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METRO. SAN. DIST. OF GR. CHICAGO v. GEN. E.

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


July 19, 1962

THE METROPOLITAN SANITARY DISTRICT OF GREATER CHICAGO, A MUNICIPAL CORPORATION, PLAINTIFF,
v.
GENERAL ELECTRIC COMPANY ET AL., DEFENDANTS.

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

This is a civil antitrust treble damage suit against some seventeen corporations and some twenty-six individuals. Twelve motions seeking to quash service of summons and/or dismiss have been filed, covering most of the individual defendants.*fn1

Joint briefs by the moving defendants have been filed, and oral argument had, asserting the bases of the motions to be that (1) the individual defendants were not subject to suit in the Northern District of Illinois, not being citizens or residents of Illinois; (2) they were not served within the territorial limits of Illinois, but were served in the states of the respective individual defendant's residence, and (3) as to four of the defendants a contention is made that the manner of service was improper under Rule 4 of the Federal Rules of Civil Procedure, 28 U.S.C.A. Defendants assert that none of them is "found," "resides," or has an agent in this District as required by Section 4 of the Clayton Act. That statute provides that a suit of this nature may only be brought in the district "in which the defendant resides or is found or has an agent." (15 U.S.C.A. § 15) Defendants further maintain that discovery which plaintiff seeks would, at most, establish agency of the corporate, not the individual, defendants.

The complaint alleges at ¶ 1.2 that

    "All individual defendants are present in the
  Northern District of Illinois, Eastern Division, by
  an agent."

Defendants counter that their affidavits prove they do not reside in this District, and have no agent in this State.*fn2

This Court very recently concluded that it could not bring itself to "`accept the suggestion in Giusti v. Pyrotechnic Industries, Inc., et al., 9 Cir., conspiracy theory*fn3 and differentiate criminal antitrust suits, or Government equity proceedings to restrain violations of the antitrust laws.*fn4

Defendants have cited precedent in support of their contention that they are not liable to service on the agency-by-conspiracy 156 F.2d 351, 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.'" (Commonwealth Edison Company, et al. v. Federal Pacific Electric Company et al., D.C., 208 F. Supp. 936.) The Court adheres to that conclusion. Mere membership in a civil conspiracy does not ipso facto render a member subject to the jurisdiction of the forum of any other member. (Commonwealth Edison Company et al. v. Federal Pacific Electric Company et al., ibid.) In the case of Periodical Distributors, Inc. v. The American News Co., Inc., (D.C.N Y 1962) C.C.H. 1961 Trade Cases, ¶ 70,011, p. 78,006, the Court said:

    "The mere allegation of a conspiracy or that acts
  in furtherance of the conspiracy were performed
  within the district is insufficient to support
  venue."

Defendants also contend that service of process was insufficient under Rule 4 of the Federal Rules of Civil Procedure, subsection (f) of which provides that

    "All process other than a subpoena may be served
  anywhere within the territorial limits of the state
  in which the district court is held and, when a
  statute of the United States so provides, beyond the
  territorial limits of that state. * * *" (Italics
  supplied.)

They maintain that this Circuit's Court of Appeals has repeatedly
held that absent an enabling statute, extraterritorial service of
process is unauthorized (Reiter v. Illinois Nat. Cas. Co., et
al., 213 F.2d 946 (7 Cir., 1954), and Blank v. Bitker,
135 F.2d 962 (7 Cir., 1943)), and no such statute exists as to individual
defendants in private antitrust cases. Defendants claim that
motions to dismiss and quash have been uniformly sustained where
service of this nature has been effected. (Orange Theatre
Corporation v. Rayherstz Amusement Corporation et al.,
139 F.2d 871 (3rd Cir. 1944); Rohlfing v. Cat's Paw Rubber Co., Inc. et
al., 99 F. Supp. 886 (D.C. 1951); Huntington Imported Cars, Inc.
v. Standard-Triumph Motor Company, Inc. et al., 27 F.R.D. 21
(D.C.N.Y. 1960); McManus v. Tato, 184 F. Supp. 958 (D.C.N Y
1959); Elizabeth Hospital, Inc. v. Richardson et al., 167 F. Supp. 155
 (D.C.Ark. 1958)) (Similarly, see Periodical Distributors,
Inc. v. The American News Co., Inc.,¶ 70,011, C.C.H. Trade Cases,
1961, p. 78,006.) In the last cited case extraterritorial service
was held invalid, absent the transaction of business or residence
in district in which service was had.

Plaintiff asserts the validity of this extraterritorial service under Rule 4(d)(7) authorizing service in the manner prescribed by any United States statute, or

    "* * * the manner prescribed by the law of the
  state in which the service is made for the summons or
  other like process upon any such defendant in an
  action brought in the courts of general jurisdiction
  of that state." (Italics supplied.)

The plaintiff points out that the Illinois Civil Practice Act, Ch. 110, § 17, provides for service on one who

  "through an agent does any of the acts hereinafter
  enumerated * * * (b) the commission of a tortious act
  within this State,"

in which event service

  "may be made by personally serving the summons upon
  the defendant outside this State"

and points out the plaintiff has averred the commission of a tortious act within the state.

In support of the applicability of the Illinois statute, plaintiff maintains that twenty of the individual defendants*fn5 pled guilty to the criminal charges returned in Pennsylvania. From this fact it argues the guilty pleas constitute prima facie proof here that they, while engaged in the management of the corporate affairs, had "authorized, ordered or done" the acts charged in the indictment, which included participation in a series of price-fixing meetings at local places here in Chicago.

Defendants, however, refute the applicability of the Illinois provision for these reasons: (1) No statute of the United States permits the extraterritorrial service in this case; (2) The state law is applicable only as to manner of service.*fn6

Defendants also point out that the service assailed was physically made in states foreign to Illinois, and therefore the Illinois statute was not the "law of the state in which the service is made" under Rule 4(d)(7). (Italics supplied.) Defendants also maintain that in all 72 years since the Sherman Act was enacted no court has sustained out-of-state service of summons.

Defendants finally contend that as to Cresap, Stirling, Chiles and Rowland, the manner of service was improper*fn7 not being in conformity with Rule 4(d) which prescribes that service be

    "* * * by delivering a copy of the summons and of
  the complaint to him personally or by leaving copies
  thereof at his dwelling house or usual place of abode
  with some person of suitable age and discretion then
  residing therein or by delivering a copy of the
  summons and of the complaint to an agent authorized
  by appointment or by law to receive service of
  process."

They cite the fact that Cresap's summons was left with his cook who did not reside at his home; Stirling's summons was left between his front and storm doors; Chiles' summons was thrown in the door of his residence, and Rowland's summons was left on his front porch.

The Court is of the opinion that a careful, consistent reading of the two subsections of Rule 4 sustains the individual defendants' interpretation of Congressional intent, i.e., that extraterritorial service is permissible only

    "* * * within the territorial limits of the state
  in which the district court is held and, when a
  statute of the United States so provides, beyond the
  territorial limits of that state."

That is the specific provision of the act in respect to extraterritorial service; it would therefore be controlling if there could be deemed to be an inconsistency with the subsection 4(d)(7), the subsection second preceding it. The Court, however, sees no inconsistency between the two subsections. Subsection 4(d)(7) simply states one way in which service shall be made, i.e., the manner of service, not the territorial scope of valid service. As is noted in Rule 82 of the Rules of Civil Procedure:

    "These rules shall not be construed to extend or
  limit the jurisdiction of the United States district
  courts or the venue of actions therein." (Italics
  supplied.)

Judge Igoe was coping with this problem of construction of Rule 4(d)(7) and 4(f) in Smith et al. v. Alexandrian, et al., D.C., 30 F.R.D. 553, and he granted a motion to quash service of Massachusetts defendants in Massachusetts, in a suit in Illinois by Illinois residents, on a cause arising in Illinois. He said:

    "But given the actual language of Rule 4(d)(7), it
  is difficult to understand how out-of-state service,

  which is expressly made ineffective by Rule 4(f), can
  be validated by a state statute. If Rule 4(d)(7)
  comes into play at all, it would refer the District
  Court to the law of the state in which service is
  made, in this instance the law of
  Massachusetts. * * * In the scheme of Rule 4, there
  appears to be a clear distinction between the
  question of where service may be made and the
  question of how it can be made. Rule 4(f) deals with
  the former problem; Rule 4(d) concerns itself with
  the latter. An examination of the whole of Rule 4(d)
  shows that it is concerned with the `manner' of
  effecting service, in other words with the modes, or
  mechanics, or formalities which must be followed in
  order effectively to accomplish service upon the
  defendant. * * * [T]he Rule, in subparagraph (7),
  indicates that service is also sufficient if `served
  in the manner prescribed by any statute of the United
  States or in the manner prescribed by the
  law of the state in which the service is
  made * * *.'"

Judge Perry has held similarly in Rappaport v. International Association of Machinists, etc. et al., 202 F. Supp. 235 (1962). Judge LaBuy so held in Rohlfing, et al. v. Cat's Paw Rubber Co., Inc. et al., 99 F. Supp. 886 (D.C.Ill. 1951). Similarly, McManus v. Tato, 184 F. Supp. 958 (D.C.N.Y. 1959).

The case of Goldlawr, Incorporated v. Shubert et al., 169 F. Supp. 677*fn8 (D.C.Pa. 1958), involved a dismissal as to some nonresident individual defendants and a retention of others, the latter action being predicated on the existence of evidence to prove presence of an agent of said nonresident defendants in the state in which the suit was brought in the United States District Court. The Court reviewed the several facts indicative of agency by the resident, of the nonresident, defendants and their control over the resident.

The Court concludes that the issue upon these motions is therefore narrowed to a determination of whether the moving individual defendants who were served extraterritorially, had agents within this District, within the meaning of Section 4 of the Clayton Act. (15 U.S.C.A. § 15)

The moving defendants point out that there has been no controverting by the plaintiff of defendants' supporting affidavits denying residence in Illinois, the existence of any agent here, and establishing the fact that they have no places of business here, have transacted no business in Illinois, and entered into no contracts here nor are there contracts to be performed here. Plaintiff on the other hand argues that these affidavits were not sufficient, even although unopposed by plaintiff, to establish lack of agency here.

Plaintiff stresses the need of discovery to prove its assertion that the individual defendants did in fact have such agents within this jurisdiction, which fact, if established, would support the venue. On the other hand, defendants maintain this discovery must be unavailing in that as a matter of law there could be no agency between the co-employees inter se, in that necessarily each is representing only his employer, and to hold nonresident corporate officials bound by their co-employees' actions would be grossly enlarging the jurisdictional scope of the antitrust acts far beyond the intent of Congress.

"Ordinarily, agency is a question of fact"*fn9 and the possibility that there can be an agency outside the corporate co-employment, is indicated.*fn10

It has been held that there is no statutory direction as to the procedure to be followed in determining whether the prerequisites to jurisdiction exist. The manner in which such a determination should be made is left to the trial court. The issue may be determined upon affidavits, or the court may determine the issue by oral testimony and other evidence. (Kantor v. Comet Press Books Corp., 187 F. Supp. 321 (D.C.N.Y. 1960)) In Green v. Oster, 20 F.R.D. 198, it was held at p. 199 that:

    "The propriety of allowing discovery upon a motion
  to dismiss on any of the grounds specified in (1) to
  (5) in Rule 12(b) is well established. [Citing many
  cases.]

    "The defendant may not be heard that his testimony
  should be withheld on the very issue he himself has
  raised, particularly when it relates to his own acts,
  conduct, intentions and state of mind.

    "Accordingly defendant's motion to vacate the
  notice of taking his deposition is denied. The motion
  to dismiss for improper venue is denied without
  prejudice to renew after completion of plaintiff's
  pre-trial discovery proceedings."

In Abrams et al. v. Bendix Home Appliances, Inc., 92 F. Supp. 633, at p. 634 (D.C.N.Y. 1950), the Court stated:

    "The moving affidavits cast doubt upon the
  propriety of the venue. Plaintiffs have asked that
  they be permitted to examine defendant on that
  question, and they are entitled to do so.

    "Consequently, the motion to dismiss for improper
  venue will be denied, without prejudice to a renewal
  after plaintiffs have completed the taking of such
  depositions as they deem necessary to meet the issue,
  or in the event of their failure to proceed
  diligently with the taking thereof." (Italics
  supplied.)

A motion to dismiss was denied with leave to renew after the taking of depositions in Anderson-Friberg, Inc. et al. v. Justin R. Clary & Son, Inc. et al., 98 F. Supp. 75 (D.C.N.Y. 1951).

The Court therefore accedes to plaintiff's request for discovery by deposition, but directs that it be limited solely to the issue of presence of agents of said defendants within this district, and further directs that such discovery be postponed subject to the further order of the court.

In view of the disposition of the instant motions, the Court does not pass upon the point of the insufficiency of the mode of service actually effected in the respective motions wherein that point is additionally presented.

The motions of the individual defendants to quash service of summons and to dismiss are therefore denied at this time without prejudice to the right to renew after completion of plaintiff's pre-trial discovery proceedings


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