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August 23, 1985


This action arises out of a loan made by plaintiffs, trustees of Consolidated Capital Income Trust, to defendants, in consideration of a promissory note secured by a Mortgage, Assignment of Rents, and Security Agreement with the Defendants Alden Equities and Medical Tower Ltd. as mortgagor. This Agreement was later modified by a Restatement and Settlement Agreement into which these parties, as well as defendant Olive Street Investments, Inc., and other parties entered.

 Plaintiff has brought this action to have judgments of mortgage foreclosure and of $9,474,301.92 (plus interest, costs, and fees) for allegedly overdue loan payments entered in its favor. Jurisdiction is founded on 28 U.S.C. § 1332. Defendants have moved to dismiss this case under Federal Rule of Civil Procedure 12(b)(3), claiming that defendant Olive Street Investments, Inc., does not reside in the Eastern District of Pennsylvania, and therefore that venue in this district is improper according to 28 U.S.C. § 1391(a). Plaintiffs have responded, and defendants have filed a reply.

 A. The Legal Background

 28 U.S.C. § 1391(a) provides that:

A civil action wherein jurisdiction is founded only on diversity of citizenship may, except as otherwise provided by law, be brought only in the judicial district where all plaintiffs or all defendants reside, or in which the claim arose.

 Plaintiffs in this action reside in California. Second Amended Complaint. Para. 1. Venue is thus proper under § 1391(a) only if all defendants reside in the Eastern District. The gravamen of defendants' Motion is that one of the defendants, Olive Street Investments, Inc. ("Olive"), does not reside in the Eastern District.

 When the defendant is a corporation, as is the case here, the court must look to 28 U.S.C. § 1391(c) to determine where a defendant resides for purposes of § 1391(a). Section 1391(c) provides that:

A corporation may be sued in any judicial district in which it is incorporated or licensed to do business or is doing business, and such judicial district shall be regarded as the residence of such corporation for venue purposes.

 Plaintiffs acknowledge in their Second Amended Complaint, para. 4, that Olive is a corporation organized under the laws of Missouri; they also allege, however, that Olive has its principal place of business at 1601 Walnut Street, Philadelphia, Pennsylvania 19103. Id. According to plaintiffs, Olive may be considered a resident of the Eastern District because Olive "is doing business" in the Eastern District within the meaning of § 1391(c). Plaintiffs' Memorandum in Opposition to Defendants Motion to Dismiss, at 5-8. Defendants deny that Olive's activities in the Eastern District are substantial enough to qualify Olive as a resident in the Eastern District.

 Before reviewing the nature and extent of Olive's business activities in the Eastern District, it is necessary first to resolve what standard to apply to those facts. In essence, content must be given to the phrase in § 1391(c) "is doing business." Defendants rely on Judge Troutman's construction of this phrase in Damon Coats, Inc. v. Munsingwear, Inc., 431 F. Supp. 1303, 1308-10 (E.D. Pa. 1977). In Damon Coats, the court began its analysis by noting that "Venue is determined by federal law." Id. at 1309. See also Wright, Miller, & Cooper, Federal Practice and Procedure: Jurisdiction § 3803 at 10 (1976) ("Venue in transitory actions is wholly a matter of federal law and state venue provisions are inapplicable. This proposition is amply supported by a multitude of cases.") (footnote omitted). The court proceeded to note, however, that there was a "split of authority" as to whether "'doing business' to a degree sufficient for jurisdiction purposes satisfies venue requirements." Id. The line of authority that the court then followed was first articulated in Remington Rand, Inc. v. Knapp-Monarch Co., 139 F. Supp. 613 (E.D. Pa. 1956), and later followed in Philadelphia Housing Authority v. American Radiator & Standard Sanitary Corporation, 291 F. Supp. 252 (E.D. Pa. 1968). In this approach, the court looks not to federal law but to applicable state law to decide "whether a license or certificate is required by the state to enter into [those activities that form the basis for asserting venue]." Damon Coats, 431 F. Supp. at 1309. In Pennsylvania, the relevant state law may be found at Pa. Stat. Ann. tit. 15 § 2001. Review of this statute makes clear, in Judge Lord's words, that "more activity is needed to subject a defendant corporation to venue in a jurisdiction than would be needed to subject it to service of process there." Philadelphia Housing Authority, 291 F. Supp at 257.

 As Judge Troutman noted, this approach is not universally followed. 431 F. Supp. at 1309. Indeed, the approach seems to diverge significantly from its original premise, that venue is a question of federal law. As Professors Wright, Miller, and Cooper have written:

There is no reason whatever to suppose that a federal statute apportioning business among the various federal courts is to be construed in the light of state law. Such a construction would lead to confusion and lack of uniformity in a statute that should have one meaning throughout the country and should not be dependent on the vagaries of state laws apportioning business among the courts of a single state.

 Federal Practice and Procedure: Jurisdiction § 3803 at 12 (1976). The immediate subject of this criticism was Judge Lord's construction in Philadelphia Housing Authority of the phrase "in which the claim arose," a phrase which appears in § 1391(a) of the federal venue statute. The Wright-Miller-Cooper critique is, however, equally applicable to like constructions of other phrases in § 1391, such as the § 1391(c) phrase "is doing business." *fn1"

 Although in one case our Court of Appeals chose not to dispute the parties' agreement to use the same federal law for determining venue as for jurisdiction, see Fraley v. Chesapeake & Ohio Ry. Co., 397 F.2d 1, 4 (3d Cir. 1968), it has not yet ruled definitively on this issue. The Fifth Circuit has provided some guidance, however, which a number of courts, as well as Professors Wright, Miller, and Cooper, have found ...

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