Sneed Shipbuilding, Inc. v. Spanier Marine Corp.
Sneed Shipbuilding, Inc. v. Spanier Marine Corp.
Opinion of the Court
MEMORANDUM OPINION AND ORDER
Plaintiff, Sneed Shipbuilding (Sneed) through its Motion for Clarification or Reconsideration of Orders, moves this court for entry of judgment on the pleadings, because defendant, Spanier Marine (Spanier), has failed to file a written denial under oath which plaintiff argues is required by Rule 185 of the Texas Rules of Civil Procedure. The plaintiff further moves this court to vacate an order substituting counsel for defendant, signed by U.S. District Judge Joe Fisher, because plaintiff contends that Judge Fisher signed the order subsequent to transferring the case and thus had no jurisdiction to approve the substitution. For the reasons discussed below, this court finds both contentions merit-less, and the plaintiffs Motion for Clarification or Reconsideration of Orders is hereby DENIED.
I. REQUEST FOR ENTRY OF JUDGMENT
In this Erie
Spanier argues that, since this is federal court, state rules of procedure are displaced by the Federal Rules of Civil Procedure. In particular to this issue, Spanier insists that Federal Rule 11, which abolishes all forms of pleading and substitutes a simple certification of all pleadings, displaces Texas Rule 185, because the latter is not substantive, but procedural, and federal procedural rules must prevail.
A. BACKGROUND
Prior to Erie, the longstanding practice in diversity cases in federal court was to apply the federal understanding of the general common law despite forum state law and precedent to the contrary,
The combination of the Erie decision and the significant departure from tradition embodied in the federal rules produced an odyssey by courts seeking the formula by which the two could co-exist. Initially, Erie itself was the only lighthouse, recognizing federal power over “procedure” while disapproving any such power over “substance.” When it became readily apparent that such labels could not consistently be applied to a given rule from one problem to
The problem with the outcome determinative test is simply that nearly all rules may have some effect on the outcome, and it calls into question the propriety of applying the federal rules in diversity cases at all. Indeed, after some struggling, the Court retreated from such extremity in Byrd v. Blue Ridge REA,
Finally, in Hanna v. Plumer,
The question of whether the federal rule is valid under the due process clause of the Constitution must be determined “by reference to the policies underlying the Erie rule.”
The precise issue confronting this court is whether a verified denial must accompany defendant’s answer to avoid confessing the accuracy of plaintiff’s accounting. Texas Rule 185 explicitly states that if defendant’s denial under oath does not accompany his answer, then the defendant will not be permitted to present evidence at trial that calls into question the accuracy of plaintiff’s accounting. Texas Rule 185 appears to be a special application, in the context of evidentiary admissibility, of another more general rule of pleading, Texas Rule 93, which requires verified affidavits in a variety of contexts, including denial of an account.
Federal Rule 11 replaced the need for verification in federal procedure with the simple requirement that an attorney’s or a party’s signature amounts to a certification that the pleading is grounded in law or fact or on a colorable argument for changing the law. The outcome of this case would clearly be different if Texas Rule 185 is applied, because the defendant did not submit a verified affidavit with its answer of denial. Thus, it appears that the two rules conflict unless they can be reconciled.
In contrast to Texas Rule 185, Texas Rule 13 is worded very similarly to Federal Rule 11, including sanctions for its violation, and it co-exists with the foregoing rules requiring verified pleadings. On closer examination, however, Texas Rule 13 appears to be limited to two situations: 1) groundless pleadings brought in bad faith or for purposes of harassment or delay of trial, and 2) fictitious suits brought as experiments to obtain court opinions. Federal Rule 11, however, has no such limitation.
Thus, reading Texas Rules 185 and 93(10) in pari materia with Rule 13, it seems that Texas has retained several individual procedural rules that the federal rules have collected into a single rule, Federal Rule 11.
Viewed in the foregoing light, Federal Rule 11 and Texas Rule 185 cannot be reconciled. Therefore, Hanna mandates that Federal Rule 11 be applied unless it is invalid under due process or the Rules Enabling Act.
C. VALIDITY OF FEDERAL RULE 11
In the context of this case, the forum shopping prong of the Erie “twin aims” inquires whether or not, because of the conflict between Federal Rule 11 and Texas Rule 185, a party would elect federal court in lieu of state court to avoid the state verified denial rule. Clearly, here, this plaintiff would not, because Sneed argues that Texas Rule 185 should apply anyway. Further, Sneed chose state court, and Spanier removed the case to this court. The question, then, is whether Texas Rule 185 served as the prime mover on Spanier’s part. The answer to this question lies in its asking, because it implies Spanier contemplated the potential trap and deliberately risked its effect by not denying Sneed’s account under oath, when the risk easily could have been avoided by a minor act of pleading.
Arguably the state verified denial rule abbreviates the proof required of a plaintiff, assuming that, as in this case, the defendant fails to verify his answer. Since this is only a rule of procedural convenience, however, it does not make full proof of the plaintiff’s case any easier when the defendant’s answer is verified. Therefore, the choice between Texas’ verified denial rule and Federal Rule 11, which ordinarily does not require verification, should havd very little impact on the choice of forum.
The second prong of the Erie “twin aims,” equitable administration of the law, asks whether failure to enforce Texas’ verified denial rule would “make so important a difference to the character or result of the litigation that ... it would unfairly discriminate against [Texas] citizens____”
Thus, Federal Rule 11 passes due process muster. It remains only for this court to assure that it is valid under the Rules Enabling Act (the Act).
Under the Act, a Federal Rule of Civil Procedure may not abridge, enlarge, or modify a state substantive right. The “right” in question here seems to be a right on plaintiff’s part to have the defendant swear to his pleading that he disputes plaintiff's accounting. As this court perceives it, the need for such a rule is to prevent frivolous denials of matters that can usually be proved readily from plaintiff’s records, but which may consume vast quantities of courtroom resources if unnecessarily denied.
The Texas Supreme Court has characterized Rule 185 as a procedural rule, with regard to evidence necessary to establish a
The purpose of both rules is the same, since both achieve the same ends in this regards. Federal Rule 11 treats the certification of pleadings as an imposition of responsibility upon the party and his attorney that a denial is not made frivolously. The rule vests great discretion in the trial court in assessing sanctions for violations, sanctions which can include, among other things, striking of pleadings that were frivolously propounded and levying upon the offending parties costs of court and attorneys fees for requiring the opponent to go forth with the expense of producing the proof. Where Texas Rule 185 would consider the matter confessed absent verification, the effect is to negate operation of a general denial under Texas Rule 92. Under Federal Rule 11, the trial court simply has more flexibility to tailor the deterrent to the particular needs of the case. Thus, the “right” is preserved under the federal scheme whether it is categorized as substantive or procedural.
For these reasons, this court holds that Federal Rule 11 is valid under the Rules Enabling Act to the extent of the “substantive right”, if any, in question under Texas Rules 185 and 93(10). Since Rule 11 meets the Hanna test, it is the rule of decision to be applied in these circumstances.
D. OTHER DEFENSES AVAILABLE TO DEFENDANT
Were Texas Rule 185 not displaced by Federal Rule 11, and were they able to co-exist, application of the Texas Rule 185 would not produce the results plaintiff seeks, that of default judgment. Texas jurisprudence permits assertion of other defenses without filing a summary denial, such as statute of limitations, accord and satisfaction and estoppel.
E. CONCLUSION
Consequently, for the reasons stated here, Federal Rule 11, which does not require verification of the defendant’s Answer, controls in the instant case and the plaintiff’s Motion for Entry of Judgment on the Pleadings or by Default is DENIED.
II. REQUEST TO VACATE EARLIER ORDER
The plaintiff asserts that Judge Fisher entered an order substituting defense counsel in this case on September 10, 1988, after having transferred the case to this court on September 6, 1988. Without reaching the question of whether “Judge Fisher, on September 10, 1988, no longer exercised jurisdiction over the case,” as argued by plaintiff’s counsel, a careful examination of the original “Order” substituting defense counsel reveals that Judge Fisher signed it on September 6, 1988, not September 10, 1988. This court will presume that Judge Fisher signed this order prior to transferring this case on the same day.
Therefore, the defendant’s request to vacate Judge Fisher’s “Order” substituting defense counsel is also DENIED.
SO ORDERED.
. Erie Railroad Co., v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938)
. See Swift v. Tyson, 16 Pet. 1, 10 L.Ed. 865 (1842).
. Judiciary Act of 1789, § 34, 1 Stat. 92.
. 302 U.S. 783 (Order of Dec. 20, 1937). See also Rules Enabling act, 48 Stat. 1064 (June 19, 1934), codified at 28 U.S.C. § 2072 (1977).
. See Veale v. Warner, 1 Wms. Saund. 323, 85 Eng.Rep. 463, K.B. 1670).
. Courts often ran aground trying to fathom a bright line distinction between substance and procedure. "The line between ‘substance’ and ‘procedure’ shifts as the legal context changes.” Hanna v. Plumer, 380 U.S. 460, 471, 85 S.Ct. 1136, 1144, 14 L.Ed.2d 8 (1965).
. Guaranty Trust Co., of New York v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945).
. 356 U.S. 525, 78 S.Ct. 893, 2 L.Ed.2d 953 (1958).
. Id. at 538, 78 S.Ct. at 901, 2 L.Ed.2d at 963.
. 380 U.S. 460, 85 S.Ct. 1136, 14 L.Ed.2d 8 (1965).
. 446 U.S. 740, 100 S.Ct. 1978, 64 L.Ed.2d 659 (1980).
. Byrd had mandated an examination by the federal court of how "important” the state rule was to the overall state scheme of substantive law or whether it was an integral part of some important state policy. In Byrd this test determined whether or not a federal rule should prevail given the importance of the conflicting federal rule to the independent federal system for administration of justice. Byrd, 356 U.S. at 537-38, 78 S.Ct. at 900-01, 2 L.Ed.2d at 962-63. Under Hanna and where no federal rule conflicts, the Byrd test remains a question of whether or not the rule is important to the substantive state law or whether it is "merely” procedural. See Note, Federal Court Procedures, 44 Tex.L. Rev. 560, 562-63 (1966).
. Rules Enabling Act, 28 U.S.C. § 2072 (1977).
. Hanna, 380 U.S. at 467, 85 S.Ct. at 1141, 14 L.Ed.2d at 14.
. “The ‘outcome-determination’ test therefore cannot be read without reference to the twin aims of the Erie rule: discouragement of forum-shopping and avoidance of inequitable administration of the laws.” Id. at 468, 85 S.Ct. at 1142, 14 L.Ed.2d at 15.
. Rules Enabling Act, 28 U.S.C. § 2072 (1977).
. See Tex.R.Civ.P.Ann. r. 93(10) (Vernon 1980). In Follenfant v. Rogers, 359 F.2d 30 (5th Cir. 1966), the court construed Texas Rule 93(7) as purely a state rule of practice and therefore not controlling in federal court. The court further declared in a footnote that Federal Rule 11 establishes a general rule that “pleadings ... need not be verified ... [and that] state rules requiring verified pleadings, such as Tex.R.Civ. P. 93 ... are wholly inapposite.” Follenfant, 359 F.2d at 32 n. 2.
Unfortunately, this dicta cannot be said to control here. In Follenfant, the appellant alleged that a change of beneficiary had been executed by the deceased to make appellant co-beneficiary of an insurance policy with the deceased’s wife. Appellant argued that he should not be required to bear the burden of proving this; instead, appellee should bear the burden because she had failed to deny under oath that the change had been executed (as required by Texas Rule 93(7)). The court noted that, traditionally, anyone seeking to overcome the presumption that the beneficiary of a policy was the person named therein bears the burden of so showing. This rule was not altered by Texas Rule 93(7), whether or not appellee’s pleadings of denial were verified. Thus, resolving the issue of whether or not Texas Rule 93 applied in federal court was unnecessary to the holding in Follenfant. Further, the case has not been cited for such proposition in any subsequent cases this court has uncovered. Hence arises here the need for analysis of Texas Rule 185 concerning open accounts.
. This is not to say that Federal Rule 11 is all inclusive of remedies available under federal procedure. See, e.g., Rule 16(f) (failure to appear at pretrial conference or to obey pretrial orders); Rule 26(g) (signing of discovery requests, responses and objections); Rule 30(g) (failure to attend oral examination); Rule 32 (limitations on use of depositions at trial); Rule 37 (failure to cooperate with discovery); Rule 41(b) (failure to prosecute); Rule 45(f),(failure to obey subpoena); Rule 55 (failure to plead or defend); Rule 56(g) (affidavits made in bad faith). See also 28 U.S.C. § 1826 (recalcitrant witnesses); and 28 U.S.C. § 1746 (substitution of unsworn declarations, certifications, etc., where such items are required to be sworn under law). Conspicuously absent from this list is any special rule for verified denials of open accounts, the confession remedy Texas applies. Rule 11 is to be viewed, then, as a background rule applicable to all process unless a more specific rule applies. See Thomas v. Capitol Securities Services, Inc., 836 F.2d 866, 875 (5th Cir. 1988); Zaldivar v. City of Los Angeles, 780 F.2d 823, 830 (9th Cir. 1986).
. Hanna, 380 U.S. at 468 n. 9, 85 S.Ct. at 1142 n. 9, 14 L.Ed.2d at 15 n. 9.
. Id. The rule in question in Hanna concerned service of process under Federal Rule 4(d)(1).
. Id. at 469, 85 S.Ct. at 1143, 14 L.Ed.2d at 16.
. Id. at 473, 85 S.Ct. at 1145, 14 L.Ed.2d at 18.
. See Hollingsworth v. Northwestern Nat'l Ins. Co., 522 S.W.2d 242, 245 (Tex.Ct.App. 1975).
. Rizk v. Financial Guardian Insurance Agency, Inc., 584 S.W.2d 860 (Tex. 1979).
. Airborne Freight Corp. v. CRB Marketing, Inc., 566 S.W.2d 573 (Tex. 1978).
Reference
- Full Case Name
- SNEED SHIPBUILDING, INC. v. SPANIER MARINE CORPORATION
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- 4 cases
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- Published