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Mayflower Industries v. Thor Corp.

decided: August 8, 1950.


Author: Hastie

Before GOODRICH, McLAUGHLIN and HASTIE, Circuit Judges.

HASTIE, Circuit Judge.

This appeal has been taken from an interlocutory order of the District Court for the District of New Jersey denying a preliminary injunction. Section 1292(1) of title 28 of the United States Code, 28 U.S.C.A. ยง 1292(1), authorizes an immediate appeal from such an order.

With the case thus properly before us, a preliminary question arises whether this litigation was removable from the state court in which it originated.Although the denial of a motion to remand itself would not support an interlocutory appeal, the question of removability is jurisdictional and therefore is before us for consideration once it appears that the case is properly here for review of an appealable order. Mansfield C. & L.M.R. Co. v. Swan, 1884, 111 U.S. 379, 4 S. Ct. 510, 28 L. Ed. 462; Deckert v. Independence Shares Corp., 1940, 311 U.S. 282, 61 S. Ct. 229, 85 L. Ed. 189.

This action was brought originally in a New Jersey court by Mayflower, a New Jersey corporation, against Thor, an Illinois corporation, and Teldisco, a New Jersey corporation. The complaint was based on an alleged breach of a distributorship contract under which Mayflower was the exclusive distributor of Thor's products in New Jersey, and one of two Thor distributors in New York and Pennsylvania.Mayflower alleged that, without cause or legal justification, Thor cancelled this contract. It is further alleged that Teldisco, with knowledge of the improper cancellation, entered into an agreement with Thor to act as its New Jersey distributor, and commenced acting in that capacity immediately after the cancellation.It is also alleged that Teldisco's "entry into said contractual arrangement with the defendant Thor corporation [together with Teldisco's sales campaign in pursuance of this agreement] constitutes an unlawful, wanton and malicious conspiracy by both defendants to injure the plaintiff in its lawful business and to deprive the plaintiff of the fruits thereof." Injunctive relief and damages are asked against both defendants.

On Thor's initiative, the cause was removed to the United States District Court for the District of New Jersey. A motion for remand was denied. A further motion by Mayflower for a preliminary injunction was denied. Thereupon this appeal was taken.

The jurisdictional issue is decisive and we consider it alone. There is no federal jurisdiction because the cause was not removable.

The controversy between the two New Jersey corporations, Mayflower and Teldisco, standing alone would not be removable. The Mayflower-Thor controversy would. Therefore, the present case is not removable unless the Mayflower-Teldisco controversy and the Mayflower-Thor controversy present "separate and independent claims or causes of action".

Section 1441(c) of the Judicial Code*fn1 provides, in relevant part, as follows: "Whenever a separate and independent claim or cause of action, which would be removable if sued upon alone, is joined with one or more otherwise non-removable claims or causes of action, the entire case may be removed * * *."

This language was intended to and does narrow the right to remove as it had existed under the Judicial Code of 1911, 36 Stat. 1094, where all that was needed, in addition to diversity, was a separable controversy. Pullman Company v. Jenkins, 1939, 305 U.S. 534, 538, 59 S. Ct. 347, 83 L. Ed. 334; see Moore's Commentary on the U.S. Judicial Code (1949) page 239. "Separate" alone might connote no more than the separability of controversies for purposes of litigation. But that is not enough here. We believe the adjectives "separate and independent" were used in conjunction to convey some meaning which would not have been apparent from the use of one adjective alone. At least their common underlying connotation of absence of some significant connection is emphasized. In the context of the present litigation it is enough to say that a consideration of the interests of the parties and the relationship of the two claims in subject matter and essential factual basis lead to the conclusion that the claims of Mayflower against Thor and Teldisco do not constitute "separate and independent" causes of action within the meaning of Section 1441(c).

As revealed by the record, the business reality is that a manufacturer has changed distributors in a certain area, the operative transactions occurring practically simultaneously. From the point of view of the complainant, Mayflower, the termination of its distributorship and the substitution of Teldisco as sole New Jersey distributor of Thor's product immediately thereafter are at most but two aspects of a single economic injury. This is true whether or not Mayflower's conclusion with reference to a "conspiracy" between Thor and Teldisco is deemed on its face a legally sufficient pleading of this basis of liability.

It is even more significant that the circumstances and alleged illegality of the termination of Mayflower's distributorship by Thor constitute the principal controversial issue in the establishment of any cause of action by Mayflower against Teldisco. There is almost complete coincidence of the basic operative facts. Thus analyzed, the claims are not separate and independent.

For present purposes, this analysis and the interests and relationships it reveals are particularly important because the avoidance of possible local prejudice against outsiders has been a principal and justifying end of diversity jurisdiction from its beginning.*fn2 In deciding under what circumstances two claims combined in one suit are "separate and independent" so that the domestic controversy does not impair the removability of the entire litigation from a state court to a court of the United States, it is proper to consider the ends to be achieved by removal of the one claim which standing alone is removable.

Here the controversy arises because a foreign corporation undertook to deprive one New Jersey corporation of an economically advantageous relationship and to confer the benefits in question upon another New Jersey corporation. What one domestic corporation loses and complains of, another domestic corporation gains and defends in the same law suit. Thus the interplay of interests is such that when the two claims are litigated together the foreign corporation is protected from any local prejudice against an outsider which might exist if it alone were sued.

For these reasons we conclude that this case was not removable and thus the matter of granting or denying a preliminary injunction should not have been adjudicated by the district court. In these circumstances, the order appealed from must be vacated and the case remanded to the district ...

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