Metropolitan San. Dist. of Gr. Chicago v. General Elec. Co.

• Decision Date: 19 July 1962
• Docket Number: No. 61 C 2192.,61 C 2192.
• Citation: 208 F. Supp. 943
• Parties: The METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO, a municipal corporation, Plaintiff, v. GENERAL ELECTRIC COMPANY et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

208 F. Supp. 943

The METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO, a municipal corporation, Plaintiff, v. GENERAL ELECTRIC COMPANY et al., Defendants.

No. 61 C 2192.

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

July 19, 1962.

Charles A. Bane, Robert W. Bergstrom, Seymour F. Simon, Thomas C. McConnell, Lee A. Freeman, William J. Froelich, Chicago, Ill., Van B. Wake, Milwaukee, Wis., Daniel P. Ward, State's Attorney of Cook County, Illinois, Barnabas F. Sears, James O. Smith, Chicago, Ill., for plaintiffs.

John T. Chadwell, Hammond E. Chaffetz, Holmes Baldridge, Edward R. Johnston, W. Donald McSweeney, John Paul Stevens, Earl E. Pollock, Robert C. Keck, Roland D. Whitman, Timothy G. Lowry, Harold T. Halfpenny, Lloyd M. McBride, Neil McKay, Jacob H. Martin, Edward R. Adams, Brainerd Chapman, Chicago, Ill., for defendants.

ROBSON, District Judge.

This is a civil antitrust treble damage suit against some seventeen corporations and some twenty-six individuals. Twelve motions seeking to quash service of summons and/or dismiss have been filed, covering most of the individual defendants.¹

Joint briefs by the moving defendants have been filed, and oral argument had, asserting the bases of the motions to be that (1) the individual defendants were not subject to suit in the Northern District of Illinois, not being citizens or residents of Illinois; (2) they were not served within the territorial limits of Illinois, but were served in the states of the respective individual defendant's residence, and (3) as to four of the defendants a contention is made that the manner of service was improper under Rule 4 of the Federal Rules of Civil Procedure, 28 U.S.C.A. Defendants assert that none of them is "found," "resides," or has an agent in this District as required by Section 4 of the Clayton Act. That statute provides that a suit of this nature may only be brought in the district "in which the defendant resides or is found or has an agent." (15 U.S.C.A. § 15) Defendants further maintain that discovery which plaintiff seeks would, at most, establish agency of the corporate, not the individual, defendants.

The complaint alleges at ¶ 1.2 that

"All individual defendants are present in the Northern District of Illinois, Eastern Division, by an agent."

Defendants counter that their affidavits prove they do not reside in this District, and have no agent in this State.²

Defendants have cited precedent in support of their contention that they are not liable to service on the agency-byconspiracy theory³ and differentiate criminal antitrust suits, or Government equity proceedings to restrain violations of the antitrust laws.⁴

This Court very recently concluded that it could not bring itself to "`accept the suggestion in Giusti v. Pyrotechnic Industries, Inc., et al., 9 Cir., 156 F.2d 351, that because of the presence within the jurisdiction of one co-conspirator all foreign corporations which are alleged to be co-conspirators are amenable to process.'" (Commonwealth Edison Company, et al. v. Federal Pacific Electric Company et al., D.C., 208 F.Supp. 936.) The Court adheres to that conclusion. Mere membership in a civil conspiracy does not ipso facto render a member subject to the jurisdiction of the forum of any other member. (Commonwealth Edison Company et al. v. Federal Pacific Electric Company et al., ibid.) In the case of Periodical Distributors, Inc. v. The American News Co., Inc., (D.C.N.Y.1962) C.C.H. 1961 Trade Cases, ¶ 70,011, p. 78,006, the Court said:

"The mere allegation of a conspiracy or that acts in furtherance of the conspiracy were performed within the district is insufficient to support venue."

Defendants also contend that service of process was insufficient under Rule 4 of the Federal Rules of Civil Procedure, subsection (f) of which provides that

"All process other than a subpoena may be served anywhere within the territorial limits of the state in which the district court is held and, when a statute of the United States so provides, beyond the territorial limits of that state. * * *" (Italics supplied.)

They maintain that this Circuit's Court of Appeals has repeatedly held that absent an enabling statute, extraterritorial service of process is unauthorized (Reiter v. Illinois Nat. Cas. Co., et al., 213 F.2d 946 (7 Cir., 1954), and Blank v. Bitker, 135 F.2d 962 (7 Cir., 1943)), and no such statute exists as to individual defendants in private antitrust cases. Defendants claim that motions to dismiss and quash have been uniformly sustained where service of this nature has been effected. (Orange Theatre Corporation v. Rayherstz Amusement Corporation et al., 139 F.2d 871 (3rd Cir. 1944); Rohlfing v. Cat's Paw Rubber Co., Inc. et al., 99 F.Supp. 886 (D.C.1951); Huntington Imported Cars, Inc. v. Standard-Triumph Motor Company, Inc. et al., 27 F.R.D. 21 (D.C.N.Y.1960); McManus v. Tato, 184 F.Supp. 958 (D.C.N.Y.1959); Elizabeth Hospital, Inc. v. Richardson et al., 167 F.Supp. 155 (D.C.Ark.1958)) (Similarly, see Periodical Distributors, Inc. v. The American News Co., Inc., ¶ 70,011, C.C. H. Trade Cases, 1961, p. 78,006.) In the last cited case extraterritorial service was held invalid, absent the transaction of business or residence in district in which service was had.

Plaintiff asserts the validity of this extraterritorial service under Rule 4(d) (7) authorizing service in the manner prescribed by any United States statute, or

"* * * the manner prescribed by the law of the state in which the service is made for the summons or other like process upon any such defendant in an action brought in the courts of general jurisdiction of that state." (Italics supplied.)

The plaintiff points out that the Illinois Civil Practice Act, Ch. 110, § 17, provides for service on one who

"through an agent does any of the acts hereinafter enumerated * * * (b) the commission of a tortious act within this State,"

in which event service

"may be made by personally serving the summons upon the defendant outside this State"

and points out the plaintiff has averred the commission of a tortious act within the state.

In support of the applicability of the Illinois statute, plaintiff maintains that twenty of the individual defendants⁵ pled guilty to the criminal charges returned in Pennsylvania. From this fact it argues the guilty pleas constitute prima facie proof here that they, while engaged in the management of the corporate affairs, had "authorized, ordered or done" the acts charged in the indictment, which included participation in a series of price-fixing meetings at local places here in Chicago.

Defendants, however, refute the applicability of the Illinois provision for these reasons: (1) No statute of the United States permits the extraterritorrial service in this case; (2) The state law is applicable only as to manner of service.⁶

Defendants also point out that the service assailed was physically made in states foreign to Illinois, and therefore the Illinois statute was not the "law of the state in which the service is made" under Rule 4(d) (7). (Italics supplied.) Defendants also maintain that in all 72 years since the Sherman Act was enacted no court has sustained out-of-state service of summons.

Defendants finally contend that as to Cresap, Stirling, Chiles and Rowland, the manner of service was improper⁷ not being in conformity with Rule 4(d) which prescribes that service be

"* * * by delivering a copy of the summons and of the complaint to him personally or by leaving copies thereof at his dwelling house or usual place of abode with some person of suitable age and discretion then residing therein or by delivering a copy of the summons and of the complaint to an agent authorized by appointment or by law to receive service of process."

They cite the fact that Cresap's summons was left with his cook who did not reside at his home; Stirling's summons was left between his front and storm doors; Chiles' summons was thrown in the door of his residence, and Rowland's summons was left on his front porch.

The Court is of the opinion that a careful, consistent reading of the two subsections of Rule 4 sustains the individual defendants' interpretation of Congressional intent, i. e., that extraterritorial service is permissible only

"* * * within the territorial limits of the state in which the district court is held and, when a statute of the United States so provides, beyond the territorial limits of that state."

That is the specific provision of the act in respect to extraterritorial service; it would therefore be controlling if there could be deemed to be an inconsistency with the subsection 4(d) (7), the subsection second preceding it. The Court, however, sees no inconsistency between the two subsections. Subsection 4(d) (7) simply states one way in which service shall be made, i. e., the manner of service, not the territorial scope of valid service. As is noted in Rule 82 of the Rules of Civil Procedure:

"These rules shall not be construed to extend or limit the jurisdiction of the United States district courts or the venue of actions therein." (Italics supplied.)

Judge Igoe was coping with this problem of construction of Rule 4(d) (7) and 4(f) in Smith et al. v. Alexandrian, et al., D.C., 30 F.R.D. 553, and he granted a motion to quash service of Massachusetts defendants in Massachusetts, in a suit in Illinois by Illinois residents, on a cause arising in Illinois. He said:

"But given the actual language of Rule 4(d) (7), it is difficult to understand how out-of-state service, which is expressly made ineffective by Rule 4(f), can be validated by a state statute. If Rule 4(d) (7) comes into play at all, it would refer the District Court to the law of the state in which service is made, in this instance the law of Massachusetts. * * * In the scheme of Rule 4, there appears to be a clear distinction between the question of where service may be made and the question of how it can be made. Rule 4(f) deals

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