Hillis v. Heineman
2010 U.S. App. LEXIS 23804
9th Cir.2010Background
- In 2006 Steve and Diane Hillis invested $135,000 for 90,000 Resolve Staffing shares after being solicited by John Fox.
- In 2007 the Hillises executed a Warrant Amendment and Exchange Agreement granting rights to purchase an additional 90,000 shares, each with forum clauses referencing Ohio venues.
- Resolve Staffing later failed in 2008 due to involuntary foreclosure; Hillises obtained a state-court default judgment they could not collect due to Resolve Staffing’s lack of assets.
- In 2009 the Hillises filed a diversity suit in the District of Arizona against Ronald Heineman, Barbara Heineman, and Gregory Bartko; Defendants answered with an improper-venue defense and also filed counterclaims and a third-party complaint against John Fox.
- The district court dismissed the action for improper venue based on the forum selection clauses; the Hillises appealed asserting no waiver for counterclaims/third-party claims.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does filing a counterclaim or third-party complaint waive improper venue? | Hillis argues that counterclaims/third-party filings waive venue defenses. | Defendants contend no waiver under Rule 12(b)(3). | No waiver; counterclaims/third-party filings do not waive improper-venue defense. |
| Does Bartko's failure to raise improper venue in the first motion to dismiss waive the defense? | Hillis asserts waiver despite contemporaneous defenses. | Bartko maintains no waiver under Rule 12(g)-(h). | No waiver; defense preserved. |
| Are arguments about illegality of the Subscription Agreement and public policy waived on appeal? | Hillis contends validity and policy concerns undermine the forum clause. | Defendants did not raise these below; waived on appeal. | Waived; not addressed on appeal. |
Key Cases Cited
- Happy Mfg. Co. v. S. Air & Hydraulics, Inc., 572 F. Supp. 891 (N.D. Tex. 1982) (venue defense not waived by counterclaim)
- Rogen v. Memry Corp., 886 F. Supp. 393 (S.D.N.Y. 1995) (filing a counterclaim does not waive venue objections)
- Gates Learjet Corp. v. Jensen, 743 F.2d 1325 (9th Cir. 1984) (jurisdictional defenses may be asserted with a counterclaim without waiver)
- United States ex rel. Lujan v. Hughes Aircraft Co., 243 F.3d 1181 (9th Cir. 2001) (statutory text governs waiver unless implied exceptions exist)
- United States v. Rutherford, 442 U.S. 544 (1981) (waiver rules in Rule 12 context)
- Bayou Steel Corp. v. M/V Amstelvoorn, 809 F.2d 1147 (5th Cir. 1987) (counterclaims/third-party demands do not waive jurisdiction objections)