' complaint alleges violations of Sections 1 and 3 of the Sherman Act, 15 U.S.C. §§ 1, 3. Specifically, plaintiffs charge that the defendants conspired, combined and contracted with Scubapro dealers to artificially set retail prices of Scubapro products, and thereby to eliminate price competition in the sale of such products at the retail level. The complaint seeks declaratory, injunctive, and monetary relief.

JWA has moved this Court to dismiss the complaint for improper venue. USI has moved for a transfer of the case to the United States District Court for the Central District of California pursuant to 28 U.S.C. § 1404(a). Both issues having been fully and skillfully briefed, and no party having requested a hearing, this Court will now address the motions, seriatim. See Local Rule 6(E).

I. VENUE OVER JWA

It is well settled that the plaintiff in an antitrust case has the burden of proving venue over any defendant who timely raises the issue. Caribe Trailer Systems v. Puerto Rico Maritime Shipping Authority, 475 F.Supp. 711, 715 (D.D.C.1979); Call Carl, Inc. v. BP Oil Corp., 391 F.Supp. 367, 370 (D.Md.1975), aff'd in part, rev'd. in part on other grounds, 554 F.2d 623 (4th Cir.) cert. denied, 434 U.S. 923, 98 S.Ct. 400, 54 L.Ed.2d 280 (1977).

Venue in antitrust suits involving a corporate defendant is governed by section 12 of the Clayton Act, 15 U.S.C. § 22 (hereinafter sometimes referred to as "section 12"):

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 of which it is an inhabitant, or wherein it may be found.

This statute was designed to give an anti-trust plaintiff a wider choice of forums in which to sue a corporate defendant than was afforded originally by section 7 of the Sherman Act, as amended by section 4 of the Clayton Act (now 15 U.S.C. § 15).³United States v. Scophony Corp., 333 U.S. 795, 804, 68 S.Ct. 855, 860, 92 L.Ed. 1091 (1948). However, section 12 was not intended to provide a forum-shopping plaintiff with an unfettered choice of venue. To survive JWA's motion to dismiss, plaintiffs must prove that JWA is within the legislatively created venue of this Court, as interpreted by the federal courts.⁴Id. at 804, 68 S.Ct. at 860; First Pullen Commodity Services, Inc. v. A.G. Becker-Kipnis & Co., 507 F.Supp. 770, 775 (S.D.Fla.1981).

Section 12 sets out three distinct bases for venue over a corporate defendant. A plaintiff may sue in any district in which the defendant is an "inhabitant," is "found," or "transacts business." If plaintiffs can show that JWA meets any one of the three tests for venue, the motion to dismiss must be denied.

A corporation is an inhabitant only of the state of its incorporation. Aro Manufacturing Co. v. Automobile Body Research Corp., 352 F.2d 400, 404 (1st Cir. 1965), cert. denied, 383 U.S. 947, 86 S.Ct. 1199, 16 L.Ed.2d 210 (1966); Athletes Foot of Delaware, Inc. v. Ralph Libonati Co., 445 F.Supp. 35, 42 (D.Del.1977). To be found within a district, a corporation must "be present in the district by its officers and agents carrying on the business of the corporation." Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 371-73, 47 S.Ct. 400, 402-03, 71 L.Ed. 684 (1927) (quoting Peoples Tobacco Co. v. American Tobacco Co., 246 U.S. 79, 84, 38 S.Ct. 233, 234, 62 L.Ed. 587 (1918) (construing identical language of § 7 of the Sherman Act)); Aro Manufacturing, 352 F.2d at 404; Athletes Foot of Delaware, 445 F.Supp. at 42. JWA is incorporated in Delaware. It has no office, warehouse, plant or other place of business in Maryland. It holds no assets here, nor does it pay any taxes to this State.⁵ Thus, it is clear that JWA is neither an inhabitant of nor found in this District. Consequently, to prove venue over JWA, plaintiffs must show that JWA "transacts business" within this District.

Plaintiffs make two arguments to support their assertion that JWA "transacts business" in Maryland. First, plaintiffs state that JWA's direct ties with this District amount to the transaction of business. Secondly, it is urged that JWA's conduct and status as parent corporation of USI, which admittedly conducts significant business here, is such that JWA is actually transacting business in Maryland through its subsidiary. The Court will now address each of plaintiffs' contentions.

A. JWA's Direct Ties to the District

Although primarily a holding company, JWA has a marketing operation known as the "Special Markets Group" (hereinafter "Group"). The Group sells products made by JWA subsidiaries to "various premium houses, prize houses, promotion houses, and catalog retailers." Affidavit of William D. George, Jr. at ¶ 5. The Group sells to over 200 customers throughout the country, with annual sales averaging approximately $570,000. The Group does not, however, sell any Scubapro products. Second Affidavit of William D. George, Jr. at ¶¶ 5, 6.

In support of the arguments for a finding of venue in this Court, plaintiffs point out that the Group has, over the last three years, sold various products to two Maryland customers. Plaintiffs note 16 such sales, totaling $5,369.00. Plaintiffs characterize these Maryland sales as "frequent and continuous," and argue that the sales are sufficient to constitute the transaction of business by JWA in this District.

To meet the "transacts business" test of § 12, plaintiffs must demonstrate that "in the ordinary and usual sense, (JWA) `transacts business' (in the district) of any substantial character." Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. at 373, 47 S.Ct. at 403. The question of the substantiality of a corporation's business dealings within a district is one of fact, which hinges on the particular circumstances of each case. Smokey's of Tulsa v. American Honda Motor Co., 453 F.Supp. 1265, 1270 (E.D.Okl.1978); Grappone, Inc. v. Subaru of America, Inc., 403 F.Supp. 123, 130 (D.N.H.1975). However, the courts generally are in agreement that a corporation's contacts with a district must be somewhat regular and continuous; meager, sporadic dealings within the district are not sufficient. E.g. B.J. Semel Associates v. United Fireworks Co., 355 F.2d 827, 832 (D.C.Cir.1966); Brandt v. Renfield Importers, 278 F.2d 904, 911 (8th Cir.), cert. denied, 364 U.S. 911, 81 S.Ct. 274, 5 L.Ed.2d 226 (1960); Athletes Foot of Delaware v. Ralph Libonati, 445 F.Supp. at 44; In re Chicken Antitrust Litigation, 407 F.Supp. 1285, 1291 (N.D.Ga.1975). It is also clear that a defendant may be found to be transacting business within a particular district even though its dealings with customers therein are entirely interstate. Eastman Kodak, 273 U.S. at 373, 47 S.Ct. at 403. Therefore, should the court determine that the Group's sales to its two Maryland customers are substantial, venue will not be defeated by the absence of any personal solicitation by JWA agents in the state.

The Group's direct sales to this district previously mentioned occurred between February, 1980, and January, 1982. JWA points out that these sales represented less than one percent of JWA's total sales for the period.⁶ However, case law makes it clear that it is not the percentage of a corporation's business in the district one looks to in resolving the venue question. See Brandt v. Renfield Importers, 278 F.2d at 911; Green v. U.S. Chewing Gum Co., 224 F.2d 369, 371-72 (5th Cir.1955); Lippa & Co. v. Lenox Inc., 305 F.Supp. 175, 180-81 (D.Vt.1969). This rule is eminently sensible. If the percentage of a corporation's total national sales was the determining factor, plaintiffs in small districts would have a very difficult time establishing venue over companies that conduct business in every state. The courts therefore look instead to the particular quantum of business conducted by the defendant in the district. B.J. Semel Associates, 355 F.2d at 832. The defendant's volume of business must be evaluated from this point of view of the average businessman, not the corporate giant. 305 F.Supp. at 180. Thus, the factual question this Court now must determine is whether JWA's sales in Maryland amount to transacting business, when considered from the viewpoint of the average Maryland businessman.

During the...