Venner v. Pennsylvania Steel Co. of New Jersey

• Decision Date: 18 April 1918
• Citation: 250 F. 292
• Court: U.S. District Court — District of New Jersey
• Parties: VENNER v. PENNSYLVANIA STEEL CO. OF NEW JERSEY et al.

250 F. 292

VENNER v. PENNSYLVANIA STEEL CO. OF NEW JERSEY et al.

United States District Court, D. New Jersey.

April 18, 1918

Lindabury Depue & Faulks, of Newark, N.J. (R. V. Lindabury, of Newark N.J., of counsel), for the motion.

McCarter & English, of Newark, N.J. (Robt. H. McCarter and Arthur F Egner, both of Newark, N.J., and Elijah H. Zoline, of New York City, of counsel), opposed.

RELLSTAB District Judge.

The Bethlehem Steel Company, a corporation of the state of Pennsylvania (hereinafter called the Bethlehem Company), was made a party defendant, pursuant to the prayer of the supplemental bill filed in this cause. It appears specially for the sole purpose of objecting to the jurisdiction of the court, and moves to quash the service of the subpoena whereby it was brought into the suit, upon the ground that the action is brought in a district where neither the plaintiff nor itself is a resident or inhabitant.

The original bill was filed May 2, 1916, by Joseph H. Brandt, a citizen and resident of Pennsylvania, against the Pennsylvania Steel Company of New Jersey, a citizen of New Jersey (hereinafter called the New Jersey Company), and its officers and directors. The Bethlehem Company was not made a defendant, for the reason, alleged in the bill, that it could not 'properly be brought in this jurisdiction.'

On May 15, 1916, Clarence H. Venner, a stockholder of the New Jersey Company and a citizen and resident of New York, was permitted to intervene as a party plaintiff. On May 23, 1916, Brandt withdrew, and the bill was dismissed as to him. Venner has since been the sole plaintiff. On the same date this court denied plaintiff's motion for a preliminary injunction, which action was affirmed by the Circuit Court of Appeals on June 30, 1916. See 233 F. 407, 147 C.C.A. 343. As between the parties to the original bill, there was diversity of citizenship, the requisite amount in controversy, and inhabitancy of the defendants in this district, to give this court jurisdiction.

On May 14, 1917, Venner filed the supplemental bill referred to. It is obvious that, if jurisdiction over the Bethlehem Company depends upon its being sued in the district whereof it is an inhabitant, the motion to quash must prevail. The plaintiff contends, however, that this court's jurisdiction is not thus limited; that, as to the original bill, this court had jurisdiction, not only on the ground of diversity of citizenship between the parties, but also because of the existence of a federal question; and that the supplemental bill is ancillary to and in aid of the original bill. That a federal question is raised by either or both of the bills does not in itself, as will presently appear, entitle the plaintiff to make a defendant a party to this suit in a district other than where such a defendant is an inhabitant.

To determine the questions of jurisdiction here raised, a correct understanding of the cause of action and the relation of the parties thereto, as stated by the two bills, is necessary. On May 23, 1916, when the preliminary injunction was denied, the original bill, as amended, in substance alleged that the New Jersey Company was about to accept a proposal made by the Bethlehem Company (a direct competitor) to dissolve and liquidate under the New Jersey corporation laws, and convey all the assets owned by it and its subsidiaries to the Bethlehem Company; that such proposed sale and dissolution were ultra vires, in derogation of plaintiff's rights under the common law, general rules of equity, the statutes and public policy of New Jersey, in violation of that state's corporation and anti-trust laws, and also in violation of the anti-trust laws of the United States, known as the Sherman and Clayton Acts. It prayed to enjoin such dissolution and the sale of assets, either directly or indirectly, to the Bethlehem Company or to any other person.

In the supplemental bill, filed May 14, 1917 (nearly a year after this court's denial of the preliminary injunction was affirmed), in substance it is alleged that, since the refusal of this court to grant a preliminary injunction, 'the transaction complained of in the bill of complaint, varying somewhat in detail, but not in substance or in its object as outlined in the original bill,' had been consummated; that a New Jersey corporation, known as the Bethlehem Steel Corporation (hereinafter called the Bethlehem Corporation), acting in conjunction with the defendants or some of them, organized a corporation known as the Penn-Mary Company, under the laws of Pennsylvania, for the sole purpose of acquiring the assets of the New Jersey Company and its subsidiaries; that said assets were thereafter conveyed to the Penn-Mary Company, and that the latter company, on or about July 1, 1916, leased all the tangible property so acquired to the Bethlehem Company, which is now in possession of the same; that the entire capital stock of the Penn-Mary Company is owned by either the Bethlehem Company or the Bethlehem Corporation, and that the latter owns all the capital stock of the Bethlehem Company, and controls and dominates its operations; that the organization of the Penn-Mary Company was a mere device to disguise the transaction, and that the sale was as originally planned and in the interest of the Bethlehem Corporation, its subsidiaries, and the individual defendants in the original bill; that this sale was in restraint of interstate and foreign commerce, and violated the said anti-trust laws of the United States, and also the laws of the state of New Jersey; and that the Bethlehem Company had an office and was doing business in the state of New Jersey. The prayer of the supplemental bill is that the Bethlehem Corporation, the Bethlehem Company, and the Penn-Mary Company be made defendants, and directed to appear and answer the original and supplemental bills, and that such sale and lease be held a violation of the United States and New Jersey anti-trust laws, and in fraud of plaintiff's rights as a stockholder of the New Jersey Company, and illegal, and set aside.

As to the federal question, both bills charge that the transactions complained of violate the Sherman and Clayton Acts, and, on their face, present federal questions justiciable in some federal court, irrespective of the citizenship of the parties. Section 24 (a), Judicial Code. Does the fact that the Bethlehem Company has an office and does business in this state give this court jurisdiction over it, regardless of its opposition? A District Court's jurisdiction is the creature of the acts of Congress enacted in pursuance of the Constitution, and apart from the powers inherent in a lawfully constituted judicial tribunal, has no jurisdiction other than that legislatively conferred upon it. Ladew v. Tennessee Copper Co., 218 U.S. 357, 368, 31 Sup.Ct. 81, 54 L.Ed. 1069; Ostrom v. Edison (D.C.) 244 F. 228.

Unless some statutory regulation other than that contained in section 51 of the Judicial Code (Act March 3, 1911, 36 Stat. 1101) authorizes this disputed service, it cannot be maintained merely because a federal question is involved, for that section provides that, except in certain cases (federal questions not being included within the exceptions), 'no civil suit shall be brought in any District Court against any person by any original process or proceeding in any other district than that whereof he is an inhabitant. ' Macon Grocery Co. v. Atlantic Coast Line R. Co., 215 U.S. 501, 30 Sup.Ct. 184, 54 L.Ed. 300; Male v. Atchison, Topeka & Santa Fe Ry. Co., 240 U.S. 97, 36 Sup.Ct. 351, 60 L.Ed. 544; Newell v. Baltimore & O.R. Co. (C.C.W.D. Penn.) 181 F. 698; Southern Pac. Co. v. Arlington Heights Fruit Co. (C.C.A. 9) 191 F. 101, 111 C.C.A. 581; Pennsylvania R. Co. v. Swift (D.C.E.D. Penn.) 242 F. 92.

Suits authorized by the Sherman Act may be brought in the district where the defendant 'resides or is found or has an agent.' 26 Stat. 209, Sec. 7; 38 Stat. 731, Sec. 4. Having an office and doing business within this district, as alleged by the supplemental bill, the Bethlehem Company is 'found,' within the meaning of the Sherman and Clayton Acts. St. Louis S.W. Ry. v. Alexander, 227 U.S. 218, 33 Sup.Ct. 245, 57 L.Ed. 486, Ann. Cas. 1915B, 77; Dobson v. Farbenfabriken, etc. (D.C.) 206 F. 125. As the process was served upon the Bethlehem Company in this district, the pertinent inquiry, as far as the Sherman Act is concerned, is whether these proceedings present a cause of action, under such act, cognizance whereof may be had over a defendant by serving it where found, as distinguished from a cause of action, however derived, whereof cognizance of a particular defendant depends upon its being served in the district of its inhabitancy.

Section 4 of that act makes it the duty of the United States district attorney, under the direction of the Attorney General, to institute suits in equity to prevent violations of the act. No private person is expressly authorized to bring these suits, and no one other than a United States attorney may bring the suit authorized in that section. Minnesota v. Northern Securities Co., 194 U.S. 48, 24 Sup.Ct. 598, 48 L.Ed. 870; Paine Lumber Co. v. Neal, 244 U.S. 459, 37 Sup.Ct. 718, 61 L.Ed. 1256. Section 7 authorizes any person 'injured in his business or property * * * by reason of anything forbidden or declared to be unlawful' by that act to sue and recover threefold damages. Obviously such suits include only actions at law. Fleitmann v. Welsbach Co., 240 U.S. 27, 36 Sup.Ct. 233, 60 L.Ed. 505.

The Clayton Act (38 Stat. 730), in important respects, enlarges both the jurisdiction of the federal court and the rights of private litigants therein, as to matters forbidden by the Sherman and Clayton Acts. Section 4 of the...