Commercial Casualty Insurance v. Consolidated Stone Co.

Background

An Indiana corporation sued a New Jersey corporation in a federal court in Ohio, relying only on the fact that the companies were citizens of different States and that the amount in dispute exceeded the statutory limit. The defendant did business in Ohio and had a local agent who was served with summons. The defendant did not appear or answer in time, and a default judgment was entered. Afterward the defendant sought to vacate the judgment, arguing the suit was brought in a district where neither party lived; the trial court denied those motions, and the appeal court asked the higher Court whether that venue objection could still be raised after the default.

Reasoning

The Court described the two governing federal provisions: one gives district courts general jurisdiction in diversity cases, and the other says such suits must be brought in the district where either party resides. The Court explained that the residence rule creates a personal privilege for defendants about the place of suit, which can be either asserted or waived. That privilege must be asserted no later than the time for making a general appearance and contesting the merits. Allowing the defendant to wait until after a default — when the case moves to deciding the merits — would disrupt orderly procedure. Because the defendant permitted the time to appear to expire and suffered a default, the Court held the defendant had waived the venue objection.

Real world impact

The ruling means parties served through local agents who fail to appear risk losing later objections about where the case was filed. The Court also noted Ohio law treats such neglected venue objections as waived. The certificate’s first question was answered in the negative.