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NEIRBO CO. ET AL. v. BETHLEHEM SHIPBUILDING CORP.

decided: November 22, 1939.

NEIRBO CO. ET AL
v.
BETHLEHEM SHIPBUILDING CORP., LTD.



CERTIORARI TO THE CIRCUIT COURT OF APPEALS FOR THE SECOND CIRCUIT.

Hughes, McReynolds, Butler, Stone, Roberts, Black, Reed, Frankfurter, Douglas

Author: Frankfurter

[ 308 U.S. Page 167]

 MR. JUSTICE FRANKFURTER delivered the opinion of the Court.

The case is here to review the affirmance by the Circuit Court of Appeals for the Second Circuit of an order of the District Court for the Southern District of New York setting aside service of process upon Bethlehem Shipbuilding Corporation, Ltd. (hereafter called Bethlehem) and dismissing as to it petitioners' bill, 103 F.2d 765. The suit was based on diversity of citizenship and was not brought "in the district of the residence of either the plaintiff or the defendant." (§ 51 of the Judicial Code, Act of March 3, 1887, 24 Stat. 552, as corrected by Act of August 13, 1888, 25 Stat. 433, 28 U. S. C. § 112.)*fn1 We took the case, 307 U.S. 619, because of the uncertainties in application of § 51, emphasized by conflict between the views below and those of the Circuit Court of Appeals for the Tenth Circuit. Oklahoma Packing Co. v. Oklahoma Gas & Elec. Co., 100 F.2d 770. The sole question in the case is whether § 51 is satisfied by the designation by a foreign corporation of an agent for service of process, in conformity with the law of a state in which suit is brought against it in one of the federal courts for that state.

The jurisdiction of the federal courts -- their power to adjudicate -- is a grant of authority to them by Congress and thus beyond the scope of litigants to confer. But

[ 308 U.S. Page 168]

     the locality of a law suit -- the place where judicial authority may be exercised -- though defined by legislation relates to the convenience of litigants and as such is subject to their disposition. This basic difference between the court's power and the litigant's convenience is historic in the federal courts. After a period of confusing deviation it was firmly reestablished in General Investment Co. v. Lake Shore Ry. Co., 260 U.S. 261, and Lee v. Chesapeake & Ohio Ry. Co., ibid. 653, over-ruling Ex parte Wisner, 203 U.S. 449, and qualifying In re Moore, 209 U.S. 490. All the parties may be non-residents of the district where suit is brought. Lee v. Chesapeake & Ohio Ry. Co., supra. Section 51 "merely accords to the defendant a personal privilege respecting the venue, or place of suit, which he may assert, or may waive, at his election." Commercial Ins. Co. v. Stone Co., 278 U.S. 177, 179.

Being a privilege, it may be lost. It may be lost by failure to assert it seasonably, by formal submission in a cause, or by submission through conduct. Commercial Ins. Co. v. Stone Co., supra. Whether such surrender of a personal immunity be conceived negatively as a waiver or positively as a consent to be sued, is merely an expression of literary preference. The essence of the matter is that courts affix to conduct consequences as to place of suit consistent with the policy behind § 51, which is "to save defendants from inconveniences to which they might be subjected if they could be compelled to answer in any district, or wherever found." General Investment Co. v. Lake Shore Ry. Co., supra, at 275.

When the litigants are natural persons the conceptions underlying venue present relatively few problems in application. But in the case of corporate litigants these procedural problems are enmeshed in the wider intricacies touching the status of a corporation in our law. The

[ 308 U.S. Page 169]

     corporate device is one form of associated enterprise, and what the law in effect has done is to enforce rights and duties appropriate for collective activity. Cf. United Mine Workers v. Coronado Coal Co., 259 U.S. 344; Puerto Rico v. Russell & Co., 288 U.S. 476. It has done so largely by assimilating corporations to natural persons. The long, tortuous evolution of the methods whereby foreign corporations gained access to courts or could be brought there, is the history of judicial groping for a reconciliation between the practical position achieved by the corporation in society and a natural desire to confine the powers of these artificial creations.*fn2

It took half a century of litigation in this Court finally to confer on a corporation, through the use of a fiction,*fn3 citizenship in the chartering state for jurisdictional purposes. Compare Lafayette Ins. Co. v. French, 18 How. 404 with Hope Ins. Co. v. Boardman, 5 Cranch 57. Throughout, the mode of thought was metaphorical. The classic doctrine was that a corporation "must dwell in the place of its creation, and cannot migrate to another sovereignty." Bank of Augusta v. Earle, 13 Pet. 519, 588. Logically applied, this theory of non-migration prevented suit in a non-chartering state, for the corporation could not be there.*fn4 And such was the practice of the circuit courts*fn5 until the opinion of Chief Justice Waite in Ex parte Schollenberger, 96 U.S. 369, displaced metaphor with common sense. The essential difference

[ 308 U.S. Page 170]

     between the practice which Mr. Justice Nelson*fn6 initiated at circuit and the decision in Schollenberger 's case was not a matter of technical legal construction, but a way of looking at corporations. Men's minds had become habituated to corporate activities which crossed state lines. The fact that corporations did do business outside their originating bounds made intolerable their immunity from suit in the states of their activities. And so they were required by legislatures to designate agents for service of process in return for the privilege of doing local business. That service upon such an agent, in conformity with a valid state statute, constituted consent to be sued in the federal court and thereby supplanted the immunity as to venue, was the rationale of Schollenberger 's case.

To be sure, that case arose under the Judiciary Act of 1875, 18 Stat. 470, the language of which differed from the Act of 1887, now § 51 of the Judicial Code. The earlier provision was as follows: "And no civil suit shall be brought before either of said courts against any person by any original process or proceeding in any other district than that whereof he is an inhabitant, or in which he shall be found . . ." The Act of 1887 omitted the words "in which he shall be found." But, of course, the Phoenix and the Clinton Insurance Company in Ex parte Schollenberger, supra, were not geographically "found" in Pennsylvania, and Chief Justice Waite so recognized. They were "found" in the Eastern District of Pennsylvania only in a ...


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