Philadelphia Hous. Auth. v. American Radiator & S. San. Corp.

CourtUnited States District Courts. 3th Circuit. United States District Court (Eastern District of Pennsylvania)
Citation291 F. Supp. 252
Docket Number41774.,Civ. A. No. 41773
Decision Date09 August 1968



Aaron M. Fine and Dolores Korman, Philadelphia, Pa., for Philadelphia Housing Authority and other named plaintiffs.

Philip M. Hammett and Lawrence T. Hoyle, Jr., Philadelphia, Pa., for Georgia Sanitary Pottery, Inc., and Kilgore Ceramics Corp.


JOHN W. LORD, Jr., District Judge.

The above-captioned antitrust suits were brought as class actions on behalf of (1) state and municipal governments, authorities and subdivisions which build or renovate homes and apartment dwellings, and (2) builders of home and apartment dwellings, alleging violations of the antitrust laws by defendants with respect to the manufacture and sale of plumbing fixtures. Included among the defendants were two so-called "Short Line Manufacturers" who manufacture the lowest price line of staple vitreous china plumbing fixtures, Kilgore Ceramics Corporation ("Kilgore") and Georgia Sanitary Pottery, Inc. ("Georgia Sanitary"). These two defendants have moved to dismiss the actions for lack of venue.

I. Venue under Section 12 of the Clayton Act

Venue in private antitrust actions against corporate defendants is governed by the special venue provision of Section 12 of the Clayton Act (15 U. S.C.A. § 22), as supplemented by 28 U. S.C.A. §§ 1391(c) and 1392(a) of the general venue statute.1 This has been established by both Judges Kraft and Joseph S. Lord, III of this Court in the cases of School District of Philadelphia v. Harper & Row Publishers, Inc., 267 F.Supp. 1006 (E.D.Pa. 1967) and State of New York v. Morton Salt Co., 266 F. Supp. 570 (E.D.Pa. 1967) respectively. Section 12 of the Clayton Act provides in part:

District in which to sue corporation
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 * * *.

Since plaintiffs' antitrust actions have been brought in this Eastern District of Pennsylvania under the antitrust laws, venue is proper here as to both Kilgore and Georgia Sanitary only if they are (a) inhabitants of this District, (b) found in this District, or (c) transacting business in this District.

(a) Inhabitant. A corporation is an inhabitant of the State in which it is incorporated. Aro Manufacturing Co. v. Automobile Body Research Corp., 352 F.2d 400 (1st Cir. 1965), cert. den. 383 U.S. 947, 86 S.Ct. 1199, 16 L.Ed.2d 210 (1966). Neither Kilgore nor Georgia Sanitary are incorporated in the Commonwealth of Pennsylvania. Kilgore is incorporated under the laws of the State of Texas; Georgia Sanitary under the laws of Indiana.

(b) Found. The word "found" within this provision of the Clayton Act connotes presence and continuous local activities within the district. So held Judge Davis of this Court in Stern Fish Co. v. Century Seafoods, Inc., 254 F. Supp. 151 (E.D.Pa. 1966). This is to say that the corporation must be present in the District by "its officers and agents carrying on the business of the corporation." Aro Manufacturing Co. v. Automobile Body Research Corp., supra, 352 F.2d at 404. Neither defendant has any officers, employees or agents in this District who continually carry on local activities here.

(c) Transact Business. In 1948, the Supreme Court held that a corporation is transacting business in a District if in fact in practical and business sense it carries on business "of any substantial character." United States v. Scophony Corporation of America, 333 U.S. 795, 807, 68 S.Ct. 855, 92 L.Ed. 1091 (1948). Since this decision there has been of necessity a case by case examination of the facts at hand to determine whether from a practical business standpoint a corporation is carrying on business of any substantial character in the District.

Where the only activity carried on within a certain District is sales into the District, it is helpful to examine and be guided by the late Judge Grim's opinion in Sunbury Wire Rope Manufacturing Co. v. United States Steel Corp., 129 F.Supp. 425 (E.D.Pa.1955). He said there, whether or not a corporation is transacting business in a District should not depend on the percentage of its overall sales made in the District, but rather "whether or not the sales would appear to be substantial from the average businessman's point of view." Id. at 427. There Detroit Steel Corporation's overall sales amounted to almost $100 million a year as compared to its almost $600,000 worth of steel delivered into the Eastern District of Pennsylvania in less than two years. While this only constituted 0.3 per cent a year of Detroit Steel's total sales, Judge Grim held that almost $600,000 worth of business in less than two years, viewed without reference to overall sales volume, would appear to be quite substantial to the average businessman.

In the case at bar, Georgia Sanitary's vice-president in charge of manufacturing attended a convention of the American Ceramics Society, Inc. in Philadelphia; the corporation placed advertisements in three trade publications distributed in this District; and made the following deliveries of goods sold into this District:

                     10/1/63 - 9/30/64 .... $3,295.00
                     10/1/64 - 9/30/65 ....  3,012.75
                     10/1/65 - 9/30/66 ....    925.00
                     10/1/66 - 5/15/67 ....  1,890.00

It seems that if Georgia Sanitary carries on any business of a substantial character in this District, it does not do so by virtue of such isolated occurrences as its vice-president's journey to Philadelphia, nor by its advertising in three trade journals that happen to be distributed in this District. Thus left with only the shipments into this District to consider and being guided by the Supreme Court test and Judge Grim's guidelines, it is my conclusion that Georgia Sanitary was not transacting business in the Eastern District of Pennsylvania when the present action was filed and service made on it.

Kilgore's activities here consisted of the placing of advertisements in two trade publications in a total of four issues in 1964. Two Kilgore employees attended the same convention as the Georgia Sanitary executive in 1965. Kilgore made no sales in this district; rather they made purchases of materials in each of the years 1964 through 1967 from two Philadelphia corporations consisting of the following:

                1964 .......4 Purchases .......$258.62
                1965 .......7 Purchases ....... 618.09
                1966 .......5 Purchases ....... 220.76
                  (Jan.-Apr.) 2 Purchases .....  64.36

In the recent case of Crusader Marine Corp. v. Chrysler Corp., 281 F.Supp. 802 (E.D.Mich.1968), the court concluded that "it is obvious that in any line of commerce purchasing may very well be as important to business as the selling of commodities." Id. at 804. The court went on to cite a 1965 Southern District of New York case wherein one factor which supported a finding that venue was proper in that District was that the defendant purchased two million dollars' worth of goods there. United States v. Burlington Industries, Inc., 247 F.Supp. 185 (S.D.N.Y.1965).

Using the "business of a substantial character" test and the applications made of it by Judge Joseph S. Lord, III in Morton Salt, supra, 266 F.Supp. at 575, and Judge Davis in Stern Fish, supra, 254 F.Supp. at 153, respectively, that transacting business requires "more than a few isolated and peripheral contacts with the particular judicial district", it is my opinion that the purchases made by Kilgore in this District over a three-and-a-half year period standing alone, or viewed in conjunction with the advertising and convention visit, do not constitute transacting business in the Eastern District of Pennsylvania.

II. Venue under Sections 1391(c) and 1392(a) of the General Venue Statute.

Section 1391(c) of the Judicial Code 28 U.S.C.A. § 1391(c) provides:

A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.

Section 1392(a) states:

Any civil action, not of a local nature, against defendants residing in different districts in the same State, may be brought in any of such districts.

As stated above,2 it has been established by two judges in this District Court that these "general venue" provisions serve to supplement the "special venue" provision of the Clayton Act.

The concept of "doing business" is narrower than "transacting business", i.e., it takes more activity to constitute "doing business" than it does to meet the "transacting business" test. Indeed, the prevailing view in this Eastern District is that "in determining how much activity within a district a foreign corporation must engage before such activity will constitute `doing business' for purposes of federal venue, the basic consideration is whether a license would be required of the foreign corporation as a condition precedent to carrying on that activity." Remington Rand, Inc. v. Knapp-Monarch Co., 139 F.Supp. 613, 617 (E.D.Pa.1956). There Judge Wright rejected the International Shoe "minimum contacts" interpretation of doing business as applied in "service of process" questions. See International Shoe Co. v. State of Washington, 326 U. S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Thus more activity is needed to subject a defendant corporation to venue in a jurisdiction than would be needed to subject it to service of process there.

Plaintiffs maintain that the Third Circuit Court of Appeals has recently established that...

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