State of West Virginia v. Morton International, Inc.

• Citation: 264 F. Supp. 689
• Decision Date: 01 February 1967
• Docket Number: No. 4-66-Civ. 292.,4-66-Civ. 292.
• Parties: STATE OF WEST VIRGINIA, and its departments, divisions and agencies, the Cities of Charleston, Huntington, Wheeling, Beckley, Bluefield, Clarksburg, Fairmont, Morgantown, Moundsville, St. Albans and Weirton, All Municipal Corporations, Plaintiffs, v. MORTON INTERNATIONAL, INC. (formerly Morton Salt Company), Diamond Crystal Salt Company, International Salt Company, Carey Salt Company, Cayuga Salt Company and Hardy Salt Company, Defendants.
• Court: U.S. District Court — District of Minnesota

264 F. Supp. 689

STATE OF WEST VIRGINIA, and its departments, divisions and agencies, the Cities of Charleston, Huntington, Wheeling, Beckley, Bluefield, Clarksburg, Fairmont, Morgantown, Moundsville, St. Albans and Weirton, All Municipal Corporations, Plaintiffs, v. MORTON INTERNATIONAL, INC. (formerly Morton Salt Company), Diamond Crystal Salt Company, International Salt Company, Carey Salt Company, Cayuga Salt Company and Hardy Salt Company, Defendants.

No. 4-66-Civ. 292.

United States District Court D. Minnesota, Fourth Division.

February 1, 1967.

C. Donald Robertson, Atty. Gen., Benjamin F. Yancy, Jr., Deputy Atty. Gen., Samuel J. Smith, Asst. Atty. Gen., State of West Virginia, Charleston, W. Va., and Lee A. Freeman, Sp. Asst. Atty. Gen., and McConnell, Freeman, Curtis & McConnell, Chicago, Ill., for plaintiffs.

Allen I. Saeks and Leonard, Street & Deinard, Minneapolis, Minn., Bruno A. Mazza, Jr., and Bryant, Mazza & Williamson, Ithaca, N. Y., for defendant Cayuga Rock Salt Co.

MEMORANDUM

LARSON, District Judge.

The State of West Virginia, its departments, divisions and agencies and several municipalities within the State, instituted this antitrust action to recover treble damages from several defendants for alleged price fixing in the sale of rock salt. This is one of many rock salt treble damage actions pending in this District. See State of Michigan v. Morton Salt, 259 F.Supp. 35 (D.Minn. 1966). In the instant action defendant Cayuga Salt Company moves to quash the service of process and dismiss the action for improper venue. Defendant is a Delaware corporation and was served at its principal place of business in Myers, New York. Defendant maintains that it is not an inhabitant of the District of Minnesota, that it is not found here, and that it transacts no business here within the meaning of § 12 of the Clayton Act, 15 U.S.C. § 22. That provision is directed to the place for venue and service in antitrust actions against corporations.

"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."

Section 22 serves the dual purpose of fixing the place of venue and determining the place of service. If venue in this District is appropriate under § 22, extraterritorial service upon Cayuga at the place of its inhabitancy was permissible. United States v. Burlington Industries, Inc., 247 F.Supp. 185 (S.D.N.Y.1965); Public Service Company v. Federal Pacific Electric Co., 210 F.Supp. 1 (D.N. M.1962); Bruner v. Republic Acceptance Corp., 191 F.Supp. 200 (E.D.Ark. 1961). The Court concludes that venue in this District cannot be sustained. Therefore, Cayuga's motion to quash service and dismiss the action must be granted.

Originally, under § 7 of the Sherman Act, venue in antitrust actions against corporations could be laid only in the district where the defendant resided or was found. In People's Tobacco Co., Ltd. v. American Tobacco Co., 246 U.S. 79, 38 S.Ct. 233, 62 L.Ed. 587 (1918), the Supreme Court interpreted the word "found" to require that a corporation "be present in the district by its officers and agents carrying on the business of the corporation." The Court continued:

"The general rule deducible from all our decisions is that the business must be of such nature and character as to warrant the inference that the corporation has subjected itself to the local jurisdiction, and is by its duly authorized officers or agents present within the state or district where service is attempted." 246 U.S. at 87, 38 S.Ct. at 235.

The "carrying on business" test embodied in the term "found" in § 7 of the Sherman Act applied both to venue and service. United States v. Scophony Corp., 333 U.S. 795, 904-905, 68 S.Ct. 855, 92 L.Ed. 1091 (1948). Thus venue could be laid only where the defendant resided or was found; similarly, service could be made only where the defendant resided or was found.

With the advent of the Clayton Act, the venue provisions of § 7 were modified. With respect to corporations, § 12 of the Clayton Act, 15 U.S.C. § 22, increased the permissible sites for venue by adding the phrase "or transacts business." That phrase was construed in Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 47 S.Ct. 400, 71 L.Ed. 684 (1927), to have a much broader meaning than the concept of carrying on business. The Court indicated that the Clayton Act amendments were intended to enlarge the venue choices of antitrust plaintiffs, and adopted an everyday, commercial test of transacting business.

"* * * We think it clear that, as applied to suits against corporations for injuries sustained by violations of the Anti-Trust Act, its the amendment's necessary effect was to enlarge the local jurisdiction of the district courts so as to establish the venue of such a suit not only, as theretofore, in a district in which the corporation resides or is `found,' but also in any district in which it `transacts business' —although neither residing nor `found' therein—in which case the process may be issued to and served in a district in which the corporation either resides or is `found'; and, further, that a corporation is engaged in transacting business in a district, within the meaning of this section, in such sense as to establish the venue of a suit—although not present by agents carrying on business of such character and in such manner that it is `found' therein and is amenable to local process —if in fact, in the ordinary and usual sense, it `transacts business' therein in any substantial character." 273 U.S. at 372-373, 47 S.Ct. at 403.

Thus, what is required to indicate transaction of business for purposes of venue in antitrust actions is less than what is necessary to meet the more stringent requirement of "carrying on business," which is the criterion for jurisdiction, as well as the test of venue embraced in the word "found." Stern Fish Company v. Century Seafoods, Inc., 254 F.Supp. 151 (E.D.Pa.1966); Ohio-Midland Light & Power Co. v. Ohio Brass Co., 221 F.Supp. 405 (S.D.Ohio 1962); Raul International Corporation v. Nu-Era Gear Corporation, 28 F.R.D. 368 (S.D.N.Y. 1961). Addition of the transaction of business test was intended by Congress to relieve persons injured by antitrust violations from going to distant forums to recover from the wrongdoer. As the Court said in United States v. Scophony Corporation, supra:

"Thereby it relieved persons injured through corporate violations of the antitrust laws from the `often insuperable obstacle' of resorting to distant forums for redress of wrongs done in the places of their business or residence. A foreign corporation no longer could come to a district, perpetrate there the injuries outlawed, and then by retreating or even without retreating to its headquarters defeat or delay the retribution due." 333 U.S. at 808, 68 S.Ct. at 862.

In the present case defendant Cayuga has never been in this District, neither at the time of the injuries complained of nor at the present time. Whatever injuries may have been perpetrated in this District were accomplished by Cayuga's alleged coconspirators to plaintiffs other than those in the instant case. At the hearing on Cayuga's motion counsel for plaintiffs conceded that Cayuga has never transacted business here. Nor is this defendant an inhabitant of this District and, in addition, it cannot be found here. Plaintiffs argue, however, that venue is nonetheless appropriate in this District under the coconspirator theory, or the target theory.

The coconspirator theory is this: Each participant in a conspiracy is an agent for other coconspirators and the transaction of business in a district by one coconspirator sustains venue in that district in an action against other coconspirators. The genesis of this theory is the Ninth Circuit's decision in Giusti v. Pyrotechnic Industries, 156 F.2d 531 (9th Cir. 1946). In Giusti, plaintiff's antitrust action was brought against a Delaware corporation, Triumph, which was an association of corporations manufacturing fireworks, which corporations were also defendants. These corporations were from several States, including California, the district of suit. Plaintiff's complaint centered on the years 1935 and 1936 and charged defendants with conspiring to fix the prices of fireworks and monopolizing the industry. Defendant Triumph had actually transacted business within the State, but apparently this business commenced subsequent to 1935 and 1936. See Independent Productions Corporation v. Loew's, Inc., 148 F.Supp. 460, 464 (S.D.N.Y.1957). In 1943 Triumph filed a certificate of withdrawal from interstate business with the California Secretary of State, which provided, pursuant to State statute, that Triumph consented to service of process upon the Secretary of State in any action upon a liability incurred within the State prior to withdrawal. Plaintiff in Giusti duly served the Secretary but Triumph objected, contending that any liability to plaintiff was incurred not by it but by its alleged coconspirators. Further, Triumph argued that the monopolistic activities of the coconspirators did not constitute transaction of business. The Court rejected these arguments, holding (1) that the coconspirators were Triumph's agents and (2) that the acts of the conspirators directed toward securing a monopoly were transaction of business. By upholding the challenged service the Court thus ruled that any liability which Triumph incurred to plaintiff through its conspirator-agents was a liability incurred through the transaction of business within the State. Triumph also raised venue objections but the Court did not consider § 22 of the Clayton Act. Rather, it took the view that by filing the certificate of...