Wyoga Gas & Oil Corporation v. Schrack

• Decision Date: 03 April 1939
• Docket Number: No. 32.,32.
• Parties: WYOGA GAS & OIL CORPORATION v. SCHRACK et al.
• Court: U.S. District Court — Western District of Pennsylvania

27 F. Supp. 35

WYOGA GAS & OIL CORPORATION v. SCHRACK et al.

No. 32.

District Court, M. D. Pennsylvania.

April 3, 1939.

Richard Henry Klein, of Sunbury, Pa., for plaintiff.

Reading & Wood, of Williamsport, Pa., for defendants.

JOHNSON, District Judge.

The plaintiff, a Delaware corporation, has brought this action against the defendants, former officers and directors of the corporation, alleging various acts of fraud, negligence, and misconduct, and seeking to recover damages for losses suffered because of these acts. Jurisdiction in this court is claimed solely on the basis of diversity of citizenship, and two of the defendants have moved to dismiss the complaint on the ground that there is no such jurisdiction under the facts alleged in the complaint.

The plaintiff is a citizen of Delaware, and there are twenty-six defendants. Twenty-four of the defendants are citizens of Pennsylvania, one a citizen of Ohio, and one a citizen of New York. The defendants who have moved to dismiss the complaint are citizens of Pennsylvania, and base their motion on Section 51 of the Judicial Code, 28 U.S.C.A. § 112, which provides, inter alia: "Where the jurisdiction is founded only on the fact that the action is between citizens of different States, suit shall be brought only in the district of the residence of either the plaintiff or the defendant."

Under this statute, the defendants contend that an action based solely on diversity of citizenship cannot be brought by a citizen of one state in the Federal District Court of another state against defendants, some of whom are citizens of the second state, and some of whom are citizens of a third state.

The defendants' contention has to do with the venue of the action, and the law of this subject has not been changed by the new Federal Rules of Civil Procedure. Rule 82, 28 U.S.C.A. following section 723c.

The exemption from suit under Section 51 is a personal privilege which is given solely to the non-resident defendant, and consequently a resident co-defendant cannot take advantage of this exemption. Camp v. Gress, 250 U.S. 308, 39 S.Ct. 478, 63 L.Ed. 997. Where the non-resident defendants are "indispensable" parties, however, the court cannot proceed to adjudicate the case in their absence. Waterman v. Canal-Louisana Bank and Trust Company, 215 U.S. 33, 30 S.Ct. 10, 54 L.Ed. 80. Therefore, in the present case the resident co-defendants who have moved to dismiss the complaint have no standing unless the non-resident defendants are "indispensable" parties.

The above rule applies only to "indispensable" parties, as distinguished from merely "necessary" parties. "Indispensable" parties are those with such an interest in the controversy that a final decree cannot be entered in their absence without adversely affecting their rights, or without leaving the action in a state which would be inconsistent with equity and good conscience. "Necessary" parties are those whose presence is necessary in order to adjudicate the entire controversy, but whose interests are so far separable that the court can proceed to final judgment without adversely affecting them. Simon v. Shaffer, D.C., 11 F.Supp. 450; State of Washington v. U. S., 9 Cir., 87 F.2d 421. The court will require "necessary" parties to be joined if jurisdiction can be obtained over them, but under Section 50 of the Judicial Code, 28 U.S.C.A. § 111, may proceed in their absence to adjudicate the rights of the parties who are properly before it.

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