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Hillis v. Heineman

November 19, 2010

STEVE HILLIS, HUSBAND; DIANE HILLIS, WIFE, PLAINTIFFS-APPELLANTS,
v.
BARBARA L. HEINEMAN, WIFE/TRUSTEE OF THE YEAR 2002 REVOCABLE TRUST DATED AUGUST 16, 2002; RONALD E. HEINEMAN, HUSBAND; GREGORY BARTKO; PERSONS 1-10, DEFENDANTS-APPELLEES,
v.
JOHN RAYMOND FOX, THIRD-PARTY-DEFENDANT.



Appeal from the United States District Court for the District of Arizona D.C. No. 2:09-cv-00073-DGC David G. Campbell, District Judge, Presiding.

The opinion of the court was delivered by: Gould, Circuit Judge

FOR PUBLICATION

OPINION

Submitted November 5, 2010*fn1 -- San Francisco, California

Before: Ronald M. Gould, Sandra S. Ikuta, Circuit Judges, and Edward R. Korman, Senior District Judge.*fn2

OPINION

We must decide whether a defendant who files a counter-claim or a third-party complaint waives the asserted defense of improper venue under Federal Rule of Civil Procedure 12(b)(3). We hold that filing a counterclaim or a third-party complaint does not waive the defense of improper venue.

I.

In 2006, Steve and Diane Hillis were solicited by John Fox, who had been retained by Resolve Staffing to sell securities.

Fox persuaded Steve Hillis to pay $135,000 and sign a Subscription Agreement in return for 90,000 shares of Resolve Staffing common stock. In 2007, Hillis and Resolve Staffing executed a Warrant Amendment and Exchange Agreement. The Warrant Amendment entitled the Hillises to buy another 90,000 shares of stock at a lower price than the first batch. These agreements each had a forum selection clause: the Subscription Agreement required venue in "the courts of the State of Ohio" and the Warrant Amendment required venue in the "State or Federal Courts serving the State of Ohio."

In 2008, Resolve Staffing went out of business because of the involuntary foreclosure and sale of its assets by its primary lender. The Hillises lost their entire investment. They sued Resolve Staffing in Arizona state court and won a default judgment, which they could not collect because Resolve Staffing had no assets. In 2009, the Hillises sued again, this time a diversity suit in federal court in the District of Arizona against Resolve Staffing's former president and C.E.O., Ronald Heineman, his wife, Barbara Heineman, and Resolve Staffing's former securities counsel, Gregory Bartko ("Defendants"). Defendants filed answers that specifically included a defense of improper venue premised on the forum selection clauses. Defendants also filed counterclaims with their answers, and the Heinemans filed separately a third-party complaint against John Fox. The district court dismissed the complaint for improper venue based on the forum selection clauses.

II.

On appeal, the Hillises contend that by filing counterclaims and a third-party complaint, Defendants waived any improper venue defense and that Bartko waived his improper venue defense by failing to assert it in his first motion to dismiss.

[1] Although we are not aware of Ninth Circuit precedent squarely addressing this precise issue, district courts have held that filing a counterclaim does not waive a defense of improper venue. See, e.g., Happy Mfg. Co. v. S. Air & Hydraulics, Inc., 572 F. Supp. 891, 893 (N.D. Tex. 1982) ("[T]here [is] nothing in Rules 12(h) or 12(b) which suggests that a venue defense is waived by filing a counterclaim. . . . Moreover, the policies behind Rule 12(b) strongly support the conclusion that a defendant does not waive a venue defense by simultaneously filing a counterclaim."); Rogen v. Memry Corp., 886 F. Supp. ...


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