The opinion of the court was delivered by: EDELSTEIN
commenced this action on February 6, 1964 by filing a complaint charging defendant with wrongfully excluding him from a joint venture or partnership. Plaintiff contends that he and defendant entered into an oral agreement in April, 1963 to acquire and thereafter operate as a joint venture the assets of the Potentiometer
Division of the DeJur-Amsco Corporation
[hereinafter referred to as DeJur]. The complaint further alleges that the parties agreed that if plaintiff would use his "peculiar, unique and close relationship with DeJur Amsco Corporation and its officers and directors to initiate, influence, arrange and facilitate the said acquisition, defendant would supply the entire cash consideration." Additionally, plaintiff asserts that the parties agreed to operate their joint venture through a corporation to be formed in Connecticut, and that they agreed that the Corporation would be called Samarius, Inc.
Plaintiff alleges that defendant, after long and protracted negotiations, eventually acquired the DeJur Potentiometer Division on or about September 30, 1963; that plaintiff was excluded from the acquisition; and that defendant thereby breached their joint venture agreement.
The first cause of action seeks one-half of all sums received by defendant through his acquisition and operation of the DeJur Potentiometer Division. The second cause of action seeks recovery of one-half of the value of the Potentiometer Division or $25,000.00 at plaintiff's option, for services performed by plaintiff in initiating and arranging for defendant's acquisition.
Upon agreement of the parties an order was entered pursuant to Fed. R. Civ. P. 42(b) providing for a separate trial on the issue of liability. At the same time all discovery sought by plaintiff with respect to the operations of Samarius, Inc., which was aimed at eliciting damages, was held in abeyance pending determination of the liability issue. Thereafter, on plaintiff's motion this action was assigned to the commercial non-jury calendar for purposes of trial on the issue of liability.
After much delay, trial was commenced on April 15, 1970 and was concluded on the following day. Decision was reserved. The parties were instructed to prepare post-trial memoranda and to submit proposed findings of fact and conclusions of law. The court was provided with these items by mid-summer 1970.
II. MOTION FOR SUBSTITUTION
While this case was sub judice, defendant served a suggestion of death pursuant to Fed. R. Civ. P. 25(a)(1), indicating for the record that the plaintiff, Harry Yonofsky, died on October 25, 1970.
On February 25, 1971, Charles Winter, in his capacity as executor of plaintiff's estate, moved to be substituted as party plaintiff.
Since the time to move for substitution under Rule 25(a)(1) had expired, Winter also moved for an enlargement of time in which to make the motion. Fed. R. Civ. P. 6(b)(2). Defendant opposed the motion for substitution on the ground that it was untimely.
Rule 25(a)(1) provides as follows:
If a party dies and the claim is not thereby extinguished, the court may order substitution of the proper parties. The motion for substitution may be made by any party or by the successors or representatives of the deceased party and, together with the notice of hearing, shall be served on the parties as provided in Rule 5 and upon persons not parties in the manner provided in Rule 4 for the service of a summons, and may be served in any judicial district. Unless the motion for substitution is made not later than 90 days after the death is suggested upon the record by service of a statement of the fact of the death as provided herein for the service of the motion, the action shall be dismissed as to the deceased party. [emphasis added].
In his papers opposing the motion for substitution, defendant states that, "The motion to substitute plaintiff's Executor is dated 118 days following the serving and filing of the suggestion of plaintiff's death upon the record." From this he concludes that the motion is untimely and requests that the motion be denied and that the action be dismissed as provided for in Rule 25(a). In support of this position, defendant relies on Johns Hopkins University v. Hutton, 297 F. Supp. 1165 (D. Md. 1968) and Graham v. Pennsylvania Railroad, 119 U.S. App. D.C. 335, 342 F.2d 914 (1964), cert. denied, 381 U.S. 904, 85 S. Ct. 1446, 14 L. Ed. 2d 286 (1965).
In the Johns Hopkins case four of the original defendants had died after the commencement of the action. Suggestions of death were duly filed with respect to each of the deceased defendants. As to two of the defendants no motion for substitution was made by anyone connected with the litigation. The court dismissed the complaint with respect to those defendants. Regarding the other two deceased defendants, motions to substitute their executors were made and the executors concerned were duly served with the motions for substitution. There was no opposition to these motions. The court, therefore, entered an order substituting the executors for these deceased defendants.
In Graham the United States Court of Appeals for the District of Columbia Circuit, with one member of the panel dissenting, affirmed per curiam the dismissal of an action with respect to a deceased plaintiff by the district court. The lower court predicated its dismissal on the ground that plaintiff had failed to comply with Rule 25(a)(1) by not moving for substitution within the ninety-day period provided for after a suggestion of death is filed. On appeal the issue was whether the district judge had abused his discretion in refusing to extend the time in which a motion for substitution could be made. Plaintiff's attorney moved for an enlargement of time under Rule 6(b). Upon a showing of "excusable neglect," Rule 6(b)(2) permits a party to move for enlargement of a time period that has expired. In Graham plaintiff's attorney predicated his "excusable neglect" argument on two grounds: (1) that he was unfamiliar with the 1963 Amendment to Rule 25, which mandated the ninety-day period for filing a motion for substitution;
and (2) that he was engaged in the preparation of seven appellate proceedings and one extensive trial during the period after he filed the suggestion of death. After a hearing the district court refused to extend the time to move for substitution and dismissed the action with regard to the deceased plaintiff. In affirming the decision below, the Court of Appeals found that the trial judge had not abused his discretion.
Responding to these contentions, plaintiff's executor asserts that the suggestion of death served by defendant was defective and that the application for enlargement under Rule 6(b)(2) is meritorious.
Plaintiff's executor contends that the suggestion of death served by defendant was defective for two reasons. First, because it was only served on plaintiff's attorney and secondly, because it failed to identify plaintiff's representative.
The two points are related. In relevant part Rule 25(a)(1) provides that a "motion for substitution may be made by any party . . . and, together with the notice of hearing, shall be served on the parties as provided in Rule 5 and upon persons not parties in the manner provided in Rule 4 for the service of a summons . . .." Additionally, it provides for the service of the suggestion of death in the same manner as provided for with respect to the motion for substitution. Consequently, plaintiff's executor contends that defendant should have served the suggestion of death on someone beside plaintiff's former counsel.
The "someone," however, was not identified. In general, the executor or administrator of a deceased party's estate is the individual substituted and upon whom service is effected. In the case at bar, it was defendant who suggested the death of plaintiff. He did so only two days after the plaintiff died.
Under these circumstances it would be difficult for defendant to know whom else to serve beside plaintiff's former counsel. With regard to the second point -- i.e., that the suggestion of death was defective for failure to identify plaintiff's representative -- the executor cites Rende v. Kay, 134 U.S. App. D.C. 403, 415 F.2d 983 (1969). In that case a suggestion of death was filed by the defendant's counsel indicating for the record that the defendant had died. The suggestion of death did not identify the deceased defendant's representative. Reversing the court below, the Court of Appeals held that the failure to name a successor or representative for the deceased defendant rendered the suggestion of death ineffective for purposes of triggering the ninety-day requirement. It should be noted, however, that in Rende, the attorney who filed the suggestion of death represented the deceased party, and, therefore, was in a position to know who would be the decedent's representative.
It is precisely for this reason that the court felt that defendant's counsel was under an obligation to name a successor for the deceased party.
Otherwise, the surviving party would be under the "burden of locating the representative of the [deceased party's] estate within 90 days." 415 F.2d at 986. In the case sub judice, it was the surviving party who suggested plaintiff's death. Therefore he would not be in the same position as was counsel for the deceased defendant in Rende. In general, he would not know who would be the representative or successor for the deceased party. Hence, by inverse analogy, the Rende case cuts against plaintiff's argument.
Having rejected movant's argument that the suggestion of death was defective, it is necessary to focus on the application for enlargement of time under Rule 6(b)(2). If the Rule 6(b)(2) motion is not granted, this action must be dismissed for failure to comply with the ninety-day limitation of Rule 25(a)(1). In relevant part Rule 6(b)(2) provides:
When by these rules or by notice given thereunder . . . an act is required . . . to be done . . . within a specified time, the court for cause shown may at any time in its discretion . . . upon motion made after the expiration of the specified period permit the act to be done where the failure to act was the result of excusable neglect . . ..
It should be noted that Rule 6(b) explicitly commits to the discretion of the court rulings on motions for enlargements.
Regarding how courts view their discretion under Rule 6(b), Professor Moore has observed:
In accordance with the mandate of Rule 1, that the Rules should be construed "to secure the just, speedy and inexpensive determination of every action," the courts generally have given Rule 6(b) a liberal interpretation in order to work substantial justice.
The burden is on movant to establish that the failure to act timely was "the result of excusable neglect." Professors Wright and Miller are of the view that the party moving for an extension must demonstrate good faith and must show "some reasonable basis for noncompliance within the time specified in the rules."
In his affidavit in support of Charles Winter's motion for substitution, plaintiff's attorney offers two reasons for his failure to act within the time limitation provided for in Rule 25(a)(1). The first reason is that there were numerous "time consuming problems proceeding [sic] the appointment of Mr. Winter as Executor. . . ." His second explanation concerns what he characterizes as a "diary oversight by deponent's firm."
With respect to the first point, counsel related a series of events following plaintiff's death which he contends are, at least in part, responsible for the delay. He asserts that he contacted Mrs. Yonofsky immediately after receiving defendant's suggestion of death, but was unable effectively to communicate with her because she was emotionally upset. But he did tell her it was necessary to bring estate proceedings so that a representative could be substituted for purposes of the instant case. A short time later he again called plaintiff's widow. At this time he was told that plaintiff had left no will and that there were no assets in plaintiff's estate. Believing that plaintiff had died intestate, counsel began preparing papers to secure Letters of Administration. After completion of these papers, but before they were filed, Mrs. Yonofsky "discovered the existence of some U.S. Treasury Bonds and three hundred and nine shares of DeJur-Amsco Corporation stock. . . ." This necessitated amending the previously completed papers. After these papers were redrawn and ready to be filed, Mrs. Yonofsky informed counsel that she had found a Last Will and Testament dated December 21, 1962, which named Charles Winter as Executor of plaintiff's estate. Needless to say, counsel abandoned the completed application for Letters of Administration, and began to prepare a petition and supporting papers for probate. The situation was further complicated when a second, earlier will was discovered. This, of course, required amendment of the prior probate papers. Finally, on February 5, 1971, Letters Testamentary were issued to Charles Winter, the Executor named in plaintiff's Last Will and Testament.
As to the "diary oversight" argument, counsel alleged that immediately after receiving the suggestion of death served by defendant, the ninety-day period, prescribed by Rule 25(a)(1) was calculated to terminate on "January 27, 1971, and said date was entered in the reserve section for 1971 at the rear of our office New York Lawyers Diary and Mannual [sic] for 1970." Subsequently, when counsel's office received the 1971 edition of the New York Lawyers Diary and Manual, the deadline for mailing the substitution motion was erroneously entered on the February 27, 1971 page instead of the January 27, 1971 page. It is asserted that the error was not uncovered until March 1, 1971, when this court notified counsel that it had set a date for argument on the substitution motion.
Defendant responded to these arguments in two ways. He relied on the Graham and Johns Hopkins cases, which were discussed earlier,
as authority precluding the court from granting the motion for substitution. His other response, by way of supplemental papers, called to the attention of the court that he had contacted Mrs. Yonofsky and that she had informed him that she had always known of the existence of plaintiff's will. This seems flatly to contradict the sworn statement in the affidavit of plaintiff's counsel that he was told no will existed. Thereafter, plaintiff's counsel questioned the propriety of defendant's contacting Mrs. Yonofsky and in having their telephone conversation transcribed without permission or warning. The court held a hearing to inquire into the facts surrounding the telephone call to Mrs. Yonofsky. The secretary who transcribed the conversation appeared and produced both her shorthand notes and a longhand transcription of the conversation. At the hearing it was established that except for the last few seconds the secretary had transcribed the entire conversation between Mr. Stull (defendant's attorney) and Mrs. Yonofsky. The transcript does not indicate that Mr. Stull advised plaintiff's widow that their conversation was being transcribed. In an affidavit filed the day after the hearing, Mr. Stull stated that before he closed his telephone conversation with Mrs. Yonofsky, he informed her that he "had notes made of [their] conversation," that he "would bring [their] discussion to the Judge's attention," and that he "suggested that she call Mr. Friedman" (plaintiff's counsel).
At the close of the hearing the court stated that it would study all papers bearing on the motion for substitution and would determine whether grievance consideration was indicated in regard to the conflicting affidavits.
After carefully considering this matter, the court is of the view that grievance proceedings are not indicated. The conflict is between the statement in Mr. Friedman's affidavit that Mrs. Yonofsky informed him that there was no will, and the statement in the affidavit of Mr. Stull, that Mrs. Yonofsky always knew of the existence of plaintiff's will. It should be noted that when Mr. Friedman inquired with respect to a will and was told there was none, it was early November 1970. This was only a short time after plaintiff's death on October 26, 1970. Mr. Stull revealed that when he asked Mrs. Yonofsky at what time she had sent plaintiff's will to Mr. Friedman's office, she answered, that it was about a month after her husband's death -- i.e., sometime after November 26, 1970. Mrs. Yonofsky explained that she waited a month before sending the will to Mr. Friedman for religious reasons. The conflict between what Mr. Friedman was told -- that there was no will -- and what Mr. Stull was told -- that Mrs. Yonofsky always knew that there was a will -- appears to be irreconcilable. It might be that Mrs. Yonofsky was mistaken when she indicated to Mr. Friedman that there was no will. This is not improbable since the alleged conversation took place only a short time after her husband's death. Hence, she might have been under severe mental and emotional strain at that time. Nevertheless, based on the facts as presented it is impossible to conclude that Mr. Friedman's affidavit was either false or not made in good faith. Accordingly, the court will decide the application for an extension of time in which to move for substitution under the assumption that both sides have acted in good faith.
The executor seeking to be substituted for Yonofsky has offered two excuses for the failure to comply with the ninety-day provision of Rule 25(a)(1): (1) that there were significant difficulties in bringing about his appointment as executor; and (2) the "diary oversight" by plaintiff's counsel. In view of the wide discretion granted to the court in determining 6(b) motions,
and the liberal view of that discretion taken by most courts
the court believes that the instant motion should be granted. The movant has made the requisite showing of excusable neglect to justify this ruling. There have been at least two cases in this district in which clerical errors or similar inadvertent actions were the cause of untimely acts under the rules. Vandervelde v. Put and Call Brokers and Dealers Ass'n, 43 F.R.D. 14 (S.D.N.Y. 1967); Colgate-Palmolive Co. v. North American Chemical Corp., 238 F. Supp. 81 (S.D.N.Y. 1964). In both of these cases motions under Rule 6(b)(2) were granted. The 6(b) motion in Vandervelde, moreover, even arose in the same procedural posture -- i.e., an untimely motion for substitution -- as the instant case.
Defendant's reliance on the previously discussed Graham and Johns Hopkins cases is unpersuasive. In the latter case the court reasoned as follows:
A suggestion of . . . death was filed . . .. No motion for substitution was made by any of the parties to this case, or by the successors or representatives of either such deceased defendant, within the ninety day period after the filing of the suggestion of death as provided in Rule 25. Therefore, in accordance with the provisions of that rule, the complaint in this case is dismissed as to each of said two deceased defendants. 297 F. Supp. at 1165.
The court's language does not indicate whether any motion for substitution was filed after the ninety-day period. The court apparently was not faced with a decision under Rule 6(b)(2). The instant case is thus distinguishable on this ground. Consequently, the Johns Hopkins case is not authority for denying the instant motion under Rule 6(b)(2).
Although the court in Graham was faced with a motion under Rule 6(b), which it denied, there was a strong dissent by Judge J. Skelly Wright. This court shares the view articulated by Judge Wright that the opinion of the majority was incorrect.
The leading case in this circuit, which discusses extensions of time for making motions under Rule 25(a)(1), is Staggers v. Otto Gerdau Co., 359 F.2d 292 (2d Cir. 1966). In that case the court rejected appellees' argument that the district judge was required to dismiss the action when no motion for substitution was made within the ninety-day period. The court stated that the "history of the 1963 amendment to Rule 25 makes clear that the 90 day period was not intended to act as a bar to otherwise meritorious actions." 359 F.2d at 296 (citation omitted). In this case the delay in making the motion to substitute was only two days. Although the court found "excusable neglect" for the short delay, it was also careful to point out "that the appellees suffered no prejudice " from the delay. Id. (emphasis added). It is not unreasonable to conclude from Staggers that "lack of prejudice" to a party opposing substitution is a key element to factor into a Rule 6(b) determination. This approach was approved in Vandervelde, in which another judge of this court attached "'crucial importance'" to the absence of prejudice in granting a motion to extend the time in which a party could move for substitution. 43 F.R.D. at 20.
In the case under consideration there can be no prejudice to the party opposing the motion for substitution. The trial was completed before the plaintiff died. Under Staggers and Vandervelde this court must attach significant weight to this factor. When the "no prejudice" factor is added to the other elements discussed, the balance unequivocally tips in favor of granting the motion.
Accordingly, the motion for enlargement of time in which to move for substitution is granted. The motion to substitute Charles Winter, executor of the deceased plaintiff's estate, is likewise granted.
III. CHALLENGES TO JURISDICTION
During argument at trial and in his trial and posttrial memoranda defendant has attacked the subject matter jurisdiction of this court on three grounds: (1) plaintiff has not established diversity of citizenship; (2) the requisite jurisdictional amount is not in issue; and (3) plaintiff has failed to join an indispensable party, namely, Samarius, Inc., the corporation under which defendant has been operating the assets of the DeJur Potentiometer Division. It should be noted that defendant never formally moved for dismissal on jurisdictional grounds prior to trial. He did, however, deny ...