APPEAL FROM THE DISTRICT COURT OF THE VIRGIN ISLANDS -- ST. THOMAS.
Rosenn, Garth, Higginbotham, Circuit Judges. Garth, Circuit Judge, concurring and dissenting.
This interlocutory appeal poses the question whether a dentist practicing in the Virgin Islands may properly bring suit in that jurisdiction alleging antitrust violations under the Sherman Act, 15 U.S.C. § 1 et seq., and the Virgin Islands Anti-Monopoly Law, 11 V.I.C. § 1501 et seq., against the American Dental Association (ADA) and certain nonresident individual defendants. The plaintiff, Dr. Donald R. Myers, challenges a rule promulgated by the ADA and subsequently implemented by the Virgin Islands Dental Association (VIDA) which requires a dentist who announces an area of specialization to limit his practice to that area. Defendants moved to dismiss the action on several grounds, including lack of personal jurisdiction over the individual defendants and improper venue as to all of the defendants. The district court granted the motion to dismiss as to several of the individual defendants but denied the motion as to ADA and Dr. Joseph P. Cappuccio, a past president of the ADA. The court certified for appeal under 28 U.S.C. § 1292(b) the question of personal jurisdiction and venue and this court granted leave to appeal. We affirm the district court as to ADA but reverse in part as to Dr. Cappuccio.
ADA, organized as an Illinois not-for-profit corporation, is a professional association of dentists. It has its principal place of business in Chicago and an office in Washington, D.C. ADA has no offices or employees in the Virgin Islands.
VIDA is a constituent society of the ADA. Although the record is sparse*fn1 as to the precise nature of the relationship between ADA and VIDA, and as to the activities engaged in by the two organizations, several points emerge. Defendants represent that VIDA is largely autonomous from its parent organization. Nonetheless, certain bonds link the two organizations. Under ADA's by-laws, members of a constituent society such as VIDA must also be dues paying members of ADA. By virtue of that relationship, VIDA was required to adopt the Principles of Ethics and Code of Professional Conduct (Code) promulgated by ADA and was prohibited from adopting any local rules inconsistent with the Code.
At the core of this case is dissatisfaction with one of the Code's provisions. Plaintiff, a dentist licensed in the Virgin Islands, Puerto Rico, and Massachusetts, objects to a provision of the Code which states:
A dentist who chooses to announce specialization . . . shall limit the practice exclusively to the announced special areas of dental practice. . . .
Complaining that practitioners in areas with small populations cannot develop an adequate practice if limited solely to their area of specialization, plaintiff seeks to hold himself out both as a general dentist and as an oral surgeon. He commenced the instant lawsuit in federal district court alleging violations of federal and Virgin Islands antitrust law and seeking injunctive relief, declaratory relief, and damages. Service was accomplished on the individual defendants while they were attending the annual meeting of VIDA in the Virgin Islands. Dr. Cappuccio and the other individual defendants were served under Fed. R. Civ. P. 4(d) (1) by the United States Marshal serving summons and complaint on each of them in the Virgin Islands. Service on ADA was effectuated by similarly serving Dr. Kerr in his capacity as the president of ADA under Fed. R. Civ. P. 4(d) (3). Defendants moved to dismiss, primarily on the ground of improper venue. The district court granted the motion to dismiss, which it treated as a motion for summary judgment, against the individual defendants Pomeranz, Kirshner, Kerr, and Chavoor; the court denied the motion to dismiss with respect to ADA and individual defendant Cappuccio.
On appeal, both Dr. Cappuccio and ADA challenge the district court's exercise of personal jurisdiction over them. An initial question posed only by ADA's jurisdictional challenge concerns whether ADA timely raised its defense of lack of personal jurisdiction before the district court. Our review of the pleadings before the district court leads us to conclude that ADA has waived its right to assert the defense.
In response to the complaint in this action defendants filed a pleading entitled "Motion to Dismiss for Improper Venue." The motion requests that the action be dismissed against the individual defendants on three grounds: improper venue, lack of (personal) jurisdiction, and failure to state an actionable claim. As to ADA, however, the motion requests dismissal only on the ground of improper venue. This division of defenses is mirrored in defendants' memorandum of law supporting their motion to dismiss.
In their next pleading to the district court, "Reply Memorandum in Support of Defendant American Dental Association's Motion to Dismiss for Improper Venue," defendants again fail to raise the question of lack of personal jurisdiction over ADA. And in their subsequent pleading, "Motion of Defendant American Dental Association to Strike Plaintiff's Opposition to Defendant's Motion and Accompanying Affidavits, or, in the Alternative, Response in Support of Defendant American Dental Association's Motion to Dismiss for Improper Venue," their last pleading prior to the district court's decision on their motion, defendants make only a passing reference to the issue of personal jurisdiction, a reference which appears to concede jurisdiction with respect to plaintiff's federal antitrust claim.*fn2
It is only in their motion to have the district court's decision certified for interlocutory appeal, "Motion of Defendants American Dental Association and Dr. Cappuccio to Amend Order Denying Motions to Dismiss in Order to Certify for Appeal Pursuant to 28 U.S.C. § 1292(b)," that defendants for the first time raise as a defense lack of personal jurisdiction over ADA.*fn3 Plaintiffs did not object, however, to this untimely injection of the jurisdictional defense. The district court thereafter certified, and we granted leave to appeal, the questions of venue and personal jurisdiction. At oral argument we requested the parties to file supplemental briefs addressing whether ADA waived its right to raise the defense of lack of personal jurisdiction.
The starting point of our analysis is Fed. R. Civ. P. 12(g) & (h), quoted in the margin.*fn4 The aim of Rule 12 "is to afford an easy method for the presentation of defenses but at the same time prevent their use for purposes of delay." 2A J. Lucas & J. Moore, Moore's Federal Practice para. 12.02, at 2225 (2d ed. 1982). To effectuate that goal, Rule 12(g) requires a party who raises a defense by motion prior to answer to raise all such possible defenses in a single motion. They cannot be raised in a second, pre-answer motion. Rule 12(h) imposes a higher sanction with respect to the failure to raise the specific defenses of lack of personal jurisdiction, improper venue, insufficiency of process, and insufficiency of service of process. If a party files a pre-answer motion but fails to raise one of the defenses enumerated above, the party waives the omitted defense and cannot subsequently raise it in his answer or otherwise. 2A J. Lucas & J. Moore, supra, para. 12.23.
Defendants maintain that their second pleading, Motion to Strike Plaintiff's Opposition to Defendants' Motion and Accompanying Affidavits, or, In the Alternative, Response in Support of American Dental Association's Motion to Dismiss for Improper Venue, "expressly broadened [their] earlier motion to dismiss to include lack of personal jurisdiction over ADA." They argue that the second pleading should be treated as amending the initial motion to dismiss and conclude that Rule 12(g) was therefore not violated. Defendants point to several cases which they represent as permitting such amendments. Neifeld v. Steinberg, 438 F.2d 423 (3d Cir. 1971); Sunrise Toyota, Ltd. v. Toyota Motor Co., 55 F.R.D. 519 (S.D.N.Y. 1972); Roller Derby Associates v. Seltzer, 54 F.R.D. 556 (N.D. Ill. 1972); Martin v. Lain Oil & Gas Co., 36 F. Supp. 252 (E.D. Ill. 1941); Mutual Life Insurance Co. v. Egeline, 30 F. Supp. 738 (N.D. Cal. 1939).
Defendants' contention regarding the state of the pleadings is erroneous. As noted above, defendants' second pleading does not raise the question of lack of personal jurisdiction over ADA with respect to plaintiff's federal antitrust claims.*fn5 Nor are the cases cited by defendants helpful. All of them involved situations where a pre-answer motion was amended or supplemented prior to argument before the district court. In the present case, in contrast, the defense of personal jurisdiction was not raised before the district court until after argument and after the court rendered its decision on the motion.
Defendants also note that plaintiff joined the issue of personal jurisdiction over ADA and did not raise the issue of their waiver of the defense before the district court. Defendants thereby argue, in effect, that plaintiff waived his right to raise the issue of defendants' waiver. A similar situation was addressed in Pila v. G.R. Leasing & Rental Corp., 551 F.2d 941 (1st Cir. 1977). In Pila, the defendant failed to raise before the district court the defense of insufficiency of service of process, which, like the defense of lack of personal jurisdiction, is controlled by the stringent waiver provision of Rule 12(h). On appeal to the First Circuit, the court concluded that under Rule 12(g) & (h) the failure to raise the defense below was "a fundamental and incurable matter," 551 F.2d at 943, and rejected the defendant's argument that the objection to the waiver was itself waived because not raised below. Accord, Lockett v. General Finance Loan Co., 623 F.2d 1128, 1132 n. 5 (5th Cir. 1980).
We believe that the course adopted by Judge Campbell in Pila for defenses that are subject to 12(h) waiver is the proper one. The federal rules single out four defenses which must be raised by the defendant's initial responsive pleading in order to be preserved. Such a rule reflects a strong policy against tardily raising defenses that go not to the merits of the case but to the legal adequacy of the initial steps taken by the plaintiff in his litigation, namely his service of process on the defendant and his choice of forum for the action. Unless the defendant objects on those grounds at the outset, he forfeits his right later to raise them as a defense. The rule benefits the court as well as the opposing party by requiring a litigant to raise certain technical objections, the basis of which should be apparent from the outset of the action, before the litigation has moved forward. Unlike the situation where a court on its own raises a defense which Rule 12 requires a party to raise in its initial responsive pleading, see Zelson v. Thomforde, 412 F.2d 56 (3d Cir. 1969), it may sometimes be appropriate for an appellate court to enforce sua sponte the waiver provisions of Rule 12.
In the case at bar, ADA's motion to dismiss proceeded before the district court solely on the basis that venue was improper. The defense of lack of personal jurisdiction over ADA was raised only after the district court had ruled on defendant's motion to dismiss. Accordingly, we hold that under Rule 12(g) & (h), notwithstanding plaintiff's failure to object in the district court, ADA by its failure timely to include in its motion to dismiss an objection to the court's exercise of personal jurisdiction over it has waived its right to challenge the district court's exercise of personal jurisdiction.
Defendants did timely raise the defense of lack of personal jurisdiction over the individual defendants, including Dr. Cappuccio, the sole individual defendant not dismissed from the case by the district court. Before this court defendants renew their claim that personal jurisdiction does not exist over Dr. Cappuccio. Reduced to its essence, defendant's argument is that the sole basis for personal jurisdiction over Dr. Cappuccio was the service of process on him during his transitory presence within the forum, a basis which defendants argue is inadequate under current Supreme Court decisions, Rush v. Savchuk, 444 U.S. 320, 62 L. Ed. 2d 516, 100 S. Ct. 571 (1980); World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286, 62 L. Ed. 2d 490, 100 S. Ct. 559 (1980); Shaffer v. Heitner, 433 U.S. 186, 53 L. Ed. 2d 683, 97 S. Ct. 2569 (1977); and International Shoe Co. v. Washington, 326 U.S. 310, 90 L. Ed. 95, 66 S. Ct. 154 (1945). We find defendants' argument unpersuasive.
Regardless of whether, as defendants maintain, the "power" theory of jurisdiction, which recognizes a state's power to affect the legal relations of property or persons within its borders, is so discredited that the mere transient physical presence of a defendant within a jurisdiction will not support a court's exercise of personal jurisdiction over him, we have no difficulty in concluding that on the facts of this case the assertion of personal jurisdiction over Dr. Cappuccio is fully consistent with the "minimum contacts" standard as it has been refined by the Supreme Court.*fn6 Dr. Cappuccio's presence in the Virgin Islands at the time of service of process was not a mere fortuity. Rather, according to plaintiff's second affidavit, Dr. Cappuccio had for some eight years been an ADA trustee for the Virgin Islands and as such regularly participated in the annual meetings of VIDA. At these meetings Dr. Cappuccio endeavored to carry out ADA policy with VIDA. Furthermore, it is alleged that Dr. Cappuccio came to the Virgin Islands to urge adoption of the Code of Ethics which is at the center of the dispute underlying this action. Having purposefully entered the district to advance the interests of the ADA in the Virgin Islands, Dr. Cappuccio rendered himself subject to the jurisdiction of the Virgin Islands' courts at least with respect to disputes related to his presence there. The instant litigation is one such lawsuit. We therefore hold that the district court may assert personal jurisdiction over Dr. Cappuccio, who, properly served, had intentionally entered within its territory for the purpose of engaging in an activity upon which the lawsuit is predicated.
Defendants also object that venue does not lie in the District of the Virgin Islands. A private antitrust plaintiff bringing federal antitrust claims has at his disposal two statutory sources of venue. The general venue statute, 28 U.S.C. § 1391(b), permits an action not based on diversity of citizenship to be brought either in the judicial district where all defendants reside, or in the district in which the claim arose. In addition, Section 12 of the Clayton Act, 15 U.S.C. § 22 provides that an action against a corporation under the antitrust laws may be brought "not only in the judicial district whereof it is an inhabitant, but also in any district wherein it may be found or transacts business." We proceed to evaluate plaintiff's choice of venue with respect to his federal claim under these two alternatives. We also evaluate plaintiff's choice of venue with respect to his Virgin Islands anti-monopoly claim under the relevant insular statute.
The district court held that venue before it was appropriate under 28 U.S.C. § 1391(b), concluding that "the restraint of trade caused injury in the Virgin Islands and therefore the cause of action arose here." The court also held that with respect to plaintiff's claims under Virgin Islands law, venue was appropriate under the court's Article I jurisdiction. Defendants argue that laying venue in the Virgin Islands for plaintiff's federal antitrust claim is precluded by the Supreme Court's decision in Leroy v. Great Western United Corp., 443 U.S. 173, 61 L. Ed. 2d 464, 99 S. Ct. 2710 (1979). We agree that venue under section 1391(b) is barred.
The Court in Leroy examined the purposes of section 1391(b) and concluded that "in most instances, the purpose of statutorily specified venue is to protect the defendant against the risk that a plaintiff will select an unfair or inconvenient place of trial." Id. at 183-84 (footnote omitted). It therefore rejected the notion that Congress intended in providing for venue "where the claim arose" to lay venue at the place of plaintiff's residence. Rather, as the Court noted, the provision for venue where a claim arises was added to close a "venue gap" that had sometimes existed when a plaintiff sought to sue multiple defendants who did not reside in the same district. At most, the Court concluded,
the broadest interpretation of the language of § 1391(b) that is even arguably acceptable is that in the unusual case in which it is not clear that the claim arose in only one specific district, a plaintiff may choose between those two (or conceivably more) districts that with approximately equal plausibility -- in terms of the availability of witnesses, the accessibility of other relevant evidence, and the convenience of the defendant (but not of the plaintiff) -- may be assigned as the locus of the claim.
Id. at 185 (footnote omitted). See also Caribe Trailer Systems, Inc. v. Puerto Rico Maritime Shipping Authority, 475 F. Supp. 711, 719 (D.D.C. 1979) ("To hold that a cause of action necessarily arose in the district in which the plaintiff was injured is a 'simplistic rationale to which antitrust actions are not susceptible.'").
In the case at bar the district court erroneously concluded that an antitrust claim, in essence a form of tort alleging business injury, can be brought under section 1391(b) where the injury occurs, i.e. at the plaintiff's residence. Defendants' affidavits establish that none of its potential witnesses are located in the Virgin Islands, and that the deliberations that led up to adoption of the Code did not take place there. Under Leroy, Chicago and not the Virgin Islands is the proper situs for a venue based on where the cause of action arose. We therefore conclude that venue does not lie in the Virgin Islands by virtue of 28 U.S.C. § 1391(b). Accordingly, because no other statutory source of venue exists with respect to the federal antitrust claims against Dr. Cappuccio, the district court's denial of defendants' motion to dismiss the complaint as to him for improper venue is reversed.
As to plaintiff's Virgin Islands anti-monopoly claims, however, his choice of venue with respect to his claim against Dr. Cappuccio is sustainable. 4 V.I.C. § 78(a) provides in relevant part "All civil actions shall be initiated in the judicial division where the defendant resides or where the cause of action arose or where the defendant may be served with process." Thus, the Virgin Islands general venue statute offers the plaintiff the option of laying venue wherever the plaintiff is able to assert jurisdiction with respect to his Virgin Islands anti-monopoly claim. We conclude that exercising its Article I jurisdiction as a local court, the district court can hear plaintiff's local law claim against Dr. Cappuccio.
The second statutory source of venue for federal antitrust actions is section 12 of the Clayton Act, 15 U.S.C. § 22. The district court, having found venue under section 1391(b), did not discuss section 22 in its memorandum opinion. Similarly, the parties on appeal did not focus their attention on this section. In dissenting as to this issue, Judge Garth believes it is improper for us to decide whether section 22 provides an alternative basis for venue in this case without remanding to the district court for findings of fact. In this connection, he also asserts the burden of proof of venue is upon the plaintiff.
Preliminarily, we note that subject matter jurisdiction is undisputed in this case, and we have concluded, see supra p. 721, that the court has personal jurisdiction over the American Dental Association. The venue issue, therefore, unlike the jurisdictional issue, is not whether the court has authority to hear the case but simply where the case may be tried.*fn7 Because federal courts are courts of limited jurisdiction, a presumption arises that they are without jurisdiction until the contrary affirmatively appears. Tanzymore v. Bethlehem Steel Corp., 457 F.2d 1320 (3d Cir. 1972); United States ex rel. Gittlemacker v. Philadelphia County, 413 F.2d 84 (3d Cir. 1969), cert. denied, 396 U.S. 1046, 24 L. Ed. 2d 691, 90 S. Ct. 696 (1970). By contrast, a motion to dismiss for improper venue is not an attack on jurisdiction but only an affirmative dilatory defense. Because of the nature of the motion, "it is not necessary [as contrasted with jurisdiction] for the plaintiff to include allegations showing the venue to be proper." Fed. R. Civ. P. Form 2, Advisory Committee note 3. It logically follows therefore that on a motion for dismissal for improper venue under Rule 12 the movant has the burden of proving the affirmative defense asserted by it. United Rubber, Cork, Linoleum & Plastic Workers v. Lee Rubber & Tire Corp., 269 F. Supp. 708, 715 (D.N.J. 1967), aff'd, 394 F.2d 362 (3d Cir.), cert. denied, 393 U.S. 835, 21 L. Ed. 2d 105, 89 S. Ct. 108 (1968).*fn8 In dissenting, Judge Garth asserts, however, that when a venue objection is raised by the defendant, the plaintiff has the burden to establish proper venue. Although he cites cases to support this view, these cases confuse jurisdiction with venue or offer no reasons to support their position. Aro Manufacturing Co. v. Automobile Body Research Corp., 352 F.2d 400 (1st Cir. 1965), cert. denied, 383 U.S. 947, 16 L. Ed. 2d 210, 86 S. Ct. 1199 (1966), relied on in the dissent, is a case involving territorial jurisdiction and not venue.*fn9 Cases that hold the burden of establishing venue is upon the plaintiff reach this result without distinguishing between jurisdiction and venue.*fn10 We agree with Professor Moore that this view is "unsound" and the defendant should ordinarily bear the burden of showing improper venue in connection with a motion to dismiss. See 1 J. Moore, Moore's Federal Practice para. 0.140, at 1319-20 (2d ed. 1982).*fn11
The special antitrust venue statute, 15 U.S.C. § 22, provides that in an action against a corporation under the antitrust laws, venue will lie, inter alia, in any district where a corporation "transacts business" or "may be found."*fn12 The motion to dismiss for improper venue was predicated on both this section and on section 1391(b).*fn13 Judge Garth asserts that both in the district court and on appeal the plaintiff resisted this challenge to venue in the Virgin Islands on the basis of section 1391(b) and that language of section 22 relating to being "found" in the Virgin Islands but not on the basis that ADA "transacts business" in the Virgin Islands. There is no doubt, however, that all of section 22 was brought to the attention of the district court. Defendant's reply memorandum, in support of its motion in the district court to dismiss for improper venue, specifically noted that "the primary statute governing venue in federal antitrust matters" is 15 U.S.C. § 22. Defendant devoted considerable attention in its written brief to the district court to an analysis of the facts and law in support of its contention "that ADA does not transact business in the Virgin Islands." Although the district court concluded erroneously that venue was proper under section 1391(b), and Myers naturally focused on vindicating the district court's view on appeal, we are not precluded from affirming the order of the district court if it has reached the right result, although for a wrong reason.*fn14 Because the burden is upon the movant (and not, as the dissent repeatedly urges, upon the plaintiff) to show that venue is improper under any permissible theory, we must consider whether the district court's decision in plaintiff's favor may be affirmed on the ground that the ADA transacted business in the Virgin Islands.
The Supreme Court first construed the phrase "transacts business" of 15 U.S.C. § 22 in Eastman Kodak Co. v. Southern Photo Materials Co., 273 U.S. 359, 71 L. Ed. 684, 47 S. Ct. 400 (1927). As the Court noted, the purpose of the statute was to expand the fora in which venue would lie for antitrust actions by providing for venue not only in those jurisdictions where the corporation's continuous presence would support a conclusion that it was "found" there, but also in those districts where "in fact, in the ordinary and usual sense, it 'transacts business' therein of any substantial character." Id. at 373. This construction, the Court observed in United States v. Scophony Corp. of America, 333 U.S. 795, 92 L. Ed. 1091, 68 S. Ct. 855 (1948), "gave the ...