Neifeld v. Steinberg

• Decision Date: 19 February 1971
• Docket Number: No. 18274,18275.,18274
• Parties: David NEIFELD, Appellant, v. Meyer STEINBERG. David NEIFELD v. Meyer STEINBERG, Appellant.
• Court: U.S. Court of Appeals — Third Circuit

438 F.2d 423 (1971)

David NEIFELD, Appellant, v. Meyer STEINBERG.

David NEIFELD v. Meyer STEINBERG, Appellant.

Nos. 18274, 18275.

United States Court of Appeals, Third Circuit.

Argued September 17, 1970.

Decided February 19, 1971.

Pace Reich, Modell, Pincus, Hahn & Reich, Philadelphia, Pa., for David Neifeld.

Daniel J. Murphy, Takiff, Bolger & Murphy, Philadelphia Pa. (Harry A. Takiff, Joseph J. Weisenfeld, Philadelphia, Pa., on the brief), for Meyer Steinberg.

Before BIGGS, SEITZ and GIBBONS, Circuit Judges.

OPINION OF THE COURT

BIGGS, Circuit Judge.

At No. 18,274, Neifeld appeals from an order of the District Court granting Steinberg's motion to dissolve a Writ of Foreign Attachment and granting Steinberg's motion to dismiss the action. At No. 18,275, Steinberg appeals from an order denying him injunctive relief.

The facts can be stated as follows: On April 7, 1969, Neifeld filed a complaint in the Court of Common Pleas of Philadelphia County, alleging that Steinberg had breached a contract to sell and deliver to Neifeld 6,000 shares of common stock of Total Energy Leasing Corporation (TELCO), a company in which Steinberg was the principal stockholder and chairman of the Board of Directors. The suit was commenced by having the Sheriff serve a Writ of Foreign Attachment (12 P.S.Appendix R.C.P. 1252) upon a Philadelphia stockbroker, Suplee, who held some of Steinberg's securities. The Sheriff, however, failed to make a manual seizure of the securities.

On May 29, 1969, Steinberg removed the case to the United States District Court for the Eastern District of Pennsylvania pursuant to 28 U.S.C. § 1441(a). On the same date, Steinberg filed an answer in which he asserted that the court lacked personal jurisdiction over him, that venue was improperly laid in that court and that there was insufficient process as to the attempted seizure of his securities. In the same pleading Steinberg also filed a counterclaim against Neifeld alleging that Neifeld had improperly used confidential information belonging to TELCO. Steinberg requested the court to enter either an order rescinding the contract which was the basis of Neifeld's suit or to award damages to Steinberg.

On June 27, 1969, Neifeld filed a motion to strike Steinberg's defenses respecting personal jurisdiction, venue and service of process on the ground that Steinberg, by filing the counterclaim, had submitted to the jurisdiction of the court.¹ On July 3, 1969, Steinberg filed an amended answer pursuant to Rule 15 (a) of the Federal Rules of Civil Procedure, 28 U.S.C., by which he purported to withdraw his counterclaim against Neifeld.², ³ On July 11, 1969, argument was had on Neifeld's motion to strike Steinberg's defenses and on August 28, 1969, the District Court (Judge Higginbotham) denied the motion reasoning that "since the counterclaim has been withdrawn, Neifeld is not entitled to any special advantage which might occur in a situation where a counterclaim is being maintained by a defendant."

On the same day the District Court denied Neifeld's motion to strike, Steinberg filed a motion to dissolve the Writ of Foreign Attachment for failure of Neifeld to comply with 12A P.S. § 8-317 (Pa.U.C.C.) which requires manual seizure of the shares to effect a valid attachment.⁴ On September 4, 1969, Steinberg filed a motion to dismiss the complaint for lack of in personam or in rem jurisdiction. At the argument on these two motions on September 12, 1969, Steinberg also requested the court to enjoin Neifeld from further attempts to attach Steinberg's securities. On September 23, 1969, the District Court (Judge Luongo) granted Steinberg's motion to dissolve the Writ of Foreign Attachment and his motion to dismiss the complaint. The court, however, denied Steinberg's request for injunctive relief.⁵

I. NEIFELD'S APPEAL

In considering the issue raised by Neifeld in his appeal we must first answer the threshold question as to what body of law this court should look in order to ascertain the applicable rule. The issue raised by Neifeld is whether the joinder of a permissive counterclaim with the defenses of lack of jurisdiction over the person, lack of venue, insufficiency of process and insufficiency of service of process (jurisdictional defenses), is a waiver of these defenses where the defendant later withdraws the counterclaim without leave of court.

In Hanna v. Plumer, 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965), the Supreme Court, confronted with a case where the applicable federal rule of civil procedure was in direct collision with the procedural rule of the state where the district court was sitting, held that if a federal rule of civil procedure (Rule 4(d) (1)) governed a matter of practice or pleading in federal courts, then the rule must be applied even if application of a state rule would require a different result. As will appear at a later point we have concluded that although the Federal Rules of Civil Procedure do not expressly cover the situation at bar, they do so implicitly. Rules 12(b) and (h) manifest an intent to "occupy the field" with respect to questions relating to the waiver of jurisdictional defenses by a defendant. The policy behind Rule 12(b) — avoidance of the necessity for making a "special appearance" — is no less applicable because the defendant has asserted a permissive counterclaim.

Moreover, even if the Federal Civil Rules did not implicitly cover the instant case, we would not be obliged to follow Pennsylvania procedure. Hanna v. Plumer indicates that the outcome-determination test enunciated in Guaranty Trust Co. of New York v. York, 326 U.S. 99, 109, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945), must be read with reference to the twin aims of the principle of Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938): "discouragement of forum-shopping and avoidance of inequitable administration of the laws." 380 U.S. at 468, 85 S.Ct. at 1142.

While it is true that the application of Pennsylvania procedural rules would alter the outcome of the litigation, the difference between the federal rule and the Pennsylvania Rule "would be of scant, if any, relevance" to Steinberg's decision to litigate in the state court or to remove to the federal court. 380 U.S. at 469, 85 S.Ct. at 1143. Similar to the plaintiff in Hanna, Steinberg, in choosing his forum, "was not presented with a situation where application of the state rule would wholly bar recovery"; rather adherence to the state rule would have resulted only in altering the way in which Steinberg would have raised his jurisdictional defenses. 380 U.S. at 469, 85 S.Ct. at 1143. Instead of asserting all the defenses in his answer he would have been required to raise the defense of lack of personal jurisdiction by "preliminary objection." See 12 P.S. App. R.C.P. 1017(b) (1), 1032; 1 Goodrich & Amram, Standard Pennsylvania Practice § 1017(b)-3, at 70-73 and § 1032-2, at 216-17 (1960); C. E. Williams Co. v. Henry B. Pancoast Co., 412 Pa. 166, 169-170, 194 A.2d 189, 190-191 (1963). Therefore, we do not think that application of a federal rule dealing with waiver of jurisdictional defenses will encourage forum-shopping. Furthermore, we cannot conclude that our decision will alter "the mode of enforcement of state-created rights in a fashion sufficiently `substantial' to raise the sort of equal protection problems to which the Erie opinion alluded." See and compare Hanna v. Plumer, supra, at 469, 85 S.Ct. at 1143.

Since we have determined that federal law governs the resolution of the issue raised by Neifeld's appeal, we will now examine the difficult problems presented. Neifeld argues that the filing of the permissive⁶ counterclaim by Steinberg constituted a submission by him to the jurisdiction and venue of the District Court. Steinberg rebuts this argument by contending that a syllogistic reading of Rules 15(a) and (c) dictates that a counterclaim was not before the court ab initio since Rule 15(c) states that an amended pleading relates back to the date of the original pleading.⁷ We agree with the conclusion sought by Steinberg and hold that the assertion of a permissive counterclaim in the same pleading in which a defendant raises defenses of lack of jurisdiction over the person, lack of venue, insufficiency of process and inadequate service of process does not constitute a waiver of these defenses where the defendant later validly withdraws the counterclaim without leave of court.

Want of personal jurisdiction and lack of venue can be waived by consent or conduct of the defendant. Hoffman v. Blaski, 363 U.S. 335, 343, 80 S.Ct. 1084, 4 L.Ed.2d 1254 (1960); 1A W. Barron & A. Holtzoff, Federal Practice and Procedure With Forms § 370, at 509-10 (rules ed. C. Wright 1960). Prior to the adoption of the Federal Rules of Civil Procedure it was also clear that the filing of a counterclaim by a defendant prevented that defendant from successfully objecting to the plaintiff's claim on the basis of lack of personal jurisdiction or venue. In Merchants Heat and Light Co. v. J. B. Clow & Sons, 204 U.S. 286, 287, 27 S.Ct. 285, 51 L.Ed. 488 (1907), one of the questions presented to the Supreme Court was whether the defendant submitted to the jurisdiction of the court by pleading a set-off and counterclaim. The Court held that "by setting up its counterclaim the defendant became a plaintiff in its turn, invoked the jurisdiction of the court in the same action, and, by invoking, submitted to it." Id. at 289, 27 S.Ct. at 286. See, also, American Mills Co. v. American Surety Co. of New York, 260 U.S. 360, 43 S.Ct. 149, 67 L.Ed. 306 (1922). The question remaining is whether this procedural rule enunciated in Merchants Heat and Light Co. was changed by the Federal Rules of Civil Procedure.

Rule 12(b) states in part: "Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the...