Smartt v. Coca-Cola Bottling Corporation, 15026.

• Decision Date: 18 June 1963
• Docket Number: No. 15026.,15026.
• Citation: 318 F.2d 447
• Parties: J. Polk SMARTT and Isabel Smartt, Plaintiffs-Appellants, v. COCA-COLA BOTTLING CORPORATION (Sued as Cincinnati Coca-Cola Bottling Co.), Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

318 F.2d 447 (1963)

J. Polk SMARTT and Isabel Smartt, Plaintiffs-Appellants, v. COCA-COLA BOTTLING CORPORATION (Sued as Cincinnati Coca-Cola Bottling Co.), Defendant-Appellee.

No. 15026.

United States Court of Appeals Sixth Circuit.

June 18, 1963.

Sizer Chambliss, Chattanooga, Tenn., John A. Chambliss, Chattanooga, Tenn., on brief; Chambliss, Chambliss & Hodge, Chattanooga, Tenn., of counsel, for appellants.

Robert T. Keeler, Cincinnati, Ohio, Taft, Stettinius & Hollister, David W. Matthews, Cincinnati, Ohio, Witt, Gaither, Abernathy, Caldwell & Wilson, by John P. Gaither, Chattanooga, Tenn., on brief, for appellee.

Before WEICK, Circuit Judge, and BOYD and THORNTON, District Judges.

BOYD, District Judge.

This is a suit for a declaratory judgment and injunction in which the plaintiffs seek to have their rights declared as to a proposed reorganization plan of the defendant corporation, and to enjoin the corporation from "adversely affecting the rights of the plaintiffs and all other holders of Class `A' stock." Plaintiffs allege that defendant, seeking to serve the interest of Class "B" stockholders, sent notice to all stockholders of a proposed merger plan whereby Class "A" stock would be exchanged for debentures. This notice is alleged to have been misleading. There is further allegation of a failure to pay proper dividends, causing owners of Class "A" stock to believe the corporation would never be profitable. It is the plaintiffs' contention that such failure misled the majority of Class "A" stockholders into acquiescing in the merger plan. Plaintiffs' contention appears to be that this activity amounts to a breach of a fiduciary trust.

Plaintiffs first obtained service of process upon a stockbroker in Chattanooga, Tennessee. This was quashed pursuant to a finding by the District Court that the broker was not a proper person upon whom service could be had in order to acquire jurisdiction of the defendant corporation. Affidavit of the broker indicates that he only rendered advisory services in connection with the proposed change in the corporate stock structure and aided in soliciting approval of the change during stockholder meetings which were held in Chattanooga, Tennessee, and on other occasions.

Service of process was then had upon the Secretary of the State of Tennessee and upon one of the defendant's directors who resided in Tennessee. This District Court granted a motion to quash service in each of these instances and dismissed the complaint herein on the ground that the defendant was not doing business within the State of Tennessee in such a manner as to make it amenable to suit in said state.

In this connection, defendant submitted the affidavit of its president, which reflects that the corporation at no time made sales of its product in Tennessee, had obtained no license to do so in Tennessee, maintained no office in that state and none of its employees performed duties there.

Jurisdiction of the subject matter herein is based upon diversity and amount and is not in dispute. 28 U.S.C. 1332 (a) (1). However, the existence of personal jurisdiction over the defendant, a Delaware corporation whose principal place of business is in the State of Ohio, is in dispute. Our consideration of this appeal ends if we agree with the District Court that there exists no valid basis of power for the exercise of personal jurisdiction. There need be no review, in other words, of the sufficiency of service of process unless personal jurisdiction is established.

In diversity cases, the question of whether a foreign corporation is present in a state, so as to render it subject to suit in that state, is to be resolved by reference to the law of the state in which the Federal District Court sits. Dolce v. Atchison, Topeka & Santa Fe, 23 F.R.D. 240 (D.C.E.D.Mich.1959); Ketch v. Atlantic Coast Line Ry. Co., 51 F.Supp. 243 (D.C.E.D.Tenn.1943); Pulson v. American Rolling Mill Co. (1 Cir., 1948) 170 F.2d 193. This is in harmony with the broad pronouncements of Justice Brandeis in Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188.

The Tennessee Code provides for the exercise of judicial power over a foreign corporation when such corporation is found to be "doing business" in Tennessee. See Tenn.Code Annotated 20-220 to the effect that any corporation found doing business in the state shall be subject to suit in Tennessee as relates to any cause of action arising there. This statute also provides that any corporation having any transaction through any agency acting for it within the state is "doing business." "Doing business" is the statutory standard to be applied in determining whether a foreign corporation is subject to suit in Tennessee.

It will be seen that the Tennessee courts have not given this statute the broad sweep that its language might suggest. We must ascertain the construction the Tennessee courts have given to this standard and determine whether the fact situation presented herein constitutes doing business in Tennessee so as to subject the defendant corporation to the jurisdiction of a District Court sitting in Tennessee.

The 1938 case of Denson v. Webb, 23 Tenn.App. 599, 136 S.W.2d 59, cert. denied 1939, states the then existing Tennessee law to be as follows:

"We think it too well settled to require the

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