Petition — Iowa Beef Processors, Inc. v. Hawkins
Supreme Court brief1979
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78-1558 @ Vive D. \|
No. APR 12 1979
k MICHARL RODAK, JR., CLERK
In THE
Supreme Court of the Anited States
Ocroser Term, 1978
IOWA BEEF PROCESSORS, INC., EDWARD W. ROTHE,
and LEE A. FREEMAN, SR.,
Petitioners,
VS.
LEX HAWKINS and JOHN A. COCHRANE,
Respondents.
——
a
PETITION FOR WRIT OF CERTIORARI TO THE
UNITED STATES COURT OF APPEALS
FOR THE EIGHTH CIRCUIT
Epwarp W. Rotue
JAMES T. MALysIaAK
FREEMAN, Rotue, Freeman & SatzMan
One IBM Plaza - Suite 4735
Chicago, Illinois 60611
(312) 467-5330
Counsel for Petitioners
TABLE OF CONTENTS
Nature of the Case 1
Opinions Below 1
Questions Presented 2
Statutes and Rules Involved 3
4
8
Statement of the Case
Reasons for Granting the Writ
I. The Eighth Circuit Compulsory Counterclaim
Holding Conflicts With Second And Third Cir-
cuit Decisions And With Rule 13’s Policy ......... 9
II. The Eighth Circuit Relation Back Holding Con-
flicts With Its Own Prior Decisions And Other
Circuits 13
Ill. Venue Lies In The Court Whose Process Was
Allegedly Abused 14
CONCLUSION 19
TABLE OF AUTHORITIES
Cases
Aftanase v. Economy Baler Co., 343 F.2d 187 (8th Cir.
1965) 15
Baker v. Gold Seal Liquors, Inc., 417 U.S. 467 (1974) .. 9
Barrett v. Baylor, 457 F.2d 119 (7th Cir. 1972) ................ 18
Beef Industry Antitrust Litigation, In re, 432 F.Supp.
211 (JPML 1977)
Bose Corp. v. Consumers Union of the United States,
Inc., 384 F.Supp. 600 (D. Mass. 1974) 11, 12
ii
Brown v. Texas and Pacific R.R. Co., 392 F.Supp. 1120
(W.D. La. 1975) 14
Chicago & Northwestern Railway Co. v. Lindell, 281
U.S. 14 (1930) 9
Columbia Plaza Corp v. Security National Bank, 525 F.
2d 620 (D.C. Cir. 1975) 9
Commercial Lighting Products, Inc. v. United States
District Court, 537 F.2d 1078 (9th Cir. 1976) ............ 15, 16
Diamond v. Terminal Ry. Ala. State Docks, 421 F.2d
228 (5th Cir. 1970) 9
Finn v. American Fire & Casualty Co., 207 F.2d 113
(5th Cir. 1953) 13
Gardner Engineering Corp. v. Page Engineering Co.,
484 F.2d 27 (8th Cir. 1973) 15
Great Lakes Rubber Corp. v. Herbert Cooper Co., 286
F.2d 631 (3rd Cir. 1961) 9,11
Great Western United Corp. v. Kidwell, 577 F.2d 1256
(5th Cir. 1978), prob.jur.noted, No. 78-759 (Jan. 8,
1979)
Hale v. Ralston Purina Co., 432 F.2d 156 (8th Cir. 1970) 14
Harris v. Steinem, 571 F.2d 119 (2nd Cir. 1978) .............. 11
International Ladies Garment Workers’ Union v. Don-
nelly Garment Co., 121 F.2d 561 (8th Cir. 1941) .......... 14
International Shoe Co. v. State of Washington, 326 U.S.
310 (1945) 15-16
Interstate Refineries Co. v. Barry, 7 F.2d 548 (8th Cir.
1925) 14
Kipperman v. McCone, 422 F.Supp. 860 (N.D. Cal.
1976) 16
Lesnik v. Public Industrials Corp., 144 F.2d 968 (2nd
Cir. 1944) 10
Moore v. New York Cotton Exchange, 270 U.S. 593
(1926) 9
Newburger, Loeb & Co., Inc. v. Gross, 563 F.2d 1057
(2nd Cir. 1977), cert. denied, 434 U.S. 1035 (1978) .. 10, 11
Norton v. Local Loan, 251 N.W.2d 520 (Iowa 1977) ...... 16
Pipeliners Local Union No. 798 v. Ellerd, 503 F.2d 1193
(10th Cir. 1974) 9
ree oP Eee
iii
Simkins Ind., Inc. v. Fuld & Co., 392 F.Supp. 126 (E.D.
Pa. 1975) 12
Southern Construction Co. v. United States, 371 U.S. 57
(1962) 9
United Artists Corp. v. Masterpiece Productions, Inc.,
221 F.2d 213 (2nd Cir. 1955) 10
United Steelworkers v. R.H. Bouligny, Inc., 382 U.S.
145 (1965) .. 5
Warshawsky & Co. v. Arcata National Corp., 552 F.2d
1257 (7th Cir. 1977) 9
Weil v. New York State Dept. of Transportation, 400 F.
Supp. 1364 (S.D.N.Y. 1975) 16
Statutes and Rules
28 U.S.C.:
§1391(a) ... 3, 8, 14, 15
$1391 (b) 15
$1407 5
Federal Rules of Civil Procedure:
Rule 13(a) passim
Rule 15(a) 5
Rule 15(c) 3, 7, 13, 14
Rule 20 18
Rule 23.2 2,5
Miscellaneous
3 Moore’s Federal! Practice:
$15.09 14
$15.15 14
3A Moore’s Federal Practice §21.03[2] 14
6 Wright & Miller, Federal Practice & Procedure:
Civil S622 ............. 12
a
NATURE OF THE CASE
Iowa Beef Processors, Inc. (“IBP”) and its counsel
Edward W. Rothe and Lee A. Freeman, Sr. who are
named defendants in this action, pray that a writ of cer-
tiorari issue to review the judgment and opinion of the
United States Court of Appeals for the Eighth Circuit,
which reversed the Southern District of Iowa’s refusal to
allow respondents to file a retaliatory abuse of process
suit in a forum other than that whose process is alleged
to have been abused. Instead, the Eighth Circuit
adopted faulty compulsory counterclaim and venue tests,
in conflict with other Circuits and with this Court’s
policy decisions, to hold that respondents’ abuse claims
not only may, but must be filed where each was served
with the alleged abusive process and a document
production request. The result, unless corrected by this
Court, is that three district courts, instead of one, will be
forced to consider the propriety of the IBP suit which
provoked respondents’ abuse claims.
OPINIONS BELOW
The panel opinion of the Court of Appeals (App. A-5-
25), Judge Bright’s opinion dissenting from denial of
rehearing en banc, (App. A-27-32), and the opinion of the
United States District Court for the Southern District of
Iowa (App. A-1-4) are unreported.
csillien
QUESTIONS PRESENTED
1. Whether the Eighth Circuit erred in deciding,
contrary to the Second and Third Circuits, that an
abuse-of-process action is not a compulsory counterclaim
under Federal Civil Rule 18a) in the lawsuit alleged to
constitute the abuse, but instead must be litigated in-
dependently in two other districts.
2. Whether the Eighth Circuit erred in abruptly
departing from its own and other Circuits’ decisions by
holding that a complaint amendment, solely to cure a
jurisdictional defect in a diversity case by dropping a
non-diverse union and substituting diverse union officers
as union class representatives under Federal Civil Rule 23.2,
does not relate back under Federal Civil Rule 1&c) to
the date the original complaint was filed.
8. Whether the Eighth, Circuit erred in adopting a
test for venue which conflicts with the Ninth Circuit’s
test and requires an abuse of process action to be pur-
sued in the district in which process was merely receiv-
ed and not in the court whose process is allegedly being
abused.
="
STATUTES AND RULES INVOLVED
Rule 13a), F.R.Civ.Proc.:
Compulsory Counterclaims. A pleading shall state
as a counterclaim any claim which at the time of
serving the pleading the pleader has against any
opposing party, if it arises out of the transaction or
occurrence that is the subject matter of the op-
posing party’s claim and does not require for its ad-
judication the presence of third parties of whom the
court cannot acquire jurisdiction. But the pleader
need not state the claim if (1) at the time the action
was commenced the claim was the subject of
another pending action, or (2) the opposing party
brought suit upon his claim by attachment or other
process by which the court did not acquire jurisdic-
tion to render a personal judgment on that claim,
and the pleader is not stating any counterclaim un-
der this Rule 13.
Rule 1&c), F.R.Civ.Proc.:
Relation Back of Amendments. Whenever the
claim or defense asserted in the amended pleading
arose out of the conduct, transaction, or occurrence
set forth or attempted to be set forth in the original
pleading, the amendment relates back to the date of
the original pleading. An amendment changing the
arty against whom a claim is asserted relates back
if the foregoing provision is satisfied and, within
the period provided by law for commencing the ac-
tion against him, the party to be brought in by
amendment (1) has received such notice of the in-
stitution of the action that he will not be prejudiced
in maintaining his defense on the merits, and (2)
knew or should have known that, but for a mistake
concerning the identity of the proper party, the ac-
tion would have been brought against him.
28 U.S.C. § 1391(a):
A civil action wherein jurisdiction is founded only
on diversity of citizenship may, except as otherwise
provided by law, be brought only in the judicial dis-
trict where all plaintiffs or all defendants reside, or
in which the claim arose.
atlas
STATEMENT OF THE CASE
On June 7, 1977, petitioner lowa Beef Processors, Inc.
filed identical diversity suits in the Northern District of
Iowa (Sioux City) and the Southern District of New
York against two former employees, Hughes A. Bagley
and Hans Aarsen, for violating contractual and
fiduciary duties by disclosing confidential IBP
documents and information and against the
Amalgamated Meat Cutters and Butcher Workmen of
North America (an Illinois unincorporated association),
Irving Stern (New York District Director of the Union),
Albert J. Krieger (a New York and Miami lawyer),
respondent Lex Hawkins (a Des Moines lawyer) and
respondent John A. Cochrane (a St. Paul lawyer) for in-
ducing Bagley’s breaches and conspiring to defame
IBP.!
On July 22, 1977, after obtaining an agreed extension
of time to answer IBP’s complaint, Hawkins and
Cochrane filed suit in the Southern District of Iowa at.
Des Moines against IBP and its counsel, petitioners
Rothe and Freeman (Illinois residents), for $24 million
in actual and punitive damages, alleging that they had
tortiously “invoked the judicial process” of the Sioux
City and New York courts by (1) filing suit, (2) serving
summons, and (3) serving a document request supposed-
ly calling for Hawkins’ and Cochrane’s work product in
1 The two identical actions were filed to insure that personal
jurisdiction and venue could be obtained over all defendants
in one or another of the two districts. Significant conspira-
torial events occurred in both districts: Important meetings of
Bagley, Krieger, and Stern took place in New York, while
Bagley, Hawkins, and Cochrane held a key meeting in Sioux
City. Moreover, Bagley and Aarsen both resided in the
Northern District of Iowa, which is also the place where the
Bagley-IBP contract in question was executed.
OE OEE BN EMS I OE Fe | one Ty
=~
Meat Price Investigators Association [MPIA] v. Jowa
Beef Processors, et al., an antitrust suit originally filed in
the Southern District of Iowa on August 10, 1976, but
transferred to the Northern District of Texas at Dallas
for pretrial proceedings under 28 U.S.C. § 1407 on June
7, 1977. In re Beef Industry Antitrust Litigation, 432
_ F.Supp. 211 (JPML 1977).
Also on July 22, 1977, Hawkins and Cochrane filed a
motion to dismiss IBP’s Sioux City case for lack of
‘liversity, claiming (without any record support) that
vince the Union had members in Nebraska, IBP’s prin-
cipal place of business, there was no complete diversity.
under the theory that an unincdrporated association
takes the citizenship of each of its members for diversity:
purposes. United Steelworkers v. R.H. Bouligny, Inc., 382
U.S. 145 (1965).
On August 1, 1977, before any answers had been filed
in the Sioux City and New York cases, IBP filed amend-
ed complaints under Federal Civil Rule 1a) to cure any
possible jurisdictional defect by substituting the Union’s
three highest officers (residents of Illinois) as class
representatives of the Union’s members pursuant to
Federal Civil Rule 23.2, in lieu of naming the Union as
an entity. There was no change in any of the other
allegations of the original complaint: The conduct
described and the causes of action alleged were iden-
tical.
On August 2, 1977, Hawkins and Cochrane filed a mo-
tion with the Judicial Panel on Multidistrict Litigation
to transfer IBP’s Sioux City and New York cases to Des
Moines for consolidation with their suit against IBP, re-
questing that all three cases be assigned to Chief Judge
Hanson. This motion was denied by the Judicial Panel
from the bench at oral argument on September 30, 1977
with the comment: “* * * since there are only two actions
=
[Sioux City and Des Moines], we will just leave them
where they are.” (App. B-11.)
Meanwhile, on August 15, 1977, IBP, Rothe and
Freeman filed a motion to dismiss the Des Moines case
for lack of venue and for Hawkins’ and Cochrane’s
failure to plead their abuse-of-process claim as a com-
pulsory counterclaim in IBP’s Sioux City and New York
cases, in violation of Federal Civil Rule 13a).
On November 17, 1977 Chief Judge Stuart granted
defendants’ motion to dismiss the Des Moines case for
lack of venue, holding that Hawkins’ and Cochrane’s
claims arose in the Northern District of Iowa (where
“defendants are alleged to be doing that which should
not be done”), which court “is in a far better position” to
determine whether its process has been abused.
Although Chief Judge Stuart expressed “serious reser-
vations”, he found it unnecessary to pass on defendants’
alternative compulsory counterclaim argument and dis-
missed on the venue ground alone. (App. A-1-4.)
Hawkins and Cochrane appealed the dismissal to the
Eighth Circuit.
On February 13, 1978 Chief Judge McManus ruled on
a number of pending motions in IBP’s Sioux City case.
He held, inter alia, that IBP’s amended complaint had
effectively cured any jurisdictional problem by naming
as class representatives three Union officers whose state
citizenship is diverse from IBP’s. He also held that
Hawkins’ and Cochrane’s work product and other objec-
tions to IBP’s document production request should be
overruled and ordered them to comply. (App. C-3-6, 8-9.)
2 During oral argument, IBP’s counsel informed the Judicial
Panel that all but one defendant (Stern, a New York resident)
ad waived personal jurisdiction and venue objections in the
Sioux City case. Stern’s counsel then told the Judicial Panel
he, too, would waive these personal objections and IBF’s
counsel stated that the New York action would be dismissed,
which was done on October 6, 1977. (App. B-7-8, 10.)
po, es
On April 10, 1978, Hawkins and Cochrane served an
answer to IBP’s amended complaint in the Sioux City
case, including a counterclaim identical to their com-
plaint in the Des Moines case, in the event the Eighth
Circuit affirmed Chief Judge Stuart’s dismissal.
On January 5, 1979 the Eighth Circuit (Becker, Senior
District Judge, writing for a panel which also included
Chief Judge Gibson and Circuit Judge Henley) reversed
Chief Judge Stuart’s ruling as to Hawkins, but affirmed
as to Cochrane, holding that the claim of each arose
where IBP’s summons and request for production of
documents were served—Des Moines in Hawkins’ case
and St. Paul in Cochrane’s case. In addition the Court of
Appeals held that Hawkins’ and Cochrane’s claims were
not compulsory counterclaims under Federal Civil Rule
13(a) because (1) IBP’s August 1, 1977 amended com-
plaint did not relate back to the original filing on June
7, 1977 under Federal Civil Rule 1&(c), and thus, at the
time IBP’s Sioux City and New York cases were “law-
fully commenced” on August 1, 1977, Hawkins’ and
Cochrane’s claims were already the subject of another
case pending in Des Moines (filed on July 22, 1977)
within the meaning of the first exception to the com-
pulsory counterclaim rule, and (2) Hawkins’ and
Cochrane’s abuse-of-process claims did not arise out of
the same transaction or occurrence as IBP’s breach of
contract and fiduciary duty, inducement, and conspiracy
claims within the meaning of Rule 13(a). (App. A-5-25.)
The Eighth Circuit on March 5, 1979 denied
petitioners’ request for rehearing en banc. (App. A-26.)
Judge Bright dissented from the denial because he con-
cluded that the panel had clearly erred in requiring
three courts rather than one to handle these inherently
related actions and had permitted respondents’ “obvious
forum-shopping” tactics. (App. A-27-32.)
—§—
REASONS FOR GRANTING THE WRIT
The Eighth Circuit decision decimates the policy un-
derlying both the federal venue statute, 28 U.S.C.
§ 1391(a), and Federal Civil Rule 13(a), i.e., to achieve a
sensible, convenient forum for the adjudication of dis-
putes while avoiding the duplication of judicial effort
and the possibility of conflicting decisions. IBP and its
counsel contend that one forum—the Northern District
of Iowa in Sioux City—should properly and most con-
veniently handle all these disputes. Respondents argue
that two courts—both the Northern District (at Sioux
City) and Southern District of Iowa (at Des Moines)—are
required even though the cases are causally-related and
share such central factual and legal issues that conflict-
ing decisions are possible and the Southern District
would be called upon to decide whether the case being
litigated before the Northern District is an abuse of
process. The Eighth Circuit held, astonishingly, that not
one, not two, but three courts must handle the cases—the
Northern and Southern Districts of Iowa and the Dis-
trict of Minnesota.
Since the Court of Appeals decision senselessly
proliferates litigation at a time when federal court
resources are under intense pressure from expanding
caseloads and also conflicts with decisions in other Cir-
cuits and the clear policy of the venue and compulsory
counterclaim provisions, certiorari must be granted and
a perverse precedent on crucial questions of judicial ad-
ministration overturned.
+ on eR Pe EE On nr ae ee
—9—
I
THE EIGHTH CIRCUIT COMPULSORY
COUNTERCLAIM HOLDING CONFLICTS
WITH SECOND AND THIRD CIRCUIT DECISIONS
AND WITH RULE 13’S POLICY
Rule 13(a) “was designed to prevent multiplicity of ac-
tions and to achieve resolution in a single lawsuit of all
disputes arising out of common matters” and “was par-
ticularly directed against one who failed to assert a
counterclaim in one action and then instituted a second
action in which that counterclaim became the basis for
the complaint.” Southern Construction Co. v. United
States, 371 U.S. 57, 60 (1962). See also Chicago &
Northwestern Railway Co. v. Lindell, 281 U.S. 14, 17
(1930); Moore v. New York Cotton Exchange, 270 U.S.
598, 610 (1926).
To achieve the economies of having closely intertwined
legal disputes litigated in one forum, the Circuits have
generally followed what they conceive to be this Court’s
broad “logical relationship” test to determine whether a
claim is so closely connected to another lawsuit to be
subject to the “compulsory counterclaim” rule. See
Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1
(1974); Warshawsky & Co. v. Arcata National Corp., 552
F.2d 1257, 1261, 1263 (7th Cir. 1977); Columbia Plaza
Corp. v. Security National Bank, 525 F.2d 620, 625-626
(D.C. Cir. 1975); Pipeliners Local Union No. 798 v.
Ellerd, 503 F.2d 11938, 1198-1199 (10th Cir. 1974); Dia-
mond v. Terminal Ry. Ala. State Docks, 421 F.2d 228,
236 (5th Cir. 1970); Great Lakes Rubber Corp. v. Herbert
Cooper Co., 286 F.2d 631, 634 (8rd Cir. 1961).
The Eighth Circuit held here, however, that a claim
that a lawsuit is in itself tortious because it allegedly is
a wrongful use of process for ulterior purposes, is not
logically related to that lawsuit and thus is not covered
~
—10—
by the compulsory counterclaim rule. This decision
directly conflicts with a recent Second Circuit decision.
In Newburger, Loeb & Co., Inc. v. Gross, 563 F.2d 1057
(2nd Cir. 1977), cert. denied, 434 U.S. 1035 (1978), the
Second Circui. held that a counterclaim asserting that
the main action was a part of a conspiracy to coerce the
counterclaimant by threatening and pursuing baseless
litigation against him, was a compulsory counterclaim
under the logical relationship test. The Court of Appeals
observed that the counterclaimant had asserted defenses
to the main action which raised essentially the same
issues as the counterclaim and that to require litigation
of the defenses and counterclaim in separate courts
“would amount to considerable duplication of judicial
time and effort and could lead to mutually inconsistent
results.” Jd., at 1072.2
There is precisely the same duplication of issues here.
Respondents expressly represented in their brief to the
Judicis: Panel on Multidistrict Litigation, when they
wanted all three cases (IBP’s Sioux City and New York
actions and respondents’ Des Moines counter-action)
consolidated in their chosen forum, that all of them “arise
out of an alleged breach of an employment termination
contract between Iowa Beef Processors, Inc., and a
former employee, Hughes A. Bagley” and that the
validity of the contract is “the central issue in each of
’ The Newburger Court relied on two earlier Second Circuit
decisions. In United Artists Corp. v. Masterpiece Productions,
Inc., 221 F.2d 213, 216 (2nd Cir. apes the Court held a
counterclaim to be compulsory which alleged that the main
action was “one of a series of harassing maneuvers” designed
to violate the counterclaimants’ rights; the holding was
necessary to avoid “circuity and multiplicity of action * * * .”
Similarly, in Lesnik v. Public Industrials Corp., 144 F.2d 968,
975 (2nd Cir. 1944), the counterclaim, held to be compulsory,
alleged that the main action was part of a conspiracy to injure
the counterclaimants.
NO ee rm re 8 re mere an ne ne EE QE UR
Se, eee ee
=—-
the three suits.”* Furthermore, respondents’ complaint
in this case alleges that petitioners filed IBP’s action
knowing that Bagley’s contract violates public policy
and asks for a declaratory judgment that the contract is
“void as against public policy.” Respondents’ answer in
IBP’s Sioux City action similarly alleges an affirmative
defense that the Bagley contract is void as against
public policy. Thus, the Newburger reasoning applies in
full force here. See also Great Lakes Rubber Corp. v.
Herbert Cooper Co., supra, 286 F.2d at 634, a Third Cir-
cuit decision with which the Eighth Circuit’s holding
also conflicts.
The Eighth Circuit, however, relied solely (App. A-22-
23) on the conclusory language and faulty analysis of a
district court decision from a different Circuit, Bose
Corp. v. Consumers Union of the United States, Inc., 384
F.Supp. 600, 603 (D. Mass. 1974), which held a
counterclaim alleging injury (defamation and perhaps
malicious prosecution and abuse of process) arising out
of the filing of the main suit and contemporaneous
publicity, to be permissive rather than compulsory.
The Second Circuit has pointed out that Bose
epitomizes a “narrow line of decisions involving
counterclaims based solely on the filing of the main com-
plaint and alleging libelous publications thereafter”,
which are founded on the truism that a defendant can-
not be forced to plead, as a compulsory counterclaim, a
cause of action that is premature and may never even
arise. See Harris v. Steinem, 571 F.2d 119, 125 (2nd Cir.
1978). For this reason, a counterclaim for malicious
4 Even the Eighth Circuit grudgingly acknowledged
respondents’ representation that the cases were closely linked,
but then apparently held that the compulsory counterclaim
rule did not apply because the claims were not identical (App.
A-24), which 1 never been the law and would obliterate
Rule 13(a) if widely adopted.
_—
prosecution is treated like a counterclaim for libel aris-
ing out of the main action: Both depend on the defen-
dant prevailing on the merits, are therefore premature,
and do not meet the basic test of Rule 13(a) that to be
compulsory, a counterclaim must be one. which the
defendant has when he files his answer. See 6 Wright &
Miller, Federal Practice and Procedure: Civil § 1411, at
55-57.
Bose, and the Eighth Circuit, however, erred in
treating an abuse-of-process claim in the same fashion,
since abuse of process, unlike malicious prosecution, is
fully mature and can be asserted immediately, provided
there are legally adequate allegations that process was
used for a wrongful collateral purpose after it was
issued. Simkins Ind., Inc. v. Fuld & Co., 392 F.Supp.
126, 129-130 (E.D. Pa. 1975). Bose was plainly wrong in
stating (384 F.Supp. at 603) that, if Consumers Union’s
counterclaim alleged abuse of process, “the analysis is
similar to the analysis concerning defamation.” The Bose
court provided no authority or reasoning for a patently
erroneous construction of Rule 13(a), but the Eighth Cir-
cuit followed it blindly.
Therefore, a square conflict among the Circuits is
presented, and the Second and Third Circuits’ holdings
must prevail. The Eighth Circuit decision cannot be
justified by any policy consideration, but it plainly
trebles both the burden on the courts generated by
respondents’ abuse-of-process claims and also the risk of
conflicting decisions.
mn nee cme ET
niin
II.
THE EIGHTH CIRCUIT RELATION BACK HOLDING
CONFLICTS WITH ITS OWN PRIOR DECISIONS
AND OTHER CIRCUITS
An alternative ground for the Eighth Circuit’s refusal
to apply the compulsory counterclaim rule was its
holding that IBP’s August 1, 1977 amended complaint
did not “relate back” under Federal Civil Rule 1&c) to
June 7, 1977 when the suit was filed, and thus when
respondents’ abuse-of-process action was filed in the in-
terim on July 22, 1977 there was purportedly no “pend-
ing” suit in which it could have been pled as a com-
pulsory counterclaim. (App. A-24-25.)
This is pure sophistry and was exposed as such by
Judge Bright’s opinion dissenting from the Eighth Cir-
cuit’s order denying rehearing en banc:
I am troubled * * * by the panel’s alternative rul-
ing on the compulsory counterclaim issue. The pan-
el determined that the appellants’ abuse of process
actions were filed prior to the effective date of
IBP’s complaint in the Northern District of Iowa
and therefore could not be compulsory counter-
claims in IBP’s action, under Fed. R. Civ. P.
13(a). See panel slip op. at 22-23. In so ruling, the
panel concluded that, for purposes of Rule 13a),
IBP’s amended complaint in the Northern District
altered to perfect diversity jurisdiction, does not
relate back to the date of IBP’s original complaint.
Such a restrictive reading of the relation back rule of
Fed. R. Civ. P. 15(c) lacks support in the language of
the rule, in case law, or in policy. Although I have
found no case considering this question in the con-
text of Rule 13(a), prior decisions of this and other
courts have indicated, without exception, that a com-
plaint amended by dropping nonessential parties to
perfect diversity jurisdiction relates back to the date
of the original pleading. E.g., Finn v. American Fire
& Casualty Co., 207 F.2d 118, 116 (5th Cir. 1953);
Brown v. Texas and Pacific R.R. Co., 392 F.Supp.
1120, 1124 (W.D.La. 1975). See International Ladies
Garment Workers’ Union v. Donnelly Garment Co.,
121 F.2d 561, 563 (8th Cir. 1941) (dictum); 3A
Moore’s Federal “Practice %21.03[2] (1978). Cf. In-
terstate Refineries Co. v. Barry, 7 F.2d 548, 550 (8th
Cir. 1925) (in accord with relation back rule, but
1 ai Rules). [App. A-32 n. 5; emphasis add-
The Eighth Circuit opinion did not even mention these
diametrically opposed precedents, and the only
authorities cited in support of the Court’s convoluted
logic (App. A-25) are completely inapposite: Hale v.
Ralston Purina Co., 482 F.2d 156, 159 (8th Cir. 1970),
did not involve the relation back of an amendment to
cure a defect in diversity jurisdiction, but rather an
attempt to introduce an entirely new claim; and Moore’s
discussion of this subject in fact directly contradicts the
Eighth Circuit’s holding (3 Moore’s Federal Practice
197115.09, 15.15 at 15-206).
No explanation has been given nor can any justifica-
tion be found for the Eighth Circuit’s willingness to defy
precedent and logic and to create an intercircuit conflict
on Rule 1c) just to guarantee that these interlocked
disputes be litigated simultaneously in three courts
rather than one.
ITI.
VENUE LIES IN THE COURT
WHOSE PROCESS WAS ALLEGEDLY ABUSED
The Eighth Circuit’s construction and application of
the federal venue statute for diversity cases, 28 U.S.C.
§ 139l(a), is as bizarre as its interpretation of Rules
13(a) and 15(c). It held that proper venue was in each of
respondents’ home districts (Southern District of Iowa
for Hawkins, District of Minnesota for Cochrane) solely
0 ere a
—
ar TD
—1§—
because each received process and IBP’s production re-
quest there. The District Court, in sharp contrast, had
ruled that respondents’ cause of action “arose” in the
Northern District of Iowa where IBP’s suit was filed
since “(i]t is there, by filing an action against Hawkins
and Cochrane, that defendants are alleged to be doing
that which should not be done.”® (App. A-3.)
To reach its desired result, the Eighth Circuit appears
to have used as the test for venue the “minimum con-
tacts” standard developed by this Court to decide
whether jurisdiction in a State can be exercised over a
nonresident. See International Shoe Co. v. State of
5 Section 157s) provides for venue where all the defendants
or all the plaintiffs reside or where the cause of action arose.
Since petitioners Rothe and Freeman reside in Illinois and
plaintiff Cochrane in Minnesota, only the “where the action
arose” test is applicable here.
The venue provision for federal-question cases also includes
the “where the action arose” rule. See 28 U.S.C. § 1391(b).
This Court recently noted probable jurisdiction of an appeal
involving the construction of the “where the action arose”
rovision of § 1391(b). Great Western United Corp. v. Kidwell,
77 F.2d 1256, 1273-1274 (5th Cir. 1978), prob. yur. noted, No.
78-759 (Jan. 8, 1979). The present petition thus presents the
Court with the opportunity to provide venue guidelines
simultaneously for diversity and federal-question cases.
6 The yaw Circuit Pol gy “> to base its venue decision on
Gardner Engineering «~ v. Page de, peu Co., 484 F.2d
27 (8th Cir. 1973), which decided both personal jurisdiction
30-32) and _ venue Neher questions. The decision below,
jowever, relied poy App. A-16, 18, 19) on the jurisdic-
tional portion of Gardner, which in turn was b on Mr.
Justice (then Judge) Blackmun’s opinion in Aftanase v.
Economy Baler Co., 343 F.2d 187 (8th Cir. 1965). Paradoxical-
ly, the Gardner Court took pains to distinguish jurisdictional
analysis from venue analysis. Discussing jurisdiction, the
Court noted that the plaintiff was not required “to choose the
forum with the most significant contacts * * *” since the
“minimum contacts” rule was applicable (484 F.2d at 31), but on
venue it used the same “significant contacts” test employed by
the Ninth Circuit in the Commercial Lighti roducts, Inc.
case discussed infra in the text. While the Eighth Circuit in this
case stated that it was using a “weight of contacts” approach to
(Footnote continued on following page)
—1§—
Washington, 326 U.S. 310 (1945), and its progeny. This
test departs dramatically from the “significant contacts”
test applied for diversity-case venue by the Ninth Cir-
cuit: “any district in which a substantial part of the acts,
events, or omissions occurred that gave rise to the claim
for relief.” Commercial Lighting Products, Inc. v. United
States District Court, 587 F.2d 1078, 1080 (9th Cir. 1976)
(emphasis added). The Ninth Circuit, moreover, express-
ly refused to hold that venue was coextensive with a
State’s jurisdictional long-arm statute. Jd., at 1079-1080.
The conflict between the Eighth and Ninth Circuits on
the proper test for venue is not academic since under the
facts here the Ninth Circuit test would have required a
different result. While there is authority arguably sup-
porting jurisdiction over a nonresident on the basis of
the resident plaintiff's receipt of a communication in the
forum State,’ there is no procedent for basing federal
venue on such a flimsy foundation. The mere receipt of
6 continued
venue, its reliance on the jurisdictional portion of Gardner, its
mode of analysis, and its result on these facts indicate that
either it viewed the “minimum contacts” test and the “weight
of contacts” method as equivalent or instead was hopelessly
confused about the distinction between jurisdiction and venue.
_ Judge Bright’s opinion dissenting from the denial of rehear-
ing en banc pointed out the improper use of the “minimum
—— test for venue (App. A-29-30 n. 4), but obviously to
no avail.
‘ Norton v. Local Loan, 251 N.W.2d 520 (Iowa 1977) (alleged-
ly fraudulent telephone call from non-resident to resident
satisfied due process. requirements for personal jurisdiction).
8 See, e.g., Weil v. New York State t. of Tra ation,
400 F.Supp. 1364, 1465 (S.D.N.Y. 1975) (receipt of notice of
employinent termination insufficient for venue where signifi-
cant acts allegedly violating plaintiff's employment rights oc-
curred in different district); Ki an v. McCone, 422
F.Supp, 860, 877-879 (N.D. Cal. 1976) (learning of ard ex.
abe wg emotional distress from allegedly illegal acts insuf-
icient for venue where substantial activities underlying cause
of action occurred in different district).
ee
_| a
process and a production request was simply not a sub-
stantial part of the wrong alleged, which was that IBP,
represented by Rothe and Freeman, had improperly “in-
voked the judicial process” of the Sioux City court.
(Respondents’ Complaint 115.) Judge Bright, dissenting
below from the denial of rehearing en banc, explained
why venue for all three cases should be in the Northern
District of lowa:
Appellant Hawkins’ abuse of process claim
against the appellees is identical in substance to the
claim of appellant Cochrane, and the disposition of
each of those claims will require identical factual
inquiries concerning the appellees’ motivation in fil-
ing IBP’s action, alleged to be abusive of process, in
the Northern District of Iowa. Moreover, it seems
that the single forum which may most conveniently
undertake such factual inquiries is the district in
which the appellees filed their lawsuit, the
Northern District of Iowa. Yet, according to the
panel opinion, the substantially identical claims of
Hawkins and Cochrane must be tried in two
different forums: respectively, the Southern District
of Iowa and the District of Minnesota.
That result is obviously impractical and potential-
ly wasteful of judicial and legal time and resources,
and I suggest that the panel’s reasoning is unsound.
* * *
Surely, the convenience of the parties and the
courts is best served by litigation of Iowa Beef’s
conspiracy action and of Hawkins’ and Cochrane's
peripheral abur* of process actions in a Single
forum, which .an only be accomplished in the
Northern District of Iowa. Instead, the panel itself
has “proliferat{[ed] this growing mass of litigation,”
by scattering these related actions to three separate
forums. [App. A-28-30; footnotes omitted.)
The Eighth Circuit’s decision is particularly
anomalous since it was done supposedly for the “aggriev-
ed party’s” convenience, but it denied Cochrane his
—18-—
choice of Des Moines as a forum and told him Minnesota
would actually be more convenient,’ and also ignored the
fact that the parties were already litigating a closely
connected case in Sioux City and that no one’s con-
venience could be furthered by the waste and expense of
triplicate litigation of the same essential issues. liistead,
the Court of Appeals sustained respondents’ “obvious
forum-shopping” tactics which, in Judge Bright’s words,
“needlessly complicate the disposition of federal
litigation * * *” and which should “receive short shrift.”!°
(App. A-31.)
It is now up to this Court to resolve the conflicts
created below and to instruct the lower federal courts
not to make senseless venue decisions which only com-
pound the mass of litigation now confronting them. All
considerations here point to one logical forum—the
Northern District of Iowa whose process is allegedly be-
ing abused. Cf. Barrett v. Baylor, 457 F.2d 119, 123 n. 1
(7th Cir. 1972).
* Hawkins and Cochrane filed a joint complaint, but
petitioners did not move to sever the causes of action because
the criteria for joining parties under Rule 20, F.R.Civ.Proc.,
were plainly met. However, the Court of Appeals necessarily
has ordered the severance of the causes of action on its own
motion to compel respondents’ to pursue their individual ac-
tions in different districts.
10 The Eighth Circuit’s result also sharply conflicts with the
Judicial Panel’s handling of the question of the proper forum
for these disputes. The Panel denied consolidation of the Sioux
City and Des Moines cases because those two courts had
available procedural tools (venue and compulsory
counterclaim) to work out their own consolidation. (App. B-1-
11.) However, the Eighth Circuit interfered and did not allow
the district courts to solve the problem.
—19—
CONCLUSION
The Court of Appeals had to decide three legal
questions (compulsory counterclaim, relation back,
venue) in determining where these disputes were to be
litigated. It erred in deciding each one, and created a
conflict among the Circuits on each point. The paradox
is that the Eighth Circuit had to labor strenuously to
‘produce this anomaly since the authorities and policy
considerations are all to the contrary. Because it
proliferates essentially one controversy between the
same parties into three different courts, the decision
below now compels an exercise of this Court’s certiorari
jurisdiction to eliminate the resulting procedural night-
mare.
Accordingly, petitioners ask the Court to grant a writ
of certiorari to the Eighth Circuit and to reverse that
Court’s decision that one controversy must be litigated
simultaneously in three different federal courts.
Respectfully submitted,
Epwarp W. RotHe
James T. Matysrak
FREEMAN, RotHe, Freeman & SALzMan
One IBM Plaza - Suite 4735
Chicago, Illinois 60611
(312) 467-5330
Counsel for Petitioners
A-1l
APPENDIX A
In the United States Dictrict Court
Southern District of Iowa
Central Division
Civil No. 77-219-2.
Lex Hawkins and John A. Cochrane,
Plaintiffs,
v. :
Iowa Beef Processors, Inc., et al.,
Defendants.
ORDER
(Filed in U.S. District Court November 17, 1977)
The Court has before it defendant’s motion to dismiss
the above entitled action for improper venue and failure
to state a claim upon which relief can be granted. Fed.
R. Civ. P. 12(bX3), 12(bX6). For the purpose of providing
necessary background for its ruling herein, the Court
first reviews the procedural context from which defen-
dants’ motion arose.
On June 7, 1977, Iowa Beef Processors, Inc., defendant
in the present action, filed as plaintiff a separate action
in the United States District Court for the Northern
District of Iowa (Iowa Beef Processors, Inc. v. Amalga-
mated Meat Cutters & Butcher Workmen of North
America, AFL-CIO, Hawkins, Cochrane, et al.). This
Northern District action, which was based in part upon
information gained during a hearing in this Court in
still another case (lowa Meat Price Investigators, et al.
A-2
v. Iowa Beef Processors, et al.), alleged that Hawkins,
Cochrane, and others induced former Iowa Beef Proces-
sors (IBP) officials to breach their contracts with IBP.
Thereafter, on July 22, 1977, Hawkins and Cochrane
responded with the present action against IBP and its
counsel, alleging abuse of process. Plaintiffs Hawkins
and Cochrane claim that IBP’s case in the Northern Dis-
trict, and a companion case filed in the Southern Dis-
trict of New York, invoked these courts’ judicial
processes in an attempt to interfere, by way of intimida-
tion and harassment, with this Court’s lowa Meat Price
Investigators case. A subsequent attempt by plaintiffs
Hawkins and Cochrane to have the cases in the
Northern District of Iowa, the Southern District of New
York, and the present case transferred to this Court for
pretrial proceedings, pursuant to 28 U.S.C. & (sic) 1407,
was unsuccessful.* See In re Iowa Beef Processors
Employment Termination Contract Litigation, Docket
No. 315 (Judicial Panel on Multidistrict Litigation, Oc-
tober 5, 1977).!
Defendants, in their motion to dismiss the pending
“abuse of process” action, contend that venue under 28
U.S.C. § 189l(a) is improper.? Clearly, as defendants
argue, the divergence in citizenship among plaintiffs
and among defendants necessarily makes proper venue
in this case turn on where “the claim arose”. The issue
before this Court is whether defendants are correct in
' The Court has received a letter from counsel for IBP in-
dicating that the New York action, on plaintiff's own motion,
was dismissed on October 6, 1977.
2 Section 1391(a) provides:
“A civil action wherein jurisdiction if founded only on di-
versity of citizenship may, except as otherwise provided b
law, be brought only in the judicial district where all
plaintiffs or all defendants reside, on (sic) in which the
claim arose.”
A-3
claiming that plaintiffs’ action for abuse of process arose
in the Northern District of Iowa, thereby making venue
improper in this district.
With convenience to the parties foremost in mind,
federal courts have recently applied a “minimum con-
tacts” approach when determining where a “claim
arose.” Travis v. Anthes Imperial Ltd., 473 F. 2d 515
(8th Cir. 1973); 1 Moore’s Federal Practice, § 0.142[.5-2].
These courts look to the operative facts of a case to
ascertain the most significant contacts. Arnold v. Smith
Motor Co., Brookfield, Mo., 389 F. Supp. 1020 (N.D.
Iowa 1974). Though considered less significant in other
types of actions, the place of injury remains as the prin-
cipal operative fact in simple tort cases. Redmond v.
Atlantic Coast Football League, 359 F. Supp. 666 (S.D.
Ind. 1973); Maney v. Ratcliff, 399 F. Supp. 760 (E.D.
Wis. 1975). This is especially true in the action, in which
the Multidistrict Panel has apparently concluded that no
other factor makes one district more convenient to the
parties than another.
In the present action, the Court finds the place of in-
jury to be in the Northern District of Iowa. It is there,
by filing an action against Hawkins and Cochrane, that
defendants are alleged to be doing that which should not
be done. While the injury may have effects in this dis-
trict, the overt act giving rise to the injury was the fil-
ing of an action in the federal court for the Northern
District of Iowa.
To prove “abuse of process”, plaintiffs must show that
defendants seek to pervert the use of judicial process in
the Northern District, and do so for an ulterior motive.
Sarvold v. Dodson, 237 N.W. 2d 447 (lowa 1976). The
Northern District Court is in a far better position to
make such a determination. Though perhaps propelied
A-4
by facts uncovered in an action elsewhere, defendants’
action in the Northern District, based upon inducement
to breach contract, is entirely different from the action
allegedly interfered with in this Court, which focuses on
antitrust violations. This Court should not attempt to tell
the Northern District Court that a case pending on its
docket was abusing its processes and was but a facade,
much less—as plaintiffs request—enjoin the Northern
District Court from processing that case. Also, if the
Northern District proceeds on both actions, the possi-
bility that rulings of this Court and the United States
District Court for the Northern District would come into
direct conflict is eliminated.
This Court, while noting its serious reservations, need
not consider defendants’ argument that plaintiffs’ pres-
ent case must be dismissed because it is a compulsory
counterclaim to defendants’ case in the Northern Dis-
trict. Having determined that the venue is improperly
laid, the Court dismisses the action on this ground alone.
28 U.S.C. § 1406(a).
It Is Hereby Ordered that the above-entitled action be
dismissed for lack of proper venue.
«
Signed this 17 day of November, 1977.
/s/ W. C. STUART
W. C. STUART, Chief Judge
Southern District of Iowa
11-17-77 Copy to attys.: Judges Hanson, Stuart & Mc-
Manus 58-0J-86
A-5
UNITED STATES COURT OF APPEALS
For The Eighth Circuit
No. 77-1988
John A. Cochrane,
Appellant,
v.
Iowa Beef Processors, Inc., Edward W. Rothe and Lee
Freeman, Sr.,
Appellees.
No. 78-1008
Lex Hawkins,
Appellant,
v.
Iowa Beef Processors, Inc., Edward W. Rothe and Lee
Freeman, Sr.,
Appellees.
Appeals from the United States District Court for the
Southern District of Iowa.
Submitted: May 18, 1978
Filed: January 5, 1979
(as corrected January 12, 1979)
Before GIBSON, Chief Judge, HENLEY, Circuit Judge,
and BECKER, Senior District Judge.*
BECKER, Senior District Judge.
* The Honorable William H. Becker, United States Senior
District Judge, Western District of Missouri, sitting by
designation.
A-6
These consolidated appeals are from a final judgment
of the United States District Court for the Southern Dis-
trict of Iowa! granting a defense motion to dismiss for
improper venue? this diversity case which sounds in
common law tort for alleged abuse of process cognizable
under Iowa law, and generally under § 682 of the
Restatement of Torts.
The plaintiffs (appellants) in the case are Lex
Hawkins and John A. Cochrane, both of whom are prac-
ticing attorneys. Mr. Hawkins is a citizen of Iowa and
resides in Des Moines, in the Southern District of Iowa.
Mr. Cochrane is a citizen of Minnesota, resides in and
practices in the City of St. Paul, and elsewhere, in-
cluding the Southern District of Iowa.
The defendants in the case are two individuals and
one corporation. The individual defendants, Edward W.
Rothe and Lee Freeman, Sr., are citizens of Illinois.
Like the plaintiffs, they are lawyers and practice in
Chicago and elsewhere, including the Southern District
of Iowa. One of their clients is the corporate defendant,
Iowa Beef Processors, Inc. (Iowa Beef), which is a
Delaware corporation having its principal place of
business in Nebraska.
The suit arises from the fact that in early June 1977,
Iowa Beef filed two suits in federal courts in the
Northern District of Iowa and the Southern District of
New York, against a number of defendants, including
Mr. Cochrane and Mr. Hawkins.’ Both complaints filed
‘ The Honorable William C. Stuart, Chief Judge.
2 28 U.S.C. § 1406(a).
’ That case is docketed as No. C-77-4040 and is on the docket
of Chief Judge McManus. The initial complaint in that case
named as defendants, in addition to Cochrane and Hawkins.
(Footnote continued on following page)
A-7
by Iowa Beef charged that in early 1977 the defendants,
including Hawkins and Cochrane, conspired to obtain
from the defendant Hughes A. Bagley, a former officer
of Iowa Beef, and from the defendant Hans Aarsen, a
former employee of Iowa Beef, confidential information
about Iowa Beef’s operation and confidential documents;
that disclosure of these documents would be damaging
to Iowa Beef and would be helpful to Messrs. Cochrane
and Hawkins in an antitrust action that they were
prosecuting in the Southern District of lowa on behalf of
an organization known as Meat Price Investigators
Association (MPIA) in which Iowa Beef and other cor-
porations were defendants; that the disclosures . by
Bagley violated not only his fiduciary duties to Iowa
Beef but also the terms of a contract that had been
entered into between him and Iowa Beef in connection
with Bagley’s separation from his employment by Iowa
Beef; and that the disclosures by Aarsen violated his
fiduciary duties to his former employer. In these actions
Iowa Beef sought damages, declaratory and injunctive
relief.
At or about the same time that it filed its suit in the
Northern District of Iowa, Iowa Beef filed a similar suit
against the same defendants in the United States Dis-
trict Court for the Southern District of New York. That
suit was later dismissed by Iowa Beef after jurisdic-
tional and venue questions were raised.
3 continued
the Amalgamated Meat Cutters and Butcher Workmen of
North America, AFL-CIO, Irving Stern, Albert J. Krieger,
Hughes A. Bagley and Hans Aarsen. On August 1, 1977 the
complaint was amended so as to elirninate the Union as a
defendant and to substitute for it three representatives of the
Union as class defendants to avoid jurisdictional problems,
caused by joinder of the Union.
A-8
The plaintiff Hawkins contends that summons and
discovery motions to produce documents in both of these
actions were unlawfully served on him in the Southern
District of Iowa causing injury to him in the Southern
District of Iowa, where most of the documents were
located in the office of MPIA.
The plaintiff Cochrane contends that summons and
discovery motions to produce documents in both of these
actions were unlawfully served on him in Minnesota
causing injury to him in both Minnesota and in the
Southern District of Iowa because most of the docu-
ments he was requested to produce were held in the
Southern District of Iowa in connection with the related
antitrust action he and Hawkins were prosecuting in the
Southern District of Iowa.
While both of those suits were pending, Iowa Beef
served on the plaintiffs motions to produce documents
that were in the possession of the plaintiffs. While the
motions requested that the documents be produced both
at the office of Iowa Beef’s counsel in Sioux City, Iowa
and at the office of Iowa Beef’s counsel in New York
City, plaintiffs contend the principal injuries to both oc-
curred in the Southern District of Iowa where most of
the documents were located, and where Hawkins was
served with the allegedly unlawful process.
The theory of the plaintiffs in this case is that while
the filing of the suits in the Northern District of Iowa
and the Southern District of New York by Iowa Beef
were improperly motivated, the service of process
therein, including summons and motions to produce,
constituted abuse of process and tortious interference
with prospective advantage. Plaintiffs contend the abuse
of process injured both in the Southern District of Iowa,
A-9
and injured Cochrane to a lesser degree in Minnesota.
Plaintiffs claimed actual and punitive damages amount-
ing to $24,000,000.00 and sought injunctive and declara-
tory relief as well. They also asked for interest, costs,
and a reasonable attorney’s fee.
From what has been said, it is clear that the district
court had diversity jurisdiction of the case. The problem
is simply one of venue. Since jurisdiction is based solely
on diversity of citizenship, the resolution of the question
of venue is governed by 28 U.S.C. § 1391(a). That section
provides, subject to exceptions not here relevant, that
where a suit is filed in federal court on the basis of
diversity of citizenship alone it must be filed either in
the district where all plaintiffs reside, or in the district
where all defendants reside, or in the district in which
“the claim arose.”
In view of the citizenship of the parties which has
been described, it is evident that venue in the Southern
District of Iowa was proper only if plaintiffs’ claim
“arose” in that district within the meaning of § 1391(a).
Apart from the venue question with which we are con-
cerned, this case would not appear to be a particularly
complicated one. However, it is an offshoot of extensive
antitrust litigation involving the beef industry in this
country. A number of suits have been filed under § 4 of
the Clayton Act, 15 U.S.C. § 15, charging violations of
§§ 1 and 2 of the Sherman Antitrust Act of 1890, 15
U.S.C. §§ 1 and 2. One of those suits was filed by
Messrs. Hawkins and Cochrane on behalf of MPIA,
which has been mentioned, against several defendants,
including Iowa Beef, represented by Messrs. Rothe and
Freeman, and another defendant identified as Spencer
A-10
Foods, Inc.‘ The filing of that suit and events leading up
to it have unfortunately created much animosity which
has extended to at least some of the lawyers involved in
the litigation.5
One may suspect that the suits filed by Iowa Beef in
the Northern District of Iowa on June 7, 1977, and in
the Southern District of New York at about the same
time were in retaliation for the filing by Hawkins and
Cochrane of the MPIA suit, and designed to provide two
new opportunities to make discovery from the clients of
appellants; and that the filing of these instant actions on
July 22, 1977 by Hawkins and Cochrane against Iowa
Beef and its attorneys was in retaliation for the filing of
the actions in the Northern District of Iowa and in the
Southern District of New York.
‘ The suits were filed in federal court in California, Iowa,
Nevada, Texas and Utah. The Judicial Panel on Multidistrict
Litigation, established by 28 U.S.C. § 1407, consolidated all of
the cases, including the MPIA suit, for pretrial purposes and
concentrated them in the United States District Court for the
Northern District of Texas. See In re Beef Industry Antitrust
Litigation, 419 F.Supp. 720 (JPML 1976), and 432 F.Supp.
211 (JPML 1977).
’ There seems to be no question that Mr. Hawkins and Mr.
Cochrane had some private conversations with Hughes A.
Bagley, who has been mentioned and who at the time of the
conversations was employed ne Spencer Foods, and that he
may have given Hawkins and Cochrane information that was
damaging not only to Iowa Beef but also to Spencer Foods. In
any event, when Spencer Foods was sued along with Iowa
Beef and other defendants, it moved unsuccessfully for a
severance of the claim against it from the claims against the
other defendants, and for an order Glaqualitying ev nine and
Cochrane from further representation of MPIA against
ot Foods on the gound that they had been guilty of un-
ethical conduct. See Meat Price Investigators Association v.
Spencer Foods, Inc., (CsA. 8 1978) 572 F.2d 163; Iowa Beef
Processors, Inc. Oy te; (C.A. 8 1978) ..... F.2d ..... , No. 78-
1855, December 14, 1978. This latter claim is mentioned in
the complaint of, appellants.
A-1l1
The appellants and other defendants in the action in
the Northern District of Iowa case filed a number of
defensive motions that were not acted upon until
February 1978. In the meantime, appellants Cochrane
and Hawkins were not compelled to produce any of the
material that Iowa Beef had sought to require them to
produce in Chicago and New York.
We now return to the point at issue, which is whether
the district court erred in holding that the claims of
appellants did not arise in the Southern District of Iowa,
and so did not satisfy the applicable venue requirement
of § 1391(a).
The district court dealt with the problem in the
following language:
With convenience to the parties foremost in mind,
federal courts have recently applied a ‘minimum
contacts’ approach when determining where a
‘claim arose’. Travis v. Anthes Imperial Ltd., 473
F.2d 515 (8th Cir. 1973); 1 Moore’s Federal Prac-
tice, § 0.142[.5-2]. These courts look to the operative
facts of a case to ascertain the most significant con-
tacts. Arnold v. Smith Motor Co., Brookfield, Mo.,
389 F.Supp. 1020 (N.D. Iowa 1974). Though con-
sidered less significant in other types of actions, the
place of injury remains as the principal operative
fact in simple tort cases. Redmond v. Atlantic Coast
Football League, 359 F.Supp. 666 (S.D. Ind. 1973);
Maney v. Ratcliff, 399 F.Supp. 760 (E.D. Wis. 1975).
This is especially true in this action, in which the
Multidistrict Panel has apparently concluded that
no other factor makes one district more cenvenient
to the parties than another.
In the present action, the Court finds the place of
injury to be in the Northern District of Iowa. It is
there, by filing an action against Hawkins and
Cochrane, that defendants are alleged to be doing
that which should not be done. While the injury
A-12
may have effects in this district, the overt act
giving rise to the injury was the filing of an action
in the federal court for the Northern District of
Iowa.
To prove ‘abuse of process’, plaintiffs must show
that defendants seek to pervert the use of judicial
process in the Northern District, and do so for an
ulterior motive. Sarvold v. Dodson, 237 N.W.2d 447
(Iowa 1976). The Northern District Court is in a far
better position to make such a determination.
Though perhaps propelled by facts uncovered in an
action elsewhere, defendants’ action in the Northern
District, based upon inducement to breach contract,
is entirely different from the action allegedly
interfered with in this Court, which focuses on
antitrust violations. This Court should not attempt
to tell the Northern District Court that a case
pending on its docket was abusing its processes and
was but a facade, much less—as plaintiffs request—
enjoin the Northern District Court from processing
that case. Also, if the Northern District proceeds on
both actions, the possibility that rulings of this
Court and the United States District Court for the
Northern District would come into direct conflict is
eliminated.
This Court, while noting its serious reservations,
need not consider defendants’ argument that plain-
tiffs’ present case must be dismissed because it is a
compulsory counterclaim to defendants’ case in the
Northern District. Having determined that the
venue is improperly laid, the Court dismisses the
action on this ground alone. 28 U.S.C. § 1406(a).
It Is Hereby Ordered that the above-entitled
action be dismissed for lack of proper venue.
Appellants seek reversal of this judgment of the
district court dismissing the action because of lack of
venue.
A-13
Issues Presented On Appeal
In support of its assignment of error on appeal,
appellants contend that:
A. In simple tort cases for (1) abuse of process and
(2) tortious interference with prospective ad-
vantage, cognizable under Iowa law, venue is
proper in the place of harm or injury, which
was in the Southern District of Iowa. For this
reason federal case law supports diversity
action venue where the process is received.
B. Application of the “weight of contacts” ap-
proach requires a finding that venue was
proper in the Southern District of Iowa.
C. Where there are no compelling justifications for
venue in another district the trial court erred in
not allowing plaintiffs their choice of forum, the
Southern District of Iowa.
Anticipating the need to secure favorable resolution of
the compulsory counterclaim issue, appellants further
contend:
D. The plaintiffs’ action was not a compulsory
counterclaim in either the Northern District of
Iowa or in the action in the Southern District of
New York.
Appellees oppose each of appellants’ contentions.
For the reasons stated hereinafter, we conclude that
within the meaning of § 1391(a) that (1) the claim of
appellant Hawkins arose in the Southern District of
Iowa, and reverse that part of the judgment of the
district court dismissing the claim for relief of the
appellant Hawkins; (2) the claim of appellant Cochrane
arose in the District of Minnesota, and affirm that part
of the judgment dismissing the claim for relief of
appellant Cochrane, and remand the action to the
district court for the Southern District of Iowa for
further proceedings consistent with this opinion.
A-14
I.
Nature of Appellants’ Claim for Relief
In this diversity action appellants base their claims
for relief upon the law of Iowa, and to recover each must
establish his claim under the law of Iowa.
In support of their claims for relief, appellants rely
upon general tort law, citing, among other authorities:
Prosser, Law of Torts, § 121 (4th edition 1971); 3 Restate-
ment of Torts 2d, § 682 on Abuse of Process; Note, Abuse
of Process, 13 Cleveland-Marshall L.Rev. 163 (1964).
Appellants cite an Iowa decision supporting their con-
tention that a claim for relief for abuse of process exists
under Iowa law, citing Sarvold v. Dodson, 237 N.W.2d
447 (lowa 1976) applying § 682 of the Restatement of
Torts (1938). Further, appellants cite an Iowa decision
supporting their contention that a claim for relief for
tortious interference with prospective advantage exists
under Iowa law. Stoller Fisheries, Inc. v. American Title
Insurance Co., 258 N.W.2d 336 (Iowa 1977). The Stoller
case follows § 766B of Tentative Draft No. 23 (1977) of
the Restatement of Torts.®
Significantly, appellants rely on the Sarvold decision,
supra, which quotes with approval the leading federal
district court opinion in Hyde Construction Co., Inc. v.
Koehring Co., (S.D. Miss. 1974) 387 F.Supp. 702, 1.c. 712,
affirmed in the material part, (C.A. 5 1977) 546 F.2d
6 The Stoller case, supra, construes § 766B of Tentative Draft
No. 23 to require as an element of the claim for relief that the
interference cause the third party to discontinue the contrac-
tual relation of appellants with their client, or their successful
rosecution of the antitrust action of MPIA v. Iowa Beef.
either result is alleged. Therefore, the second claim for
relief of appellants may be construed under Iowa law to state
a claim for abuse of process only.
A-15
1193. This latter case, at the district court level, held
that process issued by courts in Oklahoma and Wiscon-
sin but served in Mississippi supported a claim for relief
under Mississippi law cognizable in Mississippi courts,
and dealt with the “significant contacts” rule and the
“center of gravity” rule.
The better rule is that the ultimate determination in
diversity cases of the district in which the claim arose
requires application of federal procedural law constru-
ing § 1391, Title 28 U.S.C. 15 Wright, Miller & Cooper,
Federal Practice and Procedure, § 3803, page 10 and
cases cited in note 10. But state substantive law applies
in defining the essential elements and nature of the
claim for relief asserted under state law. Appellants
have demonstrated the existence under Iowa law of ac-
tions for abuse of process. Whether appellants’ second
claim for relief based on alleged tortious interference
with prospective advantage exists under Iowa law is less
clear because the Stoller case dealt with intentional in-
terference with prospective contractual relation. A deci-
sion on that question need not be made on this appeal,
and can be left to the judgment of the district court on
remand. The same acts of appellees alleged in
paragraph 15 of the complaint (Appendix 6, 7), are
relied on by appellants in support of their second claim
for relief. Therefore, the conclusions of this opinion con-
cerning the district in which each claim for relief of
appellants arose are applicable to the claims for tortious
interference with prospective advantage.
A discussion of the federal procedural law construing
§ 13891(a), Title 28 U.S.C. applicable to this appeal
follows.
A-16
II
The Applicable Federal Procedural Law
The federal courts have developed varying standards
for determining where the claim arose. The principal
ones are (1) the “weight of contacts” rule; (2) the “place
of injury” rule; (3) the American Law Institute rule,
derived from the ALI Study of the Division of Jurisdic-
tion Between the State and Federal Courts, § 1303, 1314
(1969). These, and other standards without general sup-
port, are described in Wood, Federal Venue: Locating the
Place Where the Claim Arose, 54 Texas L.Rev. 392.
This court has noted the American Law Institute rule,
in considering the analysis of five factors by Judge
Blackmun (Mr. Justice Blackmun) in Aftanase v.
Economy Baler Co., (C.A. 8 1965) 343 F.2d 187, and con-
cluded that:
“Since venue is a procedural rule of convenience,
the convenience of the aggrieved party should be
first accommodated.” Gardner Engineering Cor-
poration v. Page Engineering Company, (C.A. 8
1973) 484 F. od 27, 1.c. 33.
The American Law Institute rule allows venue in any
district in which “a substantial part of the events or
omissions giving rise to the claim occurred.” 15 Wright
Miller & Cooper, Federal Practice and Procedure,
§ 3806, page 29, citing with approval Gardner Engineer-
ing Corporation v. Page Engineering Company, supra,
(C.A. 8 1978) 484 F.2d 27.
- The principles of the Gardner Engineering Company
case, supra, should be applied in this appeal separately
to the claim for relief of appellant Hawkins, and to the
claim for relief of appellant Cochrane.
A-17
III
Where the Claim of Hawkins Arose
On June 7, 1977 the defendant, Iowa Beef Processors,
acting through its counsel defendants Rothe and
Freeman, filed in the Northern District of Iowa and the
Southern District of New York, identical diversity civil
actions against Amalgamated Meat Cutters & Butcher
Workmen of North America, AFL-CIO (Union), Irving
Stern, Albert J. Krieger, Lex Hawkins, John A.
Cochrane, Hughes A. Bagley and Hans Aarsen. The civil
actions were based on alleged conduct by the defendants
in causing and inducing one Bagley, as former employee
of the plaintiff, to violate a contract by giving confiden-
tial information to the defendants in those actions. As
noted above, the elements of the claim of Hawkins for
relief for abuse of process were based on the service
upon him in the Southern District of Iowa of summons
and motions to produce in Chicago and New York
documents located in the Southern District of Iowa
(Appellants’ Brief 5-11). The alleged abusive process was
issued contemporaneously by the district courts of the
Northern District of lowa and the Southern District of
New York. Appellants claim that, under Iowa law, the
claims arose when the abusive process was served and
each sustained injury, citing Stoller Fisheries, Inc. v.
American Title Insurance Company, supra, 258 N.W.2d
336 (lowa 1977) and Wolfswinkel v. Gesink, 180 N.W.2d
452 (Iowa 1970) (Appellants’ Brief, 18, 19) for the rule of
‘substantive law that the claim arose only when injury
was caused.
In these circumstantes it is clear that under any of the
federal procedural standards mentioned above the claim
of Hawkins arose in the Southern District of Iowa.
A-18
The controlling opinion of this court in the Gardner
Engineering Corporation case, supra, requires a reversal
of the dismissal of the claim for relief of Hawkins,
because all three primary factors described by Mr.
Justice Blackmun ~. page 31 of 484 F.2d are related
only to the Southern District of Iowa.’ All contacts giv-
ing rise to the claim for relief occurred in the Southern
District of Iowa. The remaining two secondary factors,
interest. of the forum state (district here) and con-
venience point to venue in the Southern District of Iowa.
For if the claim related to the process issued in the
Northern District of Iowa arose in the Northern District
of Iowa, then a separate second claim arose in the
Southern District of New York. This assumption would
require the appellants to travel to New York to seek
satisfaction of their claims further proliferating this
growing mass of litigation. Such a result would violate
the rule of the Gardner Engineering case, supra, that
the convenience of the aggrieved party should be first
accommodated.
All alleged acts claimed by Hawkins to constitute tor-
tious interference with prospective advantage occurred
in the Southern District of Iowa.
Under the “weight of contacts” rule and the American
Law Institute rule, it follows for all of the same reasons
that the claim of appellant Hawkins arose in the
Southern District of Iowa. So that portion of the judg-
ment dismissing the complaint of appellant Hawkins
should be reversed and remanded.
’ Judicial efficiency and convenience require, when possible,
that this peripheral litigation be tried where the central an-
oy case be tried. This factor favors the Southern District
of Iowa.
A-19
Where The Claim of Cochrane Arose
The claim of appellant Cochrane is based primarily on
service of abusive process, and secondarily on tortious
interference with prospective advantage. All wrongful
acts alleged by appellants are included in paragraph 15
of a one count complaint.
On the abuse of process claim of Cochrane it is clear
that all process issued and served in the actions filed by
defendants in the Northern District of Iowa and the
Southern District of New York was served on appellant
Cochrane in the District of Minnesota (Appellants’ Brief
9).
It is claimed that the documents, the production of
which was sought by the appellees, were in the Southern
District of Iowa, and that the appellees sought to dis-
qualify the appellants in the related basic antitrust ac-
tion pending there.
For the same reasons given in the portion of this opin-
ion concerning the district in which the claim of
Hawkins arose, it is concluded that the claim of
Cochrane, if cognizable under Minnesota law, arose in
the District of Minnesota. All the five factors described
by Mr. Justice Blackmun and noted in the Gardner
Engineering Corporation case, supra, point to. the Dis-
trict of Minnesota. Cochrane’s convenience is ac-
commodated by permitting him to litigate in the district
in which he lives and practices. The principal acts and
injury of which he complains occurred there. The loca-
tion of the documents, and the complaints about the
appellants in MPIA v. Iowa Beef are secondary.
Under the “weight of contacts” rules the most signifi-
cant contacts and the most of the contacts occurred in
the District of Minnesota.
A-20
For these reasons that portion of the judgment dis-
missing the complaint of Cochrane is affirmed without
prejudice to his bringing an action in the District of
Minnesota.
IV
The Claims of Appellants Are
Not Compulsory Counterclaims
The appellees contend that the claims for relief of
appellants are compulsory counterclaims that appellants
were required to assert in the Northern District of Iowa
under Rule 13(a) F.R.Civ.P. (Appellees’ Brief IIA). We
disagree for the reasons set out below.
Rule 13(a) in the material part provides as follows:
“(a) Compulsory Counterclaims. A pleading shall
state as a counterclaim any claim which at the time
of serving the pleading the pleader has against any
opposing party, if it arises out of the transaction or
occurrence that is the subject matter of the op-
posing party’s claim and does not require for its ad-
judication the presence of third parties of whom the
court cannot acquire jurisdiction. But the pleader
need not state the claim if (1) at the time the action
was commenced the claim was the subject of
another pending action... .”
This provision of Rule 13(a) is not applicable because
(1) the claims of the appellants did not arise out of the
transaction or occurrence that is the subject matter of
the opposing party’s claim; (2) at the time the action
below was lawfully commenced the claims of appellants
were the subject of the action under review in the Dis-
trict Court of the Southern District of Iowa.
As an introduction to the discussion below some
material dates and uncontroverted legal aspects of the
litigation should be noted.
— ss
A-21
The actions of appellees in the Northern District of
Iowa and in the Southern District of New York were
each filed as a diversity action on or about June 7, 1977.
The defendant Union was named as a defendant. A un-
ion for diversity purposes is a citizen of each state in
which it had members.’ Because the Union had
members who were citizens of Nebraska, of which Iowa
Beef was a citizen, neither of the actions in the Northern
District of Iowa and in the Southern District of New
York was lawfully commenced on June 7, 1977.
Appellees in a brief filed in the district court on
September 6, 1977, admitted the lack of diversity in
those two actions (Appendix 65).
On July 22, 1977, appellants filed the action under
review in the Southern District of lowa as a diversity
action. It was not until August 1, 1977, that appellees
filed a complaint of which the District Court had
jurisdiction in which the Union was dropped as a party.
This was the date that the action in the Northern Dis-
trict of lowa was lawfully commenced.
The transaction or occurrence that was the subject of
the two actions in the Northern District of Iowa and in
the Southern District of New York is described in
appellees’ brief as follows:
The complaint alleged inter alia that Bagley, a
former high ranking IBP officer, had breached
both a settlement agreement with IBP which had
been negotiated after Bagley’s employment with
IBP had been terminated and also his fiduciary
duties to IBP by disclosing confidential IBP
documents and information to Hawkins, Cochrane,
Stern, Krieger and the Union. Aarsen, also a
former IBP employee, was also charged with
violating his fiduciary duties to IBP by wrongfully
8 United Steelworkers of America, AFL-CIO v. R.H.
ees ny, Inc., 382 U.S. 145, 86 S.Ct. 272, 15 L.Ed.2d 217
A-22
disclosing confidential IBP documents. The other
defendants, including Hawkins and Cochrane, were
charged with inducing Bagley’s breaches of con-
tract and violations of fiduciary duties and with
conspiring to do those wrongful acts.
The Action of Appellants in the
Southern District of Iowa Did Not
Arise Out of the Transaction
That Is the Subject Matter of Appellants’ (sic)
Claim in the Northern District of Iowa.
The gist of the action of appellants filed in the
Southern District of Iowa was abuse of process and tor-
tious interference with prospective advantage by a series
of acts alleged in paragraph 15 of appellants’ complaint.
The central theme of appellants’ complaint is abuse of
legal process. In no substantial sense can appellants’
claims for relief for abuse of process be found to have
arisen out of the alleged breach of contract by Bagley
and out of the alleged breach of fiduciary duties by
Bagley and Aarsen.
This conclusion is supported by the scholarly opinion
of Judge Julian in a similar case, Bose Corporation v.
Consumers Union of United States, Inc., (D. Mass. 1974)
384 F. Supp. 600. After a review of the applicable case
law, and the various tests described in 6 Wright &
Miller, Federal Practice and Procedure § 1410, Judge
Julian concluded:
The: counterclaims can be read to allege malicious
abuse of process. The analysis is similar to the
analysis concerning defamation; the counterclaims
are permissive and are barred unless operation of
the statute of limitations was suspended. The
counterclaims also can be read to assert a claim for
malicious prosecution of a civil action. Such a claim
we (ode ee ee Cate ee ee
A Pi lh I ha
rs + ee ah a re he PS
A-23
is premature; the defendant must, and cannot,
allege a favorable termination of this suit if it is to
proceed on a theory of malicious prosecution.
(Emphasis added.) 384 F.Supp. 1.c. 603.
The varying tests for determination whether the claim
in question arose out of the same transaction or oc-
currence, within the meaning of Rule 13(a) are set forth
in 6 Wright & Miller, Federal Practice and Procedure
§ 1410 at page 42 as follows:
1) Are the issues of fact and law raised by the
claim and counterclaim largely the same?
2) Would res judicata bar a subsequent suit on
defendant’s claim absent the compulsory
counterclaim rule?
3) Will substantially the same evidence support or
refute plaintiffs claim as well as defendant’s
counterclaim?
4) Is there any logical relation between the claim
and the counterclaim? (Footnotes omitted.)
Under these tests, as concluded by Judge Julian in the
Bose Corporation case, supra, the claims for relief of
appellants for abuse of process did not arise out of the
transaction or occurrence described in appellees’ com-
plaints in the Northern District of Iowa.’
The reasoning of Judge Julian and the authorities
cited are fully applicable to this case, in which the fac-
tual contrast between the claims of appellants and the
transaction or occurrence of appellees’ claim for relief
are much clearer.
® Even if it arose out of the same transaction or occurrence,
a claim for relief that has not matured need not be asserted as
a compulsory counterclaim. 6 pai & Miller, Federal Prac-
tice and Procedure, § 1411, pages 54-55. It is not necessary to
discuss this exception.
A-24
Appellees contend that representations made by
appellants to the Judicial Panel on Multidistrict Litiga-
tion, in a motion to transfer the appellees’ actions in the
Southern District of New York and in the Northern Dis-
trict of Iowa to Judge Hanson in the Southern District
of Iowa, establish that the three actions arise out of the
same transaction and occurrence (Appendix 19-21).
While paragraph 2 of the motion contains a legal conclu-
sion lending some support to the construction of
appelllees, paragraphs 4 and 5 clearly describe the
difference in the claims noted above. Further, the full
pleadings are before us for a determination from the
primary evidence.
At the Time the Acfion of Appellees
in the Northern District of Iowa Was Lawfully
Commenced, Appellants’ Action Was Pending
in the Southern District of Iowa.
It was not until August 1, 1977, when the appellees
filed an amended complaint in the Northern District of
Iowa alleging diversity of citizenship, that the action of
appellees was lawfully commenced. At that time the ac-
tion of appellants was pending in the Southern District
of Iowa on the basis of uncontroverted diversity of
citizenship.
An action is not lawfully commenced within the mean-
ing of Rule 13(a) when a complaint disclosing absence of
jurisdiction on its face is filed. Appellees seek to avoid
this conclusion by relying on the following provision of
Rule 1c):
Whenever the claim or defense asserted in the
amended pleading arose out of the conduct, transac-
tion, or occurrence set forth or attempted to be set
forth in the original pleading, the amendment
relates back to the date of the original pleading.
ee ee ee ee
A-25
The relation back rule is not applicable if the new
claim did not arise out of the same transaction or oc-
currence. Hale v. Ralston Purina Company, (C.A. 8
1970) 432 F.2d 156. For the same reason it cannot affect
the claim of appellants in a separate suit.
The purposes for which this provision of Rule 15(c),
F.R.Civ.P., were intended do not include a procedural
fiction applicable to changing the facts in civil actions
competing for priority in filing under Rule 13(a)
F.R.Civ.P.
The purposes of Rule 15(c) are discussed in detail in 3
Moore's Federal Practice 115.15. The relation back
provision of Rule 15(c) is not applicable as contended by
appellees.
For the foregoing reasons that portion of the judgment
of the district court dismissing the claim for relief of
appellant Hawkins is reversed and the cause remanded
for further proceedings on the claim for relief of the
appellant Hawkins. That portion of the judgment dis-
missing the claim for relief of appellant Cochrane for
lack of venue is affirmed.
A true copy:
Attest:
CLERK, U.S. CourRT OF APPEALS,
8th CIRCUIT.
A-26
UNITED STATES COURT OF APPEALS
For The Eight Circuit
September Term, 1978
77-1988 and 78-1008.
77-1988.
John A. Cochrane,
Appellant,
v.
Iowa Beef Processors, Inc., et al,
Appellees.
78-1008.
Lex Hawkins,
Appellant,
v.
Iowa Beef Processors, Inc., et al,
Appellees.
Appeals from the United States District Court for the
Southern District of Iowa.
The Court having considered petition for rehearing en
banc filed by counsel for appellees and, being fully ad-
vised in the premises, it is ordered that the petition for
rehearing en banc be, and it is hereby, denied.
All of the Judges who have voted on the petition for
rehearing en banc have voted no with the exception of
Judge Bright. Judge Lay has recused himself from
voting.
Considering the petition for rehearing en banc as a
petition for rehearing, it is ordered that the petition for
rehearing also be, and it is hereby, denied.
March 5, 1979
a ee |
a Be
eh ES I et me
ne I na oy Re a A a
A-27
UNITED STATES COURT OF APPEALS
For The Eighth Circuit
No. 78-1008
John A. Cochrane,
Appellant,
v.
Iowa Beef Processors, Inc., Edward W. Rothe and Lee
Freeman, Sr.,
Appellees.
No. 77-1988
Lex Hawkins,
Appellant,
v.
Iowa Beef Processors, Inc., Edward W. Rothe and Lee
FREEMAN, Sr.,
Appellees.
Appeals from the United States District Court for the
Southern District of lowa.
DISSENT TO ORDER DENYING
REHEARING EN BANC
BRIGHT, Circuit Judge.
I dissent from the denial of the petition for rehearing.
I recognize that a decision of a panel of this court which
does not dispose of the merits of a case is usually not a
good candidate for en banc consideration. Nevertheless,
it appears to me that the panel’s opinion on the venue
issue ought to be reconsidered.
I. Factual Summary.
On June 7, 1977, Iowa Beef Processors, Inc. (IBP),
filed identical diversity actions against Hawkins,
A-28
Cochrane and others in the Northern District of Iowa
and in the Southern District of New York, alleging,
among other things, a conspiracy by Hawkins and
Cochrane to defame IBP. IBP amended its complaints
on August 1, 1977, dropping as a defendant a nonessen-
tial party whose presence arguably precluded diversity
jurisdiction.!
On July 22, 1977, Hawkins and Cochrane (appellants)
filed suit in the Southern District of Iowa against IBP
and its counsel, Messrs. Rothe and Freeman (collective-
ly, the appellees), alleging that the appellees had abused
judicial process in IBP’s Northern District of Iowa and
New York lawsuits.?
On November 17, 1977, Chief Judge William C. Stuart
(United States District Court for the Southern District
of Iowa) granted the appellees’ motion to dismiss the
appellants’ abuse of process actions in the Southern Dis-
trict of Iowa, holding that Hawkins’ and Cochrane's
claims arose in the Northern District of Iowa. The pres-
ent appeal followed.
Il. The Venue Issue.
Appellant Hawkins’ abuse of process claim against the
appellees is identical in substance to the claim of
appellant Cochrane, and the disposition of each of those
' IBP voluntarily dismissed the New York action without
prejudice on October 6, 1977.
* Specifically, the alleged abuse of process consisted of: (1) filing
Suit; (2) serving summons; and (3) serving a document request
assertedly calling for Hawkins’ and Cochrane’s work product
as counsel in Meat Price Investigators Association IA] v.
lowa Beef Processors, et al., an antitrust suit originally filed in
the Southern District of Iowa on August 10, 1976, but
transferred to the Northern District of Texas on June 7, 1977.
A-29
claims will require identical factual inquiries concern-
ing the appellees’ motivation in filing IBP’s action,
alleged to be abusive of process, in the Northern District
of Iowa.’ Moreover, it seems that the single forum which
may most conveniently undertake such factual inquiries
is the district in which the appellees filed their lawsuit,
the Northern District of Iowa. Yet, according to the pan-
el opinion, the substantially identical claims of Hawkins
and Cochrane must be tried in two different forums:
respectively, the Scuthern District of Iowa and the Dis-
trict of Minnesota.
That result is obviously impractical and potentially
wasteful of judicial and legal time and resources, and I
suggest that the panel’s reasoning is unsound.‘
8’ Under Iowa law, which the panel apparently assumes
governs the merits of this action, see panel slip op. at 11-12,
tortious abuse of process is defined as follows:
Abuse of process, * * *, is the intentional use of “—
rocess for an improper purpose incompatible with the
awful function of the process by one with an ulterior
motive in doing so, * * *. The improper use which is the
essence of the tort is ordinarily ar attempt to secure from
another some collateral advantage not properly includable
in the process itself, and is, in Prosser’s words, ‘a form of
extortion’ in which a lawfully used process is perverted to
an unlawful use. [Sarvold v. Dodson, 237 N.W.2d 447, 449
(Ia. 1976) (quoting Hyde Construction Co. v. Koehring Co.,
387 F. Supp. 702, 712-13 (S.D. Miss. 1974).]
4 In ruling that Hawkins’ claim arose in the Southern Dis-
trict of lowa and that Cochrane’s claim arose in the District of
Minnesota, the panel opinion relies heavily upon Gardner
Engineering Corp. v. Page Engineering Co., 484 F.2d 27 (8th
Cir. 1973) and the “factors (concerning the connection between
a cause of action and a state] described by Mr. Justice
Blackmun on page 31 of 484 F.2d * * *.” Panel slip op. at 15.
See id. at 17. Re
Such reliance is misplaced. Although the Gardner Engineer-
ing decision contains some discussion of a venue problem, 484
F.2d at 32-33, that discussion seems of little relevance here. In
(Footnote continued on following page) ~
A-30
The panel indicates that, if venue is proper in the dis-
tricts where IBP filed its allegedly abusive lawsuits,
Hawkins and Cochrane would need to bring abuse of
process actions in New York as well as in the Northern
District of Iowa, “further proliferating this growing
mass of litigation.” Cochrane v. Iowa Beef Processors,
Nos. 77-1988, 77-1008, slip op. at 15 (8th Cir. Jan. 5,
1979). However, if venue is proper in the Northern Dis-
trict of Iowa, Hawkins and Cochrane could join, as pen-
dent claims in their Northern District of Iowa action,
any cause of action arising out of IBP’s alleged abuse of
the New York court’s process. See Fed. R. Civ. P. 18(a).
Surely, the convenience of the parties and the courts is
best served by litigation of Iowa Beef’s conspiracy action
and of Hawkins’ and Cochrane’s peripheral abuse of
process actions in a single forum, which can only be ac-
complished in the Northern District of Iowa. Instead,
the panel itself has “proliferat{[ed] this growing mass of
litigation,” by scattering these related actions to three
separate forums.
I think the district court correctly determined that,
for purposes of venue under 28 U.S.C. § 1391(a), the
appellees’ abuse of process claims “arose” in the
Northern District of lowa and that venue was properly
in that district. In so ruling, the district court stated:
In the present action, the Court finds the place of
injury to be in the Northern District of Iowa. It is
there, by filing an action against Hawkins and
Cochrane, that defendants are alleged to be doing
that which should not be done. While the injury
4 continued
any event, the “factors” referred to and relied upon in the
panel cpinion bear upon whether a state has sufficient con-
tacts with the subject of an action for jurisdiction to exist in
— State, not upon whether venue was proper, the issue in
this case.
ABER INS MS ta ei =
Pisicniaiccnts
A-31
may have effects in this district [the Southern Dis-
trict of Iowa], the overt act giving rise to the injury
was the filing of an action in the federal court for
the Northern District of Iowa.
To prove “abuse of process”, plaintiffs must show
that defendants seek to pervert the use of judicial
process in the Northern District, and do so for an
ulterior motive. Sarvold v. Dodson, 237 N.W.2d 447
(Iowa 1976). The Northern District Court is in a far
better position to make such a determination.
Though perhaps propelled by facts uncovered in an
action elsewhere, defendants’ action in the Northern
District, based upon inducement to breach contract,
is entirely different from the action allegedly in-
terfered with in this Court, which focuses on an-
titrust violations. This Court should not attempt to
tell the Northern District Court that a case pending
on its docket was abusing its processes and was but
a facade, much less—as plaintiffs request—enjoin
the Northern District Court from processing that
case. Also, if the Northern District proceeds on both
actions, the possibility that rulings of this Court and
the United States District Court for the Northern
District would come into direct conflict is
eliminated.
I agree with the district court’s reasoning on this issue.
The effect of the panel decision is to place this court’s
imprimatur upon the obvious forum-shopping by at-
torneys Hawkins and Cochrane. A reconsideration and
reversal of the panel opinion by the full court would
demonstrate that such lawyers’ tactics, which needlessly
complicate the disposition of federal litigation, ought to
receive short shrift.
4
A-32
Accordingly, I would grant the petition for rehearing,
vacate the panel opinion, and affirm the district court.5
A true Copy:
Teste:
CLERK, U.S. COURT OF APPEALS,
EIGHTH CIRCUIT.
5 In light of the nature of the abuse of process action under
Iowa law, see note 1 supra, I agree with the panel’s deter-
mination that the appellants’ abuse of process claims did not
arise from the same transaction as Iowa Beef Processors’ ac-
tion in the Northern District of Iowa, and were therefore not
compulsory counterclaims in that action.
I am troubled, however, by the panel’s alternative ruling on
the compulsory counterclaim issue. The panel determined that
the appellants abuse of process actions were filed prior to the
effective date of IBP’s complaint in the Northern District of
Iowa and therefore could not be compulsory counterclaims in
IBP’s action, under Fed. R. Civ. P. 1 (a). See panel slip op. at
22-23. In so ruling, the panel concluded that, for purposes of
Rule 13(a), IBP’s amended complaint in the Northern District,
altered to perfect diversity jurisdiction, does not relate back to
the date of IBP’s origina! complaint. Such a restrictive
reading of the relation back rule of Fed. R. Civ. P. 15(c) lacks
yy ae in the language of the rule, in case law, or in policy.
Although I have found no case considering this question in the
context of Rule 13(a), prior decisions of this and other courts
have indicated, without exception, that a complaint amended
by dropping nonessential parties to perfect diversity jurisdic-
tion relates back to the date of the — pleading. E.g.,
Finn v. American Fire & Casualty Co., 207 F.2d 118, 116 (5th
Cir. 1953); Brown v. Texas and Pacific R.R. Co., 392 F. Supp.
1120, 1124 (W.D. La. 1975). See International Ladies’ Garment
Workers’ Union v. Donnelly Garment Co., 121 F.2d 561, 563
(8th Cir. 1941) (dictum); 3A Moore's Federal Practice
21.03[2] (1978). Cf. Interstate Refineries Co. v. Barry, 7 F.2d
48, 550 (8th Cir. 1925) (in accord with relation back rule, but
pre-Federal Rules).
B-1
APPENDIX B
HEARING BEFORE
JUDICIAL PANEL ON MULTIDISTRICT LITIGATION
IN RE: IOWA BEEF PROCESSORS EMPLOYMENT
TERMINATION CONTRACT LITIGATION
Courtroom No. 1
Post Office & Courthouse
Boston, Massachusetts
September 30, 1977
Judge Weinfeld: We will not call the next case.
It is No. 315, In re Iowa Beef Processors. ;
Mr. Greer: May it please the Court, my name is
John Greer from Spencer, Iowa. I represent the two
lawyers, Mr. Cochrane and Mr. Hawkins.
The position of the defendants is that Mr.
Hawkins is an Iowa lawyer and Mr. Cochrane is a
Minnesota lawyer. We were sued by Iowa Beef
Processors in the Southern District of New York
and in the Northern District of Iowa.
Mr. Cochrane and Mr. Hawkins brought the case
against Iowa Beef Processors and Mr. Freeland
(sic) and Mr. Roth (sic) in the Southern District of
Iowa.
All of this arose out of other multidistrict litiga-
tion, as the Panel is well aware, or at least an inci-
dent that was related to it.
Judge Hanson referred a motion brought by one
of the defendants in the wheat (sic) price fixing
cases—Spencer Foods. In that case Beef Processors
was not a mover.
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Before that matter was decided by Judge Hanson
they brought this action against these lawyers.
Professionally, I must state, that the lawyers have
had nothing to do with New York in any sense of
the word.
Judge Weinfeld: You mean the two lawyers you
represent?
Mr. Greer: Yes, sir.
Judge Weinfeld: There is an indication that the
New York action was brought really to make sure
that an action was pending in one court or the
other—Iowa or New York.
Mr. Greer: I realize that is what the brief says,
your Honor, but we were obliged to employ counsel
and defend ourselves in the Southern District of
New York, and it is still pending, and it is germane
to our case here.
No matter the representation that is made by the
defendants, I don’t think that we have had at any
time any business in New York, but they chose to
do that.
Judge Weinfeld: Well, Mr. Krieger is a defen-
dant in that case, is he not, and he practices law in
New York, although he claims he is no longer
domiciled there.
Mr. Greer: That is true, your Honor. I have just
met him during some discovery at Sioux City. I un-
derstand he is a New York lawyer who lives in
Miami and I don’t believe that he takes a position
that is contrary to ours.
Judge Weinfeld: Well, assume the cases should
be consolidated or transferred. Why do you prefer
one district over the other? I have a little difficulty
in following the arguments made in the briefs. How
far is Sioux City? Is that where you want the action
to remain?
Mr. Greer: I would prefer that it be Des Moines.
_ Judge Weinfeld: Why do you want Des Moines
instead of Sioux City? What is the difference in
mileage? I had great difficulty in following the
arguments.
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Judge Harper: There is a terrific difference in
the status of the two districts, as far as being
current is concerned. Des Moines is bogged down
very, very badly. They did seek, and the Conference
recommended, an additional judge. The other one is
current, except with respect to Judge Hanson, who
carries part of the docket. Isn’t that correct?
Mr. Greer: I think that is correct, your Honor.
Simply stated, Judge, the two men who are in-
dividual defendants, a man named Aarsen and
another named Bagley, they were former employees
of Iowa Beef Processors. They are now employed by
Spencer Foods. We have a direct flight at 6:30 in
the morning to Des Moines. We don’t have any way
of getting to Sioux City, short of driving, and,
although Sioux City is a shorter distance, it
presents a much greater problem for attendance at
the preliminary matters.
Judge Wisdom: You mean there is no airport in
Sioux City?
Mr. Greer: There is an airport but no way to fly
from Spencer to Sioux City, your Honor.
Judge Weinfeld: What is the mileage?
Mr. Greer: About a hundred miles there and
about a hundred and 30 miles by air to Des
Moines—165 by car—but, for 15 years Judge Han-
son, who lives at Jefferson, which is between Des
Moines and Sioux City, has handled matters in the
Southern District, as well as matters in the
Nor’hern District. Judge Hanson has retired. He is
on senior status.
Judge Harper: When did that occur?
Mr. Greer: August 15, your Honor.
Judge McManus sits at Cedar Rapids, Iowa, and
they are having new district attorney appointments
in the Northern District, and he anticipates a con-
centration of work at Cedar Rapids, at least that is
what I have been told.
It makes no difference to us which judge handles
this case—absolutely no difference. 1 am satisfied
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with all of our Federal Judges in lowa and have
been all my life.
The convenience of the parties would indicate
that Judge Hanson could manage these matters,
because he is more familar with them, and,
primarily, we are going to be engaged in
discovery—
Judge Wisdom: Well, your adversary suggests
the reason you want it before Judge Hanson is
because you got a favorable decision on a motion
made with respect to the attorneys, which is in the
papers. I believe that is where I got it from.
Mr. Greer: They have appealed Judge Hanson’s
order, but I don’t think that they have made any
motion with respect to—
Judge Weinfeld: Is that an appealable order?
Mr. Greer: I don’t think so, your Honor.
Judge Weinfeld: That was made under the local
rules in Iowa, wasn’t it?
Mr. Greer: Yes, your Honor.
Judge Harper: I really don’t know what you are
talking about, In other words, he is retired and they
have one other judge there, who is now the senior
judge, and they are going to get another one. Judge
Hanson was a traveling judge, carrying half the
docket in each place. In other words, you could get
him in either spot, couldn’t you?
Mr. Greer: That is exactly what I am saying. It
will be more convenient, especially for the people
who don’t have money—
Judge Weinfeld: Who doesn’t have money in this
case?
Mr. Greer: Not the people I represent, you
Honor, but the two individual employees.
For instance, in one day of the deposition where
I am deposing the general counsel of IBP there are
82 objections, all which require rulings by a court.
Judge Harper: 82 objections to what?
Mr. Greer: Based on privilege.
— Harper: You mean Interrogatories or
what:
“tui - sbiitbns eda
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Judge Weinfeld: It is evident, Mr. Greer, this is
a donnybrook and it is a case of crimination and
recrimination charges and countercharges, and
carrying with it the usual bitterness—that type of
litigation—and so it doesn’t surprise me that almost
every question that is put to a witness would draw
an objection. I think this is the nature of the litiga-
tion you are in. I think that is a realistic statement
of what this case is about.
Judge Wisdom: Mr. Greer, you have exceeded
your time by double.
Mr. Greer: I am sorry.
Judge Wisdom: We will still give you a couple of
minutes for rebuttal.
Mr. Greer: I am sorry.
Judge Wisdom: I hope it won’t take you twice as
long as Mr. Greer, Mr. Rothe, to state your case.
Mr. Rothe: I think I can be shorter than the 20
minutes I asked for.
My name is Edward Rothe. I am from Chicago. I
represent Iowa Beef Processors, the plaintiffs in
both the New York and the Sioux City cases, and a
defendant in the Des Moines case. I also speak for
myself and my partner, who are defendants in the
Des Moines case, alleging abuse of process and
bringing the New York and Sioux City cases.
Judge Weinfeld: Do you think you ought to
represent yourself as a defendant?
Mr. Rothe: So far, your Honor.
Judge Weinfeld: I think what I said a moment
ago, in all seriousness, is the truth. This is a don-
nybrook in a case of charges and countercharges
about everything.
Mr. Rothe: I fear that is true, your Honor. I
could not otherwise characterize it myself.
I would like to say that I am one of the defen-
dants who doesn’t have money in the case, in
response to an earlier question, and the two other
defendants who were identified as not having
money, the two former IBP employees, Aarsen and
Bagley, Mr. Greer referred to the fact it would be
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more conveniently situated in Des Moines than
Sioux City. Both of those people reside in the
Northern District of Iowa and both have asked this
Panel that it not be transferred to Des Monies, but,
rather, retained in Sioux City.
I should also like to comment on the convenience
of the matter to counsel. All of the parties have
retained counsel in Sioux City, or in the Northern
District, including Hawkins, and Mr. Greer himself
is from Spencer, in the Northern District.
With respect to the convenience of flying, I un-
derstood, at least during the depositions we took in
Sioux City by agreement in all of the cases, that
Mr. Greer has at his disposal a private plane. He
flew from Spencer to Sioux City and I can’t im-
agine that was very inconvenient for him.
Pag individual defendant Bagley lives in Sioux
ity.
Judge Weinfeld: Is Bagley the one that gave the
convenant which started the suit, this series of
suits?
Mr. Rothe: That is correct. He lives in Sioux
City. The covenant was executed in Sioux City.
It seems to me that nothing points to Des Moines
except the desire of Mr. Hawkins, who does reside
in Des Moines and practices there, to have the case
there. None of the other parties has really requested
that the case go to Des Moines. The union people
who have been sued as class representatives are
out of Chicago. They have said they don’t care, just
so long as it is an Iowa district. Krieger, who is a
New York lawyer, as you know, Judge Weinfeld,
has said he doesn’t care where it is tried, but does
not request Des Moines specifically.
We urge Sioux City because, otherwise, the tail
would wag the dog.
I~would like to bring up a little bit on the events
to dase. I had volunteered in our original submis-
sion to the Panel that there were ways to eliminate
the complexity of this litigation, one of wnich would
be for the defendants in either New York or Sioux
=“
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City to waive any possible venue and jurisdiction
problems personally. Just yesterday I was notified
that Stern, who is the union man in New York, and
might have a venue objection for Iowa—Sioux
City—has said that he will waive venue and per-
sonal jurisdiction objections.
His Pleading in lowa has not been filed. It is
overdue.
Judge Weinfeld: Where does he suggest it
should go? Sioux City?
Mr. Rothe: He doesn’t take a position. He did not
file a response to the motion.
Now, since he has waived or says he will when he
files his Answer, which he has not yet done because
he is asking for extensions, due to the pendency of
the matter before the Judicial Panel, I have been
urging: Let’s find out whether you are going to
claim venue or personal jurisdiction problems, and
I feel that maybe we can resolve this. I think maybe
we have, since he has said he will waive venue and
personal jurisdiction in Sioux City, and since the
other defendants have filed Motions to Dismiss for
lack of diversity jurisdiction in Sioux City, without
coupling with them either venue or personal
jurisdiction objections—I take it those have been
waived—and, therefore, I think we are in a position
to dismiss the New York action without prejudice
and allow the Sioux City action to continue. There
are motions on file in both Des Moines and Sioux
City which would force the Des Moines action to be
a compulsory counterclaim to the Sioux City action,
and so what have been three will be one, I think.
Judge Weinfeld: How do you get to Sioux City
from Chicago? Is one place as convenient to you as
the other?
Mr. Rothe: It really is. There are many, many
flights to Sioux City. My client is across the river
from Sioux City, so I am always there.
I think the practical answer is that the case
doesn’t really need to be before the Judicial Panel. I
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think that, by the consent to the venue in Iowa, it
will enable me—
Judge Weinfeld: You say that Stern has in-
dicated waiver of venue, but there is nothing before
the Panel to indicate that.
Mr. Rothe: I only got the letter yesterday. I
offered both in my submission here and I would say
orally that if the defendants could get together and
decide where they wanted the case, fine, we’d dis-
miss one or the other.
All of the other defendants said that we could
consent to venue in Iowa, except Stern, and all have
filed a motion which, I take it, would be a consent
to venue in personal jurisdiction there, except
Stern, whose Answer was due on September 26th to
the Complaint, but, as far as I know, nothing has
been filed, at least I haven’t been served. I do have
the letter, however, that says that. I do know that
there is nothing before the Panel, however, on this.
That is true.
Judge Wisdom: Mr. Greer, you have a couple of
minutes.
Mr. Greer: Mr. Bagley still has a home in Sioux
City, but he is employed at Spencer and is at
Spencer every day.
Judge Weinfeld: How far is Spencer from Sioux
City and how far is it from Des Moines?
Mr. Greer: About 100 miles, you Honor from
Sioux City to Spencer and about 160 miles from
Sioux City to Des Moines, but the distance is really
not our real problem. It is the management of the
discovery. That is our real problem.
I think that either judge will be satisfactory, as I
have previously said. Judge Hanson will be in the
position to give us that time.
Judge Harper: Judge Hanson is in the most for-
tunate position where he doesn’t have to give
anybody any time, if he doesn’t want to, that is, if
he is retired, as you say.
Mr. Greer: Right, your Honor.
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If it is possible, I would suggest that someone
representing the Panel talk with both judges before
this decision is made, because we do have some par-
ticular problems in Iowa, not just the amount of
documents.
Judge Weinfeld: Your adversary suggests the
possibility that if the Panel didn’t act that the
matter be resolved in terms of dismissal or agree-
ment. What is your view about that?
Judge Weigel: Dismissal of one suit someplace.
Judge Weinfeld: Do you mind if I ask Mr. Rothe
a very direct question?
I got the impression that somehow you did not
want the case transferred to a district where Judge
Hanson would preside over the case. Am I wrong
about that? Was that because he decided the motion
made with respect to disqualification of the
lawyers?
Mr. Rothe: I would say there are two reasons.
That is part of it, your Honor.
Judge Harper: Can I get into this: Judge Han-
son is in both of them. It doesn’t make any
difference where it goes. He is the one that it will
go to. They don’t get away from him in either court.
Mr. Rothe: Except the judge to whom it is
assigned now is Judge McManus.
Judge Harper: I understand, but Judge Hanson,
as a roving Judge in both of those areas, carries
part of the Cedar Rapids, as well as part of the Des
Moines docket.
Judge Weinfeld: It doesn’t follow it would be
assigned to him.
Mr. Rothe: Well, yes, of course, I have read
Judge Hanson’s decision in the ethical violation mo-
tion made by Spencer which, incidentally, is not be-
ing appealed by us, as you may have gathered from
Mr. Greer. It is being appealed by Spencer to the
Eighth Circuit.
We had a similar motion pending, which is now
deferred, by Judge Hanson and, therefore, is before
Judge Taylor, as a result of the transfer of the beef
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litigation to Dallas. So we have a motion that is
pending and is in limbo right now.
The other reason, aside from Judge Hanson’s ear-
ly expression of reluctance to get into the ethical
problems that we think we are going to be raised in
the case, another thing is the fact that I don’t think
that a lawyer ought to be able to violate the com-
pulsory counterclaim rule, Rule 18(a), file a
malicious prosecution action for our having brought
the Sioux City case in another forum, I suggest to
you ostensively to obtain the venue of Judge Han-
son, who ruled favorably, and then use that as a
device to leverage transfer by this Panel. I think
there are considerations as to what this Panel is for
and who ought to invoke its process and how that
enters into this question of whether it goes to Judge
Hanson or not.
I would not move to recuse Judge Hanson at all.
He is a fine judge.
Judge Weinfeld: If the New York action is
eliminated, there are only two actions persling.
Mr. Rothe: That is correct, and there are
motions pending in both courts to consolidate those
because of the compulsory counterclaim nature of
the malicious prosecution action.
Judge Weinfeld: If there are two actions pend-
ing, why wouldn’t it be appropriate for the
lawyers to move, under 1404(a) for a transfer and
let the Court there decide it?
Incidentally, I am informed that Mr. Cammer,
who represents Stern, is here. He has not asked for
permission to speak, but he did write a letter and
said that he was consenting.
Are you prepared to make a statement on the
record that you will waive the venue and jurisdic-
tion?
Mr. Cammer: We have done it by letter.
Judge Weinfeld: That leaves just two actions.
Mr. Rothe: I think so, and the mechanics for get-
ting them together through the compulsory
counterclaim motion is pending.
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(Bench conference off the record.)
Judge Weinfeld: We have had a little bench con-
ference and we have decided, since there are only
two actions, we will just leave them where they are.
Thank you very much, gentlemen. Have a good
trip back.
(Whereupon, the hearing was adjourned.)
DOCKET NO. 315
Before the Judicial Panel on Multidistrict Litigation
In re Iowa Beef Processors Employment Termination
Contract Litigation.
ORDER DENYING TRANSFER
(Filed in U.S. District Court October 7, 1977)
The Panel ruled from the bench at the hearing on this
matter that the three actions involved in this litigation
do not share unusally complex questions of fact and that
transfer of these actions to a single district pursuant to
28 U.S.C. § 1407 for coordinated or consolidated pretrial
proceedings would not necessarily serve the convenience
of the parties and witnesses or promote the just and ef-
ficient conduct of the actions.!
It Is Therefore Ordered that transfer pursuant to Sec-
tion 1407 of the actions listed on the attached Schedule
A be, and the same hereby is, Denied.
For the Panel:
JOHN MINOR WISDOM
Chairman
' See In re Scotch Whiskey, 299 F. Supp. 543, 544
(J.P.M.L. 1969).
C-1
APPENDIX C
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF IOWA
WESTERN DIVISION
IowA BEEF PROCESSORS, INC.,
Plaintiff,
v
PATRICK E. GORMAN, HARRY R. POOLE, and SAM
TALARICO, as representatives of the members of
AMALGAMATED MEAT CUTTERS AND BUTCHER WORK-
MEN OF NORTH AMERICA, AFL-CIO; IRVING STERN;
ALBERT J. KRIEGER; LEX HAWKINS; JOHN A. COCH-
RANE; HUGHES A. BAGLEY; and HANS AARSEN,
Defendants.
No. C 77-4040
ORDER
(Filed Feb 13 1978)
The matter before the court is the latest imbroglio of
the parties.! Pending motions are:
(1) Defendant John A. Cochrane’s resisted motions to
dismiss and for a protective order, both filed July 22,
1977. Denied.
' The court has examined the transcript of the hearing
before the Judicial Panel on Multidistrict Litigation
Foe ars rege 30, 1977) wherein Judge Weinfeld described this
itigation as “a donnybrook .. . [and] a case of crimination
and recrimination charges and counter-charges, and carrying
with it the usual bitterness . . . [where] almost every question
?
that is put to a witness would draw an objection”. The record
to date appears to support this assessment.
C-2
(2) Defendant Lex Hawkins’ resisted motions to
dismiss and for a protective order, both filed July 22,
1977. Denied.
(3) Defendant Albert J. Krieger’s resisted motion to
dismiss filed August 15, 1977. Denied.
(4) Plaintiffs resisted motion to enjoin a separate
action filed in the United States Court for the Southern
District of Iowa filed August 15, 1977. Denied.
(5) Defendants Hawkins and Cochrane’s resisted
motions to dismiss and for a protective order, both filed
August 30, 1977. Denied.
(6) Defendants Amalgamated Meat Cutters and But-
cher Workmen of North America, AFL-CIO (Union),
Patrick E. Gorman, Harry R. Poole, and Sam Talarico’s
resisted motion to dismiss filed September 6, 1977.
Denied.
(7) Plaintiff's resisted motion to compel production of
documents filed September 8, 1977. Granted.
(8) Defendant Irving Stern's resisted motion to
dismiss filed September 26, 1977. Denied.
(9) Plaintiff's resisted motions for summary judg-
ment, for a protective order and to compel discovery, all
filed October 28, 1977. Granted and denied in part.
(10) Defendants Hawkins and Cochrane’s resisted
motion to compel answers to deposition questions filed
December 13, 1977. Granted and denied in part.
In this diversity action plaintiff seeks damages and
injunctive relief against defendants for their role in the
alleged malicious inducement to breach and breach of a
settlement agreement between plaintiff and defendant
Hughes A. Bagley [Bagley], plaintiff's former Vice-
President.? Plaintiff claims that Bagley met with the de-
® The settlement agreement, summarized, compromised
Bagley’s compensation claims under his employment contract
(Footnote continued on following page)
C-3
fendants several times and provided copies of plaintiff's
documents, secured with the help of defendant Aarsen,
to the defendant attorneys for the purpose of aiding anti-
trust litigation pending against plaintiff in Texas,
(M.D.L. No. 248). Plaintiff alleges that the conduct by
Bagley violates both the terms of his settlement
agreement and his fiduciary duty to the company and
that it was knowingly and maliciously induced by
various defendants who conspired to use the inside
information to cause damage to IBP’s business.
Motion to Dismiss for Lack of
Subject Matter Jurisdiction
Plaintiff originally brought this suit against inter alia
the Union as an entity. Defendants Hawkins and
Cochrane originally sought to dismiss for lack of
2 continued
and released IBP from latent suits by Bagley in return for a
release of Bagley from a covenant not to compete contained in
his employment contract and a release of any cause of action
IBP may have had to the time of the settlement agreement.
Paragraph 3.2 of the covenant bound Bagley to refrain from
assisting third-party litigation against IBP, stating:
3.2 BAGLEY, for himself and heirs, legal represen-
tatives and assigns, covenants with IBP to forever refrain
from aiding, abetting or in any way assisting any third
person not a party to this agreement in the bringing of
any action or the prosecution of any claim or demand of
whatever kind or nature against IBP for any matter, fact.
circumstances, sag cong agp thing whatsoever occurring
or failing to occur from the beginning of the world to the
day of the date of these presents. BAGLEY hereby agrees
that any breach of this covenant by him would not be ade-
quately compensable in damages and agrees that, in the
event of any breach by him of said covenant, IBP shall, in
addition to any claim for damages for breach of covenant
to which it may be entitled, be authorized and entitled to
seek and obtain equitable relief by way of injunction or
otherwise in a court of competent jurisdiction.
C-4
diversity averring that the Union had many members of
Nebraska citizenship, the citizenship of plaintiff. Plain-
tiff then amended its complaint to drop Amalgamated
and add its three top officers as representatives of the
union and its members. The purpose of the amendment
as stated in plaintiffs brief was to “utilize ... the
procedure provided in Rule 23.2 of the Federal Rules of
Civil Procedure added in 1966 to avoid the absurdities
created by the ancient doctrine that a labor union takes
the citizenship of its members... .”
Defendants Hawkins, Cochrane, Stern, Gorman, Poole
and Talarico moved to dismiss, again on the basis of
lack of subject matter jurisdiction. Defendants contend
that Rule 23.2 FRCP is not a class action rule and that
the citizenship of all union members is still the relevant
determinant of diversity.
The question here is whether Rule 23.2 establishes a
class action with respect to unincorporated organizations
thereby making the citizenship of the representatives of
the class, together with the citizenship of plaintiff, solely
determinant of diversity. If the rule is a class action
rule, jurisdiction is established since plaintiff and the
representative parties are of diverse citizenship. If the
rule is not a class action rule the court lacks jurisdiction
since it is undisputed that some members of the Union
are of the same citizenship as plaintiff.
The rule states:
An action brought by or against the members of
an unincorporated association as a class by naming
certain members as representative parties may be
maintained only if it appears that the representa-
tive parties will fairly and adequately protect the
3 IBP’s ot to the Hawkins and Cochrane Motion to
Dismiss, filed August 1, 1977, at 5.
C-5
interests of the association and its members. In the
conduct of the action the court may make appro-
priate orders corresponding with those described in
Rule 23%(d), and the procedure for dismissal or
compromise of the action shall correspond with that
provided in Rule 2%(e).
Wright & Miller and Moore agree that this rule
provides a mechanism for class action treatment of
unincorporated associations.‘ It is argued, however, that
some courts have disagreed and held that the rule is
merely a capacity-to-sue-or-be-sued provision to give
entity treatment to an association. The Advisory
Committee’s Note to Rule 23.2 lends support to this
latter interpretation.®
4 See 7A Wright & Miller, Federal Practice and Procedure:
Civil § 1861 (1972); 3B Moore, Federal Practice, 123.2.02 (2d
ed. 1977).
5 See Lee v. Navarro Savings Ass'n, 416 F.Supp. 1186, 1190
(N.D. Texas 1976); Suchem, Inc. v. Central Aguerre Sugar Co.,
52 FRD 348, 351 (D. Puerto Rico 1971). Lee and Suc are
distinguishable, however, because neither court found that un-
incorporated associations did have entity status in Texas and
Puerto Rico and therefore Rule 23.2 was not available. The
Iowa rule, applicable by operation of Rule 17(b) FRCP, holds
that unincorporated associations do not have entity status and
cannot sue or be sued cirect ie the absence of waiver or es-
toppel. See er v. Iowa High School Athletic Ass'n, 138
NWod 914, 915 (Iowa 1965). The language of Wilson & Co. v.
United Packinghouse Wkrs. of America, 181 F.Supp. 809, at
817 (N.D. Ia. 1960) and oo) on v. Iowa High School Athletic
Ass'n, 150 NW2d_ 660, at 662 (Iowa 1967) put in context here,
is not otherwise. Finding that Rule 23.2 is available, the issue
before the court here was never addressed by Lee nor was it
properly before the court in Suchem.
6 The Advisory Committee’s Note states:
Although an action by or against representatives of the
membership of an unincorporated association has often
been viewed as a class action the real or main purpose of
this characterization has been to give “entity treatment” to
the association when for formal reasons it cannot sue or be
sued as a jural person under Ru!2 17(b)
39 FRD 108 (1966).
»
C-6
An examination of the rule itself and the writings of
the commentators leads this court to conclude that Rule
23.2 FRCP is a class action provision and that plaintiff
may assert its claim against the union as a class. The
rule itself incorporates by express reference portions of
Rule 23 FRCP.’ The requirements of numerosity,
commonality and typicality contained in Rule 23 may be
subsumed implicitly into Rule 23.2% In any event they
are present here. This is in fact a bona fide unin-
corporated association and there is no suggestion that
Rule 23.2 was utilized to evade the constraints on the
court’s jurisdiction.2 See 7A Wright & Miller, Federal
Practice and Procedure: Civil § 1861, at 461 (1972).
Accordingly, this action is maintainable as a class
action; the citizenship of the representative defendants
and plaintiff are diverse; motion to dismiss for lack of
subject matter jurisdiction denied. See generally Patri-
cian Towers Owners, Inc. v. Fairchild, 513 F.2d 216, 220
(4th Cir. 1975); Management Television Systems, Inc. v.
National Football League, supra.
7 Defendants point out that the provisions for notice and
pleading present in Rule 23 are absent from Rule 23.2. This
absence may be explained by the fact that the problems of
defining the class and giving notice to the class that plague
Rule 28 class actions are minimized in the context of an unin-
corporated association where the class is fairly defined and
notice easily obtained.
8 See Merkey v. Board of Regents of State of Florida, 344
Fig 1296, 1303 (N.D. Fla. 1972) vacated on other nds
493 F.2d 790 (5th Cir. 1973). But see Ma Television
Systems, Inc. v. National Football League, 52 FRD 162, 164
(E.D. Pa. 1971). 7A Wright & Miller, supra; 3B Moore; supra.
‘i a “ae point out in Reply Brief filed October 7,
, at 8:
It_ is well-settled that ... [diversity}. jurisdiction is
available . . . in a traditional class action under Rule 23
where only the citizenship of class represent«ties is con-
sidered in determining whether diversity exists. See
it lle Ward & Co. v. Longer, 168 F.2d 18%} (8th Cir.
C-7
Motion to Dismiss for Failure to State
~- a Claim Upon Which Relief Can be Granted
Defendants Hawkins, Cochrane, Krieger and Stern
next move to dismiss for failure to state a claim for
which relief can be granted. All complain of a lack of
specificity and factual allegations—in the case of
defendants Cochrane and Hawkins, as to the allegations
in the complaint of breach of fiduciary duty and
conspiracy; in the case of defendant Krieger, as to the
allegations in the complaint of inducing breach of
contract; in the case of defendant Stern, as to all of the
above.
The standard for a motion to dismiss is that such a
motion cannot be granted unless it appears to a
certainty that plaintiff is entitled to no relief under any
state of facts which could be proved in support of the
claim. Cruz v. Beto, 405 U.S. 319, 322 (1972). In this
light defendants’ motions fail and are denied.
Motion to Enjoin Prosecution of Separate
Action in Lieu of Compulsory Counterclaim
Plaintiff sought, by this motion, to prevent defendants
Hawkins and Cochrane from pursuing an abuse of
process action in the United States District Court for the
Southern District of Iowa. However, since that action
was dismissed by Judge Stuart on November 17, 1977,
this motion is denied as moot.
Motions for Protective Order
and Motions to Compel
A number of motions for protective orders and cor-
responding motions to compel have been filed in this ac-
tion. In some instances the granting of one motion re-
quires the denial of another. In each of these instances
that result will be indicated.
C-8
The first motions for protective orders were filed by
defendants Cochrane and Hawkins on July 22, 1977.
They were unaccompanied by an affidavit of good faith
attempts at resolution by alternate means and the
movants were notified that no further action would be
taken until Rule 16E of the Local Rules was complied
with. Cochrane and Hawkins filed essentially the same
motion for protective order, with affidavit, on August
30, 1977. The substance of the motion sought protection
for documents subject to discovery requests in the an-
titrust suit M.D.L. No. 248 until such time as the
documents are discoverable there. The motion also
sought to protect documents alleged to be protected by
the attorney-client privilege and work-product immuni-
ty. Finally, incorporating by reference a response to a
request for production of documents,. the defendants
refused to produce requested documents so long as their
motions to dismiss remained outstanding. Plaintiff's
response was to move to compel production of those
documents contained in its first request.
The overriding rationale applied with respect to all
discovery motions is that discovery provisions are to be
broadly and liberally construed. Hickman v. Taylor, 329
U.S. 495, 507 (1947); accord Schlagenhauf v. Holder, 379
U.S. 104, 114-15 (1964). Taking defendants’ last claim
first, it is clear that this matter has been resolved by the
court’s ruling today. As to the claim that the documents
are protected by work-product immunity and attorney-
client privilege the court concludes that a blanket in-
vocation of these doctrines to bar discovery is inap-
propriate. In this case, where state law supplies the rule
of decision, Rule 501 FREv, the burden of establishing
attorney-client privilege is on the defendants. Bailey v.
Chicago, Burlington & Quincy Railroad Co., 179 NW2d
560, 564 (lowa 1970). That burden cannot be met by
C-9
resort to a privilege incantation. The assertion must be
document-specific with a sufficient articulation of the
underlying circumstances and general substance, and
identification of the parties involved, to establish a
prima facie showing of privilege. This standard applies
to the assertion of work-product immunity as well. In
this instance defendants have not borne this burden.
The claim that defendants are protected from dis-
covery requests pending in MDL No. 248 until the
documents are allowed to be discovered in that action
cannot be accepted. The effect of an assent to this idea
would subordinate this action and ancillary discovery
matters to another case filed in another district court.
Discovery here cannot be predicated on what that court
will do. However, this does not mean that the court is in-
sensitive to the potential for interference with the con-
duct of orderly discovery in MDL No. 248. All parties
have indicated that a voluminous amount of materials
are subject to requests for discovery here. Bearing this in
mind, together with the potential for interference with
MDL No. 248, the court orders defendants Hawkins and
Cochrane to comply with plaintiff's first request for
production of documents’ by producing the documents
in the usual manner or by affording plaintiff a
reasonable opportunity to examine, audit, or inspect
such records and to make copies, compilations,
abstracts, or summaries at the place where the records
are kept or at any other mutually agreed-upon place. Cf.
Rule 33(c) FRCP. In the event discovery of the materials
in this fashion results in undue interference with MDL
No. 248 suitable protection may be obtained from this
court on a particularized showing.
‘0 The court notes that defendants maintain that they have
no documents falling within Specification No. 6 of plaintiff's
first requass for production of documents. On this representa-
tion defendants need not comply.
C-10
Plaintiff moved for a protective order on October 28,
1977, prohibiting defendants’ inquiry into matters
allegedly protected by attorney-client privilege,
prohibiting inquiry into purported illegal acts by plain-
tiff, and restricting use of IBP business information to
defense counsel for purposes of this case and to
Cochrane and Hawkins for the purposes of MDL No.
248. The court grants the protective order limiting the
usage of IBP’s confidential business information and
denies the motion regarding the claim of attorney-client
privilege and the claim of the irrelevance of illegal acts.
Plaintiff falls prey to the same lack of specificity that
defendants Hawkins and Cochrane do regarding a claim
of attorney-client privilege. A mere recitation of the
privilege litany is insufficient. The standards applicable
to meeting the burden of establishing a privilege set out
above apply here. Plaintiff cannot meet that burden by
requesting protection from inquiry into “matters
protected by IBP’s attorney-client privilege”.
The court also rejects the claim that illegal acts by
IBP are irrelevant to the case. The claim that the cove-
nant between IBP and Bagley was intended to conceal
illegal acts is central to defendants’ case. A relevance
objection is unavailing in this context.!!
Defendants Cochrane and Hawkins filed a motion to
compel answers to questions propounded during an oral
deposition of William L. Heubaum, corporate counsel for
IBP. The court has examined the questions and the con-
text in which they were asked. It seems apparent that
Plaintiff would have the court determine in the guise of a
protective order, in addition to its motion for summary judg-
ment discussed infra, that the Bagley covenant does not of-
fend public policy. The court is not willing to make that deter-
mination at this stage of the litigation.
C-11
work-product immunity or the attorney-client privilege
is applicable to the information sought.'? Defendants,
however, seek to overcome the immunity or privilege by
invoking the improper purpose exception.'? Defendants’
burden in this respect is heavy—they must make a
prima facie showing that the information sought was
transmitted in furtherance of a crime or tort. Pfizer, Inc.
v. Lord, 456 F.2d 545, 549 (8th Cir. 1972). See In re
Murphy, 560 F.2d 326, 338 (8th Cir. 1977). Defendants
assert that “[t]he testimony in the present case. . . es-
tablishes conclusively the existence of antitrust
violations by IBP”. This assertion is exaggerated. In any
event defendants must make a prima facie showing that
the communication was pursuant to the crime or tort.
See In re Murphy, supra. No such showing has been
made. Except as noted herein, the motion to compel
answers is denied.
Plaintiff moved to compel defendant Bagley to answer
deposition questions which he has refused to answer on
grounds of attorney-client privilege. An examination of
the questions reveals .that the information sought would
12 This is not true as to all information sought. For example,
counsel for IBP claimed attorney-client privilege as to the
number and bulk of file drawers regarding antitrust at
Heubaum’s office (Heubaum deposition, Volume I at 146-147)
and as to whether certain documents, often times the contents
of which were disclosed, were sent to IBP’s attorneys
(Heubaum deposition, Volume I at 155, 210-213). This infor-
mation is clearly not privileged.
‘8 Defendants also invoke the general rule that privilege does
not lie when business, as opposed to legal, counsel is sought.
Though it may be true that a corporation cannot merely
utilize general counsel as a conduit to protect ail its
documents and other information it is also true that defen-
dants have not shown in even the slightest degree that this ac-
tivity has occurred here. Merely noting that Heubaum serves
Iowa Beef as Secretary and Vice-President as well as general
counsel is insufficient.
C-12
be privileged. Plaintiff maintains, however, that the
privilege was waived by Bagley’s answer, paragraph 10,
which allegedly injects a state-of-mind issue into the
case. That paragraph states in part:
It is affirmatively alleged that paragraph 3.2 of
the Settlement Agreement was obtained by fraud
and misrepresentation on the part of IBP.
Since this response does inject the question of reliance
on IBP’s statements or acts" Bagley cannot now prevent
inquiry directed to that issue. This information is vital
to plaintiff to meet Bagley’s affirmative defense of fraud
and misrepresentation. See Haymes v. Smith, 73 FRD
572, 577 (W.D.N.Y. 1976); Hearn v. Rhay, 68 FRD 574,
581 (E.D. Wash. 1975). Defendant Bagley is directed to
answer questions relevant to the question of reliance; the
attorney-client privilege is waived.
Motion for Summary Judgment
IBP moves for summary judgment against Bagley on
the question of liability for breach of the settlement
agreement with IBP and for violation of the fiduciary
duty allegedly owed by IBP.
IBP has a particularly heavy burden of persuasion—
the movant must show that there is no genuine issue of
any material fact and that it is entitled to judgment as a
matter of law. Rule 56(c) FRCP; see Poller v. Columbia
Broadcasting System, Inc., 368 U.S. 464, 467 (1962). The
court is required to view the facts in the light most
favorable to the party opposing the motion and to give to
that party the benefit of all reasonable inferences to be
drawn from the facts. Adickes v. S.H. Kress & Co., 398
14 See 37 Am. Jur. 2d, Fraud and Deceit § 223 et seq; cf. W.
Prosser, Torts, 714 et seq (4th ed. 1971).
C-13
U.S. 144, 158-59 (1970). The court cannot say, at this
point in the litigation, that there is no genuine issue of
material fact. Furthermore, though IBP attempts to de-
emphasize the importance of the motion by carefully
limiting it to Bagley, the preclusive effect of the ruling,
if only from a reasoning standpoint, is apparent. The
ccurt considers it inappropriate at this time to resolve
this issue and therefore a major portion cf the lawsuit.
Further discovery and a vigorous analysis of the rele-
vant legal principles might make summary judgment
feasible in the future.
It is Therefore
ORDERED
1. Motions 1-6 inclusive and 8 above are denied.
2. Motion 7 is granted.
3. Motions 9 and 10 granted and denied in part.
February 10, 1978.
EDWARD J. MCMANUS, Chief Judge
United States District Court
This is a copy of a public record, reproduced as it was published. It is not legal advice, and it may not be the version a court would rely on. Check the official source before you cite it.