Giotis v. Apollo of the Ozarks, Inc.

• Decision Date: 27 October 1986
• Docket Number: Nos. 85-1835,85-2584 and 85-2656,85-2206,s. 85-1835
• Parties: Spiro GIOTIS, Plaintiff-Appellant, v. APOLLO OF THE OZARKS, INC., Red Rocket Fireworks, a corporation, and Cyril James Warrilow, Lead Underwriter, Defendants-Appellees, and Malcolm GILLESPIE, Defendant and Third-Party Plaintiff-Appellant, v. CAPITOL FIREWORKS COMPANY and John Heffinger, Jr., Third-Party Defendants.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 660

800 F.2d 660

5 Fed.R.Serv.3d 1310

Spiro GIOTIS, Plaintiff-Appellant, v. APOLLO OF THE OZARKS, INC., Red Rocket Fireworks, a

corporation, and Cyril James Warrilow, Lead

Underwriter, Defendants-Appellees, and Malcolm GILLESPIE, Defendant and Third-Party Plaintiff-Appellant, v. CAPITOL FIREWORKS COMPANY and John Heffinger, Jr.,

Third-Party Defendants.

Nos. 85-1835, 85-2206, 85-2584 and 85-2656.

United States Court of Appeals, Seventh Circuit.

Argued Feb. 26, 1986.

Decided Sept. 4, 1986.

As Amended Sept. 4, 1986.

Rehearing and Rehearing En Banc Oct. 27, 1986.

Jerome R. Kerkman, Cook & Franke, Milwaukee, Wis., for plaintiff-appellant.

Wayne M. Yankala, Simarski & Stack, Ltd., Thomas G. Ryan, Minaham & Peterson, Milwaukee, Wis., for defendants-appellees.

Before CUMMINGS, Chief Judge, CUDAHY, Circuit Judge, and BARKER, District Judge. ^*

CUMMINGS, Chief Judge.

This appeal comes to us from the district court's grant of motions by defendants Apollo of the Ozarks, Inc. ("Apollo") and Red Rocket Fireworks ("Red Rocket") to dismiss for lack of personal jurisdiction. This case once again requires this Court to explore the limitations of personal jurisdiction over non-consenting, nonresident defendants that are mandated by the constitutional requirement of due process. For the reasons set forth below, we reverse the judgments of the district court granting these defendants' motions to dismiss.

I

This case arises out of injuries suffered by plaintiff Spiro Giotis ("Giotis") at a Fourth of July party in Wisconsin. Third-party plaintiff Malcolm Gillespie, Jr. ("Gillespie"), a Minnesota resident, had purchased fireworks from Capitol Fireworks Company ("Capitol"), by completing a mail order form that appeared in Capitol's advertisement in the magazine American Rifleman. Capitol shipped the fireworks to White Bear Lake, Minnesota, where Gillespie resided at the time. Gillespie brought the fireworks with him to a party in Hartland, Wisconsin, on July 4, 1982. Gillespie and others discharged the fireworks, and one of the fireworks allegedly struck and injured Giotis who subsequently sued Gillespie, Apollo, Red Rocket and others.

Capitol is a distributor of fireworks, and allegedly sold the fireworks to Gillespie that caused the injuries to Giotis. Capitol is an Illinois corporation doing business in Springfield, Illinois. Capitol solicited business and orders through various magazines, including advertising nationwide through the American Rifleman magazine. It was through the advertisement in American Rifleman that Gillespie learned about Capitol and its fireworks. Capitol's advertisement stated that the fireworks would not be sold where prohibited by law, but Capitol sent the fireworks to Gillespie's residence in Minnesota, and both Minnesota and Wisconsin prohibit fireworks.

Apollo is a manufacturer of fireworks that may have manufactured and distributed to Capitol the fireworks that caused the injuries to Giotis. Apollo is a Missouri corporation which had a business office and retail outlet in Stanton, Missouri, and another retail outlet in Marshall, Missouri. Both retail outlets were located on the interstate highway. Apollo advertised on billboards placed along the interstate highway in Missouri, in local newspapers, and on local radio. In 1980 and 1981, Apollo's president, Thomas S. Scaman, said that Apollo may have distributed fireworks in fifteen states, including Alabama, Illinois, Indiana, Kansas, Louisiana, Michigan, Mississippi, Missouri, Ohio, Pennsylvania, South Carolina, Tennessee, and Texas, but not in Wisconsin. Scaman at one point characterized Apollo's business as selling mainly to big wholesalers who, in turn, sell to others. Capitol is one of the Illinois distributors to whom Apollo distributed fireworks.

Red Rocket is a distributor of fireworks that may have distributed to Capitol the fireworks that caused the injuries to Giotis. Red Rocket is a Missouri corporation with offices in Missouri and Louisiana. Red Rocket sells primarily (85-90% of its sales) to distributors, and during 1982 sold fireworks to distributors in at least ten states, but not in Wisconsin. Red Rocket also sells fireworks directly to consumers through gift shops located at its warehouses and has two signs along the interstate highway near Strafford, Missouri, advertising its retail outlet there.

Subsequent to sustaining injuries from the fireworks on July 4, 1982, Giotis filed suit against Gillespie, Apollo, Red Rocket, and various other persons, fireworks producers, and insurance companies. Gillespie filed a third-party complaint against Apollo Red Rocket, Capitol and others, for contribution and/or indemnification. On December 21, 1984, the district court granted Apollo's motion to dismiss for lack of personal jurisdiction. The district court subsequently granted Red Rocket's motion to dismiss for lack of personal jurisdiction. This appeal followed.

II

Before reaching the merits of this dispute over personal jurisdiction, we must first deal with some procedural preliminaries. More specifically, Red Rocket admits that it failed to raise the defense of personal jurisdiction in its initial answer to Giotis' complaint, as required by Fed.R.Civ.P. 12(h)(1). However, Gillespie, the third-party plaintiff, compounded the problem by never objecting in the court below to Red Rocket's later, untimely motion raising the defense of personal jurisdiction. We are thus faced with the problem of what to do when a party raises for the first time on appeal the opposing party's failure to timely raise the affirmative defense of personal jurisdiction. In short, we must decide whether a party can waive a waiver of the defense of personal jurisdiction.

There is no dispute that normally a failure to timely raise the defense of personal jurisdiction waives the defense; Fed.R.Civ.P. 12(h)(1) is unequivocal on this point, and Red Rocket has admitted in its brief to this Court that it failed to timely raise this defense. It is equally clear that as a general rule an argument that is not raised below cannot be raised for the first time by an appellant in this Court. Singleton v. Wulff, 428 U.S. 106, 121, 96 S.Ct. 2868, 2877, 49 L.Ed.2d 826; Gehl Company v. Commissioner, 795 F.2d 1324, 1331-32 (7th Cir.1986); National Metalcrafters v. McNeil, 784 F.2d 817, 825 (7th Cir.1986); Mattingly v. Heckler, 784 F.2d 258, 261 n. 2 (7th Cir.1986); Erff v. Markhon Industries, Inc., 781 F.2d 613, 618 (7th Cir.1986). We have further recognized that there can be a waiver of a waiver, i.e., "a defense of waiver can itself be waived by not being raised." Lynk v. LaPorte Superior Court No. 2, 789 F.2d 554, 565 (7th Cir.1986); see also Jordan v. Kelly, 728 F.2d 1, 4 (1st Cir.1984). However, we have also noted that this waiver rule has its exceptions, and we retain discretion to reach an issue initially raised on appeal in certain situations. Gehl, 795 F.2d at 1331-32. There are several reasons for the general rule requiring issues on appeal to have been raised below: the desire to receive the district court's views on the issue, the need for a factual record to answer the issue, and the desire to avoid having to decide an issue that might not have had to be decided if the district court had had the opportunity to decide the issue. These considerations affect our decision to exercise discretion to reach the issue; for example, we are more likely to reach an issue if it does not require a new factual record. National Metalcrafters, 784 F.2d at 826; Sgro v. United States, 609 F.2d 1259, 1264 n. 8 (7th Cir.1979).

In this case, however, because the issue not raised below was Red Rocket's failure to plead the defense of personal jurisdiction in a timely fashion, and the district court proceeded to reach the merits of the personal jurisdiction issue without objections from the parties, Fed.R.Civ.P. 15(b) might be relevant. Rule 15(b) states that when an issue not raised by the pleadings is nevertheless tried by the express or implied consent of the parties, the issue is treated as if it had been raised in the pleadings. If Rule 15(b) were to apply to the instant case, it would mean that Gillespie has impliedly consented to litigate the issue of personal jurisdiction, thereby excusing Red Rocket's failure to raise the issue in a timely fashion.

The issue of whether Rule 15(b) applies to the instant case is a difficult question. Rule 15(b) applies to affirmative defenses not properly included in the answer. Trapnell v. Riggsby, 622 F.2d 290, 294 (7th Cir.1980); Wagner v. United States, 573 F.2d 447, 452 (7th Cir.1978); Federal Savings and Loan Insurance Corp. v. Hogan, 476 F.2d 1182, 1186 (7th Cir.1973); see generally W RIGHT & M ILLER, 20 FEDERAL- PRACTICE AND PROCEDURE Sec. 1492 (1971) (hereinafter referred to as Wright & Miller). This Court and others have used Rule 15(b) to reach a general affirmative defense that was not properly included in defendant's answer in the district court but was not objected to by the plaintiff when the defense was eventually raised and was reached and decided by the district court on the merits. See, e.g., Wagner, 573 F.2d at 452; Bradford Audio Corp. v. Pious, 392 F.2d 67, 73-74 (2d Cir.1968); see generally Wright & Miller Sec. 1494. However, these previous cases involve general affirmative defenses governed by Civil Rules 8(c) and 8(d), whereas the instant case involves one of the seven special affirmative defenses governed by Rule 12(h). The failure to plead any type of affirmative defense can result in a waiver, but Rule 12(h) explicitly governs the waiver of the seven special affirmative defenses, whereas the question of the waiver of other affirmative defenses lacks an explicit textual basis in Rule 12(h) and typically involves more of a balancing test (fair, quick, and inexpensive determination of every action versus prejudice of a delayed motion), giving the district court greater flexibility. Wright & Miller Secs. 1278,...