Cti-container Leasing Corporation, Plaintiff-appellant, v. Uiterwyk Corporation, Defendant-appellee, 685 F.2d 1284 (11th Cir. 1982)

Ober, Grimes & Shriver, Kieron F. Quinn, James B. Wieland, Baltimore, Md., for plaintiff-appellant.

Richard Candelora, Holland & Knight, Gregg D. Thomas, Tampa, Fla., Alfred E. Yudes, Jr., Philadelphia, Pa., for defendant-appellee.

Appeal from the United States District Court for the Middle District of Florida.

Before GODBOLD, Chief Judge, ANDERSON, Circuit Judge, and HOFFMAN^* , District Judge.

WALTER E. HOFFMAN, District Judge:

In October 1980, CTI-Container Leasing Corporation (CTI) brought this action against Uiterwyk Corporation (Uiterwyk) alleging the breach of leases for ocean cargo containers and other related equipment.¹  Jurisdiction was asserted under diversity and admiralty and CTI designated its claim as a maritime claim within the meaning of Fed. R. Civ. P. 9(h). In February 1981, Uiterwyk moved to implead Iran and IEL as third-party defendants pursuant to Fed. R. Civ. P. 14. In March 1981, the United States Department of Justice filed the first of several Statements of Interest which expressed the United States' position concerning litigation involving American nationals and Iranian entities as a consequence of the Iran-United States Agreement that obtained the release of the American hostages in January 1981. On June 19, 1981, the district court without having ruled on Uiterwyk's impleader motion, stayed this action with the following order:

In each of these cases²  the United States has filed a statement of interest, and subsequent to that, a supplemental statement of interest.

The statement, in effect, is a motion for a stay of these proceedings, as a result of the agreement between the United States and the Government of Iran on January 19, 1981. 46 Fed.Reg. 7913-32 (January 23, 1981).

The Court is of the opinion that these cases should be, and they are, STAYED, pending determination by the Iran-United States Claims Tribunal of its jurisdiction to hear these claims. See Exec. Order No. 12,294, 46 Fed.Reg. 14,111 (Feb. 26, 1981).³ 

We now decide CTI's appeal of this stay order.

I. FACTS

CTI is a Delaware corporation with its principal place of business in New York and is a lessor of ocean carrier cargo containers. Uiterwyk is a Florida corporation and acted as agent for entities whose business included carriage of cargo in international trade.

CTI as lessor and Uiterwyk as lessee entered into a number of leases for ocean cargo containers and other related equipment which are the basis of this action. CTI alleged that Uiterwyk failed to pay its obligations under such leases. Uiterwyk argued that it entered into the leases as agent for IEL,⁴  which was an Iranian corporate entity and is now an alleged instrumentality of Iran. Uiterwyk alleged that IEL transported the containers and related equipment to Iran where they remain in custody and control of IEL and Iran.

II. DISCUSSION

A. Appellate jurisdiction

Uiterwyk argued that this court lacks appellate jurisdiction to review the district court's stay order. CTI argued that the stay order is reviewable as a 28 U.S.C. § 1291⁵  "final decision" pursuant to Hines v. D'Artois, 531 F.2d 726 (5th Cir. 1976).⁶ 

In Hines, the Fifth Circuit found a stay order appealable because the order operated in practical effect as a "final order" under § 1291. The district court in Hines sua sponte stayed plaintiffs' 42 U.S.C. § 1983 employment discrimination action until plaintiffs initiated proceedings before the Equal Employment Opportunity Commission (EEOC) and pursued such proceedings to final administrative action. The Fifth Circuit held such order appealable because its practical effect placed plaintiffs out of court. See Idlewild Bon Voyage Liquor Corp. v. Epstein, 370 U.S. 713, 715 n.2, 82 S. Ct. 1294, 1296 n.2, 8 L. Ed. 2d 794 (1962). The court concluded that the district court abused its discretion in staying the action until the conclusion of administrative proceedings and reversed the stay order.

The Fifth Circuit relied on the following factors to treat the stay order as appealable under § 1291. First, the court cited Gillespie v. United States Steel Corp., 379 U.S. 148, 152-53, 85 S. Ct. 308, 310-311, 13 L. Ed. 2d 199 (1964), for the principles that "the requirement of finality is to be given a practical rather than a technical construction," and when "deciding the question of finality the most important competing considerations are the inconvenience and costs of piecemeal review on the one hand and the danger of denying justice by delay on the other." (citations omitted). The court stated that such a practical construction of the finality doctrine "requires that when a plaintiff's action is effectively dead, the order which killed it must be viewed as final. Effective death should be understood to comprehend any extended state of suspended animation." Hines, supra, at 730; see also McKnight v. Blanchard, 667 F.2d 477, 479 (5th Cir. 1982).

Second, the circumstances of the case reinforced the court's conclusion that the stay order was a final order for § 1291 purposes. No EEOC complaint had been filed when the stay order was entered and a minimum delay of eighteen months was needed for final EEOC processing. The effect of such a "protracted and indefinite delay", id., at 732, was to put plaintiffs effectively out of court.

Finally, the district court had not yet addressed the merits of the action when it entered the stay order, and, therefore, "the inconvenience and costs of piecemeal review" were outweighed by "the danger of denying justice by delay." Id. The Fifth Circuit decided that these factors favored treating the stay as a final order, and we likewise feel that similar factors exist in the instant case that make this stay order a final order subject to appellate review.

The danger of denying justice by delay for CTI outweighs Uiterwyk's possible inconvenience and costs of piecemeal review. We have no way to estimate the months or even years that may pass before Uiterwyk's claims against Iran and IEL are decided by the Iran-United States Claims Tribunal ("Tribunal"), see NIC Leasing, Inc. v. Uiterwyk Corp., No. 81 Civ. 3866, slip op. at 9 (S.D.N.Y. March 1, 1982), and CTI, an American corporation, should not be denied its day in court against Uiterwyk, another American corporation, because the Tribunal might at some future date assert jurisdiction over Uiterwyk's action against Iran and IEL. Furthermore, Uiterwyk's argument that the delay from the stay order is outweighed by the possibility of inconsistent results from piecemeal review is without merit. CTI did not institute an action against Iran or IEL. Uiterwyk's claims against these two parties are contingent upon a finding in the district court of Uiterwyk's liability to CTI before the Tribunal can accurately enter a judgment in the Uiterwyk and Iran-IEL dispute.

By staying the action pending the Tribunal's determination of its jurisdiction over Uiterwyk's claim for a protracted and indefinite period, the district court placed CTI in an "extended state of suspended animation." Hines, supra, at 730. The practical effect of the stay order placed CTI "effectively out of court" and for such reason we hold that the stay order was a "final" order subject to appellate review under § 1291.

B. Merits of the stay order

CTI and Uiterwyk disagree as to whether the district court's stay order was a mandatory or discretionary stay. We conclude that the stay order as it affected Uiterwyk's third-party claims against Iran and IEL was mandatory in nature because such claims were suspended by Executive Order No. 12,294 as they are clearly within the Tribunal's jurisdiction. The district court was required to stay those claims, although it nevertheless retained jurisdiction over them. See Dames & Moore, supra, 453 U.S. at 684, 101 S. Ct. at 2989. We agree with the district court's stay order as it pertains to the stay of the third party action, but reach a contrary conclusion concerning the stay of the principal action of CTI against Uiterwyk. This portion of the stay order was discretionary in nature as the district court was not required to stay an action between two American corporations.⁷ 

The inherent discretionary authority of the district court to stay litigation pending the outcome of related proceeding in another forum is not questioned. See generally Will v. Calvert Fire Insurance Co., 437 U.S. 655, 665, 98 S. Ct. 2552, 2558, 57 L. Ed. 2d 504 (1978); Landis v. North American Co., 299 U.S. 248, 255, 57 S. Ct. 163, 166, 81 L. Ed. 153 (1936); P. P. G. Industries Inc. v. Continental Oil Co., 478 F.2d 674 (5th Cir. 1973). Our review of such an exercise of discretion is limited to an abuse of discretion standard. See McKnight v. Blanchard, 667 F.2d 477, 479 (5th Cir. 1982).

In McKnight, the Fifth Circuit recently vacated a stay order as an abuse of discretion because the stay continued an action for an indefinite period of time. In McKnight, the court stated:

The district court has a general discretionary power to stay proceedings before it in the control of its docket and in the interests of justice. Nevertheless, stay orders will be reversed when they are found to be immoderate of an indefinite duration. In Landis v. North American Co., 299 U.S. 248 (57 S. Ct. 163, 81 L. Ed. 153) (1936), the Supreme Court held that a "stay is immoderate and hence unlawful unless so framed in its inception that its force will be spent within reasonable limits, so far at least as they are susceptible of prevision and description."

667 F.2d at 479 (citations omitted).

It is difficult to accurately predict the time that CTI will be forced to stand aside if it is required to await the Tribunal's determination of its jurisdiction to hear these claims, but it can safely be described as an indefinite period of time. We cannot uphold such an indefinite or immoderate stay despite Uiterwyk's arguments to the contrary. We, therefore, agree with the procedural posture taken by other courts in similar litigation arising out of Uiterwyk's involvement with Iran and IEL. See NIC Leasing, Inc. v. Uiterwyk Corp., No. 81 Civ. 3866 (S.D.N.Y. March 1, 1982); Cotco Leasing Co. v. Uiterwyk Corp., No. 80-706 (E.D. Pa. Nov. 9, 1981); Xtra, Inc. v. Uiterwyk Corp., No. 79-1021-Civ.-T-H (M.D. Fla . Aug. 25, 1981). But see Itel Corp. v. M/S Victoria U, No. 80-2328 (E.D. La. Sept. 23, 1981), appeal docketed, No. 82-3129 (5th Cir. Feb. 24, 1982).⁸  These courts that were faced with third party complaints have severed and stayed the third-party actions against Iran and IEL while allowing the principal actions against Uiterwyk to proceed to trial.

Uiterwyk argued that the stay of the entire action should be affirmed because: (1) it will be prejudiced in developing its evidence⁹  without the presence of IEL and Iran who are necessary for a comprehensive disposition at one time of the rights of the parties to litigation arising out of the same facts; (2) it will be subjected to significant costs of duplicative proceedings before the district court and the Tribunal; and (3) IEL and Iran are indispensable parties to the litigation.

First, Uiterwyk's argument that it may be prejudiced in developing evidence to support its agency defense without the third-party defendants' presence is not a determinative factor in our decision concerning the stay. An alleged agency agreement between Uiterwyk and IEL is not at issue; it is the contract between CTI and Uiterwyk that is the focus in the principal action. Uiterwyk also will not be hampered by the third-party defendants' absence in attempting to substantiate its impossibility of performance and force majeure defenses. The historical context of the Iran-United States Agreement has not been disputed and CTI has not questioned the factual basis for these affirmative defenses.

Second, Uiterwyk will not be subjected to any undue hardship of duplicative costs by proceeding with the principal action. It will not suffer significant overlapping costs and preparation for proceeding in the Tribunal because we agree with the district court that the third-party claims should be stayed because such claims are within the Tribunal's jurisdiction. Furthermore, any extra costs Uiterwyk might incur do not outweigh the serious harm to CTI if it is compelled to stand aside for an indeterminate period of time to await the Tribunal's decision.

Third, Uiterwyk argued that Iran and IEL are indispensable parties under F.R.Civ.P. 19(b) because CTI's claims are inextricably related to Uiterwyk's claims against IEL and Iran. It is not necessary to analyze the factors enumerated in Rule 19(b)¹⁰  to determine if IEL and Iran are indispensable parties, because "Rule 19(b) deals with the determination a court should make whenever joinder of an interested person is not feasible." Gertner v. Hospital Affiliates International Inc., 602 F.2d 685, 688 (5th Cir. 1979). Hence, the first step in an indispensable party determination requires a decision as to whether joinder of the person in question is feasible. See Challenge Homes, Inc., v. Greater Naples Care Center, Inc., 669 F.2d 667 at 669 (11th Cir. 1982).

The district court did not rule on Uiterwyk's motion to join IEL and Iran as third-party defendants and CTI argued that such joinder would deprive the court of jurisdiction under Executive Order 12,294 and violate Rule 19(a). However, we agree with Uiterwyk's argument on this point that "Executive Order 12,294 purports only to 'suspend' the claims, not divest the federal court of 'jurisdiction.' " Dames & Moore v. Regan, supra, 453 U.S. at 684, 101 S. Ct. at 2989.

The court in Challenge Homes, supra, stated that in making the decision whether the party in question should be joined if feasible under Rule 19(a), "pragmatic concerns, especially the effect on the parties and the litigation, control." Challenge Homes, supra, at 669 (citations omitted). We conclude, viewing the Rule 19(a) factors in light of pragmatic concerns, that joinder of IEL and Iran is feasible and was also the course followed by other courts faced with the same decision. See NIC Leasing Corp., supra; Cotco Leasing, Inc., supra; Xtra, Inc., supra.

III. CONCLUSION

We feel that the district court's objectives of adhering to the Iran-United States Agreement, Executive Order 12,294, and the Statements of Interests filed by the United States can best be accomplished by following the paths taken by the courts in the NIC Leasing, Cotco Leasing, and Xtra cases. In these cases, Uiterwyk's motions for a stay of the entire actions were denied and the third party defendants were joined, but such third-party actions were severed under Rule 42(b), and stayed pursuant to Executive Order No. 12,294. The parties were directed to proceed with their respective principal actions. Therefore, we conclude that district court abused its discretion when it ordered a stay of this entire action. We vacate the district court's stay order and remand the action to the district court for proceedings not inconsistent with this opinion.¹¹ 

VACATED AND REMANDED.