UNITED STATES COURT OF APPEALS FOR THE THIRD CIRCUIT
decided: February 19, 1971.
DAVID NEIFELD, APPELLANT,
MEYER STEINBERG, APPELLANT
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.*fn1 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.*fn2,*fn3 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.*fn4 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.*fn5
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 permissive*fn6 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.*fn7 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 responsive pleading thereto if one is required, except that the following defenses may at the option of the pleader be made by motion: * * * (2) lack of jurisdiction over the person, (3) improper venue, (4) insufficiency of process, (5) insufficiency of service of process * * * No defense or objection is waived by being joined with one or more other defenses or objections in a responsive pleading or motion. * * *" (Emphasis added.) While Rule 12(b) allows a defendant to answer to the merits in the same pleading in which he raises a jurisdictional defense without waiving the jurisdictional defense, it does not specifically authorize a defendant to couple a counterclaim with a jurisdictional defense without waiving the jurisdictional defense. Although at least two courts interpreted the quoted rule to mean that a "counterclaim" refers back to "every defense" and that a counterclaim is a "defense or objection" which may be asserted with other defenses or objections without waiving them (Keil Lock Co. v. Earle Hardware Mfg. Co., 16 F.R.D. 388 (S.D.N.Y.1954);*fn8 Sadler v. Pennsylvania Ref. Co., 33 F. Supp. 414 (W.D.S.C.1940)), a close analysis of the language demonstrates that these courts were in error. It seems reasonably clear that "counterclaim" refers back to "claim for relief in any pleading," rather than to "every defense." The phrase "whether a claim, counterclaim, cross-claim or third-party claim" is all-inclusive and this means that the foregoing phrase must refer back to "claim for relief" since filing a claim, counterclaim, cross-claim, or third-party claim are the only methods of stating a claim for relief. Accord: Hasse v. American Photograph Corp., 299 F.2d 666, 668-669 (10 Cir. 1962); Globig v. Greene & Gust Co., 193 F. Supp. 544, 549 (E.D.Wis.1961); Beaunit Mills, Inc. v. Industrias Reunidas F. Matarazzo, S. A., 23 F.R.D. 654, 656 (S.D.N.Y.1959). Also see 1A W. Barron & A. Holtzoff, Federal Practice and Procedure With Forms § 370.2, at 535-36 (rules ed. C. Wright 1960). Moreover, Rule 8(c) expressly distinguishes between a defense and a counterclaim.*fn9 Thus, there is nothing in the language of Rule 12(b) which specifically shields the defenses of lack of personal jurisdiction and improper venue from waiver when these defenses are joined with a counterclaim.
Although Rule 12(b) does not specifically shield these jurisdictional defenses, the Rule implicitly authorizes a defendant to join these defenses with a counterclaim without waiving these defenses. Rule 12(b) provides a defendant with the option of raising jurisdictional defenses by motion or by answer. If we were to take the position that a defendant, by raising his jurisdictional defenses in the same pleading in which he asserted a counterclaim, waived his jurisdictional defenses, we would in effect be engrafting a judicial exception to Rule 12(b). We would be requiring a defendant to raise his jurisdictional defenses by motion when he intends to file a counterclaim in his responsive pleading.*fn10 This requirement would be contrary to the option provided to the defendant in Rule 12(b).*fn11
Furthermore, the policy behind Rule 12(b) militates against our finding a waiver where a defendant files a counterclaim in the same pleading in which he asserts jurisdictional defenses. The purpose behind Rule 12(b) is to avoid the delay occasioned by successive motions and pleadings and to reverse the prior practice of asserting jurisdictional defenses by "special appearance." 5 C. Wright and A. Miller, Federal Practice and Procedure: Civil § 1362, at 647-48 (1969). Judge Maris clearly articulated the changes which Rule 12(b) made in his seminal opinion in Orange Theatre Corp. v. Rayherstz Amusement Corp., 139 F.2d 871 (3 Cir.), cert. denied 322 U.S. 740, 64 S. Ct. 1057, 88 L. Ed. 1573 (1944); "Rule 12 has abolished for the federal courts the age-old distinction between general and special appearances. A defendant need no longer appear specially to attack the court's jurisdiction over him. He is no longer required at the door of the federal courthouse to intone that ancient abracadabra of the law, de bene esse, in order by its magic power to enable himself to remain outside even while he steps within. He may now enter openly in full confidence that he will not thereby be giving up any keys to the courthouse door which he possessed before he came in." Id. at 874.
If we were to find a waiver in a case, such as the instant one, we would, in effect, be requiring a defendant to make what amounts to a "special appearance" for we would be requiring him to raise his jurisdictional defenses before answering to the merits. This result would be insupportable unless there were an important countervailing policy militating in favor of a waiver. Neifeld argues that a party who invokes the power of the court asking for affirmative relief should not be allowed the inconsistent objection that the forum is personally inconvenient for him.*fn12 In other words, he argues that when Steinberg filed his counterclaim in the same pleading in which his jurisdictional defenses appeared, he utilized the court facilities in a manner inconsistent with his objections to personal jurisdiction, venue, and service of process.*fn13
We find this argument unconvincing in the light of the peculiar facts of the case at bar. As stated earlier, Steinberg filed an amended answer pursuant to Rule 15(a) in which he omitted the counterclaim. Although both Steinberg and the District Court relied upon Rule 15, when in fact the issue should have been governed by Rule 41(a)*fn14 and (c),*fn15,*fn16 we will treat Steinberg's amendment as the equivalent of a motion for a voluntary dismissal of his counterclaim. Reynolds Jamaica Mines v. La Societe Navale Caennaise, 239 F.2d 689, 692 (4 Cir. 1956); Etablissements Neyrpic v. Elmer C. Gardner, Inc., 175 F. Supp. 355, 358 (S.D.Tex.1959). Since Neifeld had not served a responsive pleading to Steinberg's counterclaim, under Rules 41(a) and (c), Steinberg had the right to voluntarily dismiss his counterclaim without order of court. Thus, it cannot be forcefully argued that Steinberg utilized the District Court's facilities in any meaningful sense, for he was entitled to dismiss his counterclaim on his own without petitioning the court for approval.*fn17
The order of the District Court granting Steinberg's motion to dissolve the Writ of Foreign Attachment and to dismiss Neifeld's suit will be affirmed.
II. STEINBERG'S CROSS-APPEAL
Since we have determined that the District Court correctly decided the issues raised by Neifeld's appeal, we must now consider whether it was also correct in disposing of the issue raised by Steinberg's cross-appeal. In Steinberg's motion to dissolve the Writ of Foreign Attachment for failure of the Sheriff to manually seize the shares in the hands of the Philadelphia brokerage firm, Steinberg also requested that the court "direct the Garnishee to deliver promptly to Defendant his securities now in Ganishee's possession, and in the interim to restrain Plaintiff from instituting any legal action designed to attach said securities in Garnishee's possession." On September 23, 1969, the District Court denied Steinberg's request. On September 24, 1969, Neifeld filed a new Writ of Foreign Attachment and a new complaint in the Philadelphia Court of Common Pleas.*fn18
Steinberg contends in his cross-appeal that since the Sheriff in making the original attachment failed to seize the securities in accordance with 12A P.S. § 8-317 of the Pennsylvania Uniform Commercial Code,*fn19 Neifeld should be forever barred from further attempts to attach the identical res for the identical cause of action.
Neifeld has suggested that the issue raised by the cross-appeal has become moot since he has already instituted a new legal action and the securities have already been seized by the Sheriff. We find it unnecessary to decide this question for the cross-appeal is, in any event, lacking in merit.
Steinberg's argument is that the District Court should have effectuated its judgment under 28 U.S.C. § 2283*fn20 by ordering the stockbroker to deliver Steinberg's securities to him and by enjoining Neifeld from further attempts to bring another Writ of Foreign Attachment by levying upon the same securities. The judgment entered by the District Court was that the Writ of Foreign Attachment was invalid by reason of the Sheriff's failure to seize the securities and that Neifeld lacked personal or in rem jurisdiction over Steinberg. This was not an adjudication upon the merits (Rule 41(b)) and Neifeld was at liberty to sue again on the identical cause of action without fear that Steinberg could successfully raise the defense of res judicata. See LeJeune v. Leiblich, 19 Schulykill L.R. 74 (1922). Since Neifeld would not be barred by res judicata in maintaining the second suit filed by him against Steinberg, it would be anomalous if Steinberg could nonetheless enjoin Neifeld from bringing the second suit.
Furthermore, Steinberg's reliance upon 28 U.S.C. § 2283 is misplaced for it only applies to a stay of a suit already instituted in a state court. It does not apply to injunctions against the institution of state court proceedings which is the type of relief Steinberg requested from the District Court. Dombrowski v. Pfister, 380 U.S. 479, 484 n. 2, 85 S. Ct. 1116, 14 L. Ed. 2d 22 (1965); United Steelworkers of America v. Bagwell, 383 F.2d 492, 495 (4 Cir. 1967).
Finally, Steinberg ascribes a purpose to 12A P.S. § 8-317 which is manifestly unfair. He asserts that the mere procedural error of a sheriff in failing to seize securities prevents a plaintiff from correcting the error and suing again. Noncompliance with 12A P.S. § 8-317 should not cause such a harsh result. The reason why 12A P.S. § 8-317 requires a party to manually seize securities in order to effect a valid attachment is to foreclose all possibility of the security finding its way into a transferee's hands after an attempted attachment has been made. This policy has already been vindicated for we take judicial notice that the Sheriff manually seized the securities on September 24, 1969.
The order of the District Court denying Steinberg's request for injunctive relief will also be affirmed.