B. J. Semel Associates, Inc., and B. J. Semel D/B/A South East Fire-Works v. United Fireworks Manufacturing Co., Inc.

355 F.2d 827

Opinions

McGOWAN, Circuit Judge:

The appeal before us in this private civil action under the antitrust laws presents solely the question of whether the venue of the action was properly laid in the District Court. This issue turns upon the language of Section 12 of the Clayton Act, 15 U.S.C. § 22, which reads as follows:

“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.”

We have concluded that, looking only to those facts as to which there is no essential dispute in the record before us, venue did exist within the meaning of the statute. Thus the order appealed from, which quashed the service of process, is reversed.

I

The complaint in this action alleged violations of the Sherman Act, 15 U.S.C. §§ 1, 2, and 1px solid var(--green-border)">3, as well as illegal price discrimination under the Robinson-Pat-man Act, 15 U.S.C. § 13(a). Appellant is a District of Columbia corporation with its principal place of business in Washington. It is engaged in the business of distributing fireworks at wholesale, in the District and elsewhere. Ap-pellee is an Ohio corporation which manufactures fireworks and sells them to wholesalers and retailers throughout the United States. Its factory and office are in Dayton. Service of process was effected upon appellee at its Dayton office.

The complaint was met with a motion under Rule 12(b), Fed.R.Civ.P., to dismiss for improper venue. An affidavit in support of the motion represented that appellee had no office, property, or personnel in the District of Columbia. It was said that no salesmen, sales agents, or advertising were used in the District to solicit business. Price lists were mailed into the District only upon specific request. Appellee had three customers in the District, including appellant, to whom sales were made pursuant to unsolicited requests received in Dayton. Resulting merchandise deliveries were all F.O.B. Dayton.¹ Sales to one of the customers other than appellant totalled $1056.23 in 1963 and $1121.50 in 1964. Sales to the other such customer were $643.20 in 1962. Since appellee’s organization in 1962, its employees had been in the District on only five occasions. Three of these were in the autumn of 1963 in connection with hearings of a Senate Subcommittee on Juvenile Delinquency. These are said to have involved no solicitations or negotiations, although “these visits [by the President and Affiant Vice-President] included incidental goodwill contacts with customers in the District.” The other two visits by affiant in 1964 were said to be “each of less than a day’s duration and related solely to this suit and problems arising out of the assignment by [appellant] to [appellee] of certain accounts receivable as security for payment of the price of merchandise sold to [appellant].”

An opposing affidavit was submitted by an officer of appellant. It recited that appellant bought $69,174.51 worth of fireworks from appellee in 1963, and $97,993.87 in 1964, or a total of $167,-163.88. Two paragraphs 2 describe frequent telephone conversations, “as many as,, twenty-two a month,” concerning “every aspect of [appellant’s] business, including advertising, promotion, defective merchandise, deliveries, [and] customers’ complaints.” Appellee was said to have “insisted” upon an assignment to it of appellant’s accounts receivable generated by appellant’s resales of ap-pellee’s products.

It will be noted that-this last-mentioned affidavit gave a different version of the “goodwill” calls admittedly paid by appellee’s officers upon appellant in 1963. This prompted the filing of a further affidavit by the movant, denying appellant’s description of these meetings and insisting that they involved no business discussions other than generalized goodwill exchanges.

The motion was heard and disposed of by the District Court solely on these affidavits, together with legal memo-randa and oral argument by the parties. The court’s order recited no more than that “having found that venue is improperly laid as to the defendant in the District of Columbia,” service is quashed.

II

Putting to one side the clash between the affidavits as to what occurred during the 1963 calls of appellee’s officers upon appellant in Washington,³ certain facts emerge as not in dispute. One is that the volume of sales made by appellee to appellant was substantial. Billings of the order of $70,000 to $100,000 annually are not insignificant in most businesses, and certainly there is nothing in this record to suggest that they are so in the fireworks trade. A second is that appellant and appellee were in eon-stant and frequent telephonic communication about all aspects of their business relationships, including appellant’s own relations with its customers — a circumstance of active interest to appellee because of its practice of requiring assignment to it of appellant’s receivables.

It seems equally clear that appellee had no permanent base or personnel in the District; that it relied heavily, if not entirely, on the telephone for the provision of those services which a travelling salesman or a local agent would otherwise have been expected to supply; and that it uniformly adhered to a trade policy of shipping its products F.O.B.

In trying to relate these facts to the governing law, it is important to remember that we are interpreting a venue statute, not resolving a constitutional objection to the assertion of jurisdiction. Compare International Shoe Co. v. State of Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1945). Furthermore, the venue statute with which we deal is not generalized in its reach but was intended by Congress to be an important facet in the scheme of private remedies devised to promote the objectives of the antitrust laws.⁴ Thus it is that the lore of the myriad cases dealing with the familiar problem of the requisite indicia of corporate presence to render the foreign corporation subject to suit locally is not directly apposite here.⁵ The Supreme Court has pointedly reminded us of the inutility of much of this learning in construing Section 12 of the Clayton Act, and has said that we are, as has it, to seek to make effective “Congress’ remedial purpose” in enacting that statute by making “the test of venue” under it a “practical, everyday business or commercial concept of doing or carrying on business ‘of any substantial character’ * * United States v. Scophony Corp., 333 U.S. 795, 807-808, 68 S.Ct. 855, 862, 92 L.Ed. 1091 (1948). The remedial purpose referred to in Scophony was clearly that identified by the Court as the relieving of “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.”⁶

Scophony does not decide this case, but it does provide an authoritative characterization of the purposes of Section 12 and of the considerations relevant to the realization of those purposes. Since this exegesis was provided in 1948, a number of courts have made their way by the light it provides. Green v. U. S. Chewing Gum Mfg. Co., 224 F.2d 369 (5th Cir. 1955); Brandt v. Renfield Importers, Ltd., 278 F.2d 904 (8th Cir.), cert. denied, 364 U.S. 911, 81 S.Ct. 274, 5 L.Ed.2d 226 (1960); Lower Colorado River Authority v. Westinghouse Electric Corp., 219 F.Supp. 743 (W.D.Tex.1963). In one way or another it is possible, as appellee does, to note factual variations from this case, but appellee’s chief reliance in this regard is upon the circumstance that deliveries of the goods sold were, in these cases, made for the seller’s account to the buyer’s place of business. We, however, are unable to believe that the spirit of Scophony comports with allowing the seller’s shipping practices to determine his amenability to suit under Section 12. Were it otherwise, F.O.B. would always, and without more, compel the buyer to litigate on the seller’s home grounds — the very result which Congress sought to avoid in Section 12.⁷

One thing at least which does emerge from the post-Soophony cases, it seems to us, is a substantiality requirement in terms of the volume of trade done.⁸ Venue is not to be found in every case simply because of an isolated transaction of modest proportions. “Transacts business,” as used in the statute, imports continuity — -and continuity and total volume tend to be inter-acting. As said above, we think the volume of business was such here as to surmount any attack of a de minimis nature. And the wholly respectable proportions of this volume complete the picture which we think the record paints of a manufacturer who looked to the District of Columbia as one of its important markets and whose contacts with that market, although physically remote in a sense, were nonetheless continuous and substantial. No more than the shipping device of F.O.B. do we think the telephone capable of insulating its user under any .and all circumstances from the reach of Section 12. Whatever may be the final verdict as to the net contribution of that instrument to civilized intercourse, it certainly has wrought changes in the necessities of doing business at far removes. The “drummers” of an earlier time have, in some lines at least, become as obsolete as the forms of transportation they had to use.

Had an officer of appellee suddenly been asked, in a non-legal context, “Are you doing any business in the District of Columbia,” his answer would, we surmise, have been “Yes.” His interrogator would understand him to mean that at least one customer in the District was looked to for an important amount of purchases; and, the more practical a man of business such an interrogator was, the more he would have assumed that appellee was in close and continuous touch with such customer about their mutual business concerns. This is what Congress had in mind when it pondered the problem of venue in relation to private antitrust suits, and decided to give the injured party wider scope to sue at home.⁹ See United States v. Scophony. Corp., supra. The exact limits of that scope may not be clearly fixed, but we think this appellee had, on the basis of the record before us, brought himself within them.

The judgment appealed from is reversed and the case remanded for further proceedings not inconsistent herewith.

It is so ordered.

Footnotes

1

. In the case of appellant, the affidavit recites that “deliveries of merchandise have been made to [appellant] at United’s factory in Dayton, with transportation arranged entirely by [appellant].” If this is thought somehow to take these deliveries outside of what are customarily referred to as F.O.B. shipments, then that would be an essential element in a claim that appellee had so tailored and restricted its operations as not to be in interstate commerce at all, thereby being beyond the reach of the federal antitrust laws. But appellee’s counsel, whose knowledge of the true nature of appel-lee’s operations may reasonably be inferred to be as realistic as it is complete, has made no such claim. It is still possible, by careful restriction of one's activities, to do business solely in intrastate commerce if one wants to, even with buyers who come from out of the state. But if the business choice is to seek the benefits of the greater latitude provided by operations within the contemplation of the Commerce Clause, then one of the burdens is amenability to federal antitrust sanctions, including the liberalized venue requirements of Section 12.

2

. “During the entire period of the relationship between plaintiffs and defendant, defendant and I were in continual communications. Sometimes these communications were made through my visiting defendant’s plan in Dayton, Ohio. Usually, they were made by long distance telephone conversations between Dayton and my office in Washington. There would be as many as twenty-two telephone conversations a month between defendant and plaintiffs. Most significant!y, these communications have taken place in the District of Columbia. Mr. Martin in Paragraph 6 of his affidavit, admits that on three different occasions in 1963, he visited the District of Columbia. He dismissed these trips, however, as made solely in connection with hearings held by the United States Senate Sub-Committee on Juvenile Delinquency. Everything else he did during his visits was brushed aside as ‘incidental good will contacts with customers.’ What he calls ‘incidental good will contacts’ were, in fact, important business sessions lasting approximately 3 to 4 hours at least. These sessions handled the major problems that had to be dealt with on a person to person basis rather than over the telephone, the problems which arise particularly in preparation for a new season in the fireworks industry. As a result of these sessions, I was able to avoid making at least one trip to Dayton, which I normally would have had to make.”

“The constant communications between defendant and myself concerned every aspect of plaintiff’s business. Defendant insisted that it obtain an assignment of my accounts from my customers, most of whom were located in the District of Columbia, in order to secure my own account with defendant. Likewise, I was in constant touch with defendant about such things as advertising, promotion, defective merchandise, deliveries, customers’ complaints, and all the other numerous matters that would naturally arise out of almost a $100,000 worth of business a year.”

3

. The District Judge did not address himself in any manner to this apparent conflict, nor purport to make findings of fact generally as, indeed, he is not required to do in deciding motions under Rule 12. See Rule 52(a), Fed.R.Civ.P. Appellee has cast its argument here largely in terms of a claim that we are bound by Rule 52(a) not to disregard the trial court’s findings of fact unless they are clearly erroneous. We find this approach wholly unpersuasive. The raising of the defense of improper venue by a motion to dismiss in advance of trial is expressly made optional with the pleader by Rule 12(b). If deferred to the answer, evidence relevant to venue will be heard by the trier of fact and findings made, if the judge is the trier, which would presumably resolve conflicts. In this posture Rule 52(a) would be relevant.

4

. See note 6, infra.

5

. It is significant, on the one hand, that Section 12, in addition to laying venue in the districts where a corporation is “an inhabitant” or “may be found,” does the same for any district wherein it “transacts business”; and, on the other, that the concluding clause authorizes service of process only in a district where the corporation is “an inhabitant” or “may be found.” Because the omission of “transacts business” from the last clause suggests that the content of that phrase differs from that of the other two categories, it' has been recognized that venue might exist in one district with process required to be served in another. See Eastman Kodak Co. of New York v. Southern Photo Materials Co., 273 U.S. 359, 373, 47 S.Ct. 400, 71 L.Ed. 684 (1927); 1 Moore, Federal Practice IT 0.144 [15] at 1668-70 (2d ed. 1964). See also, 51 Cong.Rec. 9608. Thus, considerations resting upon the likelihood of actual notice (i.e. the presence of employees or agents), which are relevant to the requirements for service of process, need not control here.

6

. As originally proposed, the provision which is now Section 12 of the Clayton Act merely repeated the language of Section 7 of the Sherman Act, which provided that suits against a corporation could be brought only in the district where the corporation is an “inhabitant” or “may be found.” H.R.Rep. No. 627, 63d Cong., 2d Sess. 20 (1914). Fearful that this provision was too restrictive and placed plaintiffs at an undue disadvantage, see 51 Cong.Rec. 9414-9417, 9466-9467, 9607-9608, the House, in a deliberate effort to ease the difficulties of bringing suit, amended the provision by adding “or has an agent.” 51 Cong.Rec. 9466, 9607. The Senate Judiciary Committee discarded the House version and proposed amending that section to it present form. S.Rep. No. 698, 63d Cong., 2d Sess. 73 (1914). The Senate accepted the change without comment, see 51 Cong.Rec. 14,214, 14,324, 14,597, 14,609-6910, and it attracted little attention until the Bill finally returned to the House from the Conference Committee. In the House, Congressman Webb, the manager of the Bill in the Conference Committee, pointed to Section 12 as part of his defense against criticism that the compromise Bill was too weak. After emphasizing the civil remedies provided by the Bill, he stated that by this section “we are liberalizing the procedure in the courts in order to give the individual who is damaged the right to get his damages anywhere — anywhere you can catch the offender * * 51 Cong.Rec. 16274. And he added, immediately before approval of the Conference report, “we have thrown the doors of the court wide open for the first time to every man who is injured. He can enter the court at his home and sue a man or corporation who injures Mm or enter suit in the man’s or corporation’s home * * 51 Cong.Rec. 16342. Thus, although Congress perhaps did not adopt the most liberal version of the section proposed, see United States v. National City Lines, Inc., 334 U.S. 573, 68 S.Ct. 1169, 92 L.Ed. 1584 (1948), there is no doubt that the version enacted represented a conscious attempt to liberalize the venue requirements. See also, Eastman Kodak Co. of New York v. Southern Photo Materials Co., 273 U.S. 359, 372-374, 47 S.Ct. 400, 71 L.Ed. 684 (1927); 1 Moore, Federal Practice ¶ 0.144 [15] at 1667 (2d ed. 1964); Note, 58 Yale L.J. 482 (1949).

7

. See Sunbury Wire Rope Mfg. Co. v. United States Steel Corp., 129 F.Supp. 425 (E.D.Pa.1955). There the court first found venue to exist on a showing that the seller had in two years sold and delivered some $600,000 worth of its products in the jurisdiction. On petition for rehearing it was pointed out that the shipments were on an F.O.B. basis, with title having passed from seller to buyer before the goods entered the jurisdiction allegedly having venue. The court adhered to its original decision, stating that passage-of-title concepts and consequences were not comprehended within the practical concept of transacting business embodied in Section 12. We agree.

Intermountain Ford Tractor Sales Co. v. Massey-Ferguson Ltd., 210 F.Supp. 930 (D.Utah 1962), involved a claim of venue in respect of a Canadian parent corporation by reason of its relationships with an American subsidiary. The court appeared to think that the claim turned upon a proper reading of Cannon Mfg. Co. v. Cudahy Packing Co., 267 U.S. 333, 45 S.Ct. 250, 69 L.Ed. 634 (1925). But Cudahy did not involve either the antitrust laws generally or Section 12 in particular. It was an action for breach of contract, and the question was whether a foreign corporation parent was doing business in North Carolina through its subsidiary so as to be subject to suit there. Judge Christensen’s preoccupation with Cudahy is evidenced by the fact that he closed the paragraph quoted in the dissent with the sentence: “And besides, as I read the Cudahy ease a similar argument was rejected there.” The significance of F.O.B. sales in measuring due process limitations on state jurisdiction is surely not to be equated with their relevance to defining a venue created by Congress as an incident to the assertion, in the form of the antitrust laws, of its plenary Commerce Clause power. The so-called “ ‘long-arm’ concept,” since it relates to the reach of state jurisdiction, is not normally to be thought of as extended by a construction of a Congressional venue statute deriving from the Commerce Clause. In any event, it is interesting that Judge Christensen eventually found Section 12 venue to exist in the Intermountain case, because he thought the parent-subsidiary problem of Cudahy, where it was held that North Carolina did not have jurisdiction over the defendant’s person, should be broadly viewed in the light of what the Supreme Court had later said in Soophony about the liberalized scope of Section 12.

8

. Commonwealth Edison Co. v. Federal Pacific Electric Co., 208 F.Supp. 936 (N.D.Ill., 1962). And see Ohio-Midland Light & Power Co. v. Ohio Brass Co., 221 F.Supp. 405 (S.D.Ohio 1962); Public Service Co. v. Federal Pacific Electric Co., 210 F.Supp. 1 (D.N.M.1962); Reid v. University of Minnesota, 107 F. Supp. 439 (N.D.Ohio 1952). What number of dollars is necessary to found venue is, obviously, a highly relative concept which takes shape from other factors in the particular setting. Cf. Donlan v. Carvel, 193 F.Supp. 246 (D.Md.1961).

9

. This is not to say that Congress intended that every case must be tried where it is first brought. The district courts have been expressly empowered to transfer civil cases for “the convenience of parties and witnesses, in the interests of justice.” 28 U.S.C. § 1404(a). This has been held to apply to civil antitrust cases, whether instituted by the Government or by a private party. United States v. National City Lines, Inc., 337 U.S. 78, 69 S.Ct. 955, 93 L.Ed. 1226 (1949); Paramount Pictures, Inc., v. Rodney, 186 F.2d 111 (3d Cir.) cert. denied, 340 U.S. 953, 71 S.Ct. 572, 95 L.Ed. 687 (1951). Thus a determination that venue exists under Section 12 does not conclude the disposition of a motion to transfer under Section 1404(a).