Warshawsky & Co. v. Arcata Nat. Corp., 76-1990
| Decision Date | 15 April 1977 |
| Docket Number | No. 76-1990,76-1990 |
| Parties | WARSHAWSKY & COMPANY, Plaintiff-Appellant, v. ARCATA NATIONAL CORPORATION and Arcata Graphics Corporation, Defendants-Appellees. |
| Court | U.S. Court of Appeals — Seventh Circuit |
Lee A. Freeman, Sr., Lawrence R. Levin, Chicago, Ill., for plaintiff-appellant.
Joseph DuCoeur, Chicago, Ill., for defendants-appellees.
Before CUMMINGS, PELL and BAUER, Circuit Judges.
Appellant Warshawsky & Company (Warshawsky), plaintiff in an action pending against Arcata National Corporation and Arcata Graphics Corporation 1 in the District Court for the Northern District of Illinois, moved therein for a preliminary injunction restraining appellees from prosecuting in the District Court for the Northern District of California a separate action based on matter allegedly required to be asserted as a counterclaim in the Illinois lawsuit. On August 26, 1976, the district court granted the motion. Subsequently, on September 23, 1976, the district court, acting sua sponte and without prior intimation to any party, vacated its prior injunction. Warshawsky filed a timely notice of appeal on October 5, 1976. We have appellate jurisdiction under 28 U.S.C. § 1292(a)(1). 2
Warshawsky is a Chicago-based Delaware corporation that sells automotive parts and accessories through mail order catalogs distributed monthly. Arcata Graphics is a Connecticut-based New York corporation that prints mail order catalogs and other materials.
The disputes that have led to the litigation between the parties arise out of a business relationship dating back to the late 1960's. Sometime in 1969, Warshawsky officials met with various persons representing J. W. Clement Corporation, later renamed Arcata Graphics, to discuss the possibility of Arcata's printing mail order catalogs for Warshawsky and its wholly-owned subsidiary, J. C. Whitney & Company (Whitney). Arcata conducted printing test runs for catalogs and, in June 1970, as a result of the negotiations and the test runs, the parties entered into an agreement under which Arcata printed and mailed in California millions of catalogs for Warshawsky over a five-year period. Upon the June 1975 termination of the written agreement, Arcata continued on a month by month basis, to print and mail Warshawsky catalogs. From December 1975 to April 1976, Arcata printed over twenty-four million catalogs. This printing took place at a time when the parties were negotiating for a new contract and to resolve Warshawsky's claims for breach of the old agreement.
The negotiations broke down. On April 12, 1976, Warshawsky filed suit in the Northern District of Illinois seeking to recover millions of dollars for claimed breaches of the old agreement. One week later, on April 19, 1976, Arcata Graphics instituted an action against Warshawsky and Whitney in California to recover, inter alia, amounts due and owing for printing done from December 1975 through April 1976.
After the filing of the complaints, a number of procedural motions were filed, briefed, and decided in both courts. On May 6, 1976, Arcata filed in the Illinois action a motion to transfer the case to California. Eleven days later Arcata filed its memorandum in support of transfer, with supporting affidavits. On the following day, Arcata National Corporation filed a motion to dismiss for want of personal jurisdiction. On May 19, 1976, Warshawsky filed a motion in the California suit to stay that action, premising its motion on the assertion that the California suit was a compulsory counterclaim to the Illinois action and should be prosecuted only in Illinois. On June 1, 1976, Arcata filed a memorandum in opposition to the stay motion, arguing that the California court was the appropriate forum for the plaintiff's and defendants' actions and that Warshawsky's stay motion should be denied because Arcata's claims were not compulsory counterclaims in the Illinois action. After considering the arguments of the parties, the California court denied Warshawsky's motion on June 11, 1976.
Five days later, on June 16, 1976, Warshawsky filed a motion in the Illinois court seeking to restrain Arcata from prosecuting the California action. Arcata resisted the motion on several grounds, submitting that 28 U.S.C. § 1404(a), 3 the basis for its earlier transfer motion, compelled transfer of the Illinois action to California, that judicial comity required that Warshawsky be precluded from relitigating identical issues previously rejected by the California court, that factors of convenience and justice pointed plainly to retention of Arcata's lawsuit in California and that Arcata's claims clearly were not compulsory counterclaims.
On August 10, 1976, the district court judge denied the appellees' motion to transfer the case to the Northern District of California. The court's decision rested on the judge's conviction that transfer would do no more than shift the convenience from one party to another. The court recognized that, under Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055 (1947), a plaintiff's choice of forum was entitled to great weight and was not lightly to be disturbed. Relying on General Portland Cement Co. v. Perry, 204 F.2d 316 (7th Cir. 1953), the court observed that the defendants must establish that the balance of interest weighed strongly in favor of transfer if they were to prevail on their transfer motion. On the same day, the district court denied defendant Arcata National's motion to dismiss for lack of personal jurisdiction.
Approximately two weeks later, on August 26, 1976, the district court granted Warshawsky's motion to enjoin. Because of the sharp disagreement between the parties as to the proper interpretation of the district court's order with particular regard to the basis on which the court rested its opinion, we set out the portions of the order pertinent to the disagreement. 4 The dispute reflected in briefs and arguments centers on whether the district court was resting the granting of the injunction on a determination that compulsory counterclaiming was appropriate or merely that the injunction would prevent duplication of effort by the parties and would conserve court time and effort. We recognize on this matter an inherent ambiguity in the decision as quoted in the margin, but also note some remarks from the bench at a subsequent session which would be indicative of a belief on the part of the court that it thought compulsory counterclaim status existed. While it might have been helpful to this court had the district court been more explicit, inasmuch as we have made our own independent determination of the counterclaim question we find it unnecessary to resolve the apparent ambiguity in the record or to determine the precise basis or bases for the district court's granting of the injunction. The court then set the cause for a pretrial conference on Friday, September 17, 1976.
Impressions developed at the scheduled pretrial conference apparently were inducing causes which led the judge to reconsider the August 26 order. After presiding at the September 17 conference, the district court judge "got the impression" that the appellees were ready for trial in California, that the California suit could be tried very soon, and that the appellees were very close there to being through with their discovery. The judge became concerned about the possibility that because of the counterclaim aspect of the case, both claims might languish in very complicated discovery proceedings for several years. Sometime during the conference the appellees appear to have asserted that Warshawsky had "conveniently" sued for an amount of damages approximately equal to Arcata's claim against them and that Warshawsky was "dragging its feet" on furnishing necessary discovery in the Illinois suit. Although admittedly uncertain whether there was substance to Arcata's contentions concerning the California litigation status, the district court judge nevertheless thought it apparent that determination of the issues between the parties would move forward more rapidly if the appellees were not enjoined from proceeding further in the California action. Accordingly, on September 23, 1976, the court vacated its earlier injunction. Its Memorandum Opinion and Order balanced the concept of "justice delayed is justice denied" with the consideration that avoiding duplication of effort and resolving related controversies in one proceeding was usually desirable by expressing the court's belief that the interests of justice and expediency would be served by permitting the parties to proceed in both jurisdictions.
Warshawsky argues that the overwhelming weight of authority clearly requires a finding that the California action constitutes a compulsory counterclaim to the Illinois proceeding. The appellant submits that Arcata's claims for amounts allegedly due for printing services are logically related to Warshawsky's own contract claims and that Arcata's claims stem from a single, continuous course of dealing between the parties. Warshawsky asserts that this "course of dealing" will serve to "give particular meaning to and supplement or qualify" the terms of the parties' subsequent ad hoc dealings under §§ 1-205(1), (3) of the Uniform Commercial Code. 5 Arcata counters that its claims against Warshawsky for the 1976 catalogs are separate from any disputes involving earlier printing. Arcata recognizes that the courts have adopted a "logical relation" test, see, e. g., 6 Wright & Miller, Federal Practice and Procedure § 1410, at 42 (1971), regarding the wording of Rule 13(a), Fed.R.Civ.P., 6 but have not abandoned the limitation of compulsory counterclaims to disputes arising out of the same transaction or occurrence.
Courts generally have agreed that the words "transaction or occurrence"...
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