U.S. v. Smithfield Foods, Inc.
| Citation | 332 F.Supp.2d 55 |
| Decision Date | 05 August 2004 |
| Docket Number | No. CIV.A. 03-00434 (HHK).,CIV.A. 03-00434 (HHK). |
| Parties | UNITED STATES of America, Plaintiff, v. SMITHFIELD FOODS, INC., Defendant. |
| Court | U.S. District Court — District of Columbia |
C. Alexander Hewes, Jr., Jessica K. Delbaum, Nina B. Hale, Caroline E. Laise, Washington, DC, for Plaintiff.
Kevin J. Arquit, Simpson, Thacher & Bartlett LLP, New York City, Thomas Michael Hughes, Hunton & Williams, Washington, DC, Thomas Glascock Slater, Jr., Hunton & Williams, Richmond, VA, for Defendant.
Plaintiff, the United States, brings this action against defendant Smithfield foods, Inc. ("Smithfield") for civil penalties under Section 7A of the Clayton Act, 15 U.S.C. § 18a, commonly known as the Hart-Scott-Rodino Antitrust Improvements Act of 1976. Presently before this court is defendant's motion to dismiss for lack of personal jurisdiction [# 3]. Upon consideration of defendant's motion, the opposition thereto, and the record of this case, the court concludes that this court is unable to exercise personal jurisdiction over defendant and that this case should be transferred to the Eastern District of Virginia.
At all times pertinent to this suit, the Hart-Scott-Rodino Antitrust Improvements Act (the "Act") required that a person with total assets or annual net sales in excess of $100 million, who as a result of an acquisition, would hold an aggregate total amount of voting securities in excess of $15 million to file a premerger notification and report with the U.S. Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") and to observe a waiting period before making the acquisition, unless otherwise exempted.1 15 U.S.C. § 18a(a). The waiting period is intended to provide the FTC and the DOJ with time to investigate the proposed transactions and determine whether to seek an injunction to prevent transactions that may violate the antitrust laws. Acquisitions of voting securities in excess of $15 million are exempt from the reporting and waiting obligations of the Act if they are "solely for purposes of investment" and the voting securities acquired or held do not exceed 10 per cent of the outstanding securities of the issuer. 15 U.S.C. § 18a(c)(9). Any person who violates the Act is liable to the United States for a civil penalty of up to $11,000 per day during which the person is in violation of the Act. 15 U.S.C. § 18a(g)(1), amended by Pub.L. No. 101-410, 104 Stat. 890 (1990) (28 U.S.C. § 2461 note), amended by Pub.L. No. 104-134, § 31001(s), 110 Stat. 1321 (1996), and 16 C.F.R. § 1.98 (2004).
Smithfield, a Virginia Corporation with its principal executive offices in Smithfield, Virginia, is the nation's largest hog producer and pork packer, reporting annual net sales of over $3 billion during the time of the alleged violations of the Act. On May 19, 1998, Smithfield began acquiring voting securities of IBP, Inc. ("IBP"), a Delaware corporation with its principal executive offices in Dakota Dunes, South Dakota. Smithfield made these acquisitions through its wholly-owned subsidiary, SF Investments, Inc. On June 26, 1998, Smithfield acquired additional IBP voting securities. Smithfield continued to acquire IBP voting securities through June 29, 1998. Smithfield held an aggregate total amount of IBP voting securities in excess of $15 million until October 1, 1998 when it began to liquidate its IBP holdings. As the parent entity, Smithfield did not file the premerger notification and report form required by the Act if the purchases were not exempt from filing as solely for investment purposes.
On June 30, 1999, Smithfield again began acquiring IBP voting securities. On December 8, 1999, as a result of its additional acquisitions of IBP voting securities, Smithfield held an aggregate total amount of IBP voting securities in excess of $15 million. Smithfield continued to acquire IBP voting securities through September 11, 2000. On January 5, 2001, Smithfield began to liquidate its IBP holdings, and by January 12, 2001, the value of Smithfield's IBP holdings fell below $15 million. Smithfield did not file the premerger notification and report form that the Act required if the purchases were not exempt from filing as solely for investment purposes.
The United States seeks civil penalties of $11,000 per day during two periods in which Smithfield allegedly violated the Act. Smithfield allegedly violated the Act for a total of 97 days from June 26, 1998 through October 1, 1998 and for a total of 401 days from December 8, 1999 through January 12, 2001.
At the time of the alleged violations of the Act, Smithfield, a holding company that does not manufacture, distribute, or sell any products or commercial services, no longer had any offices or facilities in the District of Columbia. In 1987, Smithfield moved its headquarters to offices leased in the District of Columbia. In 1993, it moved its headquarters back to Smithfield, Virginia, however. Because Smithfield's office lease in the District of Columbia did not expire until 1997, Smithfield sublet the space through April 1997. Due to its subletting activity, Smithfield filed annual corporate reports and paid taxes required by the District of Columbia, filing its last report in July 1998. Since September 2001, Smithfield has also filed a tax form with the District of Columbia pursuant to D.C.Code § 47-1812.08 because one of its employees is a resident of the District of Columbia.
Smithfield's decision to invest in IBP securities was made by executives at its headquarters in Virginia, or at the offices of its investment subsidiary, SF Investments, Inc., a Delaware corporation headquartered in Delaware. The acquisitions of IBP securities were ordered in Virginia or Delaware and executed on the New York Stock Exchange.
Smithfield conducts its operations through two subsidiary operating groups, the Meat Processing Group and the Hog Production Group. The Meat Processing Group consists of separately incorporated meat processing subsidiaries, whose operations are supplied in part by entities within the Hog Production Group. The Hog Production Group is organized under a separately incorporated subsidiary, Murphy-Brown, LLC, a Delaware limited liability corporation headquartered in North Carolina. None of the operating subsidiaries are incorporated or headquartered in the District of Columbia. Products manufactured by some of Smithfield's subsidiaries are sold in retail outlets in the District of Columbia. The United States does not allege, however, that any of these subsidiaries were involved in conduct that allegedly violated the Act.
A motion to dismiss is appropriate "only if it is clear that no relief could be granted under any set of facts that could be proved consistent with the allegations." Martin v. Ezeagu, 816 F.Supp. 20, 23 (D.D.C.1993) (internal quotation marks omitted); see Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957) (). In addition, the court must "construe the complaint in the light most favorable to [the] plaintiff and must accept as true all reasonable factual inferences drawn from well-pleaded factual allegations." In re United Mine Workers of Am. Employee Benefit Plans Litig., 854 F.Supp. 914, 915 (D.D.C.1994); see Schuler v. United States, 617 F.2d 605, 608 (D.C.Cir.1979) ().
Generally, in resolving motions to dismiss brought under Rule 12(b)(2), unlike motions brought pursuant to Rule 12(b)(6), courts are free to consider relevant materials outside the pleadings. Land v. Dollar, 330 U.S. 731, 735 n. 4, 67 S.Ct. 1009, 91 L.Ed. 1209 (1947) (), overruled on other grounds by Larson v. Domestic & Foreign Commerce Corp., 337 U.S. 682, 69 S.Ct. 1457, 93 L.Ed. 1628 (1949); Artis v. Greenspan, 223 F.Supp.2d 149, 152 (D.D.C.2002) (). Therefore, in considering Smithfield's motion to dismiss on the basis of lack of personal jurisdiction, the court has considered the parties' submissions relevant to this issue.
The plaintiff bears the burden of proof of establishing personal jurisdiction. Jacobsen v. Oliver, 201 F.Supp.2d 93, 104 (D.D.C.2002); Dooley v. United Techs. Corp., 786 F.Supp. 65, 70 (D.D.C.1992); Lott v. Burning Tree Club, Inc., 516 F.Supp. 913, 918 (D.D.C.1980). The plaintiff must make a prima facie showing of personal jurisdiction by alleging specific facts that demonstrate purposeful activity by the defendant in the District of Columbia invoking the benefits and protections of its laws. First Chicago Int'l v. United Exch. Co., 836 F.2d 1375, 1378-79 (D.C.Cir.1988); Jacobsen, 201 F.Supp.2d at 104; Novak-Canzeri v. Saud, 864 F.Supp. 203, 205 (D.D.C.1994). When personal jurisdiction is challenged, the plaintiff "cannot rest on bare allegations or conclusory statements and must allege specific facts connecting each defendant with the forum." GTE New Media Servs., Inc. v. Ameritech Corp., 21 F.Supp.2d 27, 36 (D.D.C.1998).
The United States relies on Section 12 of the Clayton Act, 15 U.S.C. § 22, as the sole basis for this court's exercise...
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