United States District Court, Northern District of Illinois, E.D
October 10, 1969
STATE OF ILLINOIS, PLAINTIFF,
HARPER & ROW PUBLISHERS, INC., ET AL., DEFENDANTS (AND RELATED CASES).
The opinion of the court was delivered by: Decker, District Judge.
This is another chapter in the consolidated discovery and
pretrial proceedings pending in this court pursuant to transfers
made under 28 U.S.C. § 1407.
Presently before the court are the motions of six defendants in
various actions to quash service of process and dismiss the
actions for improper venue. Defendants maintain that they are not
inhabitants of the forum districts, are not found there, and
transact no business there within the meaning of § 12 of the
Clayton Act, 15 U.S.C. § 22. That provision is directed to
the place for venue and service in antitrust actions against
corporations, and provides:
"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."
Accordingly, if venue in the forum districts was proper,
extraterritorial service upon defendants at their places of
inhabitancy was permissible.*fn1
The term "transacts business" has been defined to mean "[t]he
practical, everyday business or commercial concept of doing or
carrying on business `of any substantial character' * * *."
United States v. Scophony Corporation, 333 U.S. 795, 807, 68
S.Ct. 855, 862, 92 L.Ed. 1091 (1948). As applied by the lower
courts, the term "embraces elements of substantiality of business
done, with continuity in character, regularity,
contemporaneousness with time of service, and not looking toward
cessation of business." Commonwealth Edison Co. v. Federal
Pacific Electric Co., 208 F. Supp. 936 (N.D.Ill. 1962). Factors to
be considered also include the extent of business solicitation
and promotion within the district, both in person and by mail or
Applying these tests to the evidentiary matter submitted
herein, this court has concluded that movants Viking Press,
Inc.,*fn3 Thomas Y. Crowell Co., Inc.,*fn4 William Morrow &
Company,*fn5 and David McKay Company, Inc.,*fn6 are transacting
business in the relevant districts. Accordingly, their motions to
dismiss are denied.
These defendants all make substantial sales to persons in the
forum districts,*fn7 and have done so continuously for a number
of years. Additionally, they each are represented by salesmen who
visit the relevant states, and each sends catalogs and other
promotional and advertising material into these states. "A
continuous course of conduct which includes the shipment of goods
solicitation of business does constitute transacting business."
School District of Philadelphia v. Kurtz Bros., supra, 240
F. Supp. at 363.
Viking Press has challenged venue in actions brought originally
in courts in Arizona, Kansas, Wisconsin and Minnesota. Yet Viking
admits by answers to interrogatories that its salesmen make
periodic visits to these states, and its estimated sales for
fiscal 1968 in each of the relevant states are as follows:
Arizona Kansas Wisconsin Minnesota
$28,225 $31,643 $57,300 $130,850
The affidavits and answers to interrogatories filed by
defendant Crowell show significant sales in the forum states,
amounting to $45,172 in Kansas in 1967 and $39,470 in Arizona in
1968.*fn8 In addition, Crowell is represented by a commission
salesman who makes periodic visits to solicit sales in these
states and by a "traveler" who promotes sales, although he
himself takes no orders. Other promotional efforts in the form of
catalogs and advertising in the forum states amounted to
estimated expenditures of $3,770 in Kansas and $2,895 in Arizona
in fiscal 1968.
As to defendant Morrow, its sales amounted to $14,926 in Kansas
in 1967 and $24,000 in Arizona in 1968. It is represented in both
states by a commission salesman who visits each approximately
three times per year for a week at a time, and it has a salaried
salesman who visits Kansas approximately six times each year.
$200 per year is spent for catalogs and other promotional
materials sent into each state.
Defendant McKay's sales in Kansas totaled $8,665 in 1967. A
salesman visits the state twice a year, as does a traveler. An
estimated $200 was spent in 1968 to distribute over 1400 catalogs
in the forum state.
Defendants point out that they are neither incorporated nor
licensed to do business in the forum states, nor do they own real
estate or maintain offices or telephones in these states. The
absence of these particular business activities reflects only
movants' choices as to how to conduct their sales programs in
these states, and is not dispositive of the issue in light of
defendants' admitted solicited sales. See School District of
Philadelphia v. Harper & Row Publishers, Inc., 267 F. Supp. 1006
Applying the aforementioned tests of substantiality to the
answers to interrogatories of movants Cosmo Book Distributing
Co.*fn10 and DeWolfe and Fiske Co.*fn11 conclusively shows that
these companies do not transact business in the relevant
districts within the meaning of 15 U.S.C. § 22. Cosmo has neither
solicited, sold, nor purchased in Minnesota from 1959 to 1968.
DeWolfe has similarly engaged in no promotional efforts in
Minnesota, and has made no sales, its sole contact with the state
being purchases from Minnesota sellers which did not exceed
$1,000 in value until 1968. Although purchasing may, of course,
transaction of business,*fn12 these insignificant sums in the
absence of other contacts do not satisfy the substantiality test.
Plaintiffs maintain, however, that the general venue provisions
of the Judicial Code supplement the Clayton Act venue statute and
support jurisdiction here even if the tests of § 22 are not met.
The provision relied on is 28 U.S.C. § 1391(b), which provides:
"A civil action wherein jurisdiction is not founded
solely on diversity of citizenship may be brought
only in the judicial district where all defendants
reside, or in which the claim arose, except as
otherwise provided by law."
This court finds it unnecessary to determine whether § 1391(b)
applies in antitrust cases,*fn13
for even assuming that it does,
the plaintiffs' claims did not arise in the forum district. A
holding to the contrary would, in effect, be an adoption of the
"co-conspirator" theory of 15 U.S.C. § 22, which states that
presence of one alleged co-conspirator in the district
establishes venue as to all, for it would grant venue as to all
defendants merely because sales by some occurred in the district.
Just as the "co-conspirator" theory has been widely rejected as
an attempt to evade the legislative limitations on venue in
so also must the suggested application
of § 1391(b) to the facts in these cases be rejected.
The conclusion that venue is improper in the districts in which
these actions were originally brought, and thus that jurisdiction
was not validly obtained over these defendants, does not require
that the actions be dismissed. 28 U.S.C. § 1406(a) provides:
"The district court of a district in which is filed a
case laying venue in the wrong division or district
shall dismiss, or if it be in the interest of
justice, transfer such case to any district or
division in which it could have been brought."
§ 1406(a) was designed to avoid the "time consuming and justice
defeating technicalities" to which dismissal for improper venue
necessarily gives rise. Goldlawr, Inc. v. Heiman, 369 U.S. 463
467, 82 S.Ct. 913, 8 L.Ed. 39 (1962). Because no purpose would be
served by dismissal of these actions, I have decided that they
shall be severed*fn15
from the main actions and transferred at
the conclusion of these pretrial proceedings. In accordance with
Cosmo's suggestion, case 69 C 1203 will be transferred as to that
defendant to the Northern District of Illinois. The cases
involving DeWolfe will be transferred as to that defendant to the
District of Massachusetts, its state of incorporation. See
15 U.S.C. § 22.
In the State of Wisconsin case, 68 C 2014, defendants William
Morrow & Co. and Thomas Y. Crowell Co. were served with process
pursuant to the Wisconsin Business Corporation Act. Invoking
Title 17 W.S.A. § 180.847(4), plaintiff served these movants by
delivering the complaint and summons to the Wisconsin Secretary
of State and mailing copies thereof to movants' New York offices.
However, this section in terms only authorizes such service on
"transacting business in this state without a certificate of
authority, if a certificate of authority is required under this
chapter * * *." Defendants are not required to have such a
certificate because their contacts with Wisconsin are limited to
sales promotion and solicitation by traveling salesmen and
promotional material, with all sales accepted outside of the
state. And Title 17 W.S.A. § 180.801 provides in pertinent part:
"(3) Without excluding other activities which may
not constitute transacting business, * * * a
foreign corporation may, without procuring a
certificate of authority, carry on in this state
any one or more of the following activities:
(d) Soliciting or procuring orders, whether by mail
or through employees or agents or otherwise,
where such orders require acceptance without
this state before becoming binding contracts."
Because movants were not required to have a certificate of
authority, § 180.847(4) does not apply and the substituted
service was invalid.*fn16 The motions to dismiss must therefore
be granted as to these defendants.
For the reasons heretofore assigned, an order has been entered
today denying all motions to dismiss except the motions of
Crowell and Morrow in case No. 68 C 2014, which are granted. Said
order will also provide for the transfer of case No. 69 C 1203,
as to Cosmo Book Distributing Co., to the Northern District of
Illinois, and cases Nos. 68 C 2040, 69 C 797 and 69 C 1203, as to
DeWolfe & Fiske Co., to the District of Massachusetts, at the
conclusion of these pretrial proceedings.