Systems Operations, Inc. v. Scientific Games Dev. Corp.

• Decision Date: 24 May 1976
• Docket Number: Civ. A. No. 76-250.
• Citation: 414 F. Supp. 750
• Parties: SYSTEMS OPERATIONS, INC., a Delaware Corporation, and Mathematica, Inc., a New Jersey Corporation, Plaintiffs, v. SCIENTIFIC GAMES DEVELOPMENT CORPORATION, a Michigan Corporation, and Dittler Brothers, Inc., a Georgia Corporation, Defendants.
• Court: U.S. District Court — District of New Jersey

414 F. Supp. 750

SYSTEMS OPERATIONS, INC., a Delaware Corporation, and Mathematica, Inc., a New Jersey Corporation, Plaintiffs, v. SCIENTIFIC GAMES DEVELOPMENT CORPORATION, a Michigan Corporation, and Dittler Brothers, Inc., a Georgia Corporation, Defendants.

Civ. A. No. 76-250.

United States District Court, D. New Jersey.

March 23, 1976.

Clarification and Modification of Order May 24, 1976.

Miller & Porter by William Miller, Allen D. Porter, Princeton, N. J., Millman & Jacobs by Morton C. Jacobs, Max R. Millman, Philadelphia, Pa., for plaintiffs.

Powell, Goldstein, Frazer & Murphy by C. B. Rogers, Harvey D. Harkness, Atlanta, Ga., for defendant Dittler Bros., Inc.

Jones, Thomas & Askew by Anthony B. Askew, Atlanta, Ga., for defendant Dittler Bros., Inc.

Troutman, Sanders, Lockerman & Ashmore by Michael C. Murphy, Robert L. Mote, Atlanta, Ga., for defendant Scientific Games Development Corp.

Clarification and Modification of Court's Order May 24, 1976.

FINDINGS OF FACT AND CONCLUSIONS OF LAW

CLARKSON S. FISHER, District Judge.

Plaintiffs come before this Court seeking a preliminary injunction to restrain the defendants from disparaging plaintiffs' product and interfering with a contractual relationship. This is one aspect of a three part complaint alleging violations of the Sherman Anti-Trust Act, 15 U.S.C. § 1 et seq. and the Clayton Act, 15 U.S.C. § 12 et seq., and requesting a declaratory judgment as to validity of certain patents asserted by one of the defendants. 35 U.S.C. § 1 et seq.; 28 U.S.C. § 2201, § 2202. Subject-matter jurisdiction is established under 28 U.S.C. § 1337 and § 1338. This Court has pendent jurisdiction over the disparagement and contractual interference allegations.

This Court hesitates to call this matter "the lottery case," for fear that it might in some small way be confused with The Lottery Case, 188 U.S. 321, 23 S.Ct. 321, 47 L.Ed. 492 (1903) of "commerce clause" fame. Nevertheless this case does involve lottery tickets—of the instant winner variety¹ —which some states have implemented for revenue raising purposes.

Plaintiffs, Systems Operations, Inc. hereinafter referred to as S.O.I., a Delaware corporation with its principal place of business in New Jersey, and Mathematica, Inc.,² a New Jersey corporation with its principal place of business in New Jersey, are lottery consulting firms responsible for the implementation, marketing and design of various types of public lotteries. Defendant, Scientific Games Development Corporation hereinafter referred to as Scientific Games, is a Michigan corporation with its principal place of business in Atlanta, Georgia and furnishes consulting services in the implementation, marketing and design of lotteries, particularly instant lotteries. Defendant, Dittler Brothers, Inc., is a Georgia corporation with its principal place of business in Atlanta and is involved in printing, among other things, instant lottery tickets. Scientific Games markets the instant tickets produced by Dittler Brothers. Before proceeding to the merits of plaintiffs' claim for preliminary injunctive relief and the facts surrounding that claim, this Court will examine the issues raised by defendant, Dittler Brothers, as to personal jurisdiction and venue.³

I PERSONAL JURISDICTION AND VENUE

Defendant, Dittler Brothers, asserted at the outset of the hearings on this matter that this Court had no personal jurisdiction over it and that venue was improper. In its proposed findings of fact and conclusions of law, however, Dittler stated that it would not contest the propriety of venue and jurisdiction as to it for purposes of this motion for preliminary relief. Defendant will file appropriate Rule 12 motions later. It should be noted, however, that Dittler, at this juncture, expressly leaves plaintiffs to demonstrate, for purposes of preliminary injunctive relief, that they are likely to prevail on the issues of venue and jurisdiction when the action is tried on the merits. Industrial Electronics Corp. v. Cline, 330 F.2d 480, 481 (3rd Cir. 1964). To this point the Court now turns its attention.

Dittler Brothers is a Georgia corporation with its principal place of business in Atlanta. It is an extensive printing concern producing such items as timetables for major airlines and Amtrak, rotary cigar bands and, of course, instant lottery tickets. It has no registered agent in New Jersey, and no accounts with New Jersey corporations. A Dittler salesman in New York City periodically comes into New Jersey to solicit business, but, as just noted, Dittler Brothers presently has no New Jersey accounts. On the other hand, the president of Dittler Brothers, Gilbert Bachman, visited the New Jersey Lottery Director with Dr. John Koza, chairman of the board of directors for Scientific Games. Mr. Bachman accompanied Dr. Koza as his "production consultant" when he was attempting to sell instant tickets to the State of New Jersey. Mr. Bachman would answer questions concerning the techniques of ticket production. Scientific Games subsequently obtained the instant lottery contract with New Jersey. Dittler Brothers, who manufactures the New Jersey instant lottery ticket, argues that its contract is with Scientific Games, and the tickets are sold directly to it. Yet it was admitted that Dittler employees physically load their trucks with New Jersey lottery tickets and ship them to Trenton. The June, 1975 order was for 50 million tickets and called for delivery F.O.B. Atlanta. The September order was for 50-60 million tickets and called for delivery F.O.B. Trenton. While there was no testimony on precisely how much money was involved in these transactions for Dittler or Scientific Games, it was clear throughout the hearings that the amount was substantial.

15 U.S.C. § 22 states:

"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 transact 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."

This statute ". . . deals with both venue and personal jurisdiction, in antitrust actions against corporations . . ." Goldlawr, Inc. v. Heiman, 369 U.S. 463, 82 S.Ct. 913, 8 L.Ed.2d 39 (1961). The critical determination for this Court is whether Dittler Brothers can be said to transact business in New Jersey.⁴ Since venue and jurisdiction under the above statute are to be viewed as congruent, Pacific Tobacco Corp. v. American Tobacco Co., 338 F.Supp. 842 (D.Or.1972), if Dittler can be said to transact business in New Jersey, then venue is appropriate in this jurisdiction and service is authorized. Call Carl, Inc. v. B P Oil Corp., 391 F.Supp. 367, 370 (D.Md.1975).

In resolving this issue, the predomination of one factor over another is not determinative, but rather the total of relevant activities considered in light of the circumstances of this case. Moreover, the term "transact business" is to be given its ordinary and usual meaning. Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 373, 47 S.Ct. 400, 403, 71 L.Ed. 684, 689 (1927).

"The mere fact that . . . the defendant is not registered to do business in New Jersey, nor maintains any offices, telephones, etc., . . . is not dispositive, per se, of the issue whether it did, in fact, transact business here in the usual sense."

School District of Philadelphia v. Harper & Row Publishers, Inc., 267 F.Supp. 1006, 1009 (E.D.Pa.1967).

"The practical, everyday business or commercial concept of doing or carrying on business `of a substantial character' . . is the test of venue." (emphasis added).

United States v. Scophony Corp., 333 U.S. 795, 807, 68 S.Ct. 855, 862, 92 L.Ed. 1091, 1100 (1948).

Considering the facts in the instant case and the concepts outlined above, the case most on point with the instant situation is Sunbury Wire Rope Mfg. Co. v. United States Steel, 129 F.Supp. 425 (E.D.Pa.1955). In that case the court evaluated the defendant's sales activities in the district, to determine whether it was "transacting business" within the meaning of 15 U.S.C. § 22.⁵ The defendant had negotiated a contract outside the district which required substantial sales within the district. In analyzing the case before him, Judge Grim noted:

"there can be a substitute for every department of a business but sales. Products or parts of them can be bought instead of manufactured, but there can be no substitute for sales. Without sales no business can exist. A sale is never complete until delivery is made, since it is the delivery which entitles the manufacturer to money and it is the earning of money which is the real purpose of business."

Id., at 427. The defendant argued that the $600,000 worth of steel delivered was but a small portion of its overall business and was, therefore, not sufficiently substantial.

In rejecting this argument, the court stated:

"whether or not a defendant is `transacting' business in a particular district should not and does not depend on whether or not a defendant corporation or its overall sales are large or small. The important thing is whether or not the sales would appear to be substantial from the average businessman's point of view." (emphasis added).

Id.

As was noted earlier, discussions of precise dollar figures relating to various lottery contracts were carefully avoided by both parties. Nevertheless it was never disputed that ticket sales to New Jersey involve a substantial amount of money and the delivery of over 100,000,000 instant tickets. It would be difficult to find, therefore, that such sales are not substantial. As for the F.O.B. aspect of the transactions, the court in Sunbury Wire made it clear on defendant's reargument that ". . . the term `delivery' was not used in any technical sense, but was used in its `practical, everyday business or commercial...