Leroy v. Great Western United Corp., 443 U.S. 173 (1979)

Mr. Justice Stevens

delivered the opinion of the Court.

An Idaho statute imposes restrictions on certain purchasers of stock in corporations having substantial assets in Idaho. The questions presented by this appeal are whether the state agents responsible for enforcing the statute may be required to defend its constitutionality in a Federal District Court in Texas and, if so, whether the statute conflicts with the Williams Act amendments to the Securities Exchange Act of 1934,1 or with the Commerce Clause of the United States Constitution.2

Sunshine Mining and Metal Co. (Sunshine) is a “target company” within the meaning of the Idaho Corporate Takeover Act — a statute designed to regulate takeovers of corporations that have certain connections to the State.3 Sunshine’s principal business is a silver mining operation in the Coeur

d’Alene Mining District in Idaho. Its executive offices and most of its assets are located in the State. Sunshine is also engaged in business in New York and, through a subsidiary, in Maryland. Its stock is traded over the New York Stock Exchange, and its shareholders are dispersed throughout the country. App. 36. It is a Washington corporation. Great Western United Corp. v. Kidwell, 439 F. Supp. 420, 423-424.

Great Western United Corp. (Great Western) is an “offeror” within the meaning of the Idaho statute.4 Great Western is a publicly owned Delaware corporation with executive headquarters in Dallas, Tex., and corporate offices in Denver, Colo. App. 131. In early 1977, Great Western decided to make a public offer to purchase 2 million shares of Sunshine stock for a premium price. Because consummation of the proposed tender offer would cause Great Western to own more than 5% of Sunshine’s outstanding shares, Great Western was required to comply with certain provisions of the Williams Act and arguably also to comply with the Idaho Corporate Takeover Act as well as with similar provisions of New York and Maryland.

On March 21, 1977, Great Western publicly announced its intent to make a tender offer for 2 million shares of Sunshine, and its representatives took simultaneous steps to implement the proposed tender offer. They filed a Schedule 13D with the Securities and Exchange Commission in Washington, D. C.,

disclosing the information required by the Williams Act. They consulted with state officials in Idaho, New York, and Maryland about compliance with the corporate takeover laws of those States. And they filed documents with the Idaho Director of Finance in an attempt to satisfy Idaho’s statute.

On March 25, 1977, Melvin Baptie, who was then the Deputy Administrator of Securities of the Idaho Department of Finance, sent a telecopy letter of objections to Great Western’s filing to the company’s offices in Dallas. The letter stated that certain pages of Great Western’s SEC Form 13D were missing, asked for several additional items of information, and indicated that no hearing would be scheduled, nor other action taken, until all of the requested information had been received. App. to Juris. Statement A-156 to A-164. On the same day, Tom McEldowney, the Director of Finance of Idaho, entered an order delaying the effective date of the tender offer.- Id., at A-165 to A-166. Great Western made no response to Baptie’s letter or to McEldowney’s order.

On March 28, 1977, Great Western filed this action in the United States District Court for the Northern District of Texas, naming as defendants the state officials responsible for enforcing the Idaho, New York, and Maryland takeover laws. The complaint prayed for a declaration that the state laws were invalid insofar as they purported to apply to interstate cash tender offers to purchase securities traded on the national exchange. App. 1-36. The claims against the Maryland and New York defendants were dismissed because the former did not attempt to enforce their statute against Great Western and the latter expressly stated that they would not assert jurisdiction over the proposed tender offer. 439 F. Supp., at 428-429. The two Idaho defendants — McEldowney, the Director of Finance, and Wayne Kidwell, then Attorney General of the State5 — appeared specially to contest jurisdiction and

venue, and later filed an answer contesting the merits of the claim.

The District Court found four separate statutory bases for federal jurisdiction.6 It held that personal jurisdiction over the Idaho defendants had been obtained by service pursuant to the Texas long-arm statute.7 It concluded, however, that venue was improper under the general federal venue statute, 28 U. S. C. § 1391 (b),8 because the defendants obviously did not reside in Texas and the claim arose in Idaho rather than in Texas. Nonetheless, it decided that venue could be sustained under the special venue provision in § 27 of the Securities Exchange Act of 1934 (1934 Act). 48 Stat. 902, as amended, 15 U. S. C. § 78aa. See nn. 9 and 10, infra, and accompanying text.

On the merits, the District Court held that the Idaho Corporate Takeover Act is pre-empted by the Williams Act and places an impermissible burden on interstate commerce. It granted injunctive relief that enabled Great Western to acquire the desired Sunshine shares in the fall of 1977. 439 F. Supp., at 434-440. That acquisition did not moot the case, however, because the question whether Great Western has violated Idaho’s statute will remain open unless and until the District Court’s judgment is finally affirmed.

A divided panel of the Court of Appeals for the Fifth Circuit affirmed. The court sustained federal subject-matter

jurisdiction on the same four grounds relied upon by the District Court. See n. 6, su-pra. It then advanced alternative theories in support of both its determination that the District Court had personal jurisdiction over the defendants and its conclusion that venue lay in the Northern District of Texas. First, it noted that the Texas long-arm statute authorized the assertion of personal jurisdiction over nonresidents to the fullest extent allowable under the Due Process Clause of the Fourteenth Amendment. It then held that an Idaho official who seeks to enforce an Idaho statute to prevent a Texas-based corporation from proceeding with a national tender offer has sufficient contacts with Texas to support jurisdiction. Second, it held that jurisdiction was available under § 27 of the 1934 Act,9 which gives the federal district courts exclusive jurisdiction over suits brought “to enforce any . . . duty created” by the Act. It based this holding on the theory that Idaho’s enforcement attempts, by conflicting with the Williams Act, constituted a violation of a “duty” imposed by § 28 (a) of the 1934 Act.10 It relied on the same reasoning to sup

port its conclusion that venue was authorized by § 27 of the 1934 Act. Finally, disagreeing with the District Court, the Court of Appeals concluded that venue in the Northern District of Texas was also proper under the general federal venue provision, 28 U. S. C. § 1391 (b), because the allegedly invalid restraint against Great Western occurred there and it was accordingly “the judicial district ... in which the claim arose.” Great Western United Corp. v. Kidwell, 577 F. 2d 1256, 1265-1274. On the merits, the Court of Appeals agreed with the analysis of the District Court. Id., at 1274-1287.

We noted probable jurisdiction of the appeal. 439 U. S. 1065. Without reaching either the merits or the constitutional question arising out of the attempt to assert personal jurisdiction over appellants, we now reverse because venue did not lie in the Northern District of Texas.

I

The question of personal jurisdiction, which goes to the court's power to exercise control over the parties, is typically decided in advance of venue, which is primarily a matter of choosing a convenient forum. See generally C. Wright, A. Miller, & E. Cooper, Federal Practice and Procedure § 3801, pp. 5-6 (1976) (hereinafter Wright, Miller, & Cooper). On the other hand, neither personal jurisdiction nor venue is fundamentally preliminary in the sense that subject-matter jurisdiction is, for both are personal privileges of the defendant, rather than absolute strictures on the court, and both may be waived by the parties. See Olberding v. Illinois Central B. Co., 346 U. S. 338, 340; Neirbo Co. v. Bethlehem Corp., 308 U. S. 165, 167-168. Accordingly, when there is a sound prudential justification for doing so, we conclude that a court may reverse the normal order of considering personal jurisdiction and venue.

Such a justification exists in this case. Although for the reasons discussed in Part II, infra, it is clear that § 27 of the 1934 Act does not provide a basis for personal jurisdiction, the

question whether personal jurisdiction was properly obtained pursuant to the Texas long-arm statute is more difficult. Indeed, because the Texas Supreme Court has construed its statute as authorizing the exercise of jurisdiction over nonresidents to the fullest extent permitted by the United States Constitution,11 resolution of this question would require the Court to decide a question of constitutional law that it has not heretofore decided. As a prudential matter it is our practice to avoid the unnecessary decision of novel constitutional questions. We find it appropriate to pretermit the constitutional issue in this case because it is so clear that venue was improper either under § 27 of the 1934 Act or under § 1391 (b) of the Judicial Code.

II

The linchpin of Great Western’s argument that venue is provided by § 27 of the 1934 Act is its interpretation of § 28 (a) of that Act. See nn. 9, 10, supra. It reads § 28 (a) as imposing an affirmative “duty” on the State of Idaho, the violation of which may be redressed in the federal courts under § 27. As Mr. Justice Frankfurter said of a similar argument in a similar case, however, “[t]his is a horse soon curried.” Olberding, supra, at 340.

The reference in § 27 to the “liabilities] or dut[ies] created by this chapter” clearly corresponds to the various provisions in the 1934 Act that explicitly establish duties for certain participants in the securities market or that subject such persons

to possible actions brought by the Government, the Securities and Exchange Commission, or private litigants.12 Section 28 (a) is not such a provision. There is nothing in its text or its legislative history to suggest that it imposes any duty on the States or that indicates who might enforce any such duty. The section was plainly intended to protect, rather than to limit, state authority.13 Because § 28 (a) imposed no duty on appellants, the argument that § 27 establishes venue in the District Court is unsupportable.14

III

Nor, as the District Court correctly concluded, is venue available under § 1391 (b). The first test of venue under that provision — the residence of the defendants — obviously points to Idaho rather than Texas. The Court of Appeals reasoned, however, under the second relevant test that the claim arose in Dallas because that is the place where the Idaho officials “invalidly prevented Great Western from initiating a tender offer for Sunshine.” 577 F. 2d, at 1273.15 The court buttressed its conclusion by noting that a single action against the officials of New York, Maryland, and Idaho could not have been instituted in any one place unless the claim was treated as having arisen in Dallas. Ibid.

The easiest answer to this latter argument is that Great Western’s complaint did not in fact raise justiciable claims against any officials save those in Idaho. But that is not the only answer. Although the legal issues raised in the complaint challenging the constitutionality of the statutes of three different States were similar, and the convenience of Great Western would obviously be served by consolidating the three claims for trial in one district, the general venue statute does not authorize the plaintiff to rely on either of those reasons to justify its choice of forum.

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.16 For that reason, Congress has generally not made the residence of the plaintiff a basis for venue in nondiversity cases. But cf. 28 TJ. S. C. § 1391 (e). The desirability of consolidating similar claims in a single proceeding may lead defendants, such perhaps as the New York and Maryland officials in this case, to waive valid objections to otherwise improper venue. But that concern does not justify reading the statute to give the plaintiff the right to select the place of trial that best suits his convenience. So long as the plain language of the statute does not open the severe type of “venue gap” that the amendment giving plaintiffs the right to proceed in the district where the claim arose was designed to close,17 there is no reason to read it more broadly on behalf of plaintiffs.18

Moreover, the plain language of § 1391 (b) will not bear the Court of Appeals’ interpretation. The statute allows venue in “the judicial district ... in which the claim arose.” Without deciding whether this language adopts the occa

sionally Active assumption that a claim may arise in only one district19 it is absolutely clear that Congress did not intend to provide for venue at the residence of the plaintiff or to give that party an unfettered choice among a host of different districts. Denver & R. G. W. R. Co. v. Railroad Trainmen, 387 U. S. 556, 560. Rather, it restricted venue either to the residence of the defendants or to “a place which may be more convenient to the litigants” — i. e., both of them — -“or to the witnesses who are to testify in the case.” S. Rep. No. 1752, 89th Cong., 2d Sess., 3 (1966). See Denver & R. G. W. R. Co., supra, at 560. See also Brunette Machine Works v. Kockum Industries, 406 U. S. 706, 710. In our view, therefore, 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,20 a plaintiff may choose between those two (or conceivably even 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. Cf. Braden v. *30th Judicial Circuit Court of Ky.,* 410 U. S. 484, 493-494.

This case is not, however, unusual. For the claim involved has only one obvious locus — the District of Idaho. Most importantly, it is action that was taken in Idaho by Idaho residents — the enactment of the statute by the legislature, the review of Great Western’s filing, the forwarding of the comment letter by Deputy Administrator Baptie, and the entry of the order postponing the effective date of the tender by Finance Director McEldowney — as well as the future action that may be taken in the State by its officials to punish

or to remedy any violation of its law, that provides the basis for Great Western’s federal claim. For this reason, the bulk of the relevant evidence and witnesses — apart from employees of the plaintiff, and securities experts who come from all over the United States21 — is also located in the State. Less important, but nonetheless relevant, the nature of this action challenging the constitutionality of a state statute makes venue in the District of Idaho appropriate. The merits of Great Western’s claims may well depend on a proper interpretation of the State’s statute, and federal judges sitting in Idaho are better qualified to construe Idaho law, and to assess the character of Idaho’s probable enforcement of that law, than are judges sitting elsewhere. See cases cited in n. 11, supra.

We therefore reject the Court of Appeals’ reasoning that the “claim arose” in Dallas because that is where Great Western proposed to initiate its tender offer, and that is where Idaho’s statute had its impact on Great Western. Aside from the fact that these “contacts” between the “claim” and the Texas District fall far short of those connecting the claim and the Idaho District, we note that this reasoning would subject the Idaho officials to suit in almost every district in the country. For every prospective offeree — be he in New York, Los Angeles, Miami, or elsewhere, rather than in Dallas — could argue with equal force (or Great Western could argue on his behalf) that he had intended to direct his local broker to accept the tender and was frustrated in that desire by the Idaho law.22 As we noted above, however, such a reading of § 1391 (b) is inconsistent with the underlying purpose of the provision, for it would leave the venue decision entirely in the hands of plaintiffs, rather than making it “primarily a matter

of convenience of litigants and witnesses.” Denver <& R. G. W. R. Co., supra, at 560.23 In short, the District of Idaho is the only one in which “the claim arose” within the meaning of § 1391 (b).

The judgment of the Court of Appeals is reversed.

Mr. Justice White,

with whom Mr. Justice Brennan and Mr. Justice Marshall join, dissenting.

When Great Western proposed in Dallas, Tex., to make a cash tender offer for up to two million shares of Sunshine, officials in Idaho, Maryland, and New York indicated that the offer would be subject to the corporate takeover statute of each State. Having complied with the provisions of the Williams Act governing tender offers and believing that extraterritorial application of the additional requirements of the state statutes was pre-empted by and in conflict with the federal statute, Great Western brought suit in Federal District Court for the Northern District of Texas for declaratory and injunc-tive relief against enforcement of the state statutes. Because I conclude that venue in that District and personal jurisdiction over the defendant state officials were authorized by § 27 of the Securities Exchange Act of 1934, 15 U. S. C. § 78aa, I disagree with the Court’s disposition of this appeal and would reach the merits of Great Western’s contention that Idaho’s statute is pre-empted by the Williams Act.

I

The Williams Act was enacted in the form of a set of amendments to the Securities Exchange Act, which, like the

Securities Act of 1933, contains its own venue provision. Section 27 prescribes two separate requirements — one relating to the attributes of the judicial district in which suit is brought, and the second relating to the nature of the suit. I consider these in turn.

A

Comparison of the terms of § 27 with the terms of the general federal venue statute, 28 U. S. C. § 1391 (b), shows the relative ease with which venue may be obtained in suits brought under the Securities Exchange Act. Whereas under § 1391 (b) venue is proper only in a judicial district that is either where (a) the defendant(s) reside, or (b) “the claim arose,” under § 27 suit may be brought in any district that is either where (a) the defendant may be found, is an inhabitant, or transacts business, or (b) “any act or transaction constituting the violation occurred.” As the majority notes, some courts have been reluctant to embrace the view that a claim may arise in more than one district for purposes of § 1391 (b). On the other hand, it has been widely accepted that there may be more than one district where acts constituting a violation may occur for purposes of § 27, and indeed that the act on which venue is predicated need be only a “material” part of an alleged violation of the Securities Exchange Act.1 “Without question, the intent of the venue . . . provisions of the securities laws is to grant potential plaintiffs liberal choice in their selection of a forum.” Ritter v. Zuspan, 451 F. Supp. 926, 928 (ED Mich. 1978). 'Given the underlying policy of § 27 to confer venue in a wide variety of districts in order to ease the task of enforcement of federal securities law, it would be anomalous indeed if venue were not available in the North

ern District of Texas in this case. Faced with the alternative left to it by the majority — of instituting separate suits in each State attempting to apply its extraterritorial takeover law, or perhaps waiting and defending separate enforcement actions brought by each State — Great Western might well choose to forgo its tender offer altogether, a result not in keeping with the purposes of the Williams Act or § 27. Although in this case only three States indicated an intention to assert jurisdiction over the tender offer, and only Idaho ultimately attempted to enforce its statute, it is important to note that there are analogous statutes in a total of 36 States.2

With the foregoing in mind, even if the claim in this case did not arise in Dallas within the meaning of § 1391 (b), Dallas is a place where an act constituting an alleged violation of the Williams Act occurred, because it is where appellants sought to apply Idaho’s statute. Of course, for purposes of determining whether venue requirements were met, the substantive allegations of Great Western’s claim — that is, that Idaho’s statute conflicts with the Williams Act — must be accepted as true. The specific act alleged to violate a duty created by the Williams Act is the application of the Idaho statute to the Dallas tender offer. The gist of the act complained of being extraterritorial application of Idaho’s statute, this act obviously occurs not only in Idaho but also in the district where the extraterritorial tender offer is made.

B

Having determined that the Northern District of Texas has the required relationship to the claim in this case, venue in that District was proper under § 27 as long as the second general requirement of the provision was met; that is, if it may be said that Great Western’s suit was “to enforce any liability

or duty created by this chapter , or to enjoin any violation of such chapter . . . .” In the majority’s view, the term “duty created by this chapter” means only those duties “explicitly” prescribed by a provision of the Williams Act. Ante, at 181-182. The majority would further restrict the term to refer only to duties imposed on “participants in the securities market,” ante, at 181, which presumably does not include officials seeking to enforce state corporate takeover laws.

But § 27 does not provide that the duty must be “explicitly” stated in a provision of the Williams Act or that only “participants in the securities market” have duties under the Act. Rather, it broadly encompasses all suits to enforce “any . . . duty created by” the Act. Here respondent sought an injunction against enforcement of Idaho’s statute as applied to its interstate tender offer, on the ground that such enforcement is pre-empted by and in conflict with the Williams Act. The only question, then, is whether the Williams Act imposes on state officials, expressly or impliedly, the duty not to enact or enforce legislation inconsistent therewith. In my view, the answer to this question must be in the affirmative. The Supremacy Clause of the Constitution provides that if state law conflicts with federal law, federal law prevails. Given this command, the very enactment and existence of the Williams Act pre-empts and invalidates all conflicting state efforts to regulate cash tender offers. Viewed from the perspective of potential offerors, the existence of the Act creates the right not to be subject to conflicting state regulation. Viewed from the perspective of state officials, the existence of the Act creates a duty not to undertake conflicting regulation efforts.

That the duty alleged to have been violated in this case would not exist in the absence of the Supremacy Clause does not make the duty any less a creation of the Williams Act. “[A] 11 federal actions to enjoin a state enactment rest ultimately on the Supremacy Clause,” Swift & Co. v. Wickham, 382 U. S. 111, 126 (1965), whether the substantive federal

law relied upon be a statute — as in Swift3 and as in this case— or another provision of the Constitution, such as the Commerce Clause. Thus, the command of the Supremacy-Clause is necessary to the authoritative ¿ssertion of any federal right or counterpart duty, and imposes the general duty not to act in a manner inconsistent with federal law. However, the specific duty alleged to have been violated in this case — not to enforce extraterritorial state takeover laws such as Idaho’s — is imposed by the existence of pre-emptive federal regulation.4 Just as various provisions of the Williams Act create certain duties on the part of participants in the securities market, the Williams Act as a whole creates the duty on the part of state officials not to regulate in a manner inconsistent with that Act.

II

Once it is determined that § 27 contemplates venue for Great Western’s claim in the Northern District of Texas, the federal court in that District also had personal jurisdiction over the Idaho defendants, they having been served in a “district . . . wher[e] . . . found,” there being no objection to the

manner of service of process, and there being no restrictions imposed by the Constitution on the exercise of jurisdiction by the United States over its residents, see Fitzsimmons v. Barton, 589 F. 2d 330 (CA7 1979).5