Irving Trust Co. v. Nationwide Leisure Corp.

• Citation: 562 F. Supp. 960
• Decision Date: 24 November 1982
• Docket Number: No. 79 Civ. 261 (WCC).,79 Civ. 261 (WCC).
• Parties: IRVING TRUST COMPANY and Fidelity and Deposit Company of Maryland, Plaintiffs, v. NATIONWIDE LEISURE CORPORATION, et al., Defendants.
• Court: U.S. District Court — Southern District of New York

562 F. Supp. 960

IRVING TRUST COMPANY and Fidelity and Deposit Company of Maryland, Plaintiffs, v. NATIONWIDE LEISURE CORPORATION, et al., Defendants.

No. 79 Civ. 261 (WCC).

United States District Court, S.D. New York.

November 24, 1982.

Thomas A. Dickerson, New York City, for class defendant and cross claimant Klakis.

George Berkowitz, P.C., New York City, for defendant Capitol Intern. Airway, Inc.

OPINION AND ORDER

CONNER, District Judge:

Capitol International Airways, Inc. ("Capitol") has filed objections before this Court to one portion of the September 13, 1982 Recommended Decision of Magistrate Kent Sinclair, Jr. In that opinion, Magistrate Sinclair concluded, inter alia, that Capitol should not be held in default for its failure to answer the cross-claims asserted against it by the Klakis class but directed Capitol, on pain of sanctions, to respond to outstanding discovery requests. This portion of the Magistrate's Recommended Decision is before the Court for a de novo determination pursuant to 28 U.S.C. § 636(b)(1). Upon a review of the record before the Magistrate and the papers submitted by the parties before this Court, I have determined to adopt the Recommended Decision of Magistrate Sinclair for the reasons set forth in his opinion, familiarity with which is presumed.¹

Capitol has asserted both before the Magistrate and this Court that it is not a party to this interpleader proceeding and that there is no in personam jurisdiction over it by virtue of the Klakis cross-claims. As noted by Magistrate Sinclair, however, Capitol was made a party to this action in 1979 by service of an interpleader complaint by plaintiff Irving Trust Company. The cross-claims were served thereafter by mail on Capitol's counsel pursuant to Rule 5, F.R.Civ.P. Although Capitol did not answer the complaint, it participated in the action by opposing Irving's motion for summary judgment and the motion for class certification, and by submitting papers attacking the legal sufficiency of the classes' cross-claims.

Capitol now argues for the first time that because it has settled its disputes with the interpleader plaintiff Irving, there was no valid service of the cross-claims against it. The logic of this argument is somewhat difficult to comprehend. The cross-claims were served upon Capitol through its attorney in July of 1980. Capitol settled with Irving in February of 1982. Clearly, at the time Capitol was served with the cross-claims it was a party to this action and the subsequent resolution of the initial claim cannot render those claims invalid for lack of personal jurisdiction. Nor is this Court, any more than Magistrate Sinclair, impressed by Capitol's repeated denials of party status made in each of Capitol's many submissions on the merits of this case. The fact remains that Capitol "has acted like a party on each occasion that it was strategically useful to act like a party and it has never sought to be dismissed as a party," Recommended Decision, slip op. at 7, until the instant motion.

Capitol's remaining objections were presented to the Magistrate and the Court is in full agreement with the rejection of those contentions. With respect to Capitol's alternative request that this Court stay the cross-claims against it in view of the "pending" State Supreme Court action, that request is denied since there is apparently no action being taken in that case pending the outcome of the instant litigation. Accordingly, Capitol is ordered to respond to all outstanding requests within thirty (30) days of this Opinion and Order.

SO ORDERED.

APPENDIX

RECOMMENDED DECISIONS ON MOTIONS BY CLASS CLAIMANTS

SINCLAIR, Magistrate:

After decisions of this court which recommended class certification and dismissal of an affirmative defense were adopted by Judge Conner, the classes herein moved on June 18, 1982,

A. For an Order rendering a default judgment against Capitol International Airways, Inc. for its failure and refusal to answer or respond to the cross claims asserted against it by the class of defendants set forth in the Answer, Class Claims and Class Cross Claims of Marion Klakis and Carol Barnes; said judgment to be in the amount of $300,000 actual damages together with $3,000,000 punitive damages;

B. For an Order granting summary judgment on behalf of the individual class defendants Mr. & Mrs. Samuel Reiken, Mr. & Mrs. Klakis, Mr. & Mrs. Barnes, Mr. & Mrs. Dupack, Dr. Low, Gloria Goodman, Myra Eichenbaum, Myra and Arlene Richman and the classes they represent Reiken, Low, Dupack and Klakis classes dismissing as a matter of law the "Second Defense Against the Bond Or Rider Claimants" of the plaintiff, Fidelity and Deposit Company of Maryland as set forth in the Amended Complaint In The Nature Of Interpleader;

C. For an Order granting summary judgment on behalf of those persons identified in sub-paragraph "B" above dismissing as a matter of law the following enumerated Affirmative Defenses set forth by defendants Nationwide Leisure Corporation, Joel Nadel and Stuart Graff in their Answers to various cross claims;

1 The Fifth and Twelfth Affirmative Defenses in the Answer to the Klakis Cross Claims;

2 The Fifth and Ninth Affirmative Defenses in the Answer to the Low Cross Claims;

3 The Fifth and Ninth Affirmative Defenses in the Answer to the Dupack Cross Claims;

4 The Fifth and Ninth Affirmative Defenses in the Answer to the Reiken Cross Claims;

5 The Seventh Defense in the Answer to the Eichenbaum and Goodman Cross Claims;

6 The Seventh Defense in the Answer to the Richman Cross Claims;

Notice of Motion, dated June 16, 1982. Briefing was completed on August 13, 1982. For the reasons that follow in Part A, the classes' motion with respect to Capitol must be DENIED, with a caveat. For the reasons that follow in Part B, the classes' motion with respect to Fidelity must be GRANTED. For the reasons that follow in Part C, the classes' motion with respect to Nationwide, Graff and Nadel must be granted in part and denied in part. Familiarity with the extensive prior opinions and decisions in this matter is presumed. See especially as to Part A, Wasserman v. Fidelity & Deposit Company of Maryland, 490 F.Supp. 564 (S.D.N.Y.1979); Judge Conner's Opinion and Order dated July 2, 1980, reprinted at 16 Aviation Cases 18,396; as to Parts B and C, see March 12, 1982 Recommended Decision reported at 34 F.Rules Serv.2d 66 (1982); December 7, 1981 Recommended Decision reported at 93 F.R.D. 102 and 34 F.Rules Serv. 148 (1981); Judge Conner's decision dated June 1, 1982 reported at 17 Aviation Cases 17,136.¹

A. Classes' Motion to Hold Capitol in Default.

This motion was precipitated by Capitol's refusal to respond to discovery requests on the asserted ground that it is not a party to this lawsuit. The classes' motion, though denominated a motion for default, is aimed merely at securing a judicial declaration that Capitol and the cross-claims against it are properly before the court, so that Capitol may not decline to respond to proper discovery requests. Some background will help to place this peculiar situation in context.

Capitol is an air carrier which contracted to provide air transportation in connection with some Nationwide charter tours. When Nationwide passed Capitol some rubber checks in purported payment for these services, Capitol looked to interpleading plaintiff Irving Trust Company, the depository bank, for payment. When Irving declined payment, Capitol sued Nationwide in state court.

Shortly thereafter, Irving instigated this interpleader action and served Capitol at its New York offices, which service was accepted by Capitol. See Grashof Affidavit of July 19, 1979. Capitol coyly declined to answer the interpleader complaint, but began to participate in the interpleader action. Initially, its participation took the form of opposing an injunction staying its state court action against Irving² and opposing a summary judgment motion brought by Irving.

During this period, the classes herein were suing the interpleader plaintiffs, Capitol, Nationwide, Graff and Nadel in state court. When those state actions were stayed and removed to federal court and the class representatives named as parties herein, some of the classes sought and were granted certification under Rule 23. Capitol, which had never asked to be dismissed as a party, continued to participate in this lawsuit, appeared at conferences, and submitted papers opposing certification of the classes and attacking the legal sufficiency of the classes' cross-claims.³ See Affidavits in Opposition of George Berkowitz and Thomas F. Ahern, dated August 19, 1980.

Capitol seeks to avoid the entry of default and to excuse its refusals to provide discovery principally on the grounds that it is not a party because the court has no personal jurisdiction over it. Capitol's Memorandum of Law ("Capitol Mem.") at Points I⁴ and II. This contention is discussed below. Capitol's other arguments amount to a denial that the cross-claim has merit and an expression of fear that the court is permitting litigation of sham claims.⁵ No proper summary judgment motion is yet before the court and, hence, these fears cannot warrant dismissal of the cross-claims now.⁶ The only argument which requires extended discussion is made in Points I and II of Capitol's Memorandum to the effect that Capitol is not a party for lack of personal jurisdiction.

This argument must be rejected. Capitol was made a party to this lawsuit and never challenged service, it has acted like a party on each occasion that it was strategically useful to act like a party and it has never sought to be dismissed as a party. Its refusals to answer the interpleader complaint or the cross-claim and the boilerplate denials of party status which it has included in each of the many filings it has made in this action are recognizable for what they are: elements of a transparent smokescreen behind which Capitol conducts itself...