Spring City Corp. v. AM. Building Co.

• Decision Date: 27 July 1999
• Docket Number: No. 98-1585,Nos. 98-1584,s. 98-1584,98-1585
• Citation: 193 F.3d 165
• Parties: (3rd Cir. 1999) SPRING CITY CORPORATION, trading as SPRING II ASSOCIATES, v. AMERICAN BUILDINGS COMPANY, v. CONTRACTORS OF AMERICA, INC. v. PALMER CONSTRUCTION CO., INC.; BASILE CONSTRUCTION COMPANY American Buildings Company, Appellant SPRING CITY CORPORATION, trading as SPRING II ASSOCIATES, v. LYNN BRADEEN; CONTRACTORS OF AMERICA, INC.; AMERICAN BUILDINGS COMPANY American Buildings Company, Appellant & 98-1586, Argued:
• Court: U.S. Court of Appeals — Third Circuit

Page 165

193 F.3d 165 (3rd Cir. 1999)

SPRING CITY CORPORATION, trading as SPRING II ASSOCIATES, v. AMERICAN BUILDINGS COMPANY, v. CONTRACTORS OF AMERICA, INC. v. PALMER CONSTRUCTION CO., INC.; BASILE CONSTRUCTION COMPANY American Buildings Company, Appellant SPRING CITY CORPORATION, trading as SPRING II ASSOCIATES, v. LYNN BRADEEN; CONTRACTORS OF AMERICA, INC.; AMERICAN BUILDINGS COMPANY American Buildings Company, Appellant

Nos. 98-1584 & 98-1586, No. 98-1585

UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT

Argued: July 27, 1999

Filed October 4, 1999

On Appeal from the United States District Court for the Eastern District of Pennsylvania District Judge: Hon. John R. Padova (D.C. Civ. No. 98-cv-00028)(D.C. Civ. Nos. 97-cv-08127 & 98-cv-00105) [Copyrighted Material Omitted] Steven G. Hall, Esq. (formerly with McLain & Merritt, P.C.)(Argued), Robert B. Hill, Esq. McLain & Merritt, P.C., Atlanta, GA, Warren F. Sperling Bennett, Bricklin & Saltzburg, Philadelphia, PA, for Appellant American Buildings Company.

John F. Brown, Jr., Esq. Matthew F. Noone, Esq. (Argued), Cozen & O'Connor, Philadelphia, PA, for Appellee Spring City Corp.

Before: SLOVITER, NYGAARD and McKEE, Circuit Judges

OPINION OF THE COURT

SLOVITER, Circuit Judge.

This appeal has enough subsidiary procedural issues to bring a gleam to the eye of a civil procedure teacher. But there are two underlying issues that are dispositive-the nonreviewability of a remand order and the appropriateness of an order staying a duplicative federal action.

I. BACKGROUND AND PROCEDURAL HISTORY

This suit filed by Spring City Corp. arises out of the partial collapse of its building in Limerick, Pennsylvania, in 1996 as the result of a heavy snow and ice fall. Construction of that building began in 1987. The companies participating in the project were Basile Corp. ("Basile"), which was general contractor for the construction, Contractors of America, Inc. ("Contractors"), which supplied metal building components for the building, American Buildings Co. ("American"), which manufactured and delivered the building components, and Palmer Construction Co. ("Palmer"), which actually constructed the building.

In September 1997, Spring City, a Pennsylvania corporation, filed suit in the Pennsylvania Court of Common Pleas alleging negligence, breach of contract, and breach of warranty, based on the building collapse against Contractors, a New Jersey corporation, and its president, Lynn Bradeen, a New Jersey citizen. In November 1997, Contractors filed writs of summons pursuant to Pennsylvania Rule of Civil Procedure 2252 against American, a Delaware corporation with its principal place of business in Alabama, Palmer, a Pennsylvania corporation, and Basile, also a Pennsylvania corporation, to add them as third-party defendants. Under the Pennsylvania Rules, third-party defendants may be joined by writ or by formal complaint. See Pa. R. Civ. Proc. 2252(b).

In December 1997, Spring City filed an amended complaint adding American as a defendant on one count. American then removed the action to federal court on the basis of diversity of citizenship. This case was assigned docket number 98-28. Also in December, Spring City filed a second action in state court, this one naming only American as a defendant. American removed this case as well, and it was assigned docket number 97-8127. Because there was diversity between Spring City and American, Spring City did not contest the removal of this second action. American subsequently filed a third-party complaint asserting negligence and breach of warranty claims against Contractors, and Contractors filed a fourth party action for contribution and indemnification against Palmer and Basile. Finally, in January 1998 Spring City filed a third action in federal court against American as the only defendant based on diversity of citizenship. This was assigned docket number 98-105. Again, there was no jurisdictional challenge in this federal case. As in No. 978127, American filed a third-party action against Contractors and Contractors filed a fourth-party action against Palmer and Basile.

However, Spring City moved to remand No. 98-28 (the action in which, prior to removal, Palmer and Basile had been joined as third-party defendants under Rule 2252) to state court based on a lack of diversity and to stay the two remaining federal cases pending the resolution of the remanded case in state court. The District Court agreed with Spring City that there was no longer complete diversity in No. 98-28. Spring City Corp. v. Bradeen et al., Nos. 978127, 98-105, 98-28, slip op. at 6 (E.D.Pa. Mar. 12, 1998) (hereafter "Slip op.") Therefore, the court granted the motion to remand No. 98-28 to the Pennsylvania state court. The court also ruled that as a result of the remand there would be parallel proceedings pending in state and federal courts. Slip op. at 9. After analyzing the factors outlined in Colorado River Water Conservation District v. United States, 424 U.S. 800 (1976), the court determined to grant Spring City's motion to stay the two remaining federal cases, No. 97-8127 and No. 98-105. Slip op. at 1.

American filed a timely Notice of Appeal. It argues on appeal that (1) the citizenship of third-party defendants should not be considered in determining diversity, and (2) the District Court improperly applied Colorado River. It seeks reactivation on the federal docket of the stayed cases and reinstatement of the remanded case.

II. DISCUSSION

A. The Order Remanding No. 98-28

American challenges the District Court's finding that no diversity existed in No. 98-28 on the ground that complete diversity exists among what it considers the real`parties in the case, Spring City (plaintiff-appellee), Contractors (defendant), and American (defendant-appellant). American argues that the Pennsylvania citizenship of the two additional parties, Basile and Palmer, should not have been considered in determining diversity because they were solely "nominal" parties joined under state rules of procedure.

Of course, Spring City rejects American's view and emphasizes that, when Palmer and Basile were joined, it gained substantive rights against them under Pa. Rule 2255. Moreover, it states that it has recently acquired evidence, which it has submitted to this court, that defendant Contractors is incorporated in Pennsylvania and thus is non-diverse with Spring City.¹

In ruling that No. 98-28 should be remanded because there was no longer the requisite diversity of citizenship, the District Court noted the differences in the effect of joining a third-party defendant under the Pennsylvania Rules of Civil Procedure as distinguished from the Federal Rules of Civil Procedure. Third-party pleading under Pa. R. Civ. Proc. 2255(d) allows a plaintiff to "recover from an additional defendant found liable to the plaintiff alone or jointly with the defendant as though such additional defendant had been joined as a defendant and duly served and the initial pleading of the plaintiff had averred such liability." Pa. R. Civ. Proc. 2255(d); see Sheriff v. Eisele, 381 Pa. 33, 35, 112 A.2d 165, 166 (1955) (plaintiff 's claim has same effect as if additional defendant had originally been named a defendant without need to file a new pleading); Pappas v. Asbel, 450 Pa. Super. 162, 175, 675 A.2d 711, 718 (Pa. Super. 1996) (joining an additional defendant makes that defendant immediately subject to the plaintiff 's claim in every respect).

The District Court referred to other decisions of its colleagues holding that Rule 2255(d) destroys diversity by affording a plaintiff substantive rights against a third-party defendant. Slip op. at 6-7 (citing Adams v. Ford Motor Co. and Donna Lynn Peyton, Civ. A. No. 87-0524, 1987 WL 13344 (E.D. Pa. June 30, 1987) and Carey v. American Motors Corp., Civ. A. No. 87-0100, 1987 WL 5726 (E.D. Pa. Jan. 23, 1987)). In contrast, a third-party defendant joined under Federal Rule of Civil Procedure 14 does not become a defendant as against the original plaintiff, so that federal jurisdiction is not destroyed where those parties are citizens of the same state. See Smith v. Philadelphia Transp. Co., 173 F.2d 721, 724 n.2 (3d Cir. 1949). The District Court therefore held that when Bradeen and Contractors filed the writ of summons directed to Palmer and Basile, Palmer and Basile became additional defendants against whom Spring City had a direct right of recovery. Slip op. at 6.

American argues on appeal that in the context of removal, "federal law determines who is plaintiff and who is defendant," citing Chicago Rock Island & Pack R.R. Co. v. Stude, 346 U.S. 574, 580 (1954). It argues that where the operation of a local procedural rule interferes with a federal statute, which it states Pa. Rule 2255 does, the local rule must yield. In response, Spring City argues that Rule 2255 gives the plaintiff a substantive right which, under Erie Railroad Co. v. Tompkins, 304 U.S. 64 (1938), federal courts must apply in a diversity action. See Atlanta Int'l. Ins. Co. v. School Dist. of Philadelphia, 786 F.2d 136, 140-141 (3d Cir. 1986) (applying Rule 2255 but calling results "ironic" and "illogical").

It would be intriguing to analyze the jurisdictional issues presented by the application of Pa. Rule 2255 in federal court and the recently discovered Pennsylvania citizenship of an original defendant. A review of the District Court's decision to remand on the basis of lack of subject matter jurisdiction would require consideration whether the effect of Pa. Rule 2255(d) is to give Spring City a direct claim against the additional defendants Palmer and Basile even though Spring City has apparently not yet amended its complaint to assert such a claim, and, if so, whether the result is to destroy diversity of citizenship. We might then have to consider American's argument that application of the Pennsylvania Rule to destroy diversity jurisdiction is...