SOMPORTEX LIMITED v. PHILADELPHIA CHEWING GUM CORP.

Certiorari Denied March 27, 1972. See 92 S.Ct. 1294.

OPINION OF THE COURT

ALDISERT, Circuit Judge.

Several interesting questions are presented in this appeal from the district court's order, 318 F.Supp. 161, granting summary judgment to enforce a default judgment entered by an English court. To resolve them, a complete recitation of the procedural history of this case is necessary.

This case has its genesis in a transaction between appellant, Philadelphia Chewing Gum Corporation, and Somportex Limited, a British corporation, which was to merchandise appellant's wares in Great Britain under the trade name "Tarzan Bubble Gum." According to the facts as alleged by appellant, there was a proposal which involved the participation of Brewster Leeds and Co., Inc., and M. S. International, Inc., third-party defendants in the court below. Brewster made certain arrangements with Somportex to furnish gum manufactured by Philadelphia; M. S. International, as agent for the licensor of the trade name "Tarzan," was to furnish the African name to the American gum to be sold in England. For reasons not relevant to our limited inquiry, the transaction never reached fruition.

Somportex filed an action against Philadelphia for breach of contract in the Queen's Bench Division of the High Court of England. Notice of the issuance of a Writ of Summons was served, in accordance with the rules and with the leave of the High Court, upon Philadelphia at its registered address in Havertown, Pennsylvania, on May 15, 1967. The extraterritorial service was based on the English version of long-arm statutes utilized by many American states.1 Philadelphia then consulted a firm of English solicitors, who, by letter of July 14, 1967, advised its Pennsylvania lawyers:

On August 9, 1967, the English solicitors entered a "conditional appearance to the Writ" and filed a motion to set aside the Writ of Summons.2 At a hearing before a Master on November 13, 1967, the solicitors appeared and disclosed that Philadelphia had elected not to proceed with the summons or to contest the jurisdiction of the English Court, but instead intended to obtain leave of court to withdraw appearance of counsel. The Master then dismissed Philadelphia's summons to set aside plaintiff's Writ of Summons. Four days later, the solicitors sought to withdraw their appearance as counsel for Philadelphia, contending that it was a conditional appearance only. On November 27, 1967, after a Master granted the motion, Somportex appealed. The appeal was denied after hearing before a single judge, but the Court of Appeal, reversing the decision of the Master, held that the appearance was unconditional and that the submission to the jurisdiction by Philadelphia was, therefore, effective.3 But the court let stand "the original order which was made by the master on Nov. 13 dismissing the application to set aside. The writ therefore will stand. On the other hand, if the American company would wish to appeal from the order of Nov. 13, I see no reason why the time should not be extended and they can argue that matter out at a later stage if they should so wish."4

Thereafter, Philadelphia made a calculated decision: it decided to do nothing. It neither asked for an extension of time nor attempted in any way to proceed with an appeal from the Master's order dismissing its application to set aside the Writ. Instead, it directed its English solicitors to withdraw from the case. There being no appeal, the Master's order became final.

Somportex then filed a Statement of Claim which was duly served in accordance with English Court rules. In addition, by separate letter, it informed Philadelphia of the significance and effect of the pleading, the procedural posture of the case, and its intended course of action.5

Philadelphia persisted in its course of inaction; it failed to file a defense. Somportex obtained a default judgment against it in the Queen's Bench Division of the High Court of Justice in England for the sum of £ 39,562.10.10 (approximately $94,000.00). The award reflected some $45,000.00 for loss of profit; $46,000.00 for loss of good will and $2,500.00 for costs, including attorneys' fees.

Thereafter, Somportex filed a diversity action in the court below, seeking to enforce the foreign judgment, and attached to the complaint a certified transcript of the English proceeding. The district court granted two motions which gave rise to this appeal: it dismissed the third-party complaints for failure to state a proper claim under F.R.C.P. 14; and it granted plaintiff's motion for summary judgment, F.R.C.P. 56(a).

We will quickly dispose of the third-party matter. We perceive our scope of review to be limited to an inquiry whether the district court abused its discretion in refusing impleader.6 At issue here was not the alleged contract to peddle Tarzan chewing gum in England. Had such been the case, Philadelphia's third-party arguments would have been persuasive. The complaints might have met the liability test and "transaction or occurrence" requirement of F.R.C.P. 14(a).7 But the transaction at issue here is not the contract; it is the English judgment. And neither third-party defendant was involved in or notified of the proceedings in the English courts. Accordingly, we find no abuse of discretion in the district court's dismissal of the third-party complaints.

Appellant presents a cluster of contentions supporting its major thesis that we should not extend hospitality to the English judgment. First, it contends, and we agree, that because our jurisdiction is based solely on diversity, "the law to be applied . . . is the law of the state," in this case, Pennsylvania law. Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Svenska Handelsbanken v. Carlson, 258 F.Supp. 448 (D.Mass.1966).

Pennsylvania distinguishes between judgments obtained in the courts of her sister states, which are entitled to full faith and credit, and those of foreign courts, which are subject to principles of comity. In re Christoff's Estate, 411 Pa. 419, 192 A.2d 737, cert. denied, 375 U.S. 965, 84 S.Ct. 483, 11 L.Ed.2d 414 (1964).

Comity is a recognition which one nation extends within its own territory to the legislative, executive, or judicial acts of another. It is not a rule of law, but one of practice, convenience, and expediency. Although more than mere courtesy and accommodation, comity does not achieve the force of an imperative or obligation. Rather, it is a nation's expression of understanding which demonstrates due regard both to international duty and convenience and to the rights of persons protected by its own laws. Comity should be withheld only when its acceptance would be contrary or prejudicial to the interest of the nation called upon to give it effect.8 See Orfield and Re, International Law, Note, "Recognition and Enforcement of Foreign Judgments and Awards," pp. 736-737.

Thus, the court in Christoff, supra, 192 A.2d at 739, acknowledged the governing standard enunciated in Hilton v. Guyot, supra, 159 U.S. at 205, 16 S.Ct. at 159:

It is by this standard, therefore, that appellant's arguments must be measured.

Appellant's contention that the district court failed to make an independent examination of the factual and legal basis of the jurisdiction of the English Court at once argues too much and says too little. The reality is that the court did examine the legal basis of asserted jurisdiction and decided the issue adversely to appellant.

Indeed, we do not believe it was necessary for the court below to reach the question of whether the factual complex of the contractual dispute permitted extraterritorial service under the English long-arm statute. In its opinion denying leave of defense counsel to withdraw, the Court of Appeal specifically gave Philadelphia the opportunity to have the factual issue tested before the courts; moreover, Philadelphia was allocated additional time to do just that. Lord Denning said: ". . . They can argue that matter out at a later stage if they should so wish." Three months went by with no activity forth-coming and then, as described by the district court, "[d]uring this three month period, defendant changed its strategy and, not wishing to do anything which might result in its submitting to the English Court's jurisdiction, decided to withdraw its appearance altogether." Under these circumstances, we hold that defendant cannot choose its forum to test the factual basis of jurisdiction. It was given, and it waived, the opportunity of making the adequate presentation in the English Court.9

Additionally, appellant attacks the English practice wherein a conditional appearance attacking jurisdiction may, by court decision, be converted into an unconditional one. It cannot effectively argue that this practice constitutes "some special ground . . . for impeaching the judgment," as to render the English judgment unwelcome in Pennsylvania under principles of international law and comity because it was obtained by procedures contrary or prejudicial to the host state. The English practice in this respect is identical to that set forth in both the Federal and Pennsylvania rules of civil procedure.10 F.R.C.P. 12(b) (2) provides the vehicle for attacking jurisdiction over the person, and, in Orange Theatre Corp. v. Rayherstz Amusement Corp., 139 F.2d 871, 874 (3d Cir. 1944), we said that Rule 12 "has abolished for the federal courts the age-old distinction between general and special appearances."11 Similarly, a conditional or "de bene esse" appearance no longer exists in Pennsylvania.12 Monaco v. Montgomery Cab Co., 417 Pa. 135, 208 A.2d 252 (1965), Pa.R.C.P. 1451(a) (7). A challenge to jurisdiction must be asserted there by a preliminary objection raising a question of jurisdiction. Pa.R.C.P. 1017(b) (1).

Thus, we will not disturb the English Court's adjudication. That the English judgment was obtained by appellant's default instead of through an adversary proceeding does not dilute its efficacy. In the absence of fraud or collusion, a default judgment is as conclusive an adjudication between the parties as when rendered after answer and complete contest in the open courtroom. Morris v. Jones, 329 U.S. 545, 67 S.Ct. 451, 91 L.Ed. 488 (1947); Third National Bank v. Atlantic City, 130 F. 751, 754 (3d Cir. 1904); Lockhart v. Mercer Tube and Mfg. Co., 53 F.Supp. 301 (D. Del.1963).13 The polestar is whether a reasonable method of notification is employed and reasonable opportunity to be heard is afforded to the person affected. Restatement (Second) Conflict of Laws, § 92 (Proposed Final Draft), 1967.

English law permits recovery, as compensatory damages in breach of contract, of items reflecting loss of good will and costs, including attorneys' fees. These two items formed substantial portions of the English judgment. Because they are not recoverable under Pennsylvania law,14 appellant would have the foreign judgment declared unenforceable because it constitutes an ". . . action on the foreign claim [which] could not have been maintained because contrary to the public policy of the forum," citing Restatement, Conflict of Laws, § 445.15 We are satisfied with the district court's disposition of this argument:

Somportex Limited v. Philadelphia Chewing Gum Corp., 318 F.Supp. 161, 169 (E.D.Pa.1970).

Finally, appellant contends that since "it maintains no office or employee in England and transacts no business within the country" there were no insufficient contacts there to meet the due process tests of International Shoe Co. v. Washington, 326 U.S. 310, 66 S.Ct. 154, 90 L.Ed. 95 (1965). It argues that, at best, "the only contact Philadelphia had with England was the negotiations allegedly conducted by an independent New York exporter by letter, telephone and telegram to sell Philadelphia's products in England." In Hanson v. Denckla, 357 U.S. 235, 253, 78 S.Ct. 1228, 1240, 2 L.Ed.2d 1283 (1958), Chief Justice Warren said: "The application of [the requirement of contact] rule will vary with the quality and nature of the defendant's activity, but it is essential in each case that there be some act by which the defendant purposely avails itself of the privilege of conducting business within the forum State, thus invoking the benefits and protection of its laws." We have concluded that whether the New York exporter was an independent contractor or Philadelphia's agent was a matter to be resolved by the English Court. For the purpose of the constitutional argument, we must assume the proper agency relationship. So construed, we find his activity would constitute the "quality and nature of the defendant's activity" similar to that of the defendant in Mc-Gee v. International Life Ins. Co., 355 U.S. 220, 78 S.Ct. 199, 2 L.Ed.2d 223 (1957), there held to satisfy due process requirements.16

For the reasons heretofore rehearsed we will not disturb the English Court's adjudication of jurisdiction; we have deemed as irrelevant the default nature of the judgment; we have concluded that the English compensatory damage items do not offend Pennsylvania public policy; and hold that the English procedure comports with our standards of due process.

In sum, we find that the English proceedings met all the tests enunciated in Christoff, supra. We are not persuaded that appellant met its burden of showing that the British "decree is so palpably tainted by fraud or prejudice as to outrage our sense of justice, or [that] the process of the foreign tribunal was invoked to achieve a result contrary to our laws of public policy or to circumvent our laws or public policy." Christoff, supra, 192 A.2d at 739.

The judgment of the district court will be affirmed.