Dragor Shipping Corporation v. Union Tank Car Company

• Decision Date: 21 April 1967
• Docket Number: No. 20904.,20904.
• Citation: 378 F.2d 241
• Parties: DRAGOR SHIPPING CORPORATION, a corporation, formerly Ward Industries Corporation, Appellant, v. UNION TANK CAR COMPANY, a corporation, Appellee.
• Court: U.S. Court of Appeals — Ninth Circuit

378 F.2d 241 (1967)

DRAGOR SHIPPING CORPORATION, a corporation, formerly Ward Industries Corporation, Appellant, v. UNION TANK CAR COMPANY, a corporation, Appellee.

No. 20904.

United States Court of Appeals Ninth Circuit.

April 21, 1967.

Hull, Terry & Bret Harte, Tucson, Ariz., Joseph Lotterman, Lotterman & Weiser, New York City, for appellant.

Thomas C. McConnell, Boyle, Bilby, Thompson & Shoenhair, Tucson, Ariz., for appellee.

Before HAMLEY, MERRILL and BROWNING, Circuit Judges.

HAMLEY, Circuit Judge:

Union Tank Car Company (Union) brought this action against Dragor Shipping Corporation (Dragor), to recover one million dollars for breach of a settlement agreement between the parties dated October 3, 1963, and to obtain payment of a promissory note in that amount. Dragor counterclaimed for one million dollars for breach of the same agreement. The district court granted summary judgment for Union on its complaint, and Dragor appealed pursuant to Rule 54(b), Federal Rules of Civil Procedure.

While that appeal was pending before our court the district court dismissed Dragor's counterclaim for lack of prosecution. Dragor also appealed from that order. On the first appeal we reversed the district court because it lacked in personam jurisdiction over Dragor. Dragor Shipping Corporation v. Union Tank Car Company, 9 Cir., 361 F.2d 43.¹ The second appeal is now before us to decide whether the district court had jurisdiction to dismiss Dragor's counterclaim.

The suit was instituted in the United States District Court for the District of Arizona. After Union filed its complaint, Dragor appeared specially and moved for an order quashing, vacating and annulling the service of process, and for an order dismissing the summons and complaint. The motion was made on the ground that the court did not obtain jurisdiction over the person of Dragor or the subject matter of the claim.²

The motion to quash and dismiss was denied. Dragor sought to take an interlocutory appeal from such denial, pursuant to 28 U.S.C. § 1292(b) (1964), but the district court declined to amend its order to make this possible. Dragor then petitioned this court for a writ of prohibition restraining the district court from proceeding with the action. We denied leave to file the petition.

Dragor then filed its answer in which it denied the essential allegations of the complaint, raised the defenses of lack of jurisdiction, insufficiency of process and improper venue, and pleaded the counterclaim referred to above. In its counterclaim Dragor stated that, to avoid a default in answering, it had been compelled to file the counterclaim as a compulsory counterclaim. Dragor further alleged that it had done so without waiving or intending to waive the objections to the jurisdiction and venue of the court, which it had previously asserted.

Dragor's sole contention on the appeal from the summary judgment for Union on the latter's complaint was that the Arizona District Court's assumption of jurisdiction, over the person of Dragor deprived Dragor of due process of law, and was therefore unconstitutional.

The principle Dragor invoked was that due process requires that in order to subject a defendant to a judgment in personam, if he is not present within the territory of the forum, he must have certain minimum contacts with it such that the maintenance of the suit does not offend traditional notions of fair play and substantial justice. We agreed that this principle was applicable under the circumstances and held that the Arizona District Court did not have in personam jurisdiction over Dragor. The judgment was reversed. Dragor Shipping Corporation v. Union Tank Car Company, 9 Cir., 361 F.2d 43.

Before that decision came down, Dragor moved in the district court for leave to discontinue its counterclaim without prejudice. As one ground therefor, Dragor urged that the in personam jurisdiction of the district court was the subject of the then pending appeal to this court and that, if Dragor were successful, all of the proceedings in the district court would be nullified. The district court denied Dragor's motion and set the counterclaim for trial on December 7, 1965.

Dragor refused to participate in the trial of the counterclaim on that date. Before the announcement of our decision in the appeal referred to above, the district court dismissed Dragor's counterclaim for lack of prosecution. Dragor's appeal from that order of dismissal is the one now under consideration.

Under the circumstances stated above, Dragor contends that the district court not only lacked in personam jurisdiction over Dragor to hear and determine the issues raised in Union's complaint, as we have previously held, but also necessarily lacked in personam jurisdiction over Dragor with regard to Dragor's counterclaim.

Dragor's counterclaim arose out of the transaction that was the subject matter of Union's complaint, namely, the settlement agreement of October 3, 1963. The counterclaim did not require for its adjudication the presence of third parties of whom the court could not acquire jurisdiction. Nor was the counterclaim the subject of another pending action. It was therefore a compulsory counterclaim within the meaning of Rule 13(a), Federal Rules of Civil Procedure.

Under Rule 13(a) a party who fails to plead a compulsory claim against an opposing party is held to have waived such claim and is precluded by res judicata from bringing suit upon it again. Local Union No. 11, International Brotherhood of Electrical Workers, AFL-CIO v. G. P. Thompson Electric, Inc., 9 Cir., 363 F.2d 181,...