Lee v. Ply*Gem Industries, Inc.
| Decision Date | 11 January 1979 |
| Docket Number | No. 77-1008,77-1008 |
| Citation | 193 U.S.App.D.C. 112,593 F.2d 1266 |
| Parties | Page 1266 593 F.2d 1266 193 U.S.App.D.C. 112, 1979-1 Trade Cases 62,412 John M. LEE et al., Appellees, v. PLY*GEM INDUSTRIES, INC., et al., Appellants. United States Court of Appeals, District of Columbia Circuit |
| Court | U.S. Court of Appeals — District of Columbia Circuit |
Jay F. Gordon, New York City, with whom George Berger, New York City, was on the brief, for appellants. John F. McCarthy, III, Washington, D. C., also entered an appearance for appellants.
Coleman R. Rosenfield, Atty., Fort Lauderdale, Fla., of the Bar of the Supreme Court of Florida, pro hac vice, by special leave of Court, with whom Michael D. Hausfeld, Washington, D. C., was on the brief, for appellee.
Before BAZELON, LEVENTHAL and ROBINSON, Circuit Judges.
Opinion for the Court filed by SPOTTSWOOD W. ROBINSON, III, Circuit Judge.
Appellees are operators of retail stores in the Washington-Baltimore area known as Ply*Gem paneling centers. They instituted this litigation in the District Court for the District of Columbia against the Ply*Gem companies, related concerns engaged in the manufacture and marketing of wood paneling and associated products. 1 One of these companies, Ply*Gem of Laurel, Inc., licensed appellees to operate their paneling centers, which feature Ply*Gem products as their principal line and utilize Ply*Gem trademarks and tradenames in their advertising. The first two counts of the complaint charge the companies with foisting exclusive dealing and tying arrangements upon their franchisees in violation of Section 1 of the Sherman Act 2 and Section 3 of the Clayton Act. 3 The remaining three counts allege fraud, breach of contract and breach of fiduciary duty. 4
Appellants, the Ply*Gem companies, moved to dismiss the action for lack of personal jurisdiction and for improper venue. The District Court rebuffed these challenges, finding that the companies had transacted business in the District of Columbia at the time of the alleged antitrust violations 5 and deeming that fact sufficient to sustain venue and extraterritorial service of process under Section 12 of the Clayton Act. 6 The companies also requested the court to stay prosecution of the fraud, breach of contract and breach of fiduciary duty counts pending arbitration of those claims pursuant to a provision common to the franchise agreements. 7 The court denied the stay, reasoning that "(a)rbitration will not resolve the basic antitrust claims and the parties have already attempted arbitration without success." 8
This ensuing appeal tenders several issues for our consideration. We conclude initially that the District Court's order refusing a stay is appealable, 9 and that its denial of the motion to dismiss for want of proper venue and service is also properly before us. 10 We then affirm the court's disposition of the latter motion. 11 We reverse, however, the order refusing to stay proceedings on the common law counts to enable arbitration. 12
The District Court's refusal to stay itself obviously is not a final order for purposes of this appeal. 13 It is well established, however, that an order disposing of a motion for a stay is to be treated as a ruling on a motion for an injunction and as such, though interlocutory, immediately appealable 14 provided that two conditions are satisfied. 15 First, the litigation in which the order is entered must be legal rather than equitable in character. 16 Second, the stay must have been sought to enable the prior determination of an equitable defense. 17 This rule, much-maligned as divorced from any rational or coherent appeals policy, 18 is the result of reasoning by historical analogy to the days when the chancellor would enjoin a court of law from proceeding in an action after an equitable defense thereto had been asserted. 19
An agreement to arbitrate a legal dispute is considered an equitable defense. 20 Thus the appealability of the order denying the stay here turns wholly upon whether the underlying litigation is legal or equitable in nature. If legal, the ruling is analogous to the chancellor's refusal to enjoin proceedings in a law court; if equitable, the order is comparable to the chancellor's decree on the sequence in which issues shall be tried in his own court.
All five counts of the franchisees' complaint clamor for extensive damages. 21 The first two, incorporating the antitrust claims, also pray that the Ply*Gem companies "be required to refund to the (franchisees) all profits and/or kickbacks and/or mark-ups of Ply*Gem and/or its affiliates in connection with the sale of merchandise, supplies, material and services to the" franchisees. 22 Additionally, the first four counts request "such other relief as shall be deemed just and proper." 23
We thus are faced with a complaint seeking both equitable and legal relief, presenting what we have called "the most troublesome case( )" 24 in this area of federal appellate jurisdiction. Because piecemeal appeals are disfavored, we have embraced a presumption that the pending action is equitable, but that may be overborne if the request for equitable relief is incidental or clearly subordinate to essentially legal claims. 25 We believe that the franchisees' claims are basically legal.
The principal relief sought is an award of damages. 26 Although the call for return of profits, kickbacks and mark-ups arguably constitutes a plea for an accounting and restitution, we have held that an entreaty of this sort does not divest an action for damages of "its character as an action at law . . . ." 27 Moreover, recoupment of these items is asked in the antitrust counts, while the order appealed from is a refusal to stay proceedings on the common law counts. 28 The franchisees also rely on the prayer of the first four counts for "such other relief as shall be deemed just and proper." 29 This boilerplate is simply a by-product of cautious pleading, however, and does not alter the fundamental nature of the litigation. 30
In short, the historical analysis by which the appealability of orders granting or denying stays of judicial proceedings is to be determined indicates that the order appealed from is a contemporary analogue to the chancellor's refusal to enjoin an action at law. We therefore have jurisdiction. 31
In general, of course, an order denying a motion to dismiss is not immediately appealable. 32 But, on appeal of an interlocutory order granting or denying an injunction, an appellate court may properly determine whether there is an "insuperable objection to maintaining the bill" and hence whether dismissal is required. 33 In Deckert v. Independence Shares Corp., 34 the Supreme Court held that a federal court of appeals reviewing an interlocutory injunctive order has power to pass on the correctness of a denial of a motion to dismiss for want of jurisdiction and failure to state a cause of action. This principle applies with full force to the Ply*Gem companies' motion to dismiss for improper venue 35 and lack of personal jurisdiction. 36 Thus, the District Court's rejection of the companies' challenge to its venue and jurisdiction is properly before us.
The Ply*Gem companies implore us to order dismissal of the antitrust claims for improper venue and ineffective service of process. With respect to each of these prerequisites to their action, the franchisees rely primarily 37 upon Section 12 of the Clayton Act, which provides:
Any suit, action, or proceeding under the antitrust laws against a corporation may be brought not only in the judicial district wherein it is an inhabitant, but also in any district wherein it may be found or transacts business; and all process in such cases may be served in the district of which it is an inhabitant, or wherever it may be found. 38
The companies moved to dismiss the suit on the grounds that venue was not properly laid in the District of Columbia and that personal jurisdiction was not obtained over them. The District Court denied the motion, holding that the "(d)efendants had a continuing relationship with some plaintiff corporations found in the District of Columbia," that "revenues were obtained from the District of Columbia in sufficient quantity," and that "it is not essential to venue that business must still be transacted as of the date of the filing of the complaint." 39 We concur with the District Court, though we find it necessary to expand somewhat upon its rationale.
Ply*Gem of Laurel authorized the franchisees to operate retail paneling stores exhibiting the Ply*Gem tradename and carrying products bearing the Ply*Gem trademark. 40 Ply*Gem of Laurel further covenanted to provide each franchisee with a guaranteed source of supply of Ply*Gem and other products and with training and guidance in the management of their outlets. 41 Each franchise was granted for a period of fifteen years, running well into the 1980s. 42 In return, each of the franchisees paid Ply*Gem of Laurel $10,000. 43 Effectiveness of each agreement was contingent upon approval by Ply*Gem Industries, the corporate parent of Ply*Gem of Laurel. 44
The Ply*Gem companies launch their attack upon the propriety of suit in the District of Columbia from two facts: Ply*Gem of Laurel sold its last shipment of products to a plaintiff franchisee located in the District Harbinger's, Inc. in July, 1976, but the franchisees' action was not commenced until August 12, 1976. 45 The temporal reference of Section 12's "transact(ing) business" test, the companies argue, is the date suit is brought. Accordingly, they conclude, venue may not be laid in the District under Section 12 and extraterritorial service on them was not authorized thereby.
We disavow the companies' hyperliteral interpretation of Section 12. To be sure, the section is cast in the present tense; 46 but...
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