Automatic Liquid Packaging, Inc. v. Dominik

• Citation: 852 F.2d 1036
• Decision Date: 27 July 1988
• Docket Number: No. 87-3144,87-3144
• Parties: AUTOMATIC LIQUID PACKAGING, INC., Plaintiff-Appellant, v. Jack E. DOMINIK, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1036

852 F.2d 1036

11 Fed.R.Serv.3d 888

AUTOMATIC LIQUID PACKAGING, INC., Plaintiff-Appellant, v. Jack E. DOMINIK, Defendant-Appellee.

No. 87-3144.

United States Court of Appeals, Seventh Circuit.

Argued May 27, 1988.

Decided July 27, 1988.

William Henry Barrett, Fox and Grove, Chicago, Ill., for plaintiff-appellant.

Patrick W. O'Brien, Mayer Brown & Platt, Chicago, Ill., for defendant-appellee.

Before POSNER, MANION, and KANNE, Circuit Judges.

POSNER, Circuit Judge.

Before us is the appeal of Automatic Liquid Packaging, Inc., a closely held manufacturing corporation that was incorporated in 1968 with the assistance of its lawyer, Jack Dominik. In exchange for his services Dominik was allowed to buy a substantial block of shares in the new company. He drafted an agreement whereby for ten years any shareholder who either wanted to sell his shares or ceased to be employed by the company would have to offer his shares to the company at a price determined by a formula in the agreement. Dominik, the only shareholder not actually employed by the company, explained to the other shareholders that "termination of employment" (the term used in the agreement) meant "leaving the service of the Company," and that the purpose of the agreement was to ensure that ownership of the company would "remain with the employees or persons working closely with the Company," i.e., himself.

The company claims that sometime before the agreement was to expire in 1978--precisely when is a matter of sharp dispute and considerable uncertainty--Dominik ceased to be its lawyer and it asked him to tender his shares to it in accordance with the agreement. He promised that he would do so some time, but he never did, and eventually the company brought this diversity suit, which charges him with breaking the 1968 agreement. It also charges him with committing fraud and violating his fiduciary obligations, the argument here being that Dominik, as the company's lawyer back in 1968, acted unethically in drafting an agreement unduly favorable to himself and later in promising to tender his shares in accordance with the agreement but never doing so. The complaint seeks an order that Dominik tender his shares. He takes the position that the 1968 agreement expired before he ceased to be the company's lawyer and that he never acted unethically in the matter, and has counterclaimed. The district court granted summary judgment for Dominik on the company's complaint and entered final judgment for the company under Fed.R.Civ.P. 54(b), but made no ruling on Dominik's counterclaim.

The first and only question we consider is whether we have jurisdiction over the appeal. Rule 54(b) authorizes the district judge "to direct the entry of a final judgment as to one or more but fewer than all of the claims...." (A final judgment, of course, is appealable. 28 U.S.C. Sec. 1291.) If none of the claims in Automatic Liquid Packaging's complaint that are before us is duplicated in Dominik's counterclaim, the order dismissing the complaint is appealable. See Curtiss-Wright Corp. v. General Electric Co., 446 U.S. 1, 9, 100 S.Ct. 1460, 1465, 64 L.Ed.2d 1 (1980). But if complaint and counterclaim contain the same claim, the condition for the entry of a final judgment under Rule 54(b) is not satisfied, and we have no appellate jurisdiction over a decision disposing of just the complaint; for "two claims are not separate for purposes of Rule 54(b) merely because one is in the complaint and the other in the countercomplaint." In re Berke, 837 F.2d 293 (7th Cir.1988); see also National Metalcrafters v. McNeil, 784 F.2d 817, 821 (7th Cir.1986).

A theory is not a claim, id. at 821; A/S Apothekernes Laboratorium for Specialpraeparater v. I.M.C. Chemical Group, Inc., 725 F.2d 1140 (7th Cir.1984); Page v. Preisser, 585 F.2d 336, 339 (8th Cir.1978); United States v. Crow, Pope & Land Enterprises, Inc., 474 F.2d 200, 202 (5th Cir.1973); Backus Plywood Corp. v. Commercial Decal, Inc., 317 F.2d 339, 341 (2d Cir.1963), and, in this circuit at least, even two distinct claims are but one for purposes of Rule 54(b) if they "have a significant factual overlap," National Metalcrafters v. McNeil, supra, 784 F.2d at 821; see also Federal Deposit Ins. Corp. v. Elefant, 790 F.2d 661, 664 (7th Cir.1986); Exchange National Bank v. Daniels, 763 F.2d 286, 291, modified on other grounds, 768 F.2d 140 (7th Cir.1985); Jack Walters & Sons Corp. v. Morton Building, Inc., 737 F.2d 698, 702 (7th Cir.1984). Although the "significantly differing facts" test set forth in the cases just cited has been criticized, see Note, Multiple Claims Under Rule 54(b): A Time for Reexamination, 1985 Brigham Young U.L.Rev. 327, this is not the case in which to reexamine it. The factual overlap between ostensibly separate claims is so great here that a decision on the merits of one would be res judicata as to the other--and many cases, not only in this circuit, hold that two claims cannot be separate if together they constitute a single cause of action for res judicata purposes. Minority Police Officers Ass'n v. City of South Bend, 721 F.2d 197, 200 (7th Cir.1983); Local P-171, Amalgamated Meat Cutters v. Thompson Farms Co., 642 F.2d 1065, 1070-71 (7th Cir.1981); Stearns v. Consolidated Management, Inc., 747 F.2d 1105, 1109 (7th Cir.1984); Tolson v. United States, 732 F.2d 998, 1001 (D.C.Cir.1984); Gold Seal Co. v. Weeks, 209 F.2d 802, 807-11 (D.C.Cir.1954); Cinerama, Inc. v. Sweet Music, S.A., 482 F.2d 66, 69 (2d Cir.1973) (Friendly, J.); Rieser v. Baltimore & Ohio R.R., 224 F.2d 198, 199 (2d Cir.1955).

Under these decisions the district court cannot enter a final judgment dismissing a defense to a complaint while the complaint itself remains unresolved, since claim and defense are part of the same cause of action. See National Metalcrafters v. McNeil, supra 784 F.2d at 821; Brunswick Corp. v. Sheridan, 582 F.2d 175, 182-83 (2d Cir.1978) (Friendly, J.). However, this result can be challenged where the defense is presented by way of counterclaim, as in this case. See 6 Moore's Federal Practice p 54.33 at pp. 54-195 to 54-196 (2d ed. 1987). As originally promulgated in 1939, Rule 54(b) allowed the entry of a final judgment "upon a determination of the issues material to a particular claim and all counterclaims arising out of the transaction or occurrence which is the subject matter of the claim." Final judgment therefore could not be entered on the complaint if a compulsory counterclaim was pending. See Fed.R.Civ.P. 13(a). The rule was amended in 1946 to drop the reference to "[same] transaction or occurrence," and this led the Supreme Court, in Cold Metal Process Co. v. United Engineering & Foundry Co. 351 U.S....