Grubbs v. General Electric Credit Corporation

PETITIONER:Grubbs
RESPONDENT:General Electric Credit Corporation
LOCATION:Bay Marchand Area

DOCKET NO.: 71-257
DECIDED BY: Burger Court (1972-1975)
LOWER COURT: United States Court of Appeals for the Fifth Circuit

CITATION: 405 US 699 (1972)
ARGUED: Mar 23, 1972
DECIDED: Apr 18, 1972

ADVOCATES:
Bill J. Cornelius – for petitioner
Bill J. Cornelius
Hubert D. Johnson – for respondent

Facts of the case

Question

Audio Transcription for Oral Argument – March 23, 1972 in Grubbs v. General Electric Credit Corporation

Warren E. Burger:

We will hear arguments next to 71-257 Grubbs against General Electric Company.

Can you just — you may proceed whenever you are ready.

Bill J. Cornelius:

Thank you Your Honor.

Mr. Chief justice, may it please the Court.

This case involves a judgment canceling a note and for $20,000 damages recovered on the merits by the petitioner T.R. Grubbs in United States District Court against General Electric Credit Corporation, after the case had been removed from the United States Court, from State Court to United States government which was the party throughout the proceeding.

The Court of Appeals held that the case was improperly removed and ordered that it would be remanded to the State Court.

We on certiorari are asking this honorable court to reverse the ruling of the Court of Appeal and sustain the jurisdiction of the United States District Court which rendered its judgment on the merits.

The case arose in this manner.

It was originally filed by General Electric Credit Corporation in State Court against T.R.Grubbs who is a small businessman in Jefferson, Texas.

The case was filed on simple note, to collect a promissory note.

When the case was filed in State Court, the petitioner Grubbs answered on the merits, claiming the invalidity of the promissory note and also filed a cross action against General Electric Credit Corporation and the General Electric company, alleging that these two companies had conspired together in an unlawful attempt which was successful to destroy his business by torturous and wrongful conduct in violation of both the State and the Federal Antitrust Laws.

The petitioner Grubbs then amended his pleadings and brought in the United States Government in order to determine the priority of various liens being claimed against the petitioner by the government and other parties.

When the government was brought into the case and State Court, it filed a petition for removal and the case was removed without objection or without motion to remand on the part of any party.

In United States Court after removal, the United States government filed an answer claiming that its lien was indeed prior to the other liens being asserted against Mr. Grubbs, and the government also filed a cross action against General Electric Credit Corporation and the General Electric company, alleging that they had conspired together to injure and destroy the petitioner Grubb’s business and thereby had tortuously interfered and not only with the petitioner’s business but with the interest of the government, its lien which it had on the asset of Grubbs.

No party objected to removal.

William H. Rehnquist:

Mr. Cornelius was your pleading against the United States proper under the Texas law of pleadings without a permissible type of claim to assert in the case that General Electric had a reason to sue?

Bill J. Cornelius:

Yes Your Honor we believe it was, and —

Byron R. White:

Can the Antitrust claims be tried in State Court?

Bill J. Cornelius:

No Your Honor, but at the time, we filed this pleading.

We had not briefed the question carefully and we were at that time under the impression that the State Court could not construe the Federal Antitrust Laws, but could enforce them concurrently with Federal Court.

We later discovered that, that was incorrect.

Byron R. White:

So what’s your answer to Mr. Justice Rehnquist?

Was it a proper pleading or it wasn’t?

Bill J. Cornelius:

Yes Your Honor, I understood him to ask if it was proper for us to bring the government in.

William H. Rehnquist:

Using a certain antitrust decree against the —

Bill J. Cornelius:

Not against the government.

No Your Honor.

So when this was — when the removal was effective, there was no petition, no motion for remand, no objection to jurisdiction, all of the parties answered on the merits.

The United States government asserted affirmative release in tort against GECC and GE as we were doing.

GE and GECC filed a number of amended pleadings.

Bill J. Cornelius:

They consented fully to the jurisdiction of the Court and after being in the Federal Court, for a year and eight months, trial was held on the merits.

William O. Douglas:

Mr. Cornelius, straighten me out.

Since this case possessed a sufficient diversity, so it could have been instituted in Federal Court originally.

Bill J. Cornelius:

Yes Your Honor, that’s correct.

In the judgment on the merits, the General Electric Company was absorbed.

The United States government was denied relief, and the petitioner Grubbs recovered judgment of $20,000 in damages against General Electric Credit Corporation.

So the appeal has been by General Electric Credit Corporation in the absence of the other parties.

But, I would like to make clear that in the trial on the merits, all these parties were active participants in the trial, filed amended pleadings, filed motions for continuances, participated in pre-trial, hearings and pre-trial orders, and everyone of them made motions to the Court for judgment on the merits.

William O. Douglas:

Including the United States?

Bill J. Cornelius:

Including the United States, yes Your Honor.

Then, may it please the Court, the General Electric Credit Corporation appealed on the merits to the Court of Appeals.

William O. Douglas:

Did you say Mr. Cornelius, the United States prevailed at the trial?

Bill J. Cornelius:

No Your Honor, they were denied relief.

They did move the Court for judgment on their behalf, but it was denied.

William O. Douglas:

Denied, and in the case of General Electric, what happened?

Bill J. Cornelius:

General Electric was absorbed of liabilities.

William O. Douglas:

I see.

Bill J. Cornelius:

General Electric —

William O. Douglas:

On the merits of finding it no liability.

Bill J. Cornelius:

On General Electric Company, yes Your Honor.

Byron R. White:

Is the United States here this time?

Bill J. Cornelius:

No Your Honor.

You see after judgment on the merits in the Trial Court, there was only left petitioner Grubbs and GECC.

GECC appealed to the Court of Appeals on the merits, no question was raised about jurisdiction and the Court of Appeals raised the issue on its own motion and requested supplemental briefs on the question of jurisdiction.

These were provided thorough briefs on both sides and the Court of Appeals found a lack of jurisdiction and ordered remand.

William O. Douglas:

Was pending jurisdiction argued?

Bill J. Cornelius:

I think —

William O. Douglas:

Was pendant jurisdiction argued in those supplemental briefs?

Bill J. Cornelius:

Yes it was Your Honor.

Very thoroughly argued in the supplemental briefs and is also covered in our briefs here in this Court.

Bill J. Cornelius:

We take the position, may it please the Court that in as much as United States District Court in the case at bar had the organic power to hear this controversy.

In other words, had Congress understood the controversy for many different reasons, it was error for the Court of Appeals to remand the case to the State Court even if we assume that removal was not authorized, and we don’t concede that.

We believe that removal was authorized.

But, we believe the issue is moot and immaterial because whether removal was authorized or not, all parties consented to trial on the merits by the United States Court and appealed to that Court for relief and for a determination of the entire controversy.

William H. Rehnquist:

If that wasn’t necessarily a whole issue unless there were jurisdiction placed in United States District Court, your position has been – if it wasn’t properly removed, there was as you say organic jurisdiction?

Bill J. Cornelius:

Your Honor.

William H. Rehnquist:

But the fact that the parties had intent of the jurisdiction although it wouldn’t help you if it wasn’t?

Bill J. Cornelius:

Not if there was a lack of jurisdiction.

That is correct Mr. Justice Rehnquist.

But, if there is jurisdiction, then the defects or even the unauthorized removal we submit can be waived.

Byron R. White:

What’s was ahead of federal jurisdiction to say?

Bill J. Cornelius:

I beg your pardon.

Byron R. White:

What was the head of federal jurisdiction, would you say that was?

Bill J. Cornelius:

What was the head of federal —

Byron R. White:

What was the jurisdiction?

Bill J. Cornelius:

The Federal Court jurisdictions, on several grounds Your Honor and I am going to get to those in just a moment.

First of all, because of diversity of citizenship.

Secondly, because of the presence of the United Sates Antitrust Laws.

Thirdly, because of the presence of the Untied States government as a party.

Byron R. White:

Without that if it is left to the presence of the United States to party would be what?

What jurisdiction is that?

Bill J. Cornelius:

We take the position Your Honor that the presence of the United States as a party gives the Court original —

Byron R. White:

Without more?

Bill J. Cornelius:

Without more.

Byron R. White:

Without more.

Bill J. Cornelius:

Yes, and also then the government had a lien on all of the assets of petitioner Grubbs including his accounts receivable and these were in dispute in the lawsuit and were being dissipated and converted by General Electric Credit Corporation.

So the government actually stated its grounds of removal as being Section 2410 and 1444 and we are of the opinion that they had the right of removal under those sections.

William J. Brennan, Jr.:

Mr. Cornelius did anyone at anytime make a motion to remand?

Bill J. Cornelius:

No Your Honor, never.

William J. Brennan, Jr.:

Any objection ever made to Federal Court jurisdiction?

Bill J. Cornelius:

None whatsoever Your Honor.

In fact, all of the parties actively appealed to the United States District Court for a determination of the controversy.

For example, General Electric Credit Corporation waived by written letter, the removal bond.

They answered on the merits in the United States Court.

They filed a motion for a more definite statement, they filed a memorandum brief, they filed a motion for continuance, they filed a motion to add new parties, they answered the government’s cross action on the merits, they filed amended answers, they answered interrogatories, they participated under preliminary and final pretrial conferences, signed a pretrial order, participated in the trial and then moved the US District Court for judgment on the merits.

William O. Douglas:

Was this entirely sue sponte.

Bill J. Cornelius:

Yes Your Honor, entirely.

William O. Douglas:

Nobody if the arguments suggested?

Bill J. Cornelius:

Was never even mentioned in the argument before the Court of Appeals Mr. Justice Douglas.

We take the position, may it please the Court that the case is by this honorable court of Baggs versus Martin, Mackay versus Uinta Development Company, In re Albert Moore, Kreigh versus Westinghouse, Church Kerr and company.

As well as many other cases sustained on point —

Warren E. Burger:

Mr. Cornelius, on the face of the opinion of the Court of Appeals at the outset is a statement that they find the complete absence of federal jurisdiction.

In the argument of the Court of Appeals, was there any reference to the first paragraph of General Electric Company’s complaint which recites diversity facts even though, they are not directed at a diversity plain.

Bill J. Cornelius:

No Your Honor it was never mentioned, it was never anticipated by any of the parties until we received a letter from the Court of Appeals raising the questions sue sponte.

Warren E. Burger:

Now, assuming that there was no diversity either alleged as there was in paragraph one, or no diversity of substance.

In fact as soon as the United States was brought into the case, and the basis for federal jurisdiction, did the Court discuss that in the oral argument at all?

Bill J. Cornelius:

It certainly does in our opinion Mr. Chief Justice.

Warren E. Burger:

Was it argued in the court?

Bill J. Cornelius:

It was argued in the supplemental briefs both sulfurously and enthusiastically.

The Court of Appeals in its opinion —

Warren E. Burger:

How could you go by the argument to the main argument without some reference to this diversity and some reference to the fact that the United States had become a party?

Bill J. Cornelius:

I think it was touched on Your Honor in the argument before the Court of Appeals but most of the time was spent on the discussion of the merits.

Byron R. White:

Well, the Court of Appeals said it was a frivolous claim against the United States, sort of a trouped up claim, was that —

Bill J. Cornelius:

More or less Mr. Justice White, yes.

Byron R. White:

And that it was not — so it was baseless that it wouldn’t independently support removal.

Bill J. Cornelius:

Yes sir.

But, the Court of Appeals said there was no allegation of diversity or federal question and we repeatedly called the existence of these matters to the Court’s opinion and briefed them extensively in the supplemental briefs.

William H. Rehnquist:

The federal question here is just as you already answered to the plaintiff’s complaint, that wouldn’t afford independent(Inaudible)

Bill J. Cornelius:

Ordinarily no Mr. Justice Rehnquist, but in our case, it was a cross action and therefore a new action against the General Electric Company and so it was not an answer, it was a plaintiff’s complaint as against General Electric Company and raised a federal question.

Additionally, when the government got in, they cross actioned against both GE and GECC raising the same federal question.

William H. Rehnquist:

Would you just defend the jurisdiction over your claim as against General Electric Credit Company of the pendant jurisdiction to it?

Bill J. Cornelius:

We would claim that the Court had pendant jurisdiction of the entire controversy Your Honor under the circumstances because very similar situations have been affirmed on that point in some cases citied in our brief.

But, you see the Federal Court here had jurisdiction because of diversity, Federal-question, presence of the government as a party.

William H. Rehnquist:

Well supposing that government is increasing on something iterative theory that can be sustained in the federal and applicable law and said it isn’t really a claim to a limited fund, but it’s just a question to lien priority.

Bill J. Cornelius:

Yes sir.

William H. Rehnquist:

The Federal District judge confront that as soon as the case is removed, it decided that there just isn’t colorable claim against the United States, but would that support federal jurisdiction of the bill, whole balance the action (Inaudible) United States?

Bill J. Cornelius:

There is some difference of opinion on that point Your Honor, but in my opinion, it would because Section 2410 gives parties the right to sue the United States Government in State Court in order to determine the priority of liens or in actions involving the title to property or to the lien of the government.

William H. Rehnquist:

Where the United States claim is in between.

Bill J. Cornelius:

Yes Your Honor, and they did it in this case.

Byron R. White:

Mr. Cornelius I suppose that if one were a purist, pleading doesn’t support diversity jurisdiction.

It speaks as it’s not uncommon in a State Court case of residence, not of citizenship.

Bill J. Cornelius:

Yes Your Honor.

Byron R. White:

There’s certainly a plenty of circuit court opinions that this is insufficient.

Bill J. Cornelius:

But, Your Honor we believe that it is sufficient in our case and we have cited some cases in our brief to the effect that since the record showed diversity, there was no necessity that there be any formal — diversity case, any formal allegation of it.

Warren E. Burger:

But you responded to someone’s question a few minutes ago that there was no objection when it was removed.

There are cases holding that, that’s an effective waiver, isn’t it?

Bill J. Cornelius:

Yes Your Honor, very definitely.

The cases of Gordon versus Third National Bank of Chattanooga, Sun Printing Company versus Edwards and Kellean versus Maryland Casualty Company, all affirmed the proposition that if diversity is shown by the record in anyway, in any form, it is sufficient and they also hold that Mr. Justice Blackmun, if residence is refereed to that, that at least shifts the burden on the opposite party to show that there is a distinction between residence and citizenship for the purpose of showing diversity by the record.

Harry A. Blackmun:

That isn’t true in all circuits but did they affirm, I think there is no controversy here anyway?

Bill J. Cornelius:

No Your Honor.

In fact, the respondent here concedes diversity.

But we feel that the respondent here has confused right of removal with organic jurisdiction and there doesn’t seem to be any question in our minds that because the Federal Court had the organic power to hear this controversy from several different standpoints; when the party is consented to the removal, then the Federal Court had jurisdiction.

We have diversity of citizenship, we have the existence of the antitrust laws, and then of course, we have an interest of the government, the United States government here had a lien on the property which was actually being a part of — and had the government not been in the case, there was a distinct possibility that the property on which it had a lien would be dissipated or would go to someone else and the government will lose its land.

William H. Rehnquist:

You say a lien on the property would be a big problem Mr. Cornelius.

Actually, the plaintiff’s claims in the State Court be a contract that it wasn’t a claim when it addresses the specific piece of property?

Bill J. Cornelius:

That’s right Your Honor.

The plaintiff’s claim was on the promissory note, but when the cross action was filed by the petitioner, there was brought into dispute a question of whether GECC had the right to collect certain accounts receivable on which the United States Government had a lien and whether or not GECC was entitled to foreclose and take title to property on which it and the government were both claiming the lien. So these developed after the original petition had been filed.

Thurgood Marshall:

I have a little problem with Mr. Cornelius, the lien doesn’t come up until you get judgment, does it?

Is the Texas law different, I don’t know Texas law —

Bill J. Cornelius:

Yes Your Honor, Mr. Justice Marshall, under Texas law, you have a lien which can be created by the chattel mortgage and then if you recover judgment on the debt, you get a judgment lien, but it’s different from the chattel mortgage lien, which both the government and GECC were claiming on the property involved here.

Bill J. Cornelius:

Then, we say may it please that court the fact that the United States government was a party here itself certainly gave the Federal Court cognizance of the controversy, and it is our opinion that it gave the Federal Government the right to remove whether it brought itself under 2410 or not, because the constitution says that the judicial power of the United States shall extend the cases in which the government is the party.

We submit that the decisions hold that this is true whether the government is a plaintiff or a defendant

In this case, in the case of Hood versus United States which is cited in our brief holds that even if the Federal Court had been completely without jurisdiction, when the government came in and sought affirmative relief in the Federal Court, jurisdiction was conclusively established.

William H. Rehnquist:

Is it true that if the United States removes a claim against it to the Federal Court and even though that claim might be separable in terms of the present case, the whole controversy is automatically removed from the Federal Court?

Bill J. Cornelius:

Not automatically removed Your Honor, but if there is no objection and all parties proceed the trial voluntarily in the US court on the merits, it would have pendant jurisdiction of the entire controversy, even if it later found against some or even all of the federal grounds and we have citied cases in our brief which sustain this proposition.

I believe may it please the court, I will reserve the remaining time.

Warren E. Burger:

Very well, Mr. Bill J. Cornelius.Mr. Johnson?

Hubert D. Johnson:

Mr. Chief Justice and may it please the court.

I have a particular quarrel with the fact statement, factual statements that are made by Mr. Cornelius in the case.

I will certainly be the first to agree that when we received the letter from the clerk of the Court which has a text as an direct Appendix to my brief for the respondent, it was the first time that (Inaudible) that we were in the position of having perhaps vested on the Federal Court Jurisdiction that it didn’t have.

And Trial Court would closely with the GE counsel who is a Dallas counsel as I am from Dallas, and when it was — when the government was made a party, it was rather pertinent and enigmatic to me because GECC did not have a judgment at that time.

It was not involved in the competition as to whose lien, if anything was its stake.

It was not even a party involved the stakeholder face, couldn’t really quite understand what it was about, it was just an off shielded case.

It got worse when they removed.

Warren E. Burger:

Let me ask you this.

Let’s assume that the complaint rather inheartfully (ph) asserted something like diversity jurisdiction, but failed as Justice Blackmun said to state it as it should be stated.

Then let’s assume that the claim against the United States is a spurious claim and that there is no bona fide basis of it made the party but after that when the case is removed with no objection for any reason and that is against the background of complaint which alleges facts which support the diversity determination.

How did the court say that there —

Hubert D. Johnson:

I direct your attention because the question that the court asked and the court asked to us and we answered it and we tried to go on into the rest of it.

Warren E. Burger:

What page are you talking about?

Hubert D. Johnson:

I am talking about Appendix B to my brief, the reason I put it, I don’t believe it appears on the face of it in the records.

The court says it has came to the court’s attention that the District Court’s removal of jurisdiction has been predicated on 28 U.S.C.A. 2410 and 1444 which is a kind of a procedural reference to 2410.

Had even considered the record on the pleading that Court has serious questions concerning an applicability of these statutes and it may consider it sue sponte which I needed to look at the moment, but I’ve soon found out that we have to engage in a new field.

If the case was improperly removed to the Federal Court under 2410 and 1444 could it have been removed under any other Federal Statute.

I think the answer to that question had to be no.

General Electric Credit Corporation made the decision as to what to be entered into when it filed this lawsuit.

It sued a Texas resident, in the Texas court, where the Texas resident lives.

It could have elected to go to file a federal court suit, it did not.

It filed a simple suit on a simple note in a little town down near Marshall, Texas with the Marshall attorney, I was not the attorney when it was initially filed.

I was not the attorney until this antitrust law that got into it —

Byron R. White:

And that suit was not removable by that particular defendant?

Hubert D. Johnson:

Not by that particular defendant, that was a resident defendant and the right of removal was given to the non residents.

You can check the right of removability on that statute and if there is anything to it, if we had a choice to go in the Federal Court, we didn’t make it, and not having made, there is really not anything we could do there but get back in that posture again.

Byron R. White:

Read it for the defendant’s concern.

Hubert D. Johnson:

Well, the defendant was a resident — he had no right of removal and the Court of Appeals focussed the attention on the status of it, as at the time that it was removed, and as at the time it was removed, and there are a lot of cases that emphasize that, that is the point at which you determine removability jurisdiction as at that time, 2410 was the only thing we could have in the hand and if 2410 didn’t fit, then it was — it’s been this, and they thought that they would have a force to (Inaudible) and that could not be done.

Byron R. White:

Well, they thought the United States was a party by then?

Hubert D. Johnson:

Yes, but I think one of the reasons you have to keep in mind and maybe I would try to figure out one of the quotes by Judge Billy Bergley (ph), we will laugh on this, United States was nowhere in sight when it was argued at the Circuit Court level.

There was no orals, it was not much in sight in the record.

Byron R. White:

The United States though wanted to remove it to the Federal Court.

Hubert D. Johnson:

They already thought and then they sort of abandoned it.

They thought they were in it enough to file a complaint against GE —

But when they were denied to –.

Byron R. White:

In connection with this very transaction?

Hubert D. Johnson:

Yes but I do believe —

Potter Stewart:

You can’t really say, can you that United States abandoned it.

I gather they litigated on the merits of that claim and then decided not to appeal.

Hubert D. Johnson:

Not to appeal, but if the (Inaudible) that the Circuit Court of Appeals in looking at it, the government had then denied even the right as to its lien claim and this court said he couldn’t pass on that.

Potter Stewart:

At that time the United States removed it — wasn’t it a proper removal?

Hubert D. Johnson:

Not in this at 2410 because there was no assertion by a lien on any specific property, there was no — the assertion on the basis of (Inaudible) interpleader.

There was no interpleader aspect to it.

The amended answer and the cross action and regarding the third party, the US government admitted that they don’t know judgments.

There was no case — multiple, single liability among multiple claimants and the interpleader statement was completely demolished and the pleading at circuit would appear.

I must confess we were saying that I assume that I did not know until I’ve got into it later, that the government can always remove, just because they were a party.

Well, I don’t think I have found any support for that in the subsequent decisions.

I thought case came over up to this court where the both parties filed in brief saying that the Federal Court had removed the jurisdiction and this court said you can’t get that this way.

William H. Rehnquist:

How about 2410?

Do you say that, the action brought in the state court against the United States did not meet the standards under section–

Hubert D. Johnson:

I don’t think it did.

William H. Rehnquist:

Why not?

Hubert D. Johnson:

Well, I think that if you’re look the portion of 2410, that the government is by the law is called interpleader, this is not an action by the government, but this was by determination of rights over the theory of the protection of this multiple liability.

Hubert D. Johnson:

That was the whole concept 2410 A5.

William H. Rehnquist:

Do you say 1234 —

Hubert D. Johnson:

I don’t think they’re going to ask.

I think the interpleader concept is the only thing that was involved in it.

Not only government was brought into this case, for not pleading — our pleading was a civil suit to recover a judgment, never was recovered laying judgment, abstract of judgment filed, no ancillary process, none, if we’ve ever heard a lien on anything, we would have abandoned it by taking it — by a separate desk suit or we could have gotten it as a judgment and then we would have to (Inaudible) and that’s all that we were seeking on this suit.

Now the rest of this got to tidy up.

Like Judge Goldberg said, he is very open on the (Inaudible) goin gup in the wrong court.

We started that in the right court.

We started in a court, that we had the right to be in.

The government said when they –- in other words straight out, I guess.

William H. Rehnquist:

Mr. Johnson, you’ve got to deal with the argument too.

Don’t you, that even though it was improperly removed, if the Federal Court at the time of removal had what your closing of the further a gamut jurisdiction, even though it was not removal, it was then tried on the merits —

Hubert D. Johnson:

I am aware of those cases and I’ve attempted to read those cases and I have great difficulty with them, and I think they were cited in their supplemented brief.

I think that, maybe we would have to clarify and point out that the Court Of Appeals did not hear oral argument but turning to the jurisdiction point.

They may — they call for these on the specific question, and the next time when they get opinion saying that too bad, you are in the wrong court.

We don’t know, we never acted in second guessing, we don’t know yet what the circuit court woud have done with our — they are merits, though they are based on a state statute limitations and various other aspects of State Law, Texas law almost in private.

That perhaps might have more of a reason the court felt that, that we were trying to may be conspire to really debate on the question that they shouldn’t have, but that was a cornerstone from my mind but being asked the question was it property removed, was there evidence of removal?

I really couldn’t find the evidence of removal and if you found out one of those, you can’t add removability to a case by what the answer says that you could plead a constitutional question and the answer — and you do not give federal question jurisdiction.

The answer just – is doesn’t figure in determining invisibility and that’s for sure.

Now this —

William O. Douglas:

Mr. Johnson I suppose, if you would start it in federal court, you wouldn’t be here today at all.

Hubert D. Johnson:

No question.

It came up completely by reason of — if we were to start in the federal court, we as a New York Corporation, we don’t deny we are New York Corporation, we are sure that Texas (Inaudible) and able to seek $12,000 or $10,000.

We could have brought it in the federal court.

William O. Douglas:

The posture today as perhaps it was originally is that she wanted a law suit tried in the state court.

Hubert D. Johnson:

Well, I am in a position that where I don’t believe that I have the right to say that I will rollover and play bid, and you can just continue on the jurisdiction.

I don’t really – I read your cases, I don’t think I have a right to fair at the jurisdiction.

Byron R. White:

Don’t we have to talk about another lawsuit too, namely Grubbs’ suit against General Electric, Grubbs may not have been able to get this promissory note case under the Federal Court, but the judgment against use on anti-trust claims?

Hubert D. Johnson:

No, not at all.

Byron R. White:

What is it for?

Hubert D. Johnson:

It’s for tortuous interference in the business definition.

It’s business damage from connection with the way they terminated the dealership or of any — the argument was that this tortuous action filed in the Federal Court.

Byron R. White:

With that law suit he could have filed in the federal court?

Hubert D. Johnson:

He could have known –- I don’t think he could have filed it in Federal Court because he was the resident, oh, yes he could have on a diversity concept, that’s true but he simply had filed —

Potter Stewart:

That’s the lawsuit in which there is a judgment.

Hubert D. Johnson:

That’s correct, but that is a lawsuit, that’s the lawsuit, they need to file themselves and they brought in the civil court.

Byron R. White:

I understand that, but it ended up in Federal Court, and he could have filed it there originally.

Hubert D. Johnson:

Possibly so.

I think he might have had a slightly different — think you might had been in New York.

Byron R. White:

So that judgment of — well not if you were in Texas.

Hubert D. Johnson:

GECC doesn’t operate except on a sale position and may be on the long run we might have been able to get it there but I believe —

Potter Stewart:

I know but you were already in the State Court, as a party and he filed this cross action, in which he named the United States and General Electric.

Is that right?

Hubert D. Johnson:

Filed it in the state court.

Potter Stewart:

Filed it in the State Court, then after that filed — that was what was pending in the State Court when the United States removed, isn’t it?

Hubert D. Johnson:

That’s correct.

Potter Stewart:

There was pending actually a suit by the Texas resident against the New York resident and that’s the action, and the cross action that removed this.

Hubert D. Johnson:

Well, I think you have to —

Potter Stewart:

No, that’s right.

Hubert D. Johnson:

Where that leads you is to the fact that the law about not changing the nature of the case by the cross action, you’re going to have to change some of that law if you arrive at that conclusion.

Because it was a responsive cross action in the State Court, and it does not change the — it did not let the case removed, as such, Mr. Grubbs would not have removed himself, he did not attempt to remove.

Byron R. White:

There is one thing you could have done though that if you dismissed a state action and start all over again in Federal Court.

Hubert D. Johnson:

Well, he didn’t have to — if he wanted to bring his tortuous claim, his definition suit, he would not require to bring, he is not a compulsory counter claim, he could have brought it.

(Inaudible) he could have brought it in whatever form he wished and he did not do.

Potter Stewart:

One of his claims was an anti-trust claim.

Hubert D. Johnson:

That’s correct.

It was sort of mixed up with state and federal but I think that’s —

Byron R. White:

Exclusive jurisdiction in the federal court.

Hubert D. Johnson:

I think he is right.

Potter Stewart:

So here is a case in which he has judgments being tried out in the federal court and the suggestion is that you start all over and try it out again on the same court.

Hubert D. Johnson:

I don’t know what GE’s position is in the matter.

There has been no appeal by the government or by them or anybody else with respect to that, they may have the judgment that is depressive

and can be sustained to collateral attack —

Potter Stewart:

Grubbs had a judgment.

Hubert D. Johnson:

I guess too.

Potter Stewart:

GE?

Hubert D. Johnson:

No, denied, GECC.

I guess you have a corporate corporation not on antitrust, not antitrust —

Byron R. White:

What kind of a judgment did Grubbs get?

Hubert D. Johnson:

It’s plain money judgment and the damages were $20,000 – they saw on the injury to its business from deformation.

Byron R. White:

Against whom?

Hubert D. Johnson:

Against General Electric Credit Corporation that furnished the credit upon which he operated and appliance dealer for General Electric.

This was just in that and there are some accounts that have been purchased, some installments, those have been been purchased, that he defaulted and then he had been put in the form of note.

Potter Stewart:

You have to agree this was — it makes the law at hand, doesn’t it?

Hubert D. Johnson:

There is no question that it brings back memories of Charles Dickens ‘s writings.

There’s no question about that.

There is no question that we — I am trying to point out that I think that Court of Appeals was viewing it I think from what we give him the view it were and I did not except this question to be developed in the case when it came up.

I couldn’t find a suitable answer.

Perhaps the answer is — the question it has put on the grounds of removal maybe twisted me off a little bit.

But, even though as I am getting it, I do find that some of the cases are highly confusing because all of them seem to have — for instance we did not move onto trial on the plea when we filed in the State Court.

It’s true, we did some actions in the Federal Court, but we never amended our petition, the first provisionary petition was the only petition.

That’s what that’s cast in state court for –-

That’s what that does in attempt to say any jurisdiction evolves in the Federal court, it would just not in any.

Now we did file responsive pleas to these cross-actions against us.

We had some in the State Court and in the Federal Court, well for the first time the United States government took the (Inaudible), and we answered and sought full trails, I recall those answers were amended to bring them down to date because a more definite statement was subsequently filed.

But, it was in the State Court until the government got in to it.

Now, it’s just as simple as that, the government probably could remove, did remove; we thought they could remove and didn’t object.

I think that it’s true that the Court of Appeals did not discuss that banks case and those cases that are cited — the Uinta case, but in each and everyone of those cases that I could see, there were considerable elements of amended pleading and sort of a new ball game started over in the Federal Court.

I don’t know why that Court of Appeals didn’t ask them.

I saw Judge Goldberg lost that day I wanted to ask him but I figured may I better — I may have to ask him about the (Inaudible) case someday.

Hubert D. Johnson:

Thank you very much.

Warren E. Burger:

You have a few minutes left Mr Cornelius.

Bill J. Cornelius:

Thank you Your Honor, may it please the court.

In connection with the holdings of this honorable court in Baggs v. Martin and the other cases we have cited on waiver of removal, actually in our case may it please the court, there are many more recognitions of the jurisdiction of the US Court than are to be found in Baggs v. Martin or Mackay v. Uinta Development Company or any of these other cases and the appendix in this case contains in the court’s docket interest, a list of all of the things that were done.

As I said previously, they moved for judgment on the merits.

They did amend their pleadings twice or three times as I recall.

Their responses to the cross actions on the merits.

Now about the judgment which petitioner Grubbs has obtained, it is against General Electric Credit Corporation for malicious and deliberate injuries to his business which resulted in the destruction of his business.

We take the position that these acts are prohibited by the United States Antitrust laws.

The cross-action was brought under those laws, and while the court did not conclude that we have proven our conspiracy between GE and GECC, the court did find and filed an extensive Findings of Fact and Conclusions of Law indicating that there was suspicious circumstances and indications of a conspiracy between GE and GECC.

William H. Rehnquist:

The cross-action you referred to was brought into State Court.

Wasn’t it?

Bill J. Cornelius:

Yes Your Honor.

William H. Rehnquist:

Do you say that the State Court could have tried that on a antitrust theory?

Bill J. Cornelius:

No Your Honor.

At that time, we were under the impression that the courts would have had concurrent jurisdiction of it but after briefing it more thoroughly, we are of the opinion now that the United States court had exclusive jurisdiction of federal antitrust.

Byron R. White:

Do you think your $20,000 judgment was for violation of the antitrust law?

Bill J. Cornelius:

It is for the commission of acts which are prohibited by the antitrust laws as we see it Your Honor.

Byron R. White:

Was your cross-claim under state law as well as under federal law?

Bill J. Cornelius:

Yes, Your Honor.

Under both the —

Byron R. White:

For malicious injury to your business?

Bill J. Cornelius:

Yes, yes.

Under State law?

Under State law and acting in concert with General Electric Company, under federal laws.

Byron R. White:

The Federal District Court gave you judgment but said that it wasn’t an antitrust claim.

Didn’t it?

Bill J. Cornelius:

No Your Honor, it didn’t say that.

It just said that —

Byron R. White:

Well, it said there wasn’t any conspiracy.

Bill J. Cornelius:

It said that under the evidence, he could not find a conspiracy between GE and GECC.

Byron R. White:

If there wasn’t, then could it have been an antitrust judgment?

Bill J. Cornelius:

I am of the opinion that, that it could be Your Honor under the deliberate and malicious Acts of a single party — but I maybe wrong on that, but —

Byron R. White:

Incidentally what happened — and the action — no cause of action on that order?

Bill J. Cornelius:

The action on the note Your Honor was tried and the note was canceled by the Trial Court, because of the failure of consideration.

You see the note had been given by petitioner Grubbs to General Electric Credit Corporation on the condition of and in response to certain agreements made by GECC.

The evidence showed and the court concluded that these agreements had been breached and that therefore the consideration for the note had failed and it was void and it was canceled by the judgment.

Then may it please the court, we would like to discuss this point, Mr. Johnson says that the case was not removable because the antitrust claims were brought forward in a responsive pleading.

Of course, at the outset, we are faced with this distinction that there is a difference between removability and jurisdiction.

Removability can be waived, jurisdiction cannot.

But additionally, our pleadings was responsive as to GECC, but it was not responsive as to General Electric Company.

It was a new action instituted against the General Electric Company, and so could not be considered a responsive pleading in that context.

General Electric Company could have removed.

My brother a moment ago was asked a question could the case have been filed in the United States Court by a certain party?

It is our contention that the case could have been filed in the United States Court by any party; General Electric, because of diversity and antitrust, GECC because of diversity, the United States government because of 2410, the interest in property of the federal government, its lien and the fact that it was a party defendant and a cross-plaintiff and Grubbs could have filed the cross-action in the federal court.

William O. Douglas:

Do you see any difference in how aobut it’d be here — you have got two different judgments, all at one judgments, two different recoveries; one that notes that declaratory enforces about $66,000.

Bill J. Cornelius:

Yes Your Honor, yes.

William O. Douglas:

Secondly, you have got an separate judgment on $20,000.

Bill J. Cornelius:

Correct.

William O. Douglas:

— you may have been able to be in the federal court for that $20,000 either on diversity or by joining to the federal anti-trust claims but if GE got it started first in state court.

There is no way to get that suit on the notice out of the state court if you ignore the right of the United States.

Bill J. Cornelius:

That is exactly right Your Honor because we were a resident.

However, we take the position and we think the case has sustained this that our residence within the state is merely a venue restriction and is rightful and in fact, I believe it was just that kind of a resident situation that’s involved in some of these other cases.

Potter Stewart:

Well, let’s see.

It’s a restriction on removability then however.

Bill J. Cornelius:

Yes, it is.

Potter Stewart:

A resident defendant cannot remove.

Bill J. Cornelius:

Yes Sir.

But we believe that, that restriction, it’s clearly wipable.

William H. Rehnquist:

And your other case is same, even though improperly removed in a situation like that.

William H. Rehnquist:

If it goes to trial on the merits, the court doesn’t head it back to the jurisdiction.

Bill J. Cornelius:

Right, and we say we are certainly not completely lacking in jurisdiction, but had jurisdiction or the organic power to hear the controversy for five or six different reasons.

Of course, may it please the court, we also say that the action was removable under 2410.

We did not file an interpleader bill against the government.

We filed an action under 2410 to determine the priority of the government’s lien.

This was not a strict interpleader case.

2410 is not an interpleader statute alone.

It involves several causes of action which can affect the existence or the priority of the government’s lien.

William H. Rehnquist:

What most specifical items in property that are involved and —

Bill J. Cornelius:

Furniture, fixtures and equipment and Mr. Grubbs’s business and multi-thousands of dollars worth of accounts receivable, all of which had been assigned to the government as security for its note that it had from Mr. Grubbs.

William H. Rehnquist:

From my own assignment, it doesn’t consider the lien of the government.

Bill J. Cornelius:

An assignment of accounts receivable.

Byron R. White:

That’s what it is.

Bill J. Cornelius:

Under these instruments, we believe so.

Yes Your Honor.

William H. Rehnquist:

Is it Texas law that would confer a lien on a property which is subject to the constitution?

Bill J. Cornelius:

Yes Your Honor.

We see they had a chattel mortgage to begin with which created lien upon all of his property and then this was further secured by an assignment of the accounts receivable.

Byron R. White:

It’s a pledge that says all of the — .

Bill J. Cornelius:

It’s a pledge, yes.

And then GECC comes in though and is collecting without any authority whatsoever.

William H. Rehnquist:

Was there a delivery of possession in connection with the plea?

Bill J. Cornelius:

No, not of the property itself.

William H. Rehnquist:

We are assuming now in the pledge of this traditional thoughts or a sense of sort of —

Bill J. Cornelius:

Well, no, possibly not.

But, it would be a lien under Texas law, it’s our contention.

Potter Stewart:

Is it Chattel mortgage?

Bill J. Cornelius:

Chattel mortgage, yes, further secured by an assignment of accounts receivable which were actually being claimed in an adverse proceeding between GECC and the government.

Warren E. Burger:

Thank you Mr. Cornelius.

Bill J. Cornelius:

Thank you very much Your Honor.

Warren E. Burger:

The case is submitted.