Soberay Mach. & Equip. Co. v. MRF Limited Inc.

• Decision Date: 30 April 1998
• Docket Number: Nos. 96-3946,96-3997 and 97-3308,s. 96-3946
• Parties: (6th Cir. 1999) Soberay Machine & Equipment Company, Plaintiff-Appellant (96-3946; 97-3308)/Cross-Appellee, v. MRF Limited, Inc., Defendant-Appellee/Cross-Appellant (96-3997), Argued:
• Court: U.S. Court of Appeals — Sixth Circuit

Page 759

181 F.3d 759 (6th Cir. 1999)

Soberay Machine & Equipment Company, Plaintiff-Appellant (96-3946; 97-3308)/Cross-Appellee, v. MRF Limited, Inc., Defendant-Appellee/Cross-Appellant (96-3997),

Nos. 96-3946, 96-3997 and 97-3308

UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

Argued: April 30, 1998

Decided and Filed: June 16, 1999

Rehearing Denied July 7, 1999

[Copyrighted Material Omitted]

Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 91-02017--Donald C. Nugent, District Judge.

John A. Hallbauer, Brian J. Green, William E. Armstrong, BUCKLEY, KING & BLUSO, Cleveland, Ohio, for Appellant.

Matthew T. Fitzsimmons, Thomas A. Gattozzi, NICOLA, GUDBRANSON & COOPER, Cleveland, Ohio, for Appellee.

CLAY, J., delivered the opinion of the court, in which NELSON, J., joined. BOGGS, J. (pp. 24-27), delivered a separate dissenting opinion.

Before: NELSON, BOGGS, and CLAY, Circuit Judges.

OPINION

CLAY, Circuit Judge.

This is a consolidated appeal. In case No. 96-3946, Plaintiff, Soberay Machine & Equipment Company, appeals from the judgment entered by the district court enforcing the jury trial verdict in favor of Defendant, MRF Limited, Inc., in this diversity action seeking money damages for an alleged breach of contract. In case No. 97-3308, Plaintiff appeals from the district court's order denying Plaintiff's motion to review the clerk's taxation of costs in the amount of $20,507.50. In case No. 96-3997, Defendant cross-appeals from the district court's judgment that disposed of all claims with respect to all parties, and which thereby implicitly denied Defendant's previous motion to dismiss for lack of subject matter jurisdiction or alternatively for failure to join an indispensable party.

For the reasons set forth herein, in case No. 96-3997 we REVERSE the district court's judgment on Defendant's cross-appeal, thereby rendering Plaintiff's appeal in case No. 96-3946 MOOT; in case No. 97-3308, we AFFIRM IN PART, REVERSE IN PART, & REMAND the district court's order denying Plaintiff's motion to review the clerk's taxation of costs.

I. Procedural History

Plaintiff, an Ohio Corporation in the business of selling used machinery and equipment with its principal place of business in Ohio, filed suit in Ohio state court against International Polymer Equipment Corporation ("IPEC"), also a corporation with its principal place of business in Ohio, seeking the balance of payment owed for a piece of machinery used in the production of rubber products known as a "calender." On October 8, 1991, Plaintiff filed a complaint in federal district court against IPEC, as agent for Defendant, and against Defendant, a corporation with its principal place of business in India, seeking the balance of payment owed on the calender from IPEC and/or Defendant. About six months later, on January 13, 1995, Plaintiff filed a motion to amend its complaint in federal court on the basis of correcting its prayer for damages and dropping IPEC from the suit. The district court granted Plaintiff's motion, and on March 15, 1995, Plaintiff filed its amended complaint; however, in addition to correcting its prayer for damages and dropping IPEC from the suit, Plaintiff also alleged that IPEC, while acting as agent for Defendant, made a series of purchases from Soberay "for the delivery, shipping, and packaging of goods sold and delivered by Soberay to MRF."

Defendant filed a motion for summary judgment as well as a motion for judgment on the pleadings for lack of subject matter jurisdiction or, alternatively, for failure to join IPEC as an indispensable party. The court did not rule upon Defendant's motion at that time. The case proceeded to a jury trial, where the jury returned a verdict in favor of Defendant in the form of interrogatories and a general verdict form. On July 31, 1996, the district court entered judgment in favor of Defendant and against Plaintiff on the basis of the jury's verdict. Defendant filed a motion requesting the court to enter an order directing the clerk of court to tax costs against Plaintiff. On November 6, 1996, the clerk taxed costs against Plaintiff in the amount of $20,507.50. Plaintiff filed a motion to review the clerk's taxation of costs on November 27, 1998, which the district court denied. Plaintiff and Defendant filed their respective notices of appeal and cross-appeal.

Facts

In December of 1988, Defendant sent Plaintiff a telex inquiring about the availability of a second-hand calender. Plaintiff responded by telex briefly describing two calenders. Defendant notified other equipment suppliers, including IPEC, of its need for a calender. Chris Dias, Defendant's Director of Engineering, was the person in charge of this specific calender purchase. Dias claimed that he never had any dealings with Plaintiff in his efforts to purchase a calender. K. George, Defendant's top production manager, came from India to Plaintiff's office and looked at the calender. On August 25, 1989, Plaintiff sent George a quote for the purchase price of the calender.

IPEC responded to Defendant's inquiry, and sent Defendant several invoices for the purchase of a calender. Defendant entered into negotiations with IPEC for the calender, and subsequently purchased a used calender from IPEC. Before the purchase was complete, several documents passed between IPEC and Defendant, such as invoices for the purchase of the calender. The invoices were signed by Ingram Myers on behalf of IPEC, indicated that Defendant was the buyer and IPEC was the seller, and stated that payment was to be made by letter of credit from Defendant to IPEC. The invoices did not state that IPEC was Defendant's agent.

After receiving the invoices from IPEC, Dias got approval from Defendant to purchase the calender. Thereafter, Defendant sent eight purchase orders, based on IPEC's invoices, to purchase the various component parts of the calender. These purchase orders stated that Defendant would pay IPEC by way of letter of credit. Defendant also opened several letters of credit so as to transmit payment to IPEC. These letters entitled the beneficiary to draw upon the funds once the goods were shipped. On all of the letters of credit, Defendant listed IPEC as the beneficiary.

Once IPEC received the letters of credit, it prepared to ship the calender. All of the bills of lading involved in the shipment of component parts of the calender referred to IPEC as the shipper/exporter and made no reference to Plaintiff. Subsequently, Plaintiff billed IPEC for the sale of the calender. Plaintiff's own invoices stated "Sold to IPEC." Defendant paid IPEC in full for the calender. Myers acknowledged that IPEC received payment in full from Defendant for the calender.

IPEC paid Plaintiff an initial installment payment of $200,000 for the calender. However, due to financial difficulties that IPEC was experiencing at the time, IPEC did not pay Plaintiff the balance of the purchase price. Plaintiff demanded payment from IPEC, to no avail. Plaintiff filed suit against IPEC in state court seeking payment of the balance owed on the calender. Thereafter Plaintiff filed the instant suit against IPEC and Defendant in federal district court. IPEC then filed a voluntary petition for bankruptcy under chapter seven listing the balance owed to Plaintiff for the calender as a debt, and Plaintiff filed a claim against IPEC in bankruptcy court for the balance owed. Plaintiff then amended its complaint dropping IPEC from this suit.

II. No. 96-3997 - Cross Appeal

The district court did not specifically rule upon Defendant's motion to dismiss for lack of subject matter jurisdiction or alternatively for failure to join IPEC as an indispensable party pursuant to Fed. R. Civ. P. 19, but implicitly denied the motion in rendering the judgment in this case. Because IPEC was an indispensable party to this suit, we hold that the district court erred in denying the motion. See Local 670 v. International Union, United Rubber, Cork, Linoleum and Plastic Workers of Am., 822 F.2d 613, 619 (6th Cir. 1987), cert. denied, 484 U.S. 1019 (1988) (reviewing motion brought under Rule 19 de novo).

Defendant first argues that because Plaintiff's original complaint, filed in federal district court under 28 U.S.C. 1332, lacked complete diversity of citizenship, inasmuch as Plaintiff named IPEC -- a nondiverse party -- as a defendant, the district court lacked subject matter jurisdiction over the complaint and should have dismissed the case pursuant to Fed. R. Civ. P. 12(b)(7). Defendant claims that Plaintiff did not cure this jurisdictional defect by amending its complaint and dropping IPEC from the suit because jurisdiction is determined at the time the case is initially commenced and may not be created by dropping an indispensable party. Although we agree that a party may not create diversity by dropping a nondiverse and indispensable party, we note that it is appropriate to drop a nondiverse and dispensable party from litigation in order to achieve diversity. See Safeco Ins. Co. v. City of White House, Tenn., 36 F.3d 540, 545 (6th Cir. 1994); Reed v. Robilio, 376 F.2d 392, 394 (6th Cir. 1967); Grant County Deposit Bank v. McCampbell, 194 F.2d 469, 473 (6th Cir. 1952). As this Court stated in Safeco:

Rule 21 of the Federal Rules of Civil Procedure permits a district court to retain diversity jurisdiction over a case by dropping a nondiverse party if that party's presence in the action is not required under Federal Rule of Civil Procedure 19, that is, the party to be dropped must not be a necessary party. It is well settled that Rule 21 invests district courts with authority to allow a dispensable nondiverse party to be dropped at any time, even after judgment has been rendered.

36 F.3d at 545 (citations, footnotes, and internal quotation marks omitted). Furthermore, it makes no difference whether Rule 15 or Rule 21 is used to retain federal...