Petition for Writ of Certiorari — Gruppo Agusta v. Paramount Aviation Corp.

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% Darene Gen, us.

No. FAILED

In The ue RY & AUC 1 | 1999

Supreme Court of The HnitAH Sates

October Term, 1999

GRUPPO AGUSTA, AGUSTA AEROSPACE

CORPORATION, CONSTRUZIONI AERONAUTICHE

GIOVANNI AGUSTA, S.p.A. and AGUSTA S.p.A.,

Petitioners,

PARAMOUNT AVIATION CORPORATION,

Respondent.

Petition for a Writ of Certiorari to the United States

Court of Appeals for the Third Circuit

PETITION FOR A WRIT OF CERTIORARI

RUDOLPH V. PINO, JR.

PINO & ASSOCIATES, LLP

Attorneys for Petitioners

50 Main Street

White Plains, New York 10606

(914) 946-0600

August 11, 1999

Appeal Press - (914) 761-3600 (212) 267-6602 (516) 872-1110 (6842)

QUESTIONS PRESENTED

I. Whether New Jersey's entire controversy doctrine is

applicable to actions pending in a federal forum venued in

' New Jersey so as to bar claims against those claims which

could and should have been joined in a previous suit,

regardless of whether the earlier suit was brought in a foreign

state or federal court.

I. Whether New Jersey's entire controversy doctrine is a

substantive rule as its application in any matter would lead to

an outcome determinative result.

Ii. Whether the rules of fairness and the doctrines of

judicial interest demand the application of New Jersey's entire

controversy rule in a removal case based solely on diversity of

citizenship when a party that had multiple opportunities to

raise its claims involving a ten (10) year old incident which

was the subject of five prior actions, three of which it was a

direct party and one of which it was a third party defendant,

should be barred from further prosecution.

CORPORATE DISCLOSURE STATEMENT

Gruppo Agusta, Costruzioni Aeronautiche Giovanni

Agusta, S.p.A. ("CAGA"), and Agusta S.p.A. are foreign

entities which were created pursuant to the laws of the

Republic of Italy. The parent corporations and those entities

owning 10% or more are: Finmeccanica S.p.A. and Istituto per

la Ricostruzione Industriale, neither of which are publicly held

corporations.

Agusta Aerospace Corporation ("AAC") is a subsidiary

of Finmeccanica S.p.A. and is not a publicly held corporation.

TABLE OF CONTENTS

Page

8 8G | eT 1

CORPORATE DISCLOSURE STATEMENT.............0cc0000000- ll

I FT RII FD rtiernesetescnrsnsarcsconseninntsncecinesorneneeeeee Vv

OPINIONS ENTERED IN THIS CASE..............ccccccccesssesseseeee l

IEEE ST ER SE a 2

STATUTE INVOLVED IN THIS MATTER.............ccccccceee. 3

STATEMENT SETS SIS SRR Uae ee at 4

rds ccccrmesincvatibeinipnbatmseadinicenniinitbesead 4

a eT cssneesherrinssiccsuicesneiniciininhleidaibi 5

ET A 6

ER 6

BESS 7

v. PACII (The Pending Litigation).........0.0...ccseeee 8

II. Importance of the Entire Controversy Doctrine............... 9

III. Jurisdiction: U.S. Court of Appeals, Third Circuit........ 10

IV. Jurisdiction: New Jersey District Court......0..0..00ccccc 10

ARGUMENTS FOR ALLOWING WRIT...........::c::ccseeeeees 1]

I. The Third Circuit Court Erred In Holding

That The Entire Controversy Doctrine Does

Not Apply To Cases Pending In New Jersey

Federal Fora When The Prior Suit Was

Litigation In A Foreign State Or Federal Court............. ll

II. The Third Circuit Erred in Finding That The

Entire Controversy Doctrine Is A Procedural Rule....... 15

III. The Equitable Considerations Of The Entire

Controversy Doctrine Require Its Application

Considering Paramount Had Multiple Opportunities

To Raise Its Claims, But Rather, Chose To

POROMIEES TIS EI a cscvccnccccevesenscncesecnseinnreneenneesncin 19

a a Pee oiierinsticerissonsccccncciainanenaAeuiandnenamianineaiaaabaiaedinnentanianele a4 |

TABLE OF AUTHORITIES

FEDERAL CASES

Page

Airwork Corp. v. Energy Maintenance Corp.,

1993 WL 534329 (D.N.J. Dec. 22, 1993)... 12

Bates v. Union Oil Co. of Cal.,

944 F.2d 647 (9" Cir. 1991), cert. denied,

Pe Cae. Ne Eicken bdteneiniitaenisiinlsncilinaliaddlateciadies: 16

Bernhardt v. Polygraphic Co. of America,

SIU U.S. 198, 76 S.C2. 273 (1 DSG)....ccccccccceccosovecessesees 16

Electro-Minatures Corp. v. Wendon Co., Inc.,

ef eR ee ee 20

Erie R.R. v. Tompkins,

304 US. 64, 58 S.Ct. 817 (1938)... 15, 16, 17

Fioriglio v. City of Atlantic City,

963 F.Supp. 415 (D.N.J. 1997)......cccccesccsscseceseees 16, 17

Galbraith v. Lenape Regional High School Dist.,

964 F.Supp. 889 (D.N.J. 1997)......cccccscsscssceeseeseeees 19

Garruto v. Cunningham,

1994 WL 723034 (D.N.J. Dec. 27, 1994)... cece 12

Gelb v. Royal Globe Ins. Co.,

798 F.2d 38 (2d Cir. 1986), cert. denied,

I See re ics iessecattneseendsnhaceitiodactemtatatdidateanans 16

Guaranty Trust Co. of New York v. York,

326 U.S. 99, 65 S. Ct. 1464 (1945)... eee 16, 17

Hanna v. Plumer,

380 U.S. 460, 85 S. Ct. 1136 (1965)... eee 15

Itzkoff v. F&G Realty of New Jersey, Corp.,

890 F.Supp. 351 (D.N.J. 1995)....cccssecsesrsessseeseseees 11,17

Johnson v. Fankell,

520 U.S. FUL, 117 S.C 1GGD CIG87). cececvecccvecvesccevsevee 17

In re Kaplan v. First Options of Chicago Inc.,

oe | gs fo SRE marernene 18

Kozyra v. Allen,

973 F.2d 1110 (3d Cir. 1992).......000...... 9, 16, 19, 21, 22

O'Shea v. Amoco Oil Co.,

ew fe Le, nee eee 20

Paramount Aviation Corp. v. Gruppo Agusta, et al.,

yo gm Pky te Lo RRR e eens ]

Paramount Aviation Corp. v. Gruppo Agusta, et al.,

No. 91-4954 (D.N.J. July 22, 1999)... eeeeeeee 1,7

Petrocelli v. Daniel Woodhead Co..,

Fe OST LO Gal, Clee tcsvcivisnsecietteieceniaan 9,15

Robertson v. Allied Signal, Inc.,

FE Fe FOO I Cs Fe vviintivttcirsinnianiiein 15

Rycoline Products, Inc. v. C&W Unlimited, et al.,

UD FSG GES (SO Ce, TGF F ) cecececcceveecnrvevennsetve 16, 18, 19

Vii

Trump Taj Mahal Assoc. v. Costruzioni

Aeronautiche Giovanni Agusta, S.p.A..,

761 F.Supp. 1143 (D.N.J. 1991)... eececceeseeceeseeees

Vili

STATE CASES

Page

Ajamian v. Schlanger,

14N.J. 483, 103 A.2d 9, (1954), cert. denied,

8 Ea ee ee ee a ED 20

Boardwalk Regency Corp. v. Square

Brighton Corp., 288 N.J. Super. 494, 672 A.2d

SU I ca icatnicelccatnnsindtneeniids 9

Cafferata v. Peyser, 251 N.J. Super. 256

RG | RENCE rE 9

Cogdell v. Hospital Center at Orange,

116N.J. 7, 560 A.2d 1169 (1989).....0..0.0.... 9, 10,11, 19

Ditrolio v. Antiles,

142 N.J. 253, 662 A.2d 494 (1995)..........cccecceeeees 18, 20

Gross v. Cohen Dufour & Assoc.,

273 N.J.Super. 617, 642 A.2d

1074 (Super.Ct. Law Div. 1993)..........cceeceesceeeees 2. iF

Guidice v. Drew Chem. Corp.,

210 N.J.Super. 32, 509 A.2d 200 (Super.Ct.

App. Div 1986) cert. granted summarily

remanded on other grounds, 104N.J. 465,

EE Fe iii itch cectctaininsinsonictinsoenininicesviineineans 12

J.H.R. v. Board of Ed. of the Township of

East Brunswick,

308 N.J.Super. 100, 705 A.2d 766

A SRNING MINN BPI cticdunnsisatornininioncnnpninnteorecnnine 19

ll i a i i

Massari v. Einsiedler,

ee Fb et |, | | eee 10, 20

Miller v. Scari,

289 N.J.Super. 482, 674 A.2d 210

GUEE. GE. Later TOG, WDB cccesencecvcceinccossacecsvscescesiecess 12

Mori v. Hartz Mountain Dev. Corp., 193, N.J.

Super. 47, 472 A.2d 150

as eNO ONT OR 9

Mortgageling Corp. v. Commonwealth Land

Title Ins. Co.,

142 N.J. 336, 662 A.2d 536 (1995)... 12, 13,14

Olds v. Donnelly, 150 N.J. 424, 430, 696

TT eitaiiedsneiapesintiticitncacutcstintsiamisiipissicas 9

Prevratil v. Mohr,

279 N.J.Super. 652, 653 A.2d 1190

a I I Fi iiitcsncceincsitestnceincnsisnese 9, 22

Steiner v. Stein,

BPE FT s OO A2e TID TIIII vccccececctciiecesscoverses 10, 19

Velasquez v. Franz,

123 N.J. 498, 589 A.2d 143 (1991)... cccececcceseseeees 17

Wm. Blanchard Co. v. Beach Concrete Co., Inc.,

150 N.J.Super. 277 (Super. Ct. App. Div.

1977), cert. denied, 75 N.J. 528 (1977)....cccccceceseee 19, 20

STATUTES AND RULES

SE IE CIE cicissorcooenntcncmennpaaainnd 10

SEU: CB cid necccarnmiciaaneccun 10

TRUDE COON aiken 10

EGE I oiciinensecinbatcainiannd aes 2

NSE GI ou caeninataae ee 3

I CEE eencsceatccetieoaaeteee 3

OBR, DOIN crcsniessensirestctiniviticharerthececiaaamenoeccunnde 3

MISCELLANEOUS

Stephen b. Burbank, Where's The Beef’ The

Interjurisdictional Effects of New Jersey's Entire

Controversy Doctrine,

ee se ee Ce iaicenthiereitinieesnastaneeteitincceinions 13

Stephen B. Burbank, The Rule Enabling Act of 1934,

FO UPC LnIeOY. FOES CT ieeccrvccecccesecserstcesemsecsvevnses 17

OPINIONS ENTERED IN THIS CASE

The order and opinion of the Court of Appeals for the

Third Circuit is officially reported as: Paramount Aviation

Corporation v. Gruppo Agusta; Agusta Aerospace

Corporation; Costruzioni Aeronautiche Giovanni Agusta

Sip.A.; Agusta S.p.A.. 178 F.3d 132 (3d Cir. 1999).

(Appendix or App. 40a - 67a)

The order and opinion of the District Court for the

State of New Jersey is unreported. The unofficial cite to the

District Court's opinion is: Paramount Aviation Corporation

v. Gruppo Agusta; Agusta Aerospace Corporation;

Costruzioni Aeronautiche Giovanni Agusta S.p.A.; and

Agusta S.p.A., No. 91-4954 (D.N.J. July 22, 1999). (App.

22a - 38a).

JURISDICTION

The Court of Appeals entered its judgment on May

13, 1999 (App. 68a - 69a). No petition for rehearing was

timely filed in this case. A certified judgment in lieu of a

formal mandate was issued on June 4, 1999. (App. 68a -

69a).

The jurisdiction of this Honorable Court is

accordingly involved under 28 USC § 2101 (c).

STATUTE INVOLVED IN THIS MATTER

This focus of this matter turns on the interpretation

and application of New Jersey's entire controversy doctrine,

codified in Rule 4:30A of the New Jersey Rules of Court.

The statute provides,

Non-joinder of claims required to be joined by the

entire controversy doctrine shall result in the

preclusion of the omitted claims to the extent

required by the entire controversy doctrine.

except as otherwise provided by R.4:64-5

(foreclosure actions) and R.4:67-4(a) (leave

required for counterclaims or cross-claims in

summary actions).

STATEMENT OF THE CASE

l. Statement of Facts

Paramount's claims arise from a helicopter accident,

which occurred nearly ten (10) years ago. (App. 3a) On

October 10, 1989, an Agusta 109A helicopter crashed in

Lacey Township, New Jersey, fatally injuring four people:

the pilot, Larry Diener, the co-pilot, Robert S. Kent, and three

passengers. The passengers were employed at the time of the

accident by Trump Taj Mahal Associates, Trump Castle

Associates, and/or Trump Plaza Associates.

The aircraft, serial number 7309, was manufactured

by CAGA in 1984 and later purchased by AAC. (App. 3a) In

December of 1985, AAC sold the aircraft to Soundview

Leasing, which later sold it to Clifton Park Association.

In June of 1989, Clifton Park Association sold the

helicopter to FSQ Air Charter Corporation (hereinafter

referred to as "FSQ"). FSQ leased the aircraft to Paramount,

which was operating the aircraft at the time of the accident

under the Paramount certificate of authonty.

Paramount arranged and performed management and

maintenance of the subject helicopter under Part 135 of the

Federal Aviation Regulations and was responsible for the

“inspections, maintenance, overhaul and scheduling of the

subject helicopter and its components. Thereafter,

Paramount arranged for the sale of the helicopter to FSQ and

contracted with FSQ to manage the aircraft and supply one of

the two pilots to operate it.

As a result of the accident, other lawsuits were

commenced in different jurisdictions. Notably, Paramount

was a party to four of the five legal proceedings. The

following is a summary of the prior actions:

i. The Kent Lawsuit

On March 30, 1990, Susan Kent, individually, as the

wife of co-pilot Robert S. Kent, and on behalf of the

decedent's two minor children, filed a Summons and

Complaint in the United States District Court, Eastern

District of Pennsylvania, against AAC, CAGA and Agusta

S.p.A. and Paramount. (App. 4a) The Agusta Defendants

served their Answers and asserted cross-claims against

Paramount for contribution and indemnification.

Paramount's Answer included cross-claims against the

Agusta Defendants for contribution and indemnification, but

did not include any affirmative claims for relief. The action

was settled on November 27, 1990 with Agusta and

Paramount contributing to the settlement.

The Kents’ attorney, Richard E. Genter, Esq., of

Wolk, Genter & Harrington’, sent a letter to the presiding

Judge, the Hon. Joseph S. Lord, III dated November 26, 1990

that contained the following language:

Confirming our telephone conversation

this morning, and my subsequent conversation

with George Wylesol [then Deputy Clerk for

Judge Lord], I am writing to clear up two

questions you had with regard to the petition

for settlement approval in the above Captioned

case.

Specifically, upon issuance of an

appropriate order from the Court, the entire

case _as_to all defendants [the Agusta

| The Kent Plaintiffs were represented by the firm of Wolk,

Genter & Harrington, who now represent Paramount in the instant

action.

Defendants and_ then-defendant, _ plaintiff

{[Paramount}]] will be settled...

(J.A. 275).

ii. The Trump Lawsuit

On July 10, 1990, Trump Taj Mahal Associates,

Trump Castle Associates, Trump Plaza Associates (the

employers of the three passengers that were killed in the

subject accident), and Helicopter Air Services, Inc. (the

owner of another Agusta 109 Mak II helicopter similar to the

helicopter involved in the subject accident) instituted an

action in the Superior Court of New Jersey, Atlantic County

Division, against the Agusta Defendants and Paramount for

damages resulting from the subject accident.’ (App. 43a) This

action was thereafter removed to the United States District

Court, District of New Jersey. On Apml 11, 1991, prior to

service of answers by any of the Agusta Defendants, then

Chief Judge, the Hon. John F. Gerry, granted the Agusta

Defendants' motions to dismiss all claims brought by the

Trump-entity plaintiffs. The Court also dismissed the claims

of Helicopter Air Services, Inc., as frivolous. This Court

affirmed the tnal court's decision. The United States

Supreme Court denied certioran on October 5, 1992.

iii. The FSQ Lawsuit

On Apmil 11, 1991, FSQ Air Charter Corp., the owner

of the subject helicopter, filed a Summons and Complaint in

the United States District Court, Eastern District of New

York, against the Agusta Defendants for damages to its

aircraft resulting from the subject accident. (App. 43a) AAC

2 As in the Kent lawsuit, the Trump plaintiffs were represented

by the firm of Wolk, Genter & Harrington, the firm now

representing Paramount.

served a Third-Party Complaint against Paramount for

contribution and indemnification. Paramount's Third-Party

Answer did not contain any affirmative defenses or any

affirmative counterclaims for damages against the Agusta

defendants.

When Paramount served its Third-Party Answer in

the FSQ lawsuit, the Kent lawsuit against Agusta and

Paramount had been settled, and the Trump plaintiffs were in

the process of appealing Agusta and Paramount's motion for

summary judgment. On June 19, 1992, the FSQ lawsuit was

settled and a mutual release was executed by Agusta and

United States Aviation Underwriters, Inc., the insurance

carrier for both FSQ and Paramount. The release settled the

property damage claim occasioned by the destruction of the

subject helicopter. The Mutual Release provides in part:

This Release does not extend to any claim

made or related to the lawsuit encaptioned

Trump Taj Mahal Associates v. Costruzioni

Aeronautiche Giovanni Agusta, S.p.A., No. 91-

5295, currently pending before the United States

Court of Appeals for the Third Circuit, and the

lawsuit encaptioned Paramount Aviation

Corporation Corp. v. Gruppo Agusta, et al.,

Civil Action No. 91-4954 (JWB), currently

pending before the United States District Court

for the District of New Jersey...

iv. PAC I

On July 11, 1990, Paramount’ filed a Summons and

Complaint in the United States District Court, District of

New Jersey, against Agusta seeking damages for economic

3 Inthe PACI lawsuit, Paramount was represented by the firm

of Shain, Schaffer & Refanello, P.C.

losses resulting from the subject accident. (App. 43a) The

PAC I _ lawsuit sought: Compensatory damages;

Consequential damages; Loss of income; Loss of goodwill

in the industry; Interest; Costs; Attorneys fees; Such other

damages as are deemed just and provided for by applicable

law; and Punitive damages for Defendants’ outrageous,

willful, wanton, malicious and reckless conduct meriting

civil punishment.

Five weeks later, however, Paramount voluntarily

discontinued its action against Agusta. When PAC I was

discontinued, Kent was active in the Eastern District of

Pennsylvania and the Trump iawsuit had just been filed.

Paramount and Agusta were defendants in both actions.

v. PAC II (The Pending Litigation)

On October 10, 1991, Paramount* filed a Summons

and Complaint in the Superior Court of New Jersey, Morris

County, against Agusta again seeking damages for economic

losses resulting from the subject accident. The causes of

action and damages plead in PAC II are substantially the

same as those alleged in PAC I. (App. 44a)

The damages sought allegedly resulted from the

subject accident. On November 12, 1991, AAC removed the

action to the United States Distnct Court, District of New

Jersey, and filed its Answer and Counterclaim.

At the time of this action: the Kent lawsuit, which

named both Agusta and Paramount as defendants, had been

4 At the time the lawsuit was filed, Paramount was represented

by the firm of Shanley & Fisher, P.C. Paramount later retained the

services of their current counsel, Wolk, Genter & Harrington, which

had represented the plaintiffs in the Kent and Trump actions against

Paramount.

settled for almost one year; the trial court in the Trump case,

which named both Agusta and Paramount as defendants, had

granted the defendants' motions dismissing the Trump

plaintiffs' lawsuit; and, Paramount had served its Third-Party

Answer in the FSQ lawsuit without pleading any affirmative

claim for damages.

Il. Importance Of The Entire Controversy Doctrine

The entire controversy doctrine seeks to assure that

all aspects of a legal dispute occur in a single lawsuit. Olds

v. Donnelly, 150 N.J. 424, 430, 696 A.2d 633, 636 (1997);

Prevratil v. Mohr, 145 N.J. 180, 678 A.2d 243 (1996). In

applying the entire controversy doctrine, the central

consideration is whether the claims arise from related facts of

the same transaction or series of transactions. Mori v. Hartz

Mountain Dev. Corp., 193 N.J. Super. 47, 472 A.2d 150

(App. Div. 1983) (holding that action for rent should have

been joined with an earlier partition action because both

claims related to the same property and to the parties' rights);

Boardwalk Regency Corp. v. Square Brighton Corp., 288

N.J. Super. 494, 672 A.2d 1185 (App. Div. 1996) (applying

doctrine to bar a subsequent claim because both actions

related to the parties’ interests inthe same property).

The doctrine serves several purposes: "[T]he needs of

economy and the avoidance of waste, efficiency and the

reduction of delay, fairness to parties, and the need for

complete and final disposition through the avoidance of

‘piecemeal decisions." Cogdell v. Hospital Ctr. at Orange,

116 N.J. 7, 15 (1989) (citation omitted); see also Petrocelli,

993 F.2d 27, 28-29 (quoting Cogdell); Kozyra, 973 F.2d

1110, 1111 (quoting Cogdell). The doctrine is equitable in

nature and is predicated upon judicial fairness. Kozyra v.

Allen, 973 F.2d 1110-1111; Cafferata v. Peyser, 251 NJ.

Super. 256 (Super. Ct. App. Div. 1991). In the interest of

fairness, courts have carved out several exceptions to the

preclusive effect of the doctrine.

Since the doctrine was incorporated into the New

Jersey constitution, the doctrine has evolved to become "a

mandatory rule for the joinder of virtually all causes, claims,

and defenses..." Cogdell, 116 N.J. at 16; see, e.g., Steiner v.

Stein, 2 N.J. 367 (1949) (requiring joinder of legal claims

even when equitable claims have been decided); Massari v.

Einsiedler, 6 N.J. 303 (1951) (requiring joinder of all

defenses).

Ill. Jurisdiction: U.S. Court of Appeals, Third Circuit

The United States Court of Appeals, Third Circuit

had jurisdiction pursuant to 28 U.S.C. § 1291 to review the

judgment and final orders entered by the United States

District Court for the District of New Jersey.

IV. Jurisdiction: New Jersey District Court

The District Court maintained removal jurisdiction

pursuant to 28 U.S.C. § 1441 (a) and thereafter, original

jurisdiction over the underlying action pursuant to 28 U.S.C.

§ 1332 based upon the diversity of citizenship of the parties.

ARGUMENTS FOR ALLOWING WRIT

I. The Third Circuit Court Erred In Holding That

The Entire Controversy Doctrine Does Not Apply

To Cases Pending In New Jersey Federal Fora

When The Prior Suit Was Litigated In A Foreign

State Or Federal Court.

"...[T]}he contours of the entire controversy doctrine

‘are not fixed precisely by this decision. Its contents and

bounds can evolve with experience...either through formal

rulemaking or case-by-case adjudications.” Itzkoff v. F&G

Realty of New Jersey, Corp., 890 F.Supp. 351 (D.N.J. 1995)

(citing Cogdell v. Hospital Center at Orange, 116 N.J. 7, 28,

560 A.2d 1169 (1989)). In this action, the U.S. District Court

for the State of New Jersey used its discretionary powers to

make certain factual and legal determinations. The Third

Circuit's opinion is clearly inimical to the District Court's

findings and contrary to its discretionary mandate.

In sum, the Third Circuit has rendered a per se rule

that is inconsistent with previous state court opinions and

contrary to established federal law. A per se ban against the

application of the doctrine any time the prior action was

adjudicated in an out-of-state court ignores the doctrine's

appeal to fairness and basic underlying foundation.

Out of the five previously commenced actions, three

actions were venued in New Jersey. In Trump, the action

was originally commenced in New Jersey state court and then

removed to New Jersey federal court. In PAC I, the

Respondent, filed its action in a New Jersey federal court.

PAC II was also commenced by Respondent in New Jersey

state court, but was later removed to a New Jersey federal

court. The Third Circuit failed to consider or refer to the

prior actions which were indisputably venued in New Jersey.

In essence, the Third Circuit's opinion is that it

indirectly overrules prior District Court and State Court

decisions holding that prior legal actions need not have been

held in a New Jersey state court. In Garruto v. Cunningham,

1994 WL 723034 (D.N.J. Dec. 27, 1994), the District Court

for the State of New Jersey found that the entire controversy

doctrine barred plaintiffs claim. Both parties in Garruto

litigated in the Court of Common Pleas, Union County, Ohio.

After the Ohio action concluded, Garruto then initiated a

subsequent action in the U.S. District Court for the State of

New Jersey. Id. The Garruto opinion is void of any language

holding that the doctrine is inapplicable to matters previously

litigated in foreign jurisdictions. See, e.g., Airwork Corp. v.

Energy Maintenance Corp., 1993 WL 534329 (D.N.J. Dec.

22, 1993) (barring plaintiff's suit by the entire controversy

doctrine when prior action was commenced in the U.S.

District Court for the Southern District of New York); Miller

v. Scari, 289 N.J.Super. 482, 674 A.2d 210 (Super. Ct. Law

Div. 1996) (barring action under entire controversy doctrine

although prior action was litigated in the U.S. District Court

for the District of New Jersey); Gross v. Cohen Dufour &

Assoc., 273 N.J.Super. 617, 642 A.2d 1074 (Super. Ct. Law.

Div. 1993) (holding doctrine applicable when prior action

was litigated in the U.S. District Court for the District of New

Jersey); Guidice v. Drew Chem. Corp., 210 N.J.Super. 32,

509 A.2d 200 (Super. Ct. App. Div. 1986), cert. granted and

summarily remanded on other grounds, 104 N.J. 465, 517

A.2d 448 (1986) (precluding, under entire controversy

doctrine, claims that could have been brought in related New

York proceedings).

As evident by its opinion, the Third Circuit claims to

have found support in Mortgageling Corp. v. Commonwealth

Land Title Ins. Co., 142 N.J. 336, 662 A.2d 536 (1995) by

placing significant reliance on the holding. The clear

language and the obvious holding of Mortgageling

unquestionably supports, both factually and legally,

Petitioner's position.

The entire controversy doctrine controlled the court's

result in Mortgageling. Similar to this matter, Mortgageling

involved a prior proceeding which was litigated in a foreign

federal court - the U.S. District Court for the Eastern District

of Pennsylvania. Subsequent to the Pennsylvania action, a

second case was brought in New Jersey state court. As in

this case, the issues, facts, causes of action and transactions

in both cases were virtually identical. See Id. at 336, 662

A.2d. 536 Even more instructive to this Petition is that the

District Court certified two questions precisely responsive to

this case:

(1) This issue is whether the non-joinder of

parties in a related action in the Pennsylvania

federal court results in the same party preclusion

in New Jersey.

(2) If so, what is the effect of that preclusion in

other jurisdiction? ;

The question was answered in the affirmative. The

court in Mortgageling held that the plaintiffs were precluded

from suing in New Jersey the defendants who had been

omitted from the federal case in Pennsylvania. The court

also held that this result was binding only in New Jersey,

leaving other jurisdictions free to permit litigation against the

omitted defendants in their courts. Stephen B. Burbank,

Where's The Beef? The Interjurisdictional Effects Of New

Jersey's Entire Controversy Doctrine, 28 Rutgers L.J. 87, 88

(1996).

The holding in Mortgageling as announced by the

New Jersey Supreme Court is clear and unequivocal and

should not be undermined by the self-serving interpretation

of another sovereign:

the entire controversy doctrine operates to bar suits

against parties which could and should have been

joined in a previous suit despite the fact that the

earlier suit was brought in another state or federal

court.

Id.

In a situation where a party that deliberately chooses

to fragment litigation by suing certain parties in another

jurisdiction and withholds claims against other parties, a New

Jersey court need not later entertain the claims against the

omitted parties if jurisdiction was available in the first forum.

See Mortgageling. In the instant opinion, the Third Circuit

virtually echoed this same holding. The Third Circuit held:

...the entire controversy doctrine would only bar a

subsequent New Jersey suit if the first forum would

have had jurisdiction over the claims raised in that

subsequent suit. It therefore follows that there was

an alternate non-New Jersey forum for the relevant

claims, although in some cases that forum would be

another state court.

(App. 56a).

Paramount's fragmentation of its claims is the precise

conduct that the entire controversy doctrine seeks to

eliminate.

II. The Third Circuit Erred In Finding That The Entire

Controversy Doctrine Is A Procedural Rule.

The bedrock canons pronounced in Erie R. R. v.

Tompkins, 304 U.S. 64, 58 S.Ct. 817 (1938), were rooted in

part in a realization that it would be unfair for the character of

the result of a litigation to materially differ because the suit

had been brought in a federal court. Hanna v. Plumer, 380

U.S. 460, 85 S.Ct. 1136 (1965). Erie held that federal courts

sitting in diversity cases, when deciding questions of

substantive law, are bound by state court decisions as well as

State statutes. Robertson v. Allied Signal, Inc., 914 F.2d 360,

378 (3d Cir. 1990) (citing Erie R.R. v. Tompkins, 304 U.S.

64 (1938)). The fact that this action was removed to federal

court based on diversity is not reason to deprive the parties of

the application of a substantive state-enacted rule.-

Third Circuit's decision to qualify the entire

controversy doctrine as "procedural" is in direct conflict with

prior decisions. In fact, the Third Circuit expressed its

unsettled holding by stating that,

[WJhile a decision to apply federal preclusion law

would be outcome determinative in this case,

therefore, it would not ex ante cut off or extend any

substantive rights that a plaintiff would have in the

absence of a New Jersey federal forum, and would

be unlikely to encourage significant forum-

shopping.... The issues of outcome-

determinativeness and a consequent incentive to

forum-shop are not free from doubt, however.

(App. 57a).

The entire controversy doctrine has been routinely

applied in the courts of this jurisdiction. See, e.g., Petrocelli

v. Daniel Woodhead Co., 993 F.2d 27 (3d Cir. 1993); Kozyra

v. Allen, 973 F.2d 1110 (3d Cir. 1992); Rycoline Products,

Inc. v. C&W Unlimited, 109 F.3d 883, (3d Cir. 1997). In

deciding issues of preclusion, other circuit courts have

applied state substantive laws specifically in federal diversity

cases. See, e.g., Gelb v. Royal Globe Ins. Co., 798 F.2d 38

(2d Cir. 1986), cert. denied, 480 U.S. 948 (1987) (holding

that federal courts routinely apply state law to determine the

preclusive effect of a federal diversity judgment ~in a

subsequent diversity action); Bates v. Union Oil Co. of

California, 944 F.2d 647 (9th Cir. 1991), cert. denied, 503

U.S. 1005 (1992) (holding that in a subsequent diversity

action, forum state's law applies to determine preclusive

effect of previous judgment);

The entire controversy doctrine is a creature of New

Jersey common law and, therefore, is applicable in a federal

forum. Erie, 304 U.S. 64, 64. It was decided in Ene that the

federal courts in diversity cases must respect the definition of

state-created rights and obligations by the state courts. Cases

following Erie have evinced a broader policy to the effect

that the federal courts should conform as near as may be -- in

the absence of other considerations -- to state rules even of

form and mode where the state rules may bear substantially

on the question whether the litigation would come out one

way in the federal court and another way in the state court if

the federal court failed to apply a particular local rule. See,

e.g., Guaranty Trust Co. of New York v. York, 326 US. 99,

65 S.Ct. 1464, (1945); Bemhardt v. Polygraphic Co. of

America, 350 U.S. 198, 76 S.Ct. 273 (1956).

Erie suggests that federal judgments on state-law

issues should have the same impact they would have if

rendered by New Jersey courts. Fioriglio v. City of Atlantic

City, 963 F.Supp. 415, 421 (D.N.J. 1997). In Fioriglio, the

plaintiff's claim was not barred by the entire controversy

doctrine since the previous matter involved claims brought

under federal statute. Id. In deciding whether the doctrine

should be applied in federal court, the Fioriglio court engaged

in a resonant discussion invoking the Erie three-prong

inquiry. In applying Erie, the court found that "an overriding

federal interest justifies the application of federal law."

Fioriglio, 963 F.Supp. at 422.

The Fioriglio court also based their decision on the

simple fact that the claim was based on federal question

jurisdiction. Id. at 415, 423. The instant matter, however,

does not involve federal question jurisdiction. Rather, the

instant matter involves tort claims specific to New Jersey law

and its interpretation. New Jersey's preclusion rule should

apply in the instant matter since this is an action pending in

federal court arising out of the law of New Jersey. Velasquez

v. Franz, 123 N.J. 498, 589 A.2d 143 (1991).

The line between substance and procedure shifts as

the legal context changes. Guaranty Trust at 108, 65 S.Ct.

1464, 1469. Each implies different variables depending upon

the particular problem for which it is used. Id. The Third

Circuit failed to treat the entire controversy doctrine

comparable to its legal context.

The doctrine should operate to bar suits against

parties which could and should have been joined in a

previous suit, despite the fact that the earlier suit was brought

in another state or in federal court. Itzkoff, 890 F.Supp. 351,

359. See, e.g., Gross ("the entire controversy doctrine bars a

state court suit against parties which could have and should

have been joined in a previous federal action").

The Federal Rules of Civil Procedure are not statutes,

and mischief can follow from the assumption that they are.

Stephen B. Burbank, The Rule Enabling Act of 1934, 130

U.Pa.L.Rev. 1015, 1102 (1982). This Court in Johnson v.

Fankell, 520 U.S. 911, 117 S.Ct. 1800 (1997) cautioned

against the exact extraneous interpretation that has been

given the entire controversy doctrine by the Third Circuit.

This Court stated:

[E]ven if the Idaho and federal statutes contained

identical language -- and they do not -- the

interpretation of the Idaho statute by the Idaho

Supreme Court would be binding on federal courts.

Neither this Court nor any other federal tribunal has

any authority to place a construction on a state

statute different from the one rendered by the

highest court of the state.

Id. at 520 U.S. 911, 916, 117 S.Ct. 1800, 1803.

Unlike preclusion law, the entire controversy doctrine

applies to pnor settlements whether or not they were reduced

to judgment. Ditrolio v. Antiles, 142 N.J. 253, 278, 662 A.2d

494, 507 (1995). New Jersey has introduced this powerful

administrative weapon to confront scenarios as the one at

hand. By initially dismissing this matter, the Distnct Court

simply applied its own notion of adjudicative integrity to

close its courts to a particular fnvolous lawsuit.

The Third Circuit concedes’ that "the

substance/procedure divide is not necessanly the controlling

factor in determining when a federal court must apply state

law (citations omitted)." (App. 49a) In holding that federal

res judicata law governs successive diversity actions, the

Third Circuit relies on cases that involve a federal question,

where indeed, federal law is proper. (App. 53a) see also /n re

Kaplan v. First Options of Chicago Inc., 143 F.3d 807, 814-

1S (3d Cir. 1998) and Rycoline Products, Inc. v. C&W

Unlimited, 109 F.3d 883 (3d Cir. 1997).

In Rycoline, the Third Circuit panel held that the

entire controversy doctrine is "an aspect of the substantive

law of New Jersey, by virtue of the Full Faith and Credit Act"

(citations omitted) (App. 52a). Although the Third Circuit in

the instant matter confined their holding in Rycoline to mean

that New Jersey law governs the preclusive effects of an

earlier New Jersey state court judgment, cases following

Rycoline interpreted that holding to be "substantive" and not

procedural. See, e.g., Galbraith v. Lenape Regional High

School Dist., 964 F.Supp. 889 (D.N.J. 1997); J.H.R. v. Board

of Ed. of the Township of East Brunswick, 308 N.J.Super.

100, 705 A.2d 766 (Super. Ct. App. Div. 1998).

The Third Circuit's constrained application has

dislodged the entire controversy doctrine from its

jurisprudential foundations and has turned it into a reward for

plaintiffs strategically inclined to experiment with foreign

jurisdictions before ultimately filing suit in New Jersey.

III. The Equitable Considerations Of The Entire

Controversy Doctrine Require Its Application

Considering Paramount Had Multiple

Opportunities To Raise Its Claims, But Rather,

Chose To Piecemeal The Litigation.

The doctrine will be applied against a party who had a

"fair and reasonable opportunity” too fully titigate a disputed

claim in a prior action. Kozyra, 973 F.2d at 1112. "The

doctrine requires that a component of the controversy may

not be unfairly withheld. A withholding is unfair if it

effectively renders the pending litigation ‘merely one inning

of the whole ball game.' " Id. (quoting Wm. Blanchard Co. v.

Beach Concrete Co. Inc., 150 N.J. Super. 277 (Super. Ct.

App. Div. 1977), cert. denied, 75 N.J. 528 (1977)).

Since the doctrine was incorporated into the New

Jersey constitution, the doctrine has evolved to become "a

mandatory rule for the joinder of virtually all causes, claims,

and defenses ... ." Cogdell, 116 N.J. at 16; See, e.g., Steiner

v. Stein, 2 N.J. 367, 66 A.2d. 713 (1949) (requiring joinder of

legal claims even when equitable claims have been decided);

Massari v. Einsiedler, 6 N.J. 303, 78 A.2d 572 (1951)

(requiring joinder of all defenses); Ajamian v. Schlanger, 14

N.J. 483, cert. denied, 348 U.S. 835 (1954) (requiring joinder

of affirmative claims that could be brought as counterclaims),

Wm. Blanchard Co. v. Beach Concrete Co. Inc., 150 N.J.

Super. 277 (Super. Ct. App. Div. 1977), cert. denied, 75 N.J.

528 (1977) (requiring joinder of any and all cross-claims and

counterclaims by defendants that arise out of the underlying

transaction).

Whether successive claims constitute one

controversy, and thus are subject to preclusion by the entire

controversy doctrine, depends on whether the claims "arise

from related facts or the same transactions or series of

transactions." Ditrolio v. Antiles, 142 N.J. 253, 267 662

A.2d 494 (1995). The test for "relatedness" is as follows:

If parties or persons will, after final judgment is

entered, be likely to have to engage in additional

litigation to conclusively dispose of their respective

bundles of rights and liabilities that derive from a

single transaction or related series of transactions,

the omitted components of the dispute or

controversy must be regarded as constituting an

element of one mandatory unit of litigation.

Ditrolio, 142 N.J. at 268 (citing O'Shea v. Amoco Oil Co.,

886 F.2d 584 (3d Cir. 1989)); accord Electro-Miniatures

Corp. v. Wendon Co. Inc., 889 F.2d 41, 45 (3d Cir. 1989).

In the present case, Paramount alleges damages

arising from an accident that occurred on October 10, 1989.

The alleged damages were immediate in effect, beginning on

the accident date and carrying forward, including lost

maintenance and spot charter revenues from the subject

helicopter, lost maintenance and spot charter revenues from

another Agusta helicopter, and "{l]oss of nearly all other

helicopter management services business and charter income

which existed, or could with reasonable certainty have been

anticipated, as of the date of the crash of the Accident

Helicopter." Thus, pursuant to the entire controversy

doctrine, Paramount was required to assert any affirmative

claims in the first lawsuit initiated after October 10, 1989,

that "derived" from the subject accident.

The entire controversy doctrine was applied to a

situation similar to the present case, that is, a lawsuit

involving co-defendants from a prior action. Kozyra. In

Kozyra, a three-vehicle accident occurred on May 17, 1988,

in which one driver brought a personal injury action against

the other two drivers and against a driver's employer. The

Kozyra plaintiffs Answer included a cross-claim against the

Kozyra defendants for contribution, but the Answer did not

include any affirmative claims for damages. Kozyra, 973

F.2d at 1111.

After the first action settled, one co-defendant

brought a second, personal injury action against the other co-

defendants. When an arbitrator found for the plaintiff in the

second action, the defendants moved to dismiss the second

lawsuit on the ground that the second lawsuit was barred by

the entire controversy doctrine. The federal district court

granted defendants’ motion and plaintiff appealed. Id.

Essentially, the issue before the court was the fairness

of barring plaintiff's lawsuit, when she had been represented

in the first lawsuit by counsel appointed by her insurance

carrier, and the appointed counsel had never advised plaintiff

about her rights involving her personal injury claim. Id. at

1112-14. In affirming the dismissal, the court pointed out

that: plaintiff had received the pleadings in the first action

and was aware that she had been sued; plaintiff had a year

following receipt of those papers to look into her legal nghts

before the first action had settled; plaintiff did not claim that

she was unaware of her injury; defendants would be

prejudiced having to relitigate the entire controversy; and

allowing the second lawsuit to proceed would undermine the

accomplishments of the first lawsuit. Id. at 1113. In a

footnote, the court suggested that plaintiff's proper legal

remedy was a legal malpractice action against her insurance

carrier. Id. at 1114 n.2.

As in Kozyra, Paramount was aware of the Kent

lawsuit and, as evidenced by the PAC I lawsuit, believed that

it had suffered damages because of the subject accident.

However, rather than proceed with the PAC I lawsuit,

Paramount withdrew its action. Rather than amend its

Answer in the Kent action to include affirmative claims for

damages from Agusta, Paramount with Agusta settled the

Kent lawsuit. Rather than assert affirmative claims for relief

in the Trump action, Paramount successfully moved to

dismiss the lawsuit with Agusta. Rather than assert

affirmative claims for relief in the FSQ action, Paramount's

answer simply denied the allegations in Agusta's Third-Party

Complaint. It was only after the Kent lawsuit settled and after

Trump defendants' motion was granted, that Paramount

attempted to seek another at bat, another "inning" in the

game.

The doctrine serves the twin goals of "efficient

judicial administration" and "fairness," and results in "the

comprehensive and conclusive determination of a legal

controversy." Prevratil v. Mohr, 279 N.J. Super. 652, 653

A.2d 1190 (Super. Ct. App. Div. 1995). After three prior

lawsuits arising from the subject controversy, Paramount

now attempts to avoid the "comprehensive and conclusive

determination" arnved at between the parties to seek

affirmative damages. The unfairness to Petitioners, in light

of the PAC I abandonment, the Kent settlement, the Trump

motion to dismiss, and the FSQ Third-Party Answer, is

exactly what the entire controversy doctrine is intended to

prevent.

CONCLUSION

The Petition for a Wnt of Certioran is

meritorious, and should be granted.

Respectfully submitted,

0» L [aseleGpele. V- yf 2.

Rudolph V. Pino, Jr.

Pino & Associates

Westchester Financial Center

50 Main Street

White Plains, New York 10606

Counsel for Petitioners

Gruppo Agusta, Agusta Aerospace

Corporation, Costruzioni Aeronautiche

Giovanni Agusta, S.p.A. and Agusta,

S.p.A.

August 10, 1999

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

PARAMOUNT AVIATION CORPORATION.

Plaintiff,

V. Civil Action No. 91-4954

GRUPPO AGUSTA. AGUSTA AEROSPACE

CORPORATION. COSTRUZIONE OPINION

AERONAUTICHE GIOVANNI AGUSTA,

S.p.A., and AGUSTA. S.p.A.,

Defendants.

APPEARANCES:

EDWARDS CALDWELL & POFF

By: Daniel D. Caldwell. Esquire

1600 Route 208 North

P.O. Box 23

Hawthorne, New Jersey 07507

- and -

WOLK & GENTER

By: Catherine B. Slavin. Esquire

1710-12 Locust Street

Philadelphia, Pennsylvania 19103

(Attorneys for Plaintiff)

JOHN R. ALTIERI, ESQUIRE

25 East Salem Street

P.O. Box 279

Hackensack, New Jersey 07602-0279

- and -

PINO & ASSOCIATES :

By: Rudolph V. Pino, Esquire

Westchester Financial Center

50 Main Street

White Plains, New York 10606

(Attorneys for Defendants)

BISSELL, District Judge

This matter comes before the Court on Defendants

Agusta Aerospace Corporation ( "AAC"), Costruzioni

Aeronautiche Giovanni Agusta ("CAGA"), S.p.A. and

Agusta S.p.A.’s (collectively, the Agusta defendants")

motion for Summary Judgment’, They argue that the

plaintiff’s claims are barred by operation of the Entire

Controversy Doctrine under New Jersey law and the

operation of the U.C.C. as interpreted by the Supreme Court

of New Jersey in Sorina motors Distributors, Inc. v. Ford

Motor Co., 98 N.J. 555 (1985).

This Court has jurisdiction pursuant to 28 U.S.C. 5

1332.

FACTS

On October 10, 1989 an Agusta 109A helicopter

crashed in Lacey Township, New Jersey, killing the pilot,

co-pilot, and three Passengers. The passengers were

employees of Trump Taj Mahal Associates, Trump Castle

Associates, and/or Trump Plaza Associates ("Trump").

The helicopter was manufactured by CAGA and

purchased by AAC?. AAC then sold it to Soundview

' A Return of Service/Proof of Service on Registered Agent was

filed as to Defendant Gruppo Agusta. Gruppo Agusta has made no

appearance, nor has the entry of default been sought. It is unclear if

"Gruppo Agusta” is a legal entity or merely a name by which the Agusta

defendants refer to themselves collectively. See Compl. at 4 6.

‘ Costruzioni Aeronautiche Giovanni Agusta, S.p.A. isa subsidiary

of Agusta S.p.A. and part of Gruppo Agusta. Agusta Aerospace

Corporation is CAGA’s wholly owned U.S. subsidiary.

Leasing which sold it to Clifton Park Association which sold

it to FSQ Air charter Corporation ("FSQ"). Plaintiff

Paramount Aviation Corporation ("Paramount") arranged for

the sale of the helicopter to FSQ, and contracted with FSQ

to manage the aircraft and supply one of the two pilots who

operated it.

As a result of the crash. a number of lawsuits were

commenced in different courts.

cent V. struzi A utiche Giovanni

Aviation Corp. and Paramount Aviation

This case was filed in the United States District Court

for the Eastern District of Pennsylvania on March 30, 1990

by the wife and estate of co-pilot Robert Kent for damages

as a result of his deathh AAC, CAGA and Agusta filed

answers asserting cross-claims against Paramount for

contribution and indemnification. Paramount's answer

included cross-claims for contribution and indemnification

against the Agusta defendants, but no affirmative claim. The

Kent suit was settled on November 27, 1990 for $3,150,000,

with the Agusta defendants paying $2,900,000 and

Paramount paying $250,000.

Trump _ Taj Mahal Assocs. , Trump Castle Assocs. : “ars

Pl a fy)

Costruzioni Acronautiche Giovanni Agusta, Agusta, Cappo

usta usta Aviation Co and Pa u Viati

This case, filed in the Superior Court of New Jersey,

Aulantic County Law Division, in July 1990, sought damages

for the injury to the plaintiffs, businesses as a result of the

death of the executives in the crash. The case was removed

to this District before the Honorable John F. Gerry. Prior

to serving answers, the defendants filed motions for summary

judgment and dismissal. Chief Judge Gerry dismissed all

counts of that complaint on April 11, 1991.

In a reported Opinion, Judge Gerry ruled that the

plaintiff employers were barred from seeking recovery of

worker's compensation benefits paid to their executives.

beneficiaries, that New Jersey's wrongful death statute

precluded these employers from recovery of economic

damages attributable to the death of their executives, that

Claims for alleged destruction and failure to preserve

evidence were not recognized under New Jersey law and that

the complaint failed to state a cognizable claim for willful

and intentional interference with contractual relations

between the plaintiff employers and their deceased

executives. m i M Ociates_v. Costruzioni

r iche Giovanni .p.A., 761 F. Supp. 1143

(D.N.J. 1991, d without opinion, 958 F.2d 365 (3d Cir.

1992, cert. denied, 506 U.S. 826. (1992). Accordingly,

claims such as those between the parties in the case at bar

(co-defendants in Trump Tal Mahal) were never raised in

that action; nor did the occasion for the assertion of such

claims arise in that action.’

F a _ Vv. Costruzione Aeronautiche

iovanni A A A ta

Aviation Corporation

This action was filed on April 11, 1991 in the United

States District Court for the Eastern District of New York.

AAC filed a third-party complaint against Paramount in that

action, and Paramount answered. Paramount did not raise

any affirmative defenses or counterclaims against AAC.

This action was settled in June 1992 with an exchange of

* However, as explored hereafter, Kent and FSQ present a

different picture.

mutual releases that specifically excluded the claims in the

instant action and the Trump action.

Paramount Aviation v. Gruppo Agusta, Agusta

Aerospace Corporation struzi Aeronauti

Giovanni Agusta, S.p.A. and Agusta S.p.A.

- ("PAC I")

This case filed-in the United States District Court for

the District of New Jersey on July 11, 1990 involved a

complaint by Paramount stating seven counts: Strict Liability

in Tort; Fraud; Gross Negligence, Wilful Misconduct,

Wantonness and outrageous Conduct; Negligence; Breach of

Express and Implied Warranties; Willful Destruction and

Spoliation of Evidence; and Fraud and Deceit. Paramount

claimed that, as a result of the crash, it suffered "adverse

publicity, public hostility and ridicule, loss of clients, loss of

goodwill and standing in the industry, loss of income and

other damages. "

On August 16, 1990, pursuant to Fed. R. Civ. P. 41,

Paramount voluntarily dismissed the complaint, without

prejudice, prior to answers by any defendant. At that point

in time, the Kent litigation, to which Paramount was a party,

was still pending.

Paramount Aviation v. Gruppo Agusta, Agusta

Aerospace Corporation, Costruzione Aeronautiche

Giovanni Agusta, $.p.A. and Agusta S.p.A.

- ("PAC II")

The litigation now pending before this court was

originally filed in the Superior Court of New Jersey, Morris

County Law Division on October 7, 1991. This Complaint

states two counts: Negligence, Gross Negligence, Willful and

Reckless Misconduct; and Strict Liability in Tort. The other

counts in PAC I were not reasserted in the present action.

Paramount seeks damages for several types of lost income,

loss of goodwill, and other economic losses. (Compl. at ¢

33). These damages arose as a result of the crash and/or the

Agusta defendants, manufacture and design which allegedly

caused the crash. (Compl. at ¢4 29-30, 36-37).

Defendants removed PAC JI to this Court on

November 12, 1991. Defendants CAGA. Agusta and AAC

each filed answers, with AAC also stating a counterclaim

against Paramount. The counterclaim is for rents allegedly

due and owing for another Agusta helicopter and payment for

spare helicopter parts, service and training. As noted above

all previous actions have been concluded some five to seven

years ago.

ANALYSIS

l. Standard for Summary Judgment

Federal Rule of Civil Procedure 56(c) provides that

summary judgment should be granted "if the Pleadings,

depositions, answers to interrogatories, and admissions on

file, together with the affidavits, if any, show that there is no

genuine issue as to any material fact and that the moving

party is entitled to a judgment as a matter of law, Fed. R.

Civ. Pro. 56 (c) ; see also Chipollini v. Spencer Gifts, Inc. ,

814 F. 2d 893, 896 (3d Cir.) en banc, cert. dismissed, 483

U.S. 1052 (1987). In deciding a motion for summary

judgment, a court must view the facts in the light most

favorable to the nonmoving party and must resolve any

reasonable doubt as to the existence of a genuine issue of fact

against the moving party. Continental Insurance Co. v.

Bodie, 682 F. 2d 436, 438 (3d Cir. 1982). The moving

party has the burden of establishing that there exists no

genuine issue of material fact. See Celotex Corp. v. Catrett,

477 U.S. 317 (1986).

The Supreme Court has stated that. in applying the

criteria for granting summary judgment,

the judge must ask ... not whether .. the

evidence unmistakably favors one side or the

other but whether a fair-minded jury could

return a verdict for the [ponmoving party] on

the evidence presented. The mere existence

of a scintilla of evidence in support of the

(non-movant's] position will be insufficient:

there must be evidence on which the jury

could reasonably find for the [nonmoving

party]. The judge's inquiry, therefore,

unavoidably asks whether reasonable jurors

could find by a preponderance of the evidence

that the (non-movant) is entitled to a verdict

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986).

A fact is “material” only if it will affect the outcome of a

lawsuit under the applicable law, and a dispute over a

material fact is “genuine,” if the evidence is such that a

reasonable fact finder could return a verdict for the

nonmoving party. Id.

In order to survive a motion for summary judgment,

a plaintiff must present “more than a mere scintilla of

evidence," in his favor. He “cannot simply reallege factually

unsupported allegations contained in his pleadings.,,

Anderson v. Liberty Lobby, 477 U.S. 242, 249, 325 (1986);

see also Maguire v. Hughes Aircraft Corp., 912 F.2d 67, 72

(3d Cir. 1990). Only evidence that would be admissible at

trial may be used to test a summary judgment motion.

Jordan _v. Fox, Rothschild, O’Brien & Frankel, 20 F.3d

1250, 1261 (3d Cir. 1994). Evidence with a deficient

foundation must be excluded from consideration. Williams

v. Borough of West Chester, PA, 891 F.2d 458, 466 (3d

Cir. 1989) see also Trap Rock Indus., Inc. v. Local 825,

Int'l Union of Operating Eng'rs, 982 F.2d 884, 890-91 (3d

Cir. 1992).

ll. Entire Controversy Doctrine

New Jersey's “entire controversy rule," set forth in

Rule 4:30A of the Rules Governing Civil Practice, states that

[nJon-joinder of claims or Parties required to

be joined by the entire controversy doctrine

shall result in the preclusion of the omitted

Claims to the extent required by the entire

controversy doctrine ....

Comment | to the Rule indicates that the legislature

intentionally left the scope of the Rule to be defined by case

law. Comment 1, Rule 4:30A. Rules Governing Civil

Practice.

Central to the entire controversy rule and the doctrine

that underlies it is a recognition of the need for judicial

economy. In Guidice v. Drew Chemical Corp., the

Appellate Division of the New Jersey Superior Court noted

that the entire controversy doctrine is a preclusionary

principle intended to prevent the fractionalization of litigation

by requiring all claims between the same parties arising out

of or relating to the same transactional circumstances to be

joined in a singl« action. The effect of the doctrine is to

preclude a party from withholding from the action for

separate and later litigation a constituent part of the

controversy even where that component is a separate and

independently cognizable cause of action. [citation omitted. ]

210 N.J. Super. 32, 41 (App. Div. 1986), remanded on

other grounds, 104 N.J.465 (1986) (quoting Brown v.

Brown, 208 N.J. Super. 372 (App. Div. 1986)).

The entire controversy doctrine applies to claims

arising prior to and during the pendency of a litigation.

Brown v. Brown, 208 N.J. Super 372, 379 (App. Div.

1986). The doctrine does not apply to bar component claims

either unknown, unarisen or unaccrued at the time of the

10a

original action. Zarcomb v. Borucka, 166 N.J. Super. 22

(App. Div. 1979). The doctrine constitutes an affirmative

defense to be raised by way of summary judgment if such a

disposition is otherwise appropriate under Fed. R. Civ. P.

56(b). Rycoline Products, Inc. v. W im! ae

_F.3d __ No. 96-5788, slip op. at 8 (3d. Cir. March

25, 1997). It does not implicate any lack of jurisdiction. Id.

A. Waiver

Plaintiff argues that Defendants have waived the

entire controversy doctrine defense by not pleading it

affirmatively in their Answers. Plaintiffs are correct that

"the entire controversy doctrine is an affirmative defense

which is waived if not pleaded or otherwise timely raised.

B. F. v. Division of Youth and Family Svcs., 296 N.J.

Super. 372, 382 (App. Div. 1996) (quoting Brown_v.

Brown, 208 N.J. Super. 372, 384 (App. Div. 1986) see also

Kopin v. Orange Products, Inc., 297 N.J. Super. 353, 375

(App. Div. 1997) (same).

Failure to raise an affirmative defense in a responsive

pleading does not always result in a waiver of the defense.

Charpentier v. Godsil, 937 F.2d 859, 863 (3d Cir. 1991). In

the Federal system, the necessity of pleading such an

affirmative defense must be viewed in light of the policy of

liberally allowing amendments under Federal Rule of Civil

Procedure 15(a)*. Kleinknecht v. Gettysburg College, 989

* Fed. R. Civ. P. 15 (a) governs a motion to amend a

complaint and provides, in pertinent part:

(Beyond 20 days of service of the complaint], a party

may amend the party's pleading only by leave of court

or by written consent of the adverse party; and leave

shall be freely given when Justice so requires.

lla

F.2d 1360, 1374 (3d Cir. 1993). Where an affirmative

defense is raised in a motion for summary judgment, a Court

may address it on its merits if the defendant would otherwise

have been granted leave to amend its answer. id. It is not

necessary for this Court to deny the instant motion. grant a

subsequent motion to amend, and then address the entire

controversy defense anew. Cf. Burrell _v. Quaranta, 259

N.J. Super. 243, 255 (App. Div. 1992) (holding entire

controversy defense not foreclosed where trial judge would

Fed. R. Civ. R. 15(a) (emphasis added). Leave to amend is freely

granted and the reasons for denying such a motion must be clear:

In the absence of any apparent or declared reason --

such as undue delay, bad faith or dilatory motive on the

part of the movant, repeated failure to cure deficiencies

by amendments Previously allowed, undue Prejudice to

the opposing Party by virwe of allowance of the

amendment, futility of amendment, etc. -- the leave

sought should, as the rules require, be “freely given".

Of course, the grant or denial of an Opportunity to

amend is within the discretion of the District Court ...

Foman v. Davis, 371 U.S. 178, 183 (1962); accord, U.S. v. Hougham

364 U.S. 310 (1960) Skehan v. Tru tees of Bloomsbu State College,

590 F.2d 470 (3d Cir. 1978), cer. denied, 444 U.S. 832 (1979) ; Heyl

tte ntem. v._ F.D. Rich Housin » 663 F.2d 419 (3d Cir. 1981),

the touch-stone for the denial of leave to amend." l

& Co., Inc. v. Occup. § H. Review Com'n, 573 F.2d 820 (3d Cir.

1978); accord, Foman, 371 U.S. at 182; Zenith i ation v.

| -, 401 U.S. 321, 330-33] (1971) ; Skehan, 590

F.2d at 492: Heyl, 663 F.2d at 425. The liberal rules of amendment are

determination of every action.” Boileau v. thleh t orp., 730 F.

2d 929, 939 (3d Cir. 1984), cert. denied, 469 U.S. 871 (1984), quoting

Fed. R. Civ. P. |.

12a

have granted leave to amend if asked)

The entire controversy defense raised here does not

involve any questions of fact, but "presents only a question

of law for resolution." Id.; Godsil, 937 F.2d at 864.

Therefore, the exact form of any amendment would not

affect the defense’s availability.

Furthermore, plaintiff can show no prejudice from its

inclusion. Given the lengthy history of litigation concerning

the helicopter crash, it could not be unforeseen to the

Plaintiff that the entire controversy doctrine might be

implicated. Nor is the long delay between the filing of the

Complaint and the instant motion prejudicial, as it is largely

the result of Plaintiff's failure to vigorously prosecute this

action. Finally, no argument has been made that discovery

upon this newly-asserted defense is required. Accordingly,

the Court will address the entire controversy defense on its

merits.

B. Plaintiff's Claims

Plaintiff argues that the entire controversy doctrine is

inapplicable in the present case because it is in federal court.

This is simply not the case. The doctrine has been routinely

applied in the courts of this jurisdiction. See, e.g. Petrocelli

v. Daniel Woodhead Co., 993 F. 2d 27 (3d Cir. 1993);

Kozyra v. Allen, 973 F. 2d 1110 (3d Cir, 1992) ; Rycoline

Products, Inc. v. C&W Unlimited, etal. _ F.3d __ No. 96-

5788, slip op. at 8 (3d. Cir. March 25, 1997). Plaintiffs

mistakenly treat the doctrine as state procedural law due to

its codification in N.J.R. 4:30A. However, the doctrine is

a creature of New Jersey common law, and therefore

applicable in a federal forum’. Erie R.R. v. Tompkins, 304

S « :

~ “(T]he (New Jersey Court) rule does not define the doctrine. That

is best left to case law. It does, however, constitute a caution to the bar

to be aware of potential claim preclusion against non-parties as well as

13a

U.S. 64 (1938)

The Kent litigation in the Eastern District of

Pennsylvania offered Paramount an Opportunity to bring these

claims against the Agusta defendants. In fact, Paramount did

bring crossclaims for contribution and indemnity against

them. Although Paramount may not have been required to

bring the claims presented here in that forum, it may still be

barred by the entire controversy doctrine from subsequent

litigation of these claims in a New Jersey forum.

The New Jersey Supreme Court faced a very similar

situation in Mo ing Vv. nweal nd Title, 142

N.J. 336 (1995). In Mortageling, the plaintiffs filed an

action in the Eastern District of Pennsylvania against certain

defendants. Id. at 340. Later, they filed a second action in

New Jersey state court against different defendants. Id. The

Law Division dismissed the complaint on the basis of the

entire controversy doctrine.° Id. at 341. The New Jersey

parties.” N.J.R. 4:30A, cmt. 1. The doctrine has also been confirmed in

the New Jersey Constitution. Cogdell v. Hospital Center at Orange, 116

N.J. 7, 15 (1989) (citing Article 6, section 2, paragraph 4 of the 1947

Constitution).

° The Law Division's dismissal took place during the concurrent

pendency of both the federal and state actions. Mortageling Corp. v.

Commonwealth Land Title, 262 N.J. Super. 178, 182 (Law. Div. 1992),

That decision was affirmed on appeal, but after the resolution of the first

action. Mortgageling, 142 N.J. at 342 n.2: see also Rycoline, slip op.

at 11 (discussing the procedural history of Mortgageling. Because neither

of the appellate courts in Mortgageling mentioned the simultaneous

pendency in rendering their decisions, it is unclear if this is an element

to be considered in applying the entire controversy doctrine.

Panels of the Appellate Division and the Third Circuit have each

determined that concurrent actions are not barred by the entire

controversy doctrine. Kaselaan & D'Angelo v. Soffian, 290 N.J. Super.

293 (App. Div. 1996); Rycoline; contra Kelly v. Bor ville,

927 F. Supp. 797 (D.N.J. 1996), aff'd No. 96-5342, 1997 WL 92050 (3d

l4a

Supreme Court affirmed the dismissal.

The Supreme Court held "that when a party

deliberately chooses to fragment litigation by suing certain

parties in another jurisdiction and withholds claims against

other parties, a New Jersey court need not later entertain the

claims against the omitted parties if jurisdiction was available

in the first forum." Mortgageling, 142 N.J. at 338. In this

case, Paramount deliberately chose to fragment the litigation

by bringing certain claims against the Agusta defendants in

Cir. March 5, 1997); Pittst

No. Civ. A. 96-1578, 1996 WL 617139, at *7-9 (D.N.J. Oct. 18, 1996).

However, the New Jersey Supreme Court has yet to definitively speak on

this issue. Ultimately, it is up to them to put “this jurisprudential genie

back into its analytical bottle." Kelly v. Borough of Sayerville, No. 96-

5342, slip op. at 13 (3d Cir. March 5, 1997) (McKee, J., concurring)

(district court error in applying entire controversy defense not due to

concurrency).

Neither Kaselaan nor Rycoline addressed the situation where, as

here, the other concurrent actions have concluded. Kaselaan, 290 N.J.

Super. at 301 n. 1; Rycoline, slip op. at 14 n. 2. The facts of

Mortgageling strongly suggest that, to whatever extent concurrent actions

may not be barred by the entire controversy doctrine during their

pendency, the remaining action will be barred following the conclusion

of its companion litigation. Mortgageling 142 N.J. at 348. To hold

otherwise would frustrate the goal of "fairness to the system of judicial

administration” through a continuing waste of resources. Id. at 344.

Although the similarities between the entire controversy doctrine and res

judicata may militate that one of the proceedings reach a final

adjudication, there can be no bar beyond that point. Otherwise, parties

could circumvent the doctrine entirely -- making each action “merely one

inning of the whole ball game", by starting those “innings” at the same

time. Wm. Blanchard Co. v. Beach Concrete Co., Inc., 150 N.J. Super

277, 294 (App. Div. 1977) certif. denied 75 N.J. 528 (1977).

lSa

the Kent action while withholding other claims against them’.

Those claims were clearly known to Paramount. They were

two of the seven claims asserted in the complaint in PAC |

while Kent was still pending. Paramount also failed to bring

these claims in the FSQ litigation.

Paramount can show nothing which prevented the

assertion of its present claims in the Kent and FSO cases.

Rule 4:30A put Paramount on notice of the possibility that it

would be unable to bring such unasserted Claims at a later

date. That those actions were pending in another jurisdiction

is immaterial. Mortgageling, 142 N.J. 338: Guidice, 210

N.J. Super. at 41-42. Strategic considerations, such as the

possibility of settlement in Kent will not suffice. Defendants’

motion for summary judgment is granted.*

ee AAC’s Counterclai

The Court has reason to believe that New Jersey’s

ent controversy doctrine would also bar AAC’s

counterclaim against Paramount. However, the claim does

not arise out of the October 1989 helicopter crash, and

plaintiff has made no formal motion for such relief. At oral

argument, counsel for the plaintiff indicated that she might

’ Although Mortgageling dealt with Party joinder, it should be

equally applicable in the more traditional area of claims joinder.

Mortgageling, 142 N.J. at 343 ("Heretofore our joinder rules have been

understood to apply when claims have been omitted from proceedings in

another jurisdiction. *) (citing Giudice v. Drew Chemical Corp., 210 N.J.

Super. 32 (App. Div. 1986), certif granted and summarily remanded on

other grounds, 104 NJ. 465 (1986)

* In light of this disposition, the Court need not address defendants’

Spring Motors argument and, therefore, chooses not to do so.

l6a

well pursue such a motion if defendants’ was granted. That

has now occurred. The Court requests that such a motion be

filed within 30 days if plaintiff intends to proceed in that

fashion.

CONCLUSION

- For the foregoing reasons, Defendants, motion for

summary judgment is granted as to all counts in the

Complaint. An interesting question arises as to whether this

dismissal should be with or without prejudice. Under

classical analysis a summary judgment is with prejudice.

Mortgageling, however, suggests otherwise. As in

Mortgageling, the prior actions which trigger the entire

controversy bar here were in other states: Kent in the Eastern

District of Pennsylvania and FSQ in the Eastern District of

New York. The New Jersey Supreme Court in Mortgageling

dismissed the barred claims in that action, without prejudice

to their being asserted in a foreign forum, in order that the

Court "not export our entire controversy doctrine to other

jurisdictions." Mortgageling, 142 N.J. at 338. Sitting in

diversity and thus applying New Jersey law to that issue, this

Court chooses the same course. The complaint is dismissed

without prejudice.?

JOHN W. BISSELL

United States District Judge

DATED: April 4, 1997

9 Asa practical matter, plaintiff's claims are probably now

barred by any applicable statute of limitations; however, that is

an affirmative defense to be asserted if those claims are refiled

in a state or federal court not located in New Jersey.

lh sniihdciaeieiaasidi ine iahlieiaiaiiadiniaaaaalaeaiailil

17a

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

PARAMOUNT AVIATION CORPORATION %.

Plaintiff,

V. Civil Action No. 91-4954

GRUPPO AGUSTA, AGUSTA AEROSPACE:

CORPORATION, COSTRUZIONE ORDER

AERONAUTICHE GIOVANNI AGUSTA, S.p.A.,

and AGUSTA, S.p.A.,

Defendants.

For the reasons set forth in the Court’s Opinion filed

herewith,

It is on this 4th day of April, 1997,

ORDERED that defendants’ motion for summary

judgment be and it hereby is granted, and plaintiff's

complaint is hereby dismissed, without prejudice.

JOHN W. BISSELL

United States District Judge

18a

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

PARAMOUNT AVIATION CORPORATION, :

Plaintiff,

Civil Action No. 91-4954

ORDER

GRUPPO AGUSTA, AGUSTA AEROSPACE:

CORPORATION COSTRUZIONE

AERONAUTICHE GIOVANNI AGUSTA.,

S.p.A., and AGUSTA, S,p.A..

Defendants.

By an opinion and Order dated April 4, 1997 this

Court dismissed the claims of the plaintiff's Complaint,

without prejudice, pursuant to New Jersey’s entire

controversy doctrine. The only surviving claim in this

matter is a counterclaim of Agusta Aerospace Corporation

(AAC) against the plaintiff for rents allegedly due and owing

for an Agusta helicopter, and payment for spare helicopter

parts, service and training. The helicopter involved in the

counterclaim is not the one which crashed, leading to the

multiple lawsuits reviewed in this Court’s April 4 Opinion,

including the claims in plaintiff's present Complaint. In that

Opinion, the Court made the following observation regarding

AAC’s counterclaim and its possible vulnerability to the

entire controversy doctrine.

The Court has reason to believe that New

Jersey's entire controversy doctrine would

also. bar AAC’s counterclaim against

Paramount. However, the claim does not

19a

arise out of the October 1989 helicopter crash,

and plaintiff has made no formal motion for

such relief. At oral argument, counsel for the

plaintiff indicated that she might well pursue

such a motion if defendants’ was granted.

That has now occurred. The Court requests

that such a motion be filed within 30 days if

plaintiff intends to proceed in that fashion.

(Op. dated Apr. 4, 1997 at 15). Among the considerations

which the Court had in mind at that time was the following

allegation at paragraph 3 of the counterclaim: "This

counterclaim arises out of the same transaction or occurrence

which is the subject matter of the plaintiff's Complaint and

the Court’s jurisdiction over this counterclaim is proper

under the doctrine of ancillary jurisdiction. "

In response to the excerpt from the April 4 Opinion

cited above, plaintiff filed a motion for reconsideration or, in

the alternative, a motion for certification of this Court’s

decision pursuant to 28 U.S.C. § 1292(b). Although styled

aS a motion for reconsideration, the plaintiff actually

requested that this Court grant summary judgment, sua

sponte, dismissing AAC’s counterclaim based upon the entire

controversy doctrine. The Court determined that adequate

notice of the possibility of such relief had been provided to

all parties and called for subsequent briefs on the issue.

Letter-memoranda were filed on behalf of both plaintiff and

AAC which the Court has considered Carefully.

While the entire controversy doctrine in New Jersey

is quite broad in scope, it is not without its limitations, as

reflected in recent decisions of the Supreme Court of New

Jersey. As stated by that Court in Joel v. Morocco, 147

N.J. 546, 548 (1997), the doctrine requires parties to a

controversy before a court to assert all claims known to them

that stem from the same transactional facts...." the

companion decision in Gelber v. Zito Partnership, 147 N.J.

20a

561 (1997). In the case at bar, AAC’s counterclaim is

essentially a collection action presented in a conventional

fashion in five counts: 2 for breach of contract, two for

conversion and one for an account stated. The facts relevant

to claims resulting from the October 10, 1989 crash of a

different Agusta helicopter bear no relationship to the

transactions which are the subject of the counterclaim.

Plaintiff argues that "the debilitating effects’ of the October

1989 accident upon its overall business caused "the inability

tO meet contractual obligations" such as those in the

counterclaim. (Plaintiff's Letter-Memo, Aug. 4, 1997 at 2)

While serving as an explanation for the accumulated debts

which form the subject of the counterclaim, those allegations

are hardly material. Indeed, the Court doubts that such

equitable assertions could be presented as a defense to the

basic action at law set forth in the counterclaim. The Court

has not ignored the allegation in paragraph 3 of the

counterclaim quoted above. However, that statement merely

parrots the language of Fed. R. Civ. P. 13(a) describing a

compulsory counterclaim. At most, it is a weak admission

entitled to little weight. In reality, this is a permissive (not

compulsory) counterclaim within the purview of Fed. R. Civ.

P. 13(b) . Accordingly, AAC’s counterclaim in this action is

not barred by the entire controversy doctrine which would

compel AAC to have raised it in any prior litigation.

The plaintiff has also requested the Court to certify its

April 4 Opinion and Order for interlocutory appeal pursuant

to 28 U. S. C. 4 1292 (b). However, this Court is not of the

opinion that this decision and Order involve a material

question of law as to which there is substantial ground for

difference of opinion. The bar of the entire controversy

doctrine to the claims in plaintiff's Complaint is clear.

Secondly, an immediate appeal from the April 4, 1997 order

would not materially advance the ultimate termination of this

litigation. Only AAC’s counterclaim remains in this action.

The Court believes that this claim can promptly be disposed

Bithcncenerenreenamenen-cune. saci acre eres amen

2la

of either by settlement. dispositive motions or trial.

Accordingly, for the reasons set forth above,

It is on this 9th day of October. 1997, ORDERED

that:

1. Plaintiff's motions are denied:

2. The counterclaim of the defendant Agusta

Aerospace Corporation is not barred by New Jersey’s entire

controversy doctrine; .and

3. The Court declines to certify this matter for

interlocutory appeal under 28 U.S.C. § 1292(b).

JOHN W. BISSELL

United States District Judge

22a

NOT FOR PUBLICATION

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

PARAMOUNT AVIATION CORPORATION:

Plaintiff,

V. Civil Action No. 91-4954

GRUPPO AGUSTA; AGUSTA AEROSPACE: OPINION

CORPORATION; COSTRUZIONE

AERONAUTICHE GIOVANNI AGUSTA, :

S.p.A., and AGUSTA, S.p.A.,

Defendants.

APPEARANCES:

WOLK & GENTER

By: Catherine Slavin, Esquire

1710-12 Locust Street

Philadelphia, Pennsylvania 19103

and

EDWARDS, CALDWELL & POFF

By: Daniel D. Caldwell. Esquire

1600 Route 208 North

Hawthorne, New Jersey 07506

(Attorneys for Plaintiff Paramount Aviation Corporation)

23a

JOHN R. ALTIERI, ESQUIRE

25 East Salem Street

P.O. Box 279

Hackensack, New Jersey 07602-0279

and

PINO & ASSOCIATES

Westchester Financial Center

50 Main Street

White Plains, New York 10606

(Attorneys for Defendants Agusta Aerospace

Corporation, Agusta S.p.A. and

Costruzione Aeronautiche Giovanni Agusta, S.p.A.)

BISSELL, District Judge

This matter comes before the Court on plaintiff

Paramount Aviation Corporation’s ("Paramount’s") motion

to vacate the entry of summary judgment in favor of

defendants Agusta Aerospace Corporation ("AAC w

Costruzione Aeronautiche Giovanni Agusta, S.p.A.

("CAGA"), and Agusta S.p.A.’ s (collectively "the Agusta

Defendants”) dismissing plaintiff's claims.' The Court

granted summary judgment in favor of the Agusta defendants

in an Order of April 4, 1997, based on its determination that

the entire controversy doctrine bars plaintiff’s claims.

The Court has jurisdiction over this action pursuant

to 28 U.S.C. § 1332.

' A Return of Service/Proof of Service on Registered Agent was

filed as to defendant Gruppo Agusta. Gruppa Agusta has made no

appearance, nor has the entry of default been sought. It is unclear if

“Gruppo Agusta” is a legal entity or merely a name by which the Agusta

defendants refer to themselves collectively. (See Compl., 4 6).

24a

FACTS

As the Court explained in the Opinion accompanying

its April 4, 1997 Order, the following are the basic facts

underlying this action and the Agusta defendants’ motion for

summary judgment. On October 10, 1989, an Agusta 109A

helicopter crashed in Lacey Township, New Jersey, killing

the pilot, co-pilot, and three passengers. The passengers were

employees of Trump Taj Mahal Associates, Trump Castle

Associates, and/or Trump Plaza Associates("Trump")

The helicopter was manufactured by CAGA and

purchased by AAC.’ AAC then sold it to Soundview Leasing

which sold it to Clifton Park Association which sold it to

FSQ Air Charter Corporation ("FSQ") Plaintiff Paramount

Aviation Corporation ("Paramount") arranged for the sale of

the helicopter to FSA and contracted with FSQ to manage the

aircraft and supply one of the two pilots who operated it.

As a result of the crash, a number of lawsuits were

commenced in different courts.

Kent v. Costruzione Aeronautiche Giovanni Agusta,

Agusta, Gruppa Agusta, Agusta Aviation Corp. and

Paramount Aviation, Inc.

This case was filed in the United States District Court

for the Eastern District of Pennsylvania on March 30, 1990

by the wife and estate of co-pilot Robert Kent for damages

as a result of his deathh AAC, CAGA and Agusta filed

answers asserting cross-claims against Paramount for

contribution and indemnification. Paramount's answer

included cross-claims for contribution and indemnification

* Costruzione Aeronautiche Giovanni Agusta, S.p.A. is a subsidiary

of Agusta S.p.A. and pam of Gruppo Agusta. Agusta Aerospace

Corporation is CAGA’s wholly owned U.S. subsidiary.

a hee Oe

25a

against the Agusta defendants, but no affirmative claim. The

Kent suit was settled on November 27, 1990 for $3,150,000,

with the Agusta defendants paying $2,900,000 and

Paramount paying $250,000.

A le_ Assocs.

Trump Plaza Assocs., and Helicopter Air Services,

a 3 truZi ronauti iovanni Agusta

Agus ru sta, A Aviation Corp. and

Paramount Aviation

This case, filed in the Superior Court of New Jersey,

Law Division, Atlantic County, in July 1990, sought

damages for the injury to the plaintiffs’ businesses as a result

of the crash. The case was removed to this district before

the Honorable John F. Gerry. Prior to serving answers, the

defendants filed motions for dismissal. Chief Judge Gerry

dismissed all counts of that complaint on April 11, 1991.

In a reported Opinion, Judge Gerry ruled that the

plaintiff employers were barred from seeking recovery of

worker’s compensation benefits paid to their executives’

beneficiaries, that New Jersey’s wrongful death statute

precluded these employers from recovering economic

damages attributable to the death of their executives, that

claims for alleged destruction and failure to preserve

evidence were not recognized under New Jersey law and that

the complaint failed to state a cognizable claim for willful

and intentional interference with contractual relations

between the plaintiff-employers and their deceased

executives. Trump Taj Mahal Associates v. struzione

Aeronautiche Giovanni Agusta. S. -A., 761 F. Supp. 1143

(D.N.J. 1991), aff’d without opinion, 958 F.2d 365 (3d Cir.

1992), cert. denied, 506 U.S. 826 (1992). Accordingly, the

court concluded in its April 4, 1997 Opinion, claims such as

those between the parties in the case at bar (co-defendants in

Trump Tal Mahal) were never raised in that action; nor did

26a

the occasion for the assertion of such claims arise there.

FSQ Air Charter Corp. v. Costruzione Aeronautiche

Giovanni Agusta. Agusta. Gruppo Agusta sta

Aviation Corporation

This action was filed on April 11, 1991 in the United

States District Court for the Eastern District of New York.

AAC filed a third-party complaint against Paramount in that

action, arid Paramount answered. Paramount did not raise

any affirmative defenses or counterclaims against AAC. The

action was settled in June 1992 with an exchange of mutual

releases that specifically excluded the claims in the instant

action and the Trump action.

Paramount Aviation v. Gruppo Agusta, Agusta

Aerospace Corporation, Costruzione Aeronautiche

Giovanni Agusta, S.p.A. and Agusta S.p.A. -

("PAC") :

This case was filed in the United States District Court

for the District of New Jersey on July 11, 1990.

Paramount’s complaint stated seven counts: strict liability in

tort; fraud; gross negligence, willful misconduct, wantonness

and outrageous conduct; negligence; breach of express and

implied warranties; willful destruction and spoliation of

evidence; and fraud and deceit. Paramount claimed that, as

a result of the crash, it suffered "adverse publicity, public

hostility and ridicule, loss of clients, loss of goodwill and

standing in the industry, loss of income and other damages."

On August 16, 1990, pursuant to Fed. R. Civ. P. 41,

Paramount voluntarily dismissed the complaint, without

prejudice, prior to answers by any defendant. At that point

in time, the Kent litigation, to which Paramount was a party,

was still pending.

27a

Par unt Aviati Vv.

Aerospace Corporation, Costruzione Aeronautiche

Giovanni Agusta, S.p.A. and Agusta S.p.A. - ("PAC

I")

The litigation now pending before this Court was

originally filed in the Superior Court of New Jersey, Law

Division, Morris County on October 7, 1991. This

complaint states two counts: negligence, gross negligence,

willful and reckless misconduct; and strict liability in tort.

The other counts in PAC I were not reasserted in the present

action. Paramount seeks damages for several types of lost

income, loss of goodwill, and other economic losses.

(Compl., § 33). These damages arose as a result of the

crash and/or the Agusta defendants’ manufacture and design

which allegedly caused the crash. (Compl., 4¥ 29-30, 36-

37).

Defendants removed PAC II to this Coun on

November 12, 1991. Defendants CAGA, Agusta and AAC

each filed answers, with AAC also Stating a counterclaim

against Paramount. The counterclaim is for rents allegedly

due and owing for another Agusta helicopter and payment for

spare helicopter parts, service and training. Although the

Court granted summary judgment to the Agusta defendants

over a year ago, PAC II remains pending because of AAC’s

counterclaim. AAC filed a motion for summary judgment on

its counterclaim on May 22, 1998.

ANALYSIS

Plaintiff asks the Court to vacate its April 4, 1997

Order granting summary judgment to the Agusta defendants.

In support of its motion, plaintiff argues that intervening

decisions of the New Jersey Supreme Court in Olds v.

Donnelly, 150 N.J. 424 (1997): Karpovich v. Barabula, 150

N.J. 473 (1997); Donohue v. Kuhn 150 N.J. 484 (1997): and

28a

Oliver v. Ambrose 152 N.J. 383 (1998), demonstrate that,

contrary to the Court’s earlier conclusion, New Jersey's

entire controversy doctrine does not bar a subsequent legal

malpractice action. Oliver holds that the entire controversy

doctrine applies to family law actions.

1. Standard

Plaintiff argues that the Court’s Order should be

vacated under Fed. R. Civ. P. 60(b). Rule 60(b) states in

relevant part:

On motion and upon such terms as are just,

the court may relieve a party or a party's legal

representative from a final judgment, order,

or proceeding for the following reasons: (1)

mistake, inadvertence, surprise, or excusable

neglect; (2) newly discovered evidence which

by due diligence could not have been

discovered in time to move for a new trial

under Rule 59(b); (3) fraud (whether

heretofore denominated intrinsic or extrinsic),

misrepresentation, or other misconduct of an

adverse party; (4) the judgment is void; (5)

the judgment has been satisfied, released, or

discharged, or a prior judgment upon which it

is based has been reversed or otherwise

vacated, or it is no longer equitable that the

judgment should have prospective application;

or (6) any other reason justifying relief from

the operation of the judgment.

The Court of Appeals for the Third Circuit explained

in Boughner v. Secretary of Health, Education and Welfare,

572 F.2d 976 (1978): “The general purpose of Rule 60 ... is

to strike a proper balance between the conflicting principles

that litigation must be brought to an end and that justice must

Hiiceememectererennceenneiimenetalsaitti Nila ee

29a

be done." Id. at 977).

Plaintiff appears to rely on the catch-all provision in

Fed. R. Civ. P. 60(b)(6). It cites Ov v. Van Waters &

Rogers, 765 F.2d 578 (6th Cir. 1985). In that case. the

Court of Appeals for the Sixth Circuit held that a district

court erred in denying a Rule-60(b)(6) motion. 765 F.2d at

6579. The state supreme court had reversed one of its own

prior decisions, making the district court "clearly in error"

on a question of state law. (Id.) The Court of Appeals

determined that "extraordinary" circumstances required that

the Rule 60(b)(6) motion be granted. 765 F.2d at 580: see

also Boughner, 572 F.2d at 978 ("Rule 60(b)(6) ... provides

an extraordinary remedy and may be invoked only on a

showing of exceptional circumstances. ") Although the Court

of Appeals recognized, numerous courts have held that the

mere showing of a change in the law is not enough to

demonstrate ... an extraordinary situation when the judgment

has become final," 765 F2d at 580, it reasoned that the

judgment in question was not final and it was highly unusual

for the state supreme court to reverse itself within a year.

(Id.) -

As plaintiff notes, the New Jersey Supreme Court

specifically provided in Olds that the decision should apply

to “all pending cases, whether on appeal or in the trial

courts." Olds 150 N.J. at 449. The Supreme Court

explained: "Giving the benefit of our decision to litigants

with pending cases serves the interests of justice by

permitting resolution of their claims on the merits." (Id. at

450).

Defendants do not argue that it would be procedurally

inappropriate to vacate the Court’s Order granting summary

judgment at this Stage in the litigation. Rather, they contend

that the recently decided New Jersey Supreme Court cases

cited by plaintiff do not undermine the reasoning behind the

Court’s April 4, 1997 Order. The Court will assume. in

order to reach the heart of this motion, that if the recently

30a

decided New Jersey cases indicate that the Court’s April 4,

1997 Order was wrongly entered, the Court may now vacate

that Order on the theory that extraordinary circumstances

exist because this case remains open and the New Jersey

Supreme Court explicitly rendered its recent pronouncements

applicable to pending cases.

Il. Application

Nonetheless, the Court will not vacate its Order

granting summary judgment to the Agusta defendants. The

Court concludes that its dismissal of plaintiff’s claims based

on the entire controversy doctrine remains sound,

notwithstanding the New Jersey Supreme Court’s recent

explications on the entire controversy doctrine. Three of the

cases cited by plaintiff. Olds v. Donnelly, 150 N.J. at 424:

Karpovich v. Barabula, 150 N.J. at 473; and Donohue v.

Kuhn, 150 N.J. at 484, address the necessity of joining

parties, not claims, to assert a subsequent legal malpractice

claim; they do not have the broad implications for the entire

controversy doctrine that plaintiff suggests. The fourth case

cited by plaintiff, Oliver v. Ambrose, 152 N.J. at 383,

relates, like this case, to the necessity of joining claims, not

parties, but articulates no change in law that implicates the

Court’s Order.

Plaintiff first argues that the new cases clearly

establish that the entire controversy doctrine does not apply

to plaintiff's assertion of its claims here since Paramount was

not actually required to bring its claims against the Agusta

defendants in Kent. and FSQ. In addition, plaintiff argues

that the recent cases show that even if the entire controversy

doctrine applies here, plaintiff's claims should not be

precluded because preclusion is a remedy of last resort for

vindicating the doctrine’s purposes.

The Court did conclude in connection with its April

4, 1997 order that plaintiff was not required to assert its

3la

Claims in the earlier fora. It explained:

The Kent litigation in the Eastern District of

Pennsylvania offered Paramount an

- Opportunity to bring these claims against the

Agusta defendants. In fact, Paramount did

bring crossclaims for contribution and

indemnity against them. Although paramount

may not have been required to bring the

Claims presented here in that forum, it may

still be barred by the entire controversy

doctrine from subsequent litigation of these

claims in a New Jersey forum.

(Op., Apr. 4, 1997 at 12). The Court determined the same

to be true with respect to the FSQ litigation. (Id. at 14

("Paramount can show nothing which prevented the assertion

of its present claim in the Kent and FSO cases."))

However, the Court does not agree with plaintiff that

Olds establishes that the entire controversy doctrine does not

apply to claims about which a Party was not required to

notify the court in an earlier proceeding. In support of its

interpretation, plaintiff cites part of the passage in Olds

which states:

Before precluding a second action, a court

must determine whether the plaintiff in the

earlier action was required to notify the court

of the party alleging preclusion. See DiTrolio

[v. Antiles], 142 N.J. 253, 27] (1995) ("the

determinative consideration is whether distinct

claims are aspects of the single larger

controversy because they arise from

interrelated facts."). If notice was required the

court must discern whether the plaintiff

complies with the requirements of the rules in

32a

the prior litigation. Although unnecessary, a

formal motion under Rule 4:28 to join a party

would suffice. The plaintiff need only notify

the first trial court of the party now alleging

preclusion. Failure to comply with those

requirements need not lead to preclusion in

the second action. Gelber __v. Zito

Partnership, 147 N.J. 561, 565 (1997))

("(T]be court did not intend the violation of

the notice requirements of Rule 4:5-1 should

result in automatic orders of dismissal.") If a

remedy other than preclusion will vindicate

the cost or prejudice to other parties and the

judicial system, the court should employ such

a remedy.

15@ N.J. at 448. This passage. by its terms, discusses the

application of the entire controversy doctrine to party

joinder, not claims joinder, and, indeed, it comes in the

context of a lengthy discussion of party joinder and entire

controversy doctrine preclusion. See 150 N.J. 447-49.

In Oliver v. Ambrose, 152 N.J. 383 (1998), the

recent claims joinder decision cited by plaintiff, the New

Jersey Supreme Court indicates no change to the rule that the

entire controversy doctrine applies to claims not brought in

an earlier action that arise out of the same underlying facts.

That case begins its discussion of the entire controversy

doctrine by recounting: "For over sixty years, it has been

established in New Jersey that the entire controversy doctrine

requires the mandatory joinder of all claims to a single

transaction.” (Id. at 392). The opinion continues:

The entire controversy doctrine encompasses

"virtually all causes, claims, and defenses

relating to a controversy... "At a minimum,

all parties to a suit should assert affirmative

33a

Claims and defenses arising out of the

underlying controversy." [T]he doctrine also

includes counterclaims and cross-claims .... In

applying the doctrine, "{iJt is the core set of

facts that provides the link between distinct

claims against the same parties ... and triggers

the requirement that they be determined in one

proceeding. ,"

(Id. at 395) (citations omitted). The Supreme Court further

affirmed: “Claims stemming from the same core of facts

Should be raised in one action. [T]he goal is to avoid

fractionalized and successive litigation...." (Id. at 397).

Nowhere in that case does the state Supreme Court indicate

the existence of any new rule that if a party was not required

to give notice of claims against another Party to the court in

an earlier proceeding, the entire controversy doctrine does

not apply to its subsequent assertion of those claims.

Plaintiff's claims here arise out of the same core set of facts

as those in Kent and FSQ. Thus, notwithstanding Olds, under

Oliver and under the cases cited in this Court’s earlier

Opinion, the entire controversy doctrine required that they be

brought in one of the earlier proceedings.°

As plaintiff notes, the New Jersey Supreme Court also

Stated in Olds: "If a remedy other than preclusion will

vindicate the cost or prejudice to other parties and the

judicial system, the court should employ such a remedy."

150 N.J. at 448. This Observation, too, arose in the context

> The Court acknowledges that its April 4, 1997 decision relied

heavily on another party joinder case, Mortgageling Co V.

Commonwealth Land Title Insur. Co., 142 N.J. 336 (1995), but while

that case dealt with the entire controversy doctrine, generally, the Coun

determines that Olds is addressed specifically to procedures and

underlying policies relating to party joinder, not claims joinder. The

Court finds support-for its conclusion in Oliver.

34a

of a discussion of party joinder, not joinder of claims. The

Supreme Court explained earlier in its discussion:

Some contend that the dominant consideration

with party joinder should be the freedom of

claimants to decide what defendants to join in

an action. They theorize that most plaintiffs’

attorneys rationally want to join as many

parties as possible .... The reality, however,

is that some attorneys have elected to conceal

. or withhold ... claims against additional

parties .... In that limited context, when no

lesser remedy would suffice, a court may

resort to preclusion.

150 N.J. at 448-48 (citations omitted).

More importantly, though, the Supreme Court’s

admonition, like the passages on fairness to the parties and

fairness to the system of judicial administration that plaintiff

cites from Karpovich v. Barabula, 150 N.J. at 480-93, and

Oliver, 152 N.J. at 395-402, fundamentally reaffirms the

longstanding principle. that "the polestar of the application of

the (entire controversy] rule is judicial fairness." See

DiTrolio, 142 N.J. at 272 (cited in Oliver, 152. J. at 395).

As the Supreme Court explained in Oliver: "[T]he

boundaries of the entire controversy doctrine are not

limitless. It remains an equitable doctrine whose application

is left to judicial discretion based on the factual

circumstances of individual cases." 152 N.J. at 395 (citation

omitted). Ultimately holding that the entire controversy

doctrine precluded the plaintuff’s claims, the Supreme Court

explained in Oliver: "The courts have indicated that equitable

considerations can relax the application of the [entire

controversy] doctrine, but the extent to which the doctrine is

relaxed depends on the facts of the case and the policy

interests implicated.” (Id. at 397).

sei tcc ecnstaey citrine nv remaromanre

35a

Plaintiff urges that equitable considerations here make

it inappropriate to bar plaintiff's claims under the entire

controversy doctrine. Specifically, plaintiff argues that it is

unfair to bar its claims since plaintiff was represented by

insurance carriers’ counsel in the Kent and FSOQ litigations

where it failed to pursue affirmative Claims against the

Agusta defendants. Moreover. plaintiff notes that in settling

the litigation, both plaintiff and the Agusta defendants signed

a release which stated: This Release does not extend to any

claim made or related to ... the lawsuit encaptioned

Para Viati a t_al., Civil

Action No. 91-4954(JWB) currently pending before the

United States District Court for the District of New Jersey."

(Plaintiff's Motion to Vacate Summary judgment at Exh. B).

The equitable concerns that plaintiff raises do not alter

the Court’s conclusion that plaintiff's claims should be

dismissed under the entire controversy doctrine. That

"plaintiff was represented by counsel selected by the insurer

in the first action" is "a possible equitable consideration."

See Oliver, 152 N.J. at 396. However, it is one not

particularly favored under New Jersey law. See Prevratil v.

Mohr, 145 N.J. 180, 194-96 (1996) (holding no general

exception to entire controversy doctrine exists for litigants

represented by insurance counsel in initial litigation). As the

New Jersey Supreme Court explained in Prevratil:

For decades, courts have discounted a

plaintiff's representation in an earlier action

by counsel provided by an insurer. See

Schweitzer v. MacPhee, 130 N_J. Super. 123,

127 (App. Div. 1974] (stating that "[t]he mere

fact that an insurance carrier {’sl ... counsel

defended, in no way demonstrates the inability

of plaintiff to comply with the rules of the

court"); Burrell [v. Quaranta], 259 N.J.

Super. 243, 254 (App. Div. 1992)).

~ 36a

Although an insurer may select the attorney to

represent an insured, that attorney owes his

first allegiance to his client in the action, the

insured, and bears the responsibility to

represent him properly in all respects."

Molnar v. Hedden, 260 N.J. Super. 133, 147

... (App. Div. 1992), rev’d on other grounds,

138 N.J. 96 ... (1994); see also Lieberman v.

Employers Ins., 84 N.J. 325, 336 ... (1980)

(stating that insurance carrier has fiduciary

duty to represent insured); Rova_ Farms

Resort, Inc. v. Investors Ins. Co., 65 N.J.

474 ... (1974) Plainly stated, in any litigation,

counsel for an insurer must put the insured’s

interests ahead of the insurer’s. Lieberman,

supra, 84 N.J. at 336...

145 N.J. at 194.

Plaintiff correctly points out that the parties agreed

that the settlement of the FSQ litigation should not affect this

litigation. However, the Court is aware of no such

agreement with respect to the earlier Kent litigation. More

importantly, the goals of the entire controversy doctrine are

both "fairness to the parties and fairness to the system of

judicial administration." Karpovich, 150 N.J. at 480. To the

extent that preclusion of plaintiff's claims may not be

required by the first of these underlying principles, the Court

believes it to be mandated by the second. Contrary to

plaintiff's arguments, this is not a case like Karpovich where

the Supreme Court concluded, on the basis of equitable

considerations, that the entire controversy doctrine did not

bar claims against a party who had not been joined in an

earlier action. In Karpovich, the earlier action had been

pending for only seven days before the entry of a consent

judgment. _ The Supreme Court,reasoned: "Preclusion of

Karpovich’s legal malpractice action against defendants

37a

simply does not advance the entire controversy 's central role

of promoting judicial economy and efficiency." 150 N.J. at

482. Here, in contrast, plaintiff was party to two separate

actions arising out of the same circumstances as the claims

it asserts here, one (Kent) lasting eight months, and the other

(FSQ) lasting for over a year. Under these circumstances,

fairness to the system of judicial administration calls for the

dismissal of plaintiff’s claims.

Although the Court did not discuss equitable

considerations at length in its April 4, 1997 Opinion, it did

not ignore them. It noted, in its recitation of the facts, that

the FSQ action was settled in June 1992 with an exchange of

mutual releases that specifically excluded the claims in the

instant action and the Trump action." (Op., Apr. 4, 1997 at

5). In rejecting plaintiff's argument that the Agusta

defendants had waived their entire controversy defense, the

Court stated: "Given the lengthy history of litigation

concerning the helicopter crash, it could not be unforeseen to

the plaintiff that the entire controversy doctrine might be

implicated." (Id. at 11). In addition, the Court observed:

In this case, Paramount deliberately chose to

fragment the litigation by bringing certain

Claims against the Agusta defendants in the

Kent action while withholding other claims

against them. Those claims were Clearly

known to Paramount. They were two of the

seven Claims asserted in the complaint in I

while Kent was still pending. Paramount also

failed to bring these claims in the FSQ

litigation.

(Id. at 14). The Court still considers these to be the

fundamental facts that must be taken into account.

Notwithstanding subsequent case law, which the Court finds

has little if any effect on this action, the Court stands by its

38a

earlier conclusion that the entire controversy doctrine bars

plaintiff's claims. Accordingly, the Court will not vacate its

April 4, 1997 Order.

CONCLUSION

For the foregoing reasons, plaintiff's motion to vacate

the entry of summary judgment in favor of the Agusta

defendants dismissing the-claims of the plaintiff is denied.

JOHN W. BISSELL

United States District Judge

Dated: June 26, 1998

39a

UNITED STATES DISTRICT COURT

DISTRICT OF NEW JERSEY

PARAMOUNT AVIATION COP.

Plaintiff.

V. Civil Action No. 91-4954

ORDER

GRUPPO AGUSTA; AGUSTA AEROSPACE:

CORPORATION ; COSTRUZIONE

AERONAUTICHE GIOVANNI AGUSTA,

S.p.A., and AGUSTA, S.p.A.,

Defendants.

For the reasons set forth in the Court’s Opinion filed

herewith,

It is on this 26th day of June, 1998.

ORDERED that plaintiff's motion to vacate the entry

of summary judgment in favor of the Agusta defendants in

this Court’s Order of April 4, 1997 be, and it hereby is

denied.

JOHN W. BISSELL

United States District Judge

Filed May 13, 1999

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 98-6257

PARAMOUNT AVIATION CORPORATION,

Appellant

Vv.

GRUPPO AGUSTA:; AGUSTA AEROSPACE

CORPORATION; COSTRUZIONI AERONAUTICHE

GIOVANNI, Augusta, S.P.A.; AUGUSTA. S.P.A.

On Appeal From the United States District Court

For the District of New Jersey

(D.C. Civ. No. 91-cv-04954)

District Judge: Honorable John W. Bissell

Argued: March 25, 1999

Before: BECKER, Chief Judge, LEWIS and

WELLFORD,® Circuit Judges.

(Filed May 13, 1999)

CATHERINE B. SLAVIN, ESQUIRE

(ARGUED)

Wolk & Genter

1710-12 Locust Street

Philadelphia, PA 19103

Counsel for Appellant

*Honorable Harry Wellford. United States Circuit Judge for the United

States Court of Appeals for the Sixth Circuit. situung by designation.

4la

JOHN R. ALTIERI. ESQUIRE

(ARGUED)

Foglia & Altieri

25 East Salem Street

Hackensack, NJ 07601

RUDOLPH V. PINO, JUR.. ESQUIRE

JOANNA ROBERTO. ESQUIRE

PINO & ASSOCIATES

Westchester Financial Center

White Plains, NY 10606

Counsel for Appellees

OPINION OF THE COURT

BECKER, Chief Judge.

New Jersey's entire controversy doctrine is an extremely

robust claim preclusion device that requires adversaries to

join all possible claims stemming from an event or series of

events in one suit. Animated by the laudable goal of easing

the burdens of excessive litigation, the doctrine was

developed in the domestic context, precluding suits in New

Jersey courts based on disputes that were previously the

subject of litigation in New Jersey courts. It has attained

interjurisdictional proportions, however. and has been used

in New Jersey to preclude claims based on a failure to effect

joinder in previous litigation in non-New Jersey courts,

where such joinder was not required by those courts’ own

rules. The repercussions of the doctrine have prompted

adverse scholarly comment. See generally Symposium:

Entire Controversy Doctrine, 28 Rutgers L.J. 1 (1996)."

This case began with a helicopter crash, though the facts

have little bearing on the issue before us. We must decide

whether a federal court in New Jersey should, when

1. Until quite recenuy the entire controversy doctrine required Party as

well as claim joinder. The party joinder aspect of the doctrine. the focus

of the lion's share of the criticism. has now been eliminated. See N.J. R.

Civ. Pro. 4:30A. However. the interyunsdicuonal claim preclusion

problem. also the subject of considerable scholarly criticism, remains.

42a

exercising its diversity jurisdiction. apply the entire

controversy doctrine to bar the plaintiff from asserting

claims against the defendants because they were not

asserted in prior litigation involving the instant parties and

others in federal courts in Pennsvivania. New York. and

New Jersey. We conclude that we should not. Disagreeing

with the District Court, which barred the plaintiff's claim.

we hold that federal courts should apply the general rule

that the preclusive effect of a judgment is determined by

the preclusion law of the issuing court—in this case. a

federal court. We will. therefore, reverse the District Court's

grant of summary judgment to the defendants on the

plaintiff's tort claims and remand for further proceedings.

We will also uphold the District Court's determination of

the amount owed to defendant Agusta Aerospace

Corporation (“AAC”) on its counterclaims. but we will vacate

the judgment on the counterclaims pending disposition of

Paramount's tort claims.

I. Facts and Procedural History

On October 10, 1989, an Agusta 109A helicopter crashed

in New Jersey, killing the pilot. co-pilot. and three

passengers, who were top-echelon employees of the Trump

Hotel and Casino enterprises. The helicopter was

manufactured by Costruzioni Aeronautiche Giovanni

Agusta (“CAGA") and purchased by AAC. CAGA is a

subsidiary of Agusta S.p.A. and a part of Gruppo Agusta.

AAC is CAGA's wholly-owned U.S. subsidiary. These are the

“Agusta defendants.” AAC sold the helicopter to Clifton Park

Association, which sold it to FSQ Air Charter Corporation

("FSQ"). Paramount Aviation, Inc. (“Paramount”) arranged

for this sale to FSQ and contracted with FSQ to manage the

aircraft and to supply one of the two pilots who operated it.

The first lawsuit arising from the crash was Kent v.

Costruzioni Aeronautiche Giovanni Agusta. Gruppo Agusta.

Agusta Aviation Corp.. & Paramount Aviation, Inc. (“Kent’),

filed in the United States District Court for the Eastern

District of Pennsylvania, on March 30, 1990, by the widow

and estate of co-pilot Robert Kent. The Agusta defendants

filed answers asserting cross-claims against Paramount for

contribution and indemnification, and Paramount's answer

43a

included cross-claims against the Agusta defendants for

contribution and indemnification. but no affirmative claims.

This case settled on November 27. 1990, for $3,150,000, of

which the Agusta defendants paid $2.900.000 and

Paramount paid $250,000.

Second came Trump Taj Mahal Assoc., Trump Castle

Assoc., Trump Plaza Assoc., & Helicopter Air Services. Inc. v.

Costruzioni Aeronautiche Giovanni Agusta, Agusta. Gruppo

Agusta, Agusta Aviation Corp.. & Paramount Aviation Corp.

(“Trump”), filed in 1990 in the Superior Court of New Jersey

and immediately removed to federal court. Prior to serving

answers, the defendants filed motions for su

judgment, and the district court dismissed all counts.

ruling that the plaintiff-employers were not entitled to

recover under any of the theories they had alleged. See

Trump Taj Mahal Assoc. tv. Costruzioni Aeronautiche

Giovanni Agusta. S.p.A.. 761 F. Supp. 1143 (D.N.J. 1991),

aff'd mem., 958 F.2d 365 (3d Cir.). cert. denied, 506 U.S.

826 (1992). Paramount and the Agusta defendants asserted

no cross-claims against each other. nor was there occasion

for them to do so after the Summary judgment motions

were granted.

Next came FSQ Air Charter Corp. v. Costruzioni

Aeronautiche Giovanni Agusta, Agusta, Gruppo Agusta, &

Agusta Aviation Corp. (“FSQ"). filed in 1991 in the United

States District Court for the Eastern District of New York.

AAC filed a third-party complaint against Paramount. and

Paramount answered without raising affirmative defenses

or counterclaims. The parties’ insurers defended the action,

which was settled in June 1992 with an exchange of

mutual releases that specifically excluded the claims in the

case before us.

Fourth was Paramount Aviation Corp. v. Gruppo Agusta.

Agusta Aviation Corp., Costruzioni Aeronautiche Giovanni

Agusta, & Agusta S.p.A. ("PAC I’), filed in the United States

District Court for the District of New Jersey in 1990. That

complaint alleged seven counts of tortious behavior,

including negligence. willful misconduct, and strict tort

liability. Paramount claimed that the crash caused it

adverse publicity. public hostility, loss of clients and

goodwill. loss of income. and other damages. On August 16,

44a

1990, the complaint was voluntarily dismissed under

Federal Rule of Civil Procedure 41. without prejudice. prior

to answer. Kent was still pending at that point, and Trump

was on appeal.

Finally, PAC II. the instant case. was filed in New Jersey

Superior Court in 1991. Alleging the same damages as PAC

I, plaintiff Paramount stated two counts: (1) negligence.

gross negligence. and willful and reckless misconduct; and

(2) strict tort liabilitv. Paramount claimed damages as a

result of the Agusta defendants’ manufacturing and design.

which allegedly caused the crash. The case was removed.

and the Agusta defendants (except for “Gruppo Agusta.”

which seems to be an umbrella name without independent

corporate existence) filed answers in October 1992. while

AAC also stated a counterclaim against Paramount for

amounts allegedly owed for another Agusta helicopter and

for payments for spare parts. service. and training.

Although the complaint contained a certification about

Trump and FSQ. as required by N.J. Rule 4:5-1, the Agusta

defendants did not raise the entire controversy doctrine in

their answers. The defendants first raised the entire

controversy doctrine in February 1996 and filed a summary

judgment motion on that ground in February 1997.

The District Court granted summary judgment against

Paramount on its claim, reasoning that the claim was

barred by the entire controversy doctrine. It then granted

summary judgment for AAC on the counterclaim.

Paramount appeals.

Il. The Entire Controversy Doctrine

A. Introduction; The District Court's Rationale

Under the entire controversy doctrine. a party cannot

withhold part of a controversy for separate later litigation

even when the withheld component is a separate and

independently cognizable cause of action. The doctrine has

three purposes: (1) complete and final disposition of cases

through avoidance of piecemeal decisions: (2) fairness to

parties to an action and to others with a material interest

in it: and (3) efficiency and avoidance of waste and delay.

See DiTrolio v. Antiles. 662 A.2d 494, 502 (N.J. 1995). As an

45a

equitable doctrine, its application is flexible, with a case-by-

case appreciation for fairness to the parties.

The entire controversy doctrine is an affirmative defense.

waived if not pleaded or otherwise umely raised. See Brown

v. Brown. 506 A.2d 29. 35 (N.J. Super. Ct. App. Div. 1986).

Notwithstanding that Principle, the District Court held that

litigation offered Paramount an Opportunity to bring its

Claim against the Agusta defendants: Paramount had

brought cross-claims for contribution and indemnification

in that case.

Paramount argued that the doctrine should not apply

2. The parues strenuously dispute the causes and effects of the delay,

but. as we need not reach the issue. we will not address it in greater

46a

1993). Paramount maintained that the doctrine was

procedural. The court responded that it was not

“procedural” simply because it was codified in a rule of

procedure: as a creature of state common law, the entire

controversy doctrine was to be applied federally under the

rule of Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938).

Paramount urges that the District Court abused its

discretion in its application of the equitable considerations

behind the entire controversy doctrine. The District Court,

of course. has great discretion in matters of this sort.

However, we need not reach the issue. because we find that

the entire controversy doctrine is not the right preclusion

doctrine for a federal court to apply when prior judgments

were not entered by the courts of New Jersey.

B. Foreign Application of the Entire Controversy Doctrine

In order to decide whether to apply New Jersev law or

federal law, we must follow the rules laid down in Ene and

its progeny. We are required to weigh the significance and

substantive character of the state preclusion rule, and the

likelihood that application of the federal rule would produce

forum-shopping by parties. against the importance of the

federal interests underlying the federal rule. See Byrd v.

Blue Ridge Rural Elec. Co-op., Inc., 356 U.S. 525, 535-40

(1958). If a rule is outcome-determinative, so that applying

the federal rule would change the result of a case filed in

federal court from the result in an identical state court

case, it is likely to affect parties’ decisions where to litigate.

and applving the state rule is generally appropriate. On the

other side. a strong federal policy embodied in

constitutional principles or federal law justifies the

application of a federal rule. In this case, the relevant

federal interests are embodied in Federal Rule of Civil

Procedure 13. which establishes federal claim joinder rules,

and in federal principles of res judicata. We conclude that

New Jersey's interest in the entire controversy doctrine,

while weighty. does not require us to adopt it in order to

decide the preclusive effects of non-New Jersey cases.

47a

1. The Parties’ Contentions

Paramount riotes that none of the lawsuits filed in the

aftermath of the accident was litigated in New Jersey state

court (three were brought in federal court and two were

removed). It argues that the New Jersey Ruies of Court

containing the entire controversy doctrine are procedural

and therefore should not be applied in federal court.

Paramount also submits that New Jersey's interest in

preserving the resources of its courts is minimal. if not

absent, here. where all of the Prior cases were litigated

outside of the New Jersey courts. See Henkels & McCoy,

Inc. v. Adochio, 906 F. Supp. 244, 249 (E.D. Pa. 1995)

(declining to apply the doctrine where both the previous

case and the instant case were in the Fastern District of

Pennsylvania).

Paramount further contends that. when a prior decision's

preclusive effect is examined, it is the pnor jurisdiction's

preclusion law that should generally be applied. See

Restatement (Second) of Judgments § 87 (1982). Paramount

reasons that federal preclusion law should apply to

determine the preclusive effects of federal diversity

judgments. In the absence of a prior New Jersey judgment

on the merits. Paramount maintains. we have no reason to

apply New Jersey's supercharged preclusion doctrine.

The defendants respond that the Full Faith and Credit

Act. 28 U.S.C. § 1738 (1994). requires a federal court

hearing a New Jersey tort claim to be bound by New Jersey

3. Paramount submits. and the Agusta defendants do not challenge, that

the fact that actions were onginally commenced in state court is

irrelevant. Once removed. Junmsdiction in the Distnet Court is onginal

and federal procedure applies. Moreover. the state courts have expended

negligible resources on the removed Case; New Jersey courts do not

apply the doctnne when a prior case was pending for only a few days

and no notable activity took place. Cf, Hulmes v. Honda Motor Co., 924

F. Supp. 673 (D.N.J. 1996) (declining to apply the doctrine when the first

acuon was onlv pending in New Jersey state court for one week before

its voluntary dismissal): Karpovich v. Barbarula. 696 A.2d 659 (N.J.

1997) (holding that a settlement did not require application of the

doctnne where there were only seven davs between the State court filing

and the entry of a consent judgment and virtually no judicial] resources

were used).

48a

substantive law, of which the entire controversy doctrine is

a part. See Rycoline Prods., Inc. v. C&W Unltd., 109 F.3d

883. 887 (3d Cir. 1997). We note some initial discomfort

with this description. as we believe that the entire

controversy doctrine. like all preclusion doctrine. should

generally be characterized as procedural. We take up

Rycoline and the substance/procedure divide infra. noting

here only that the Supreme Court has long instructed us

that the substance/procedure line is not dispositive when

federal courts must choose which sovereign’s law to apply.

See Guaranty Trust Co. v. York, 326 U.S. 99 (1945).

The defendants also point out that federal courts have

occasionally applied the entire controversy doctrine to

determine the effects of non-New Jersey judgments, but the

parties in prior decisions have not contested the application

of the doctrine.’ Nor have we resolved the broader issue of

whether federal or state res judicata law governs successive

diversity actions. See Venuto v. Witco Corp.. 117 F.3d 754,

758 & n.7 (3d Cir. 1997). We have. however, decided that

federal law governs the preclusive effect of a prior diversity

judgment on a subsequent federal question case. See In re

Kaplan, 143 F.3d 807, 814-15 (3d Cir. 1998). We noted in

Kaplan that the Supreme Court used federal law to

determine the preclusive effect of a prior diversity judgment

in Heiser v. Woodruff. 327 U.S. 726 (1946). Though the

issue was not then before us, we also suggested that the

rationale for applying federal preclusion law to determine

4.The enure controversy doctrine has indeed been invoked when the

previous suit was in another state or in a federal court. Melikian uv.

Corradetti 791 F.2d 274 (3d Cir. 1986). applied the entire controversy

doctnn€. though its onlv preclusive effect was on a corporation that mav

not even have been a party to the second lawsuit. See id at 280 &n.3.

Melukian assumed that the doctnne applied to successive diversity cases

in New Jersey and did not address the choice of law question. Thus. it

does not control our decision today. Similariv, in Itzkoff v. F&C Realty,

Corp.. 890 F. Supp. 351 (D.N.J. 1995). the first action was in New York

State court and the second in New Jersey federal court. The parties and

the court assumed that the entire controversy doctmne governed. See

Itzkoff. 890 F. Supp. at 355. The court found that New Jersey (state)

courts would apply the doctnne to foreign proceedings “where fairness so

required.” Id. at 356. The parues did not broach the specific issue of a

federal court's applicauon of the doctnne.

I icerereseeeseenneeieeereiereeteeeaenteiiesiaacaemmeataaiemannt aati iitaiasiceiiaaiaitaiiiasitesdaatesiiaeiaaaimaiaiaaiia

49a

the effects of a prior diversity judgment on a later federal

question Case was quite similar to the rationale for doing so

in a later diversity case. See Kaplan. 143 F.3d at 815 n_15.

2. Relevant Case Law

We find two New Jersey decisions particularly helpful in

elucidating New Jersev's view of the entire controversy

doctrine. In Watkins v. Resorts International Hotel & Casino,

Inc.. 591 A.2d 592 (N.J. 1991), the New Jersey Supreme

Court acknowledged the general rule that the preclusive

effect of a judgment is determined by the law of the

jurisdiction that rendered it, as a logical consequence of the

procedures of the issuing court. See id. at 598. This nile

affects the application of the entire controversy doctrine in

New Jersey state court. Only in “limited circumstances”

may the doctrine preclude an action not otherwise

precluded by the res judicata effects of a federal decision.

See id. at 598-99. The court held that it was essential to

consider the federal law of claim preclusion in determining

whether to apply the entire controversy doctrine, as an

equitable matter, in state court cases. See id at 599.

Watkins thus suggests that New Jersey recognizes the

interests of other jurisdictions that have differing preclusion

doctrines.

In Mortgageling Corp. v. Commonwealth Land Title Ins.

Co., 662 A.2d 536 (N.J. 1995), the New Jersey Supreme

Court applied the entire controversy doctrine to a plaintiff

who had previously sued on the same underlying facts in

the federal District Court for the Eastern District of

Pennsvivania. Almost a year earlier, a mortgage lender had

brought an action in the latter court against Pennsylvania-

based companies and individuals who were allegedly the

central figures in a fraudulent scheme involving mortgage

financing, and the Federal Home Loan Mortgage

Corporation (“Fannie Mae”) had intervened as a plaintiff.

The second case was brought in New Jersey state court by

the lender and Fannie Mae against New Jersey-based

companies and individuals who participated in the same

mortgage transactions and who were allegedly accessories

in the same scheme.

50a

Mortgageling stated decisively that the entire controversy

doctrine is procedural. and that it was formulated

specifically to preserve the resources of New Jersey courts.°®

The Court held that the doctrine bars suits in New Jersey

against parties who could have been joined in an earlier

suit in another state or in federal court. The result was

binding only in New Jersey, however; other jurisdictions

could permit litigation against earlier-omitted defendants

despite a New Jersey decision dismissing an action on

entire controversy grounds. The decision thus attempted to

cabin the effect of the doctrine outside of New Jersey

courts:

We hold that when a party deliberately chooses to

fragment litigation by suing certain parties in another

jurisdiction and withholds claims against other parties.

a New Jersev court need not later entertain the claims

against the omitted parties if jurisdiction was available

in the first forum. In doing so we do not export our

entire controversy doctrine to other jurisdictions, but

merely hold that our notions of procedural fairness do

not permit the claims that could have been brought

elsewhere to be brought in New Jersey. This ruling

presupposes that when the procedural rules of foreign

jurisdictions permit the omitted claims to be brought

later, the foreign jurisdiction is free to entertain such \

claims. Just as we do not seek to export our

procedural requirements of party joinder. we do not

seek to export any preclusive effect to our rules of

party joinder.

5. Guaranty Trust Co. announced that “ijt is . . . immatenal whether

Statutes of lirmtauon are charactenzed either as ‘substantive’ cr

‘procedural’ in State court opinions in any use of those terms unrelated

to the specific [Ene] issue before us.” Guaranny Trust Co.. 326 U.S. at

109. Mortgageling. however. is inumately related to the choice of law

issue. and thus we do not believe that Justice Frankfurter’s conclusion

precludes us from considemng that case. More importanuy. we believe

that Watkins and Morgageling provide insight into the scope of New

Jersey's interest in its doctmne. an issue that is distinct from the

doctnne's locauon on the substance/procedure line.

Sla

One of the underpinnings of the entire controversy

doctrine, in addition to fairness tr the parties, is

faimess to the system of judicial administration.

“Judicial economy and efficiency—the avoidance of

waste and delay—remain constants in the application

of the entire controversy doctrine. F ragmented and

multiple litigation takes its toll on not only the parties

but the judicial institution and the public.” Each

jurisdiction is free to assess the importance of such

values. . .

If Pennsylvania courts do not have a comparable

party-joinder rule, principles of comity suggest that

New Jersey should not seek to export its entire

controversy doctrine to regulate the conduct of

attormeys in that jurisdiction. In other words. attorneys

conducting litigation in Pennsylvania courts should net

have to accommodate their practices to the demands of

New Jersey courts. A corollary of that proposition,

however, is that New Jersey courts need not

necessarily grant relief when parties deliberately refrain

from seeking relief in other jurisdictions when doing so

would have been much fairer to all Parties involved.

There is a delicate balance between the interests of the

two jurisdictions that must _accommodate the interests

of justice... .

Maintaining a cohesive federal system (and the Full

Faith and Credit Clause melds the State courts into

that system) does not require that the other parts of

the federal system honor our enuire controversy

doctrine.

Mortgageling, 662 A.2d at 537. 540, 541, 542 (citations

omitted).

The Mortgageling court mentioned that “the federal courts

are considered those of another sovereign,” id. at 541, and

Suggested that the application of the doctrine in a diversity

acuon in New Jersey federal court might be governed by

choice of law principles, indicating that the court did not

necessarily expect federal courts in New Jersey to apply the

doctrine exactly as the state courts would. See id. at 542.

52a

Thus. while Mortgageling continued to embrace an

expansive view of the doctrine within New Jersey state

courts, it heralded an awareness of the doctrine’s limits

when interjurisdictional problems were involved. While New

Jersey cannot. of course. control our understanding of the

relevant federal law, we consider Watkins and Mortgageling

useful explications of the justifications for the doctrine, and

hence of New Jersey's interests. We turn, therefore, to an

assesment of the relevant state and federal interests.

3. Analysis of the Relevant State and Federal Interests

‘

a. The Import of Rycoline

Rycoline held that a federal court deciding a federal cause

of action is bound by the entire controversy doctrine when

determining the effect of a prior New Jersey state court

judgment. The court characterized the doctrine as “an

aspect of the substantive law of New Jersey, by virtue of the

Full Faith and Credit Act.” Rycoline, 109 F.3d at 887. Thus,

the plaintiffs, who had filed a previous suit in New Jersey

state court, were subject to the mgors of the entire

controversy doctrine when they filed a second suit in New

Jersey federal court, although they were able to proceed

because we decided that New Jersey would not apply the

doctrine while the first suit was still pending.

The defendants claim that the just-quoted phrase from

Rycoline obligates us to apply the entire controversy

doctrine as part of New Jersey substantive law under Erie.

We believe that the question is slightly more complex. The

Full Faith and Credit Act provides that the judicial

proceedings of a state court shall have the same full faith

and credit within every court in the United States as they

have by law or usage in the courts of the issuing state.

Thus. federal courts must give the same preclusive effect to

a state court judgment as another court of that state

would, unless to do so would violate due process. See

Rycoline, 109 F.3d at 887. In this case, there are only

federal judgments. and the Full Faith and Credit Act is not

by its terms applicable. It is usually thought that federal

judgments receive full faith and credit by virtue of federal

common law. See, e.g.. Ronan Degnan, Federalized Res

53a

Judicata, 85 Yale L.J. 741, 744-50 (1976) (discussing the

development of the rule requinng respect for federal

judgments); cf. Embry v. Palmer. 107 U.S. 3. 10 (1883)

(“[T]he judgments of the courts of the United States have

invanably been recognized as upon the same footing, so far

as concerns the obligation created by them, with domestic

judgments of the states, wherever rendered and whereever

[sic] sought to be enforced.”).

To the extent that Rycoline labelled the entire controversy

doctrine “substantive” for Purposes of the Full Faith and

Credit Act, we conclude that it meant only that New Jersey

law governed the preclusive effects of an earlier New Jersey

State court judgment. This is exactly what the Act requires.

See University of Tennessee v. Elliott. 478 U.S. 788, 794

(1986). We decline to read one phrase in a decision that

depended on completely different issues as determining the

result in this case. Rather. our interpretation of Rycoline

renders it consistent with the long line of New Jersey cases

labelling the entire controversy doctrine “procedural.” See.

e.g., Oliver v. Ambrose, 705 A.2d 742. 746 (N.J. 1998):

Harley Davidson Motor Co. v. Advance Die Casting. Inc., 696

A.2d 666, 668 (N.J. 1997): Mortgageling;: Woodward-Clyde

Consultants v. Chemical & Pollution Sciences, Inc..,

923 A.2d 131, 135 (NJ. 1987). At all events, the

Substance/procedure_ divide is not necessarily the

controlling factor in determining when a federal court must

apply state law. See Guaranty Trust Co., 326 U.S. at 109-

10.

Under Mortgageling. a dismissal on entire controversy

grounds is not a dismissal on the merits: this rule helps to

ensure that the doctrine will not have untoward

extratermtonal effects.° However. New Jersey law still

6 The charactenzauon of an enure controversv-based dismissal as one

not on the ments only matters when the pnor decision to which New

Jersey applies the doctnne is not handed down by a New Jersey state

court. When the first decision issues from a New Jersey court, that case

cames ils own preclusive effect. deserving of full respect in the courts of

other junsdictions. If there 1s a second New Jersey case that is dismissed

on enure controversy grounds, and then a third federal case. we might

also give the second New Jersey case preclusive effect on the issue of the

54a

determines the preclusive effects of a prior New Jersey state

court judgment on the merits, as in Rycoline.

b. New Jersey's Interests and the Risks of Forum-

Shopping

New Jersey's main justification for the doctrine. its

interest in preserving its judicial resources, is minimized

when none of the prior litigation took place in New Jersey

state courts. See Rochelle Cooper Dreyfuss & Linda J.

Silberman, Intenurisdictional Implications of the Entire

Controversy Doctrine, 28 Rutgers L.J. 123. 156 (1996). New

Jersey state courts still apply the doctrine in such cases,

which conserves some of New Jersey's judicial resources by

precluding subsequent litigation in New Jersey. By

contrast, when both prior and subsequent litigation takes

place outside the New Jersey state courts, it is hard to see

any New Jersey resource interest whatsoever, except

inasmuch as the size of the federal docket indirectly affects

the state courts.

The risk of unfair surprise is also heightened where the

initial litigation did not take place in New Jersey; it may be

difficult for responsible lawyers to predict that litigation in

New York or California will close the New Jersey federal

courts to future claims. See id. at 169; cf. Electro-Miniatures

Corp. v. Wendon Co., 889 F.2d 41, 45 & n.6 (3d Cir. 1989)

(expressing the concern that, if the entire controversy

doctrine were applied to out-of-state judgments in New

Jersey federal court, other jurisdictions would be adversely

affected by the need to tailor litigation to avoid preclusion

in New Jersey). But see Perry Dane. Dignity and Glorious

Chaos: A Comment on the Intenurisdictional Implications of

the Enttre Controversy Doctrine. 28 Rutgers L.J. 173 (1996)

(arguing that the problems with the _ doctrine’ are

overstated). Given New Jersey's recognition, in Watkins and

application of the enure controversy doctnne to the facts. see 18 Wright

et al.. Federal Practice & Procedure § 4418. at 171 (1981) (discussing the

preclusive effects of determinations that do not go to the merits). but we

need not delve further into these murky preclusion waters to decide the

case before us.

eT eee

5Sa

Mortgageling, that other jurisdictions have significantly

different preclusion doctrines and a Strong interest in giving

effect to those doctrines, we do not believe that a decision

requiring federal courts to apply federal preclusion law

would depreciate New Jersey law.

Some commentators have argued that Mortgageling was

wrongly decided and that the Full Faith and Credit Act does

not give New Jersey the freedom to give other courts’

decisions greater preclusive effect than those courts would

allow. See Stephen B. Burbank. Where's the Beef? The

Internjurisdictional Effects of New Jersey's Entire Controversy

Doctrine, 28 Rutgers L.J. 87 (1996). Professor Burbank

argues that Mortgageling works against the compelling

interest in national unity by requiring litigants in other

States to consider the preclusive effects of their cases on

future cases in New Jersey, regardless of the preclusion law

of the state in which they file complaints. He concludes

that, regardless of New Jersey state court practice, federal

courts in New Jersey should apply standard preclusion law,

rather than the entire controversy doctrine. to the

judgments of non-New Jersey courts. See Burbank. supra,

at 100-01; see alsoDreyfuss & Silberman, supra at 157-

58.

Professor Burbank further argues that. when a federal

court in New Jersey tries to resolve this conundrum, it

should apply the Full Faith and Credit Act rather than Erie

balancing. Judicial balancing would be unnecessary,

because Congress has explicitly instructed courts how to

treat the judgments of state courts. See Burbank, supra, at

103 n.82. Thus. if the Previous litigation involved in this

case had taken place in a state court. we would. as a

matter of course. give it the preclusive effect it would have

in that state's courts.

Though we find this argument persuasive, it does not

dispose of this case, because the Full Faith and Credit Act

does not by its terms apply here. When the prior decision

is a federal decision, the Act applies only by analogy. And

in that case, it is important to look to Erie principles to

decide which sovereigns law to apply. The Full Faith and

Credit Act has an important implication, however: If the Act

instructs New Jersey federal courts how to determine’ the

56a

preclusive effect of state decisions, there is a compelling

argument for treating federal cases similarly. There is no

good reason to apply New Jersey entire controversy law to

determine the preclusive effects of a federal diversity case

from Pennsylvania when the preclusive effects of the same

case would have been governed by the law of the issuing

court if it had been litigated in Pennsylvania state court. To

make different rules for the two types of cases would be

absurd, and would only move the potential forum-shopping

problem back one level further, to the initial non-New

Jersey litigation.

We note another factor that diminishes the force of the

Erie concerns that generally lead to application of state law.

Our Erie jurisprudence counsels us to avoid situations in

which parties who can invoke federal jurisdiction are

treated differently from those who cannot. Because we are

considering a preclusion doctrine, the question is whether

parties who can invoke federal jurisdiction will be able to

litigate claims that will be precluded for parties who cannot.

The risk of inequitable preclusion is minimal, for the

following reason: This situation arises only when there has

been previous litigation outside the New Jersey state

courts. However, the entire controversy doctrine would only

bar a subsequent New Jersey suit if the first forum would

have had jurisdiction over the claims raised in that

subsequent suit. It therefore follows that there was an

alternate non-New Jersey forum for the relevant claims,

although in some cases that forum would be another state

court. The relevant point is that no plaintiff in this situation

will find itself entirely unable to litigate its claims; even if it

is not able to take advantage of federal jurisdiction, it will

have another state in which to bnng its claims.’

7. lt is possible, of course, thal a party who has already participated in

a foregn lawsuit will mistakenly file a second suit in New Jersey siate

court and will lose on enure controversy grounds after the statute ol

limitations for filing a claim elsewhere has run. although it is not enurely

clear that a plainuff in such a situauon would be subject to the doctrine.

See Erenberg v. Cordero. 683 A.2d 567, 574 (N.J. Super Ct. App. Div.

1996) (Stern. J.. concurmng) (staung that the doctmne should only be

applied to the judgments of foreign courts if the plainulf’s claim is

actually capable of being lhugated in some non-New Jersey court). After

pas eee tn iy Aa ea arcs ir ee pnmnone!

57a

Any resulting disparity is no more than the disparity

created by the very existence of diversity jurisdiction, which

allows some parties the opuion of going to federal court

whereas others with identical causes of action cannot.®

While a decision to apply federal preclusion law would be

outcome-determinative in this case, therefore. it would not

ex ante cut off or extend any substantive rights that a

plaintiff would have in the absence of a New Jersey federal

forum, and would be unlikely to encourage Significant

forum-shopping.°

Our analysis can be summarized as follows: New Jersey

has no significant interest in controlling the dockets of

other court systems. Moreover. application of a federal rule

in the rather unusual circumstances here would be

unlikely to create unfairness by causing different results in

our decision. a plainufl who files in New Jersey federal court will not be

“mistaken.” and will not face this dilemma. Thus. there is a possibility

that results will differ in some cases. However. Ene rules were designed

lo avoid conscious forum-shopping. not to increase the risks of

carelessness or unlamiliantv with state law

8. The decision to apply federal! preclusion law affects forum choice in

this sense only: A well-informed plainull might be able to split claims

between some foreign court and a New Jersey federal court that, if the

federal court applied the entire controversy doctnne, it would otherwise

consolidate in the foreign court. But this is not the forum-shopping

between state and federal court that Ene decried: it is claim-splitting,

which presents different issues. As long as the plaintiff adheres to the

other junsdictions’ rules of joinder, we do not think that anv inequity

has occurred. {t is theoreucally possible that vanations between New

Jersey choice-of-law doctnnes and the choice-of-law doctrines of other

jumsdicuons might change the outcome on such a split claim. but we

doubt that parues will base their forum choices on such exouc

possibiliues~

9. Relatedlv. the forum shopping concern ts diminished simply because

successive liugauon is less common than ligation in the first instance:

there are many factors that go into a decision to file a second lawsuit.

and we doubt that a decision to apply federal preclusion law will

substanually alter the relevant incenuves. In this case, Paramount was

not even the iniual plaintiff in the pre-PAC lawsuits; in a real sense.

Paramount had very litue choice over those fora. even though it filed

counterclaims and cross-ciaims.

58a

federal court than in state court or to cause significant

forum-shopping. The issues of outcome-determinativeness

and a consequent incentive to forum-shop are not free from

doubt, however. Therefore, it is important for us to

determine whether there-ts-a-stgnificant federal interest

counseling application of the federal rule. See Fauber v.

KEM Transp. & Equip. Co.. 876 F.2d 327, 331 (3d Cir.

1989). It is to this question that we now turn.

c. The Federal Interest

Federal courts have a significant interest in determining

the preclusive effects of federal judgments. See Kaplan, 143

F.3d at 815 n.15 (citing cases). Kaplan applied federal law

to determine the preclusive effects of a diversity judgment

on a subsequent federal question case. We believe that its

logic is equally applicable here. when successive diversity

cases are al issue. The source of federal jumsdiction over

the second case should not affect our analysis. because we

are concerned with the preclusive effect of the first. As the

Second Circuit has put it:

One of the strongest policies a court can have is that

of determining the scope of its own judgments. . . . It

would be destructive of the basic principles of the

Federal Rules of Civil Procedure to say that the effect

of a judgment of a federal court was governed by the

law of the state where the court sits simply because

the source of federal jurisdiction is diversity.

Kem v. Hettinger, 303 F.2d 333, 340 (2d Cir. 1962). We

agree.

Paramount persuasively argues that we should apply the

general federal rule that (he préclusive effects of prior cases

are determined by the law of the pnor forum. Applying the

federal rule would also give effect to the joinder rules of the

Federal Rules of Civil Procedure. which define the claims

that parties must join if they are not to be later barred. Cf.

Hanna v. Plumer, 380 U.S. 460 (1965) (the strong federal

policies embodied in the Federal Rules of Civil Procedure

justify a refusal to apply an outcome-determinative state

procedural ule); Byrd (outcome-determinative _ state ~

procedural rules do not need to be applied when they are

59a

not an integral part of the underlying substantive right and

there is a strong countervailing federal policy. such as the

policy against disrupting the allocation of power between

judge and jury in federal court). Paramount draws further

support from the scholarly opinion in Fioriglio v. City of

Atlantic City, 963 F. Supp. 415 (D.N.J. 1997), which

engaged in a calculus similar to ours; Judge Irenas

concluded, as we do. that federal joinder and preclusion

rules embody an important federal policy that weighs

heavily against applying the entire controversy doctrine in

these circumstances. See id. at 424.

d. Summary and Conclusion

We conclude that respecting courts’ power to determine

the preclusive effects of their own rulings is a significant

federal interest. In particular, the claim joinder provisions

of the Federal Rules of Civil Procedure express a federal

policy about what claims must be joined to avoid later

preclusion. Applying New Jersey preclusion law to

determine the preclusive effects of federal cases would

frustrate the policy embodied in the Rules, and we decline

to do so. Instead we will follow the federal rule that the law

of the issuing court—here, federal law—determines the

preclusive effects of a prior judgment.

In reaching this result. clearly foreshadowed by Kaplan,

we follow the majority of circuits to confront the issue of

the law to be applied in successive diversity cases. See, e.g.,

J.Z2.G. Resources, Inc. v. Shelby Ins. Co., 84 F.3d 211, 213-

14 (6th Cir. 1996); Havoco, Lid v. Freeman, Atkins &

Coleman, Ltd., 58 F.3d 303. 307-08 (7th Cir. 1995):

Johnson v. SCA Disposal Servs.. 93] F.2d 970, 974 (lst Cir.

1991): Empire Fire & Marine Ins. Co. v. J. Transport, Inc..

880 F.2d 1291. 1293 n.2 (11th Cir 1989): Shoup v. Bell &

Howell Co., 872 F.2d 1178. 1179 (4th Cir. 1989): Aerojet-

General Corp. v. Askew, 51] F.2d 710, 715-18 (5th Cir.

1975); Kern. 303 F.2d at 340 (Second Circuit). But see

Follette v. Wal-Mart Stores, Inc.. 4] F.3d 1234, 1237 (8th

10. We need not resolve here whether particular aspects of preclusion,

such as pnvity. are “substantive” and are governed by state law. Cf.

Lubnzol Corp. v. Exxon Corp.. 929 F.2d 960, 962 n.2 (3d Cir. 199}).

60a

Cir. 1994) (applving state law); Pardo v. Olson & Sons, Inc..

40 F.3d 1063, 1066 (9th Cir. 1994) (same).

Since we have decided that federal law, rather than the

entire controversy doctmne, applies, the obvious question

is: What is the federal law? However, the Agusta defendants

have not argued. either in the District Court or this cour,

that federal preclusion principles bar Paramount's suit. We

thus deem a possible res judicata argument waived. See

Secunty Servs., Inc. v. K Mart Corp., 996 F.2d 1516, 1519

(3d Cir. 1993); Brenner v. Local 514, United Bhd. o/

Carpenters & Joiners, 927 F.2d 1283, 1298 (3d Cir. 1991).”

11. We doubt that such a claim would be menitonous in any event. The

preclusion inquiry in this case is essenually identical to the question

whether Paramount's tort clams were compulsory in any of the earlier

lawsuits. See Publicis Communication v. True North Communications Inc..

132 F.3d 363. 365 (7th Cir. 1997). There is no compulsory cross-claim

rule in the federal sysiem. see Wolfe v. Safecard Servs.. 873 F. Supp.

648. 649 (S.D. Fla. 1995). and therefore the Trump suit clearlv docs not

preciude this suit.

The Kent suit raises a somewhat tnckier issue. because Paramount

and the Agusta defendants filed cross-claims for contribution and

indemnificauon against one another in that case. Arguably. the filing of

a cross-claim makes parues “opposing parties” within the meaning of

Federal Rule of Civil Procedure 13. See Schwab v. Erie Lackawanna R.R.

Co., 438 F.2d 62. 66 (3d Cir. 1971) (dicta). A conversion into “opposing

party” status would imply that. although cross-claims are never

compulsory in themselves. the filing of one cross-claim would tigger

duties on both sides to file all claims that were compulsory under Rule

13(a). However, we suspect thal a compulsory cross-claim rule would be

limited to situauons in which the initial cross-claim included a

substanuve claim. as opposed to claims for contnbuuon and indemnity,

in order to avoid needless complicauon of litigauon. See Hall v. General

Motors Corp.. 647 F.2d 175. 184 (D.C. Cir. 1980): Rainbow Mgmt. Group.

Lid. v. Atlanus Submannes Hawaii L.P.. 158 F.R.D. 656. 660 (D. Haw.

1994) (cuted in 6 Wnght et al.. Federal Practice & Procedure § 1404, at 2

(Supp. 1997), for the proposiuon that filing one cross-claim tums

coparues into opposing parues). But see Kane v. Magna Mixer Co., 71

F.3d 555. 562 (6th Cir. 1995) (holding that indemnity claims uigger the

compulsory cross-claim rule). Thus, the cross-claims for contribution

and indemnity in Kent would not likely bar the present litigation.

FSQ. in which AAC filed a third-party complaint against Paramount.

raises the specter of an omitted compulsory counterclaim that would

6la

We will therefore vacate the judgment in favor of the

defendants and remand to the District Court for further

proceedings on Paramount's tort claims.

III. The Counterclaims

In its counterclaims, AAC alleged that it was entitled to

payments for the lease of one helicopter and for goods and

services provided for three other helicopters. It presented

three counterclaims. but the third counterclaim in actuality

duplicated the claims of the first two, and the District Court

granted summary judgment on those two. In order to

prevail on summary judgment, a Party stating an

affirmative claim must come forward with evidence entitling

it to a directed verdict. See International Shortstop, Inc. v.

Rally’s. Inc., 939 F.2d 1257, 1264 (5th Cir. 1991).

The first counterclaim was for $34.629 plus 1.5% interest

per month for breach of a helicopter lease contract entered

into on March 20, 1987, and expiring November 15, 1989.

The second was for $28,159.98 plus 1.5% interest per

month for breach of a contract for the sale and supply of

spare parts, services. and training related to three of

Paramount's helicopters. The third was for an account

Stated between AAC and Paramount for $62,788.98 for

unpaid lease payments and goods, services, and training,

plus 1.5% interest per month after September 1989. The

contracts were governed by Pennsylvania law.

AAC proffered the relevant lease agreements and invoices,

and an affidavit from its Vice President of Finance and

Administrauon. Vincen: Genovese. detailing the amounts

preclude the present suit. However, we are inclined to think that the

releases in FSQ. which specifically excluded the PAC claims. would

operate as a waiver of a preclusion defense. See Publicis. 132 F.3d at

366: cf Bristol Farmers Market & Auction Co. v. Arlen Realty & Devel.

Corp.. 589 F.2d 1214. 1220-21 (3d Cir. 1978) (parties are not precluded

from arbitrating claims that would normally be precluded by the

compulsory counterclaim ruie if they have agreed to arbitrate those

claims); Restatement (Second) of Judgments § 26(1)(a) (providing that

parues may agree “in terms or in effect” that a plaintiff may split a

Claim).

62a

not paid and calculating the interest due thereunder. For

its account stated claim, AAC submitted a November 14,

1991, letter from Genovese to A] Bartone, Paramount's

president. The letter states:

This letter shall formalize our agreement in which you

have agreed to make monthly payments of S3,000

commencing 1/1/1992 in order to satisfy the debts

owed by Paramount to Agusta Aerospace. As of October

31, 1991, the outstanding balance was S88,829.02

which includes interest of $10,361.00. Interest will

continue to accrue on the principal amount of the debt

until it is paid in full.

Please indicate your agreement witk these terms by

signing below.

Bartone signed “Agreed” on November 14, 1991. Paramount

States that. in addition to this letter, it entered into a

“short-term lease agreement” with AAC on the same dav.

This agreement gave Paramount the right to lease a newer

model 109 helicopter from AAC for an hourly rental fee, and

Paramount agreed to attempt to sell this aircraft on

commission. Paramount contends that this new lease

agreement was part of a package deal that also included

the agreement relating to past debts quoted above.

However, Paramount does not challenge AAC’s basic

underlying evidence regarding the existence and terms of

the 1987 helicopter lease and the service contract.

Paramount defended against the account stated claim by

noting that, although the November 14 Genovese/Bartone

letter was signed two davs after AAC filed counterclaims,

the amount in the letter differs from that in_ the

counterclaim, and the letter makes no mention of those

counterclaims. Paramount also argued that AAC did not

submit proof that it demanded payment before filing the

counterclaims. The District Court found Paramount's

arguments persuasive to defeat the account stated claim,

but ultimately irrelevant. because the relief sought on the

account stated claim was exactly the same relief sought on

the two breach of contract claims. on which it granted

Summary judgment to AAC. We agree.

63a

In fact. Paramount did not effectively challenge AAC's

entitlement to the amounts asserted in the counterclaims,

except to offer a number of defenses: an argument that the

November 14 letter constituted an accord and satisfaction

or a novation; a claim that AAC had waived its

counterclaims; and various equitable defenses. It also

asserted a set-off. The District Court rejected these

defenses. We take them up in turn. except for the equitable

defenses, which we dispose of summarily in the margin.'*

A. Accord and Satisfaction or Novation

Paramount contends that there was an accord and

Satisfaction or a novation, based on the November 14 letter.

An accord and satisfaction is a substitute contract for

settlement of a debt by some alternative other than full

payment. See Occidental Chem. Corp. v. Environmental

Liners, Inc.. 859 F. Supp. 791 (E.D. Pa. 1994). The

consideration is the resolution of a disputed claim. The

District Court found that the November 14 letter might be

evidence of an accord. but that there was no evidence that

Paramount had made pavment according to the agreement,

which is required for satisfaction. See Beechwood Commons

Condominium Ass'n v. Beechwood Commons Assocs., Ltd..,

580 A.2d 1, 5 n.2 (Pa. Super. Ct. 1990). We agree. When an

accord is breached. the non-defaulting party can enforce. at

its option, the underlying agreement or the accord. See

12. Paramount asserted a hodgepodge of equitable defenses, which the

court held inapplicable to AAC’s counterclaims. Estoppel, for example.

requires matenal misrepresentation. reasonable reliance, and resulting

damage. See Greenberg v. Tomlin. 816 F. Supp. 1039, 1055 (E.D. Pa.

1993). The Distnct Court found no evidence of misrepresentation. As for

unciean hands. that defense applies when the party seeking relief is

guilty of fraud. unconscionable conduct. or bad faith direcuy related to

the matter at issue that injures the other party and affects the balance

of equiules. See Equibank v. Adle. Inc.. 595 A.2d 1284, 1287 (Pa. Super.

Ct. 1991). However. Paramount does not allege that the invoices that are

the subject of the counterclaim deal with sernces that were negligently

provided. nor would a wbration problem in one helicopter be enough to

establish the defense. Furthermore. the court found no evidence of

unconscionability or that the contract was against public policy. The

equitable defenses are essenually conclusory and we think that the

Distnct Court was correct to reject them.

64a

Nowicki Constr. Co. v. Panar Corp., 492 A.2d 36, 40 (Pa.

Super. Ct. 1985). Thus, without any evidence of satisfaction

(and there was none), there was not a scintilla of evidence

supporting this defense. We find no error in the District

Court's reasoning on this point.

Paramount then argued that the letter was a novation,

extinguishing the former obligation by another new

promise. In a novation, the new promise itself satisfies the

preexisting claims, whereas in an accord it is the

performance of the new promise that does so. See d. A

novation bars revival of the preexisting duty. See

Beechwood, 580 A.2d at 5. The essential difference between

an accord and a novation is the parties’ intent. See Nowicki.

492 A.2d at 40. The party asserting a novation has the

burden of proof. See Buttonwood Farms, Inc. v. Carson, 478

A.2d 484, 486 (Pa. Super. Ct. 1984). The District Court

found that there was no evidence of any kind that the

parties intended to extinguish their obligations under the

original lease and contract.

Paramount claims that a jury could find the letter to be

a novation, especially when viewed in context with the lease

agreement for the new model 109A helicopter executed the

same day and given that the amount in the letter differed

from that stated in the counterclaim. The existence of a

substituted contract is generally for the jury. See Proie

Bros., Inc. v. Proie, 301 F. Supp. 680, 682 (W.D. Pa. 1968),

aff'd. 414 F.2d 1365 (3d Cir. 1969). However. we do not

think that a reasonable jury could find that the November

14 lease agreement or the counterclaim evidence an intent

to enter into a novation. There is simply no suggestion in

the record that either of the parties considered the

November 14 letter to be a new contract. On its face it is no

more than an agreement to pay amounts owed on a certain

schedule, and Paramount has offered no other evidence of

the parties’ intent.'?

13. If there was a new contract. Paramount further argues. the statute

of limitations has run on it. because the counterclaim was never

amended to include the new contract. Because we conclude that there

was no new contract, we need not resolve this issue.

B. Waiver

Paramount also argues that AAC waived its claim by

failing to send dunning notices or to take any steps to

collect the debts that were due and owing until Paramount

sued. Under Pennsylvania law, waiver of legal rights can

arise by clear. unequivocal. and decisive action by a party

with knowledge of such rights and evident purpose to

surrender them. Waiver can be express or implied from

conduct in situations that would support equitable

estoppel. The party claiming implied waiver must show that

it was misled and prejudiced by the other party's conduct.

See Prousi v. Cruisers Div. of KCS Int'l, Inc., 975 F. Supp.

768, 771-72 (E.D. Pa. 1997). Under these requirements. the

court held, Paramount could not prove waiver. Even

assuming that AAC made no attempt to collect on its debts

unul sued, Paramount was neither misled nor prejudiced.

Moreover, failure to demand payment is simply not a clear.

unequivocal. and decisive action. As long as the claim was

asserted within the statute of limitations, as it was.

Paramount had no reasonable expectation that it would be

free from the counterclaim.

C. Disputes as to Amount

Paramount also makes several claims about the amount

due. First, it argues that the award of 1.5% interest on the

goods and services contract was inappropriate, because

only the helicopter lease agreement provided for interest,

and because many of the invoices for goods and services

were issued after September 1989, while interest was

calculated on the entire amount in controversy starting

from September 1989. See App. at 640. However. as the

District Court observed, Paramount never attempted to

rebut AAC’s calculation, expressed in the affidavit of its

Vice President. Mr. Genovese. We will not allow it to do so

on appeal.

Second. Paramount contends that AAC sought

compensation for goods and services with respect to a

helicopter numbered 7341. which Paramount never owned

or operated. However, Paramount never submitted evidence

to the District Court to counter AAC’s affidavit. Although

Paramount denied knowledge or information about the

66a

helicopter in its responses to requests for admission, its

general denial is insufficient to create a genuine issue of

fact. See United States v. Bottenfield, 442 F.2d 1007, 1008

(3d Cir. 1971).

Paramount finally argues that there was a difference

between the arnount claimed in the _- counterclaim

(S62,788.98 without interest) and the amount stated in the

November 14 letter ($78,468.02 without interest), despite

the fact that the counterclaim was filed two days before the

letter was sent, and that this creates a genuine issue ol

material fact. We disagree, concluding that the District

Court was correct to award judgment on the breach of

contract claim based on the Vice President's affidavit about

the amounts Paramount owed. This is true regardless of

what the November 14 letter said, because if it was an

accord it was never satisfied and thus Paramount was

responsible for the initial obligation.

D. The Setoff

Paramount asserted a setoff based on the sa

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