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G. H. MCSHANE CO. v. MCFADDEN

May 19, 1976

G. H. McSHANE CO., INC., a corporation, Plaintiff
v.
WARREN A. McFADDEN, an Individual, Defendant



The opinion of the court was delivered by: SNYDER

SNYDER, J.

 The Defendant has filed a Motion to Vacate Dismissal of his Counterclaim. The Plaintiff, a Pennsylvania corporation, filed suit in assumpsit on October 1, 1974 in the Court of Common Pleas of Allegheny County to collect a real estate broker's commission and began its action with writs of foreign attachment seizing Defendant's rents from certain property located in the City of Pittsburgh. *fn1" The Defendant being a resident of Florida, removed the case to Federal Court here, entered a general appearance, and demanded the Plaintiff release the attachment. When the Plaintiff refused to do so, the Defendant filed suit to enjoin continuance of the attachment on the grounds that the Pennsylvania foreign attachment procedure was unconstitutional. Defendant filed an Answer to the Complaint in the foreign attachment proceedings denying the indebtedness and counterclaiming for damages caused by the alleged unlawful attachment which Plaintiff McShane had obtained by use of Pennsylvania's Rules of Civil Procedure. *fn2"

 Upon consolidation of the two actions, the Honorable Wallace S. Gourley of this Court dismissed the McFadden injunction suit and dismissed the McFadden Counterclaim in the matter sub judice, holding in both cases that the Pennsylvania foreign attachment procedure was not unconstitutional.

 McFadden appealed from the dismissal of the injunction suit and the Court of Appeals vacated the order and remanded the cause for hearing before a Three Judge Court (519 F.2d 1398). After argument on the stipulated record, the Three Judge Court filed an opinion on February 2, 1976, finding Pennsylvania's foreign attachment procedure unconstitutional, and on February 18, 1976, enjoined the attachment of McFadden's rents.

 Meanwhile, Plaintiff's claim for the real estate commission had been tried on its merits to the Court and on March 15, 1976, judgment was entered for the Defendant. On March 25, 1976, the Defendant filed the instant Motion to Vacate Dismissal of his Counterclaim setting forth that the Order of Dismissal entered December 2, 1974 did not contain direction for the entry of final judgment under Rule 54(b) of the Federal Rules of Civil Procedure, was therefore not appealable, and was proper for consideration at this time. *fn3" Defendant's Motion will be denied.

 I. THE PROCEDURAL ASPECT.

 Defendant McFadden contends that his Counterclaim was dismissed solely on the ground that Pennsylvania's foreign attachment procedure was not unconstitutional and that that ground has been conclusively held to be incorrect. Initially, the Defendant claimed that the dismissal should be vacated, the Counterclaim reinstated, and the Plaintiff ordered to plead to it. However, counsel has now filed a Stipulation that:

 
". . . the Court may consider and determine the broad question of whether said counterclaim fails to state a claim upon which relief can be granted because it calls for the retroactive application of a new principle of law, rather than limit its consideration to the narrower question of whether the basis for this Court's dismissal of defendant's counterclaim in its Order dated January 31, 1975, was incorrect."

 Fuentes v. Shevin and its companion, Parham v. Cortese, 407 U.S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556, reh. denied 409 U.S. 902, 93 S. Ct. 177, 34 L. Ed. 2d 165 (hereinafter Fuentes), were argued before the Supreme Court on November 9, 1971 and decided on June 12, 1972. In an opinion by Justice Stewart, expressing the views of four members of the Court, the replevin laws of both Florida and Pennsylvania were declared as violative of the Due Process Clause of the Fourteenth Amendment as they denied the right to prior opportunity to be heard before chattels were taken from their possessor, notwithstanding that possession could be regained by posting security bond, and holding that such replevin laws served no such important governmental or general public interest as would justify postponement of the due process right to an opportunity for hearing until after the seizure of property. Justices Powell and Rehnquist did not participate in the decision, and Justice White was joined by Chief Justice Burger and Justice Blackmun in dissenting, on the grounds that when the Federal actions were filed, replevin proceedings were in progress in State Court at which time the constitutional objections to the replevin laws could have been raised, there being no allegations in the Federal Courts of bad faith, harassment, or irreparable injury.

 Counsel for the Defendant argues on the basis of Fuentes, that the Plaintiff in the case sub judice seized the Defendant's property two years after Fuentes by resorting to a writ even more objectionable than the writ of replevin used in Fuentes. He contends the foreign attachment in this case did not afford the Defendant protection of a surety bond and, since Plaintiff resorted to such a writ after Fuentes, it did so knowing that the writ of foreign attachment was a fortiori unconstitutional since it lacked even the replevin bond requirement. He cites Higley Hill, Inc. v. Knight, 360 F. Supp. 203 (D.Mass. 1973), where the plaintiffs filed suit in Federal Court to enjoin attachment of their property in the State Court, on the ground that Fuentes outlawed the use of the Massachusetts attachment procedure available in the filing of a bill in equity, the attachments having been authorized in advance by the State Court Judge ex parte. The Three Judge Court denied plaintiff's motion for a preliminary injunction permitting the question to be considered by the State Court Judge at a new hearing scheduled for the day following that on which the opinion was handed down. With respect to the retroactivity of Fuentes, the District Court pointed out that the Supreme Court's opinion gave notice not merely that writs of replevin were illegal, but that all pre-judgment attachments were suspect, saying through Circuit Judge Campbell (at p. 205):

 
". . . After Fuentes, the bar, the legislature and the courts were on notice that the long-established Massachusetts pre-judgment attachments rules were, at very least, suspect. They knew, or should have known, that attachments made without notice and hearing opportunity were governed by principles spelled out in Fuentes. Accordingly, state plaintiffs generally can have little complaint if such later attachments are invalidated."

 There is, however, a long step to be taken between a process being "suspect" and liability for damages if such suspect process is used. It would serve no useful purpose to recite the rather tortured history of the constitutional attacks upon the writ of foreign attachment which were engaged in unsuccessfully in Pennsylvania for about one hundred and forty years. *fn4" Suffice it, at this point, to mention that Judge Teitelbaum of this Court first held the Pennsylvania foreign attachment procedures to be unconstitutional by his opinion filed April 7, 1975 in the case of Jonnet v. Dollar Savings Bank of City of New York, 392 F. Supp. 1385, affirmed, 530 F.2d 1123 (3d Cir. Pa. 1976), relying heavily on the Supreme Court opinion in North Georgia Finishing, Inc. v. Di-Chem, Inc., 419 U.S. 601, 95 S. Ct. 719, 42 L. Ed. 2d 751 (1975), involving the constitutionality of a Georgia statute under which the plaintiff corporation had garnished defendant's bank account by issuance of a writ of garnishment on the affidavit of the plaintiff without participation of a judge, upon the posting of bond for double the amount sworn to be due. Thus, it is noted that the Pennsylvania Rule of Civil Procedure regarding foreign attachments had not been declared invalid in October of 1974 when the Plaintiff brought the instant action and sought to make use of the Rules. It then becomes apparent that the sole basis for the Defendant's Counterclaim in the case sub judice must be that the Jonnet decision should be applied retroactively. Fuentes cannot be the basis for such suit for there is an interest of the State involved in jurisdiction over non-residents.

 It is noted that in Fuentes, the Supreme Court was concerned that the State did not have an important governmental or general public interest to justify the postponement of the due process rights to an opportunity for hearing until after the seizure of the property. Thus, Justice Stewart said (407 U.S. 67, 92 S. Ct. 1983, 32 L. Ed. 2d 556 at p. 576):

 
". . . First, in each case, the seizure has been directly necessary to secure an important governmental or general public interest. Second, there has been a special need for very prompt action. Third, the State has kept strict control over its monopoly of legitimate force: the person initiating the seizure has been a government official responsible for determining, under the standards of a narrowly drawn statute, that it was necessary and justified in the particular instance. Thus, the Court has allowed summary seizure of property to collect the internal revenue of the United States, to meet the needs of ...

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