The opinion of the court was delivered by: FOGEL
A tender offer has detonated a series of actions that exploded first in the Southern District of New York, next in the Eastern District of Pennsylvania, and then in the Northern District of Illinois. The initial fall-out in this court has produced several critical motions, one of which raises major issues of first impression.
The chronology of events, which is seminal to the adjudication of this matter, follows:
(1) On September 27, 1977, Humana, Inc. (Humana), sent a letter to the Board of Directors of American Medicorp, Inc. (Medicorp), which announced Humana's proposed offer to Medicorp shareholders. The Board responded by issuing two statements on September 29, 1977;
(2) On September 30, 1977, Humana filed a complaint in the Southern District of New York, alleging that Medicorp's press releases were fraudulent and manipulative acts in violation of the Securities Exchange Act of 1934, (Humana, Inc. v. American Medicorp, Inc., 77 Civ 4809, assigned to the Honorable Morris E. Lasker);
(3) On October 3, 1977, Medicorp began this action by filing a complaint which stated a claim for violation of the federal antitrust laws, a second claim for violation of the West Virginia "cornering the market" law, and asked for a preliminary injunction to block the tender offer;
(4) Three days later, on October 6, 1977, Medicorp filed a Motion for Leave to Amend the Complaint. The proposed amended complaint which was attached to that motion repeated the claims of the original complaint, and added five claims founded on purported violations of federal and state securities laws and state fiduciary principles;
(5) Following a pre-trial conference, on October 12, 1977, we issued an Order which set a schedule for briefs, oral argument and a hearing on the application for the preliminary injunction. Pursuant to that Order, Humana filed a brief on October 17, 1977, and Medicorp filed its briefs on October 19 and 20, 1977;
(6) On October 13, 1977, Humana filed a Motion to Transfer to the Southern District of New York, a Motion to Dismiss for Improper Venue, a Motion to Dismiss for Failure to State a Claim, and, in the alternative, a Motion for a More Definite Statement;
(7) On that same day, we entered an Order granting expedited discovery with priority for that discovery which was necessary to prepare for argument of the venue motions;
(8) On October 18, 1977, we entered a second discovery Order which spelled out the method for handling confidential materials;
(9) On October 21, 1977, counsel engaged in extensive oral argument of all the motions before the court;
(10) Both parties then filed supplemental briefs on October 25 and 26, 1977;
(12) Humana then moved the Court to reconsider retaining the Sixth Claim, which the parties argued before this Court on November 7, 1977;
(13) We granted the Motion to Reconsider that same day, and transferred the Sixth Claim, together with pertinent parts of the Eighth Claim, to the Southern District of New York.
All parties agreed that a tight time table was critical and therefore at our scheduling conference, which was held on October 12, 1977, we not only set the deadline for briefing and arguing the motions, but also the date for commencement of the hearing for preliminary injunction sought by Medicorp to stop the tender offer. Since these hearings were scheduled to begin on November 7, 1977, we entered our Order on October 28, 1977, so that the parties could properly prepare for that hearing, which in fact began on November 8, 1977. We noted in that Order that this opinion would follow. We believe that the novelty of some of the issues, as well as the fact that multiple actions are still pending in the various jurisdictions, including the transferee district, the Southern District of New York, call for a statement of the factors which prompted us to decide the motions as we did. Our reasons follow.
I. MOTION FOR LEAVE TO FILE AN AMENDED COMPLAINT
Plaintiff filed the original complaint on October 3, 1977. A Motion for Leave to File an Amended Complaint was filed three days later on October 6, 1977. In the interim, defendant had served its motions to dismiss and to transfer. Plaintiff now argues, by its supplemental brief filed on October 25, 1977, that its original motion to amend was erroneously filed by plaintiff's previous counsel. Hence, it has reversed its position, and now asserts that it may amend the complaint as of right because as of that date there was no answer filed, but only a motion to dismiss, which is not a responsive pleading within the meaning of F.R.C.P. 15(a). A recent Eastern District case directly supports this contention. In Drennon v. Philadelphia Hospital, 428 F. Supp. 809 (E.D. Pa. 1977), our former colleague, Judge Higginbotham, now of the Court of Appeals for the Third Circuit, held that plaintiff did not need the permission of the court to submit an amended complaint filed in response to defendant's motion to dismiss. See also Kelly v. Delaware River Joint Comm'n, 187 F.2d 93, 94 (3rd Cir. 1951). Defendant has not disputed plaintiff's right to file an amended complaint without the permission of the court, (Letter of Defendant's Counsel, October 26, 1977). Accordingly, (notwithstanding the reams of paper, argument and time spent on this issue), we will deny that Motion for mootness, and rule on the remaining motions on the basis of the amended complaint.
II. MOTION TO DISMISS FOR IMPROPER VENUE
Defendant contends that its activities in this district are not sufficient to establish venue under either Section 12 of the Clayton Act, 15 U.S.C. § 22 (Section 12) or Section 1391(b) of the general venue statute, 28 U.S.C. § 1391(b). Section 12 reads as follows:
Section 1391(b) provides:
A civil action wherein jurisdiction is not founded solely on diversity of citizenship may be brought only in the judicial district where all defendants reside, or in which the claim arose, except as otherwise provided by law.
Plaintiff contended in its briefs that this "claim arose" in the Eastern District because plaintiff will be injured in its business in Bala Cynwyd, the location of its corporation headquarters, thus satisfying the venue requirements of 1391(b). Plaintiff also asserted that venue was proper under Section 12 because defendant has transacted business in this district through such acts as: (1) purchases of medical supplies, (2) advertisements in journals which circulate here, (3) recruitment of personnel, (4) attendance by its personnel at business meetings, and (5) preparation of the tender offer itself. At oral argument, plaintiff shifted its emphasis, and urged that defendant's compliance with the Pennsylvania Takeover Disclosure Law, 70 P.S. §§ 71-85, Supp. 1977, including its appearance before the Pennsylvania Securities Commission (PSC), and all of its other efforts in this jurisdiction designed to achieve its goal of a successful tender offer were sufficient, in and of themselves, to establish venue. (Tr. at 75, 69-70). By resting on this prong of its contention,
plaintiff asks us to decide a question not previously addressed, to our knowledge, by any other federal court in any reported opinion.
In determining whether Humana's activities within this district are sufficient to establish venue, we will be guided by the Congressional purpose underlying Section 12 of the Clayton Act. United States v. Scophony Corp., 333 U.S. 795, 92 L. Ed. 1091, 68 S. Ct. 855 (1948). The Supreme Court has construed Section 12 as broadly expanding venue in antitrust litigation
. . . by relieving the injured person from the necessity of resorting for the redress of wrongs committed by a non-resident corporation, to a district, however distant, in which it resides or may be 'found' -- often an insuperable obstacle -- and enabling him to institute the suit in a district, frequently that of his own residence, in which the corporation in fact transacts business, and bring it before the court by the service of process in a district in which it resides or may be 'found'. United States v. National City Lines, 334 U.S. 573, 579-580, 92 L. Ed. 1584, 68 S. Ct. 1169 (1947), quoting Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 373-374, 71 L. Ed. 684, 47 S. Ct. 400 (1927). (Emphasis supplied).
In place of the former highly restrictive definition of being "found" in a district, Section 12 substituted "the practical everyday business or commercial concept of doing business or carrying on business 'of any substantial character '," as the standard. (Emphasis added). Scophony, supra, 333 U.S. at 807.
The first question, therefore, is whether this district would be the appropriate forum if Medicorp had waited until the tender offer was a fait accompli, with the result that the antitrust claims would then have had to have been raised, if at all, in a derivative action by the remaining "Medicorp" shareholders. If the acquisition of corporate assets by means of a tender offer accomplishes the same result as more traditional forms of purchase, then it must be given the same effect in applying the "everyday business concept" standard for transacting business. Medicorp possesses substantial assets within Pennsylvania and this district: it owns the Parkview Hospital, and manages St. Mary's Hospital, both located in Philadelphia (SEC FORM S-7 at 61); its corporate headquarters is located in Bala Cynwyd, Montgomery County, also within this district; estimated aggregate assets of at least $75,000,000 are located in Pennsylvania, (testimony of Mr. Kline, PSC staff, Transcript of PSC Hearing, October 19, 1977, at 34); and, of this total, at least $23,000,000 in assets are deposited in Philadelphia banks (testimony of Mr. Harvey, Id. at 25). A direct purchase of these assets would clearly amount to Humana's engaging in " substantial business operations,"
(emphasis supplied), 333 U.S. at 807, in this district.
In applying Section 12, this court must open its eyes to the dynamics of change in business techniques and not be blinded by outmoded technical concepts. Scophony, supra, 333 U.S. at 809. The creativity of our economic system is continually spawning new business methods. We must take cognizance of the progeny produced, and fashion solutions which are capable of dealing with these offspring. Certainly, nothing in the legislation or its history supports the notion that Congress in 1914 contemplated that business would always be conducted as it was then. Indeed, the very impetus that led to passage first of the Sherman Act, and later the Clayton Act were the vast changes that had occurred in the conduct of business in the last part of the Nineteenth and first part of the Twentieth centuries. The Clayton Act was intended to provide the courts with a new kit of tools. Our mandate is to adapt those tools to do the job as changed methods, practices and techniques evolve. The purchase of a sufficient number of shares to effectuate a merger by means of a tender offer is a rapidly developing new technique for corporate expansion. See Hearings before the Senate Committee on Banking, Housing and Urban Affairs on Regulation Under Federal Banking and Securities Laws of Persons Involved in Corporate Takeovers, February 16, 1976, p. 71. The practical effect of the tender offer, according to the stated intentions of the purchaser (SEC FORM S-7 at 16), is identical to the results of an outright purchase of assets. Therefore, the tender offer must be given the same legal effect under Section 12. The completion of a successful tender offer would transfer control of substantial assets in this district to Humana, and accordingly would establish venue here.
Section 12, however, refers to a district in which defendant transacts business, and not one in which it prospectively will transact business. The ensuing question, therefore, is whether venue is established by demonstrating that the feared future activities, which in and of themselves, if conducted, as alleged antitrust violations, would be sufficient for venue, are a basis for venue in this matter. Neither the parties nor the Court has found any case which sheds light on this question which appears to be a matter of important first impression.