the counterclaim plaintiffs, and that counterclaim defendants have waived their rights to respond by failing to answer Diversified and Sall's claims. Although the court agrees with Diversified and Sall that counterclaim defendants should have answered the counterclaims, default judgment will not be entered.
It is unclear whether the counterclaims filed with this court were filed on behalf of AT&T alone, or on behalf of all three counterclaim plaintiffs. Counterclaim plaintiffs point out that the introductory "Nature of Action" portion of the counterclaim defines AT&T, Diversified, and Sall as "Counterclaimants." However, as noted by counterclaim defendants, only AT&T is defined in the "Parties" section of the counterclaim and the counterclaim was signed only on behalf of "attorneys for AT&T Nassau Metals Corporation."
Although the court would not normally sanction counterclaim defendants' failure to respond to such an unclear pleading, the counterclaim plaintiffs apparently cleared up any confusion surrounding the counterclaims. On December 2, 1994, counsel for counterclaim plaintiffs informed counterclaim defendants of their failure to respond, and explained that the counterclaims were brought on behalf of all three counterclaim plaintiffs. Despite this explanation, counterclaim defendants have failed to answer Diversified and Sall's counterclaims, move to dismiss Diversified or Sall's claims, or move for a clarification of the counterclaims. The court finds counterclaim defendants' failure to respond to Diversified and Sall to be unreasonable.
Counterclaim plaintiffs have moved this court to enter default judgment against counterclaim defendants, noting that it is within this court's discretion whether to enter such judgment. See Federal Rule of Civil Procedure 55 (d); Heinzeroth v. Golen, 1990 U.S. Dist. LEXIS 17661, No. CIV.A. 84-2407, 1990 WL 238354 (E.D. Pa. Dec. 28, 1990). In the alternative, counterclaim plaintiffs have asked this court to rule that counterclaim defendants have waived any affirmative defenses that they may have raised. However, the court has not decided to adopt either of counterclaim plaintiffs' suggestions.
In a case of this size and importance, the court is reluctant to enter a default judgment or exclude affirmative defenses. As the Court of Appeals has noted, there exists a strong "policy disfavoring default judgments and encouraging decisions on the merits," Harad v. Aetna Casualty & Surety Company, 839 F.2d 979, 982 (3d Cir. 1988), and that in close cases doubts should be resolved in favor of "reaching the merits." Zawadski De Bueno v. Bueno Castro, 822 F.2d 416, 420 (3d Cir. 1987). In light of the ambiguous drafting of the counterclaims, the court could not in good conscience enter a default judgment or rule that the counterclaim defendants have waived their rights to offer affirmative defenses. Horner Equipment International, Inc. v. Seascape Pool Center, Inc., 884 F.2d 89, 93 (3d Cir. 1989)(court's discretion to enter default judgment "should be sparingly used . . . "). However, this does not mean that the court can overlook the counterclaim defendants failure to respond properly to the counterclaims after being told to do so.
As previously noted, this litigation has proceeded very slowly. The court has ruled on various motions, and has spent many hours getting this case on schedule for trial. Therefore, the court has a great interest in moving this litigation past the preliminary motions stage without expending further judicial resources or delaying trial. Accordingly, the court has tried to fashion a sanction which will keep this litigation moving forward. See Gross v. Stereo Component Systems, Inc., 700 F.2d 120, 122 (3d Cir. 1983)(when determining whether default judgment ought to be entered, district courts "should consider whether lesser sanctions would better serve the interests of justice").
As a sanction for their deficiency, the court will order counterclaim defendants to answer counterclaim plaintiffs' new counterclaims within ten days of receiving them.
In addition, counterclaim defendants will be forbidden from filing any further motions to dismiss prior to answering the new counterclaims. This result serves the dual purposes of sanctioning the counterclaim defendants for their default and allowing this litigation to proceed to the discovery stage. Accordingly, counterclaim plaintiffs will be able to begin investigating their counterclaims without having to respond to further motions, and the flurry of legal memoranda being filed with this court should be slowed.
V. CNA Financial's Motion to Dismiss
CNA Financial has moved to dismiss, pursuant to Federal Rules of Civil Procedure 12(b)(2) and 12(b)(6), the counterclaims filed against it by counterclaim plaintiffs.
However, because the court is not persuaded by CNA Financial's arguments, CNA Financial's motion to dismiss will be denied.
CNA Financial contends that there is no legal entity by the name of "CNA Insurance Company," and that therefore CNA Insurance lacks the legal capacity to be sued. However, the court has been informed by counterclaim plaintiffs that litigation has been commenced under the name "CNA Insurance Companies," CNA Insurance Companies v. Waters, 926 F.2d 247 (3d Cir. 1991), and legal memoranda have been filed on behalf of "CNA Insurance Companies." See, e.g., Plaintiff's Second Trial Brief, CNA Insurance v. Transamerica Insurance Company, CIV.A. No. 78-2263 (E.D. Pa. filed July 12, 1983). In addition, policyholders pay insurance premiums to "CNA." Moreover, the court is aware that many products are advertised under the name "CNA Insurance." Accordingly, because the court is unable to decipher whether CNA Insurance Company lacks the capacity to be sued, it will deny CNA Financial's motion to dismiss all claims against CNA Insurance Company.
CNA Financial next argues that it is not subject to this court's in personam jurisdiction. Because CNA Financial engages in a substantial amount of business in Pennsylvania, however, the court is not persuaded.
Federal Rule of Civil Procedure 4(e) permits a federal district court to exercise personal jurisdiction over a non-resident to the extent permitted by the laws of the state where the court sits. Under Pennsylvania law, jurisdiction over non-residents may be exercised to the fullest extent allowed under the United States Constitution. 42 Pa. C.S.A. § 5322. Therefore, as every first-year law student learns, the issue facing the court is whether CNA Financial has "minimum contacts" with Pennsylvania such that this court's exercise of personal jurisdiction over it would not offend "traditional notions of fair play and substantial justice." International Shoe Company v. Washington, 326 U.S. 310, 316, 66 S. Ct. 154, 90 L. Ed. 95 (1945). In order to satisfy the minimum contacts requirement, the court must be able to point to "some act by which the defendant purposefully availed itself of the privilege of conducting activities within the forum state, thus provoking the benefits and protection of the law." Burger King Corporation v. Rudzewicz, 471 U.S. 462, 475, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985).
In the present case, the court cannot conclude as a matter of law that CNA Financial has not purposefully availed itself of the privilege of doing business in Pennsylvania. The court has been informed that CNA Financial advertises extensively in Pennsylvania. In addition, CNA Financial officers have testified under oath that CNA Financial is the owner of trademarks with national application. Moreover, CNA Financial has bank accounts within Pennsylvania where policyholders are directed to deposit their premium payments. Finally, the court notes that CNA Financial has been subject to suit in other Pennsylvania cases based upon its business operations within Pennsylvania. See, e.g., Little v. MGIC Indemnity Corporation, 836 F.2d 789 (3d. Cir. 1987).
The remainder of CNA Financial's arguments with regard to its motion to dismiss refute AT&T's allegations that CNA Financial was involved with the CGL Policies at issue. However, these arguments are more appropriate at the summary judgment stage than as the basis for a motion to dismiss. AT&T has presented this court with sufficient facts to support this court's exercise of in personam jurisdiction over CNA Financial. Accordingly, CNA Financial's motion to dismiss will be denied.
An appropriate order follows
BY THE COURT:
Edward N. Cahn, Chief Judge
AND NOW, this 27th day of March, 1995, upon consideration of the various motions before this court, and the responses thereto, it is hereby ORDERED that:
1. Defendants' Motion for Reconsideration, filed on September 30, 1994, is DENIED;