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Encoder Communications Inc. v. Telegen Inc.

decided: July 15, 1981.


Appeal from pretrial orders of the United States District Court for the Southern District of New York, Charles S. Haight, Judge, denying appellants leave to add an antitrust claim to their complaint, remanding the case to state court because of lack of federal subject matter jurisdiction, and dismissing the complaint as to one appellee based on his discharge in bankruptcy. Cross-appeal from the district court's grant of a motion under Federal Rule of Civil Procedure 60(b) allowing appellants to add tort claims to their complaint. Held that the three issues raised by appellants are nonappealable, and that the district court did not abuse its discretion in granting the Rule 60(b) motion. Appeal dismissed; grant of Rule 60(b) motion affirmed.

Before Feinberg, Chief Judge, Oakes, Circuit Judge, and Bonsal, District Judge.*fn*

Author: Oakes

This appeal involves a complex of procedural questions arising out of pretrial maneuvers in a case commenced in August 1972 in the Supreme Court of New York and removed by the defendants to the United States District Court for the Southern District of New York. The district court, Charles S. Haight, Judge, on September 27, 1979, denied appellants' motion to amend their complaint to add a claim under the federal antitrust laws. When the appellants then amended their complaint, with the district court's permission, to add certain tort claims, complete diversity was destroyed and the district court, on July 3, 1980, remanded the case to the New York state court for lack of federal subject matter jurisdiction. The district court also dismissed the complaint as to appellee Theodore Salata, who had been discharged in bankruptcy in 1977. Appellants challenge the court's denial of leave to amend their complaint to add an antitrust claim, the remand of the case to the state court, and the dismissal as to Salata. Appellees Thomson-CSF, Inc. (Thomson N.Y.), Michel Boxberger (named in the caption as Michael M. Boxberger), and Thomson-CSF Paris (collectively referred to as the Thomson appellees) cross-appeal the district court's rulings permitting the appellants to amend their complaint to state additional tort claims and remanding the case to the state court. After following Judge Haight's thread through this procedural maze which, over the years, has involved four attorneys for appellants, two district court judges, two federal magistrates, and one state court, and in the course of which two of the appellee corporations have become defunct and one individual appellee has been declared bankrupt, we dismiss the appeal.


Appellant Encoder Communications, Inc. is a New York corporation controlled by appellant Anthony Lazzarino, who is a resident of New York. Appellee Compagnie Francaise de Television (CFT) is a French corporation owning world patent rights for a color process used in color television broadcasting in France and other foreign countries, known as SECAM. Thomson-CSF Paris is a French corporation which manufactures components for the SECAM process. Thomson N.Y. is a New York corporation which acts as sales representative in the United States for Thomson-CSF Paris. Michel Boxberger was an officer of Thomson N.Y. and, when this suit was commenced, a New York resident. Telegen (named in the caption as Telegen, Inc.) and Graduate Education Network (named in the caption as Graduate Education Network, Inc.) (GEN) are California corporations, both now defunct. CFT granted Telegen and GEN a six-month, nonexclusive license with respect to the SECAM process. When that license expired in March 1971, CFT entered into a five-year agreement with Telegen, pursuant to which CFT appointed Telegen as its exclusive representative in North America for promotion of the SECAM process in closed circuit applications and granted Telegen the nonexclusive right to manufacture SECAM equipment. Appellee Theodore Salata, who since the commencement of this action has been discharged in bankruptcy, was formerly president of Telegen and GEN. Appellee Joseph Roizen was Salata's successor as president of Telegen. Both Salata and Roizen were residents of California at all relevant times. Richard J. Reynolds, formerly a vice-president of Telegen, was never served. Optimedia Systems, Inc. is a New Jersey corporation which was at one time a distributor for the SECAM process.

In their original complaint appellants alleged that Telegen and GEN had represented that they were exclusive representatives for the SECAM process in North America, and that based on these representations Lazzarino had entered into an agreement whereby the two corporations conveyed to him an exclusive license in perpetuity for use of the SECAM process in certain closed circuit applications in North America. Lazzarino subsequently transferred the license to his company, Encoder. The complaint alleged that Telegen and GEN had defrauded the appellants because they had not disclosed that their relationship with CFT was terminable at the end of five years. The appellants further claimed that all of the appellees were acting in concert to interfere with the appellants' purported license rights by selling SECAM equipment to third parties.

After certain discovery proceedings, counsel for Telegen and GEN were permitted to withdraw on the ground that those corporations no longer existed in fact and therefore were unable to participate in their own defense. Judge Haight denied Roizen's motion to dismiss for lack of personal jurisdiction. And Judge Haight stated that, while his preliminary conclusion was that CFT was entitled to summary judgment, he would, before entering an order granting CFT's motion, permit plaintiffs to call to his attention any proper, outstanding requests for discovery which might lead to additional pertinent facts. The matter of further discovery was referred to a magistrate, who concluded, inter alia, that there appeared to be no reason to deny summary judgment for CFT, and that there could be no more discovery concerning Salata, since he had been discharged in bankruptcy in 1977 and therefore was no longer before the court.

The first district court order of any substance that is involved in this appeal is one made on June 29, 1979, in which the court ruled that the Thomson appellees were entitled to summary judgment. The court observed, however, that in their opposing papers appellants had advanced a new theory against the Thomson appellees which had not been asserted in the previous pleadings, namely that those appellees were involved in the fraud allegedly perpetrated upon appellants by the other appellees. The court further noted that if appellants were to amend their complaint to allege such a claim it would destroy the diversity of citizenship upon which federal subject matter jurisdiction was based.*fn1 The court then granted summary judgment in favor of the Thomson appellees but withheld entry of judgment for thirty days to permit the appellants to file a motion to amend their complaint, stating, however, that if such motion were granted, the case would be remanded to the Supreme Court of New York.

On July 30, 1979, appellants moved for leave to serve an amended complaint incorporating not only the fraud claim against the Thomson appellees, but also an antitrust claim against all of the appellees, alleging a complex scheme to monopolize the patent rights to SECAM and a concerted refusal to deal with appellants. The appellees opposed the motion to amend on the grounds that the antitrust claim was time-barred because it was based on conduct occurring more than four years previously, the claim could not properly be construed to relate back to the date of the original complaint, and, in any case, the proposed pleading was insufficient to state a viable antitrust claim. In the second key order, filed on September 27, 1979, the court denied appellants' motion in all respects, dismissed the complaint as to Thomson N.Y. and Boxberger, and certified its decision as a final judgment under Federal Rule of Civil Procedure 54(b) for immediate appellate review. Appellants did not appeal, however, nor did they move for reargument or take any other steps until on November 21, 1979, they announced their intention to move for relief under Federal Rule of Civil Procedure 60(b). They did so move in January 1980.

In the third key order, filed on April 16, 1980, the court modified its September 27, 1979, order to the extent that it ruled that the appellants could amend their complaint to assert additional tort claims against the Thomson appellees (as the court had previously ruled in its June 29, 1979, order). The court again noted, however, that if the appellants chose to so amend their complaint, diversity jurisdiction would be destroyed and the case remanded to state court. In its April 16, 1980, order the court also observed that the request to add an antitrust claim had already been denied in the September 27, 1979, order, and the appellants had failed to appeal pursuant to the court's certification of the issue under Rule 54(b), so the antitrust claim was completely foreclosed and would not be reconsidered.

The Thomson appellees moved for reargument of the decision of April 16, 1980, or for certification for interlocutory appeal; appellants served their new amended complaint, which included reasserted claims against Salata; and counsel for Salata once again noted his client's discharge in bankruptcy and the bankruptcy court's injunction against further litigation on these claims. On July 3, 1980, the court denied the motion for reargument or certification, dismissed the action against Salata, and remanded the case to the Supreme Court of New York. Encoder and Lazzarino appeal the July 3, 1980, order and apparently also seek to appeal portions of the September 27, 1979, and April 16, 1980, orders. The Thomson appellees cross-appeal the district court's grant of the Rule 60(b) motion.


Appellants tardily seek to appeal the district court's denial on September 27, 1979, of leave to add an antitrust claim to their complaint. Ordinarily, denial of a request to amend the complaint is not appealable as an interlocutory matter, 15 C. Wright, A. Miller & E. Cooper, Federal Practice and Procedure § 3914, at 538 (1976), but in this case the issue was explicitly certified as immediately appealable. However, when the appellants failed timely to avail themselves of the right to appeal the certified September 27, 1979, ruling, they lost the opportunity.

Nevertheless, appellants argue that the district court, in modifying its September 27, 1979, order on April 16, 1980, to the extent of permitting appellants to amend their complaint to allege fraud by the Thomson appellees, thereby extended appellants' time to appeal on the merits the denial of their motion to add an antitrust claim. It is true that the time for appeal may begin to run anew from entry of a revised judgment on a Federal Rule of Civil Procedure 60(b) motion if the lower court, in that second judgment, "has disturbed or revised legal rights and obligations which, by its prior judgment, had been plainly and properly settled with finality." FTC v. Minneapolis-Honeywell Regulator Co., 344 U.S. 206, 212, 73 S. Ct. 245, 249, 97 L. Ed. 245 (1952). However, we need not reach the issue whether the April 16, 1980, order, which dealt with the appellants' tort claims, so substantially modified that portion of the September 27, 1979, order dealing with the appellants' antitrust claim as to rise to the level of a "substituted judgment" thus extending the time for appeal. This is because the April 16, 1980, judgment itself was not final and appealable unless certified by the district court under 28 U.S.C. § 1292(b), and Judge Haight expressly refused to certify his April 16, 1980, order for interlocutory appeal. The Minneapolis-Honeywell rule is based on the policy that a party should have the appropriate amount of time to appeal a final judgment, whenever that judgment comes down. We do not believe that this principle should be extended to the situation present here, in which the first judgment was not a final one and was appealable only because the district court so certified it. Therefore we conclude that the appellants lost their ...

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