Rensing v. Turner Aviation Corporation

• Decision Date: 22 October 1958
• Docket Number: No. 58 C 82.,58 C 82.
• Citation: 166 F. Supp. 790
• Parties: Herman RENSING, Plaintiff v. TURNER AVIATION CORPORATION, Defendant.
• Court: U.S. District Court — Northern District of Illinois

166 F. Supp. 790

Herman RENSING, Plaintiff v. TURNER AVIATION CORPORATION, Defendant.

No. 58 C 82.

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

October 22, 1958.

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Nathan & Klafter, Chicago, Ill., for plaintiff.

McHale, Cook, Welch & McKinney, Indianapolis, Ind., by Hopkins, Sutter, Owen, Mulroy & Wentz, Chicago, Ill., for defendant.

CAMPBELL, District Judge.

Plaintiff, Herman Rensing, a citizen and resident of California, sues the defendant, Turner Aviation Corporation, an Indiana corporation, alleged by the plaintiff to be doing business in this District, for personal injuries allegedly sustained while a passenger in defendant's plane which crashed to the ground at or near Grant Park, Illinois, on March 6, 1957. The complaint bases jurisdiction on Title 28 U.S.C. §§ 1332 and 1391.

The defendant has filed a motion to dismiss the complaint or quash the return of summons contending that service of process could not properly be made upon it in Illinois under Rule 4(d) F.R. Civ.P., 28 U.S.C.A., because the defendant, a foreign corporation, was not "doing business" in this District so as to be present for jurisdictional purposes. Service of process upon the president of the defendant while he was temporarily present in this District the defendant states does not act to bring the corporation within the jurisdiction of this Court. The defendant further maintains that the question of what constitutes "doing business" is one of Federal and not State law.

The plaintiff maintains that the defendant was "doing business" in Illinois so as to be present for jurisdictional purposes and was therefore subject to service of process. The plaintiff agrees that the question of what constitutes "doing business" is one of Federal and not State law.

The affidavits submitted by the parties indicate that the defendant has never been licensed to do business in Illinois; nor owned any property the business situs of which is in Illinois; nor maintained any facility for conducting business in Illinois; nor employed or retained officers or agents in Illinois. The plaintiff's affidavit states that planes operated by the defendant land at Midway Airport in the City of Chicago "with regularity" and that such planes "principally carry passengers for hire from points in Indiana; and that a lesser part of it's regular business is the carrying of passengers for hire from the City of Chicago to various points of Indiana and elsewhere." Defendant's affidavit shows that for a period of fourteen (14) months prior to the accident, the defendant made the following flights into Illinois:

1. No intrastate flight in Illinois;

2. Eight (8) one-way flights into Illinois;

3. Two (2) one-way flights out of Illinois;

4. Seven (7) round-trip flights from a point outside Illinois to a point in Illinois and return.

It further appears that Roscoe Turner, a resident of Indiana and president of the defendant corporation, was served with a summons and complaint herein directed against the corporation while he was temporarily present in Chicago, Illinois, on personal business. The issue now presented by the pleadings is whether or not the defendant, Turner Aviation Corporation, was "doing business" within this Judicial District so as to be considered "present" here for jurisdictional purposes. As stated above, both parties maintain that this issue should be decided solely by Federal law. I think both are incorrect.

I find a great deal of confusion among the decisions in regard to the term "doing business." Much of this confusion seems to be due to the fact that in some instances Federal law has been applied in its interpretation while in other cases, State law has governed its interpretation. Further confusion stems from the fact that Title 28 U.S.C.A. § 1391(c) provides in regard to venue that a foreign corporation may be sued where it is "doing business" while presence of a foreign corporation for jurisdictional purposes is often governed by the same phrase, "doing business." An example of this is seen in Riverbank Laboratories v. Hardwood Prod. Corp., 7 Cir., 220 F.2d 465, where upon a motion to dismiss because of improper venue, the Court applied State law in interpreting "doing business." The Court relied directly upon Canvas Fabricators Inc. v. William E. Hooper & Sons Co., 7 Cir., 199 F.2d 485, which case however was predicated upon a motion to quash summons because of lack of jurisdiction over the person of a foreign corporation. In this case the question of whether a foreign corporation was "doing business" within the State and hence "present" for jurisdictional purposes was quite properly decided according to State law. The Riverbanks case considering the question of improper venue under Title 28 U.S.C. § 1391(c) apparently overlooked the fact that the Canvas case was one of jurisdiction and not of venue and applied the same State test for "doing business" and was therefore later reversed by the United States Supreme Court in 350 U.S. 1003, 76 S.Ct. 648, 100 L.Ed. 866. For the reasons I shall try to point out it is my opinion that the law clearly requires questions of venue to be decided by Federal law and questions of jurisdiction in diversity cases to be decided by the law of the State wherein the particular U. S. District Court is sitting.

When Swift v. Tyson, 16 Pet. 1, 41 U.S. 1, 10 L.Ed. 865 representing a doctrine of a Federal common law free from the authority of State courts was overruled by Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, a new policy concerning the proper distribution of judicial power between State and Federal Courts was proclaimed by the Supreme Court. "In essence, the intent of that decision was to insure that, in all cases where a federal court is exercising jurisdiction solely because of the diversity of citizenship of the parties, the outcome of the litigation in the federal court should be substantially the same, so far as legal rules determine the outcome of a litigation, as it would be if tried in a State court. The nub of the policy that underlies Erie R. Co. v. Tompkins is that for the same transaction the accident of a suit by a non-resident litigant in a federal court instead of in a State court a block away, should not lead to a substantially different result." Guaranty Trust Co. v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 1470, 89 L.Ed. 2079.

Today, this policy is recognized by Congress in Title 28, U.S.C.A. § 1652 which provides:

"The laws of the several states, except where the Constitution or treaties of the United States or Acts of Congress otherwise require or provide, shall be regarded as rules of decision in civil actions in the courts of the United States, in cases where they apply."

Thus, it is generally stated that in diversity of citizenship cases, all substantive matters are controlled by State law while purely procedural matters, that is procedural matters which do not affect the substantive rights of the parties are controlled by Federal law. Guaranty Trust Co. v. York, supra; Occidental Life Ins. Co. of California v. Kielhorn, D.C., 98 F.Supp. 288; Brookshire v. Pennsylvania R. Co., D.C., 14 F.R.D. 154; Cyclopedia of Federal Procedure, Sec. 6.03.

Title 28 U.S.C.A. § 1391, entitled Venue Generally provides in subsection (c) as follows:

"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."

It was noted before that a state may gain jurisdiction over a foreign corporation by a number of ways. However, the most usual way for a state to gain personal jurisdiction over a foreign corporation occurs when the corporation is "doing business" within the state because then it is present within the state and is thus amenable to process. Fletcher, Cyclopedia of Corporations Sections 8639-8648; Cyclopedia of Federal Procedure Sec. 11.76.

Therefore, since the phrase "doing business" is found in Title 28 U.S.C.A. § 1391(c) in regard to venue and also is used with regard to the basic jurisdiction of the Court over the person of a foreign corporation, the following problems are presented:

1. Should Federal or State law govern the interpretation of the phrase "doing business" as contained in the venue section, 1391 (c) of the United States Code;

2. Should Federal or State law be applied in deciding whether a corporation is "doing business" within the judicial district of the court so that it is "present" for jurisdictional purposes and thus amenable to service;

3. Should the same test for "doing business" be applied in both instances.

In considering these problems, it is important to distinguish between jurisdiction of the subject matter, jurisdiction over the person and venue. Jurisdiction of the subject matter is the fundamental power of the Court to hear and decide a cause on its merits and therefore is beyond the scope of litigants to confer. It is clearly distinguished from venue in Neirbo Co. v. Bethlehem Shipbuilding Corp., 308 U.S. 165, 60 S.Ct. 153, 84 L.Ed. 167. Jurisdiction over the person is the power of the Court over the parties obtained by process or appearance. To distinguish this from venue see Robertson v. Railroad Labor Board, 268 U.S. 619, 45 S.Ct. 621, 69 L.Ed. 1119. Venue on the other hand merely relates to the place where a suit may be heard and is a personal privilege of a party which may be asserted or waived. Commercial Casualty Ins. Co. v. Consolidated Stone Co., 278 U.S. 177, 49 S.Ct. 98, 73 L.Ed. 252. Cyclopedia of Federal Procedure, Sections 4.01, 4.49, 4.5. The essence of venue is "to save defendants from inconveniences to which they might be subjected if they could be compelled to answer in any district, or wherever found." General Investment Co. v. Lake Shore & M. S. Ry. Co., 260 U.S. 261, 43 S.Ct. 106, 113, 67 L.Ed. 244. Thus, it can be seen...