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Ruling on an issue that has splintered the federal courts, U.S. District Judge Berle M. Schiller has decided that a pair of class action antitrust suits under the Clayton Act that name 20 defendants must be litigated in a district that is a proper venue for all of the defendants. In his 20-page opinion in Cumberland Truck Equipment Co. v. Detroit Diesel Corp., Schiller found that seven of the 20 defendants conduct no business in Pennsylvania and therefore cannot be subjected to the jurisdiction of a Pennsylvania court. As a result, Schiller transferred the entire case to the Eastern District of Michigan. In doing so, Schiller rejected the arguments of a team of plaintiffs lawyers who said that Pennsylvania is a proper venue for all of the defendants since the Clayton Act explicitly allows for nationwide service of process. Instead, Schiller found that while Congress intended to expand venue options in antitrust cases, Section 12 of the Clayton Act “was not intended to provide a forum-shopping plaintiff with an unfettered choice of venue.” Schiller found that the federal courts have divided into three schools of thought when analyzing venue issues under the Clayton Act. He predicted that the 3rd U.S. Circuit Court of Appeals would adopt an approach that allows the Clayton Act’s venue clause to be supplemented for alien defendants, but not for domestic defendants. The lead defendant in both suits is Detroit Diesel Corp., a leading manufacturer of truck engines. Attorneys Wayne A. Mack, J. Manly Parks and Bruce Hanson of Duane Morris filed the suits on behalf of truck dealers who claim the company orchestrated an illegal group boycott and price-fixing scheme after it became a subsidiary of DaimlerChrysler. The proposed classes consist of hundreds of International and Volvo truck dealers. The cases, Cumberland Truck Equipment Co. v. Detroit Diesel and Diamond International Trucks Inc. v. Detroit Diesel, allege that Detroit Diesel and its independent distributors engaged in a group boycott of truck dealers not affiliated with DaimlerChrysler by terminating those dealers’ rights to perform major warranty repairs on Detroit Diesel engines in trucks that they had sold. At the same time, the suits allege, Detroit Diesel and its distributors also agreed to an across-the-board increase on the prices the terminated dealers paid for Detroit Diesel parts. As a result, the suits allege, the dealers lost their ability to perform engine-overhaul warranty work on Detroit Diesel engines in trucks they had sold, and were forced to pay higher prices for engine parts than truck dealers whose brands are affiliated with DaimlerChrysler. The suits allege that the group boycott and price-fixing schemes were designed to restrict the ability of International and Volvo truck dealers to compete for engine repairs and truck sales. A second motive of the schemes, the suits allege, was to force International and Volvo to enter into long-term supply contracts with Detroit Diesel to install its engines in those manufacturers’ new trucks. According to the suits, DaimlerChrysler acquired Detroit Diesel in October 2000. At the time, DaimlerChrysler also owns three truck manufacturers — Freightliner, Western Star Trucks and Sterling Trucks. After Detroit Diesel was acquired, Volvo and International announced that they would no longer install Detroit Diesel engines in their trucks because it was affiliated with three of their major competitors. The suits allege that the plaintiffs — the Volvo and International dealers — had “no control over the decision by these respective manufacturers to stop purchasing and installing Detroit Diesel engines.” But when Detroit Diesel and its distributors retaliated, the suits allege, it was the dealers who suffered. The suits allege that Detroit Diesel and its distributors “entered into a conspiracy to boycott plaintiffs … and to raise the prices the distributors charged plaintiffs … for Detroit Diesel parts to noncompetitive levels so as to eliminate competition between plaintiffs … and Freightliner, Western Star and Sterling dealers.” The plaintiffs claim the conspiracy was “orchestrated and enabled” by Detroit Diesel, and that all of its distributors agreed that they would “sever their existing business relationships” with the plaintiffs. The plaintiffs also claim they were stripped of the authorization to perform maintenance on Detroit Diesel engines. The suits also allege that the distributors jointly agreed not to extend any discounts to the plaintiffs, and to “substantially raise” the prices they charged the plaintiffs for Detroit Diesel parts. The price increases were so steep, the suits allege, that it became “impossible for plaintiffs … to service their customers.” After the price increases took effect, the suits allege, the plaintiffs were being charged 35 percent more than competing Freightliner, Western Star or Sterling dealers for Detroit Diesel parts. The plaintiffs in the Cumberland Truck case are truck dealers who claim they were terminated or not renewed as Detroit Diesel dealers. The plaintiffs in Diamond International are dealers who claim their status was downgraded to truck maintenance dealer. Although many of the defendants named in the suits filed formal answers denying the allegations, a handful decided to move for dismissal on the grounds that they are not subject to the jurisdiction of a Pennsylvania court. The plaintiffs lawyers urged Schiller to reject the argument, saying the defendants “rely upon the mistaken proposition of law that the venue clause in Section 12 of the Clayton Act … somehow modifies the nationwide service of process clause of that section.” That interpretation, they said, “blurs the historical distinction between venue and personal jurisdiction analyses and effectively nullifies the nationwide service clause of Section 12 by limiting it to areas in which service is already authorized.” But defense lawyers argued that the plaintiffs were asking Schiller to read the nationwide service provisions in the Clayton Act too broadly. “Nationwide service, and any expanded jurisdiction that accompanies it, cannot apply to a domestic corporate defendant unless that defendant is somehow connected to the forum district,” defense lawyers argued. Schiller found that “the issue of which statutes govern proper venue in antitrust cases against corporate defendants is hotly contested not only by the parties, but also by federal courts throughout the country.” The courts, Schiller found, have adopted “three distinct approaches” for assessing proper venue when a plaintiff asserts personal jurisdiction pursuant to Section 12. Some courts, he said, suggest that a plaintiff suing a domestic defendant for antitrust violations must use the Section 12 venue clause exclusively, but allow a plaintiff suing an alien defendant to use the general alien venue statute to supplement the Section 12 venue clause. Other courts have allowed plaintiffs to establish venue under Section 12 or an alternative general venue source interchangeably, Schiller noted. And a third set of courts have held that the Section 12 venue clause is the exclusive venue provision for all defendants, alien and domestic, and it pre-empts the general venue statutes. Schiller found that the 3rd Circuit’s decision in In re Automotive Refinishing Paint Antitrust Litigation “suggests that this circuit would adopt the first approach, allowing Section 12′s venue clause to be supplemented for alien but not domestic defendants.” The rationale for that approach, Schiller said, is that an alternative venue statute “may supplement the special venue requirements of Section 12 for alien corporations not because Section 12 may be supplemented by any general venue statute, but rather because Section 1391(d) reflects a unique tradition in United States jurisdictional jurisprudence.” The longstanding tradition, Schiller said, is that suits against aliens are unrestricted, and may be tried in any district, subject only to the requirement of service of process. Although the 3rd Circuit allowed foreign corporations to be sued in the Automotive Refinishing Paint case, Schiller noted that the court also “emphasized the importance of distinguishing between out-of-state and foreign corporate antitrust defendants.” Schiller found that the seven defendants that moved for dismissal on improper venue grounds had all met their burden of proof. “None of the moving defendants are incorporated in Pennsylvania, thus they do not qualify as ‘inhabitants’ of this district. Nor do plaintiffs allege that any of the moving defendants have a presence in this district, engage in continuous local activities in this district sufficient to be ‘found’ here, or even transact business in this district,” Schiller wrote. “Indeed, defendants assert in their motions that they have no contacts whatsoever with this district.” Instead of transferring only the claims against the seven moving defendants, Schiller decided that, in the interest of judicial economy, the entire case should be transferred to the Eastern District of Michigan since it is undisputed that every defendant did business with Detroit Diesel.

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