'doing business' for the purpose of exercising jurisdiction over a foreign corporation.
On the other hand, the Government contends that even though the dealership agreement designates Schenker as an 'independent contractor,' Mutual's control over Schenker's operations' and the business realities of the situation, clearly demonstrate that Schenker is Mutual's agent; that Schenker's activities constitute doing business in Pennsylvania; that Schenker's business is Mutual's business; and that therefore Mutual is subject to the jurisdiction of this Court. The Government relies upon the recent cases decided by the Supreme Court of the United States holding that a foreign corporation may be subject to the jurisdiction of state courts if that foreign corporation has 'minimum contacts' with the state sufficient to warrant forcing the corporation to trial in that state without violating traditional concepts of fair play and substantial justice.
In addition, the Government correctly points out that the relationship between Mutual and the door-to-door salesmen employed by Schenker may be an employer-employee relationship under the expressed policy and the terms of the Fair Labor Standards Act; it being settled law that the finding of an employment relationship under that Act does not depend upon traditional principles of common law. In any event, says the Government, the existence of that relationship should be tested at the trial with Mutual as one of the defendants.
Applicable Law Re Jurisdiction
All counsel agree that the question of jurisdiction presented by the present motion is a question to be determined by 'Federal law.' It has been previously stated that the Court's jurisdiction over the subject matter of this action depends upon the Fair Labor Standards Act; and the questions presented by the suit are questions arising under a Federal statute. Therefore, we believe that Pennsylvania statutory law and case law on the issue of the jurisdiction of Pennsylvania courts over foreign corporations have no bearing on this case. State law has been followed by Federal Courts in diversity cases to determine the jurisdiction of the Federal Court over a foreign corporation. Apparently, the Circuit Courts of Appeal are not in accord as to whether state law should be determinative of a Federal Court's jurisdiction even in diversity cases.
However, it seems clear that 'Federal law' should control the question of our jurisdiction in this case.
It is not so clear just what Federal law exists to guide our determination.
Mutual has relied upon a line of cases, which although decided by Federal Courts, held that foreign corporate defendants were not 'doing business' under a state test of doing business. Obviously, these cases do not provide us with 'Federal law' on the subject of a Federal Court's jurisdiction over a foreign corporation in a suit arising under a Federal statute. Furthermore, many of the cases relied upon by Mutual were decided before the Supreme Court's decisions in International Shoe and McGee, supra. Of course, these cases greatly expanded the reach of the state courts over foreign corporations, and substituted the test of 'minimum contacts' with the state for the old fictions of corporate 'presence' and 'consent.'
For these reasons, we think the cases relied upon by Mutual in support of the proposition that solicitation of subscriptions does not constitute doing business within a state are cases which are no longer good law.
We think that under the test of International Shoe, and especially in light of McGee, the activities of Schenker are clearly the doing of business within Pennsylvania.
Two questions remain: 1) Is Schenker's business really Mutual's business for the purpose of concluding that Mutual is doing business in, or has the minimum contacts with Pennsylvania? 2) are the limits of our jurisdiction to be found in the opinions of the Supreme Court in International Shoe and McGee?
We shall dispose of the second question first. We noted earlier that Federal cases applying state laws to resolve jurisdictional questions provide us with no Federal law. Technically, neither do the cases of International Shoe or McGee.
Those cases set forth the limits to which a state could go under the Due Process Clause of the Fourteenth Amendment in exercising jurisdiction over foreign corporations. Obviously, the Fourteenth Amendment has no effect on the jurisdiction of Federal District Courts in cases arising under Federal law. The Fifth Amendment contains a Due Process Clause, but its limitation on the jurisdiction of the Federal District Courts over foreign corporations has never been clearly stated. The result is that we are left at best with an anomolous body of 'Federal law' from which to discern the principles applicable to this case. The problem has been recognized before:
'The Federal Rules of Civil Procedure provide the manner in which service of process may be made on a foreign corporation, and define the geographical extent of effective process in all cases not covered by federal statutory provisions as the 'territorial limits of the state in which the district court is held.' However, there is no rule or statute which informs the courts when foreign corporations are amenable to process so that in personam jurisdiction may be had over them in diversity and most nondiversity suits. 3
'3. The Judiciary Act of Sept. 24, 1789, c. 20, 1 Stat. 73, was silent not only as to personal jurisdiction over corporations but as to whether they were 'citizens' for purposes of diversity jurisdiction at all. The attribution of citizenship to the corporation, like the determination of its amenability to process, has been 'tantamount to judicial legislation." 69 Harvard 508.
In spite of the doubtful applicability of the formula of the International Shoe case to questions of Federal jurisdiction, some Federal Courts have applied that formula to cases where the jurisdiction of the Federal Court depended upon Federal law.
Although we have found no case decided by the Circuit Court of Appeals for the Third Circuit which deals with this problem, we think the reasoning of the Court in the Lone Star Package Car Co. case, cited below, is correct. In that case, the Court said:
'In any event, so much has now been written upon the subject that we content ourselves with saying that we are satisfied that insofar as cases are governed by federal law, the question of whether they are to be tried in one locality or another is now to be tested * * * simply by basic principles of fairness. (Citing International Shoe, and other cases.) It is true that in most of the cases just cited the question has arisen as to constitutional limitations imposed upon the states but the broad statements of ploicy expressed, particularly in the International Shoe Co. case, supra, seem to us to be extended also to cases where the jurisdiction of the federal court depends upon federal law.' 212 F.2d at page 155.
We hold, therefore, that the limits of our jurisdiction in this case are to be determined by looking to the 'contacts' which Mutual has with the Commonwealth of Pennsylvania; if they are substantial enough to require Mutual to defend this lawsuit here without violating traditional concepts of fairness and substantial justice, we have the power to render a judgment for or against Mutual.
Relationship between Schenker and Mutual
We have already set forth in detail the business arrangement between Mutual and Schenker. Suffice it to state that we think Schenker's business is sufficiently controlled by Mutual and sufficiently necessary to Mutual's operations to enable us to conclude that Schenker is Mutual's agent is Pennsylvania for the purposes of service of process on Mutual and of exercising our jurisdiction over Mutual.
Having concluded that Schenker's business is Mutual's business in Pennsylvania, we think that the quantity and nature of those business activities are more than sufficient to constitute the minimum contacts with the commonwealth of Pennsylvania required under the test of International Shoe. We hold, therefore, that we have jurisdiction over the defendant Mutual.
Validity of Service of Process
Rule 4(d)(3) of the Federal Rules of Civil Procedure 28 U.S.C.A., provides in pertinent part as follows:
'Service shall be made as follows: * * *
'(3) Upon a domestic or foreign corporation * * * by delivering a copy of the summons and of the complaint to an officer, a managing or general agent, or to any other agent authorized by appointment or by law to receive service of process * * *'
The decided cases hold that a person in charge of the local business of a foreign corporation is a 'managing agent' within the meaning of the Rule.
We hold that Schenker is the 'managing agent' of Mutual, and that therefore the service of process upon Schenker was valid service upon Mutual.
And now, to wit, this 3rd day of August, 1961, It Is Hereby Ordered that the motion to dismiss of the defendant, Mutual Readers League, Inc. is Denied.