Hylte Bruks Aktiebolag v. Babcock & Wilcox Company, No. 68 Civ. 3462.

• Court: United States Courts of Appeals. United States Court of Appeals (5th Circuit)
• Citation: 305 F. Supp. 803
• Docket Number: No. 68 Civ. 3462.
• Parties: HYLTE BRUKS AKTIEBOLAG and Nymolla, AB, Plaintiffs, v. The BABCOCK & WILCOX COMPANY, Defendant.
• Decision Date: 14 May 1969

305 F. Supp. 803

HYLTE BRUKS AKTIEBOLAG and Nymolla, AB, Plaintiffs,
v.
The BABCOCK & WILCOX COMPANY, Defendant.

No. 68 Civ. 3462.

United States District Court S. D. New York.

May 14, 1969.

305 F. Supp. 804

COPYRIGHT MATERIAL OMITTED

305 F. Supp. 805

White & Case, New York City, for plaintiffs; John M. Johnston, Jeffrey A. Barist, New York City, of counsel

Walsh & Frisch, New York City, for defendant; E. Roger Frisch, Eric M. Dreyfus, New York City, of counsel.

OPINION

COOPER, District Judge.

Plaintiffs Hylte Bruks Aktiebolag (Hylte Bruks) and Nymolla move pursuant to Rule 12(b) (1), F.R.Civ.P., to dismiss plaintiff Hylte Bruks' claims against defendant Babcock & Wilcox Co. (B & W) for lack of jurisdiction over the subject matter. Alternatively, plaintiffs seek pursuant to Rule 41(a) (2), F.R.Civ. P., an order permitting them to voluntarily dismiss without condition Hylte Bruks' claims.

Defendant, on the other hand, opposes dismissal for want of jurisdiction. Additionally, while not opposing voluntary dismissal, it urges that such dismissal be conditioned upon (1) payment by Hylte Bruks of defendant's reasonable expenses including attorney's fees; (2) agreement by Hylte Bruks to certain guarantees regarding discovery sought by defendant;¹ and (3) acceptance by Hylte Bruks of a procedure to insure the continuation of defendant's counterclaim against both Nymolla and Hylte Bruks.

Plaintiffs consent to the continuation of the counterclaim against them both.² However, plaintiffs resist B & W's other two proposed conditions on the ground that (1) a dismissal for want of jurisdiction may not be conditioned by the Court and (2) even if the Court should find subject matter jurisdiction present, this is not an appropriate case for imposing conditions upon the allowance of a voluntary dismissal.

* * *

In 1959, Hylte Bruks, a Swedish corporation, entered into two agreements with B & W relating to a proposed pulp mill to be constructed in Ivetofta, Sweden. The first agreement was for the sale of certain equipment to be designed, manufactured and installed by B & W. This agreement contains an arbitration clause and by its terms is non-assignable. The second agreement was a license in which B & W agreed to furnish certain "know-how" for the running of the pulp mill. The license agreement contains no arbitration clause and permits assignment.

305 F. Supp. 806

Subsequent to the execution of these two contracts, Hylte Bruks formed Nymolla as a wholly-owned subsidiary corporation, to which, in due course, it transferred the mill in Ivetofta, including the equipment manufactured and installed by B & W. Hylte Bruks payment for this transfer to Nymolla came by means of selling 60% of Nymolla's stock to the public and retaining the other 40%. Additionally, the license agreement between B & W and Hylte Bruks was assigned to Nymolla. Following these transactions, and when Nymolla sought to go into production, plaintiffs allege Nymolla suffered injury and damages because the equipment B & W installed was defective and B & W did not have and misrepresented the "know-how" it purported to sell

On April 19, 1967, after unsuccessful efforts to adjust differences, arbitration of the equipment contract was demanded by Hylte Bruks and Nymolla against B & W. B & W objected thereto contending that Nymolla was not a party to the equipment contract, the sole contract in which B & W had agreed to arbitrate, and that Nymolla lacked standing to participate in the arbitration as a party claimant on its own behalf. Plaintiffs, on October 24, 1967, consented to a stay of the arbitration proceeding so long as Nymolla remained a party.

On October 17, 1967 (a week prior), Nymolla alone instituted a civil action in this Court, in which Nymolla sought damages for breach of the equipment contract by B & W, arguing that Nymolla was a third party beneficiary thereof. Judge Metzner dismissed that suit on the ground that Nymolla was not a party or a third party beneficiary on the equipment contract. 67 Civ. 4041 (S.D.N.Y. February 13, 1968). On appeal, the Court of Appeals affirmed, holding Nymolla not a proper party to either arbitrate or to sue as a third party beneficiary on the equipment contract. 399 F.2d 289 (2d Cir. 1968).

The Court of Appeals recognized Nymolla's dilemma:

"Even assuming that Nymolla could prove beyond question that B & W was at fault and that its losses were caused by that fault, Nymolla has found itself up against difficulties in suing for redress. On the one hand Nymolla is not itself in privity with B & W under the contract; and on the other hand, Hylte Bruks, which has such privity and would like to see Nymolla recover its losses, has not suffered the particular damage asserted." Id. at 294.

The Court of Appeals went on to note that the evidence suggested Nymolla as a purchaser may have a cause of action for breach of warranty against B & W, the manufacturer. Id. at 295.

Following the decision by the Court of Appeals, this action was instituted on August 28, 1968. An amended complaint was filed on September 26, 1968 setting forth three causes of action to which Hylte Bruks is a party:^2a

(a) Hylte Bruks and Nymolla seek recovery for breach of the licensing agreement alleged to have resulted in injury and loss to Nymolla;

(b) Hylte Bruks seeks reformation of the equipment contract to provide that Nymolla is included therein as the direct beneficiary thereof;

(c) Hylte Bruks and Nymolla seek recovery for breach of implied warranty alleged to have resulted in injury and loss to Nymolla.

Although the only injuries claimed in the complaint are those to Nymolla, Hylte Bruks and Nymolla together demand judgment against B & W in the sum of $836,000 on causes of action (a) and (c).³

Lack of Jurisdiction Over the Subject Matter

The initial issue to be resolved is whether this Court has jurisdiction over Hylte Bruks' claims against B & W.

305 F. Supp. 807

Where two or more plaintiffs are suing a single defendant, the general rule is that the claims of each cannot be aggregated; the claims of each plaintiff must individually satisfy the jurisdictional amount. See Wright, Federal Courts § 29 (1963). The single exception to this rule is a suit "in which several plaintiffs, having a common undivided interest, unite to enforce a single title or right," when "it is enough if their interests collectively equal the jurisdictional amount." Troy Bank of Troy, Indiana v. G. A. Whitehead & Co., 222 U.S. 39, 40-41, 32 S.Ct. 9, 56 L.Ed. 81 (1911); Shields v. Thomas, 17 How. 3, 5, 15 L.Ed. 93 (1854); Gibbs v. Buck, 307 U.S. 66, 74-75, 59 S.Ct. 725, 83 L.Ed. 1111 (1939). Where, however, the matters in dispute are considered "separate and distinct" aggregation is not permitted. Thus, as stated in Thomson v. Gaskill, 315 U.S. 442, 447, 62 S.Ct. 673, 675, 86 L.Ed. 951 (1942):

"Aggregation of plaintiffs' claims cannot be made merely because the claims are derived from a single instrument, Pinel v. Pinel, 240 U.S. 594, 36 S.Ct. 416, 60 L.Ed. 817, or because the plaintiffs have a community of interest, Clark v. Paul Gray, Inc., 306 U.S. 583, 59 S.Ct. 744, 83 L.Ed. 1001."

Here, plaintiffs Hylte Bruks and Nymolla are not suing to enforce an undivided or joint interest. See DeLorenzo v. Federal Deposit Insurance Corp., 259 F.Supp. 193 (S.D.N.Y.1966), opinion adhered to on reargument, 268 F.Supp. 378, 381 (1967). Although the claims to which Hylte Bruks is a party are derived from the same instrument⁴ allegedly breached and from the same alleged breach of implied warranty, and although plaintiffs share a community of interest, there is no contention by any party herein that the injuries claimed are not separate as to each plaintiff. See Aetna Insurance Co. v. Chicago, Rock Island & Pac. R. Co., 229 F.2d 584, 586 (10th Cir. 1956); Eagle Star Insurance Co. v. Maltes, 313 F.2d 778 (5th Cir. 1963). In fact, Hylte Bruks concedes, and defendant does not contest, that it sustained no injury and thus suffered no damages whatsoever from B & W's alleged breaches. The only injuries alleged were losses suffered by...