Summary
finding lack of personal jurisdiction on out-of-state defendant when plaintiff relied on the Clayton Act and failed to establish § 12's venue provision
Summary of this case from In re SSA Bonds Antitrust Litig.Opinion
03 Civ. 8555 (RCC).
September 28, 2006
MEMORANDUM ORDER
News America Marketing In-Store, Inc. ("News America") brings this motion, pursuant to Rule 13(a) of the Federal Rules of Civil Procedure, to enjoin Insignia Systems, Inc. ("Insignia") from litigating claims against News America and Albertson's, Inc. ("Albertson's") filed in the District of Minnesota after the filing of this case. For the following reasons the motion is DENIED.
I. BACKGROUND
News America and Insignia are both providers of in-store advertising and promotion products and services to retailers and consumer packaged goods companies. News America filed a complaint in this case in the Southern District of New York on October 29, 2003 and filed an amended complaint on June 25, 2004 (the "New York Action"). In the amended complaint, News America alleges that Insignia has and is violating New York (and other states') deceptive practices statutes, has and is tortiously interfering with News America's existing business relationships, has and is tortiously interfering with News America's prospective economic advantage, and has and is engaging in unfair competition.
Insignia filed a complaint in the District of Minnesota on September 23, 2004, amended on September 23, 2005 (the "Minnesota Action"). In the Minnesota Action, Insignia claims News America violated federal antitrust laws (including sections 1 and 2 of the Sherman Act, and section 3 of the Clayton Act), engaged in false and deceptive advertising in violation of the Lanham Act, and violated several sections of the Minnesota Antitrust Act and the Minnesota Antitrust and Deceptive Trade Practices Statute. Insignia also named Albertson's as a defendant in the Minnesota Action. Albertson's is one of the world's largest food and drug retailers, and receives payments from in-store advertisers for the signs displayed in its stores. It is alleged that News America has conspired with Albertson's to violate both Minnesota and federal antitrust laws.
II. DISCUSSION
News America argues that the Minnesota Action brought by Insignia should be enjoined because the claims asserted therein are compulsory counterclaims that must be asserted in this case or not brought at all. The court in which a case was originally filed has the authority to enjoin any subsequent proceeding in which compulsory counterclaims are asserted. See Adam v. Jacobs, 950 F.2d 89, 93 (2d Cir 1991). Because News America brought the New York Action prior to the filing of the Minnesota Action, this Court has the power to enjoin the Minnesota Action if Insignia's asserted claims are in fact compulsory counterclaims to News America's claims here.
Rule 13 defines a compulsory counterclaim as one that "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction." Fed.R.Civ.P. 13(a). Phrased in the negative, a party need not assert a claim if it either arises from a different transaction or occurrence or if resolution of the claim requires the presence of a third party outside the court's jurisdiction. The Court finds that the claims asserted in the Minnesota Action are not compulsory counterclaims and thus need not be asserted here. Because the Court finds that it would lack jurisdiction over Albertson's — a party it determines is required for full adjudication of Insignia's antitrust claims — the Court need not determine whether the New York and Minnesota claims arise out of the same transaction or occurrence.
In its moving brief, reply brief, and supplemental brief, News America does not contend that Albertson's can be found in or is doing business in New York, or otherwise subject to jurisdiction under New York's long-arm provisions. Instead, it relies on the section 12 of the Clayton Act, 15 U.S.C. § 22, which provides for extraterritorial service of process for suits brought under the antitrust laws when certain criteria are met.
In the last footnote in its reply papers, News America requests limited jurisdictional discovery to determine Albertson's contacts in the Southern District of New York. It then reiterates that request in a letter dated April 25, 2006, which further makes allegations that Albertson's does have contacts with this district including being listed on the New York Stock Exchange, maintaining a website accessible in New York, and contemplating a sale to a New York-based consortium of investors. The Court rejects the request, first because News America waited until its reply brief (and after) to make the request and second, because there is little to no support in the case law that jurisdictional discovery is warranted, even though News America now seeks to assert the Court's jurisdiction over Albertson's under New York's long-arm provisions.
Rule 4(e) of the Federal Rules of Civil Procedure authorizes service of process on an out of state party when authorized to do so by another federal statute. To wit, section 12, titled "District in which to sue corporation," provides that:
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.15 U.S.C. § 22. The first clause refers to venue, and the second clause to service of process. The second clause has been regularly construed as conferring in personam jurisdiction over the corporation served. Goldlawr, Inc. v. Heiman, 288 F.2d 579, 581 (2d Cir. 1961), rev'd on other grounds, 369 U.S. 463 (1962);General Electric Co. v. Bucyrus-Erie Co., 550 F. Supp. 1037, 1038 (S.D.N.Y. 1982).
At the time this motion was filed, serious questions existed as to whether section 12's service of process provision could be invoked independently of the venue provision. News America claimed the two provisions were independent and that the Court could assert jurisdiction over Albertson's under section 12's extraterritorial service of process provision without regard to that section's venue provision. Insignia argued that reliance on the service clause required satisfaction of the venue provisions. The issue has since been definitively resolved by the Second Circuit's decision in Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408, 423 (2d Cir. 2005), which held that "the plain language of Section 12 indicates that its service of process provision applies (and, therefore, establishes personal jurisdiction) only in cases in which its venue provision is satisfied." In so holding, the Second Circuit sided with its own 44 year-old decision in Goldlawr, Inc. v. Heiman, 288 F.2d 579, 581 (2d Cir. 1961), rev'd on other grounds, 369 U.S. 463 (1962), which held (arguably in dictum) that reliance on the service clause to establish personal jurisdictional over a corporate defendant required prior satisfaction of the venue provisions, as well as the more recent D.C. Circuit decision GTE New Media Services, Inc. v. Bellsouth Corp., 199 F.3d 1343, 1351 (D.C. Cir. 2000), which held that "[a] party seeking to take advantage of Section 12's liberalized service provisions must follow the dictates of both of its clauses." It also rejected the reasoning in recent Third and Ninth Circuit cases which allowed section 12's venue provisions to be supplemented by other venue provisions. See Action Embroidery Corp. v. Atlantic Embroidery, Inc., 368 F.3d 1174, 1179-80 (9th Cir. 2004) (holding that, "under Section 12 of the Clayton Act, the existence of personal jurisdiction over an antitrust defendant does not depend upon there being proper venue in that court"); In re Automotive Refinishing Paint Antitrust Litig., 358 F.3d 288, 296-97 (3rd Cir. 2004) ("[We] hold that the service of process provision on foreign corporations is independent of, and does not require satisfaction of, the specific venue provision under Section 12 of the Clayton Act."); Go-Video, Inc. v. Akai Elec. Co., 885 F.2d 1406, 1413 (9th Cir. 1989) ("[W]e conclude that process may be served on an antitrust defendant pursuant to 15 U.S.C. § 22 in cases where venue is not established under that section but lies properly under 28 U.S.C. § 1391(d).") In light of Daniel, and the fact that News America cannot establish section 12's venue requirement over Albertson's, the Court must find that it lacks jurisdiction over Albertson's.
Finally, the Court rejects News America's invitation to enjoin the Minnesota case as to the claims against News America but not as to the claims against Albertson's. Insignia will not be able to fully litigate its antitrust claims here without the presence of Albertson's because, inter alia, the alleged antitrust conspiracy involves both News America and Albertson's and Albertson's (as an alleged member of the antitrust scheme) may be in possession of discoverable documents helpful to Insignia's case. Further, while News America may be correct that the antitrust laws allow for joint and several liability and, therefore, that Insignia could fully collect against News America, the counter argument is also readily available — should Insignia prevail, it may choose to seek the full amount from Albertson's (who may be more able to pay the judgment) but would be unable to do so in the New York Action because Albertson's was not a party. Finally, without Albertson's presence here, the Court could never afford Insignia the complete injunctive relief it seeks against both Albertson's and News America in the Minnesota action. In sum, Albertson's presence in the case is required for adjudication under Rule 13; for that reason, the claims in the Minnesota Action are not compulsory counterclaims; and, therefore, the Court declines to enjoin the Minnesota Action.
III. CONCLUSION
So Ordered.
DENIED.