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United States District Court, Northern District of Illinois, E.D

May 11, 1962


The opinion of the court was delivered by: Robson, District Judge.

Schwager-Wood Corporation,*fn1 one of eight defendants in this two-count treble damage antitrust cause, has moved to quash the return of service on it and to dismiss the cause,*fn2 on the ground it is not subject to service in this District. It is an Oregon corporation, and assertedly transacted no business here and maintained no office in the District.

The affidavit of A.C. Schwager, its president, states the corporation was organized

in Oregon, April 9, 1946, and dissolved November 6, 1959. Its successor corporation is Schwager-Wood Company, Inc. Service was had on William Maxwell Wood, vice president and secretary, on August 9, 1961, in Portland, Oregon.

The affidavit further states that:

    "Schwager-Wood Corporation at all times has
  maintained its offices and manufacturing facilities
  only in Portland, Oregon, and at no time has had any
  such offices or facilities in the State of Illinois.

    "Schwager-Wood Corporation has not ever been
  registered to do business in Illinois and has never
  sought or been obliged to so register. It has not
  done or transacted business in Illinois, has not ever
  based any of its employees, in Illinois and has not
  ever authorized any person in Illinois to accept
  service on its behalf. It has not ever had any
  subsidiary or controlled corporation in Illinois or
  elsewhere. It has not ever had any employees who
  periodically or regularly called on customers or
  prospected in Illinois.

    "Schwager-Wood Corporation has not ever sold
  anything in the State of Illinois * * *."

    "Schwager-Wood Corporation has never been
  controlled by or in any way affiliated with any
  corporation engaged in the manufacture of any
  electrical products.

    "Schwager-Wood Corporation at all times was a
  distinctly `small business.' Its entire operations
  were conducted in and from leased premises consisting
  of an old one-story building * * *. It never employed
  more than approximately 50 to 60 people, including
  all executive, engineering, sales and production
  personnel. In 1958 the last full calendar year of its
  existence, its gross billings for all products
  totaled $2,321,077; its total sales of `power
  switching equipment' for that year amounted to
  $1,887,460, representing approximately 4.3% of the
  total national output during the first half and 4.4%
  during the last half of the year."

The affidavit sets forth six letters in an appendix
*fn3 to show the only contractual relationships between Schwager-Wood Corporation and anyone in Illinois, and that the "arrangements" reflected in the letters never produced any sales of its products in Illinois, or any negotiations in Illinois to which it was a party. The correspondence is claimed to show on its face that the persons to whom the letters were addressed were independent contractors, and that Schwager-Wood Corporation had no control or authority whatsoever over these persons except to terminate the agreements, and the power to terminate was the only authority which it ever exercised or attempted to exercise over those persons.

The affidavit points out that the first of the relationships was terminated by it because "The response in the two years * * * does not justify any continuation of expense * * * in promoting our products." The second relationship was terminated because the other party stated he was not getting "the kind of co-operation from your company that I expect and that is necessary to get results. * * *" The writer stated that he had tried many times to contact and procure information from Schwager-Wood Corporation with no success, and concluded his letter by asking for instructions on immediate disposition of the sample switches that he had.

The supplemental affidavit of Mr. Schwager, filed January 4, 1962, also reveals that the business which defendant, Schwager-Wood Corporation, had conducted prior to its dissolution on November 6, 1959, is now conducted by Schwager-Wood Company, Inc., also an Oregon corporation, of which he is president and Mr. William Maxwell Wood is vice president and secretary. He states that there was received between November 6, 1959, and the present time at Portland, Oregon, four unsolicited orders from the Milwaukee, Wisconsin, office of Line Materials Industries, of an aggregate invoice value of $1,812.80, less than 1/12th of 1% of Schwager-Wood's 1960 gross sales; during the same period it also received from the same Company's Melrose Park office, two unsolicited orders totaling $1,268.10 (less than 1/17th of 1% of said gross sales). The shipments were delivered f.o.b. Portland for consignment into the Northern District of Illinois, in accordance with instructions from the Line Materials Industries. He believed the said company to be a subsidiary or division of McGraw-Edison Company, that the Schwager Company itself had no corporate affiliation with McGraw-Edison, or any other electrical manufacturer. He specifically stated that the Schwager Company received no other orders from and made no other shipments to, or for the account of any customer in the Northern District of Illinois.

The pertinent statutes provide:

    "Any person who shall be injured in his business or
  property by reason of anything forbidden in the
  anti-trust laws may sue therefor in any district
  court of the United States in the district in which
  the defendant resides or is found or has an agent,
  without respect to the amount in controversy, and
  shall recover threefold the damages by him sustained,
  and the cost of suit, including a reasonable
  attorney's fee." 15 U.S.C.A. § 15. (Italics

    "Any suit, action, or proceeding under the
  anti-trust 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." 15
  U.S.C.A. § 22. (Italics supplied.)

    "A corporation may be sued in any judicial district
  in which it is incorporated or licensed to do
  business or is doing business, and such judicial
  district shall be regarded as the residence of such
  corporation for venue purposes." 28 U.S.C. § 1391
  (c). (Italics supplied.)

The Court is of the opinion that the defendant's motion to dismiss for lack of venue has sound legal foundation for the reasons (1) that the isolated, unsolicited sales of relatively unsubstantial amounts by defendant to one customer did not constitute the transaction of business; (2) that membership in a civil conspiracy does not ipso facto render a member subject to the jurisdiction of the forum of any other member, and (3) that the contracts of exclusive representation granted to residents of this area had been terminated long before the instant service was made, and were of small significance businesswise.

The six sales by defendant in Milwaukee and this District were unsolicited, and constituted but a fraction of one percent of its total 1960 gross sales. This, is not a "substantial" amount under the precedent cited infra. True, the six sales totaled $3,080.90, not an inconsequential amount, but when that sum is viewed in the perspective of defendant's total business and also of the overall sales of the entire industry,*fn4 it is readily apparent that the sales were of a very negligible proportion.

While the phrase "transacts business" in the venue provision of the statute (15 U.S.C.A. § 22) has been held to have the broadest connotation of all the antitrust statutes for venue purposes,*fn5 still it embraces elements of substantiality of business done,*fn6 with continuity in character,*fn7 regularity,*fn8 contemporaneousness with time of service,*fn9 and not looking toward cessation of business.*fn10 The phrase was said to have been included in the statute to "increase the number of districts in which a corporation might be sued for violation of the antitrust laws,"*fn11 and relieve "persons injured from the `often insuperable obstacle' of resorting to distant forums for redress of wrongs. * * *"*fn12

The term "transacting business" is to be construed in the ordinary and practical, everyday, usual commercial sense,*fn13 instead of the previous "hair-splitting legal technicalities encrusted upon the `found,' — `present' — `carrying-on-business' sequence."*fn14 It "relieved persons injured through corporate violations of the anti-trust laws from the `often insuperable obstacle' of resorting to distant forums for redress of wrongs done in the places of their business * * *."*fn15 But the Congressional purpose has been held to "enlarge the jurisdiction of the district courts to establish the venue of a suit under the antitrust laws not only where a corporation resides or is `found',"*fn16 a much "broader meaning for establishing venue than the concept of `carrying on business' denoted by `found' under the preexisting statute and decisions."*fn17 Section 12 is to be liberally construed,*fn18 it being "designed to broaden the choice of forum available * * *."*fn19

The Court concludes, as did the Second Circuit's Court of Appeals in Bertha Building Corporation v. National Theatres Corporation, 2 Cir., 248 F.2d 833, 836 (1957), that it cannot bring itself "to accept the suggestion in Giusti v. Pyrotechnic Industries, 9 Cir., 156 F.2d 351,*fn20 that because of the presence within the jurisdiction of one co-conspirator all foreign corporations which are alleged to be co-conspirators are amenable to process."*fn21 That Court said, at p. 836, of 248 F.2d, it thought such "doctrine inherently unsound * * *." A very recent similar holding is Bruner, et al. v. Republic Acceptance Corporation, et al., 191 F. Supp. 200 (D.C.Ark. 1961), which differentiates precedent as concerning criminal prosecutions (or Government civil suits) for conspiracy, as did the District Court in Independent Productions Corporation, et al. v. Loew's, Incorporated, et al., 148 F. Supp. 460 (D.C.N Y 1957), and Westor Theatres, Inc., et al. v. Warner Bros. Pictures, Inc., et al., 41 F. Supp. 757 (D.C.N.J. 1941).

Support to this view is given by the dictum in Bankers Life & Casualty Co. v. Holland, Chief Judge et al., 346 U.S. 379, at p. 384, 74 S.Ct. 145 at page 148, 97 L.Ed. 1361 (1953), where the Supreme Court said:

    "While a criminal action under the antitrust laws
  lies in any district where the conspiracy was formed
  or in part carried on or where an overt act was
  committed in furtherance thereof, Congress by
  15 U.S.C. § 15 placed definite limits on venue in
  treble damage actions. Certainly Congress realized in
  so doing that many such cases would not lie in one
  district as to all defendants, unless venue was
  waived. It must, therefore, have contemplated that
  such proceedings might be severed and transferred or
  filed in separate districts originally. Thus
  petitioner's theory has all the earmarks of a
  frivolous albeit ingenious attempt to expand the

The Court in the Periodical decision (C.C.H. Trade Regulations Service, ¶ 70,011) supra, says of the Giusti holding:

    "The effect of an allegation of conspiracy on venue
  has been a matter extensively considered in the
  cases. There appears to be a conflict in the courts
  as to whether or not such an allegation is sufficient
  for a finding of venue. This conflict is, in fact,
  more apparent than real. It springs from Giusti v.
  Pyrotechnic Industries, Inc., 156 F.2d 351 (9th Cir.

    "Although the Giusti case has been cited for the
  proposition that once acts of conspiracy are alleged
  to have taken place within the district venue will
  lie, this is a result of too broad a reading of the
  case. In fact, the situation was that the acts
  alleged, in addition to being overt acts in
  fulfillment of a conspiracy and acts of
  monopolization, were themselves the conduct of the
  business. The acts alleged, and apparently proved
  were coincidental to those necessary to establish
  that the defendant was transacting or doing business
  within the district. Thus the case stands for no more
  than that where the acts of conspiracy and
  monopolization are identical with the business of the
  corporation, then if the plaintiff sustains his
  burden of jurisdictional proof, he has, in fact,
  established that the defendant is doing business or
  transacting business, and that venue is properly
  laid * * *. The argument that a court has venue over
  an antitrust action where it is alleged that acts of
  conspiracy have taken place within the district, was
  rejected by the Second Circuit in Bertha Building
  Corp. v. National Theatres Corp., [2 Cir.]
  248 F.2d 833 * * *. Prior to the Circuit decision in Bertha,
  the broad reading of Giusti met a broad base of
  opposition. This Court itself has said: `The mere
  allegation of conspiracy would hardly seem sufficient
  to establish venue in the absence of some showing
  that the defendant was found in the district or was
  transacting business in the District.' * * * Mere
  allegation of participation in a conspiracy was again
  held not to invest the court with jurisdiction and
  venue * * * [Citing several cases]. The mere
  allegation of a conspiracy or that acts in
  furtherance of the conspiracy were performed within
  the district is insufficient to support venue. Where
  the conspiracy has been proven, and the acts
  established are coincident with those of doing
  business or transacting business, then venue is
  proper, but for a different reason. The reason in
  that case is that the

  defendant may be found to be doing or transacting
  business within the district."

Inasmuch as the contracts for exclusive representation of Schwager-Wood Corporation in this District had expired long before the instant suit was filed, and had been fruitless during their existence, and sales by said defendant in this forum had been to but one customer, had been unsolicited, and had constituted but a very minute part of its total sales, the conclusion seems inescapable that the defendant did not transact business within this District within the meaning of the venue provisions of antitrust acts. The transactions were unsubstantial; they were not continuous. Finally, even if it should be proved that Schwager-Wood Corporation was a member of the alleged conspiracy, membership per se does not render each member thereof liable to process on the theory of agency of each conspirator for the other, in the forum of every other conspirator.

The motion of Schwager-Wood Corporation to dismiss the cause as to it for improper venue is granted, and the cause is hereby dismissed as to Schwager-Wood Corporation.

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