Le Vecke v. Griesedieck Western Brewery Co., 14816.

• Decision Date: 22 May 1956
• Docket Number: No. 14816.,14816.
• Citation: 233 F.2d 772
• Parties: William R. LE VECKE and Reed LeVecke, Appellants, v. GRIESEDIECK WESTERN BREWERY CO., a corporation, and Carling Brewing Co., a corporation, Appellees.
• Court: U.S. Court of Appeals — Ninth Circuit

233 F.2d 772 (1956)

William R. LE VECKE and Reed LeVecke, Appellants, v. GRIESEDIECK WESTERN BREWERY CO., a corporation, and Carling Brewing Co., a corporation, Appellees.

No. 14816.

United States Court of Appeals Ninth Circuit.

May 22, 1956.

Thomas A. Wood, Larwill & Wolfe, George R. Larwill, Charles W. Wolfe, Los Angeles, Cal., for appellants.

Sheppard, Mullin, Richter, Balthis & Hampton, James C. Sheppard, Los Angeles, Cal., for appellees.

Before STEPHENS, ORR and CHAMBERS, Circuit Judges.

ORR, Circuit Judge.

Appellants seek review of a holding by the district court that appellees, two foreign corporations, were not "transacting intrastate business" in California, within the meaning of the law of California¹ and the limitations of due process of law, sufficient to subject them to service of process in California.

Appellants, citizens of California, commenced this action in the California Superior Court in and for the County of Los Angeles, effecting service of process on each of the defendants, appellees, by service on the Secretary of State.² Appellees removed the action to the federal district court and then respectively moved that court to set aside, vacate, and quash service of summons and complaint or alternatively to dismiss the action as to each defendant. Each motion was accompanied by supporting affidavits and in each case appellants filed counter-affidavits. On May 12, 1955 the district court granted the motions.

The complaint purports to allege a cause of action against appellee Griesedieck Western Brewery Co., hereafter Griesedieck Co., for breach of an oral contract entered into between the said Griesedieck Co. and appellants, doing business as The LeVecke Company, a partnership, pursuant to which the latter agreed to act and did act as local distributor for Griesedieck Co.'s beer products. The Carling Brewing Co., hereafter Carling Co., was joined as co-defendant for alleged unlawful interference with the Griesedieck-LeVecke contract.

We have examined the pleadings and affidavits and conclude that appellee Griesedieck Co. was not "transacting intrastate business" in California within the meaning of § 6203, Calif.Corp.Code, and the limitations of due process of law and was, therefore, not subject to service of process in that state, but that Carling Co. was so engaged and so subject.³

Appellee Griesedieck Co. supported its motion with affidavits of four of its corporate officers. From these it appears without contradiction that Griesedieck Co. is an Illinois corporation and is licensed to do business in Missouri. During the period relevant here Griesedieck Co. engaged in the manufacture and sale of beer and operated breweries and offices in Belleville, Ill. and St. Louis, Mo. On November 1, 1954 Griesedieck Co. sold to appellee Carling Co. all of its brewing assets, equipment, real estate, plants and inventory and has not since engaged in the brewing business.⁴ Griesedieck Co. did not register with the State of California as a foreign corporation conducting business in that state.⁵

During the period of its brewing operations Griesedieck Co.'s beers were labeled "Stag" and "Hyde Park." Its sales in California were confined to two customers, viz. appellants, doing business as The LeVecke Company, and a company known as the Drexel Distributing Co. These companies were independently owned and operated and purchased beer from Griesedieck Co. for resale, orders being accepted by Griesedieck Co. at its Belleville and St. Louis plants from which shipments were made f. o. b. said plants by common carrier. Purchases by appellants were on their own account. Griesedieck Co. at no time maintained an office or place of business in California; did not own or lease real estate in California; did not own inventory or maintain a warehouse in California; had no salesmen in California; did not advertise; had no authorized telephone listing and did not pay taxes therein. It held no California licenses, nor did it apply for any. It had no employees; did not maintain a bank account; did not lend money; did not ship on consignment to California. Further, Griesedieck did not require appellants to keep any records, collect any data or file any reports.

The affidavits filed by appellants, stripped of conclusions of law, disclose that one Edward D. Jones, as president of Griesedieck Co., made four annual trips to California on which visits Mr. Jones accompanied appellants to the stores of many of appellants' customers. On these visits Mr. Jones praised the Griesedieck Co. products, suggested sales techniques to the retailers, sought to build confidence in the solvency of the Griesedieck Company, thanked the managers for handling the Griesedieck line and referred on occasion to appellants as Griesedieck Co.'s representatives. In addition Mr. Jones wrote letters to various retailers thanking them for handling the Griesedieck products and generally seeking to promote business.

Appellants' affidavits further disclose that Griesedieck supplied The LeVecke Company with letterheads, envelopes, business cards and point of purchase advertising materials of Griesedieck Co. Griesedieck Co., it is stated, controlled appellants' resale prices. It paid appellants a commission based on sales by Griesedieck to the Drexel Distributing Company, which was a subsidiary of Safeway Stores, whose account appellants had obtained for Griesedieck Co. In connection with the Drexel account appellants aver they had authority from Griesedieck Co. to settle disputes between the latter and purchasers of Griesedieck beer.

Appellants point to the trend in recent years to liberalize the requirements necessary to subject foreign corporations to local service of process based on business activities within the state of service. In this connection the Supreme Court of the United States in the case of International Shoe Co. v. State of Washington, Office of Unemployment Compensation and Placement, 1945, 326 U.S. 310, 319, 66 S.Ct. 154, 159, 90 L.Ed. 95, said:

"* * * The test is not merely, as has sometimes been suggested, whether the activity, which the corporation has seen fit to procure through its agents in another state, is a little more or a little less. * * * Whether due process is satisfied must depend rather upon the quality and nature of the activity in relation to the fair and orderly administration of the laws which it was the purpose of the due process clause to insure."

The more liberal concept of "doing business" adopted by the Supreme Court in the International Shoe case for purposes of measuring the requirements of due process has been incorporated into the law of California by the courts of that state as a measure of the breadth of its statutory requirements, see Jeter v. Austin Trailer Equipment Co., 122 Cal.App. 2d 376, 265 P.2d 130, Kneeland v. Ethicon Suture Laboratories, Inc., 118 Cal.App. 2d 211, 257 P.2d 727, and Note, Suing Foreign Corporations in California, 5 Stan.L.Rev. 503, 504 (1953).

Numerous decisions of the California courts have been cited to us by appellants wherein foreign corporations have been held to be "transacting intrastate business" in that state within the intent of its statute. Each case, of course, turns on its peculiar facts, West Publishing Co. v. Superior Court, 20 Cal. 2d 720, 128 P.2d 777. In each of the numerous cases cited to us by appellants elements not here present existed and were looked to by the court in its consideration. Thus, in West Publishing Co. v. Superior Court, supra, the foreign corporation had full time agents in California, rented office space there and had merchandise on display. In Koninklijke Luchtvaart Maatschappij v. Superior Court, 107 Cal.App.2d 495, 237 P.2d 297, the foreign corporation had an office in the state with employees engaged in solicitation of business. In Jeter v. Austin Trailer Equipment Co., supra, the local distributor operated on a commission basis and the foreign corporation had inventory in the state. In Sales Affiliates v. Superior Court, 96 Cal.App.2d 134, 214 P.2d 541, agents of the foreign corporation were engaged in soliciting business in California. In Fielding v. Superior Court, 111 Cal.App.2d 490, 244 P.2d 968, the local distributor was required to make periodic reports to the foreign corporation which, in addition, kept title to goods warehoused in California until such goods were sold by the distributor. In Kneeland v. Ethicon Suture Laboratories, Inc., supra, the foreign corporation had six permanent employees in the state engaged in sales promotional activities. In Thew Shovel Co. v. Superior Court, 35 Cal.App.2d 183, 95 P.2d 149, the distributor operated on a consignment basis. The opinions in some of these cases express the requirements sufficient to warrant a finding of "transacting intrastate business" in very liberal terms.

Postponing for the time being discussion of problems raised by the miscellaneous activities detailed in appellants' counter-affidavits it is clear that the mere fact of substantial sales by an out of state manufacturer to a local distributor do not constitute "transacting intrastate business" within the intent of the California statute as construed by California courts. Such is the holding of the recent case of Martin Bros. Electric Co. v. Superior Court, 121 Cal.App. 2d 790, 264 P.2d 183, and see Estwing Mfg. Co. v. Superior Court, 128 Cal.App. 2d 259, 275 P.2d 146.⁶ The Supreme Court of California in its most recent pronouncement on the scope of the requirement in West Publishing Co. v. Superior Court, supra, 20 Cal.2d at page 728, 128 P.2d at page 781, stated that:

"* * * it is not any activity of a corporation in a state other than that of its residence which will justify the conclusion that it is `doing business\' there, so as to make it amenable to process there * * * the business must be of such a nature and character as to warrant the inference that the corporation has subjected itself to the local

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