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What corporations should know about the Clayton Act circuit split

12/23/24

By: Cameron N. Regnery

Federal antitrust laws prohibit anticompetitive business conduct such as price-fixing, monopolization, and conspiracies to restrain trade. Corporations sued under these laws face a difficult challenge. Such lawsuits are complex, and often subject corporations to lengthy, expensive litigation. Compounding this already uphill battle is the growing circuit split over Section 12 of the Clayton Act, which governs where corporations may be sued for alleged antitrust violations. Depending on how a given court has interpreted Section 12, corporations may be forced to litigate burdensome antitrust lawsuits in far-flung, disadvantageous locations. 

The key issues underpinning the Section 12 split are personal jurisdiction and venue. In their most basic formulation, these doctrines collectively determine whether a court situated in a particular geographic location has the ability to hear a case brought against a corporation. A court must possess personal jurisdiction over the specific corporation, and venue must be proper in the court’s location, to allow that court to preside over the lawsuit. Notably, a court possesses personal jurisdiction over a corporation if that corporation is properly served with summons—or “process”—under the terms of a federal statute.1 In turn, venue is proper, generally-speaking, where personal jurisdiction is present.2 

In the antitrust context, there is such a federal statute that governs personal jurisdiction and venue—namely, Section 12 of the Clayton Antitrust Act of 1914.3 Section 12 includes two clauses, separated by a semicolon. The first clause (the Venue Clause) provides that: “[a]ny suit, action, or proceeding under the antitrust laws against a corporation 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.” The second clause (the Service of Process Clause), following the semicolon, provides that: “and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found.” 

As previously noted, personal jurisdiction over a corporation may be established if a corporation is properly served with process under a federal statute. Section 12’s Service of Process Clause is one such federal statute, and provides for service of process nationwide.4 Accordingly, two federal circuits—the Third and Ninth Circuits—have ended the analysis there, adopting a “broad interpretation” of Section 12.5 Under this broad interpretation, corporations are subject to nationwide personal jurisdiction. Moreover, because venue is generally proper wherever a defendant is subject to personal jurisdiction, the broad interpretation of Section 12 effectively allows a corporation to be sued anywhere in the United States.  

Other circuits, by contrast, have not confined their inquiry to the Service of Process Clause alone, but have read that clause in tandem with the Venue Clause. Indeed, the Second, Seventh, and D.C. Circuits have adopted a “narrow interpretation” of Section 12, under which a court only has personal jurisdiction over a corporation if venue is proper under Section 12’s Venue Clause.6 Accordingly, for a court to have personal jurisdiction over a corporation, that corporation must either (i) inhabit or be found in that federal district (e.g., be registered there, headquartered there, etc.), or (ii) “transact business” in that federal district. In the Section 12 context, “transact business” is a somewhat nebulous phrase, which the U.S. Supreme Court has held to mean the transacting of business of “substantial character” in “the ordinary and usual sense.”7 

The practical consequence of these two interpretations is a wide variance in where a corporation may be sued under a federal antitrust law. Under the broad interpretation, a corporation may be sued anywhere in the United States. A corporation registered and headquartered in Florida, for example, could be properly sued in California. By contrast, under the narrow interpretation, a corporation may only be sued where it is found or inhabits, or where it transacts business of a substantial character. A corporation registered and headquartered in Florida, that only transacts business in Florida, could therefore only be properly sued in Florida. 

While only five circuit courts (encompassing just eighteen states and the District of Columbia) have adopted one of these competing statutory interpretations, the divide over Section 12 has embedded nationwide. Indeed, in those circuits that have not adopted either interpretation of Section 12, district courts have taken it upon themselves to adopt one of the interpretations. In the First Circuit, for example, the District of Maine has adopted the broad interpretation8, while in the Eleventh Circuit, the Northern District of Alabama has adopted the narrow interpretation9. 

Other district courts, citing the tension created by the diverging interpretations of Section 12, have chosen not to pick a side altogether. For example, in the Sixth Circuit, the Middle District of Tennessee recently acknowledged that, “[w]hether the Court can exercise personal jurisdiction over the [defendants], and therefore whether venue is appropriate, depends entirely on this unresolved statutory-interpretation issue that has deeply divided the circuit courts of appeals.”10 Accordingly, the Court decided to “not choose a side in this circuit split,” instead sidestepping the issue on other procedural grounds.11  

While this growing split on the correct interpretation of Section 12 may appear to be a legalistic squabble over technicalities, the real-world impact for corporations is notable. If sued under a federal antitrust law, corporations should be aware of the particular interpretation used in the district in which the lawsuit is brought. If a plaintiff sues a corporation in a district subscribing to the narrow interpretation, there may be strong arguments that the court lacks personal jurisdiction or that venue is improper, both of which are potential avenues for dismissal of the case.12 Conversely, if a plaintiff sues a corporation in a district that applies the broad interpretation, the corporation likely will not be able to escape litigating in that district, regardless of any geographic burdens or strategic disadvantages. In those districts that have not adopted either interpretation, corporations are perhaps in an even more precarious position, and may have to urge the court to expressly adopt (or not adopt) a specific interpretation.  

The bottom line is that how a given court interprets Section 12 of the Clayton Act has serious ramifications on where and how a corporation will have to litigate a federal antitrust action. 

The commercial litigation attorneys at Freeman Mathis & Gary, LLP are well-versed in complex antitrust matters and have litigated issues related to Section 12, personal jurisdiction, and venue in federal courts throughout the United States. 

For more information, please contact Cameron Regnery at cameron.regnery@fmglaw.com or your local FMG attorney.

  1. See Fed. R. Civ. P. 4(k)(1)(C). ↩︎
  2. See 28 U.S.C. § 1391(b)(3). ↩︎
  3. 15 U.S.C. § 22. ↩︎
  4. See, e.g., In re Blue Cross Blue Shield Antitrust Litig., 26 F. Supp. 3d 1172, 1194 n.21 (N.D. Ala. 2014) (“[A]ll courts seemingly agree with the notion that Section 12 grants nationwide personal jurisdiction.”). ↩︎
  5. See In re Auto. Refinishing Paint Antitrust Litig., 358 F.3d 288 (3d Cir. 2004); Action Embroidery Corp. v. Atl. Embroidery, Inc., 368 F.3d 1174 (9th Cir. 2004). Notably, while the Third Circuit has applied the broad interpretation, it has only done so in the context of a foreign, rather than domestic corporation, which the Court noted was a crucial distinction. In re Auto. Refinishing Paint, 358 F.3d at 292-96. ↩︎
  6. See Daniel v. Am. Bd. of Emergency Med., 428 F.3d 408 (2d Cir. 2005); KM Enters., Inc. v. Global Traffic Techs., Inc., 725 F.3d 718 (7th Cir. 2013); GTE New Media Servs. Inc. v. BellSouth Corp., 199 F.3d 1343 (D.C. Cir. 2000).  ↩︎
  7. United States v. Scophony Corp. of Am., 333 U.S. 795, 807 (1948). ↩︎
  8. See In re New Motor Vehicles Canadian Export Antitrust Litig., 307 F. Supp. 2d 145, 148-49 (D. Me. 2004). ↩︎
  9. See In re Blue Cross, 26 F. Supp. 3d at 1196. ↩︎
  10. In re RealPage, Inc., Rental Software Antitrust Litig., No. 3:23-md-03071, 2024 WL 993302, at *4 (M.D. Tenn. Mar. 7, 2024). ↩︎
  11. Id.  ↩︎
  12. See Fed. R. Civ. P. 12(b)(2)-(3). ↩︎

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