Appeal from the United States District Court for the Northern District of Illinois, Eastern Division. No. 78-C-679 -- George N. Leighton, Judge.
Bauer, Posner, and Coffey, Circuit Judges.
This is an appeal from an order of the United States District Court for the Northern District of Illinois, Eastern Division, dismissing the defendant Dresser Industries, Inc., from this action brought for an alleged breach of a commission contract between the plaintiff Intercon Research Associates, Ltd. (hereinafter referred to as "Intercon") and the other defendants Atelier de Mecanique de Clamart (hereinafter referred to as "AMC"), a French corporation, and Roger Orio. Roger Orio is a French citizen and the principal officer and shareholder of AMC. The defendants AMC and Orio allegedly owe the plaintiff Intercon commissions for Intercon's efforts that Intercon claims resulted in AMC securing Dresser Industries as a customer. The issue presented in this diversity action is whether it was proper for the plaintiff Intercon to join Dresser Industries, (not a party to the commission contract) as a party-defendant in this action in order that the plaintiff might secure an equitable lien on any of Dresser Industries' funds in the United States presently due and owing to either AMC or Orio.*fn1 The district court ruled that joinder of Dresser Industries, not a party to the principal action but joined only to ensure collection on a potential judgment against AMC and/or Orio, was not proper under Federal Rules of Civil Procedure 20(a).*fn2 The order of the district court is AFFIRMED.
The plaintiff Intercon alleges that it entered into a contract in 1974 with AMC in which Intercon agreed to use its business acumen and contacts to secure customers in the United States for AMC's "technology, know-how and patents." In return, AMC agreed to pay Intercon a 20 percent commission on any business AMC acquired through Intercon's efforts. In its efforts to locate customers for AMC, Intercon contacted several American firms on AMC's behalf, including the defendant Dresser Industries. Shortly thereafter, Roger Orio, acting on behalf of AMC, entered into negotiations with Dresser Industries. These negotiations resulted in: (1) a contract between Dresser Europe S.A. (Dresser Industries' French subsidiary) and AMC under which AMC agreed to sell, and Dresser Europe S.A. agreed to purchase, "the full ownership of a registered trademark consisting in the appellation 'Robinetterie AMC'" and the "know-how allowing [the trademark's] industrial exploitation";*fn3 and (2) a contract between Dresser Industries (Dresser Europe S.A.'s American parent corporation) and Roger Orio pursuant to which Dresser Industries hired Orio as a consultant.
Neither AMC nor Orio have to date paid the commissions allegedly owed to the plaintiff Intercon for securing Dresser Industries as a customer. As a result, the plaintiff Intercon instituted an action in federal district court to collect the commissions allegedly owed by AMC and Orio. Counts I and II of the complaint, which are not at issue in this appeal, seek judgment against AMC and Orio, respectively, for the commission allegedly owed the plaintiff Intercon. Count III of the complaint, the subject of this appeal, seeks "judgment declaring a lien in favor of Plaintiff on any and all sums paid or payable to AMC and/or Orio by Dresser and further to enjoin Dresser from paying any sums to AMC and/or Orio without first paying Plaintiff all sums found to be due." The plaintiff argues the lien was necessary to ensure that Intercon would be able to satisfy any potential judgment it might secure against AMC and/or Orio. The plaintiff contends that without this lien AMC and Orio would be "judgment proof" as these defendants had no assets in the United States and in all probability would transfer any funds received from Dresser Industries to France, beyond the jurisdiction of the district court.
In response to the complaint, the defendant Dresser Industries initially moved to dismiss Count III on the grounds that it failed to state a claim upon which relief could be granted and constituted an unconstitutional prejudgment attachment. On May 1, 1978, Judge Marshall granted the defendant Dresser Industries' motion and dismissed Count III, finding that the plaintiff Intercon's claim against Dresser Industries was in the nature of a creditor's bill, and was controlled by Illinois law which no longer permits the joinder of a creditor's bill to a creditor's principal action.
On May 31, 1978, in open court Judge Marshall stated that his initial dismissal was incorrect and that joinder was proper as a matter of federal procedural law. By minute order, the judge granted the plaintiff Intercon leave to file an amended complaint. After Intercon filed this amended complaint, the defendant Dresser Industries again moved to dismiss Count III, claiming that the remedy sought in Count III violated due process, the attachment procedures prescribed by Illinois law and the rules of joinder set forth in Federal Rules of Civil Procedure 18 and 20.
Before ruling on Dresser Industries' motion, Judge Marshall recused himself from the case and it was reassigned to Judge Leighton, who granted the defendant Dresser Industries' motion to dismiss on January 31, 1979. Judge Leighton characterized the plaintiff Intercon's claim against Dresser Industries as a prejudgment attachment and ruled that the plaintiff could not maintain Count III since the requirements of Illinois attachment procedure had not been met.*fn4
In response to a motion by Intercon to reconsider and reverse the ruling, Judge Leighton in an order dated April 4, 1979, reversed his prior ruling and determined that the plaintiff's request for a lien against Dresser Industries was not a prejudgment attachment but was rather in the nature of a creditor's bill which, under Fed. R. Civ. P. 18(b), could "arguably" be joined with Intercon's claims against AMC and Orio. However, with regard to the question of joinder of parties, Judge Leighton concluded that joinder of Dresser Industries was improper because the requirements of Fed. R. Civ. P. 20, relating to joinder of parties, were not satisfied:
"It is well recognized that Rule 20 operates independently of Rule 18; multiple defendants may be joined in a single action only if the plaintiff asserts at least one claim to relief against each of them that arises out of the same transaction or occurrence and presents questions of law or fact common to all. 7 Wright & Miller, Federal Practice and Procedure § 1655, at 280 (1972); 3A Moore's Federal Practice para. 20.06, at 2036-2045 (2d ed. 1978). In the case at bar, plaintiff's right to relief against the defendants AMC and Orio arises out of an agency agreement between it and AMC, while any right to relief against defendant Dresser arises, if at all, out of sales and services agreements between Dresser and the foreign defendants to which plaintiff was not a party. The requirements for joinder of parties under Rule 20(a), therefore, are not satisfied as to Dresser."
This appeal, then, focuses on the district court's April 4, 1979 order which dismissed the plaintiff's action against Dresser Industries on the ground that joinder of Dresser Industries as a party was improper under Fed. R. Civ. P. 20(a). On appeal, the plaintiff Intercon contends that Judge Leighton's order was incorrect in several respects. We hold that Fed. R. Civ. P. 20(a) governs this appeal and thus we do not address all of the plaintiff's arguments.
ISSUE : Did the district court err in ruling that joinder of Dresser Industries in these circumstances was ...