Neirbo Co. v. Bethlehem Shipbuilding Corp.

Background

A group of companies sued a foreign shipbuilding company that had designated a local agent for service under New York law. The District Court set aside service on the foreign company and dismissed it; the Court of Appeals affirmed. The suit was brought on grounds of diversity of citizenship and was not filed in the district where either party lived. The legal question presented concerned whether a corporation’s state-law designation of an agent satisfies the federal venue rule in Section 51 of the Judicial Code.

Reasoning

Justice Frankfurter’s majority opinion explained that the place where a case is tried is a personal privilege for defendants that can be waived by consent. He relied on longstanding practice and earlier cases holding that, when a foreign corporation designates an agent under a valid state statute, that designation is a real consent to be sued and therefore satisfies the federal venue statute. The Court reviewed the history of the law, explained why deletion of the phrase “in which he shall be found” from an 1887 statute did not change the effect of such consent, and concluded the lower courts’ practice recognizing state-agent designation as sufficient was sound. The Supreme Court reversed the dismissal and allowed the federal suit to proceed against the company.

Real world impact

Companies that lawfully register and name an in-state agent can be sued in that state’s federal courts even if they are incorporated elsewhere. The ruling focuses on where a case may be brought, not on whether the claim has merit. Businesses doing local business under state registration requirements should expect that state-ordered agent designations can authorize federal venue.

Dissents or concurrances

Justice Roberts dissented, arguing the Court departed from a long-settled construction that treats a corporation as a citizen only of its state of incorporation and that Congress had acquiesced in that view; he would have affirmed the dismissal.