The opinion of the court was delivered by: TROUTMAN
TROUTMAN, District Judge.
Briefly stated, the factual background underlying this action concerns the development and sale of microelectronic components for use in computer organs. Plaintiff, Allen Organ Company, [Allen], is engaged in the production and sale of electronic organs and other electronic musical instruments. The corporate defendant, North American Rockwell Corporation, [Rockwell], is a technically-oriented research and manufacturing company, engaged in various types of electronic, mechanical and aerospace technology, including the production of microelectronic devices and systems. In connection with microelectronic systems, Rockwell's NRMEC Division is engaged in the development and production of metal oxide semi-conductor devices [MOS devices]. The individual defendants, Carlson and Edge, are President and Vice-President of Business Affairs respectively of Rockwell's NRMEC Division. Defendant Deutsch was a former employee of the NRMEC Division.
In 1966, Rockwell conceived the idea of applying computer technology to the production of musical sounds. By 1967, Rockwell sufficiently developed this concept and at that time Deutsch filed a patent application. Thereafter, Rockwell contacted Allen, in addition to several organ manufacturers, seeking to license the patent. Following extended negotiations over a period of years, Allen and Rockwell entered into a series of contracts. Allen's dissatisfaction with Rockwell's performance under these contracts ultimately manifested itself in the instant litigation.
In its complaint, Allen charges defendants with violations of Section 10(b) of the Securities Exchange Act of 1934 and of Rule 10(b)(5) of the Securities and Exchange Commission (Counts I and V); with common law fraud (Count II); with violations of the anti-trust laws, including Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act, (Count III); and with breach of contract (Count IV). Before the Court is the motion of individual defendants to quash service of process. In addition, both the individual and corporate defendants have moved to dismiss certain portions of the complaint. Thus, for the purpose of this motion we must accept the facts as alleged in the complaint as true.
Briefly stated, the relevant facts are as follows: In 1968, defendants, Rockwell and Deutsch, contracted Allen, advising Allen that they planned to develop a microelectronic computer system, composed in part of MOS devices, for installation in organs and other musical instruments. Defendants proposed that Allen purchase the exclusive right to utilize Rockwell's microelectronic system technology and expertise in the organ and musical instrument field. Thereafter, the parties engaged in intensive negotiations in which Rockwell allegedly made numerous representations which, according to Allen, later proved to be false. On May 21, 1969, in reliance on these representations, the parties entered into a series of contracts which they term the "Tone Generation System Transaction". Under these contracts, Rockwell agreed to grant plaintiff an exclusive license to use Rockwell's computer organ technology in the United States and various foreign countries and to grant plaintiff the right of first refusal for an exclusive license regarding any innovations thereafter developed in the field. [Licensing Contract]. In addition, Rockwell agreed to furnish plaintiff with experimental and prototype models of the proposed computer organ system, utilizing the MOS devices, in addition to certain technical information. [Development Contract]. In exchange, plaintiff was obligated to pay $ 600,000 in cash to Rockwell, to deliver to Rockwell a $ 750,000 convertible debenture and to pay Rockwell a specified royalty.
In October 1969, a second series of transactions, known as the "Capture Combination System Transaction" were consummated. A licensing agreement was entered into, whereby Rockwell granted plaintiff an exclusive license and a right of first refusal similar to those granted in the Tone Generation System Transaction. In addition, Rockwell agreed to develop, deliver and disclose information relating to the capture combination system, a device which automatically sets tone adjustments on an organ. In exchange, Allen agreed to deliver to Rockwell 20,000 shares of its Class B common stock.
Subsequent to these initial contracts, numerous problems and disputes arose, many of which plaintiff alleges amounted to breaches of contract. Generally, three major problem areas developed which were: (1) the need to obtain a "second source" for Allen to secure MOS devices; (2) the royalty base for the tone generation patent license; and (3) continued difficulties with the capture combination units.
On May 11, 1972, following several days of negotiations, the parties entered into the "Memorandum of Understanding" which purportedly settled the disputes concerning the "second source" for the procurement by Allen of MOS devices and the royalty base for the tone generation patent agreement. The "Memorandum of Understanding" ostensibly failed to achieve resolution of the problems underlying the contracts and plaintiff, thereafter, commenced this litigation.
Individual Defendant's Motion to Quash Service of Process
Before the Court is the motion of the individual defendants to quash service of process. By affidavit, the individual defendants have averred that they are residents of California; that they are not presently transacting business in the Commonwealth of Pennsylvania; and that they, except for defendant Deutsch for a brief period in 1957-1958, have never transacted business in the Commonwealth of Pennsylvania, in any capacity other than in their corporate capacity as representatives and employees of North American Rockwell. These defendants have been served on two occasions: initially, they have been served pursuant to the nationwide service of process provisions contained in Section 27 of the Securities Exchange Act of 1934, 15 U.S.C. § 78aa, and, secondly, they have been served with the complaint pursuant to the Act of July 1, 1970, P.L. 144, 12 P.S. § 341 et seq.
The Securities Exchange Act of 1934 provides for nationwide service of process in cases arising under that act and provides in pertinent part as follows:
"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.
At the outset, we note that there exists a split of authority on this question not only within the federal courts in general, see cases cited in 2 Moore, Federal Practice P4.42 n. 43, 44, but also within this district. Compare In re Penn Central Securities Litigation, 338 F. Supp. 436 (E.D.Pa.1972) with Huber v. Bissel, 39 F.R.D. 346 (E.D.Pa.1965) and Lasch v. Antkies, 161 F. Supp. 851 (E.D.Pa.1958). Those courts which have not permitted service as to related claims under the nationwide service provision of the Securities Act have reasoned that Congress has not explicitly provided for such service and that under this statutory approach, implied extensions of statutes authorizing service of process are discouraged. See e.g. Trussell v. United Underwriters, Ltd., 236 F. Supp. 801 (D.Colo.1964); Lasch v. Antkies, supra. On the other hand, those courts which have permitted such service have based their conclusion on the policy considerations underlying the judicially created doctrine of pendent jurisdiction: judicial economy, convenience and fairness to litigants. See e.g. In re Penn Central Securities Litigation, supra ; Schwartz v. Eaton, 264 F.2d 195 (2d Cir. 1959) (dictum); Kane v. Central American Mining & Oil, Inc., 235 F. Supp. 559 (S.D.N.Y.1964); Cooper v. North Jersey Trust Co. of Ridgewood, N.J., 226 F. Supp. 972 (S.D.N.Y.1964); Townsend Corp. of America v. Davidson, 222 F. Supp. 1 (D.N.J.1963).
If the considerations of judicial economy, convenience and fairness to litigants are sufficient to support the judicial expansion of the traditionally restrictive scope of federal jurisdiction, these considerations would a fortiori support the judicial expansion of service of process. In addition, the trend in this Court has been to permit service of process as to related claims where the principal claim is based in the Securities Act. See In re Penn Central Securities Litigation, supra ; Tanzer v. Huffines, 314 F. Supp. 189 (D.Del.1970); Puma v. Marriott Co., 294 F. Supp. 1116 (D.Del.1969); Townsend Corp. of America v. Davidson, supra. By permitting service of process as to the related claims in this case, we would obviate the necessity of piecemeal litigation in both California and Pennsylvania, thereby fostering judicial economy. Since all claims in this case arise out of a common nucleus of operative fact, those persons with particular knowledge of the transactions and alleged misrepresentations involved would be parties to this action. Finally, we perceive no particular inconvenience to the individual defendants, since they are properly before the Court on the securities counts and any depositions required to be taken may be so taken in California without any inconvenience to those defendants.
Moreover, the Court of Appeals in Robinson v. Penn Central Co., 484 F.2d 553 (3d Cir. 1973) recently affirmed Judge Lord's decision in Penn Central Securities Litigation, supra, and thereby resolved the conflict of authority within this district. The Court rejected the defendants' contention that:
"* * * F.R.Civ.P. 4(f) prohibits the service of process outside of the territorial limits of the state in which the district court is held, unless extra-territorial service of process is authorized by a statute of the United States, and that neither the Securities Exchange Act of 1934 nor the Securities Act of 1933 mention service of process for pendent claims."
The individual defendants have also been served pursuant to the Pennsylvania Long Arm Statute, governing service of process in actions against non-residents. Act of July 1, 1970, P.L. 144, 12 P.S. § 341 et seq. The defendants have also moved to quash this service in its entirety, on the ground that they were acting in their corporate capacity as employees or representatives of a corporation rather than "acting individually" as that term is used in the Act. Since we have previously determined that the individual defendants ...