Pochiro v. Prudential Ins. Co. of America

Decision Date09 September 1987
Docket NumberNo. 85-2799,85-2799
Citation827 F.2d 1246
PartiesJohn POCHIRO and Karen Pochiro, husband and wife, Plaintiffs-Appellants, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Defendant-Appellee.
CourtU.S. Court of Appeals — Ninth Circuit

James T. Milliken, Scottsdale, Ariz., for plaintiffs-appellants.

Nancy L. Rowen and William L. Thorpe, Phoenix, Ariz., for defendant-appellee.

Appeal from the United States District Court for the District of Arizona.

Before NORRIS, BEEZER and BRUNETTI, Circuit Judges.


Appellee's petition for rehearing is denied.

The Court's opinion filed on July 14, 1987, is hereby withdrawn.


NORRIS, Circuit Judge:

In January 1983, the Prudential Insurance Company of America (Prudential) sued John Pochiro and his wife, Karen, in Arizona state court, pleading various causes of action based upon allegations that Pochiro appropriated for his own use confidential customer information obtained while Pochiro was an employee of Prudential (the Prudential action). In December 1983, the Pochiros sued Prudential in Arizona state court, pleading various causes of action based upon allegations that Prudential defamed John Pochiro by calling him "a crook" and engaged in other wrongful conduct intended to damage his competing insurance business (the Pochiro action). Prudential removed the Pochiro action to federal district court, and the district court denied the Pochiros' motion to remand.

On August 23, 1985, the Arizona superior court entered a final judgment for Prudential in the Prudential action. 1 On October 8, 1985, the federal district court entered a final judgment dismissing the Pochiros' action as a compulsory counterclaim to Prudential's state court action. The Pochiros raise three issues in this appeal from the judgment of the district court dismissing their action: (1) whether the district court erred in denying their motion to remand to the state court; (2) whether the district court erred in dismissing the claims set out in their original complaint as compulsory counterclaims to the Prudential action; and (3) whether the district court erred in denying them leave to amend their complaint. We affirm.


The Pochiros make two arguments in support of their claim that the district court should have remanded their action to state court: first, that Prudential's petition for removal was not verified in conformity with the requirements of 28 U.S.C. Sec. 1446(a), and second, that the removal petition was not timely filed. Whether a removal petition satisfies the requirements of section 1446(a) is a question of law reviewable de novo. See Gould v. Mutual Life Ins. Co., 790 F.2d 769, 771 (9th Cir.1986) (removal questions in general reviewed de novo), cert. denied, --- U.S. ----, 107 S.Ct. 580, 93 L.Ed.2d 582 (1986).

The Pochiros claim Prudential's removal petition was fatally defective because the mere signature of counsel on the petition did not constitute sufficient verification within the meaning of section 1446(a). 2 We need not decide whether the signature of counsel on the petition satisfies the verification requirement of section 1446(a) because the alleged defect in the removal petition was cured when a formally verified petition was later filed by Prudential. See D.J. McDuffie, Inc. v. Old Reliable Fire Ins. Co., 608 F.2d 145, 146-47 (5th Cir.1979) (permitting amendment to removal petition to add a statement of citizenship of parties), cert. denied, 449 U.S. 830, 101 S.Ct. 97, 66 L.Ed.2d 35 (1980). 3

The Pochiros' argument that the removal petition was untimely is based upon their claim that the petition was filed more than 30 days after a copy of their complaint was delivered to the law firm that was counsel of record for Prudential in Prudential's state court action. 4 This argument also fails, however, because the Pochiros make no claim that the law firm representing Prudential in its state court action was authorized to accept service of process for Prudential in the Pochiro action. See Kalakosky v. Collins, 125 Ariz. 326, 609 P.2d 596, 596-97 (App.1980) (service of a complaint on an attorney ineffective unless attorney has specific authority to accept service); Sloan v. Florida-Vanderbilt Devel. Corp., 22 Ariz.App. 572, 529 P.2d 726, 729 (1974) (same); see also Ransom v. Brennan, 437 F.2d 513, 516-19 (5th Cir.) (same), cert. denied, 403 U.S. 904, 91 S.Ct. 2205, 29 L.Ed.2d 680 (1971); Schultz v. Schultz, 436 F.2d 635, 639-40 (7th Cir.1971) (same). 5 Moreover, the Pochiros do not claim that Prudential otherwise received a copy of their complaint before December 2, 1984, which was the thirtieth day prior to the filing of the petition for removal. Thus, the removal petition was timely.


The question whether the Pochiros' claims are compulsory counterclaims which should have been pleaded in the earlier Prudential state court action is a question of state law. See, e.g., Carnation Co. v. T.U. Parks Constr. Co., 816 F.2d 1099, 1099-1102 (6th Cir.1987); Podhorn v. Paragon Group, 795 F.2d 658, 661 (8th Cir.1986); Chapman v. Aetna Finance Co., 615 F.2d 361, 362-64 (5th Cir.1980); Cleckner v. Republic Van and Storage Co., 556 F.2d 766, 768-69 (5th Cir.1977). We review de novo district court rulings on questions of state law. In re McLinn, 739 F.2d 1395, 1397 (9th Cir.1984) (en banc). 6


Arizona Rule of Civil Procedure 13(a), which defines a compulsory counterclaim, is identical to Federal Rule of Civil Procedure 13(a): "A pleading shall state as a [compulsory] counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim...." Like the federal courts, Arizona applies the liberal "logical relationship" test to determine whether two claims arise out of the same "transaction or occurrence." See Technical Air Products, Inc. v. Sheridan-Gray, Inc., 103 Ariz. 450, 445 P.2d 426, 428 (1968) (adopting the rule of Moore v. New York Cotton Exchange, 270 U.S. 593, 610, 46 S.Ct. 367, 371, 70 L.Ed. 750 (1926)); see also Albright v. Gates, 362 F.2d 928, 929 (9th Cir.1966) (noting that we have given Rule 13 an "increasingly liberal construction"); 6 C. Wright & A. Miller, Federal Practice & Procedure Sec. 1410, at 40 n. 36 (1971). 7 "This flexible approach to Rule 13 problems attempts to analyze whether the essential facts of the various claims are so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit." Harris v. Steinem, 571 F.2d 119, 123 (2d Cir.1978) (applying Fed.R.Civ.P. 13).

In its state court action, Prudential pleaded causes of action for breach of employment contract, unfair competition, and intentional interference with business relations. The operative facts underlying these causes of action were that John Pochiro, when employed by Prudential as an agent, was given confidential records about Prudential's present and prospective policyholders. Then, after resigning from Prudential, Pochiro failed to return the records to Prudential and instead used them in soliciting business in competition with Prudential.

Prudential argues that the operative facts underlying the Pochiros' action also revolve around the Pochiros' use of these same confidential records. We agree. Although the Pochiros' complaint is rather jumbled, their causes of action for unlawful restraint of trade, unfair business practices, intentional interference with contractual advantage, defamation, abuse of process, intentional infliction of emotional distress, and tortious breach of employment contract are bottomed on a single paragraph of factual allegations, which we quote in full:

Commencing in December, 1982 and January-February, 1983, Prudential deliberately, maliciously, willfully and/or with gross, wanton and negligent conduct set about to substantially damage John's reputation, credibility and business; that Prudential's wrongful conduct included it doing the following acts: (1) Prudential told John's employees and/or prospective employees that John was a crook, and/or was dishonest and threatened them with litigation involvement or economic difficulty if they worked for John; (2) Prudential told insurance customers that John was a crook, dishonest, and/or unscrupulous and that if they did business with him they would suffer losses; (3) Prudential encouraged one customer to file a complaint, without justification, against John at the Arizona Insurance Commissioner; (4) Prudential used delay tactics in paying its own policyholders to prevent them from converting existing Prudential policies and doing business with John; (5) Prudential unjustifiably tried to pursuade [sic] other insurance companies not to do business with John; (6) Prudential abused the process of the Arizona court system by bringing a lawsuit against John for the ulterior purpose of using it as a tool to dissuade persons from doing business with John; (7) Prudential told customers of John that if they did business with him they would be involved in litigation; (8) Prudential in bad faith delayed and/or failed to make payments to John under John's own insurance policy with Prudential and stopped payment on at least one such check, wrriten [sic] in favor of an ambulance service.

Excerpt of Record (E.R.) at 7-8. Although some of these allegations at first blush appear a bit removed from Prudential's action to enjoin the Pochiros' use of confidential records, it is undisputed that Pochiro's use of Prudential's customer records is inextricably intertwined with the facts as alleged in the Pochiros' complaint. For example, the Pochiros' allegations that Prudential called John Pochiro "a crook" relate to Prudential's litigated claim that Pochiro misappropriated confidential records. Moreover, the Pochiros argue that the district court, rather...

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