Thanks for visiting! Welcome to a new way to research case law. You are viewing a free summary from Descrybe.ai. For citation and good law / bad law checking, legal issue analysis, and other advanced tools, explore our Legal Research Toolkit — not free, but close.
Neirbo Co. v. Bethlehem Shipbuilding Corp.
Citations: 308 U.S. 165; 60 S. Ct. 153; 84 L. Ed. 167; 1939 U.S. LEXIS 77; 128 A.L.R. 1437Docket: 38
Court: Supreme Court of the United States; November 22, 1939; Federal Supreme Court; Federal Appellate Court
Justice Frankfurter delivered the Court's opinion regarding a case that reviewed the Second Circuit's affirmation of a District Court's order set aside service of process on Bethlehem Shipbuilding Corporation and dismissed the petitioners' bill. The suit arose under diversity of citizenship, and neither party resided in the district where the suit was filed. The case addressed uncertainties in the application of Section 51 of the Judicial Code, particularly the designation of an agent for service of process by a foreign corporation in compliance with state law. The Court emphasized that federal court jurisdiction is granted by Congress and cannot be conferred by litigants, while the venue of a lawsuit relates to the convenience of the parties and can be influenced by their choices. Section 51 provides defendants with a personal privilege regarding venue, which they may assert or waive. This privilege can be lost through failure to assert it promptly, by participation in the case, or by conduct suggesting consent to be sued. The Court noted that while venue issues are straightforward for natural persons, they become more complex with corporate litigants, as corporations are treated similarly to individuals in legal contexts. The evolution of how foreign corporations could access courts reflects a historical attempt to reconcile their societal roles with legal limitations. The opinion cites relevant case law to illustrate these principles. The legal concept of corporate presence has evolved from a metaphorical doctrine that a corporation could only exist where it was created, which prevented lawsuits in states other than its chartering state. This perspective was challenged by Chief Justice Waite in Ex parte Schollenberger, where he recognized that corporations engage in business across state lines and should not be immune from lawsuits in states where they operate. Corporations were thus required to designate agents for service of process, which constituted consent to be sued in those states, including federal courts located there. The Schollenberger decision highlighted that consent to be sued extended to federal courts within the state, regardless of the corporation's physical presence. The 1887 amendment to the Judiciary Act, which removed the language allowing suits only where defendants were physically present, was intended to limit certain types of service against natural persons but did not alter the implications of corporate consent established in earlier cases. The amendment aimed to manage the increasing litigation in federal courts related to corporate citizenship rather than change the status of corporate litigants in diversity cases. Foreign corporations authorized to conduct local business were prohibited from accessing federal courts, a measure rejected by the Senate multiple times. The House bill included a venue provision that omitted the “found” clause, raising questions about the treatment of corporate litigants barred from federal courts. It was argued that it would be contradictory for the House to impose such restrictions while allowing foreign corporations the option to choose between state and federal courts based on a flawed interpretation of consent. Despite the 1887 Act’s removal of the “found” clause, lower federal courts continued to interpret the designation of an agent for service of process as valid consent to federal jurisdiction, a practice upheld until the Southern Pacific Co. v. Denton case in 1892. In Denton, the Supreme Court ruled a Texas statute unconstitutional for denying foreign corporations access to federal courts, clarifying that any consent derived from such a void statute was invalid. However, the Court suggested that had the statute been valid, consent might have established jurisdiction. While some lower courts misapplied the Denton ruling to cases with valid consent, others adhered to the precedent set in Schollenberger’s case. The current case aligns with the sound practice established by Schollenberger, as Bethlehem designated an agent for service of process in New York, a decision upheld by the New York Court of Appeals. This designation constitutes a legitimate contract, confirming the agent's role as a representative for process service. The statute mandating this designation is constitutional, and the consent to jurisdiction does not impose New York law on federal procedures, affirming Bethlehem's consent to be sued in both state and federal courts. State legislation and the consent of parties can create circumstances for U.S. courts to take jurisdiction over a case. The judgment in the referenced case is reversed. Section 112 of the law prohibits arresting someone in one district for trial in another in civil actions, except as specified in sections 113 to 117. Civil suits involving citizens of different states must be filed in the district where either the plaintiff or defendant resides. Historically, circuit courts have generally declined jurisdiction in similar cases, as noted in various precedents. The Act of 1887-88 aimed to limit circuit court jurisdiction, a misunderstanding that influenced the decision in Ex parte Wisner, which was later overruled. The Culberson Bill proposed restrictions on federal court cognizance of suits involving state-created corporations and their citizens, including provisions against removal to federal courts. The distinction between cases is emphasized, particularly regarding consent derived from agent designation under state law. In previous cases, the requirement of residence was satisfied by consent, as seen in various rulings from different federal courts.