Occidental Petroleum Corp. v. Buttes Gas & Oil Co.

• Citation: 331 F. Supp. 92
• Decision Date: 17 March 1971
• Docket Number: Civ. No. 70-1397-HP
• Court: U.S. District Court — Central District of California
• Parties: OCCIDENTAL PETROLEUM CORPORATION, a California corporation, and Occidental of Umm al Qaywayn, Inc., a California corporation, Plaintiffs, v. BUTTES GAS & OIL COMPANY, a corporation, Clayco Petroleum Corporation, a corporation, John Boreta, William H. Smith, E. David Philley, and Bruce J. Clayman, Defendants.

331 F. Supp. 92

OCCIDENTAL PETROLEUM CORPORATION, a California corporation, and Occidental of Umm al Qaywayn, Inc., a California corporation, Plaintiffs, v. BUTTES GAS & OIL COMPANY, a corporation, Clayco Petroleum Corporation, a corporation, John Boreta, William H. Smith, E. David Philley, and Bruce J. Clayman, Defendants.

Civ. No. 70-1397-HP

United States District Court, C. D. California.

March 17, 1971.

COPYRIGHT MATERIAL OMITTED

Philip F. Westbrook, Jr. and Donald M. Wessling, O'Melveny & Myers, Arthur Groman, Mitchell, Silberberg & Knupp, Los Angeles, Cal., Louis Nizer, Simon Rose and David G. Miller, Phillips, Nizer, Benjamin, Krim & Ballon, New York City, for plaintiffs.

Thomas H. Kuchel and Frank Rothman, Wyman, Bautzer, Finell, Rothman & Kuchel, Beverly Hills, Cal., for defendants, Buttes Gas & Oil Co., John Boreta and William H. Smith.

Maurice J. Hindin, Hindin, McKittrick & Marsh, Beverly Hills, Cal., for defendants, Clayco Petroleum Corp. and Bruce J. Clayman.

OPINION AND ORDER

PREGERSON, District Judge.

This is a private antitrust suit for treble damages and an injunction,¹ brought by Occidental Petroleum Corporation and its wholly owned subsidiary Occidental of Umm al Qaywayn against the Clayco Petroleum Corporation ("Clayco") and its president, Clayman, and the Buttes Gas and Oil Company ("Buttes") and its officers Boreta and Smith.² The complaint charges the defendants with conspiracy in restraint of trade,³ conspiracy to monopolize,⁴ and attempted monopoly,⁵ all with respect to "the exploration, development and exploitation of petroleum reserves of the territorial waters of the Trucial States." The plaintiffs and the defendant corporations are holders of offshore oil concessions granted by two adjacent sheikdoms in the Persian Gulf. Defendants are charged with instigating a presently pending international dispute over sovereign rights to a portion of the Gulf— allegedly covering the richest area of plaintiffs' concession—with the result that plaintiffs have been prevented from enjoying the fruits of their concession.⁶ The facts alleged in the complaint also constitute the basis of a claim for damages and injunctive relief, on the theory of inducing breach of contract, instituted in California state court between the present parties.

The court has before it separate motions to dismiss, urged respectively by Clayco and Clayman on the one hand and by the Buttes defendants on the other. Clayco and Clayman claim lack of personal jurisdiction, improper venue, and defective service of process. The Buttes defendants attack the face of the complaint, raising five substantive grounds allegedly warranting dismissal of the action. The two sets of motions will be considered separately.

THE CLAYCO-CLAYMAN MOTION

Personal jurisdiction of defendant Clayman and venue as to him are governed by Section 4 of the Clayton Act, 15 U.S.C. § 15, which permits suit against a non-corporate defendant "in the district in which the defendant resides or is found or has an agent * * *." By affidavit and motion, Clayman affirms that he is a resident of New York and has never resided in the Central District of California. From the face of this averment it would appear that this court does not have jurisdiction over the person of Clayman, and that venue as to him is not properly laid here.

Plaintiffs have at no time in this proceeding disputed Clayman's affirmations. They urge only that decision of whether he is properly before this court be reserved until they may, by discovery process, ascertain whether there in fact exist any bases of jurisdiction as to him. Plaintiffs have cited no authority for the proposition that the court may continue the pendency of an action against an individual defendant, and allow him to be subjected to discovery in that capacity, where the court has before it an unrebutted showing that he is not within its personal jurisdiction. In these circumstances, this court considers it necessary to dismiss the complaint as to Clayman for want of jurisdiction over his person. See Hansen Packing Co. v. Armour & Co., 16 F.Supp. 784, 786-787 (S.D.N.Y. 1936). Similarly, dismissal on the ground of improper venue would appear warranted. 15 U.S.C. § 15.

Defendant Clayco urges dismissal on the grounds of lack of personal jurisdiction, improper venue, and insufficiency of service of process. These matters are governed by Section 12 of the Clayton Act, 15 U.S.C. § 22, which provides:

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 wherever it may be found.

The uncontested allegations before the court are that Clayco is a Delaware corporation, that its principal and only place of business is in New York, that it has never conducted business in this district, and that it has no officers, agents, offices, property, or other links in California or in this district. Once again, then, there appears a prima facie showing under the relevant statute that jurisdiction and venue are not here properly laid.

To overcome this showing, plaintiffs rely upon the so-called "co-conspirator" or "Giusti" theory of antitrust venue— a doctrine which had its origin in the case of Giusti v. Pyrotechnic Industries, 156 F.2d 351 (9th Cir.), cert. den., Triumph Explosives v. Giusti, 329 U.S. 787, 67 S.Ct. 355, 91 L.Ed. 675 (1946). Plaintiffs' reading of Giusti and the cases following it is that, by virtue of an agency principle, "co-conspirators are deemed to be found or to transact business within a district under 15 U.S.C.A. § 22 when one of them is found or transacts business within the district." Defendant Clayco, in reply, questions whether the Giusti theory is presently tenable in any form, and, if so, whether it is as broad as plaintiffs construe it.

In the Ninth Circuit, any assessment of the possible applicability of the co-conspirator principle requires an understanding of Giusti itself. Examination of the decision immediately discloses that the case is not direct authority on the sweep of the Clayton Act's venue provisions. Rather, Giusti involved an interpretation of the service of process requirements of the California Civil Code. In holding that the out-of-state defendant had "transacted business" in California within the meaning of then section 406a of the California Civil Code,⁷ the court decided first that the acts of the defendant's co-conspirators alleged in the complaint constituted "transacting business" in California, and then applied an agency principle to impute this "transacting" to the foreign defendant. 156 F.2d at 353-354.

The co-conspirator theory of "transacting business" within the meaning of Section 12 of the Clayton Act—to which Giusti has been said to have given "illegitimate birth"⁸—has been rejected by the only court of appeals squarely confronted with it,⁹ and has (in dictum) been termed "frivolous" by the Supreme Court.¹⁰ While it has been observed, as plaintiffs herein stress, that the venue provisions for private antitrust actions are intended to give injured plaintiffs a broad choice of forum, the co-conspirator approach, allowing venue as to defendants with no direct contacts with the forum district, has frequently been rejected as an unwarranted extension, beyond the legislative purpose. E. g., Bankers Life & Casualty Co. v. Holland, supra; Independent Productions Corp. v. Loew's, Inc., 148 F.Supp. 460, 463 (S.D.N.Y.1957); West Virginia v. Morton International, Inc., 264 F.Supp. 689, 695 (D.Minn.1967); Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corp., 291 F.Supp. 252, 262 (E.D.Pa.1968); Byrnes, supra, 11 Antitrust Bull. at 895-896. One major vice of the theory, it has been noted, is that under it a defendant could establish the claim of improper venue only after submitting to a trial on the merits. See West Virginia v. Morton International, supra, 264 F.Supp. at 695; Byrnes, supra, 11 Antitrust Bull. at 896.

Several of the district courts in the Ninth Circuit that have admitted co-conspirator venue under 15 U.S.C. § 22 have done so out of a belief that the result was compelled in the circuit by Giusti itself. See De Golia v. Twentieth Century-Fox Film Corp., 140 F.Supp. 316, 317 (N.D.Cal.1954); California v. Brunswick Co., 32 F.R.D. 36, 38 (N.D. Cal.1961); cf. Haleiwa Theatre Co. v. Forman, 37 F.R.D. 62, 65 (D.Haw.1965). But the most recent Ninth Circuit decision discussing Giusti in the antitrust context intimates that this is, at best, an open question. The court of appeals stated in Hayashi v. Red Wing Peat Corp., 396 F.2d 13, 15 (9th Cir. 1968):

Since appellants disavowed reliance upon acts of alleged co-conspirators within the district as affording a basis for venue, we need not consider whether Giusti v. Pyrotechnic Productions sic, Inc., 156 F.2d 351, 354 (9th Cir. 1946) holds that venue may be established on this basis, and, if it does, whether, as appellee argues, such a holding is inconsistent with Bankers Life & Casualty Co. v. Holland, 346 U.S. 379, 383, 74 S.Ct. 145, 98 L.Ed. 106 (1953). See Bertha Bldg. Corp. v. National Theatres Corp., 248 F.2d 833 (2d Cir. 1957); H. L. Moore Drug Exchange, Inc., supra.

Whatever the authority of Giusti in the antitrust realm, careful examination of the case and of subsequent decisions explicating it discloses that its delineation of what may be deemed "transacting business" in a district by foreign co-conspirators is not as sweeping as plaintiffs assert. Plaintiffs' contention that any transacting of business in the district by a defendant may be imputed to co-conspirators—whether or not connected with the conspiracy—carries the co-conspirator rationale beyond its own logic, because one co-conspirator is deemed the agent of the...