Mottolese v. Kaufman
Opinion of the Court
This is a petition for mandamus to direct the respondent, Judge Kaufman, to proceed in due course with the hearing and trial of an action in the District Court for the Southern District of New York, between Mottolese, the petitioner, as plaintiff, and Harry Preston and others, as defendants. The petitioner sought by appeal to review the same order which this petition brings up; and although we dismissed the appeal last January,
There can be no question that we have jurisdiction to proceed by mandamus, and, if the stay of the action was wrong, the writ -should go,
It is probably true that -originally the statutory privilege of access to a federal court was regarded as absolute and indefeasible, no matter whether -its exercise resulted in inconvenience, delay and expense to the defendant.
The power is well settled, when the earlier suit is also in a federal court. Landis v. North American Co.
It is quite true, as was held in Meredith v. City of Winter Haven,
As has already appeared, Judge Kaufman is holding “in abeyance” the motions of the three defendant corporations, to vacate un
If the defendants refuse to submit to as full examination in the state court as the plaintiff could obtain in the action at bar, the judge should decide the motions made under Rule 30(b) to vacate the notices served under Rule 30(a). If he grants the motions 'as a matter of federal procedure ■under Rule 30(b), we see no reason why he should take any other step in the action at •bar, unless some other ground for intervention shall come up later. If on the other hand he denies the motions as a matter of federal procedure, the plaintiff should be allowed to proceed with the examinations. When these are concluded, if the defendants in the Consolidated Action are willing to consent, and do consent, to the use of them, in that action, we see no occasion for any further steps in the case at bar. It is quite possible that, when Judge Kaufman held the motions “in abeyance,” he meant to wait until it appeared ■that the defendants would not agree to examinations in .the Consolidated Action equivalent to those which could be had under Rule 30. We do not .mean to circumscribe his discretion in that regard in what we are now saying; very properly he will wish to 'known whether any decision of the motions is necessary before he makes it. If the defendants in .the Consolidated Action refuse to allow the examinations, if and when taken, to be used in that action, this action should go forward; but on this ■record the petition is premature.
Petition denied.
Mottolese v. Preston, 2 Cir., 172 F.2d 308.
McClellan v. Carland, 217 U.S. 268, 30 S.Ct. 501, 54 L.Ed. 762.
McClellan v. Carland, 217 U.S. 268, 282, 30 S.Ct. 501, 54 L.Ed. 762; Kline v. Barke Construction Co., 260 U.S. 226, 239, 43 S.Ct. 79, 67 L.Ed. 226, 24 A.L.R. 1077; City of Ironton v. Harrison Construction Co., 212 F. 353, §55 (semble); Great North Woods Club v. Raymond, 6 Cir., 54 F.2d 1017.
United States v. City of New York, 2 Cir., 175 F.2d 75; East Coast Lumber Terminal, Inc. v. Babylon, 2 Cir., 174 F.2d 106.
Rogers v. Guaranty Trust Co., 288 U.S. 123, 53 S.Ct. 295, 77 L.Ed. 652, 89 A.L.R. 720.
Commonwealth of Pennsylvania v. Williams, 294 U.S. 176, 55 S.Ct. 380, 79 L.Ed. 841, 96 A.L.R. 1166.
Brillhart v. Excess Insurance Co., 316 U.S. 491, 495, 62 S.Ct. 1173, 1170, 86 L.Ed. 1620.
D.C., 46 F.Supp. 522.
299 U.S. 248, 254, 255, 57 S.Ct. 163, 166, 81 L.Ed. 153.
330 U.S. 501, 67 S.Ct. 839, 91 L.Ed. 1055
330 U.S. 518, 67 S.Ct. 828, 91 L.Ed. 1067.
320 U.S. 228, 64 S.Ct. 7, 88 L.Ed. 9.
Dissenting Opinion
(dissenting).
1. As my colleagues’ opinion shows, there are now pending in the court below two stockholders’ derivative suits against the defendants, based on the same claim, and asking the same .relief, i. e., the Mottolese suit and the earlier Martini suit.
The Martini suit was begun on July 21, 1947, less than three weeks after the first state-court suit was brought (July 2, 1947), and when no others were pending. At that time, no steps of any significance had been 'taken in the state-court suit, so that, practically, the situation was the same as if the Martini suit had been begun a day after the state-court suit. Since the Martini suit began, there have been merely pleading maneuvers in the consolidated state-court suit; so far as the record here shows, the pleadings there have not yet been settled and the case is far from being ready for trial.
That decision goes a long way towards wiping out a substantial part of the diversity of citizenship jurisdiction of the federal courts, a jurisdiction with roots deep in our national history, a jurisdiction conferred because of a highly cherished policy. My colleagues’ decision is without precedent in any decisions of the Supreme Court or of any circuit court (including this court). Indeed, it is directly against the teaching of all such decisions including one rendered by my colleagues i. e., Krauss Bros. Lumber Co. v. Louis Bossert & Sons, 2 Cir., 62 F.2d 1004, 1006.
In support of their ruling, my colleagues rely on (1) the doctrine of forum non conveniens and (2) that of multiplicity of suits. Combining these doctrines, they conclude that merely the inconvenience to defendants of possibly defending two actions, one in a federal and one in a state court in the same city, suffices to justify staying the federal action, unless the plaintiff shows that that inconvenience to the defendants is outweighed by disadvantages to him which will flow from the stay. Thus my colleagues put on the plaintiff the burden of showing why his federal suit should not be stayed. The Supreme Court, I think, has decided that precisely the contrary is the applicable rule.
In Landis v. North American Company, 299 U.S. 248, 255-256, 57 S.Ct. 163, 166, 81 L.Ed. 153, the Court said that “the suppliant for a stay must make out a clear case of hardship or inequity in being required to go forward. * * * ” And there — although both suits were in the federal courts —the Supreme Court sanctioned a stay only because the issue was one of “extraordinary public moment.” Even so, said the court, “the burden of making out the justice and wisdom of a departure from the beaten track lay heavily” on the defendant seeking the stay. In Meredith v. City of Winter Haven, 320 U.S. 228, 234-235, 64 S.Ct. 7, 11, 88 L.Ed. 9, the Court said: “The diversity jurisdiction was not conferred for the benefit of the federal courts or to serve their convenience. Its purpose was generally to afford to suitors an opportunity in such cases, at their option, to assert their rights in the federal rather than in the state courts. In the absence of some recognized public policy or defined principle guiding the exercise of the jurisdiction conferred, which would in exceptional cases warrant its non-exercise, it has from the first been deemed to be the duty of the federal courts, if their jurisdiction is properly invoked, to decide questions of state law whenever necessary to the rendition of a judgment. Commonwealth Trust Co. v. Bradford, 297 U.S. 613, 618, 56 S.Ct. 600, 601, 80 L.Ed. 920; Risty v. Chicago, R. I. & P. Ry. Co., 270 U.S. 378, 387, 46 S.Ct. 236, 240, 70 L.Ed. 641; Kline v. Burke Construction Co., 260 U.S. 226, 234-235, 43 S.Ct. 79, 82, 83, 67 L.Ed. 226, 24 A.L.R. 1077; McClellan v. Carland, 217 U.S. 268,
As I read those Supreme Court and circuit court decisions, they come to this: (1) Presumptively a plaintiff has a right to maintain a federal diversity suit, notwithstanding an earlier state suit; (2) in very exceptional circumstances, however, the federal trial judge has discretion to grant a stay; (3) a defendant who asks a stay has a heavy' burden of showing that such exceptional circumstances exist.
It is true, as my colleagues say, that since McClellan v. Carland, 217 U.S. 268, 30 S.Ct. 501, 54 L.Ed. 762, the Supreme Court has held that a stay of the federal suit is proper where the circumstances are exceptional. The exceptional circumstances recognized up to and including the most recent Supreme Court decisions are the following, enumerated by Judge Hand: (a) a critical issue in the federal action is the proper construction of a state constitution or statute (but cf. Propper v. Clark, supra, as to a state statute); (b) the state provides an adequate administrative procedure; (c) the federal suit seeks a declaratory judgment and a state suit is pending which presents the same issues; (d) the federal suit involves interference in the “internal affairs” of a foreign corporation (but cf. Koster v. Lumberman’s Mutual Co., 330 U.S. 518 at page 527, 67 S.Ct. 828, 91 L.Ed. 1067). There are in the instant case no exceptional circumstances the same as or remotely resembling any of those thus heretofore recognized.
The sole fact to which my colleagues point as “exceptional” here is that the state suit commenced first. But never has that fact been regarded as enough. Whenever it has been urged as a ground for a stay, the upper federal courts have rejected it. See, e. g., Great North Woods Club v. Raymond, 6 Cir., 54 F.2d 1017; Krauss Bros. Lumber Co. v. Louis Bossert & Sons, 2 Cir., 62 F.2d 1004; Premier Malt Products Co. v. G. A. Ackerman Printing Co., 7 Cir., 24 F.2d 89; Byrd-Frost, Inc. v. Elder, 5 Cir., 93 F.2d 30; General Outdoor Advertising Co. v. Williams, 1 Cir., 12 F.2d 773; W. Reeves Lumber Co. v. Leavenworth, 5 Cir., 248 F. 686; Holmes County v. Burton Const. Co., 5 Cir., 272 F. 565; Boston & M. R. R. v. Dutille, 1 Cir., 289 F. 321; Barber Asphalt Paving Co. v. Morris, 8 Cir., 132 F. 945, 948-949; Consumers Gas Co. v. Quinby, 7 Cir., 137 F. 882, 893; cf. Commonwealth Trust Co. v. Bradford, 297 U.S. 613, 56 S.Ct. 600, 80 L.Ed. 920; Grubb v. Public Utilities Comm., 281 U.S. 470, 476, 50 S.Ct. 374, 74 L.Ed. 972.
Of particular interest is Krauss Bros. Lumber Co. v. Louis Bossert & Sons, 2 Cir., 62 F.2d 1004, 1006. There the plaintiff had begun a suit in the state court some six months before he began the federal suit. The state suit was at issue and on the trial calendar when defendant asked a stay of the federal suit.4
Neither of the two decisions in other circuits cited by my colleagues employed or even discussed any distinction between a case where the state-court action is begun before and one where it is brought after the federal action: (1) In In re President and Fellows of Harvard College, 1 Cir., 149 F.2d 69, the court held the stay improper because the circumstances were not exceptional; there is nothing in the opinion indicating that the decision would have been otherwise if the state suit had been begun first. Significantly, the court, after citing with approval Great North Woods Club v. Raymond, 6 Cir., 54 F.2d 1017 — a case where the state-court suit was prior in time — said: “The later decision in Eric R. Co. v. Tompkins, supra, has not weakened the authority of McClellan v. Carland, which was cited with approval in Meredith v. Winter Haven, supra (320 U.S. 228 at page 234).” [149 F.2d 73.]
(2) In Butler v. Judge, 9 Cir., 116 F.2d 1013, 1015, the two suits were not of the ordinary in personam type but involved the quieting of title to specific property. While the rationale of that decision is not entirely clear to me, the court did not suggest that it would have stayed the action if it had not involved specific property. Whether or not that decision was sound, it does not support my colleagues’ position.
I cannot agree with my colleagues that the stay here can be brought within the forum non conveniens doctrine. I think that it is one thing (1) to dismiss a federal suit because of the serious “inconveniences which may arise from compelling a defendant to stand trial at a distance from the place where the transactions have occurred” (when, be it noted, the plaintiff can begin again in the federal court in another district) and quite another thing (2) to arrest a federal diversity suit because it. will require the defendant “to defend another action on the same claim”- — where both actions are brought in the very same place. To treat (1) and (2) identically, as my colleagues do, is, I say, to shift to the plaintiff the burden of proving that the stay is improper. , In Gulf Oil Corp. v. Gilbert, 330 U.S. 501; 67 S.Ct. 839, 843, 91 L.Ed. 1055, the Court said, as to the rationale of forum non conveniens: “There is a local interest in having localized controversies; decided at ho-me.”
Nor can I agree that the multiplicity-of-suits doctrine is applicable. There is now but one suit pending in the state court. There are two in the federal court, only because (as earlier noted) one of the defendants successfully opposed plaintiff’s motion to consolidate the Mottolese and Martini suits; as they ought now be consolidated, and are not thanks solely to a defendant’s objection, we should treat the case as if there were but one state and one federal action. The pendency of but a single other suit would, at best, be a slim basis for invoking the multiplicity doctrine. More to the point, it has never been invoked in a context such as that here. If there is the requisite “multiplicity” here, there was fully as much “multiplicity” in the Krauss Bros, case, supra, where the state suit was set for trial but my colleagues refused to abate the later federal suit. And what of the cases cited above where other circuits have ruled similarly?
2. Even assuming, arguendo, that plaintiff has the burden my colleagues put upon him, I think he has borne it. For he has pointed to the notorious fact that, in the
Among the weaknesses of the state procedure is this: A pre-trial examination is allowed only on an affirmative showing that each item of the examination is “material and necessary”;
On these facts alone, I think the stay should have been denied (especially as the plaintiff has stated her willingness to stipulate that there will be no duplication of pre-trial testimony in the state and federal courts). Moreover, in the state court, many interlocutory appeals are permitted, as a matter of right,
It is also pertinent that the state law does not guarantee as complete protection as the federal to the stockholders who do not be
Instead of concluding that, all else aside, •the procedural disadvantages in the state court rendered it clearly an abuse of the trial judge’s discretion to stay this suit, my colleagues resort to a roundabout technique to bolster his order. They say that the order may stand on the basis of a condition not imposed by the trial judge, i. e., that the defendants in the state court consent to the use in that suit of any answers to pretrial questions properly put to the defendants in the federal suit. Thus the sole remaining purpose of the federal suit is to aid in discovery of facts for use in the state court. This is a novel suggestion. Indeed, whenever it has appeared to a district judge that the sole purpose of a federal suit was to aid discovery of evidence for use in a state suit-, discovery has been denied. DeSeversky v. Republic Aviation Corp., D.C., 2 F.R.D. 183; Empire Liquor Corp. v. Gibson Distilling Co., D.C., 2 F.R.D. 247; Bachrach v. General Investment Corp., D.C., 31 F.Supp. 84; Snap Lite Corp. v. Stewart Warner Corp., D.C., 40 F.Supp. 776.
However that may be, the condition imposed by my colleagues, if satisfied, will not cure the defects in the state procedure: (1) It will not preclude many interlocutory appeals as of right by the defendants in the state suit. (2) It will not ensure notice to all stockholders of a settlement. (3) Most important, it will not give plaintiff the same freedom he would have in the federal court to examine, before trial, persons other than defendants in the federal suit. A plaintiff in the state court is in that respect particularly hamstrung; in general, he can there, before trial, examine such persons only by demonstrating that they will not be available as witnesses at the trial.
Consider, then, the complications which may ensue. If the plaintiff desires to examine before trial any non-defendants who will be available at the trial, he will have to apply to the federal district court; presumably that court will permit such examination on condition that the defendants in the state suit consent that the testimony of such non-defendants may (if relevant) be used in thát suit. Thus the intertwining of the two suits will yield more complications than would occur if the federal action were allowed to continue wholly unrestricted.
This also should be noted: There are some persons who are defendants in the state suit but not in the federal suit. As to them, my colleagues’ condition will leave plaintiff hampered. For pre-trial examination of those persons, since they are not parties to the federal suit, will be governed by the narrower state rules as to non-parties, whereas, were the federal suit to continue unrestricted, those persons could be examined freely.
My colleagues indicate that, after all, no harm is done to plaintiff by the stay because he can at any time apply for its modification, if the state suit is delayed or the stay becomes more oppressive than it now is. In the Landis case, the Court answered a similar suggestion by saying that “to drive a plaintiff to that course is to make him shoulder a burden that should be carried by” the defendant asking the stay, and that an improper order “is not to be up
I think we should direct that the motion for a stay' be denied and that this action be consolidated with the pending Martini action.
As my colleagues’ opinion states, the Martini suit -was a consolidation of two suits originally brought by Turner; but he later dropped out, and the consolidated suit was continued by Martini, who was an intervenor.
The original state-court'action, Waterman Corporation v. Johnston, was commenced in the Supreme Court, New York County, on July 2, 1947. Similar suits were filed by other stockholders, and the actions in the state court were consolidated on November 28, .1947. The plaintiffs made a motion therein, returnable on May 28, 1948, for the appointment of a receiver and for injunctive relief. On September 16, 1948, — Misc. —, 85 N.Y.S.2d 462, Mr. Justice Pécora denied for the time being the appointment of a receiver, but enjoined the officers and directors of San-Nap-Pak from taking any acts other than in the normal course of the corporation’s business. An order to that effect was entered October 11, 1948.
In the consolidated state-court suit, there are some defendants who are not defendants in the federal court.
See also cases cited in 1 C.J. 87 note 22; 1 C.J.S., Abatement and Revival, § 67, page 101 note 85.
These record facts were set forth in detail in defendant’s brief in that case.
Seo remarks by Judge L. Hand, in Bryant v. Atlantic Coast Line Co., 2 Cir., 92 F.2d 569, 571 decided in .1937.
gee also Koster v. Lumberman’s Mutual Insurance Co., 330 U.S. 518, 524-526, 67 S.Ct. 828, 91 L.Ed. 1067.
See, e.g., Saxe, Examinations Before Trial in New York, 36 Law Lib.J. (1943) 112.
Compare the remarks of Mr. Justice Lumbard in Peyton v. Coulson, 190 Misc. 754, 74 N.Y.S.2d 730, 732: “This case is an illustration of the need for revision ■of the antiquated New York law respecting examinations before trial. These litigants have been required to add three applications to an already congested motion calendar in order to obtain relief which would be available under the more efficient Federal Rules of Civil Procedure without any application to the court * * *.”
See also Tremblay v. Lyon, 176 Misc. 906, 29 N.Y.S.2d 336, 340, where, in denying plaintiff the right to examine defendant before trial, the court said: “Under the new Federal Rules of Civil Procedure, Rules 26 and 30, 28 U.S.C. A. following section 723c, such an examination would be granted as of course.”
See New York Judicial Council, 8th Annual Report (1941) 361-377.
New York Civil Practice Act, § 288 provides: “Any party to an action in a court of record may cause to be taken by deposition, before trial, his own testimony or that of any other party which is material and necessary in the prosecution or defense ok'the action. * * * Any party to such an action also may cause to be so taken the testimony of any other person, which is material and necessary, where such person is about to depart from the state, or is without the state, or resides at a greater distance from the place of trial than one hundred miles, or is so sick of infirm as to afford reasonable grounds of belief that he will not be able to attend the trial, or other special circumstances render it proper that his deposition should be taken.”
See Hornstein, Legal Controls for Intracorporate Abuse, 41 Col.L.Rev. (1941) 405, 416-422.
N. Y. C. P. A. § 609. I favor amendments to the federal statutes allowing many kinds of interlocutory appeals within the discretion of the upper courts.
For a convincing brief picture of the dilatory character of such appeals, see the annotations to Sections 588, 589 and 609 of the New York Civil Practice Act.
Apart from the argument of delay, that condition of the docket deserves no consideration here. Congress did not say that the right to prosecute a federal diversity of citizenship suit should depend on the number of district judges available. The problem of a paucity of district judges should be met directly — by asking Congress to authorize the appointment of more judges in the Southern District. A bill to that effect is now pending. I sincerely hope it passes
Rule 8 of the New York Rules of Civil Practice authorizes, but does not require, such notice.
299 U.S. at page 257, 57 S.Ct. 163, 81 L.Ed. 153.
Reference
- Full Case Name
- MOTTOLESE v. KAUFMAN, District Judge
- Cited By
- 106 cases
- Status
- Published