Summary of a Recent
Judicial Development in
Antitrust

Smithfield Foods Not Subject to Jurisdiction
for Alleged Antitrust Violations

Jennifer Williams
National AgLaw Center Graduate Assistant

Summary of Decision

In United States v. Smithfield Foods, Inc., No. 03-00434, 2004 WL 1846141 (D.D.C. Aug. 5, 2004), the United States District Court of the District of Columbia held that Smithfield Foods, Inc. (Smithfield) was not subject to personal jurisdiction as a result of its own activities or that of its subsidiaries. The court also held that when deciding jurisdiction based on actions of subsidiaries under § 12 of the Clayton Act that only actions of subsidiaries "involved in alleged violations of the Act" should be considered. Id. at *5.

Background

The United States brought a civil action against Smithfield for alleged violations of the Hart-Scott-Rodino Antitrust Improvements Act. See id. at *1. The Act

require[s] that a person with total assets or annual net sales in excess of $100 million, who as a result of an acquisition, would hold an aggregate total amount of voting securities in excess of $15 million to file a premerger notification and report with the U.S. Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") and to observe a waiting period before making the acquisition, unless otherwise exempted. 15 U.S.C. § 18a(a). The waiting period is intended to provide the FTC and the DOJ with time to investigate the proposed transactions and determine whether to seek an injunction to prevent transactions that may violate the antitrust laws.

Id. (footnote omitted).

Smithfield, based in Smithfield, Virginia, is the "nation's largest hog producer and pork packer, reporting annual net sales over $3 billion . . . ." Id. In 1998, Smithfield began acquiring voting securities in IBP, Inc. (IBP), a company based out of South Dakota. See id. From June 29, 1998 to October 1, 1998, Smithfield "held an aggregate total amount of IBP voting securities in excess of $15 million." Id. It dropped below the $15 million dollar level until December 8, 1999, when it again held more than $15 million in IBP voting securities until September 11, 2000. Id. at *2. The United States filed suit alleging that at no time when Smithfield was acquiring and holding securities above the $15 million level did it file the reports and notifications required by the Act. See id.

Arguments

Smithfield argued that the District of Columbia did not have personal jurisdiction over the company nor any of its subsidiaries and moved for dismissal of the suit. See id. The United States countered that under the long-arm statute of § 12 of the Clayton Act, 15 U.S.C. § 22, the court had personal jurisdiction over Smithfield and "contend[ed] that Smithfield transact[ed] business in the District of Columbia through the operations of subsidiaries that Smithfield controls." Id. at *4.

Analysis and Holdings

The court held that there was not personal jurisdiction over Smithfield or its subsidiaries in the District of Columbia. See id. at *6. The court stated that Smithfield's only contacts within the District of Columbia were reports and taxes Smithfield filed as a result of subletting space in the District of Columbia and an employee being a resident of the District of Columbia. See id. at *2. The court recognized that the majority of Smithfield's operations were conducted through two subsidiary groups, the Meat Processing Group and the Hog Processing Group. See id. It further noted that while neither of these groups is "incorporated or headquartered in the District of Columbia . . . [p]roducts manufactured . . . are sold in retail outlets in the District of Columbia." Id. However, the court pointed out that "[t]he United States does not allege . . . that any of these subsidiaries [meat processing or hog processing] were involved in conduct that allegedly violated the Act." Id. The court emphasized that actual acquisitions of the IBP stock were done through Smithfield's wholly-owned subsidiary, SF Investments, Inc., a Delaware-based corporation that does not operate within the District of Columbia. See id.

The court stated that in general, § 12 of the Clayton Act "does not require that the transactions on which jurisdiction is based be related to the underlying cause of action." Id. at *5. However, the court further explained that when looking to apply personal jurisdiction to a company through its subsidiaries, only contacts from subsidiaries "involved in the conspiracy" or alleged violations of the Act should be used. See id.

The court found that when it applied this rule, the contacts of the Hog Processing Group and Meat Processing Group were "not relevant in determining whether this court has personal jurisdiction over Smithfield" as they were not part of any alleged violations of the Act. Id. It further noted that "[t]he United States has not alleged that Smithfield's investment subsidiary, SF Investments, Inc., through which Smithfield acquired the voting securities of IBP, transacted business in the District of Columbia." Id. As such, the court held that Smithfield was not subject to personal jurisdiction in the District of Columbia through the actions of the corporation or its subsidiaries. See id.

Even though the court lacked personal jurisdiction over Smithfield, it rejected Smithfield's motion to dismiss. See id. Instead, the court determined that "the better course is to 'transfer [this] case . . . to a district court for another district, in the interest of justice or for the convenience of the parties' (28 U.S.C. § 1412)." Id. at *6. The court then transferred the case to the United States District Court for the Eastern District of Virginia. See id.

The case was decided on August 5, 2004; this summary was posted Oct. 13, 2004.