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July 3, 1962


The opinion of the court was delivered by: BODY

This is an action brought by Paul Steiner, a Pennsylvania citizen, against Dauphin Corporation (Dauphin) which is a holding company incorporated during 1959 in the State of Delaware. The suit is based on an alleged breach of contract. There is diversity and the amount in controversy exceeds the jurisdictional requirement.

Suit was instituted on August 24, 1961. Subsequently the plaintiff served one Grant Fosnocht personally in this district at an office in Sinking Spring, Berks County, Pennsylvania. Mr. Fosnocht is and was at the time of service an officer and a director of Dauphin.

 Counsel for Dauphin has filed a motion to dismiss the action or in the alternative to quash the service of the summons and complaint. It is contended that venue is improper and that there is no jurisdiction.

 The record before this court consists of the complaint, the service return, an affidavit and depositions of Mr. Fosnocht and an affidavit of Henry A. Hofmann, both of whom are directors of Dauphin.

 During the organization of Dauphin in 1959 and 1960, daily transactions were carried on in Pennsylvania; records were kept in Sinking Spring; correspondence was carried on there; checks were drawn in Pennsylvania and 'Sinking Spring, Pa.' appeared on the stationery and on a notice of a shareholders' meeting. While there were meetings of shareholders and directors in Pennsylvania before June 14, 1960, there have been no shareholders' meetings in Pennsylvania since that date and no directors' meetings since April 1961.

 On June 14, 1960 the shareholders held a meeting in Wilmington, Delaware. This date marks a transfer of substantially all activity from Pennsylvania. An office for Dauphin was opened in Washington, D.C. By July 1960 all the records were in that office. Thereafter, the company affairs were handled from the Washington office. Banks other than Pennsylvania banks were used and the stationery bears the Washington address. Directors' meetings since April 1961 were held in New York.

 Dauphin has no employees or assets, performs no services, and solicits no business in Pennsylvania and never has, except for the matters described.

 Mr. Fosnocht and Mr. Hofmann, residents of Pennsylvania, are officers as well as directors of both Dauphin and a wholly owned Pennsylvania subsidiary corporation of defendant. Neither man has received any compensation from Dauphin nor has either engaged in any physical activity on behalf of the holding company in Pennsylvania since January 1, 1961.

 Dauphin directly or indirectly owns three Pennsylvania subsidiaries which have done or now do business in Pennsylvania. *fn1" Defendant maintains two bank accounts in Pennsylvania which contain purely nominal balances. These accounts were opened during the period of organization and were reduced by withdrawals to nominal sums before the complaint was filed.

 The agreement upon which the plaintiff bases his suit arises out of a building enterprise in Alabama. Dauphin was organized expressly to engage in this activity, plaintiff was engaged to perform services there, and the Pennsylvania subsidiaries were acquired for the same purposes. *fn2"

 Plaintiff contends that despite the transfer of activity from Pennsylvania, there are sufficient facts to establish that Dauphin was amenable to service in this district since it was doing business in Pennsylvania when the complaint was filed. Plaintiff contends further that service on the officer of Dauphin was proper personal service on the corporation in Pennsylvania. These contentions are based solely on the maintenance of the two nominal and inactive bank accounts, the ownership and control by Dauphin of the Pennsylvania subsidiaries, and the fact that there are interlocking directorates and identity of some officers, including Mr. Fosnocht, who are Pennsylvania residents.

 The activity which plaintiff cites as sufficient for a finding of doing business is the 'thinking and action with respect to the parent and the wholly owned subsidiaries. * * * When dealing with a corporation of this type we must consider mental activity and not physical activity as the test of doing business.' *fn3"

 The plaintiff further urges that this court should refrain from deciding the issues now and instead should allow a jury to determine at trial whether Dauphin was doing business in Pennsylvania.

┬áDefendant maintains that venue is improper under the requirements of ┬ž 1391(c) of the Judicial Code (28 U.S.C.) and also that service was insufficient to ...

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