Miller v. American Telephone & Telegraph Company
| Decision Date | 31 March 1975 |
| Docket Number | Civ. A. No. 72-798. |
| Citation | 394 F. Supp. 58 |
| Parties | Russell P. MILLER and Margaret Jane Miller, h/w v. AMERICAN TELEPHONE & TELEGRAPH COMPANY et al. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
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John C. Butera, King of Prussia, Pa., for plaintiffs.
Philip M. Hammett, Philadelphia, Pa., for defendants.
Plaintiffs, Russell P. Miller and Margaret Jane Miller, filed this action against American Telephone & Telegraph Company ("AT&T") and the named members of the Board of Directors of AT&T ("the individual defendants") involving a $1,500,000 debt alleged by plaintiffs to be due AT&T from the Democratic National Committee, principally for telephone and other communication services rendered at the 1968 Democratic National Convention in Chicago, Illinois, and during the 1968 Presidential campaign. Federal diversity jurisdiction was invoked under 28 U.S.C. § 1332.
This Court previously dismissed plaintiffs' first amended complaint for failure to state a claim upon which relief could be granted. 364 F.Supp. 648 (E.D. Pa.1973). The Court of Appeals reversed that decision and remanded the case here, 507 F.2d 759 (3rd Cir. 1974), on the ground that the failure of AT&T to collect the debt conceivably constituted an illegal corporate campaign contribution in violation of 18 U.S.C. § 610 and, thus, a claim of breach of the individual defendants' fiduciary duty to the corporation was sufficiently stated by the complaint to withstand a motion to dismiss.
Subsequent to the decision of the Court of Appeals, plaintiffs filed a second amended complaint consisting of two counts. The first count sets forth a stockholders' derivative action against the defendants seeking monetary and injunctive relief. The second count, asserting private rights of action under the Federal Corrupt Practices Act, 18 U.S.C. § 610, and the Communications Act of 1934, 47 U.S.C. § 202, again seeks monetary and injunctive relief.
Before the Court are defendants' motions to dismiss the second amended complaint. The individual defendants move for dismissal of the complaint as to them for insufficiency of process and for lack of jurisdiction over the person of each of them. Alternatively, they move to dismiss Count II of the complaint as to them for lack of jurisdiction over the subject matter and for failure to state a claim against them upon which relief can be granted. Defendant AT&T moves to dismiss Count I of the complaint as to it for failure to state a claim upon which relief can be granted. AT&T moves to dismiss Count II as to it for lack of jurisdiction over the subject matter and for failure to state a claim upon which relief can be granted. For the reasons stated below, this Court agrees that plaintiffs' second amended complaint must be dismissed as to all of the defendants.
The facts relevant to a determination of these motions are not in dispute. Plaintiffs, citizens and residents of Pennsylvania, are the owners of 200 shares of AT&T common stock. At the end of June, 1974, there were outstanding approximately 557 million common shares and 48 million preferred shares of AT&T stock.
Defendant AT&T is a corporation organized and existing under the laws of the State of New York. It does business in Pennsylvania, but has its principal place of business and executive offices in New York City. The individual defendants were members of the Board of Directors of AT&T when this action began in 1972. None of them are citizens or residents of Pennsylvania,1 and they reside in states scattered across the country: California, Georgia, Illinois, Massachusetts, New Jersey, Indiana, New York, North Carolina, Ohio, and Texas. Meetings of the Board of Directors of AT&T are normally held at the corporate headquarters in New York City, and at no time since September 1, 1968, the approximate date the debt arose, has the Board of Directors ever met in the Commonwealth of Pennsylvania. In fact, of the approximately 300 times the Board has met since 1952, only three of those meetings have been in Pennsylvania.
While they are related in substance, this Opinion will discuss separately the individual and corporate defendants' motions.
The individual defendants' motion to dismiss the second amended complaint, pursuant to Fed.R.Civ.P. 12(b) (2) and (4), for insufficiency of process and for lack of jurisdiction over the person of each of them must be granted. Rule 4(d)(7) of the Federal Rules of Civil Procedure permits service of process upon an individual to be made in the manner prescribed by a statute of the state in which the District Court is located. Plaintiffs contend that proper service of process upon the individual defendants was made in compliance with the Pennsylvania "long-arm" statute, 42 Pa. S. § 8301 et seq. (Supp.1974).2 In particular, they rely on §§ 8304 and 8305 of that statute.
In determining this type of jurisdictional question, two issues are presented: First, whether the conduct of the defendants is within the relevant provisions of the statute; second, assuming the statutory requirements are satisfied, whether the application of those provisions to the particular circumstances of this case complies with the constitutional standard of due process of law. Each of the sections of the Pennsylvania statute alleged by plaintiffs to support the service of process here will be considered separately.
42 Pa.S. § 8304 provides, in pertinent part:
The threshold question in determining whether service of process was proper under § 8304 is whether the individual defendants were "doing business"3 in Pennsylvania within the meaning of the statute.
This Court believes that the language of § 8304 clearly requires plaintiffs to demonstrate the applicability of at least one of the § 8309 indicia to the individual defendants qua individuals, not as directors of AT&T. Their activities on behalf of the corporate defendant are not relevant to a finding of in personam jurisdiction over them as individuals under § 8304. In Yardis Corporation v. Cirami, 76 Misc. 2d 793, 351 N.Y.S.2d 586 (Nassau Cty. 1974), an action brought in New York against corporate and individual defendants to recover on a default judgment obtained in Pennsylvania, the individual defendants argued that service of process under the "long-arm" statute in the Pennsylvania action had been improper as they did not engage in any business in Pennsylvania as individuals. Any acts performed in Pennsylvania were as an officer and employee of the corporate defendant, a New York corporation. The court, which granted summary judgment in favor of the individual defendants on the ground that the Pennsylvania court had not obtained jurisdiction over them under the "long-arm" statute, concluded: "Under such circumstances the individual defendants were not doing business in Pennsylvania." 76 Misc.2d at 794, 351 N.Y.S. 2d at 587.
Plaintiffs have failed to allege any facts which would support a finding that the individual defendants in this case were "doing business" in Pennsylvania. Even if plaintiffs could allege some minimal or infrequent business activity within the Commonwealth by the individual defendants, the Pennsylvania Supreme Court has recently held that § 8304 requires a more significant degree of contact when the plaintiff's cause of action arises outside of Pennsylvania and not out of any business which the defendant conducts within the Commonwealth. The Court stated that, in such a case, the complaint must allege that the business activity of the defendant within Pennsylvania was "so continuous and substantial as to make it reasonable" for the trial court to exercise jurisdiction over him with respect to an unrelated cause of action. Bork v. Mills, 458 Pa. 228, 329 A.2d 247, 249 (1974).
Having failed to meet this burden, valid service of process on the individual defendants in this case cannot be based by plaintiffs on 42 Pa. S. § 8304. Pincus v. Mutual Assurance Co., 457 Pa. 94, 321 A.2d 906 (1974), relied on by plaintiffs, is distinguishable both on its facts and on the issue presented. Unlike the present case, there was no question in Pincus whether the corporate director defendants, apparently Pennsylvania residents, were doing business in the Commonwealth. The question was rather whether they could be served at the main corporate headquarters, located in Philadelphia, as well as the offices where they normally worked. This Court does not believe that the affirmative answer given to that question is apposite to a determination of the basic question under § 8304 — namely, whether the individual defendants are "doing business" within Pennsylvania.
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