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PORTSMOUTH BASEBALL CORP. v. FRICK

June 22, 1955

PORTSMOUTH BASEBALL CORPORATION, Plaintiff,
v.
Ford C. FRICK, Commissioner of Baseball, et al., Defendants



The opinion of the court was delivered by: DIMOCK

This is an action for damages alleged to have been sustained as a result of defendants' breach of contract. Defendants are Ford C. Frick, as Commissioner of Baseball, The National League of Professional Baseball Clubs, The American League of Professional Baseball Clubs, both unincorporated associations, and the fifteen corporations and one partnership which are the member baseball clubs of the two Leagues. Plaintiff, Portsmouth Baseball Corporation, is alleged to be a corporation organized under the laws of Virginia and doing business in that state. It is a minor league baseball club. The complaint alleges that all of the corporate major league baseball clubs are incorporated under the laws of states other than Virginia, that the partners of the remaining major league baseball club are citizens of a state other than Virginia, that Ford C. Frick is a citizen of a state other than Virginia and that each of the Major Leagues has its principal office in a state other than Virginia. It is further alleged that all of defendant corporations do business in the State of New York, that all of the members of the partnership reside in New York and that the major leagues have been and are doing business in New York. Jurisdiction is based solely upon diversity of citizenship.

Defendants move pursuant to rule 12(b), F.R.C.P., (a) for an order dismissing the complaint upon the ground that venue was improperly laid in this district and cannot properly be laid in any other district and (b) for an order dismissing the complaint as to defendant Frick for failure to state a claim upon which relief can be granted. These motions, while brought on by a single notice of motion, are unrelated and I shall consider them separately.

 The Motion Based Upon Improper Venue

 Since federal jurisdiction in this case is based upon diversity of citizenship the action may be brought 'only in the judicial district where all plaintiffs or all defendants reside.' 28 U.S.C. § 1391(a). Defendants contend that since plaintiff is not a resident of this district and since the two defendant Leagues are not residents of this district the complaint must be dismissed as to all defendants. Their contention that the Leagues are not residents is based on the claim that an unincorporated association can reside only where it has its principal place of business. It will not be necessary for me to decide whether the defendant Leagues have their principal places of business within this district because, as will hereinafter appear, I find (a) that venue can be laid here if they are doing business here and (b) that they are doing business here.

 The language of the statute concerned, 28 U.S.C. 1 1391(a), is:

 'A civil action wherein jurisdiction is founded only on diversity of citizenship may * * * be brought only in the judicial district where all plaintiffs or all defendants reside.'

 The question is what is meant by the word 'reside'. Must the Leagues have their principal places of business here or will it be enough if they merely do business here? Subdivision (c) of the same section 1391 says:

 '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.

 Sperry Products v. Association of American R.R., 2 Cir., 132 F.2d 408, 145 A.L.R. 694, seems to me to hold that the rule for corporations holds for unincorporated associations. That case involved a question of venue of suit against an unincorporated association. Judge Learned Hand, for the court, 132 F.2d at page 411, came to the conclusion that, for venue purposes, those associations should be considered as jural entities, that the test for their location 'must always be what it is for a corporation outside the state of its incorporation' and that such an association is 'present' whereever any substantial part of its activities are carried on.

 The question of venue presented by that case arose under section 48 of the old Judicial Code, 28 U.S.C., 1946 Ed. § 109. That section read:

 'In suits brought for the infringement of letters patent the district courts of the United States shall have jurisdiction, in law or in equity, in the district of which the defendant is an inhabitant, or in any district in which the defendant, whether a person, partnership, or corporation, shall have committed acts of infringement and have a regular and established place of business.'

 At that time the venue of an ordinary case could be laid only where the defendant was an 'inhabitant' of the district. Judicial Code § 51, 28 U.S.C. 1946 Ed. § 112(a); Shaw v. Quincy Mining Company, 145 U.S. 444, 12 S. Ct. 935, 36 L. Ed. 768. In the case of patent infringement suits, however, the rule was more liberal. Section 48, above quoted, permitted them to be brought not only where the defendant was an 'inhabitant' but also where he had 'a regular and established place of business' provided that acts of infringement had been committed there. The question in the Sperry Products case was how far that liberal provision applied to an unincorporated association. The Court assimilated the position of the unincorporated association to that of the corporation. It said, 132 F.2d at page 411, that by 'inhabitancy' the section demanded something more of a corporation than mere doing of business within the district because it contrasted it as an 'inhabitant' with having 'a regular and established place of business'. The Court thus held that a corporation was an 'inhabitant', within the meaning of the provision, only at the place where it had its principal place of business within its state of incorporation. Hence it held that an unincorporated association was an 'inhabitant' only at the place where it had its principal place of business. It therefore concluded, 132 F.2d at pages 411-412, that 'if a patentee chooses to sue an unincorporated association * * * he must do so either at its principal place of business, or at any of the regular and established places of its business where it may have infringed.'

 A few years later there came before the District of Columbia Court of Appeals the question of the treatment of an unincorporated association under the later superseded form of the more restricted general venue provision. In that case, Brotherhood of Locomotive Firemen and Enginemen v. Graham, 84 U.S.App.D.C. 67, 175 F.2d 802, Graham had sued the Brotherhood, an unincorporated association, in the District of Columbia district, on a civil rights claim under the constitution. The general venue provision considered was section 51 of the Judicial Code, 28 U.S.C. 1946 Ed. § 112(a), above referred to, which provided: 'no civil suit shall be brought in any district court against any person * * * in any other district than that whereof he is an inhabitant'. The District of Columbia Court of Appeals quoted Judge Learned Hand's opinion in the Sperry Products case, followed him in assimilating the position of the unincorporated association to that of the corporation and said that, under section 51 just as under section 48, an unincorporated association could be an 'inhabitant' only where it had its principal place of business. If one were to stop there, it would seem clear that the Graham case had no bearing on the application to unincorporated associations of the statute involved in the instant case, 28 U.S.C. § 1391, which permits a suit to be brought where the defendant resides and says that any judicial district in which a corporation is incorporated 'or is doing business' shall be regarded as its residence. Nevertheless the defendant Leagues cite the case for the proposition that, except in special cases like that of patent infringement under old section 48, an unincorporated association can be sued only in the judicial district where its principal place of business is located. It is of course true that that was the effect of the case as long as section 51 continued to say that no suit should be brought against a defendant 'in any other district than that whereof he is an inhabitant', but that provision is gone and section 1391 of tit. 28 U.S.C. has taken its place. Some foundation is given, however, for the Leagues' argument by a footnote in the Graham case. That case was argued in the Court of Appeals on April 13, 1948. On September 1, 1948, the repeal of section 51 of the Judicial Code and the enactment of section 1391 went into effect. The Court of Appeals referred to this in a footnote to their opinion handed down October 26, 1948, and there, 175 F.2d at page 804, said, inter alia, 'we think that the rephrasing in 28 U.S.C. § 1391(b) (1948) of 28 U.S.C. § 112 (1946) makes no substantive change in respect of venue of the United States courts generally'.

 That statement could mean nothing more or less than that the rephrasing left standing the limitation of venue over corporate defendants to cases where the corporation was an 'inhabitant' of the district. The Court of Appeals simply shut its eyes to subdivision (c) of section 1391 which gives express permission for suit against a corporation in any judicial district where it is doing ...


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