Source: http://openjurist.org/443/us/173
Timestamp: 2017-06-23 16:58:32
Document Index: 235313078

Matched Legal Cases: ['§ 3801', '§ 27', '§ 27', '§ 1391', '§ 27', '§ 28', '§ 28', '§ 27', '§ 27', '§ 28', '§ 27', '§ 1391', '§ 1391', '§ 1391', '§ 1391', '§ 1391', '§ 1391', '§ 27', '§ 1391', '§ 1391', '§ 27', '§ 1391', '§ 27', '§ 27', '§ 27', '§ 1391', '§ 27', '§ 78', '§ 8', '§ 30', '§ 30', '§ 1331', '§ 1332', '§ 1337', '§ 78', 'Art. 2031', '§ 78', '§ 14', '§ 78', '§ 16', '§ 78', '§ 17', '§ 78', '§ 28', '§ 27', '§ 1391', '§ 3803', '§ 1391', '§ 3806', '§ 1391', '§ 28', '§ 78', '§ 28', '§ 27', '§ 27', '§ 1983', '§ 1983']

443 US 173 Leroy v. Great Western United Corporation | OpenJurist
443 U.S. 173 - Leroy v. Great Western United Corporation Homethe United States Reports443 U.S.
* The question of personal jurisdiction, which goes to the court's power to exercise control over the parties, is typically decided in advance of venue, which is primarily a matter of choosing a convenient forum. See generally C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3801, pp. 5-6 (1976) (hereinafter Wright, Miller & Cooper). On the other hand, neither personal jurisdiction nor venue is fundamentally preliminary in the sense that subject-matter jurisdiction is, for both are personal privileges of the defendant, rather than absolute strictures on the court, and both may be waived by the parties. See Olberding v. Illinois Central R. Co., 346 U.S. 338, 340, 74 S.Ct. 83, 85, 98 L.Ed. 39; Neirbo Co. v. Bethlehem Corp., 308 U.S. 165, 167-168, 60 S.Ct. 153, 154-155, 84 L.Ed. 167. Accordingly, when there is a sound prudential justification for doing so, we conclude that a court may reverse the normal order of considering personal jurisdiction and venue.
Such a justification exists in this case. Although for the reasons discussed in Part II, infra, it is clear that § 27 of the 1934 Act does not provide a basis for personal jurisdiction, the question whether personal jurisdiction was properly obtained pursuant to the Texas long-arm statute is more difficult. Indeed, because the Texas Supreme Court has construed its statute as authorizing the exercise of jurisdiction over non-residents to the fullest extent permitted by the United States Constitution,11 resolution of this question would require the Court to decide a question of constitutional law that it has not heretofore decided. As a prudential matter it is our practice to avoid the unnecessary decision of novel constitutional questions. We find it appropriate to pretermit the constitutional issue in this case because it is so clear that venue was improper either under § 27 of the 1934 Act or under § 1391(b) of the Judicial Code.
The linchpin of Great Western's argument that venue is provided by § 27 of the 1934 Act is its interpretation of § 28(a) of that Act. See nn. 9, 10, supra. It reads § 28(a) as imposing an affirmative "duty" on the State of Idaho, the violation of which may be redressed in the federal courts under § 27. As Mr. Justice Frankfurter said of a similar argument in a similar case, however, "[t]his is a horse soon curried." Olberding, supra, 346 U.S., at 340, 74 S.Ct., at 85.
The reference in § 27 to the "liabilit[ies] or dut[ies] created by this chapter" clearly corresponds to the various provisions in the 1934 Act that explicitly establish duties for certain participants in the securities market or that subject such persons to possible actions brought by the Government, the Securities and Exchange Commission, or private litigants.12 Section 28(a) is not such a provision. There is nothing in its text or its legislative history to suggest that it imposes any duty on the States or that indicates who might enforce any such duty. The section was plainly intended to protect, rather than to limit, state authority.13 Because § 28(a) imposed no duty on appellants, the argument that § 27 establishes venue in the District Court is unsupportable.14
Nor, as the District Court correctly concluded, is venue available under § 1391(b). The first test of venue under that provision—the residence of the defendants—obviously points to Idaho rather than Texas. The Court of Appeals reasoned, however, under the second relevant test that the claim arose in Dallas because that is the place where the Idaho officials "invalidly prevented Great Western from initiating a tender offer for Sunshine." 577 F.2d, at 1273.15 The court buttressed its conclusion by noting that a single action against the officials of New York, Maryland, and Idaho could not have been instituted in any one place unless the claim was treated as having arisen in Dallas. Ibid.
In most instances, the purpose of statutorily specified venue is to protect the defendant against the risk that a plaintiff will select an unfair or inconvenient place of trial.16 For that reason, Congress has generally not made the residence of the plaintiff a basis for venue in nondiversity cases. But cf. 28 U.S.C. § 1391(e). The desirability of consolidating similar claims in a single proceeding may lead defendants, such perhaps as the New York and Maryland officials in this case, to waive valid objections to otherwise improper venue. But that concern does not justify reading the statute to give the plaintiff the right to select the place of trial that best suits his convenience. So long as the plain language of the statute does not open the severe type of "venue gap" that the amendment giving plaintiffs the right to proceed in the district where the claim arose was designed to close,17 there is no reason to read it more broadly on behalf of plaintiffs.18
Moreover, the plain language of § 1391(b) will not bear the Court of Appeals' interpretation. The statute allows venue in "the judicial district . . . in which the claim arose." Without deciding whether this language adopts the occasionally fictive assumption that a claim may arise in only one district,19 it is absolutely clear that Congress did not intend to provide for venue at the residence of the plaintiff or to give that party an unfettered choice among a host of different districts. Denver & R. G. W. R. Co. v. Railroad Trainmen, 387 U.S. 556, 560, 87 S.Ct. 1746, 1748, 18 L.Ed.2d 954. Rather, it restricted venue either to the residence of the defendants or to "a place which may be more convenient to the litigants"—i. e., both of them—"or to the witnesses who are to testify in the case." S.Rep.No.1752, 89th Cong., 2d Sess. 3 (1966). See Denver & R. G. W. R. Co., supra, at 560, 87 S.Ct., at 1748. See also Brunette Machine Works v. Kockum Industries, 406 U.S. 706, 710, 92 S.Ct. 1936, 1939, 32 L.Ed.2d 428. In our view, therefore, the broadest interpretation of the language of § 1391(b) that is even arguably acceptable is that in the unusual case in which it is not clear that the claim arose in only one specific district,20 a plaintiff may choose between those two (or conceivably even more) districts that with approximately equal plausibility—in terms of the availability of witnesses, the accessibility of other relevant evidence, and the convenience of the defendant (but not of the plaintiff)—may be assigned as the locus of the claim. Cf. Braden v. 30th Judicial Circuit Court of Ky., 410 U.S. 484, 493-494, 93 S.Ct. 1123, 1128-1129, 35 L.Ed.2d 443.
This case is not, however, unusual. For the claim involved has only one obvious locus—the District of Idaho. Most importantly, it is action that was taken in Idaho by Idaho residents—the enactment of the statute by the legislature, the review of Great Western's filing, the forwarding of the comment letter by Deputy Administrator Baptie, and the entry of the order postponing the effective date of the tender by Finance Director McEldowney—as well as the future action that may be taken in the State by its officials to punish or to remedy any violation of its law, that provides the basis for Great Western's federal claim. For this reason, the bulk of the relevant evidence and witnesses—apart from employees of the plaintiff, and securities experts who come from all over the United States21 —is also located in the State. Less important, but nonetheless relevant, the nature of this action challenging the constitutionality of a state statute makes venue in the District of Idaho appropriate. The merits of Great Western's claims may well depend on a proper interpretation of the State's statute, and federal judges sitting in Idaho are better qualified to construe Idaho law, and to assess the character of Idaho's probable enforcement of that law, than are judges sitting elsewhere. See cases cited in n. 11, supra.
We therefore reject the Court of Appeals' reasoning that the "claim arose" in Dallas because that is where Great Western proposed to initiate its tender offer, and that is where Idaho's statute had its impact on Great Western. Aside from the fact that these "contacts" between the "claim" and the Texas District fall far short of those connecting the claim and the Idaho District, we note that this reasoning would subject the Idaho officials to suit in almost every district in the country. For every prospective offeree—be he in New York, Los Angeles, Miami, or elsewhere, rather than in Dallas—could argue with equal force (or Great Western could argue on his behalf) that he had intended to direct his local broker to accept the tender and was frustrated in that desire by the Idaho law.22 As we noted above, however, such a reading of § 1391(b) is inconsistent with the underlying purpose of the provision, for it would leave the venue decision entirely in the hands of plaintiffs, rather than making it "primarily a matter of convenience of litigants and witnesses." Denver & R. G. W. R. Co., supra, 387 U.S., at 560, 87 S.Ct., at 1748.23 In short, the District of Idaho is the only one in which "the claim arose" within the meaning of § 1391(b).
* The Williams Act was enacted in the form of a set of amendments to the Securities Exchange Act, which, like the Securities Act of 1933, contains its own venue provision. Section 27 prescribes two separate requirements—one relating to the attributes of the judicial district in which suit is brought, and the second relating to the nature of the suit. I consider these in turn.
Comparison of the terms of § 27 with the terms of the general federal venue statute, 28 U.S.C. § 1391(b), shows the relative ease with which venue may be obtained in suits brought under the Securities Exchange Act. Whereas under § 1391(b) venue is proper only in a judicial district that is either where (a) the defendant(s) reside, or (b) "the claim arose," under § 27 suit may be brought in any district that is either where (a) the defendant may be found, is an inhabitant, or transacts business, or (b) "any act or transaction constituting the violation occurred." As the majority notes, some courts have been reluctant to embrace the view that a claim may arise in more than one district for purposes of § 1391(b). On the other hand, it has been widely accepted that there may be more than one district where acts constituting a violation may occur for purposes of § 27, and indeed that the act on which venue is predicated need be only a "material" part of an alleged violation of the Securities Exchange Act.1 "Without question, the intent of the venue . . . provisions of the securities laws is to grant potential plaintiffs liberal choice in their selection of a forum." Ritter v. Zuspan, 451 F.Supp. 926, 928 (ED Mich.1978). Given the underlying policy of § 27 to confer venue in a wide variety of districts in order to ease the task of enforcement of federal securities law, it would be anomalous indeed if venue were not available in the Northern District of Texas in this case. Faced with the alternative left to it by the majority—of instituting separate suits in each State attempting to apply its extraterritorial takeover law, or perhaps waiting and defending separate enforcement actions brought by each State—Great Western might well choose to forgo its tender offer altogether, a result not in keeping with the purposes of the Williams Act or § 27. Although in this case only three States indicated an intention to assert jurisdiction over the tender offer, and only Idaho ultimately attempted to enforce its statute, it is important to note that there are analogous statutes in a total of 36 States.2
With the foregoing in mind, even if the claim in this case did not arise in Dallas within the meaning of § 1391(b), Dallas is a place where an act constituting an alleged violation of the Williams Act occurred, because it is where appellants sought to apply Idaho's statute. Of course, for purposes of determining whether venue requirements were met, the substantive allegations of Great Western's claim—that is, that Idaho's statute conflicts with the Williams Act—must be accepted as true. The specific act alleged to violate a duty created by the Williams Act is the application of the Idaho statute to the Dallas tender offer. The gist of the act complained of being extraterritorial application of Idaho's statute, this act obviously occurs not only in Idaho but also in the district where the extraterritorial tender offer is made.
That the duty alleged to have been violated in this case would not exist in the absence of the Supremacy Clause does not make the duty any less a creation of the Williams Act. "[A]ll federal actions to enjoin a state enactment rest ultimately on the Supremacy Clause," Swift & Co. v. Wickham, 382 U.S. 111, 126, 86 S.Ct. 258, 267, 15 L.Ed.2d 194 (1965), whether the substantive federal law relied upon be a statute—as in Swift3 and as in this case—or another provision of the Constitution, such as the Commerce Clause. Thus, the command of the Supremacy Clause is necessary to the authoritative assertion of any federal right or counterpart duty, and imposes the general duty not to act in a manner inconsistent with federal law. However, the specific duty alleged to have been violated in this case—not to enforce extraterritorial state takeover laws such as Idaho's—is imposed by the existence of pre-emptive federal regulation.4 Just as various provisions of the Williams Act creates certain duties on the part of participants in the securities market, the Williams Act as a whole creates the duty on the part of state officials not to regulate in a manner inconsistent with that Act.
Once it is determined that § 27 contemplates venue for Great Western's claim in the Northern District of Texas, the federal court in that District also had personal jurisdiction over the Idaho defendants, they having been served in a "district . . . wher[e] . . . found," there being no objection to the manner of service of process, and there being no restrictions imposed by the Constitution on the exercise of jurisdiction by the United States over its residents, see Fitzsimmons v. Barton, 589 F.2d 330 (CA7 1979).5
82 Stat. 454; see 15 U.S.C. §§ 78m(d), 78m(e), 78n(d)-78n(f).
"The Congress shall have Power . . . To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes . . . ." U.S.Const., Art. I, § 8.
" 'Target company' means a corporation or other issuer of securities which is organized under the laws of this state or has its principal office in this state, which has substantial assets located in this state, whose equity securities of any class are or have been registered under chapter 14, title 30, Idaho Code, or predecessor laws or section 12 of the Securities Exchange Act of 1934, and which is or may be involved in a take-over offer relating to any class of its equity securities." Idaho Code § 30-1501(6) (Supp.1979) (emphasis added).
" 'Offeror' means a person who makes or in any way participates in making a take-over offer, and includes all affiliates and associates of that person, and all persons acting jointly or in concert for the purpose of acquiring, holding or disposing of or exercising any voting rights attached to the equity securities for which a take-over offer is made.
" 'Take-over offer' means the offer to acquire or the acquisition of any equity security of a target company, pursuant to a tender offer or request or invitation for tenders, if after the acquisition thereof the offeror would be directly or indirectly a beneficial owner of more than five per cent (5%) of any class of the outstanding equity securities of the issuer." §§ 30-1501(3), (5) (Supp.1979).
"The Court has subject matter jurisdiction over this case on four bases: 28 U.S.C. § 1331 (general federal question), 28 U.S.C. § 1332 (diversity), 28 U.S.C. § 1337 (acts affecting commerce) and Section 27 of the [Securities Exchange Act of 1934, 15 U.S.C. § 78aa]." 439 F.Supp., at 430.
Tex.Rev.Civ.Stat. Ann., Art. 2031b (Vernon 1964).
"The district courts of the United States . . . shall have exclusive jurisdiction of violations of this chapter or the rules and regulations thereunder, and of all suits in equity or actions at law brought to enforce any liability or duty created by this chapter or the rules and regulations thereunder. Any criminal proceeding may be brought in the district wherein any act or transaction constituting the violation occurred. Any suit or action to enforce any liability or duty created by this chapter or rules and regulations thereunder, or to enjoin any violation of such chapter or rules and regulations, may be brought in any such district or in the district wherein the defendant is found or is an inhabitant or transacts business, and process in such cases may be served in any other district of which the defendant is an inhabitant or wherever the defendant may be found. . . ." 15 U.S.C. § 78aa.
E. g., U-Anchor Advertising, Inc. v. Burt, 553 S.W.2d 760 (Tex.1977). Appellants argue that this construction is only applicable to private commercial defendants and should not govern either in a suit against the agents of another sovereign State or in one against persons who are not engaged in commercial endeavors. Both the District Court and the Court of Appeals, however, have concluded that the statute does extend to the limits of the Due Process Clause in this case, and it is not our practice to re-examine state-law determinations of this kind. E. g., Butner v. United States, 440 U.S. 48, 57-58, 99 S.Ct. 914, 919, 59 L.Ed.2d 136; Bishop v. Wood, 426 U.S. 341, 345-346, 96 S.Ct. 2074, 2077-2078, 48 L.Ed.2d 684 and n. 8; Propper v. Clark, 337 U.S. 472, 486-487, 69 S.Ct. 1333, 1341-1342, 93 L.Ed. 1480.
E. g., § 14(a) of the 1934 Act, 15 U.S.C. § 78n(a) ("It shall be unlawful for any person . . . to solicit any proxy . . . in contravention of such rules and regulations as the Commission may prescribe . . . ") (emphasis added); § 16(b), 15 U.S.C. § 78p(b) ("For the purpose of preventing the unfair use of information which may have been obtained by [the] beneficial owner [of 10% of any class of equity security], director, or officer by reason of his relationship to the issuer, any profit realized by him from any purchase and sale, or any sale and purchase, of any equity security of such issuer (other than an exempted security) within any period of less than six months, unless such security was acquired in good faith in connection with a debt previously contracted, shall inure to and be recoverable by the issuer . . . ." (emphasis added); § 17(a)(1), as set forth in 15 U.S.C. § 78q(a)(1). ("Every national securities exchange, member thereof, broker or dealer who transacts a business in securities through the medium of any such member, registered securities association, registered broker or dealer, registered municipal securities dealer, registered securities information processor, registered transfer agent, and registered clearing agency . . . shall make, and keep . . . such records . . . and make . . . such reports as the Commission, by rule, prescribes . . . .") (emphasis added).
Thomas Corcoran, a principal draftsman of the 1934 Act, indicated to Congress that the purpose of § 28(a) was to leave the States with as much leeway to regulate securities transactions as the Supremacy Clause would allow them in the absence of such a provision. Hearings on S.Res. 84 (72d Cong.), 56, and 97 (73d Cong.) before the Senate Committee on Banking and Currency, 73d Cong., 1st Sess., 6577 (1934). In particular, the provision was designed to save state blue-sky laws from pre-emption. See ibid.
Nor is the breadth of the venue created by § 27, see post, at 188-189, citing Ritter v. Zuspan, 451 F.Supp. 926, 928 (ED Mich.1978), a sufficient reason for assuming that that section, rather than some narrower venue provision, applies whenever a suit involves the 1934 Act. See Radzanower v. Touche Ross & Co., 426 U.S. 148, 96 S.Ct. 1989, 48 L.Ed.2d 540.
The Court of Appeals properly concluded that the determination of where "the claim arose" for purposes of federal venue under § 1391 is a federal question whose answer depends on federal law. See cases cited in 1 J. Moore, Federal Practice ¶ 0.142[5.-2], pp. 1429-1430 (1979); Wright, Miller, & Cooper, § 3803, pp. 10-13.
See Braden v. 30th Judicial Circuit Court of Ky., 410 U.S. 484, 493-494, 93 S.Ct. 1123, 1128-1129, 35 L.Ed.2d 443; Denver & R. G. W. R. Co. v. Railroad Trainmen, 387 U.S. 556, 560, 87 S.Ct. 1746, 1748, 18 L.Ed.2d 954; Nierbo Co. v. Bethlehem Corp., 308 U.S. 165, 168, 60 S.Ct. 153, 154, 84 L.Ed. 167; Reuben H. Donnelley Corp. v. FTC, 580 F.2d 264, 269 (CA7 1978).
See Brunette Machine Works v. Kockum Industries, 406 U.S. 706, 710, and n. 8, 92 S.Ct. 1936, 1939, 32 L.Ed.2d 428. As Brunette indicates, the amendment of § 1391 to provide for venue where the claim arose was designed to close the "venue gaps" that existed under earlier versions of the statute in situations in which joint tortfeasors, or other multiple defendants who contributed to a single injurious act, could not be sued jointly because they resided in different districts. 406 U.S., at 710 n. 8, 92 S.Ct., at 1939. In this case, by contrast, Great Western has attempted to join in one suit three separate claims—each challenging a different statute—against three sets of defendants from three States. The statute simply does not contemplate such a choice on the part of plaintiffs.
"The requirement of venue is specific and unambiguous; it is not one of those vague principles which, in the interest of some overriding policy, is to be given a 'liberal' construction." Olberding v. Illinois Central R. Co., 346 U.S. 338, 340, 74 S.Ct. 83, 85, 98 L.Ed. 39.
The two sides of this question, and the cases supporting each, are discussed in 1 Moore, supra n.15, at ¶ 0.142[5.-2], pp. 1426-1435; Wright, Miller, & Cooper § 3806, pp. 28-34.
At the trial held in the Northern District of Texas, the witness roster, in addition to various Idaho officials and Great Western employees from Dallas, mainly included experts from the New York area as well as one each from California, Maryland, Texas, and Wisconsin. App. 100-292.
In Denver & R. G. W. R. Co., the Court concluded that the drafters of § 1391(b) did not intend to provide venue in suits against unincorporated associations in every district in which a member of the association resided. To do so, it noted, would give the plaintiff an unrestrained choice of venues and would accordingly be "patently unfair" to the defendant. 387 U.S., at 560, 87 S.Ct., at 1748. A like reasoning is controlling here.
See Puma v. Marriott, 294 F.Supp. 1116, 1120 (Del.1969); Prettner v. Aston, 339 F.Supp. 273 (Del.1972); Mayer v. Development Corp. of America, 396 F.Supp. 917, 928-930 (Del.1975). See also Black & Co. v. Nova-Tech, Inc., 333 F.Supp. 468 (Or.1971).
A claim of pre-emption is based on an alleged violation of a federal statute. In Swift, appellants—poultry packing companies alleged that "enforcement [of a New York statute's labeling requirements] would violate the . . . overriding requirements of [a federal labeling statute]." 382 U.S., at 114, 86 S.Ct., at 260. Similarly, state welfare practices may be challenged on the ground that they conflict with the Social Security Act, see, e. g., Edelman v. Jordan, 415 U.S. 651, 675, 94 S.Ct. 1347, 1361, 39 L.Ed.2d 662 (1974); Hagans v. Lavine, 415 U.S. 528, 94 S.Ct. 1372, 39 L.Ed.2d 577 (1974); King v. Smith, 392 U.S. 309, 312 n. 3, 88 S.Ct. 2128, 2130, 20 L.Ed.2d 1118 (1968).
The Court of Appeals concluded that appellants' duty was created by § 28(a) of the Securities Exchange Act of 1934, 15 U.S.C. § 78bb(a). See Great Western United Corp. v. Kidwell, 577 F.2d 1256, 1271-1272 (CA5 1978). However, the duty not to act in a manner inconsistent with the Williams Act would exist even without § 28(a). Of course, that provision may be relevant in considering the merits of Great Western's claim of pre-emption, in that it may shed light on the nature and scope of state regulation of tender offers that would not be in conflict with the Williams Act.
Appellants also raise the issue whether a tender offeror has a cause of action "under the Williams Act amendments to the Securities Exchange Act of 1934 to challenge the constitutionality of state corporate takeover laws." Juris. Statement 4. In Piper v. Chris-Craft Industries, Inc., 430 U.S. 1, 47 n. 33, 97 S.Ct. 926, 952, 51 L.Ed.2d 124 (1977), we left open the question "whether as a general proposition a suit in equity for injunctive relief . . . would lie in favor of a tender offeror" under an antifraud provision of the Williams Act. See also Touche Ross & Co. v. Redington, 442 U.S. 560, 577, 99 S.Ct. 2479, 2490, 61 L.Ed.2d 82 (1979), rejecting the notion that § 27 of the Securities Exchange Act of 1934 creates any implied cause of action. However, the complaint alleged a cause of action not only under the Williams Act and § 27, but also under 42 U.S.C. § 1983, see App. 3-4, 13, which applies in suits against state officials. Because the pre-emption claim alleges deprivation of a right secured by a federal statute, see Part I-B of text, supra, it states a cause of action under the "and laws" provision of § 1983.