Eastern Metals Corporation v. Martin

• Decision Date: 14 November 1960
• Citation: 191 F. Supp. 245
• Parties: EASTERN METALS CORPORATION, Plaintiff, v. Bernard MARTIN and Alvin E. Shulman, individually and as co-partners doing business under the firm name and style of Martin Enterprises, Defendants.
• Court: U.S. District Court — Southern District of New York

191 F. Supp. 245

EASTERN METALS CORPORATION, Plaintiff, v. Bernard MARTIN and Alvin E. Shulman, individually and as co-partners doing business under the firm name and style of Martin Enterprises, Defendants.

United States District Court S. D. New York.

November 14, 1960.

George Berkowitz, New York City, for plaintiff, Eastern Metals Corp.

Nathaniel Rothstein, New York City, for defendants.

Alfred S. Julien, New York City, for plaintiff, United Steel Sales, Inc., in Civ. 124-189, and amicus curiae on the motion in this case (David Easton, New York City, of counsel).

LEIBELL, District Judge.

Two questions are presented to the Court on this motion:

(1) Whether this Court has jurisdiction under the Diversity statute, T. 28 U.S.C. § 1332, to decide an action removed here from the New York State Supreme Court, where the defendants are a partnership and its two partners, and one of the partners is a citizen of the State of New Jersey of which the plaintiff corporation is also a citizen; and

(2) Whether the New Jersey partner is an indispensable party under Rule 19(a) Federal Rules of Civil Procedure, 28 U.S.C.A., and may not be dropped as a defendant under Rule 21 Federal Rules of Civil Procedure in order to create complete diversity of citizenship between the plaintiff and the two remaining defendants, the partnership and the other partner.

The action (Civil 125-45) of Eastern Metals Corporation v. Martin and Shulman individually and as copartners doing business under the firm name and style of Martin Enterprises, was instituted in the Supreme Court of the State of New York, County of New York, and a copy of the summons and complaint was served upon Martin September 12, 1957. It does not appear that Shulman was ever served. But after the removal of the action to this Court Mr. Rothstein, an attorney, filed an answer for all the defendants, containing denials and counterclaims. Mr. Berkowitz was and is the attorney for the plaintiff, Eastern Metals Corporation.

In the Eastern Metals Corporation action defendant Martin filed a verified petition in this Court on September 24, 1957, for the removal of the action from the New York Supreme Court to this Court. The petition alleged that Martin, one of the parties, was a citizen of New York, that the partnership, Martin Enterprises, had its office in New York City, and that Eastern was a New Jersey corporation. The petition said nothing about the citizenship of the other partner, Shulman. On September 24, 1957, plaintiff Eastern by its attorney, Mr. Berkowitz, waived the bond requirement for a removal, by an endorsement to that effect on the petition but added that the waiver was not to be considered a consent to the removal. However, he never made any motion to remand the Eastern action to the State court.

Another action (Civil 124-189), that of United Steel Sales, Inc. v. Martin and Shulman, individually and as copartners doing business as Martin Enterprises, was commenced by the plaintiff United, a Michigan corporation, September 9, 1957, by filing a complaint with the Clerk of this Court. The law firm of Goldman & Frier then represented United. Defendants Martin and Shulman were served with a copy of the summons and complaint in that action on September 11, 1957.

On October 4, 1957, defendants Shulman and Martin and the partnership Martin Enterprises moved for an order consolidating for trial the two actions, United v. Martin et al. (Civil 124-189) and Eastern v. Martin et al. (Civil 125-45). This motion was withdrawn and was endorsed to that effect by Chief Judge Ryan on October 15, 1957. On October 21, 1957, defendants filed their answers in both actions through their attorney, Mr. Rothstein. The answers in both actions plead counterclaims.

On October 29, 1957, Mr. Rothstein, as attorney for the defendants in each of the actions, again moved for an order consolidating the two actions for trial, or in the alternative granting a joint trial of the actions. Plaintiffs United and Eastern opposed the motion for a consolidation, but the alternative relief requested was consented to. By an order dated November 13, 1957, it was ordered that a "joint trial" be held of the two actions.

On March 4, 1959, the plaintiff in the United action, through a new attorney, Mr. Julien, filed a statement of readiness, and a statement of issue, under the local calendar rules of this Court, in order to place both actions on the trial calendar On March 10, 1959, the attorney for the defendants opposed the statement of readiness as to both trials. The opposition to the "note of issue" was withdrawn on March 30, 1959 and was so endorsed by Judge Herlands on the affidavit of opposition.

Two pretrials were had in both cases, one before Judge Herlands on March 30, 1959, the other before Judge Levet on April 28, 1959. The two actions were referred to me by the Calendar Judge during the third week of September of this year. At a preliminary conference with the attorneys on September 27, 1960, I set the date for the joint trial to begin October 17th. On October 13, 1960, plaintiff Eastern served a belated reply to defendant Martin's counterclaims.

On the third day of the joint trial, on the afternoon of October 19th, Mr. Julien, the attorney for United, stated, "amicus curiae", that in his opinion this Court did not have jurisdiction of the Eastern v. Martin et al. action. That was the first time that the attention of any Judge of this Court had been called to the question of lack of jurisdiction, due to the absence of diversity of citizenship between the plaintiff Eastern on the one hand and the defendant Shulman on the other.

The following morning, October 20th, the Court heard argument on the question of its jurisdiction in the Eastern case. The attorney for Eastern does not question the fact that Shulman at the time of the institution of the Eastern action was a resident and citizen of the State of New Jersey, and that he is still a citizen of New Jersey. There is no proof that at the commencement of the Eastern action or at any time since then Shulman had a residence in any other State or that he was domiciled in any other State.

The two actions had been ordered to be tried jointly because they both involved the same shipment of stainless steel plates, which were claimed to have been the subject of two certain purchase agreements in June 1957; in the first instance by the partnership Martin Enterprises from United Steel Sales, Inc., and later that month by Eastern Metals Corporation from Martin Enterprises. The stainless steel plates, which had been purchased by United from McLough Steel Corporation, a steel mill located in Detroit, were delivered by United to Martin Enterprises' trucker, Mr. Carroll, in Detroit. The trucker, at the direction of Martin Enterprises, delivered the plates to Eastern at Eastern's warehouse in Newark, New Jersey. Martin Enterprises and United Steel Sales, Inc., dealt in stainless steel but had no warehouses.

The steel plates are asserted by Eastern to have been defective and not of the quality ordered by Eastern from Martin Enterprises. Eastern so notified Martin Enterprises and in turn United was informed by Martin Enterprises of Eastern's claims. Martin Enterprises makes a similar claim against United.

The stainless steel plates were retained by Eastern and were sold by Eastern six months later in January 1958. Eastern has kept the money it received on the sale of the plates, against an asserted claim for damages for loss of prospective profits on alleged contracts which Eastern claims to have made for the resale of the plates. None of those purchasers ever demanded or received any payments from Eastern.

Because the two actions above described, involved, among other issues, sales agreements for the same stainless steel plates, their quality, and what was done with them, much of the testimony in the Eastern case was relevant and material to issues in the United action. The same is true of the testimony in the United action. Further the defendant, Martin Enterprises, pleaded counterclaims in both actions raising similar issues.

When the taking of testimony was completed in both actions on October 24th I informed counsel that I had then concluded that under Section 1447(c) of T. 28 U.S.C., I should first dispose of the legal question of the Court's jurisdiction in the Eastern action before hearing any argument on the merits. Briefs on that question were ordered and have been submitted.

On the issue of this Court's jurisdiction in the Eastern case, in which both Shulman and Eastern are admittedly citizens of New Jersey, Mr. Berkowitz, the attorney for Eastern has moved under Rule 21 Federal Rules of Civil Procedure to drop Shulman as a party defendant on the grounds that Shulman is not an indispensable party. He argues that the action may then properly be considered and decided by this Court as an action by Eastern against Martin as a partner and against the partnership, Martin Enterprises.

A United States District Court is an "inferior" court, i. e., inferior to the United States Supreme Court. The District Court is a tribunal created by Congress under the power given to Congress by Article 1, Section 8, Clause 9, of the United States Constitution, which provides that Congress shall have power "To constitute Tribunals inferior to the supreme Court". Romero v. International Terminal Operating Co., 358 U.S. 354, 79 S.Ct. 468, 3 L.Ed. 368. The creation and composition of the United States District Courts is presently set forth in T. 28 U.S.C. § 132. A United States District Court has only such jurisdiction as the Congress confers upon the court.

The general jurisdiction of United States District Courts is set forth in T. 28 U.S.C. Chap. 85 (§§ 1331 to 1360). Other statutes, not pertinent, confer jurisdiction on the District Court in certain types of actions. On this motion we are concerned with Section 1332 of T. 28 U.S.C.—the Diversity of...