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SEI CORP. v. NORTON & CO.

March 31, 1986

SEI CORPORATION
v.
NORTON & COMPANY, a limited partnership, NORTON & COMPANY, INC., NORTON HOLDINGS COMPANY, B. ROY NORTON, III, RANDALL C. PERRY, ALEXANDER B. VAN PUTTEN, MARK D. OAKLEY, and RICHARD K. VAUGHAN



The opinion of the court was delivered by: BECHTLE

 BECHTLE, J.

 Presently before the court is defendants' motion for reconsideration of their motion for a new trial and motion for judgment notwithstanding the verdict, and defendant Alexander B. van Putten's motion to set aside the judgment against him.

 FACTS

 On October 19, 1984, plaintiff SEI Corporation ("SEI") filed a complaint only against Norton & Company, a limited partnership ("Norton"). On December 13, 1984, an answer and counterclaim were filed by attorneys for Norton & Company. On December 28, 1984, the court entered its scheduling Order in accordance with Federal Rule of Civil Procedure 16 that required all discovery to be completed by May 1, 1985, and pretrial memorandums to be filed by May 15, 1985, on which date the case was to go on the trial list. These dates were later extended by a stipulation of the parties approved by the court that resulted in pretrial memorandums to be filed by July 1, 1985, at which time the case was to go on the trial list. This stipulation was filed of record and appears as docket entry #14, filed June 21, 1985. The case was placed on the court's trial list on July 1, 1985, and published in The Legal Intelligencer in keeping with court procedures every day thereafter. The case was called for trial on July 15, 1985, and proceeded through to verdict on July 19, 1985.

 More than two months before the case was called for trial, on May 7, 1985, Joel W. Todd, Esquire entered his appearance on behalf of Norton & Company and the previous attorneys withdrew their appearance. On May 16, 1985, the court granted SEI's unopposed motion to amend its complaint, naming as defendants: Norton, Norton & Company, Inc. (the successor corporation to the limited partnership), Norton Holdings Company, and the alleged general partners of Norton, B. Roy Norton, III, Randall C. Perry, Alexander B. van Putten, Mark D. Oakley and Richard K. Vaughan. The alleged basis for the joinder of the individuals is that each of them were "at all times relevant hereto, a general partner of Norton & Company, a limited partnership. " (Amended complaint paras. 5-8). The sole basis of the alleged liability of defendant van Putten and the other individuals is the claim that "the general and limited partners of, and successor in interest to, Norton & Company are liable for the obligations of Norton & Company." (Amended complaint para. 28).

 By a confirming letter dated May 22, 1985 from the attorney for SEI to attorney Todd, Todd agreed to accept service of the summons and amended complaint on behalf of all the named defendants, including Mr. van Putten, except for Richard K. Vaughan. On June 13, 1985, Todd filed an answer to plaintiff's amended complaint on behalf of all the named defendants, including Mr. van Putten, again with the exception of defendant Vaughan. Of particular significance is the fact that Todd admitted that at all relevant times defendants B. Roy Norton, III, Randall C. Perry, Mark D. Oakley and Alexander B. van Putten were all general partners of Norton. (See paragraphs 5, 6, 7 and 8 of the answer to the amended complaint).

 On June 21, 1985, which was the same day that the court approved the stipulation extending pretrial memorandum filing dates and consequently the date the case would go on the trial list until July 1, 1985, Todd sent a copy of the amended complaint and defendants' answer thereto to Mr. van Putten, along with the following cover letter: *fn1"

 
Dear Mr. Van Putten:
 
Enclosed please find a copy of the AMENDED COMPLAINT and the DEFENDANTS' ANSWER TO AMENDED COMPLAINT, which have been filed in the above captioned case.
 
You have been named as an individual defendant. This firm has been retained to provide overall representation to the defendants. You are entitled to separate counsel; and I would suggest that you discuss this matter with your attorney at your earliest opportunity.
 
Please call me if you have any questions.
 
Very truly yours,
 
Joel W. Todd.

 Mr. van Putten received the letter and enclosed pleadings on June 25, 1985. (Van Putten affidavit para. 2). Prior to receiving this letter van Putten was unaware that he had been named in the suit and had never before heard of attorney Todd. (Van Putten affidavit para. 2). Van Putten promptly forwarded the letter and pleadings to his authorized attorneys in New York City, Schnader, Harrison, Segal & Lewis (the "Schnader firm"), *fn2" who received the package of documents "at the end of June, 1985." (Cohen affidavit para. 2).

 It is crucial to recognize that at this very moment there was on file in the public docket maintained by the Clerk of the United States District Court for this district all of the pleadings in the case that could be inspected by anyone by merely asking to see the file. Indeed, a telephone call to the Clerk about an important matter in that public file would have been responded to by the Clerk in keeping with local practice. In this file, which was not voluminous at that time, in addition to all of the other papers, was the answer to the amended complaint filed on Mr. van Putten's behalf by attorney Todd two weeks earlier. More importantly, there rested in the file the court's Order of December 28, 1984, setting forth all of the pretrial requirements and discovery and trial scheduling dates required under Federal Rule of Civil Procedure 16, including a reference to the fact that the case was to go on the trial list on May 15, 1985. As stated previously in this Memorandum, this date was postponed to July 21, 1985, by reason of the court's extending the pretrial memorandum filing date from May 15, 1985, to July 1, 1985.

 On July 15, 1985, a jury was selected and trial commenced. At no time prior to the commencement of the trial did Mr. van Putten or an attorney from the Schnader firm notify the court or plaintiff of any problem with attorney Todd's authority to represent Mr. van Putten. On July 17, 1985, on the third day of trial, van Putten, through his local counsel Ira P. Tiger of the Schnader firm, for the first time appeared before the court and raised the issue of Todd's purported unauthorized representation of Mr. van Putten, and argued that service of the complaint as to Mr. van Putten was therefore improper. It must be noted here that neither the defense of insufficiency of process nor insufficiency of service of process as to van Putten was ever raised in a motion under Rule 12 or in the answer filed by Todd on June 13, 1985. He did raise the defense of lack of personal jurisdiction over all of the defendants, except Norton Company and Vaughan as an affirmative defense in his answer, but this was limited to the defense arising under the Pennsylvania Long-Arm Statute, 42 Pa. C.S.A. 5301, which intention is made clear when Todd's pretrial memorandum addressing lack of personal jurisdiction is limited to the long-arm statute claim. See Todd's pretrial memorandum on behalf of defendants filed July 2, 1985. Nowhere in any of the pleadings or at any time prior to Mr. Tiger's appearance before the court mid-trial, was the question of insufficiency of process or insufficiency of service of process ever raised. *fn3" At a hearing outside of the presence of the jury, the court concluded that since counsel of record for Mr. van Putten, Joel Todd, had accepted service of the amended complaint on van Putten's behalf, service was proper. Later that same day, again outside of the presence of the jury, the court denied defendants' oral motion to amend the answer to the amended complaint in regard to the partnership status of Mr. van Putten and Mr. Oakley.

 On July 19, 1985, the jury returned its verdict in favor of SEI and against defendants Norton, Norton & Company, Inc., B. Roy Norton, III, Randall C. Perry, Alexander B. van Putten and Mark D. Oakley in the amount of $183,970.00. *fn4" Formal judgment on the verdict was entered on July 23, 1985. On August 19, 1985, the court amended the judgment to allow prejudgment interest in the amount of $25,054.68. On July 31, 1985, defendant van Putten filed a motion to set aside the judgment. On October 22, 1985, the court denied defendants' motion for a new trial and motion for judgment notwithstanding the verdict. On November 1, 1985, defendants' filed a motion for reconsideration of defendants' motion for a new trial and for judgment notwithstanding the verdict.

 DISCUSSION

 A.) Defendant van Putten's Motion to Set Aside the Judgment

 Defendant van Putten contends that the verdict against him should be set aside because attorney Todd was not authorized to accept service of process on his behalf and consequently no personal service of process was ever effectuated.

 The record shows that attorney Todd never had any face-to-face or direct discussions with van Putten concerning his authority to accept service or to answer the amended complaint on van Putten's behalf. On July 17, 1985, the following colloquy took place:

 
MR. TODD: If the Court pleases, as the Court knows, I have not only been representing Norton & Company, Norton & Company, Inc., but certain individuals in a lawsuit presently before the Court.
 
I undertook that representation based upon the express directions I was given by B. Roy Norton, III, and Randall C. Perry.
 
Testimony was presented at depositions and documentation was provided to me which indicated that Mr. Alexander Van Putten was a general partner of Norton & Company at the ...

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