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D C ELECTRONICS, INC. v. SCHLESINGER

January 7, 1974

D C ELECTRONICS, INC., A DELAWARE CORPORATION, PLAINTIFF,
v.
JAMES SCHLESINGER, SECRETARY OF DEFENSE, ET AL., DEFENDANTS.



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

MEMORANDUM OPINION

This is an action challenging the procedure followed by the defendant agents of the federal government in letting a contract for the construction and sale of turn-signal control and flasher units used on United States military vehicles. The case is presently before this Court to resolve the questions presented by defendants' motion pursuant to Fed.R.Civ.P. 12(b)(3) to dismiss for improper venue.

The pertinent facts are as follows: Plaintiff is a Delaware corporation having its principal and only place of business within the Northern District of Illinois. The individual defendants are all agents or employees of the federal government whose official actions in Michigan gave rise to the alleged cause of action. None of the defendants reside in Illinois. Plaintiff's allegations as to venue read as follows:

  "5. Venue is properly laid in the Northern District
      of Illinois pursuant to the provisions of 28
      U.S.C.A. §§ 1391(e)(4) and 1402(a)(1) in that
      Plaintiff DCEL [DC Electronics, Inc.] is a
      resident of the Northern District of Illinois and
      no real property is involved in this action."

Defendants contend these facts are insufficient to establish that venue is properly laid within this district. They argue that for purposes of venue under 28 U.S.C.A. §§ 1391(e) and 1402(a)(1), a plaintiff corporation resides only in the district in which it is incorporated, and that because plaintiff is incorporated only in Delaware, it does not reside here. They conclude that venue is therefore improper and that the instant suit must therefore be dismissed.

The crucial question for decision, then, is whether, for the purpose of venue under 28 U.S.C.A. §§ 1391(e) and 1402(a)(1), a plaintiff corporation may be considered a resident of both the judicial district in which it is incorporated and another district in which its principal and only place of business is located.

At the outset, it is noted that the question presented for decision here was raised by the parties in Abbott Laboratories v. Gardner, 387 U.S. 136, 87 S.Ct. 1507, 18 L.Ed.2d 681 (1967). Unfortunately, the Court failed to resolve it, believing it to be difficult and with far-reaching effects. Id. at 156-157, n. 20, 87 S.Ct. 1507. Moreover, the courts of this District and the Seventh Circuit apparently have yet to decide the question; for the parties do not cite, and I am unable to find, a reported opinion from those courts on the subject. Therefore, outside authority must be looked to for guidance.

A. VENUE UNDER SECTION 1391(e)(4)

The pertinent parts of 28 U.S.C.A. § 1391 read as follows:

  "(c) 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.
  (e) A civil action in which each defendant is an
      officer or employee of the United States or any
      agency thereof acting in his official capacity or
      under color of legal authority, or an agency of
      the United States, may, except as otherwise
      provided by law, be brought in any judicial
      district in which . . . (4) the plaintiff resides
      if no real property is involved in the action."

Both subsections utilize the term "residence" in determining proper venue. Accordingly, the accepted definition of the term as it is used in subsection (c) shall be applied to subsection (e).

Plaintiff contends it is a "resident" of the Northern District of Illinois under § 1391(c) because it has its principal and only place of business here, and that therefore venue is properly laid here under § 1391(e)(4). Defendant, on the other hand, argues that § 1391(c) applies only to defendant corporations, not plaintiff corporations, and that therefore plaintiff's residence is defined by settled principles to be the place of its incorporation, i.e., Delaware. In light of the cases and authorities on the subject, I find the latter argument to be the more persuasive.

It was long recognized, both by Congress and the Supreme Court, that the "residence" of a corporation for purposes of venue in the federal courts is only the state and district in which it has been incorporated. E.g. Suttle v. Reich Brothers Co., 333 U.S. 163, 166-168, 68 S.Ct. 587, 92 L.Ed. 614 (1948). Shortly after the Suttle case was decided, Congress modified this rule by enacting 28 U.S.C.A. ยง 1391(c) as it now reads. As a result, a corporation may now be ...


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