Agrashell, Inc. v. Bernard Sirotta Company

• Citation: 344 F.2d 583
• Decision Date: 06 April 1965
• Docket Number: Docket 29177.,No. 259,259
• Parties: AGRASHELL, INC., Plaintiff, v. BERNARD SIROTTA COMPANY, Edwin M. Sirotta, and Milton A. Sirotta, Defendants and Third-Party Plaintiffs-Appellants, v. HAMMONS PRODUCTS COMPANY, Third-Party Defendant-Respondent.
• Court: United States Courts of Appeals. United States Court of Appeals (2nd Circuit)

344 F.2d 583 (1965)

AGRASHELL, INC., Plaintiff, v. BERNARD SIROTTA COMPANY, Edwin M. Sirotta, and Milton A. Sirotta, Defendants and Third-Party Plaintiffs-Appellants, v. HAMMONS PRODUCTS COMPANY, Third-Party Defendant-Respondent.

No. 259, Docket 29177.

United States Court of Appeals Second Circuit.

Argued January 5, 1965.

Decided April 6, 1965.

Rehearing Denied April 21, 1965.

Edward Halle, Garden City, N. Y. (David F. Cohen, New York City, of counsel), for defendants and third-party plaintiffs-appellants.

Lawrence C. Moore, Washington, D. C. (Damon M. Gunn, Washington, D. C., of counsel), for third-party defendant-respondent.

Before LUMBARD, Chief Judge, and WATERMAN and HAYS, Circuit Judges.

WATERMAN, Circuit Judge:

Defendants (hereinafter Sirotta), residents of New York constituting a New York partnership, bought cracked black walnut shells from the third-party defendant (hereinafter Hammons), a Missouri corporation operating under the slogan, "Our Black Walnut Goodies Are Just What They're Cracked-Up To Be." When Sirotta resold the goods, plaintiff (hereinafter Agrashell), a Delaware corporation, brought suit in the United States District Court for the Eastern District of New York, alleging that Sirotta had infringed Agrashell's patent rights. Sirotta, by leave of the court under Fed.R.Civ.P. 14(a), impleaded Hammons as a third-party defendant, alleging that Hammons had warranted the fitness of the goods for resale and had agreed to indemnify Sirotta against a patent infringement suit. The summons and complaint in the third-party action were served on Hammons in Missouri.

Hammons moved to dismiss the third-party complaint on the ground that it was not personally subject to the jurisdiction of the court. In support of the motion, Hammons submitted virtually identical affidavits by three of its officers, stating that Hammons had never maintained an agency, salesman, stock of goods, representative, or telephone listing in New York; that all goods offered or sold to Sirotta were contracted for and delivered in Missouri; and that Hammons had neither been licensed to do business in New York nor had otherwise voluntarily subjected itself to the jurisdiction of the New York courts.

In opposition to the motion, Sirotta submitted affidavits and exhibits describing in detail its dealings with Hammons relative to the purchase of the goods. The contents of these documents will be set forth subsequently. The district court declined to order a trial-type hearing on the motion but proceeded to dismiss the third-party complaint on the papers alone. Judge Bartels's careful and comprehensive opinion is reported at 229 F.Supp. 98. The district court also directed entry of a final judgment pursuant to Fed.R.Civ.P. 54(b), enabling us to review its decision prior to adjudication of the claim by Agrashell against Sirotta.

The district court, citing Arrowsmith v. United Press Int'l, 320 F.2d 219 (2 Cir. 1963), ruled that because the third-party suit was a diversity action, the amenability of Hammons to the suit was to be determined by relevant New York law, in this case Section 302(a)1 of the Civil Practice Law and Rules (hereinafter the CPLR). We agree that Section 302(a) 1 is dispositive of this motion, but we arrive at this result by a somewhat different route from that taken by the district court.

A leading authority on the Federal Rules of Civil Procedure asserts:

"The general purpose of Rule 14 is to avoid two actions which should be tried together to save the time and cost of a reduplication of evidence, to obtain consistent results from identical or similar evidence, and to do away with the serious handicap to a defendant of a time difference between a judgment against him, and a judgment in his favor against the third-party defendant." 3 Moore, Federal Practice ¶ 14.04, at 501 (1964), quoted in Dery v. Wyer, 265 F.2d 804, 806-07 (2 Cir. 1959).

Accordingly, even without diversity of citizenship between the parties, Sirotta would have been permitted to implead Hammons in the federal courts, so long as there was subject-matter jurisdiction of Agrashell's suit against Sirotta. 3 Moore, Federal Practice ¶ 14.26; Dery v. Wyer, supra, at 807. Likewise, it is probable that even though the third-party claim did not satisfy the venue requirements for diversity actions, Sirotta would have been allowed to implead Hammons in the Eastern District court, so long as Agrashell's claim against Sirotta was properly laid there. 3 Moore, Federal Practice ¶ 14.282; United States v. Acord, 209 F.2d 709, 713-14 (10 Cir.), cert. denied, 347 U.S. 975, 74 S.Ct. 786, 98 L.Ed. 1115 (1954); Morrell v. United Air Lines Transp. Corp., 29 F.Supp. 757 (S.D.N.Y.1939).

In view of these doctrines, it may well be that the issue of personal jurisdiction, in the sense of territorial domain, should also be resolved by a rule fashioned especially for third-party claims. Indeed, a special rule might be peculiarly appropriate in the present case, for Sirotta's third-party claim is joined to a federal question action. However, we find it unnecessary to decide this difficult question, which was neither briefed nor argued by the parties. Even if a special rule should govern the territorial dominion of the district court over Hammons, we do not suppose that it would be more restrictive than Section 302(a)1 of the CPLR; and in this particular case Section 302(a)1 clearly determines the related issue of whether the process of the district court was properly served on Hammons in Missouri.

Even in the case of a third-party claim, process can be served only within the limits prescribed by Fed.R.Civ.P. 4. See 3 Moore, Federal Practice ¶ 14.28 1; Moreno v. United States, 120 F.2d 128, 130 (1 Cir. 1941); Banachowski v. Atlantic Ref. Co., 84 F.Supp. 444 (S.D. N.Y.1949). The basic restriction on the range of process of a federal court is found in Rule 4(f):

"All process other than a subpoena may be served anywhere within the territorial limits of the state in which the district court is held, and, when authorized by a statute of the United States or by these rules, beyond the territorial limits of that state."

The principal federal statute or rule potentially authorizing service of the process of the Eastern District court on Hammons in Missouri is Rule 4(e):

"Whenever a statute or rule of court of the state in which the district court is held provides * * * for service of a summons * * * upon a party not an inhabitant of or found within the state, * * * service may * * * be made under the circumstances and in the manner prescribed in the statute or rule."

Only Section 313 of the CPLR might provide for service of a New York summons on Hammons in Missouri:

"A person domiciled in the state or subject to the jurisdiction of the courts of the state under section 301 or 302 * * * may be served with the summons without the state, in the same manner as service is made within the state * * *."

No one contends that Hammons is a domiciliary of New York or subject to the jurisdiction of the New York courts under Section 301. As for Section 302, according to our record, Sirotta relied only on subsection (a)1 in the proceedings below.¹ Thus, at the end of a roundabout search, we find the same statutory provision to be dispositive of this case as did the district court.

Hammons, however, denies the applicability of Section 302(a)1. It points out that the CPLR went into effect on September 1, 1963, and that although Sirotta's third-party suit was commenced on December 17, 1963, the events on which the suit is based occurred prior to September 1, 1963. Hammons consequently argues that Sections 313 and 302 were not intended to have retroactive effect, and that to apply them retroactively would violate due process.

Hammons has neither alleged nor proved that its dealings with Sirotta were carried out in reliance on prior New York law concerning personal jurisdiction and service of process. Therefore, Sections 313 and 302 were clearly intended to cover this case, for in Simonson v. International Bank, 14 N.Y.2d 281, 290, 251 N.Y.S.2d 433, 440, 200 N.E.2d 427, 432 (1964), the Court of Appeals ruled:

"With the possible exception of cases in which the acts serving as the predicate for jurisdiction under the new section are shown to have been carried out in justifiable reliance on the prior law * * *, CPLR § 302 has retroactive effect to the extent of embracing suits instituted after its effective date but based on previously accrued causes of action."

Furthermore, in the absence of such a showing, the limited retroactivity prescribed by the Court of Appeals for these procedural provisions does not violate due process. See McGee v. International Life Ins. Co., 355 U.S. 220, 224, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957); Note, Retroactive Expansion of State Court Jurisdiction Over Persons, 63 Colum.L.Rev. 1105, 1124 (1963).

Section 302(a)1 of the CPLR states:

"(a) * * * A court may exercise personal jurisdiction over any non-domiciliary * * * as to a cause of action arising from any of the acts enumerated in this section, in the same manner as if he were a domiciliary of the state, if, in person or through an agent, he:

"1. transacts any business within the state."

In Gelfand v. Tanner Motor Tours, Ltd., 339 F.2d 317, 320 (2 Cir. 1964), we described the general scope of this provision as follows:

"§ 302 was enacted to take advantage of New York\'s newly acquired constitutional power, derived from International Shoe Co. v. State of Washington 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95, supra, and its progeny, to subject non-residents to personal jurisdiction based on acts occurring within the state. Simonson v. International Bank, supra, 14 N.Y.2d at 288, 251 N.Y.S.2d at 438-439, 200 N.E.2d at 430, 431. The provision is apparently based on that portion of International Shoe Co. v. State of Washington, supra, 326 U.S. at 318-319, 66 S.Ct. at 159, 90 L.Ed. 95, which holds that `the

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