Campbell v. Triangle Corporation

• Decision Date: 27 January 1972
• Docket Number: Civ. A. No. 70-786.
• Citation: 336 F. Supp. 1002
• Parties: Russell O. CAMPBELL, Plaintiff, v. The TRIANGLE CORPORATION, a Delaware corporation, and Century Tool Company, Inc., a Delaware corporation, Defendants.
• Court: U.S. District Court — Eastern District of Pennsylvania

336 F. Supp. 1002

Russell O. CAMPBELL, Plaintiff, v. The TRIANGLE CORPORATION, a Delaware corporation, and Century Tool Company, Inc., a Delaware corporation, Defendants.

Civ. A. No. 70-786.

United States District Court, E. D. Pennsylvania.

January 27, 1972.

Melvin A. Bank, Bank & Minehart, Philadelphia, Pa., for plaintiff.

Morris R. Brooke, Drinker, Biddle & Reath, Philadelphia, Pa., for defendants.

OPINION AND ORDER

JOSEPH S. LORD, III, Chief Judge.

Plaintiff, a citizen of Pennsylvania, has brought this action for breach of contract and fraudulent inducement against Triangle Corporation ("Triangle") and Century Tool Company, Inc. ("Century"), both Delaware corporations. Century has its principal place of business in Pendel, Pennsylvania, while Triangle has its principal offices in Orangeburg, South Carolina.

Plaintiff alleges that as a member of a management group employed by Century Tool Company, Inc., a New Jersey corporation, Century Tool Company Contract Division, a New Jersey corporation, and Custom Tool Company, Inc., a Pennsylvania corporation, he was a party to an agreement entered into with Fred T. and Betty L. Ueltzen on November 1, 1966 for the purchase of the outstanding capital of the three corporations which was owned by the Ueltzens. On March 12, 1968, plaintiff, as a member of the management group, and the Ueltzens entered into an agreement with Triangle in which Triangle agreed to purchase all the assets of the three corporations through a subsidiary (Century) which was to be formed. Plaintiff alleges that consideration to the management group for the purchase was the issuance of warrants to purchase the common stock of Triangle and five year employment agreements to be entered into by Triangle through its subsidiary. On March 16, 1968, plaintiff and other members of the management group entered into a further agreement which rescinded and cancelled the stock purchase agreement of November 1, 1966 with the Ueltzens. Plaintiff claims that he never received the stock warrants or entered into a five year employment contract with Triangle or Century and that his employment was terminated by Century as of January 1, 1970. Plaintiff seeks damages against Triangle and Century for breach of contract and for fraudulently inducing plaintiff to rescind the November 1, 1966 stock purchase agreement and to continue in the employ of Century.

Defendants have moved to dismiss on the grounds that: (1) the requisite diversity of citizenship between plaintiff and defendants does not exist; (2) Triangle was not properly served with process and the court lacks jurisdiction over its person; and (3) Triangle conducts no business activity within Pennsylvania and therefore venue is improper.

I.

Plaintiff asserts jurisdiction under 28 U.S.C. § 1332 which provides in pertinent part:

"(a) The district courts shall have original jurisdiction of all civil actions where the matter in controversy exceeds the sum or value of $10,000, exclusive of interest and costs, and is between—

(1) citizens of different States; * * *."

This provision has been interpreted to require complete diversity between all plaintiffs and all defendants, i. e. each plaintiff must be able to sue each defendant. Strawbridge v. Curtiss, 7 U.S. (3 Cranch) 267, 2 L.Ed. 435 (1806). Section 1332(c) provides that a corporation is to be considered a citizen of

"* * * any State by which it has been incorporated and of the State where it has its principal place of business."

Century has its principal place of business in Pennsylvania and is therefore a citizen of Pennsylvania for purposes of determining diversity jurisdiction. Because plaintiff is also a citizen of Pennsylvania, complete diversity does not exist between plaintiff and all defendants.

Plaintiff seeks to avoid dismissal for lack of subject matter jurisdiction by asserting that the court can and should exercise pendent jurisdiction over the claim against Century. The doctrine of pendent jurisdiction was recognized by the Supreme Court in Hurn v. Oursler, 289 U.S. 238, 53 S.Ct. 586, 77 L.Ed. 1148 (1938) and was recently defined by the Court in United Mine Workers v. Gibbs, 383 U.S. 715, 725-726, 86 S.Ct. 1130, 1138, 16 L.Ed.2d 218 (1966) as follows:

"* * * Pendent jurisdiction, in the sense of judicial power, exists whenever there is a claim `arising under the Constitution, the Laws of the United States, and Treaties made, or which shall be made, under their Authority * * *,' U.S.Const., Art. III, § 2, and the relationship between that claim and the state claim permits the conclusion that the entire action before the court comprises but one constitutional `case.' The federal claim must have substance sufficient to confer subject matter jurisdiction on the court. * * * The state and federal claims must derive from a common nucleus of operative fact. But if, considered without regard to their federal or state character, a plaintiff's claims are such that he would ordinarily be expected to try them all in one judicial proceeding, then, assuming substantiality of the federal issues, there is power in federal courts to hear the whole.

"That power need not be exercised in every case in which it is found to exist. It has consistently been recognized that pendent jurisdiction is a doctrine of discretion, not of plaintiff's right. Its justification lies in considerations of judicial economy, convenience and fairness to litigants; if these are not present a federal court should hesitate to exercise jurisdiction over state claims, even though bound to apply state law to them * * *." (Emphasis in original; footnotes omitted)

Although the doctrine of pendent jurisdiction was initially applied only in cases in which a federal question formed the basis of the court's jurisdiction, in recent years the doctrine has been extended to apply to cases where federal jurisdiction is based on diversity of citizenship. Jacobson v. Atlantic City Hospital, 392 F.2d 149 (C.A.3 1968); Stone v. Stone, 405 F.2d 94 (C.A.4 1968); Hatridge v. Aetna Casualty & Surety Co., 415 F.2d 809 (C.A.8 1969). For the reasons set forth below, we have concluded that the doctrine of pendent jurisdiction is applicable in this case and that we therefore have jurisdiction over plaintiff's claim against Triangle and Century.

In three recent cases, Borror v. Sharon Steel Co., 327 F.2d 165 (1964); Wilson v. American Chain and Cable Co., 364 F.2d 558 (C.A.3 1966); and Jacobson v. Atlantic City Hospital, supra, the Third Circuit "has taken the lead in recognizing diversity jurisdiction over an entire lawsuit in tort cases presenting closely related claims based, in principal part at least, on the same operative facts and normally litigated together, even though one of the claims, if litigated alone, would not satisfy a requirement of diversity jurisdiction." Jacobson v. Atlantic City Hospital, supra, 392 F.2d at 153. In Borror, the court held that where diversity of citizenship existed in a Pennsylvania survival action, the doctrine of pendent jurisdiction was applicable to give the court jurisdiction over an accompanying wrongful death action in which diversity was lacking. The court noted that Pennsylvania had a strong policy in favor of coupling wrongful death and survival claims in a single lawsuit and concluded that application of pendent jurisdiction in diversity cases would be fair, time saving and desirable.

In Wilson, the court held that in a diversity case in which the requisite jurisdictional amount was present in an action for personal injuries on behalf of a child but absent in the father's related claim for medical expenses, the court had jurisdiction over both actions under pendent jurisdiction. The court emphasized that considerations of judicial economy and convenience to litigants prompted it to view the litigation as a single action for purposes of diversity particularly when the state practice required the two actions to be redressed in a single suit.

Finally in Jacobson, the court held that where the facts giving rise to claims for medical malpractice against two defendants were interrelated, the court could consider the claim against one defendant as pendent to the claim against the other for purposes of establishing the jurisdictional amount. The court concluded that the claims against the defendant hospital and physician could be viewed as constituting a single "action" for diversity purposes because both claims arose out of a single injury sustained by a particular person and most of the operative facts were common to the coupled claims so that "in normal and most convenient and expeditious practice and procedure these claims would be tried together in a single lawsuit." (at 154). Affirming the trend begun in Borror, the court concluded that the doctrine of United Mine Workers v. Gibbs, supra, should extend to diversity cases where the "claims * * * `derive from a common nucleus of operative fact,' particularly where `considered without regard to their federal or state character, a plaintiff's claims are such that he would ordinarily be expected to try them all in one judicial proceeding. * * *'" Jacobson v. Atlantic City Hospital, supra, 392 F.2d at 155, quoting United Mine Workers v. Gibbs, supra, 383 U.S. at 725, 86 S.Ct. 1130. See also Nelson v. Keefer et al., ...