Appeals pursuant to 28 U.S.C. § 1292(b), from orders of the District Courts for the Eastern and Southern Districts of New York. Dooling, Lasker, Nickerson and Sifton, Judges, sustaining jurisdiction in negligence actions against non-resident defendants for wrongful death or personal injury caused by an out-of-state accident to New York residents, wherein jurisdiction was obtained by the attachment of a liability policy issued to the defendants by an insurer doing business in New York, and from an order of the District Court for the Eastern District of New York, Dooling, Judge, in one of these cases holding that liability was determinable by New York rather than Virginia law.
Friendly, Gurfein and Meskill, Circuit Judges.
We have before us four interlocutory appeals, pursuant to 28 U.S.C. § 1292(b), which raise the question whether Seider v. Roth, 17 N.Y. 2d 111, 269 N.Y.S.2d 99, 216 N.E.2d 312 (1966), sanctioning a procedure for obtaining jurisdiction in a negligence action by a New York resident against a non-resident defendant for wrongful death or personal injury in an out-of-state accident through attachment of a policy of liability insurance issued by an insurer doing business in New York, the constitutionality of which was upheld by this court in Minichiello v. Rosenberg, 410 F.2d 106 (1968), adhered to en banc, 410 F.2d at 117, cert. denied, 396 U.S. 844, 90 S. Ct. 69, 24 L. Ed. 2d 94 (1969), has been undermined by Shaffer v. Heitner, 433 U.S. 186, 53 L. Ed. 2d 683, 97 S. Ct. 2569 (1977). A fifth interlocutory appeal pursuant to 28 U.S.C. § 1292(b) in one of these cases raises an independent question whether the district court was correct in holding that the liability of the defendant was determinable not by Virginia law, under which allegedly no liability could exist, but rather by New York law, under which it could if negligence was established. All four actions were brought by New York resident plaintiffs against non-resident defendants, and federal jurisdiction rested on 28 U.S.C. § 1332.
In each of the four cases the district courts denied motions of the defendants to vacate the attachment of their insurance policies and dismiss the actions. Since the cases are similar so far as the legal question is concerned and the courts in Schwartz, Kotsonis, and Ferruzzo expressly followed the lead of Judge Dooling's opinion in O'Connor v. Lee-Hy Paving Corp., 437 F. Supp. 994 (E.D.N.Y. 1977), we will state in text only the facts of O'Connor and will summarize the three other cases in the margin.*fn1
Mrs. Marguerite O'Connor, administratrix of the estate of her husband, Daniel J. O'Connor, sues for personal injuries to and the wrongful death of her husband which occurred in an industrial accident at the construction site of the Regency Square Shopping Center near Richmond, Virginia. Plaintiff alleges that her husband was struck and killed by a motor grader owned by defendant Lee-Hy Paving Corp. and negligently operated by defendant Davis E. Clem, an employee of Lee-Hy. O'Connor was a New York resident and was employed by L. Farber & Co., a New York proprietorship. His duties with Farber included supervising construction of the Regency Square Shopping Center, which took him to the construction site at least one day a week, and frequently three or four times a week. He was on an overnight visit when he was killed on September 25, 1975. Defendant Lee-Hy is a Virginia corporation which transacts no business in New York. Defendant Clem is an employee of Lee-Hy and a resident of Virginia, who has no contacts with New York.
Plaintiff filed her complaint in the District Court for the Eastern District of New York on November 6, 1975 and thereafter moved for an order pursuant to New York Civil Practice Law and Rules § 6201 to attach the contractual obligations of Royal-Globe Insurance Co. and Continental Casualty Co. to defend and indemnify Lee-Hy under its insurance policies. Both insurance companies do business in New York and have offices in the state, but neither lists New York as its principal place of business.
The requested order was granted on December 9, 1975. On July 22, 1977, a month after the Shaffer decision, defendants made the motion here at issue, which Judge Dooling denied in a carefully considered opinion on September 27, 1977, 437 F. Supp. 994. On October 14, 1977, he certified interlocutory appeals from his decision and also from an earlier order concerning the choice of law issue indicated above. This court granted defendants' petition for leave to appeal both orders on January 23, 1978. This appeal followed.*fn2
Appellants' attack on the decisions below is simple and straightforward. In their view, Shaffer conditions the exercise of what has been called quasi in rem jurisdiction, more particularly the exercise of jurisdiction where the ownership of property within the state is used to subject the defendant to its courts,*fn3 on the existence of at least some other "contacts" between the defendant and the state. In these four cases there are admittedly no contacts between the named defendants and New York. Although appellants consider this argument alone to be dispositive, they add other makeweights. They contend that in sustaining the constitutionality of Seider, both the New York Court of Appeals in Simpson v. Loehmann, 21 N.Y.2d 305, 310, 287 N.Y.S.2d 633, 636, 234 N.E.2d 669 (1967), motion for reargument denied, 21 N.Y.2d 990, 290 N.Y.S.2d 914, 238 N.E.2d 319 (1968), and this court in Minichiello v. Rosenberg, supra, 410 F.2d at 117-18, rested squarely on Harris v. Balk, supra, 198 U.S. 215. Since Shaffer clearly overruled Harris on its own facts, 433 U.S. at 208-09, Seider, they say, must fall with it. By way of minimizing the Court of Appeals' determination in Simpson that Seider comports with the International Shoe fairness standard, they point to Chief Judge Fuld's remark in that case inviting the New York Law Revision Commission and the Advisory Committee of the Judicial Conference "to conduct studies in depth and make recommendations with respect to the impact of in rem jurisdiction on not only litigants in personal injury cases and the insurance industry but also our citizenry generally." 21 N.Y.2d at 312, 287 N.Y.S.2d at 638. This task, they suggest, has now been performed by a still more august body, the Supreme Court of the United States.*fn4
If the plaintiffs in these cases had "attached" the debt to defendants of a debtor only transitorily in New York, as in Harris v. Balk, or even bank accounts maintained by them in New York, we would readily agree that attachment jurisdiction could not be sustained when, as here, the defendants had no other "contacts" with New York. In such a case, Shaffer v. Heitner clearly forbids a state from depriving a defendant of his property in the debt that is owed him unless other contacts make it fair to do so. See Intermeat, Inc. v. American Poultry Incorporated, 575 F.2d 1017 (2nd Cir. 1978). What sharply differentiates these cases from those just hypothesized is that a judgment for the plaintiff will not deprive a defendant of anything substantial that would have been otherwise useful to him. He could not recover, sell or hypothecate the covenant to indemnify; its utility is solely to protect him from liability and in an appropriate case to allow the plaintiff to recover from the insurer under § 167(1)(b) of the New York Insurance Law.*fn5 What we said in Minichiello, supra, nine years ago apropos of Harris v. Balk remains just as true today:
Appellants' problem is significantly less serious than was Balk's in several respects. Balk had to decide whether to hire a Maryland lawyer to protect his interest in the $180 debt Harris owed him; the appellants are entitled to have lawyers in New York furnished by their insurers without expense. The Maryland judgment deprived Balk of money he could have used for whatever purpose he willed; a Seider judgment would mean simply that liability policies, on which appellants could not have realized for any purpose other than to protect themselves against losses to others, will be applied to the very objective for which they were procured.
410 F.2d at 118 (emphasis supplied). Moreover, since the insurance policy was purchased to protect against the type of liability which is the subject of the lawsuit and since the obligation to defend clearly encompasses the litigation, Seider does not sanction "the type of quasi in rem action typified by Harris v. Balk and the present case [sequestration of shares in a Delaware corporation]", where the property which "serves as the basis for . . . jurisdiction is completely unrelated to the plaintiff's cause of action," Shaffer v. Heitner, supra, 433 U.S. at 208-09 (emphasis supplied).*fn6 The fall of Harris v. Balk therefore does not necessarily topple Seider, and it is necessary to probe more deeply than appellants would have us do.*fn7
The overriding teaching of Shaffer is that courts must look at realities and not be led astray by fictions. Quoting the Restatement Second of Conflict of Laws, § 56, introductory note, Mr. Justice Marshall explained that "the phrase 'judicial jurisdiction over a thing,' is a customary elliptical way of referring to jurisdiction over the interests of persons in a thing" and held in consequence that "in order to justify an exercise of jurisdiction in rem, the basis for jurisdiction must be sufficient to justify exercising 'jurisdiction over the interests of persons in a thing.'" 433 U.S. at ...