Sportmart, Inc. v. Frisch

• Decision Date: 07 May 1982
• Docket Number: No. 81 C 4980.,81 C 4980.
• Citation: 537 F. Supp. 1254
• Court: U.S. District Court — Northern District of Illinois
• Parties: SPORTMART, INC. and Olympic Distributors, Inc., Plaintiffs, v. Walter FRISCH, Gary Petrich, RNC, Inc., Nordica USA, Rossignol Ski Company, Inc., Nordica di Franco e Giovanni Vaccari & C.S.A.S. and Skis Rossignol, S. A., Defendants.

537 F. Supp. 1254

SPORTMART, INC. and Olympic Distributors, Inc., Plaintiffs, v. Walter FRISCH, Gary Petrich, RNC, Inc., Nordica USA, Rossignol Ski Company, Inc., Nordica di Franco e Giovanni Vaccari & C.S.A.S. and Skis Rossignol, S. A., Defendants.

No. 81 C 4980.

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

May 7, 1982.

Ralph A. Mantynband, Arvey, Hodes, Costello & Burman, Chicago, Ill., for plaintiffs.

Keith F. Bode, Jenner & Block, Chicago, Ill., James M. Rhodes, Battle, Fowler, Jaffin & Kheel, New York City, Alan Horwich, Schiff, Hardin & Waite, Chicago, Ill., for defendants.

MEMORANDUM OPINION AND ORDER

ASPEN, District Judge:

Plaintiffs, Sportmart, Inc. and Olympic Distributors, Inc., (hereinafter referred to as "Sportmart"), brought this private antitrust action against defendants, Rossignol Ski Company, Inc. and Skis Rossignol, S. A. ("Rossignol defendants"), Nordica USA, Inc. ("Nordica-US") and Nordica di Franco e Giovanni Vaccari & C.S.A.S. ("Nordica-Italy"), RNC, Inc. ("RNC"), a domestic distributor of Nordica and Rossignol ski products, and two employees of RNC, seeking declaratory, injunctive and monetary relief on the ground that defendants allegedly conspired together in a concerted refusal to supply Sportmart with certain Alpine skis and boots in violation of sections 1 and 2 of the Sherman Act.¹ This matter is presently before the Court on the Nordica defendants' motion to dismiss the complaint for lack of personal jurisdiction, improper venue, and insufficient service of process² pursuant to Rule 12(b)(2), (3), (4) and (5) of the Federal Rules of Civil Procedure. For the reasons set forth below, that motion will be granted.

Although the parties submit that the in personam jurisdiction of this Court is governed by the law of Illinois, citing Ohio-Sealy Mattress Manufacturing Co. v. Kaplan, 429 F.Supp. 139, 140 (N.D.Ill.1977), it is clear that federal due process principles govern the jurisdiction and venue questions in this antitrust action.³ Rule 4(e) of the Federal Rules of Civil Procedure provides that:

Whenever a statute of the United States or an order of court thereunder provides for service of a summons ... upon a party not an inhabitant of or found within the state in which the district court is held, service may be made under the circumstances and in the manner prescribed by the statute or order, or, if there is no provision therein prescribing the manner of service, in a manner stated in this rule.

Thus, if a federal statute or rule provides for service of process, service may be made in the manner prescribed by the statute or rule. Only if there is no applicable federal statute or rule, as in a case brought pursuant to federal diversity jurisdiction, does Rule 4(e) refer to alternative methods of service. In such circumstances, Rule 4(d)(7) immediately preceding Rule 4(e) refers a federal court to the applicable state long-arm statute.⁴

The second clause of section 12 of the Clayton Act, 15 U.S.C. § 22, provides for service of process upon a corporate defendant in an antitrust case "in the district of which it is an inhabitant, or wherever it may be found." This worldwide service of process provision prescribes the manner of service in antitrust cases so that, pursuant to Rule 4(e), there is no need to refer to the long-arm statute of the state in which the federal district court sits.⁵ The only limitations on service of process under section 12 of the Clayton Act are those general due process principles articulated in International Shoe and subsequent cases dealing with the constitutional limits on extra-territorial service of process. As the court said in Black v. Acme Markets, Inc., 564 F.2d 681, 684 (5th Cir. 1977), "in such cases, the requirements of state long-arm statutes are simply irrelevant to the in personam jurisdiction of a federal court."⁶See also 14 Von Kalinowski, Antitrust Laws and Trade Regulation § 104.026 at 104-27.XX-XXX-XX.15 (1981).

Venue, the other threshold inquiry with which we are concerned at this early stage in these proceedings, may be established under the special venue provisions of the Clayton Act, 15 U.S.C. §§ 15, 22, or under the general federal venue provisions applicable to non-diversity cases, 28 U.S.C. § 1391(b), (c). It is clear that the venue provisions of the Clayton Act are not to be applied exclusively in antitrust cases; they merely supplement the general rule. Ohio-Sealy Mattress Manufacturing Co. v. Kaplan, 429 F.Supp. 139, 140 (N.D.Ill.1977); C. C. P. Corporation v. Wynn Oil Company, 354 F.Supp. 1275, 1279 (N.D.Ill.1973); A. B. C. Great States, Inc. v. Globe Ticket, 310 F.Supp. 739 (N.D.Ill.1970). In the instant case, Sportmart contends that venue is properly laid in this district because the Nordica defendants transact business here within the meaning of 15 U.S.C. § 22 and because the claim arose here within the meaning of 28 U.S.C. § 1391(b).

It is established that, as far as the Court's power over a non-resident corporate defendant in an antitrust action is concerned, the jurisdiction and venue analyses are virtually congruent, since both are controlled by general due process principles. United States v. Scophony Corporation, 333 U.S. 795, 68 S.Ct. 855, 866, 92 L.Ed. 1091 (1948); Eastman Kodak Company v. Southern Photo Materials Co., 273 U.S. 359, 370, 47 S.Ct. 400, 402, 71 L.Ed. 684 (1927); Smokey's of Tulsa, Inc. v. American Honda Motor Co., 453 F.Supp. 1265, 1267 (E.D.Okl.1978); Zenith Radio Corp. v. Matsushita Electric Industrial Co., Ltd., 402 F.Supp. 262, 317 (E.D. Pa.1975); C. C. P. Corporation v. Wynn Oil Company, 354 F.Supp. 1275, 1278 (N.D.Ill. 1973); Pacific Tobacco Corporation v. American Tobacco Co., 338 F.Supp. 842, 844 (D.Or.1972). If venue is proper, then personal jurisdiction may be obtained over the defendants by extra-territorial service of process. If venue is improper, then the personal jurisdiction issue is moot since the court would not entertain the action in any event. With these principles in mind, we proceed to a discussion of the merits of the motion to dismiss in the case at bar.

In United States v. Scophony Corporation, 333 U.S. 795, 807-08, 68 S.Ct. 855, 961-62, 92 L.Ed. 1091 (1948), the Supreme Court stated that "the practical, everyday business or commercial concept of doing business or carrying on business `of any substantial character' is the test of venue" under the "transacts business" language in section 12 of the Clayton Act. Since Scophony, the lower federal courts have consistently applied that practical test in determining whether venue is proper over a nonresident corporate defendant, domestic or foreign. See Caribe Trailer Systems, Inc. v. Puerto Rico Maritime, 475 F.Supp. 711, 716 (D.D.C.1979); Smokey's of Tulsa, Inc. v. American Honda Motor Co., 453 F.Supp. 1265, 1268 (E.D.Okl.1978); Chromium Industries, Inc. v. Mirror Polishing & Plating Co., Inc., 448 F.Supp. 544, 550 (N.D.Ill.1978); Zenith Radio Corporation v. Matsushita Electric Industrial Co., Ltd., 402 F.Supp. 262, 318-19 (E.D.Pa.1975). Whether a defendant has transacted business within a particular district sufficient to create venue is a factual question to be determined in each individual case. Id. Temporally, a corporation must have transacted business in the district at least at the time the cause of action accrued, if not when the complaint was filed. Lee v. Ply*Gem Industries, Inc., 593 F.2d 1266, 1271-72 (D.C.Cir.1979); Board of County Commissioners v. Wilshire Oil Company of Texas, 523 F.2d 125, 131-32 (10th Cir. 1975); Eastland Construction Company v. Keasbey & Mattison Co., 358 F.2d 777, 780 (9th Cir. 1966); Sunbury Wire Rope Manufacturing Co. v. United States Steel Corp., 230 F.2d 511, 512 (3d Cir. 1956); Redmond v. Atlantic Coast Football League, 359 F.Supp. 666 (N.D.Ill.), affirmed, 478 F.2d 1405 (7th Cir. 1973).

In the case at bar, Sportmart contends that the Nordica defendants transact business in this district because: (1) Nordica products are sold and advertised in Illinois; (2) Nordica-Italy purportedly controlled defendant RNC, a domestic distributor of Nordica products which concededly transacted business in this district, during the time period covered by the complaint; (3) Nordica-US, a wholly-owned subsidiary of Nordica-Italy, has been the exclusive domestic distributor of Nordica products since early January, 1982, with substantial sales in this district; and (4) Nordica-US is merely a continuation of the ongoing business of RNC with respect to the distribution of Nordica products. Taken singly or together, however, these factors do not compel the conclusion that either Nordica defendant is subject to personal jurisdiction in this district or that venue is properly laid here.

Those courts that have considered the question in an antitrust context have tended to reject the notion that a foreign corporation transacts business in a district simply because its products are sold in the district in the absence of other evidence that the sales are made by a company controlled by the foreign manufacturer. See, e.g., O.S.C. Corporation v. Toshiba America, Inc., 491 F.2d 1064, 1066 (9th Cir. 1974); Smokey's of Tulsa, Inc. v. American Honda Motor Co., Inc., 453 F.Supp. 1265 (E.D.Okl. 1978). In order to support the exercise of jurisdiction and venue over the foreign corporation, the relationship between the foreign and local corporations must be such that one is merely the alter ego of the other. Wells Fargo & Company v. Wells Fargo Express Company, 556 F.2d 406, 425 (9th Cir. 1977). That clearly was not the case as between RNC and Nordica-Italy at the time of the wrongs alleged in the complaint.

RNC is a Delaware corporation with headquarters in Williston, Vermont. Nordica-Italy has a 34 percent minority interest in the company. Rossignol owns the remaining 66 percent of RNC. Of the five members of the board of directors of RNC, only two are also on the five member Nordica-Italy board. Betw...