# Appendix — Schmutz Manufacturing Co. v. Atkins

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## Record

- **Collection:** Supreme Court brief
- **Document type:** Appendix
- **Published:** January 1, 1971
- **Citation:** 402 U.S. 932

## Text

APPENDIX

IN THE

Supreme Court of the United States

OCTOBER TERM, 1970

Nn. 1438

SCHMUTZ MANUFACTURING COMPANY, INC.,
Petitioner.
vs.

DONALD L. ATKINS,

Respondent.

Petition for a Writ of Certiorari to the United States
Court of Appeals for the Fourth Circuit

JOHN P. ARNESS
E. BARRETT PRETTYMAN, JR.
DAVID J. HENSLER
HoGAN & HARTSON
815 Connecticut Avenue
Washington, D.C. 20006

Attorneys for Petitioner
Of Counsel: ;
FRANK OQ. MEADE
Meade, Tate & Meade

516 Masonic Building
Danville, Virginia 24541

Dated: March 5, 1971

WILSON - EPES PRINTING Co. - RE 7-6002 - WASHINGTON. D. C. 20001

APPENDIX A.

APPENDIX B.

APPENDIX C.

APPENDIX D.

INDEX TO APPENDIX

Opinions of the Court of Appeals
upon the second rehearing en banc. -.

Opinions of the Court of Appeals
upon the first rehearing en bance. ....

Opinions of the Court of Appeals
upon the initial hearing by a three-

judge panel.

Opinion of the United States District
Court for the Western District of
Virgiiia. -....

Page

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1d

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APPENDIX A

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 11,566

DONALD L. ATKINS,

Appellant,
versus
SCHMUTZ MANUFACTURING COMPANY, INCORPORATED,
Appellee.

Appeal from the United States District Court for the
Western District of Virginia, at Danville.
Ted Dalton, District Judge.

(Decided December 10, 1970.)

Before Haynsworth, Chief Judge, Sobeloff, Boreman,
Bryan, Winter, Craven and Butzner, Circuit Judges
sitting en banc, on resubmission.

James A. Eichner (George E. Allen, Jr., and Allen,

Allen, Allen & Allen on Brief) for Appellant, and

Frank O. Meade (Meade, Tate and Meade on Brief)
for Appellee.

Filed Dec. 10, 1970. Samuel W. Phillips, Clerk

2a

HAYNSWORTH, Chief Judge:

When this troublesome case first came before this court,
a divided panel upheld its summary dismissal on the
ground that its maintenance was barred by Virginia’s
statute of limitation. Treating the law of Virginia as
controlling, a majority of the panel held that the running
of the statute was not tolled by the filing and pendency
of a previous action in the Western District of Kentucky.’

Subsequent reconsideration by the court en banc re-
sulted in a conclusion by a majority of a divided court
that equitable considerations partially foreclosed assertion
of the bar of the statute.* There followed a petition for
further reconsideration and a conclusion by the members
of the court that proper disposition of the anpeal required
treatment by the full court of the initial issue.

We conclude that the tolling effect of the pendency of
an identical suit in another federal court isyto be deter-
mined as a matter of federal, rather than state, law and
that the Virginia statute of limitations was tolled by the
action brought by Atkins in the Western District of Ken-
tucky. Our conclusion rests principally upon a considera-
tion of the unitary nature of the federal court system. It
draws strong support from the fact that in the analagous
situation of transfers from one district court to another,
after the period of limitation has run, we look to federal
law to reach the conclusion that the pendency of the ac-
tion in the transferor district tolls the running of the
statute. By whatever procedural means prosecution of
the claim is transferred from one district court to an-
other, the tolling effect of the action in the first district
should be determined under the same body of law.

The plaintiff, Atkins, a resident of Virginia, was se-
verely injured while working for his employer in Virginia

1 Atkins v. Schmutz Manufacturing Company, 4 Cir., 401 F.2d 731.
2 These opinions have not been published, and are withdrawn.

me,

when his feet were caught in a machine manufactured by
the defendant, Schmutz Manufacturing Company. He al-
leges that the accident was caused by design and con-
struction defects in the machine. Schmutz is a Kentucky
corporation with its sole place of business in that state.

At the time of the accident, Virginia had no long-arm
statute, and Atkins’ counsel reasonably concluded that
personal jurisdiction of Schmutz could not be obtained in
Virginia. Consequently, he filed a personal injury action
in the United States District Court for the Western Dis- .
trict of Kentucky, where Schmutz had its principal place
of business. That action was commenced within Vir-
ginia’s two-year period of limitations for tort actions, but
not within Kentucky’s one year period of limitation. Ex-
tensive discovery and other pre-trial proceedings followed,
for everyone reasonably assumed that the applicable limi-
tations period was that of Virginia (the state where the
cause of action arose) and not that of Kentucky (the
forum state).* That assumption was sharply upset, how-
ever, when the Kentucky Court of Appeals held that Ken-
tucky’s limitation period was applicable in actions brought
in the courts of that state if the limitation period of the
state where the cause of action arose was longer.‘

Applying Kentucky’s new rule, the District Court for
the Western District of Kentucky dismissed the action as
time-barred. The Sixth Circuit affirmed,® considering it-
self bound to follow Kentucky’s choice of law * and thus to

8In the Sixth Circuit this was the settled construction of Ken-
tucky law. Collins v, Clayton & Lambert Manufacturing Co., 6 Cir.,
299 F.2d 362, 364; Koeppe v. Great Atlantic & Pacific Tea Co., 6
Cir., 250 F.2d 270; Burton v. Miller, 6 Cir., 185 F.2d 817.

*Seat v. Eastern Greyhound Lines, Inc. ——- Ky, ——, 389
S.W.2d 908. The decision expressly overruled the earlier decisions
of the Kentucky Court of Appeals which had been the basis of the
Sixth Circuit’s reading of Kentucky law.

5 Atkins v. Schmutz Manufacturing Company, 6 Cir., 372 F.2d
762.

* Klaxon Co. v. Stentor Electric Manufacturing Co., 318 U.S. 487.

4a

apply Kentucky’s one year period of limitation,’ and to
do it even in cases previously filed in reliance upon Ken-
tucky’s earlier choice of law rule.* The Supreme Court
denied a writ of certiorari.°

In the meantime, Virginia had enacted a long-arm stat-
ute under which plaintiff believed personal jurisdiction of
the defendant could be obtained in Virginia.” Before the
Sixth Cireuit’s mandate became final, this action was
commenced in the Western District of Virginia. Dismissal
followed upon the ground that Virginia’s two year limi-
tation period had run before this action was filed and was
untolled by the proceedings in the federal courts in the
Sixth Circuit."

In this diversity case, Guaranty Trust Co. v. York, 326
U.S. 99, compels adoption of the requirement, applicable
in the state courts of Virginia, that actions for personal
injuries “be brought within two years next after the right
to bring the same shall have accrued.” ” Atkins’ action
against Schmutz accrued when he was injured, Caudill v.
Wise Rambler, Inc., 210 Va. 11, 168 S.E.2d 257, and he
brought an action within two years of that date. But that
action was terminated without any decision on the merits,
and Schmutz, relying on its interpretation of Virginia
law, asserts that its pendency had no tolling effect.

If, in determining the tolling effect of the pendency of
the action in the federal courts of Kentucky, we were
required, as we are in determining the applicable period
of limitation, to follow the state law of Virginia, it is pos-

7 Guaranty Trust Company v. York, 326 U.S. 99.
8 Wetherington v. Griggs, ——- Ky. ——, 392 S.W.2d 56.
389 U.S, 829.

10'Va. Code Ann. §§ 8-81.1 througl. 8-81.5. These provisions were
enacted in 1964.

11268 F.Supp. 406.
12°Va. Code Ann. § 8-24.

5a

sible, although not certain, that we would uphold the time-
bar. Few cases involving the tolling effect of prior actions
have been decided by the Virginia Supreme Court of Ap-
peals, but in a case decided in 1938, Jones v. Morris Plan
Bank of Portsmouth, 170 Va. 88, 195 S.E. 525, that
court dealt with a situation somewhat similar to the one
before us.

The plaintiff in Jones had filed an action against the
defendant in the Circuit Court of the City of Suffolk to
recover damages for alleged malicious abuse of civil
process. Fourteen months later, it was dismissed “for lack
of proper venue duly pleaded.” ** Later, Jones asserted
the same cause of action against the same defendant in
the Circuit Court of the City of Portsmouth. By then,
the two year period of limitation had run, unless its run-
ning was interrupted by the pendency of the action in the
Circuit Court of the City of Suffolk. Construing § 5826
of the Virginia Code (now § 8-34), the Virginia Supreme
Court of Appeals found no basis for granting relief to a
plaintiff whose prior suit was brought in the wrong forum
or was dismissed otherwise than upon the merits.”

We cannot be confident, however, that the result in
Jones would necessarily compel the Virginia Supreme

13195 S.E. 525.

14“An analysis of our statute (section 5826) shows that in only
four instances is there a suspension of the statute of limitations by
reason of the pendency of a former suit brought in due time. These
are: (1) Where such suit abates ‘by the return of no inhabitant,’
that is, where the writ is not served for that reason; (2) where
the suit abates by reason of the ‘death or marriage’ of a party;
(3) where, after the piaintiff has obtained a judgment or decree
in his favor, it is ‘arrested or reversed upon a ground which does
not preclude a new action or suit for the same cause’; and (4)
where ‘there be occasion to bring a new action or suit by reason
of the loss or destruction of any of the papers or records in a
former suit or action which was in due time.’ “None of these pro-
visions applies to the plaintiff’s case. There is no saving provision
where a suit, such as that of the plaintiff here, was brought in the
wrong forum or was dismissed otherwise than upon the merits.”
195 S.E. 526.

Co EN Ne Ee DOE SE AGL IIT

6a

Court of Appeals to reach the same result if it were called
upon to decide the case before us. Some indication that
it might not may be found in the more recent case of
Weinstein v. Glens Falls Insurance Co., 202 Va. 722, 119
S.E.2d 497. An action was brought within the one year
period of limitations to recover on a policy of insurance.
During its pendency it was discovered that recovery was
unavailable unless the policy were reformed. Reforma-
tion could be accomplished only by bringing a separate
suit in equity. The equity suit was brought in the same
court before dismissal of the law action but more than one
year after the loss occurred. The Virginia Supreme Court
of Appeals rejected the company’s contention that the
statute barred the institution of the reformation suit,
holding that, as a matter of judicial treatment, the newly
filed suit in equity was a continuation of the earlier action
at law. There was no reference to the tolling statute,
which would not have saved the case.

Virginia’s Supreme Court of Appeals has recently in-
dicated its reluctance in deciding statute of limitations
questions to reach results which are unjust and inequit-
able. Caudill v. Wise Rambler, Inc., supra. Clearly it
would be unjust and inequitable in the circumstances of
this case not to give a tolling effect to the prior action.
Enforcement of the time-bar here would serve none of the
underlying purposes of the statute of limiiations, and
equitable considerations, absent in the Jones case, cry for
mitigation of the statute’s harshness.

Atkins has been diligent and without fault in his ef-
forts to prosecute his claim against Schmutz. His belief
that the Western District of Kentucky was the correct
forum for litigating the merits of his claim and his belief
that he had two years in which to commence his action
were entirely reasonable and consistent with established
precedents in Kentucky and in the Sixth Circuit.

Nothing Atkins has done or failed to do has prejudiced
in any way Schmutz’s ability to defend this suit on the

ONT, SOLID IIL IERIE LIE GOOLE IO ALG MEF I PLOY, Sra Peery

Ta

merits. This is not a case where a time lapse between the
erd of one suit and the commencement of another might
cause the defendant to think that the litigation has come
to an end. From the initial filing of the complaint in the
District Court in Kentucky, these parties have been con-
tinual adversaries before one federal tribunal or another
pressing their respective claims. More importantly, At-
kins asserted his claim in a court of competent jurisdic-
tion within the period prescribed by Virginia and both
parties prepared for litigation on the merits.* Allow-
ing Atkins to litigate the merits of his claim would not
frustrate the oft-stated purpose of statutes of limitations
to compel the assertion of a right of action promptly while
the evidence is available and still relatively fresh.* Al-

15 Extensive discovery, resulting in the recording and preserva-
tion of evidence, was undertaken by both parties after Atkins filed
his suit in the Kentucky District Court. In addition, Atkins was
hospitalized for an extended period at the expense, and under
the general supervision, of the defendant’s liability insurance
carrier, which was als» the workmen’s compensation insurance
carrier for Atkins’ employer. The insurance carrier, which is
defending Schmutz, has had ar intimate acquaintance with the
claim and the nature and extent of the plaintiff’s injuries from a
date shortly after the accident.

16 “Statutes of limitation are statutes of repose, the object of
which is to compel the exercise of a right of action within a
reasonable time. They are designed to suppress fraudulent and
Stale claims from being asserted after a great lapse of time,
to the surprise of the parties, when the evidence may be lost, the
facts may have become obscure because of defective memory, or
the witnesses have died or disappeared.” Street v. Consumers
Mining Corp., 185 Va. 561, 575, 39 S.E.2d 271, 277.

“Statutes of limitation are primarily designed to assure fairness
to defendants. Such statutes ‘promote justice by preventing sur-
prises through the revival of claims that have been allowed to
slumber until evidence has been lost, memories have faded, and wit-
nesses disappeared. The theory is that even if one has a just claim
it is unjust not to put the adversary on notice to defend within
the period of limitation and that the right to be free of stale claims
in time comes to prevail over the right to prosecute them.’ Order
of Railroad Telegraphers v. Railway Express Agency, Inc., 321 U.S.
342, 348-349. Moreover, the courts ought to be relieved of the
burden of trying stale claims when a plaintiff has slept on his
rights.” Burnett v. New York Central R. Co., 380 U.S. 424, 428.

cies eee ag ee aE CE ST Ne

8a

lowing Atkins to litigate the merits of his claim at this
time would be consistent with the basic purpose reflected
in the tolling rule—saving the right of action for plain-
tiffs who, without fault, have been unable to obtain an
adjudication on the merits.

This, then, is a case where the parties have obtained
the full protection the statute of limitations was designed
to afford, and they have obtained it in the precise manner
required by the statute—institution of a suit within the
prescribed period. Given these considerations, one may
doubt whether the Virginia Supreme Court of Appeals
would mechanistically follow. Jones and deny Atkins his
day in court.

There is, however, a fundamental and, we think criti-
cal difference between the situation in Jones and this case
—the nature of the judicial systems involved. Jones, and
the statutory provision under which it was decided, may
be accepted as declarations of the law of Virginia with
regard to successive actions brought in different courts
of that state, but we deal with another, dissimilar judicial
system. By its nature this issue never has been and never
will be resolved, or even considered, by any court of the
Commonwealth of Virginia. Given the differences be-
tween the two judicial systems, no one can say with any
assurance what Virginia’s Supreme Court of Appeals
would do if confronted with the question now before us
in the context in which it arises.

Virginia’s is a highly decentralized, realtively autono-
mous, system of independent trial courts of sometimes
overlapping and duplicating jurisdiction with few admin-
istrative or procedural provisions for coordination of
their effort or the performance of cooperative or comple-
mentary functions. In stark contrast, the federal system
is “one great system for the administration of justice” *”

17 Internatio-Rotterdam, Inc. v. Thomsen, 4 Cir., 218 F.2d 514,
517.

al i li | ae eres eee

9a

with a singularity and a unity which encourages and re-
quires conformity in the functioning of each of the parts
to the purposes and objectives of a highly cohesive whole.

The resolution of an essentially procedural issue in
one judicial system will not necessarily apply with simi-
lar reason when the question comes up in the context of a
very different system. The nature, history and traditions
of a judicial system have an especially profound influence
on the recognition given by one court within that system
to earlier proceedings in another court within the sys-
tem. Occurrences in a highly autonomous court need not
always be noticed in another highly autonomous court;
but in a unitary system the workings of each part must
have their reflections in the whole.

The differences between the two systems would not be
so significant had not commencement of the action in the
Western District of Kentucky, the defendant’s response
and the conduct of pretrial proceedings there fully served
all of the purposes underlying Virginia’s adoption of its
two year statute of limitation. Since those purposes have .
been satisfied, the institutional basis of Virginia’s tolling
rule becomes critical to a consideration of the applica-
bility of that rule.

On an issue so closely procedural and so intimately
involved in the nature and functioning of the federal
judicial system, we believe that service of the integrity
and needs of that institution should prevail over random
guesses about essentially irrelevant state law stemming
from different institutional considerations. :

Sketches of the two judicial systems will disclose their
great differences.

Virginia has a melange of basic trial courts.

Circuit courts are the usual trial courts of general
jurisdiction. There is a circuit court for each county,
which is also the circuit court of any city of more than

10a

10,000 people within the boundaries of the county,** un-
less a separate circuit court for that city has been cre-
ated. Twenty-one such cities now have a separate cir-
cuit court.’

The original jurisdiction of the circuit courts, except
those of Richmond and Newport News, extends to all
civil and criminal matters, except those triable initially in
inferior courts, and except that they have no criminal
jurisdiction if the crime was committed within the terri-
torial limits of a city in which there is a corporation or
hustings court.”

Fourteen of the larger cities have corporation or hust-
ings courts.** The subject matter jurisdiction of these
courts is generally the.same as that exercised by circuit
courts. Some cities have a second corporation court of
more restricted jurisdiction than the first.**

Below the circuit and corporation or hustings courts
exist numerous inferior courts with limited, specialized
jurisdiction, including county courts, municipal courts,
courts of limited jurisdiction (“police courts”), and ju-
venile and domestic relations courts.™*

The cities of Richmond, Norfolk, Roanoke, and New-
port News have even a larger number of trial courts

18 Va. Code Ann. § 17-118.
19 Va. Code Ann. § 17-117.

20 Va. Code Ann. § 17-123. The jurisdiction of the circuit courts
of the larger cities is fixed by separate statutes. See, for example,
the references below to the trial courts sitting in Richmond whose
circuit court is one of very specialized jurisdiction.

21 The cities with corporation or hustings courts are set forth
in § 17-135, Va. Code Ann. Most, but not all of these cities also
have a separate circuit court. Corporation courts and hustings
courts appear to differ in name only.

22, Va. Code Ann. § 17-139.
28. Va. Code Ann. § 17-140.
24 See generaiiy Title 16.1, Va. Code Ann.

lla

with varied jurisdiction. An abbreviated summary of
the jurisdiction of the five basic trial courts sitting in
Richmond may be illustrative. These are:

1. The Law and Equity Court of Richmond which has
the same jurisdiction given to circuit and corporation
courts, except as to matters of criminal jurisdiction, the
probate and recordation of wills, and the appointment
and qualification of fiducaries; *

2. The Chancery Court which has jurisdiction of all
suits and proceedings in chancery except those specially
cognizable in the Circuit Court of Richmond, jurisdiction
of all other matters, except matters of common law and
criminal jurisdiction, within the jurisdiction of the Cir-
cuit courts, and exclusive jurisdiction, within that part
of the City of Richmond which lies north of the James
River, over probate and registration matters and the
appointment, qualification, and removal of fiduciaries; *°

3. The Circuit Court of Richmond which has juris-
diction of criminal matters against convicts, and civil
jurisdiction of claims against the state, of claims by the
stute for money owing, of claims by the state for fines
levied upon certain officials and general civil jurisdiction
over causes of actions arising within the Capitol Square; *

4. The Hustings Court of Richmond which has general
criminal jurisdiction, except of proceedings against con-
victs (see Circuit Court, above), and civil jurisdiction in
actions of forcible or unlawful entry or detainer, in
condemnation proceedings and in proceedings to ‘correct
erroneous assessments; * and

25 Va. Code Ann. § 17-164. Prior to 1954 there was also a Law
and Equity Court, Part II.

26. Va. Code Ann. § 17-161.
27 Va. Code Ann. § 17-163.
28 Va. Code Ann. § 17-153.

12a

5. The Hustings Court of Richmond, Part Two which
has jurisdiction concurrent with the Hustings Court, ex-
cept as to proceedings to correct assessments, jurisdiction
concurrent with the Law and Equity Court of all common
law cases, jurisdiction concurrent with the Chancery
Court of proceedings in equity, and jurisdiction, within
that part of Richmond which lies south of the James
River (see Chancery Court, above) over probate and reg-
istration matters.”

Essentially, the scheme of the Virginia court system is
one of multiple, separate trial courts with sometimes
overlapping territorial and subject matter jurisdiction.
While there are provisions for the assignment of judges
to equalize work loads and while some courts may have
more than one judge, there is a strong tendency to give
each trial judge his own court. Although the judgments
of the various courts are reviewable by the Supreme
Court of Appeals of Virginia, the system leaves each of
the individual trial courts a marked independence and a
special identity of its own.

The federal court system is more simply organized
and places greater emphasis on the functioning of the
system as a whole. There are some specialized courts,
such as the Court of Claims, the Court of Customs and
Patent Appeals and the Customs Court, having nation-
wide jurisdiction, but narrowly confined subject matter
jurisdiction. There are subordinate and specialized courts
in the District of Columbia and in the territories. The
great burden of judicial work of the system, however, is
conducted in the District Courts, courts of general juris-
diction encompassing almost the whole of federal jurisdic-
tion itself. In each district there is but one District
Court, and the boundaries of many districts coincide with
those of whole states. There are only two District Courts
in Virginia. Multiple judgeships are the rule, rather than
the exception, and every judge of a District is authorized

29'Va. Code Ann. § 17-154.

a ee ee

13a

to preside over any proceeding within the court’s juris-
diction.

For purposes of appellate review and administration,
the several district courts are grouped in eleven judicial
circuits. With the exception of the District of Columbia
Circuit, the Circuits are all multi-district and multi-state.
The judgments of the District Courts within each cir-
cuit are reviewable by a Court of Appeals of the Cir-
cuit, or, with respect to a limited number of proceedings
which are thought to require expedition, directly by the
Supreme Court of the United States. In addition, the
Circuit Councils exercise substantial administrative con-
trol over the District Courts within the Circuit and their
judges,” and the Chief Circuit Judge may assign judges
anywhere in the Circuit if the work requires. With the
consent of the Chief Justice and the Chief Circuit Judges
concerned, such assignments may be made to other cir-
cuits.

In a developing sense, the boundaries of a district are
not impenetrable walls strictly confining the power of a
District Court. Even if the district encompasses only a
part of a state, the process of the District Court reaches
throughout the state. When additional parties need be
brought in, its process may reach out a hundred miles,
across district and state boundaries.“ In interpleader
actions, its process reaches throughout the nation.”

Relatively liberal provisions for the transfer of cases
from district to district permit consolidations for- trial **

3028 U.S.C. § 332, 28 U.S.C. § 187. See the discussion by Mr.
Justice Harlan, concurring in Chandler v. Judicial Council, 398 U.S.
74, 89, of the important role played by the Circuit Judicial Councils
in the management of judicial work in the Federal Court System.

31 Federal Rules of Civil Procedure, Rule 4(f).
32 28 U.S.C. § 2361.

33 Rule 42(a) of the Federal Rules of Civil Procedure allows
consolidation and joint trial of actions involving a common question

14a

and evidence a cooperative functioning of the parts of
the system. Recent developments in the handling of mul-
ti-district litigation arising out of such things as airline
crashes and multitudinous anti-trust claims now permit
the consolidation for pretrial processing of all such cases
by one judge in one district under the general super-
vision of a special panel of judges.“ Duplications and
wasteful effort and expense are thus avoided in a system
capable of functioning in a unitary manner.

A judgment obtained in one district court may be en-
forced in another, without formal proof of judgment, by
filing a certified copy of the judgment in the district in
which enforcement is sought. 28 U.S.C.A. § 1963.

The capacity of the federal courts to function co-
operatively led Judge Parker, speaking for this court, to
describe the system as “unified” and to approve the
transfer of an action, timely filed in the Southern Dis-
trict of New York in the Second Circuit, but where the .
respondent ship had not been found, to the District of
Maryland, where the ship could be attached, though the
statute of limitations had run before the transfer. In
somewhat similar circumstances, the Supreme Court ap-
proved the transfer of a case from the Eastern District
of Pennsylvania, where it had been filed but where the
defendants could not be “found,” to the Southern District

of law or fact. Transfer of cases from one district to another for
purposes of consolidation is possible under 28 U.S.C. § 1404(a)
which permits transfer of any civil action for the convenience of the
parties and witnesses, in the interest of justice. Cf. Van Dusen v.
Barrack, 376 U.S. 612.

8428 U.S.C. § 1407. See Peterson and McDermott, Multi-district
Litigation: New Forms of Judicial Administration, 56 A.B.A.J. 737.

35 Internatio-Rotterdam, Inc. v. Thomsen, 4 Cir., 218 F.2d 514.
The transfer was held to be permitted under either 28 U.S.C.
§ 1404(a) or 28 U.S.C. § 1406(a).

15a

(f New York where the defendants could be “found.” *
That transfer was made pursuant to 28 U.S.C. § 1406
(a),°7 one of several procedural provisions affording fed-
eral court litigants protection against “justice-defeating
technicalities.” *

The problem which confronted the Virginia Supreme
Court of Appeals in Jones v. Morris Plan Bank of Ports-
mouth, supra, never should have arisen in the federal
system. If Virginia’s trial courts had been organized as
the federal district courts are, if Virginia, as an essen-
tial part of that organization, had a statute comparable
to 28 U.S.C. § 1406(a), the Circuit Court of the City of
Suffolk would never have dismissed the action “for lack
of proper venue duly pleaded,” unless the action was
patently frivolous or harrassing and provided the filing
of the action had served the basis purpose of the statute
of limitations. In a more unitary system, it would have
been transferred by the Circuit Court of the City of
Suffolk to the Circuit Court of the City of Portsmouth,
and there would not have been a plea of the statute’s bar.
If the circuit courts of the two cities had been as closely
related as are district courts, with all of the mechanical
means of promoting the closeness of that relationship,
Mr. Jones would not have been remembered in procedural
defeat.*

86 Goldlawr v. Heiman, 369 U.S. 463.

$728 U.S.C. § 1406(a): The district court of a district in which
is filed a case laying venue in the wrong division or district shall
dismiss, or if it be in the interest of justice, transfer such case to
any district or division in which it could have been brought.

38 Internatio-Rotterdam, Inc. v. Thomsen, 4 Cir., 218 F.2d 514,
517. See also, for example, 28 U.S.C. §1406(c) authorizing the
transfer from the District Court to the Court of Claims of cases

a in the former but within the exclusive jurisdiction of the
tter.

3° Although Virginia has a removal statute, Va. Code Ann. § 8-
157, which permits some transfers of cases from one court to
another, a plaintiff who lays venue in the wrong court will have

l6a

In the institutional context in which it arises, this
case appears more like Weinstein than Jones. The insti-
tutional considerations emanating from a system of auton-
omous trial courts which dictated the result in Jones
were absent in Weinstein, where both actions were
brought in the same court. It was unnecessary in Wein-
stein that a second action between the same parties deal-
ing with the same subject matter be treated as entirely
independent of the first. It is noteworthy, too, that
Weinstein does not rely on Virginia’s tolling statute for
its holding. The tolling statute was just as inapplicable
there as in Jones. The principal difference between the
two cases appears to be that in Jones, unlike Weinstein,
the second action was filed in a different and independent
court, which was not required to notice the pendency of
proceedings in the first court. In a system of integrally
related, cooperating trial courts the result in Weinstein
and its rationale appear naturally to encompass the Jones
situation, at least when the second action is filed during
the pendency of the first.

We do not attempt an appraisal of the comparative
merits of the systems. To say that they are different
implies no inferiority of either. Virginia’s system has
been developed in response to appraisals of her needs,
while the federal system has grown responsively to the
needs of the national system of courts. The federal
system may be no more adaptable to Virginia’s needs
than Virginia’s system would be to national needs. The
point is that the resolution of a problem arising out of
the nature of one system ought not to control, in a mech-
anistic way, the resolution of a somewhat similar prob-

his case dismissed and not transferred. Woodhouse v. Burke &
Herbert Bank, 166 Va. 706, 185 S.E. 876; see also Jones v. Morris
Plan Bank of Portsmouth, 170 Va, 88, 195 S.E. 525. Simiarly, a
case filed in a court which lacks subject matter jurisdiction over the
controversy cannot be transferred to the proper court. Valley Turn-
pike Co. v. Moore, 100 Va. 702, 42 S.E. 675. Compare 28 U.S.C.
§ 1406(c), cited in note 38, supra.

17a

lem when it comes up in the context of a very different
system.

In deciding that the question of the recognition to be
given by one federal court to proceedings in another fed-
eral court should be resolved as a matter of federal law,
we do no violence to the doctrine of Erie Railroad Co. v.
Tompkins, 304 U.S. 64, which requires that federal courts
in the diversity jurisdiction decide cases in accordance
with state law, whether decisional or statutory. The con-
tours of that requirement have been delineated with in-
creasing clarity by subsequent cases which have made it
plain that not every issue arising in a diversity case is
governed by state law. See, e.g., Guaranty Trust Co. v.
York, 326 U.S. 99; Byrd v. Blue Ridge Cooperative, 356
U.S. 525; Hanna v. Plumer, 380 U.S. 460; Szantay v.
Beech Aircraft Corp., 4 Cir., 349 F.2d 60.

The essence of our Federal system is the allocation of
law-making functions between state and national authori-
ties and the decision in Erie was, at least in part, a
recognition of the fact that this fundamental govern-
mental scheme is seriously undercut if the federal courts,
in serving as a forum for the enforcement of state-
created rights, formulate their own rules in areas which
are properly matters of state, not federal, concern.”

#0304 U.S. 64, 78-80; Bernhardt v. Polygraphic Co. of America,
Inc., 350 U.S. 198, 202. See also, Hanna v. Plumer, 380 U.S. 460,
471-472:

“We are reminded by the Erie opinion that neither Congress
nor the federal courts can, under the guise of formulating rules
of decision for federal courts, fashion rules which are not
supported by a grant of federal authority contained in Article
I or some other section of the Constitution; in such areas
state law must govern because there can be no other law.”

The extent to which the Erie doctrine is constitutionally com-
pelled has been a subject of considerable debate, see the discussion
and citations in Wright, Federal Courts, 2nd ed. § 56. Since we are
dealing with an issue relating to the operation of the federal
courts which the Constitution gives the federal government author-
ity to resolve, see Hanna v. Plumer, 380 U.S. 460, 472, that debate
is academic for purposes of our decision in this case.

APR SRR IEE BAN 7

18a

The problem facing the federal courts since Erie has
been to determine which questions arising in diversity
litigation are matters of state concern which ‘ould be
answered by reference to state law and which questions
are matters of federal concern which can be answered by
reference to federal law. Erie and its progeny may be
seen as an attempt to formulate a workable doctrine gov-
erning choice of law in diversity actions which would
prevent impermissible federal court interference with
state rules reflecting policy considerations lying within
the realm of state law-making competence. Guaranty
Trust Co. v. York, 326 U.S. 99, 109; Hanna v. Plumer,
380 U.S. 460, 474 (concurring opinion of Mr. Justice
Harlan).

The Erie doctrine clearly leaves for determination by
the states questions concerning the definition of the basic
state-created cause of action, with the federal courts be-
ing required to take a position of substantive neutrality.
But legal rights are not self-executing, and they can not
be viewed in total isolation from the rules governing their
judicial enforcement.

It is, of course, neither possible nor necessary for fed-
eral courts to be totally neutral in the adjudication of
state-created rights. It is not possible simply because
federal courts are not protean and are unable to trans-
form themselves into exact replicas of their state coun-
terparts.** That state and federal judicial systems are
not identic will inevitably mean that the choice of forum
will have some effect upon the course of litigation. Some
adoption of state court procedures by federal courts sit-
ting in diversity may be feasible, but it may also be in
conflict with fundamental interests of the federal courts
in the conduct of their own business and the maintenance
of the integrity of their own procedures, the legitimate
interests of a federal forum, qua forum.

*1 Guaranty Trust Co. v. York, 326 U.S. 99, 108-109; Cohen v.
Beneficial Loan Corp., 337 U.S. 541, 555-556.

eh ee ee Te ee eee ee eee

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BAM Se OAELIOD SESS SNR AN ie

= St ne

RD OEE Oe SORE te Oe “ht

19a

Literal application of some of the language in Guaranty
Trust Co. v. York, supra, might appear to compel the
conclusion that a federal court must apply state law in
every case where failure to do so might make a difference
in the outcome of the litigation. The language of that
opinion, however, has been moderated.** Now, in the
choice between state and federal law in the disposition of
procedural problems such as the one before us, we prop-
erly take account of federal interests and the effective
functioning of the federal courts as a cohesive, relatively
unitary, system for the administration of justice.

In Szantay v. Beech Aircraft Corp, supra, we described
the analysis to be undertaken by a federal court at-
tempting to resolve a federal-state conflict in a diversity
case as follows:

“1. If the state provision, whether legislatively
adopted or judicially declared, is the substantive
right or obligation at issue, it is constitutionally
controlling.

2. If the state provision in a procedure intimately —
bound up with the state right or obligation, it is
likewise constitutionally controlling.

3. If the state procedural provision is not intimately
bound up with the right being enforced but its ap-
plication would substantially affect the outcome of
the litigation, the federal diversity court must still
apply it unless there are affirmative countervailing
federal considerations. This is not deemed a con-
stitutional requirement but one dictated -by com-
-. >

In order to determine whether Virginia’s tolling rule
is “intimately bound up with the right being enforced,”
it would be helpful to know with certainty the state poli-
cies underlying the tolling rule. Unfortunately, as in

*? Byrd v. Blue Ridge Cooperative, 356 U.S. 525; Hanna v.
Plumer, 380 U.S. 460.

43 349 F.2d 60, 63-64.

PEL PLEO SEI AE RENT OE GOS CE TY sty

20a

Szantay, there is an absence of evidence from state
sources shedding any light on the problem. As pointed
out above, however, we think it is clear that to the ex-
tent that the purposes of the statute of limitations have
been satisfied and the plaintiff has been without fault
in not prosecuting his claim to a final judgment, the
rule reflects essentially institutional considerations rele-
vant to the administration of justice within the Virginia
court system which are unrelated to the basic rights and
obligations of the parties. The presence of other con-
siderations is unapparent, while Weinstein, treating suc-
cessive actions in the same court as one, emphasizes the
institutional nature of the tolling rule of Jones, in which
no effect was attributed to the pendency of an earlier
action in a different Virginia trial court. In the context
of this case, where the only relevant considerations are
institutional, Virginia’s tolling rule cannot be said to be
“intimately bound up with the right being enforced.”

That there is a significant federal concern for the ap-
plication of rules of litigation in federal courts which are
consistent with the fundamental nature of that court sys-
tem is well established. See, e.g., Byrd v. Blue Ridge
Cooperative, supr; Herron v. Southern Pacific Co., 283
U.S. 91, 94.

Insofar as federal concerns are involved, this action is,
in effect, merely a continuation of the proceedings com-
menced in the Western District of Kentucky.“ This is
clear from the unitary nature of the federal court system
and the procedures it embodies for the expeditious ad-
judication of cases on their merits.

44 See Adams v. Collier, 122 U.S. 382, holding that a suit insti-
tuted in the Circuit Court [under the pre-1911 judicial system]
after withdrawal of a prior suit on the same cause of action in
the District Court was, for statute of limitations purposes, “in
effect, a continuation of the former” suit. That the second action
is a continuation of the first is precisely the rationale on which
the Supreme Court of Appeals of Virginia relied in holding the
reformation suit timely in Weinstein.

EO

21a

Whether the Kentucky action could have been trans-
ferred to the Western District of Virginia under 28
U.S.C, § 1404 is a matter of federal law.* If this action
had initially laid venue in the wrong district, its trans-
ferability under 28 U.S.C. § 1406(a), after the running
of any applicable statute of limitations, would be de-
termined as a matter of federal law.“ implicit in a de-
cision that there should be a transfer after the lapse of
two years following the injury is a determination that the
basic purpose of the applicable statutue of limitations
has been satisfied and that the interests of justice dictate
against dismissal.*’

Though here there was no transfer of the action in the
Western District of Kentucky and the question of its
transferability was not raised, the commencement of this
action in the Western District of Virginia during the
pendency of the Kentucky action has achieved the same
practical result. A determination of the tolling effect of
the commencement and prosecution of the federal action
in the Western District of Kentucky ought to be had
under the same body of law regardless of the procedural
means by which prosecution of the substantive cause of
action is discontinued in the district court sitting in

*® Compare Gulf Oil Corp. v. Gilbert, 330 U.S. 501, 509, a diversity
case in which the Supreme Court declined to decide whether a pre-
§.1404 forum non conveniens transfer was governed by state or
federal law, with Sullivan v. Behimer, 363 U.S. 335, a diversity
case in which the Supreme Court treated a transfer pursuant to
§ 1404 entirely as a matter of federal statutory interpretation. See
also, Van Dusen v. Barrack, 376 U.S. 612; Internatio-Rotterdam,
Inc. v. Thomsen, 4 Cir., 218 F.2d 514.

*6 Cf. Goldlawr v. Heiman, 369 U.S. 463.

** “When a lawsuit is filed, that filing shows a desire on the part
of the plaintiff to begin his case ana thereby toll whatever statutes
of limitation would otherwise apply. The filing itself shows the
proper diligence on t’2 part of the plaintiff which such statutes
of limitation were intended to insure.” Goldlawr v. Heiman, 369
U.S. 463, 467.

eee

22a

Kentucky and continued in a district court sitting in
Virginia.

Since Virginia’s tolling statute and state decisions con-
struing it have been so largely influenced by the nature
and the structure of Virginia’s system of trial courts,
since the question here arises out of a different system
and reasonable answers are dependent upon the nature
and the structure of that system and its effective func-
tioning, we conclude that we must seek the answer as a
matter of federal, not state, law. Since every purpose of
Virginia’s proscription against the commencement of tort
actions more than two years after the injury has been
served, we conclude that, as a matter of federal law, the
statute has been satisfied.“

The judgment is reversed and the case remanded with
instructions to overrule the plea of the statutory bar.

Reversed and remanded.

48 It is suggested in the concurring opinion that any consideration
favoring the application of a federal tolling rule would equally
favor the application of a federal statute of limitations. Whether
or not Congress could validly enact such a statute for diversity
cases, it has not done so. We need not resurrect the indefinite,
cumbersome doctrine of laches as the only limitation on the com-
mencement of actions in the diversity jurisdiction. State statutes
provide a convenient, predictable period of limitations for use in the
diversity jurisdiction, and resort to them minimizes the disparity
of results of litigation in state and federal courts. If Guaranty
Trust has no constitutional foundation, as long as there is no
federal statute of limitations, its result would be dictated by
institutional considerations.

In the federal system, the tolling effect of an earlier action in a
federal court is a very different question than the one resolved in
Guaranty Trust. Adoption of a state’s statutory period of limita-
tion is not inconsistent with our conclusion that recognition in a
federal courf of earlier proceedings in another federal court should
be determined as a matter of federal law.

We accept and apply Guaranty Trust, but we do not extend it
to require federal adoption of a state tolling rule, born of state
court institutional considerations which have no relevance in the
context of the federal system.

eer ee

28 a

WINTER, Circuit Judge, specially concurring :

I concur in the judgment of the Court because I think
that state law requires reversal and remand. We need
not and should not decide more.

Following plaintiff’s petition for further reconsidera-
tion, counsel have referred us to Weinstein v. Glens Falls
Insurance Co., 202 Va. 722, 119 S.E.2d 497 (1961), de-
cided after Jones v. Morris Plan Bank of Portsmouth,
170 Va. 88, 195 S.E. 525 (1938), on which we relied for
affirmance in our original decision. In Weinstein an ac-
tion at law on a policy of insurance was commenced
within the one year period of limitations for actions at
law or in equity specified in the policy. The contractual
period of limitations was required to be included in the
policy by Virginia statute. Neither tue statute nor the
contract contained any provision for its tolling. During
the course of the litigation, it became apparent that the
court in which the action had been instituted was not
competent to grant relief. To warrant recovery, reforma-
tion of the contract, an action cognizable solely in an
equity court in Virginia, would be required. An action
in equity was then instituted. It was filed before final
disposition of the action at law but more than one year
after the loss occurred. When the insurer contended that
the equitable action was barred by limitations, the Vir-
ginia Supreme Court of Appeals rejected the contention.
It ruled that “the chancery suit was but a continuation of
the claim asserted in the law action which was concededly
brought in time, and the statute having stopped running
upon the institution of the law action, the suit in chan-
cery was not barred.” 119 S.E.2d at 503.

To me, Weinstein is dispositive of this appeal. Plain-
tiff’s suit was instituted in Kentucky before the expira-
tion of two years prescribed by the applicable Virginia
statute. The Kentucky court, bound by Kentucky’s ex
post facto determination that Kentucky public policy pro-

24a

hibited giving effect to foreign statutes of limiations more
liberal than that of Kentucky, was not competent to con-
sider the merits of the suit. Plaintiff’s suit in Virginia
was instituted before the Kentucky action was termi-
nated. Indeed, suit was filed in the Western District of
Virginia before the mandate of the United States Court
of Appeals for the Sixth Circuit issued and more than
six months before the Supreme Court denied certiorari.
See Burnett v. New York Cent. R. Co., 380 U.S. 424, 435
(1965). I have no difficulty in concluding that the Vir-
ginia suit was “but a continuation” of the previously
filed Kentucky action, timely under Virginia law, and,
therefore, the Virginia statute of limitations interposed
no bar.

Inexplicably, the opinion in Weinstein made no refer-
ence to the earlier decision in Jones. We are told, also,
that no reference to Jones was made in the briefs filed in
Weinstein. Whatever our views with regard to conflict
between the two decisions, Weinstein, as the latest ex-
pression of Virginia law, is entitled to be followed. Re-
conciliation, if any is needed, is for the state courts in an
appropriate case, not us.

We ought not to decide more than that the present suit
is not barred by limitations under Virginia law. The par-
ties have agreed that, under Guaranty Trust Co. v. York,
326 U.S. 99 (1945), we must look to the law of Virginia
to decide this case. Guaranty Trust held that, in a diver-
sity action like that at bar, we must look to the state law
to determine the period of limitations. The court pur-
portedly accepts this proposition, but seeks to avoid its
logical consequences by finding that the tolling of limita-
tions is a matter of federal law. While Guaranty Trust
did not concern the tolling of limitations, tolling is so
clearly the obverse of the same coin that I think we are
bound to Virginia law and are foreclosed from fashion-
ing a federal rule.

25a

Certainly, Guaranty Trust has not been sufficiently
eroded in whole or in part that we should refuse to follow
it; nor, in my estimation, has a satisfactory way been
devised by the court to avoid it. The decisions of the
Supreme Court in Byrd v. Blue Ridge Cooperative, 356
U.S. 525 (1958), and Hanna v. Plumer, 380 U.S. 460
(1965), do provide a basis for applying a federal rule of
law in a diversity case une«r certain circumstances, but
the rationale of those two cases does not support a fur-
ther departure from the principles of Erie Railroad Co.
v. Tompkins, 304 U.S. 64 (1938), under the facts pre-
sented here. Byrd (factual issue must be decided by a
jury in a federal court) and Hanna (service of process
in federal actions must meet the standards of the Fed-
eral Rules of Civil Procedure) were dictated by strong
expressions of federal policy: the Seventh Amendment
and the Federal Rules of Civil Procedure, respectively. In
contrast to these Constitutional and Congressional man-
dates, here we have only a notion of an “institutional in-
terest” in the uniform management of the federal court
system. If this interest is sufficient to support a federal
rule of tolling, I suggest that it favors the application of
a federal statute of limitations just as strongly, so that
by implication Guaranty Trust is being overruled. I note,
also, that there is lacking in this case any discriminatory
state policy of the type intended to be prevented by the
creation of federal diversity jurisdiction so that there
would be justification for noncompliance with state law.
Szantay v. Beech Aircraft Corp., 349 F.2d 60 (4 Cir.
1965). ;

To me, it is, therefore, unwise to impugn the vitality
and scope of Guaranty Trust when the law of Virginia
alone provides the result.

Judge Sobeloff authorizes me to say that he joins in
this opinion.

oF

os,

1b

APPENDIX B

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 11,566

DONALD L. ATKINS,
Appellant,
vs.

SCHMUTZ MANUFACTURING COMPANY, INCORPORATED,
Appellee.

Appeal from the United States District Court for the
Western District of Virginia, at Danville.
Ted Dalton, District Judge.

(Decided April 17, 1969).

Before Haynsworth, Chief Judge, Sobeloff, Boreman,
Bryan, Winter, Craven and Butzner, Circuit Judges
sitting en banc, on resubmission.

James A. Eichner (George E. Allen, Jr., and Allen,

Allen, Allen & Allen on brief) for Appellant, and

Frank O. Meade (Meade, Tate and Meade on brief)
for Appellee.

2b

Albert V. Bryan, Circuit Judge:

Whether a plea of limitations should be excluded in this
personal injury action is the point on appeal. Donald R.
Atkins, in the employ of the U. S. Plywood Company at
South Boston, Virginia, was injured on June 22, 1961
when using as intended a machine made by Schmuiz
Manufacturing Company, the defendant, from whom Ply-
wood had purchased it. It cost him both legs. Claiming
damages, Atkins put his tragedy upon the negligence of
Schmutz in the machine’s design and construction. Find-
ing the action came too late under the Virginia limita-
tion act, the District Court dismissed. We reverse. The
plea should have been enjoined or disallowed as inequit-
able.

Schmutz had no place of business or agent in Virginia
and Virginia’s long-arm statute was not enacted until
three years afterwards, in June 1964.1 Suit was first
begun in the United States District Court in Kentucky on
June 19, 1963, three days before the running of Virginia’s
two-year limitation. Kentucky’s period for such an ac-
tion was one year,’ but as long understood by the State
and Federal courts there, it yielded to the greater indul-
gence, if any, of the State of the injury. However, this
impression was disavowed by Kentucky’s courts while
Atkins’ case was pending® and the new order made
retroactive.*

? Code of Va., 1950, as amended, Section 8-81.2
2 Code of Va., 1950, as amended, Section 8-24.
> KRS § 413.140.

* Collins v. Clayton & Lambert Manufacturing Co., 299 F.2d 362,
364 (6 Cir. 1962) ; Koeppe v. Great Atlantic & Pacific Tea Co., 250
F2d 270 (6 Cir. 1957); Burton v. Miller, 185 F2d 817 (6 Cir.
1950).

* Seat v. Eastern Greyhound Lines, Inc., 389 SW2d 908 (Ky.
1965).

* Wethington v. Griggs, 392 SW2d 56 (Ky. 1965).

3b

This turnabout in precedent occurred with Atkins’
cause at the trial stage. The District Court in Kentucky
dismissed upon the one-year statute and was affirmed on
appeal. Atkins v. Schmutz Mfg. Co., 372 F2d 762 (6
Cir. 1967) cert. den. 8389 US 829 (October 9, 1967). Be-
fore the mandate of affirmance issued, Atkins commenced
this action in Virginia on March 13, 1967—almost six
years after the injury—laying summons on Schmutz un-
der the new long-arm law. The action fell on the plea
of the Virginia two-year limitation interposed for Schmutz
by its liability insurer.

Dismissal of Atkins’ suit shocks the conscience, as the
trial judge recognized but saw no escape. We think re-
jection of the plea is demanded by the attending equitable
considerations. The amputee is denied trial of his claim
despite his strenuous vigilance to get a hearing. His de-
feat is accomplished by resort to a statute of limitations.
Laws of this kind have always been merely to give as-
surance against stale or ancient claims, lest the defense
be impeded by disappearance of proof through lapse of
time. Here the statute defies plaintiff’s clacrity. True, he
waited two years, but never to the defendant’s prejudice.
At all times it was aware of Atkins’ hurt. Postponement
of the institution of personal injury actions is not uncom-
mon; it allows an opportunity both for compromise and
for further study of the permanence of the injury.

Utterly unforseeable to the plaintiff was the about-face
of the Kentucky State court. Of course this destruction
of his claim would have been avoided had he sued sooner,
but never was there an inkling of the necessity. Defend-
ant’s absence compelled him to sue in Kentucky.

I. Key to relief is that Atkins as plaintiff and Schmutz
as defendant had the same insurer, Liberty Mutual In-
surance Company. It carried the insurance of Plywood
required under the Virginia Workmen’s Compensation

4b

Act” and thus insured Atkins as an employee; it was,
too, the liability insurance carrier of Schmutz. Through-
out, it was both a co-plaintiff and a co-defendant. As a
plaintiff, it sought reimbursement of what it had ad-
vanced pursuant to the Plywood policy and a supplement :
thereto. In defense it sought to save itself as insurer of
Schmutz. The history of this case exposes the ensuing
prejudice to Atkins.

As just intimated, he applied for and accepted work-
men’s compensation. He could, also, sue the third-party
tort-feasor for his injury. However, under the Act when
demand is made by an employee upon his employer for
the statutory benefits it “shall operate as an assignment
to the employer of any right to recover damages which
the injured employee . . . may have against [the tort-
feasor] . . . and such employer shall be subrogated to
any such right and may enforce . . . the legal liability of
[the tortfeasor].... [But] any amount collected by the
employer . . . in excess of the amount paid by the em-
ployer . . . shall be held by the employer for the benefit
of the injured employee . . . less a proportionate share
of such amounts as are paid by the employer for reason-
able expenses and attorney’s fees.. .”®

If an insurer, as here, satisfies the benefactions of the
statute, then all the privileges of the employer are au-
tomatically assigned to the insurer, including the right
to reimbursement for the items enumerated in the fore-
going excerpt from the Act.° Insistence upon indemnifi-
cation of Liberty by Atkins is also found in the agree-
ment Liberty exacted of Atkins for payment of extra-
statutory benefits. The action may be brought by the in-
sured or the insurer in the name of either. Hence it is

™Va. Code 1950, 65-1 et seq., as revised 65.1-1 et seq. (1968).
® Va. Code 1950, 65-38, as redesignated, 65.1-41 (1968).
® Va. Code 1950, 65-108, as redesignated, 65.1-112 (1968).

’ FAAS AME PIE PO pea
SES I ORIG 5 ee i aan Pear SEN

5b

a suit for the use of both the employee and the insurer,
but primarily for the latter and secondarily for Atkins.
The insurer, thus, is a co-plaintiff, whether named or not.
In the instant facts, Liberty is defending Schmutz and
so is in reality a defendant.

II. In remarkably like circumstances Czaplicki v. The
Hoegh Silvercloud, 351 US 525, 531 (1956), held that the
equities in favor of the apparently prejudiced insured
should be looked to as well as the rigid literality of a
pertinent statute. In consequence, he was permitted to
maintain a suit despite the express statutory transfer of
the right of action to his insurer.

Recalling that Liberty holds title to Atkins’ claim, the
following excerpt from Czaplicki indicates its resemblance
to our case: “. .. an action by Travelers [the insurer |
would, in effect, be an action against itself, .. .” 851 US
531. Czaplicki is cited only to authenticate the duty and
power of a court to exert an equitable discretion to fos-
ter the interests of the injured insured. The opinion re-
frained from declaring, as unnecessary, the relation be-
tween the insurer and insured, when the tortfeasor is
sued for their several benefits, to be a trust, but in join-
ing, Justice Frankfurter conceived of it that way. Other
decisions enunciate this concept. It was the view of the
concurring judge in Potomac Electric Power Company
v. Wynn, 343 F2d 295, 299 (D.C. Cir. 1965). Earlier,
this had been the concept of Learned Hand, C.J., United
States Fidelity & Guaranty Co. v. United States, 152 Fed
46, 48 (2 Cir. 1945).

Advertently or inadvertently, Liberty has put itself
into a fiduciary category, a realm historically dominated
by equity. It would discountenances resort to the statute
of limitations wherever seen to be inequitable or uncon-
scionable. Marine Insurance Co. v. Hodgson, 11 US
(Cranch) 881, 336 (1812); La Porte v. United States
Radium Corp., 18 FSupp. 263, 273 (D.N.J. 1935) ; Bruns-

6b

wick Land Corp. v. Perkinson, 153 Va. 608, 151 SE 138
(1930).

The insurer’s duty to avoid prejudice to the employee’s
recovery goes back to Liberty’s policy insuring Plywood
under the Virginia Workmen’s Compensation Act.’® While
this document is not in the record, necessarily it is avail-
able to Atkins as a beneficiary. It must be read, too, as
forbidding interference with Atkins’ enforcement of his
- claim. Just as the employee cannot debase the insurer’s
rights of subrogation and indemnity against the wrong-
doer,"' so neither the employer nor the insurer can preju-
dice the employee’s rights.** It is incumbent upon the
employer and insurer to observe this commandment faith-
fully.

III. Notwithstanding, Liberty through its dualism has
thwarted Atkins’ recovery in Kentucky and in Virginia,
and to the advantage of Liberty. Liberty is so postured
that if Atkins loses, Liberty is saved the possibility of
paying any more than the expenditures it has already
made for Atkins. It is an encouragement for Liberty to
oppose Atkins, just as it has. Obviously, this is in vio-
lent contravention of Liberty’s duty under the Virginia
law not to hinder Atkins, certainly not to its own ad-
vantage.

Justification urged for Liberty’s position is that in
pleading the statute, it is doing no more than Schmutz
could have done. The answer is that the real defendant,
of course, is Liberty and it is bound to Atkins as Schmutz
is not. Liberty cannot recast its actual part by acting in
the shadow of Schmutz. Equity must correct the in-
justice.

1°'Va. Code 1950, 65-109, as redesignated 65.1-113 (1968).
11 Stone v. Heline Co., 184 Va. 1051, 37 SE2d 70 (1946).
*C. & O. Ry. Co. v. Palmer, 149 Va. 560, 140 SE 831 (1927).

7b

IV. Our decision to strike the limitation plea does not
rest on estoppel. It is placed on the jurisdiction of equity,
noted in Czaplicki. supra, 351 US 525, and elsewhere :.
cited, to prevent imposition upon the insured when, as
here, there are breaches by the insurer of its ties to the
insured. Especially is this the aim when the abandon-
ment of the insured is due to a conflict of the company’s
interests with the individual’s.

V. At once arises the query of why did not Atkins
raise the present contention in the Federal court in Ken-
tucky. Explanation is immediately at hand. From the
day of his injury, June 22, 1961, until October 1963, he
was not informed of Liberty’s interest in Schmutz, and
then only by chance. The limitations of both Kentucky
and Virginia had by that time matured, although the
plea was not filed until November 19638.

Naturally, the next inquiry is why Atkins did not, after
learning that Liberty was also Schmutz’ insurer, dispute
the limitation defense. The answer is quite adequate. At-
kins’ attorneys in opposing Liberty as Schmutz’ champion
were cautious not to jeopardize Liberty’s obligatory re-
habilitative care of Atkins. It was owing him by virtue
of the Virginia statute and the supplemental agreement.
A consideration in this regard was whether if in the Ken-
tucky trial Atkins resisted Liberty’s medical evidence on ©
damagés, he might be charged with hampering and not
cooperating with his insurer. On that ground, his entitle-
ments to restorative treatments might be denied. Tn this
connection, it is notable that the supplemental agreement
stipulates that the benefits it provides are those “which
in the opinion of the Company are reasonably necessary.”
Incidentally, Liberty gained complete medical evidence
upon Atkins through its care of him. The Schmutz-Lib-

erty defense was profited by Liberty’s relationship to
Atkins,

Termination of the required reparative measures would
have meant a serious and severe loss to Atkins. Atkins

8b

had been receiving medical and hospital attention from
Liberty ever since the day of his accident. From time to
time for that purpose he was taken by Liberty to its
center in Boston, Massachusetts. This solicitude ceased
just after Atkins filed his suit in Virginia in March 1967
—whether as a consequence of this step or as “in the
opinion of the Company” was no longer necessary, does
not appear in the record.

The same fear possibly accounts for the absence of any
fight on the limitation plea. Intended or not, Liberty’s
Janus-capacity put a “squeeze” on Atkins, either to forego
a replication with an assault on the plea or lose the
medical attention.

VI. Res judicata or estoppel by judgment is not a
defense here. The Kentucky Federal court’s judgment
dealt only with the Kentucky statute. Concededly, the
statute has no extraterritorial force and is not a con-
sideration in applying the Virginia laws. Furthermore,
a decision on a statute of limitations of this kind is not
a resolution on the merits of the controversy. For these
reasons the dismissal on that ground is not effective be-
yond Kentucky.

Rule 41(b) F.R.Civ. P."* has been cited as requiring,
in some situations, that a dismissal on the statute of
limitations by a Federal court in one State be given res
judicata-effect in a subsequent case in a Federal court
in another State as a dismissal on the merits. See Bertha
Building Corp. v. National Theatres Corp., 248 F2d 833,
840 (2 Cir. 1957) disapproving Warner v. Buffalo Dry-
dock Co., 67 F2d 540 (2 Cir. 1933) cert. den. 291 US
678 (1934); Murphy v. A/S Sobral, 187 FSupp 163, 164

13 (b) Involuntary Dismissal: Effect Thereof .... Unless the
court in its order of dismissal otherwise specifies, a dismissal
under this subdivision and any dismissal not provided for in this
rule, other than a dismissal for lack of jurisdiction, for improper
venue, or for failure to join a party under Rule 19, operates as an
adjudication upon the merits.

9b

(S.D.N.Y. 1960). But this is not the prevalent view.
Moore’s Federal Practice, 2d Ed., p. 1033; cf. Costello v.
United States, 365 US 265, 285 (1961). The insignifi-
cance of the point presently is obvious when it is re-
called that Atkins could have sued the second time in a
Virginia State court without this obstruction.

VII. Equity powers aside, intervention in the utiliza-
tion of the Virginia act of limitations does not affront
her precedents. While it was said, in Brunswick Land
Corp. v. Perkinson, supra, 153 Va. 603, 151 SE 188, 140
(1930), that the act provides its only exceptions, the
decision recognizes the possibility of other exceptions un-
der “certain extraordinary circumstances, wherein the
positive and plain requirements of an equitable estoppel
preclude its application”. Wilson v. Butt, 168 Va. 259,
190 SE 260 (1937).

VIII. Exoneration from the predicament in which
Liberty now finds itself is not suggested by the question
of how far Liberty’s duality withdraws the defenses of
Schmutz-Liberty. The ready response is that equity has
a discretion in lending its aid. It is justified at this time
only with respect to the employment of the limitations
act, which is quite different from a stand taken on the
merits; it is only a means of escape.

IX. The contention is pressed that Liberty would be
damaged in the sale of insurance if it is to be restricted
in its defenses when a contest develops between two of
its insureds. Automobile liability and collision_ policies
are mentioned as examples. Frequently it may develop,
it is said, that the same insurer has written these con-
tracts for the plaintiff as well as for the defendant,
and under our decision difficulties for the insurer are to
be anticipated, particularly in the event of counterclaims.
This is quite true, but it is a possibility arising from the
generality of the insurance business, not from the fault
of the insured. It is Liberty’s concern alone. 18 ALR

10b

8rd 482. Certainly the problem is not solved to the
prejudice of the insured."

Liberty is not accused or thought of by the court as
purposely resorting to a bifold position to advantage it-
self or Schmutz. There is not the slightest basis for such
an imputation. Undoubtedly overlooked by Liberty was
the prejudice to Atkins reflected by its twin character.
The point is, however, that we must look to the result,
and not to the intendment, of the insurer’s twoness.

X. The record does not disclose the terms or limits of
Liberty’s insurance of Schmutz, but to the extent that
Schmutz is not protected, our decision presently shall not
preclude Schmutz from interposing the plea of limita-
tions in respect to the amount of any judgment obtained
by Atkins which is not covered by Liberty’s policy.
Schmutz did nothing to prejudice Atkins in the prosecu-
tion of his claim and there is no equitable ground for
denying it this defense.

It appears that in regard to the running of the statute
there is no jury issue. If that is true, then at the trial the
Court will apply our decision to Liberty and Schmutz to
the extent of Liberty’s obligation to indemnify Schmutz,
and apply it to Schmutz separately as to any unindemni-
fied liability. The point would not go to the jury in any
manner.

The District Court’s order of dismissal will be vacated
and the previous opinion of the majority of this court

1‘ It has been suggested, too that the present situation has existed
for years, without disapproval, when a longshoreman claims work-
men’s compensation from his employing stevedore for injury
aboard ship. The analogy dra‘.n is this: under the stevedore’s
policy the insurer pays the claim; neither the longshoreman, nor
the insurer in his name, can sue the stevedore, but they can and
do sue the ship; thereupon the ship impleads the stevedore; and
the insurer defends the stevedore. No conflict is present in the
position of the insurer. Throughout, the insurer claims with the
longshoreman and the stevedore against the ship, and defends the
stevedore on the ship’s claim. The insurer never takes the side
of the ship against the longshoreman.

11b

will be withdrawn. On remand Liberty should be made a
party defendant, as recommended in Czaplicki, supra,
351 US 525." The plaintiff will be permitted to amend
his complaint to effectuate our determinations and Liberty
given leave to answer. |

The District Court will suspend or enjoin the inter-
vention of Schmutz-Liberty’s plea of the statute of limi-
tations insofar as it may relieve Schmutz and Liberty of
liability for the indemnity provided Schmutz under Lib-
erty’s insurance policy. But the statute may be pleaded
by Schmutz against recovery by Atkins of any amount
for which it is not covered by Liberty’s policy. The ac-
tion will then go to trial without this defense.

Vacated and Trial Ordered.

CRAVEN, Circuit Judge, concurring:

With Chief Judge Haynsworth, I regret the refusal
of the court to reconsider en banc the merits of the Erie
question. I would prefer to reverse on Erie grounds as
stated in my dissent from the panel decision, 401 F.2d
734, but have no hesitation in joining in Judge Bryan’s
opinion.

WINTER, Circuit Judge, with whom HAYNSWORTH,
Chief Judge, joins, dissenting :

By a tour de force the majority achieves what may
be considered a just result on the particular facts of an

1* Liberty was initially a party defendant in a Separate count in
the Kentucky case, but not to the cause of action pleaded against
Schmutz. Recovery was sought on the allegation that Liberty
“either gratuitously or by virtue of the provisions of a policy of
insurance” with Plywood had undertaken, but failed, to maintain
a safety inspection of Plywood’s plant machinery. Liberty was
voluntarily dropped from the suit by Atkins under this count.

12b

appealing case. It does so by ignoring the shackles of
state law which attach to our diversity jurisdiction and
by embroidering on the basic fact that Liberty Mutual
Insurance Company was the insurer for both plaintiff
and defendant. However commendable the result in the
instant case, it is unsupported by any authority, and the
precedent which the opinion establishes has a disturbing
and far-reaching adverse effect on well-established prin-

ciples of insurance law. en

True, Liberty Mutual was workmen’s compensation
insurer for plaintiff’s employer and by paying workmen’s
compensation benefits to plaintiff succeeded to plaintiff’s
cause of action, if any, against the defendant, its other
insured. But this duality, standing alone, serves as no
basis to provide equitable relief. Czaplicki v. The Hoegh
Silvercloud, 351 U.S. 525 (1956), is no authority for
the result reached here. It held only that in the circum-
stances where the same insurer was subrogee of plaintiff
and liability insurer of the marine contractor whose fault
was alleged to have caused plaintiff’s injuries, plaintiff
could maintain his own action against the third-party tort-
feasor notwithstanding subrogation. In the instant case,
this is the very thing that plaintiff has done, and de-
fendant has never challenged plaintiff’s right to sue, if
suit were timely. Significantly, Czaplicki was remanded
for an evidentiary hearing as to whether the insurer by
action or inaction justified plaintiff’s delay in bringing
suit so as to excuse plaintiff from the defense of laches,
or whether the insurer suffered prejudice by the delay, a
significant factor in regard to laches but not in regard
to limitations. In the instant case, the majority is un-
able toe point to any action or nonaction on the part of
Liberty Mutual which would provide 2 shadow of a claim
that Liberty Mutua! waived or should be estopped from
pleading limitations.

Even if the “fiduciary” or “trustee” relationship stated
by Mr. Justice Frankfurter in concurring in Czaplicki,

13b

or Judge Wright, in his concurrence in Potomac Electric
Power Company v. Wyman, 348 F.2d 295, 299 (D.C. Cir.
1965), or Judge Learned Hand in United States Fidelity
& Guaranty Co. v. United States, 152 F.2d 46 (2 Cir.
. 1945), is invoked, the result reached by the majority
should not stem therefrom, absent a showing of something
more than the mere fact of the relationship. While Lib-
erty Mutual arguably has a fiduciary relationship to

3 plaintiff, it has-a fiduciary relationship to defendant also.
Undoubtedly it covenanted to defend defendant and it may
well be that the covenant to defend exists in the context
of a policy limitation of liability well below the substan-
tial damages that plaintiff may be expected to prove if lia-

‘bility is established. The record does not disclose the
limits of defendant’s policy, but Liberty Mutual’s obliga-
tion to defendant should not be lightly subordinated to
its obligation to plaintiff. The only satisfactory basis on
which Liberty Mutual’s obligation to plaintiff should be
held to prevail over its obligation to defendant is where,
unlike here, Liberty Mutual or defendant has done or
failed to do some act from which it can be concluded that
the obligation to plaintiff has acquired a superior equity.
No decided case of which we are aware, except that of the
majority’s decision today, would predicate a similar re-
sult on any other basis. The absence of estoppel or waiver

? The majority insists that today’s decision does no violence to the
policy considerations underlying Virginia’s statute of limitations
and cites in this connection Brunswick Land Corp. v. Perkinson,
153 Va. 603, 151 S. E. 188 (1980). Aside from some doubt con-
cerning the authoritativeness of Brunswick in light of the fact that
it was a trial court opinion adopted by the Virginia Supreme Court,
and in light of more recent pronouncements by that Court upon
the issue of exceptions to the statute of limitations—most notably
Jones Vv. Morris Plan Bank of Portsmouth, 170 Va. 88, 195 S. E. 525
(1938)—it must be noted that Brunswick did no more than to
acknowledge the generally recognized equitable estoppel exception
to the defense of limitations. Yet the majority specifically dis-
avows reliance upon the doctrine of equitable estoppel. In short,
in spite of the fact that this is a diversity case, the majority can
point to no colorable Virginia authority which suggests the result
that the majority reaches today.

14b

renders irrelevant the speculations of the majority as to
why plaintiff may have concluded not to assert the exist-
ence of the fiduciary relationship when he learned of it
in October, 1963; properly, knowledge of the mere exist-
ence of the relationship is without significance.’

The scope of the majority’s decision is uncertain; its
possible consequences are horrendous. Does the fact of a
fiduciary relationship mean that as well as precluding
the plea of limitations, defendant may not assert non-
liability on the merits? The majority suggests not, but
its ipse dixit that the defense of limitations may be dis-
tinguished is unsupported by authority or logic. No less
convincing nor better supported is the distinction drawn
between Liberty Mutual’s right to plead limitations with
regard to the portion of plaintiff’s ad damnum, or recov-
ery, which exceeds Schmutz’s policy limits and that less
than the policy limits. Liberty Mutual defends Schmutz
under a covenant to defend which provides no basis for
such fragmentation; Liberty Mutual is not a party de-
fendant and its liability is strictly secondary. Thus, initial
error is compounded by further error. Even with regard
to the portion of plaintiff’s alleged cause of action to which
limitations may not be pleaded, one may wonder is Lib-
erty Mutual precluded from contesting the extent of
plaintiff’s recovery even if it is allowed to contest liability?

These are not idle inquiries having relevance only to
tiuis particular case. In the field of maritime litigation it

2 Even if the reasons why Atkins has never alleged that Liberty
was bound to him by a fiduciary relationship and has never com-
plained of the dual aspect of Liberty’s position were relevant, we
note that the majority’s speculations do not supply a satisfactory
explanation. The majority theorizes that the issue was never raised
by Atkins because he feared that to do so would antagonize Liberty
and thereby place in jeopardy the medical attention which Atkins
was receiving from Liberty. Yet the majority says that this
attention ceased in March, 1967. The majority suggests no reason
why the duality issue was not raised after this date, particularly if
Liberty was attempting to bring unconscionable pressure to bear
upon Atkins.

15b

is not unusual for the same insurer to provide the work-
men’s compensation coverage for injured longshoremen
and the liability coverage for their employer who is im-
pleaded when a longshoreman sues the ship. Ballwanz v.
Jarka Corporation of Baltimore, 382 F.2d 433 (4 Cir.
1967), is one example. With growing liberality in the
obtention of verdicts over on the theory of breach of im-
plied warranty of good workmanship, the realities of such
litigation are that the insurer is in a position antago-
nistic to itself, as Ballwanz demonstrated. As every ex-
perienced admiralty trial judge has observed, the steve-
dore’s insurance carrier’s first ground of defense is the
non-liability of the ship. Indeed, where the seaman’s
claim is that the unseaworthiness of the ship was the re-
sult of the negligent act of the stevedore’s fellow-em-
ployee, the identity of interest is inevitable. In_ these
and other cases, the active cooperation between counsei
for the stevedore and the ship, heretofore not thought im-
proper, legally or ethically, in establishing that defense
is manifest. Until today no one dared suggest that Lib-
erty Mutual on behalf of Jarka, or any carrier on behalf
of its stevedore-insured, could not defend vigorously and
successfully with regard to the entire claim. Their right
to do so in the future is now in question.

In the field of motor vehicle tort liability, it is not un-
usual that defendant’s insurer has also provided collision
coverage to the plaintiff, or even that the same insurer
insures both parties for public liability in a suit in which
a counterclaim or cross-claim is asserted. How an insurer
in such circumstances may avoid the dilemma the ma-
jority’s decision poses, or how it should conduct itself
with respect to the rights of its various insureds when
it finds itself in this dilemma, is likewise highly proble-
matical in the light of today’s decision. Much more is at
stake than the individual concern of the insurer. No
feasible basis to provide reasonable protection to the in-
surer is apparent; the only assumable alternative is

16 b

greatly increased costs of providing insurance coverage
with the resulting deleterious effect of discouraging the
socially desirable result of ready and certain response to
judgments for liability which insurance provides.

To paraphrase Mr. Justice Frankfurter in Czaplicki,
the disposition of a case is of prime importance to the
parties, but how a result is reached concerns the rational
development of the law. We deem today’s decision ir-
rational, and respectfully dissent.

HAYNSWORTH, Chief Judge, dissenting:

I associate myself without reservation with Judge
Winter’s dissenting opinion. It is not enough, as Judge
Winter demonstrates, to point to the fact that there was
a fiduciary relationship between Liberty Mutual and
Atkins. To warrant judicial limitation upon Liberty
Mutual’s performance of its fiduciary obligations to
Schmutz and its defense of its own financial interest as
the liability insurer of Schmutz, it is essential that there
appear some neglect of Liberty’s fiduciary duty to Atkins
or conduct which would create the basis of an estoppel.
Had Liberty lulled Atkins into delay, beyond Kentucky’s
one-year statute of limitations, in filing his action in the
Western District of Kentucky, there would be a basis for
the remedy the majority evokes, but no such thing oc-
curred. Liberty fully discharged its fiduciary obligations
to Atkins. With respect to them, it has done all of those
things it ought to have done; it has done none of those
things it ought not to have done. To impose disabilities
upon it under those circumstances, seems to me to be
without foundation either in law or morality.

I think it most regrettable, however, that the resub-
mission of the case to the en banc court has resulted in

17b

such a radical change in the dialogue and the production
of a majority opinion with a high potential for untoward
consequences upon liability insurers and their businesses
and upon the effectiveness and cost of their contracts.
Liability insurance has become a necessity for every busi-
ness, which is not so large as to be able to afford the risk
of self-insurance, and to every responsible individual.
Limitations upon the effectievness of such protection and
unreasonable inflation of its cost, for in the end it is
the assureds, not the insurance companies, which must
bear the financial burden, are matters of no small public
concern.

The earlier dialogue in the original panel was more
rational and more useful. See Atkins v. Schmutz Manu-
facturing Company, 4 Cir., 401 F.2d 781. It is quite pos-
sible, I think, to reach the result to which the majority
comes on the ground that the question of the tolling of
Virginia’s statute of limitations is to be resclved as a
matter of federal law. The federal courts provide a single
unified system for the administration of justice, see In-
ternatio-Rotterdam, Inc. v. Thomsen, 4 Cir., 218 F.2d
514, and, aside from matters of convenience and prac-
ticality, its subdivisions need not conform to state boun-
daries. Surely the question of the transferability of the
first action from the Western District of Kentucky to the
Western District of Virginia, more than two years after
the injury, would have been determinable solely as a
question of federal procedure. That provides a logical
analogy to support the conclusion that the effect of the
pendency of the first action in the Western District of
Kentucky should be resolved as a matter of federal law
when the filing of the first action met the fundamental
purpose of Virginia’s two-year statute of limitations fore-
closing stale claims of longer duration and the second
action was filed in the Western District of Virginia dur-
ing the pendency of the first.

18b

Guaranty Trust Company v. York, 326 U.S. 99, and
Ragan v. Merchants Transfer & Warehouse Co., 387 U.S.
530, are major obstacles in the way of that conclusion,
of course, but if a majority of this court is not now pre-
pared to join Judge Craven in the position he earlier took
in dissent from the panel’s decision,’ expansion of that
dialogue would at least have afforded the Supreme Court
an opportunity for further consideration of the continu-
ing vitality of Guaranty Trust and Ragan after Byrd v.
Blue Ridge Electric Cooperative, 356 U.S. 525, and Hanna
v. Plumer, 380 U.S. 460.. Abandonment of that dialogue
destroys an opportunity to achieve elucidation and a
healthy evolution of the law in this area and substitutes
a declaration, in a wholly unrelated area of the law, of
a legal principle which has as its apparent * support only
the wish to achieve a particular result in a particular
ease and which carries with it much potential mischief
in litigation yet to come.

1 See 401 F.2d 734, et seq.

2I do not intimate that greater support for their conclusion
is not apparent to my brothers of the majority than to me.

ve

o

le

APPENDIX C

UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT

No. 11,566

DONALD L. ATKINS, Appellant,
Versus

SCHMUTZ MANUFACTURING COMPANY, INCORPORATED,
Appellee.

Appeal from the United States District Court for the
Western District of Virginia, at Danville.
Ted Dalton, Chief Judge.

(Argued Jan. 12, 1968. Decided Sept. 10, 1968.)

Before WINTER and CRAVEN, Circuit Judges, and
KELLAM, District Judge.

James A. Eichner (George E. Allen, Jr., and Allen, Allen,
Allen & Allen on brief) for Appellant, and Frank O.
Meade (Meade, Tate and Meade on brief) for Appellee.

WINTER, Circuit Judge:

Plaintiff appeals from a summary judgment entered
for defendant on the ground that plaintiff’s action was
barred by the Virginia statute of limitations. In the
limited role that we occupy in the exercise of diversity

Det ee A cae

2¢

jurisdiction, we are constrained to agree, and we affirm
the judgment.

Plaintiff was injured on June 22, 1961, at South Boston,
Virginia, when he became entangled in a machine manu-
factured and sold by the defendant. His injury neces-
sitated amputation of both of his feet and he spent a long
period of time in various hospitals and rehabilitation
centers. Because he believed that the defendant was neg-
ligent in the design and construction of the machine which
so severely and permanently injured him, he concluded
to pursue his rights against the defendant.

The defendant’s only place of business was and is in
Louisville, Kentucky. Virginia had no “long-arm statute”
until 1964.1 Thus, plaintiff, at the time he initially sought
to institute suit, reasonably concluded that the defendant
could not be sued in Virginia. Suit was brought in the
United States District Court for the Western District of
Kentucky on June 19, 1963. The suit in Kentucky was
brought more than one year, but three days less than two
years, after the date of injury. The Virginia statute ap-
plicable to the plaintiff’s alleged cause of action prescribes
two years as the period of limitations, 2 Code of Virginia
(1957 Repl. Vol.) § 8-24; the comparable period under
Kentucky law is one year, K.R.S. § 413-140.

At the time plaintiff brought suit in Kentucky, Ken-
tucky decisions were understood in the federal courts to
hold that in a suit filed in Kentucky, based upon a cause
of action arising in another state, “the statute of limita-
tions of another state, if longer, is applicable.” Collins
v. Clayton & Lambert Manufacturing Co., 299 F.2d 362,
364 (6 Cir. 1962); Koeppe v. Great Atlantic & Pacific
Tea Co., 250 F.2d 270 (6 Cir. 1957); Burton v. Miller,
185 F.2d 817 (6 Cir. 1950). However, while plaintiff’s
suit was pending in the Kentucky district court, the

1 Such a statute is now in effect. 2 Code of Virginia (1966 Cum.
Supp.) § 8-81.2.

a

3¢

Kentucky Court of Appeals held that in such cases the
Kentucky one-year statute of limitations would prevail
over a longer period of another state. Seat v. Eastern
Greyhound Lines, Inc., —— Ky. ——; 389 S.W.2d 908
(1965). And it also decided that this rule should be ap-
plied retrospectively. Wethington v. Griggs, —— Ky.
——, 392 S.W.2d 56 (1965).

Thereafter, defendant filed a motion for summary judg-
ment on the ground that suit was barred in Kentucky.
The motion was granted by the district court and affirmed
on appeal. Atkins v. Schmutz Mfg. Co., 372 F.2d 762 (6
Cir. 1967). Certiorari to the Supreme Court has been
denied. Atkins v. Schmutz Manufacturing Co., Inc., 389
U.S. 829 (1967).

The instant case was filed in the United States District
Court for the Western District of Virginia, on March 18,
1967, almost six years after the injury occurred, but
before the mandate of the United States Court of Appeals
for the Sixth Circuit had issued. By motion for summary
judgment, defendant asserted that the Virginia two-year
statute of limitations barred plaintiff's suit. Finding that
plaintiff could not fit himself into any of the instances in
which Virginia suspends the running of the statute, the
district judge granted the motion. We agree that plain-
tiff may not maintain the action.

Virginia suspends the running of the statute for vary-
ing periods when the plaintiff is under the disability of
infancy or insanity, when the plaintiff has died, when
there is delayed qualification of plaintiff’s personal repre-
sentative and when suit is prevented by the defendant.
2 Code of Virginia (1957 Repl. Vol.) §§ 8-30; 8-31; 8-32;
8-33. None of these instances of Suspension is applicable.
Section 8-34 is the only remaining suspension statute, and
its text is set forth in the margin.’

*Ҥ 8-34. Further time given when suit abates or is defeated on
ground not affecting the right to recover.—If an action or suit

4e

Section 8-84 (known as § 5826 in the Code of 1919)
was judicially construed in Jones v. Morris Plan Bank of
Portsmouth, 170 Va. 88, 195 S. E. 525 (1938). There,
the plaintiff to avoid the bar of limitations argued that
there should be excluded from the limitation period the
fourteen months during which there was pending in the
Circuit Court of the City of Suffolk a suit by him against
the same defendants for the same alleged cause of action
for malicious abuse of civil process which had been finally
dismissed for lack of venue properly pleaded. In reject-
ing the contention, the Supreme Court of Appeals said
this about the statute:

“An analysis of our statute (section 5826) shows
that in only four instances is there a suspension of
the statute of limitations by reason of the pendency
of a former suit brought in due time. These are:
(1) Where such suit abates ‘by the return of no in-
habitant,’ that is, where the writ is not served for
that reason; (2) where the suit abates by reason of
the ‘death or marriage’ of a party; (3) where, after
the plaintiff has obtained a judgment or decree in his
favor, it is ‘arrested or reversed upon a ground
which does not preclude a new action or suit for the
same cause’; and (4) where ‘there be occasion to
bring a new action or suit by reason of the loss or
destruction of any of the papers or records in a
former suit or action which was in due time.’

commenced within due time in the name of or against one or more
plaintiffs or defendants abate as to one of them by the return of no
inhabitant or by his or her death or marriage, or if in an action
or suit commenced within due time judgment or decree for the
plaintiff shall be arrested or reversed upon a ground which does
not preclude a new action or suit for the same cause, or if there be
occasion to bring a new action or suit by reason of the loss or
destruction of any of the papers or records in a former suit or
action which was in due time; in every such case, notwithstanding
the expiration of the time within which a new action or suit must
otherwise have been brought, the same may be brought within one
year after such abatement, or such arrest, or reversal of judg-
ment or decree, or such loss or destruction, but not after.”

5e

None of these provisions applies to the plaintiff’s
case. There is no saving provision where a suit, such
as that of the plaintiff here, was brought in the wrong
forum or was dismissed otherwise than upon the
merits.” 195 S.E. 526-527.

See also Manuel v. Norfolk & Western Ry. Co., 99 Va.
188, 37 S.E. 957 (1901).

As significant as the holding and what was said was
the approach of the Court in that case. The Court treated
as absolute the bar contained in § 8-24 unless and until
plaintiff could bring himself specifically into one of the
instances of suspension of the bar elsewhere provided in
the statute. In that case, the plaintiff could not, any more
than can the plaintiff in the instant case, and hence his
suit was held barred. In this connection, the Court in the
Morris Plan Bank case deemed significant, as do we, that
when a suit is for wrongful death (as distinguished from
personal injuries), Virginia law suspends the period of
limitations during the pendency of any action subse-
quently abated or dismissed without a determination of
its merits. 2 Code of Virginia (1957 Repl. Vol.) § 8-634.
The presence of this provision in suits for wrongful death
makes its absence in suits for personal injuries strong
evidence that Virginia would not permit suspension of
the limitation period in the instant case.?

Citing Burnett v. New York Cent. R. Co., 380 U.S. 424
(1965), plaintiff argues that pendency of the action in
Kentucky tolled the Virginia statute. Burnett held that a

”

’ The parties call to our attention House Bill 744, introduced into
the 1966 session of the Virginia General Assembly, which would
have tolled the statute for action timely instituted “within or with-
out the State”, but “dismissed otherwise than upon the merits of
the cause of action.” The bill passed the House, but died in the
Senate Committee. Because of the paucity of legislative materials
we cannot determine if the bill was permitted to die because it
was thought unnecessary, or because it was thought undesirable.
If for no other reason, the history of the bill is thus of minimal aid.

*The Kentucky suit was filed three days before the expiration of
two years from the date of the accident. The Virginia suit was

6c

timely state action under the Federal Employers’ Liability
Act dismissed for lack of proper venue tolled the Act’s
three-year period limitations until the state court order
dismissing the action became final by expiration of the
- time for appeal or the entry of final judgment on ap-
peal; hence, a federal suit, filed eight days after dis-
missal of the state action, was not barred. Although the
Burnett case concerned limitations under the Act and
presented a question different from that presented here,
plaintiff stresses its broad statements that statutes of
limitations are intended to promote justice by preventing
the revival of claims which have been allowed to slumber
until evidence has been lost, and that the policy of re-
pose is frequently outweighed where the interests of
justice require vindication of a plaintiff’s rights. The
Burnett case did contain such language and we are in
full accord with it. Indeed, we are in full accord with
the observations of the Sixth Circuit that the equities
of this case “strongly favor appellant” (372 F.2d 764)
and of the district judge below that the argument that
plaintiff should prevail on the point in issue “is appealing
to this court.” In the instant case, the pendency of the
Kentucky litigation would certainly satisfy any legislative
purpose to guard against slumbering claims and would
have provided ample opportunity for discovery and preser-
vation of relevant evidence.

But the short answer is that we do not have before us
a federal statute of limitations on which we are free to
apply the holding or the rationale of the Burnett decision.
We have a state statute to which we must apply state de-
cisional law to the end that “the outcome of the litigation
in the federal court should be substantially the same, so
far as legal rules determine the outcome of a litigation, as
it would be if tried in a State court.” Guaranty Trust Co.
v. York, 326 U. S. 99, 109 (1945); Erie R. Co. v. Tomp-

filed within three days after the issuance of the mandate by the
United States Court of Appeals for the Sixth Circuit.

Te

kins, 304 U. S. 64 (1938).> We cannot read the Virginia
statutes or the Morris Plan Bank case as permitting
plaintiff an opportunity to show if his claim of negligence
on the part of defendent is meritorious.

We find no merit in plaintiff’s argument that we are
free to reexamine § 8-34 under federal law because this
case presents a federal question—whether plaintiff has
been denied due process of law because of the deprivation
of a trial on the merits. If plaintiff has been denied due
process of law, that deprivation occurred when the Ken-
tucky district court under the Erie doctrine applied Ken-
tucky’s retroactive state construction of state law. Al-
though not explicitly, that issue was decided implicitly
against plaintiff in his appeal to the Sixth Circuit. We
would be unwarranted in entertaining a collateral attack
on the judgment of the Sixth Circuit.

AFFIRMED.

CRAVEN, Circuit Judge, dissenting:

I regret that I am unable to persuade the court that we
may faithfully follow the Erie-Guaranty-Byrd-Hanna !
doctrine without necessarily denying this plaintiff a trial
on the merits. If we were deciding this case after Erie
and Guaranty but before Byrd and Hanna, I would agree,
albeit reluctantly, that the result is compelled. It would
be difficult, indeed, to distinguish Guaranty, involving as
it did a state statute of limitations, without ‘the light

5 It should be noted that the Guaranty Trust case decided that the
now familiar Erie rule was applicable to state statutes of limitations
in diversity cases.

1 Erie v. Tompkins, 304 U.S. 64 (1938) ; Guaranty Trust Co. of
N.Y. v. York, 326 U.S. 99 (1945); Byrd v. Blue Ridge Elec. Co-
operative, 356 U.S. 525 (1958); Hanna v. Plumer, 380 U.S. 460
(1965). Hereafter, these state-law-in-the-federal-courts cases will
be referred to simply as Erie, except as indicated.

8c

shed by Byrd and Hanna. The ‘simplistic test of Erie
(substance-procedure) and the mechanistic test of Guar-
anty (outcome) have undoubtedly survived Byrd and
Hanna, but have been so altered that Mr. Justice Harlan,
concurring in Hanna, concludes that the Supreme Court
has “not succeeded in articulating a workable doctrine
governing choice of law in diversity actions.” More spe-
cifically with respect to the problem before us—the appli-
eation of a state statute of limitatioas—Professor Charles
Alan Wright concluded, even before Hanna, that under
the Constitution (1) only the state can say what local
tort duties are to be imposed within the state; (2) that
only the federal government can say how the federal
courts are to administer their proceedings; and (3) that
it is a difficult and doubtful question whether state or
federal law should control how promptly a suit must be
brought in a federal court to vindicate a state-created
right.2 What seemed so clear after Guaranty *—that a
federal court must mechanistically apply a state stutute of
limitations—is now, as Professor Wright suggests, in the
shadow zone. If there is room for doubt that the federal
court must apply the Virginia state statute of limitations,
it would seem to me an a fortiori proposition that there
ought to be considerable doubt about the very narrow is-
sue before us: whether, assuming the application of the
two-year Virginia statute of limitations, it may have been
tolled by the commencement of the Kentucky diversity ac-
tion. Finally, if I am wrong on both counts, and it be
assumed that we must not only apply the two-year Vir-
ginia statute but also apply the law of Virginia with

2 Wright, Federal Courts § 56 at 198. Professor Wright assumes
that Erie rests on its avowed constitutional basis despite much
commentary to the contrary. See id. § 56.

’ The mechanical test of Guaranty (from which the Court sharply
retreated in Hanna) may be partially explained by the author’s
aversion to diversity jurisdiction. See Mr. Justice Frankfurter’s
dissent in Burford v. Sun Oil Co., 319 U.S. 815 (1948), where
he said, “I speak as one who has long favored the entire abolition
of diversity jurisdiction.” Id. at 387.

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respect to the tolling of it, I am strongly of the opinion
that we need not assume the rule of ventriloquist’s
dummy * but are, instead, free to function as Virginia
state judges would when faced with a fact situation not
previously considered by Virginia’s highest court.

Although I think the question is not free of doubt, I
am willing to assume for purposes of this decision that
Guaranty Trust forecloses consideration by an inferior
federal court of the possibility that a statute of limitations
not bound up with the creation of the cause of action
is “procedural” rather than “substantive” and thus clear-
ly outside the Erie rule as originally promulgated in Erie
itself.®

To go so far, and no further, will, in my opinion, serve we
federalism better than will a mechanistic resort to Vir-
ginia tolling statutes and imprecise Virginia state court
decisions interpreting them. “The purpose of the Erie
doctrine, even as extended by York and Ragan, was never
to bottle up federal courts with ‘outcome-determinative’
and ‘integral-relations’ stoppers—when there are affirma-
tive countervailing [federal] considerations ... .” Hanna
v. Plumer, 380 U.S. 460, 473 (1965) (brackets in origi-
nal).

It is important to remember how this particular plain-
tiff became enmeshed in this particular procedural booby
trap. He is a Virginia resident who reasonably thought
he could not bring his suit in Virginia because it lacked
a long-arm statute and was thus driven out of his own

* Fidelity Union Trust Co. v. Field, 311 U.S. 169 (1940), is the
high water mark of ritualistic application of state law in a federal
court. Before the water began to noticeably recede, Judge Jerome
Frank expressed his dismay in this colorful phrase. Richardson v.
CIR, 126 F.2d 562,-567 (2d Cir. 1942). Annot., 140 ALR 705
(19—).

5It has often been suggested that Congress possess the power to
enact a general statute of limitations governing diversity cases.
E.g., Friendly, In Praise of Erie—And of the New England Com-
mon Law, 89 N.Y.U.L. Rev. 388, 402 n. 90 (1964).

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state to litigate. Even so, he brought it within the two-
year period allowed by his state of residence and the place
of the tort, ie, Virginia. He reasonably relied on Ken-
tucky decisions as interpreted in United States courts
that Kentucky would permit the maintenance of the
suit if brought within the period of limitation of the place
of the tort. Pendente lite the decisional law of Kentucky
is changed retrospectively so as to make applicable to his
case the shorter one-year statute of limitation of Ken-

tucky.°

The majority decision rests heavily upon the premise
that the “outcome” must be the same in the federal court
as it would have been in the state court, citing Guaranty.
For reasons developed later. I am not sure what the out-
come would have been in a Virginia court. But presently
assuming that Atkins would have been barred in the state
court, I think it fairly demonstrable that the opposite re-
sult—trial on the merits—could have been obtained in a
federal court unhampered by either Erie or Guaranty.
If this is so, then the problem becomes a purely procedural
one involving the method of operation of the federal courts.
In at least two ways Atkins might have avoided the Erie
problem.

‘When the Kentucky Supreme Court switched its inter-
pretation of the period of limitation, Atkins could then
have sought a transfer of the proceedings to Virginia un-
der $1406(a) of the Judicial Code. Section 1406(a)
provides:

“The district court of a district in which is filed
a case laying venue in the wrong division or district
shall dismiss, or if it be in the interest of justice,

6 The issue on this appeal is completely different from the issue
before the Sixth Circuit in the original Schmutz action. The
original action was controlled entirely by Klazon Co. v. Stentor
Mfg. Co., 313 U.S. 487 (1941), which holds foursquare that a fed-
eral court in a diversity action must apply the forum state’s conflict
of laws rule.

lle

transfer such case to any district or division in which
it could have been brought.”

A district is “wrong” within the meaning of § 1406
whenever there exists an obstacle to an expeditious and
orderly adjudication on the merits.’ Thus where the ob-
stacles to reaching the merits in the original district were
both improper venue and a lack of personal jurisdiction
over the defendant, the Supreme Court of the United
States has approved a transfer of the proceedings to an-
other district, rather than permit a dismissai to result in
having the statute of limitations bar a new proceeding in
another district. Goldlawr v. Heiman, 369 U.S. 463
(1962).

But obstacles other thax. improper venue or lack of per-
sonal jurisdiction have been held to warrant a transfer
under § 1406. Thus a libellant who filed a libel in the
Southern District of New York, thinking he could find a
vessel there, was permitted to transfer the proceeding to
the Maryland district where the vessel was, thereby avoid-
ing a dismissal in New York and the bar of the statute of
limitations that would have confronted a new proceeding
in Maryland. Internatio-Rotterdam, Inc. v. Thomsen, 218
F.2d 514 (4th Cir. 1955). In ordering the Maryland
district court to accept the transfer from the New York
district, the late Judge John Parker of this court added:

“Certainly such transfer is in accord with the mod-
ern standards of procedure, the purpose of which is
to get away from time-consuming and justice-defeat-
ing technicalities and secure an adjudication of the
rights of the parties by as direct and expeditious a
route as possible. The courts of the United States

*“The statute does not refer to ‘wrong’ venue, but rather to
venue laid in a ‘wrong division or district.’ We conclude that a
district is ‘wrong’ within the meaning of § 1406 whenever there
exists an ‘obstacle [to] . . . an expeditious and orderly adjudication’
on the merits.” Dublin v. United States, 380 F.2d 818, 815 (5th
Cir. 1967). Accord, Mayo Clinic v. Kaiser, 888 F.2d 658 (8th Cir.
1967).

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comprise one great system for the administration of
justice... [There is no reason why the proceedings
should not have been transferred instead of being
dismissed, with the necessity of starting all over
again,] where, as here, the new proceeding would be
barred by the statute of limivations.” Internatio-
Rotterdam, Inc. v. Thomsen, 218 F.2d 514, 517 (4th
Cir. 1955).

Had the Atkins’ Kentucky proceeding been transferred to
the Western District of Virginia while the present action
was awaiting trial there, the two proceedings could have
been consolidated and tried there as one case. See Abbott
Laboratories v. Gardner, 387 U.S. 186 at 154-155 (1967).

The obstacle to an orderly and expeditious adjudica-
tion on the merits of Atkins’ claim in Kentucky was the
novel and unanticipated application of that state’s one-
vear statute of limitation. When Atkins commenced the
Kentucky action the existing decisions caused him justi-
fiably to believe he could rely on the longer Virginia pro-
vision. What made the Kentucky district “wrong” as a
place to reach the merits of Atkins’ claim was the unex-
pected obstacle created by the changed rulings of the
Kentucky state courts after his action was commenced.

After the Supreme Court of the United States denied
certiorari to the Court of Appeals for the Sixth Circuit,
Atkins v. Schmutz Mfg. Co., Inc., 389 U.S. 829 (1967),
it was finally settled that the one-year Kentucky sta‘ute
of limitation was an insurmountable obstacle to reaching
the merits of Atkins’ claim in the Kentucky district.’
Atkins was then in a “wrong” district within the mean-
ing of § 1406 and a transfer of the action to the Western

8 For a discussion of Kentucky law as it was understood in the
federal courts when Atkins commenced his action in Kentucky, see
poeag v. Schmutz Mfg. Co., Inc., 872 F.2d 762, 763 (6th Cir.
1967).

‘9 There is no suggestion that the judgment of the Kentucky dis-
trict court adjudicates the merits of Atkins’ complaint.

13 ¢

District of Virginia would have preserved the tolling ef-
fect on the Virginia statute that began with the com-
-Mencement of the federal court action in Kentucky. By
commencing this action within two years of his injury,
Atkins had shown that diligence required by the Virginia
statute and the delays that resulted thereafter came out
of moves by the defendant to avoid trial of Atkins’ claim
on the merits.

That Atkins’ situation at this point came within the
protection of § 1406 seems transparently clear from what
the Supreme Court of the United (.ates has said of that
section :

“The problem which gave rise to the enactment of
the section was that of avoiding the injustice which
had often resulted to plaintiffs from dismissal of
their actions merely because they had made an er-
roneous guess with regard to the existence of some
elusive fact of the kind upon which venue provisions
often turn. Indeed, this case it itself a typical ex-
ample of the problem sought to be avoided, for dis-
missal here would have resulted in plaintiff’s losing a
substantial part of its cause of action under the stat-
ute of limitations merely because it made a mistake
in thinking that the respondent corporations could
be ‘found’ or that they ‘transact . . . business’ in the
Eastern District of Pennsylvania. The language and
history of § 1406(a), both as originally enacted and
as amended in 1949, shows a congressional purpose
to provide as effective a remedy as possible to avoid
precisely this sort of injustice.

“The language of § 1406(a) is amply broad enough
to authorize the transfer of cases, however wrong
the plaintiff may have been in filing his case as to
venue, whether the court in which it was filed had
personal jurisdiction over the defendant or not. The
section is thus in accord with the general purpose
which has prompted many of the procedural changes
of the past few years—that of removing whatever
obstacles may impede an expeditious and orderly ad-

14¢

‘udication of cases and controversies on their merits.
When a lawsuit is filed, that filing shows a desire on
the part of the plaintiff to begin his case and thereby
toll whatever statutes would otherwise apply. The
filing itself shows the proper diligence on the part of
the plaintiff which such statutes of limitation were
intended to insure. If by reason of the uncertainties
of proper venue a mistake is made, Congress, by the
enactment of § 1406(a), recognized that the ‘inter-
est of justice’ may require that the complaint not be
dismissed but rather that it be transferred in order
that the plaintiff not be penalized by what the late
Judge Parker aptly characterized as ‘time-consuming
and justice-defeating technicalities.’ It would at least
partially frustrate this enlightened congressional ob-
jective to import ambiguities inte § 1406 (a) which
do not exist in the language Congress used to achieve
the procedural reform it desired.” Goldlawr v. Hei-
man, 369 U.S. 468, 466-467 (1962). (Emphasis
added. )

The Goldlawr language just quoted also strongly sug-
gests that the commencement of the Kentucky proceedings
tolled “whatever statutes of limitation would otherwise
apply.” In Atkins’ case this could only refer to the two-
year Virginia statute of limitations since the one-year.
Kentucky statute had already run when the Kentucky
proceeding commenced. Indeed it was the application of
the Kentucky statute which deprived Atkins of a remedy
in that state and brought his claim within the protective
policy oi § 1406. It has been held, where lack of personal
jurisdiction in the transferor district provided the basis
for a venue transfer under § 1406, that the statute of
limitation of the transferor state transferred with the
action. Mayo Clinic v. Kaiser, 388 F.2d 653 (8th Cir.
1967). Whatever may be the applicable rule where the
obstacle to reaching the merits is either defective venue
or personal jurisdiction,” it would both defeat the general

10In Van Dusen Vv. Barrack, 876 U.S. 612 ( 1964), it was held that
the law of the transferor district followed a case transferred on

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protective policy of § 1406 and the particular justification
for a venue transfer if the statute of limitations of Ken-
tucky were to follow a transfer of Atkins’ action to Vir-
ginia.

Thus, as I see the matter, the commencement of Atkins’
action in Kentucky tolled the running of the Virgini
statute of limitations. When it became clear he was
barred from a remedy in Kentucky, he could have trans-
ferred the action te the Virginia district court under
§ 1406 and have proceeded to the merit; of his claims
without having the Virginia statute of limitations bar his
claim. Moreover, the Virginia district by this time was
one in which the case “could hive been brought” within
the meaning of § 1406 since the Virginia long-arm statute

motion of the defendant under § 1404(a). The Court reserved the
question whether a §1404(a) transfer sought by the plaintiff
would be governed by the same rule, id., at 639-640, and there seem
to be good reasons for not taking along the law of the transferor
district where the plaintiff seeks a transfer from a district “wrong”
under § 1406.

In Les Schwimley Motors, Inc. v. Chrysler Motors Corp., 270 F.
Supp. 418, Judge Halbert expressed the viewpoint that transferring
a diversity case to a district in another state, on motion of the
plaintiff, does not necessarily carry with it the statute of limita-
tions of the state in which the suit was commenced, citing the pro-
posal of the American Law Institute in its Study of the Division of
Jurisdiction. Between State and Federal Courts. Judge Halbert finds
himself in accord with the viewpoint of the late Professor Brainerd
Currie as indicated in the following quotation from the opinion of
the district court:

“Viewing the federal courts as independent forums for the
invocation of legal rights created by state law, the essence of
the decision in Erie R. Co. v. Tompkins, supra, militates against
the unthinking adoption of one forum’s statute of limitation:
in a case which no longer has any substantial connection with
that forum. If such a course does not violate the due process
clause (See: Home Insurance Co. v. Dick, 281 U.S. 397, 50 S.Ct.
338, 74 L.Ed. 926) it certainly violates the sense of ‘juster
justice’ that hopefully prevails in the federal system (See:
Hart and Wechsler, The Federal Courts and the Federal System
(1953) at pp. 652, 892-900; Hart, The Relations between State
and Federal Law, 54 Column.L.Rev. 489).” Id. at 420-421.

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had been enacted in 1964, long before the Supreme Court
of the United States denied certiorari to the Court of
Appeals for the Sixth Circuit.

I concede, of course, that the path to a trial on the
merits envisioned above is not a broad, inviting one. I
suggest only that it may have been negotiable. But
there is another and easier way that Atkins might have
obtained a trial on the merits.

Despite the lack of a Virginia long-arm statute at the
time, Atk'ns could have originally filed suit in the dis-
trict court in Virginia. When the defendant predictably
moved to dismiss for lack of jurisdiction, Atkins could
have so... ‘ht a transfer of venue under 28 U.S.C. § 1406
and would have brought himself squarely within Gold-
lawr v. Heiman, supra. Pursuant to Goldlawr, presum-
ably the district judge in Virginia would have transferred
_the case to the District Court of Kentucky and under the
doctrine of Mayo Clinic v. Kaiser, 383 F.2d 653 (8th Cir.
1967), the Virginia statute of limitations would have
“followed” the case to the District Court of Kentucky and
the shorter Kentucky statute of limitations would have
had no effect."

Thus it seems that there are at least two ways by which
specialists in federal jurisdiction, if there are any outside
of the faculties of law schools, might have been able to
obtain for the plaintiff a trial on the merits in a federal
court. If this be so, the outcome-determinative test of
Guaranty is not invoked, or if invoked, is simply avoid-
ed by the method of operation of the federal courts which
is surely not a matter of state regulation. Summarizing,
it is apparent that the Erie decision alone does not require
the court’s result. “In view of Brandeis’ careful lin,ita-
tion of his statement of unconstitutionality to ‘substan-
tive rules of common law,’ it is strange that Hrie has

11 See note 10 supra; accord, Headrick v. Atchison Topeka and
Santa Fe Ry. Co., 182 F.2d 305 (10th Cir. 1950).

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sometimes been claimed to have handcuffed federal pro- |
cedure to that of the state where the court sits—although
in this instance most critics have had the grace to admit
that their fears spring not from Erie itself but from some
overly enthusiastic expressions in Guaranty Trust Co.
v. York ....”** Whether the conduct of the plaintiff in
instituting suit in Kentucky amounts to a tolling of the
statute certainly relates as much to “procedure” as it
does to “substance.” For conflicts of law purposes, ques-
tions of application of statutes of limitations have tradi-
tionally been classified with procedure. The conflicts of
laws rule in most jurisdictions is that lex fori controls.
Michigan Insurance Bank v. Eldred, 180 U.S. 693 (1889) ;
McElnoyle v. Cohen, 38 U.S. 311 (1839) ; Goodrich, Con-
flict of Laws § 85 (4th ed. 1964). In Guaranty Trust,
supra, the Supreme Court declined to categorize statutes
of limitations as either “substantive” or “procedural” for
Erie purposes.

Similarly, the “outcome-determinative test” of Guar-
anty is not violated for the result of triai on the merits
would have occurred in the state court of Virginia had
it been possible at the time for Virginia process to run
outside the state.* “Forum shopping” within the State
of Virginia is not involved for presumably the plaintiff
would have been well content in a Virginia state court if
its process could have reached to Kentucky."* Finally, since
Byrd, it is not at all clear that the substantive right in
tort is in this case “bound up” either with the statute of
limitations or with the question of the tolling of that
statute, for this statute of limitations is simply a gen-
eral one and not a condition precedent to the exercise of

12H, Friendly, Benchmarks 175 (1967). (Footnotes omitted.)

18 Whether “outcome” would have been different if the present
act.on had been begun in the Virginia State court is discussed
below.

14 Whether forum shopping was involved in starting the present
action in a federal court in Virginia is also discussed below.

ETL

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a special right created by statute, e.g., wrongful death.
The statute in this case is not prescriptive and the run-
ning of the period does not destroy the underlying right.
See Comment, Developments—Statute of Limitations, 63
Harv. L. Rev. 1177, 1186 (1950); Page v. Cameron Iron
Works, 155 F.Supp. 288, 286 (S.D. Texas 1957).

Mr. Justice Harlan, concurring in Hanna, gave us good
advice when he said, “To my mind the proper line of ap-
proach in determining whether to apply a state or fed-
eral rule, whether ‘substantive’ or ‘procedural’ is to stay
close to basic principles by inquiring if the choice of rule
would substantially affect those primary decisions respect-
ing human conduct which our constitutional system leaves
for state regulation.” The primary decision here was
whether to sue the defendant. That decision remains gov-
erned by state regulation creating a tort action against
the defendant. Application of Mr. Justice Harlan’s test
plainly leaves us free to permit this plaintiff a trial on
the merits. Doing so will divert no stream of cases into
the federal courts in Virginia or elsewhere. Doing so does
not dishonor the Virginia statute of limitations for the
reason that the action was commenced in Kentucky within
the Virginia two-year period. To now permit this plain-
tiff a trial on the merits is not in derogation of Virginia
policy but is plainly in accord with it. The enactznent of
the Virginia long-arm statute is a plain enunciation of a
policy that its citizens be accorded the right of a trial on
the merits against out-of-state tortfeasors.

The court recognizes that the state policy embodied in
§ 8-24 (the two-year statute of limi

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/brief%3Amicro_IA40385605_0893%3A1. Public record. Not legal advice.