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February 27, 1990


The opinion of the court was delivered by: Keenan, District Judge:

Before the Court is the motion of defendant and counter-plaintiff Krueger, Inc. ("Krueger") for an Order vacating an Order dated April 13, 1987 in which the Court granted the motion to dismiss of third-party defendants Tom John and Alan Morse for lack of personal jurisdiction. Fed.R.Civ.P. 60. Also before the Court is a motion for partial summary judgment by Facit, Inc. ("Facit"), Human Factors Technologies, Inc. ("HFT") and Ericsson Information Systems, AB ("Ericsson") pursuant to Federal Rule of Civil Procedure 56.*fn1


The facts of this case are set forth in a thorough decision reported at 657 F. Supp. 1069 (S.D.N.Y. 1989) (Walker, J.) and will be summarized for purposes of this discussion.

Plaintiff Facit is a distributor of office furniture referred to as "computer support furniture." Facit is incorporated under the laws of Delaware with its principal place of business in New Hampshire. Defendant Krueger is a Wisconsin corporation with its principal place of business in Wisconsin, and also manufactures computer support furniture. Third-party defendants Jahn and Morse, both former Facit employees, currently serve as officers of third-party defendant HFT.

Facit initiated this suit in 1986, alleging that Krueger breached a 1983 settlement agreement with it by failing to make payments due under the settlement. Krueger counterclaimed, alleging that Facit, together with the additional defendants on counterclaims, was responsible for breaching the 1983 agreement. Pursuant to the agreement, Krueger had exclusive rights to manufacture the "920 Series," a specific line of computer support furniture. Krueger alleges that Facit violated Krueger's exclusive marketing rights under the agreement by selling and distributing the "Generation III" line of computer support furniture, which Krueger alleges is a virtual copy of the 920 Series.

In January 1984, the parties entered into an agreement settling litigation commenced by Krueger in the United States District Court for the Eastern District of Wisconsin. According to the settlement, Facit agreed to discontinue selling the Generation III line.

In April 1984, HFT was incorporated under the laws of New Hampshire. In May 1984, HFT purchased the Facit Furniture Division. Krueger alleges that HFT was founded by Facit for the purpose of distributing the Generation III line, in violation of the settlement agreement. Krueger's counterclaims allege tortious interference with contractual relations against Tom Jahn, Alan Morse and HFT. Krueger also alleges unfair competition against Facit and HFT.


I. Rule 60(b) Motion

Krueger bases its motion to vacate on the ground that the April 13, 1987 Order was premised on the "fiduciary shield" doctrine, which subsequently was held by the New York Court of Appeals to be unavailable to defeat personal jurisdiction in New York. See Kreutter v. McFadden Oil Corp., 71 N.Y.2d 460, 527 N.Y.S.2d 195, 522 N.E.2d 40 (1988). As stated in Kreutter, the fiduciary shield doctrine "provides that an individual should not be subject to jurisdiction if his dealings in the forum State were solely in a corporate capacity." 527 N.Y.S.2d at 199, 522 N.E.2d at 44.

The following facts are pertinent to this discussion. On April 13, 1987, Judge Walker issued a decision granting Jahn and Morse's motion to dismiss for lack of personal jurisdiction. On March 29, 1988, the New York Court of Appeals decided Kreutter. On July 25, 1988, upon HFT's request, Judge Walker recused himself from the case. On August 4, 1988, Krueger wrote to Judge Walker requesting that he decide a pending discovery motion regardless of his recusal. On December 13, 1988, Krueger wrote to Judge Walker requesting a pre-motion conference for a motion to vacate his prior Order. The case was re-assigned to Judge Keenan on February 7, 1989. A conference was held with Judge Keenan on March 7, 1989, during which a motion schedule was determined. Krueger filed its Rule 60(b) Notice of Motion on March 13, 1989.

Krueger brings its motion under Rule 60(b) without identifying a particular subsection. In its supporting brief Krueger argues that 60(b)(5) and (6) apply, and in its reply brief it argues that 60(b)(1) applies. Rule 60(b) provides:

  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; . . . (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 motion
  shall be made within a reasonable time, and for
  reasons (1), (2), and (3) not more than one year
  after the judgment, order, or proceeding was entered
  or taken.

A motion under Rule 60(b) is addressed to the discretion of the court, and the Rule attempts to strike a proper balance between the conflicting principles of the finality of litigation and that justice should be done. C. Wright & A. Miller, Federal Practice and Procedure § 2851 at 140 (1973 & Supp. 1989). Courts may consider equitable principles when determining a Rule 60 motion. Rule 60 is not, however, to be used as a substitute for appeal. See id.

The Court must first determine under which subsection of Rule 60(b) Krueger's motion falls. It has been held that Rule 60's catch-all provision found in 60(b)(6) may be used "only if other, more specific grounds for relief encompassed by the rule are inapplicable." Maduakolam v. Columbia University, 866 F.2d 53, 55 (2d Cir. 1989). Because the Court finds that Krueger's motion falls under Rule 60(b)(1), the other two subsections referred to need not be addressed.

Rule 60(b)(1) allows for relief from a final judgment, order or proceeding for "mistake, inadvertence, surprise or excusable neglect." Krueger argues that 60(b)(1) applies because Judge Walker made a mistake in finding that New York recognizes the fiduciary shield doctrine to defeat the assertion of personal jurisdiction under New York's long-arm provision. Krueger indicates that the Kreutter court did not change New York law with its decision, but held that there is not and never has been a fiduciary shield doctrine in New York. See Kreutter, 527 N YS.2d at 200-02, 522 N.E.2d at 45-7 ("none of our prior decisions have adopted the fiduciary shield doctrine"). Jahn and Morse argue that the prior decision of the Court was not a "mistake" in that the decision was made in reliance on cases of this Circuit which have applied the fiduciary shield doctrine, and that therefore this motion cannot fall under Rule 60(b)(1).

Alternatively, Jahn and Morse argue that under Rule 60(b)(1), the motion is untimely. A time limitation is placed on motions made under subsection (1): "The motion shall be made . . . not more than one year after the judgment, order, or proceeding was entered or taken." The one year period has been described by the Second Circuit as an "absolute one-year bar." Amoco Overseas Oil Co. v. Compagnie Nationale Algerienne de Navigation, 605 F.2d 648, 656 (2d Cir. 1979). Krueger points out, however, and the Court finds, that because the April 13, 1987 Order dismissed only some of the additional defendants on counterclaims, it was not a final and appealable order. 28 U.S.C. § 1291. See C. Wright, Federal Courts § 98 at 660 (4th ed. 1983). The one year limitation period for claims under Rule 60(b)(1) therefore cannot begin to run until a final judgment is entered. See Max M. v. Thompson, 585 F. Supp. 317, 321 (N.D.Ill. 1984). The Court further notes that, although the motion to vacate was filed almost one year after the Kreutter decision was issued, the intervening recusal of Judge Walker as well as the delay in the re-assignment of this case present extenuating circumstances under which delay is excusable. The Court thus finds Krueger's motion to have been timely filed.

While it has been held that "a change in decisional law is not grounds for relief under 60(b)(6)," Travelers Indem. Co. v. Sarkisian, 794 F.2d 754, 757 (2d Cir.), cert. denied, 479 U.S. 885, 107 S.Ct. 277, 93 L.Ed.2d 253 (1986), a different result has occurred in Rule 60(b)(1) cases. See G & T Terminal Packaging Co. v. Consolidated Rail Corp., 646 F. Supp. 511 (D.N.J. 1986), aff'd, 830 F.2d 1230 (3d Cir. 1987), cert. denied, 485 U.S. 988, 108 S.Ct. 1291, 99 L.Ed.2d 501 (1988); Max M. v. Thompson, 585 F. Supp. 317 (N.D.Ill. 1984). The decision of the New York Court of Appeals finding that the fiduciary shield doctrine does not and has never existed in New York is certainly persuasive on this motion to vacate the April Order which relied on that doctrine.

The Court also finds that certain equitable factors weigh in favor of vacating the April Order. Although substantial discovery in this case has been conducted, a motion for summary judgment is pending, see discussion infra, and thus no trial date had previously been set nor have pre-trial materials been filed. Morse and Jahn are employed by HFT and have been represented by HFT's counsel throughout this litigation. The prejudice to Morse and Jahn in reinstating them as defendants on counterclaims is minimal. In fact, Morse and Jahn suggest an option for Krueger: commence a suit against them in New Hampshire. The result would then be two suits in two separate jurisdictions based on the same facts and the same evidence. Trying Morse and Jahn in the same forum with HFT is much preferable in terms of judicial economy. In addition, should this motion be denied, the finality in litigation theory would be frustrated. Krueger would have to wait for a final judgment to be entered in this case to file an appeal based upon the same grounds as this Rule 60(b) motion.

The Court finds, therefore, that the equities and the subsequent decision of the New York Court of Appeals weigh in favor of granting Krueger's motion to vacate the April 1987 Order of this Court, and Krueger's motion is granted. The request for Rule 11 sanctions against Krueger accordingly is denied.

II. Personal Jurisdiction

Having granted Krueger's motion to vacate the April 13, 1987 Order, the Court must now determine whether in light of Kreutter personal jurisdiction may be asserted over Jahn and Morse. In considering this issue, which originally arose on a motion to dismiss, the Court must accept as true the allegations of the non-movant, drawing all factual inferences in the light most favorable to it.

It is undisputed that in June 1983, Facit entered into an agreement with Krueger whereby Krueger was given the exclusive right to market the 920 Series in the United States. Shortly thereafter, Facit began marketing the Generation III line. On January 16, 1984, Facit and Krueger entered into a settlement agreement under which Facit agreed to discontinue distributing the Generation III. At the time of these events, Jahn was Facit's president and Morse was General Manager of Facit's Furniture Division. An inference can easily be made, then, that Jahn and Morse were aware of the above transactions.

The issue of personal jurisdiction concerns Jahn and Morse, both New Hampshire residents, who are alleged to have used information obtained from Krueger to compete unfairly with Krueger, and to have tortiously interfered with contractual relations between Krueger and Facit. Personal service was made upon Morse and Jahn ...

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