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. e du/thir dc ir c uit_1999/122Filed May 13, 1999

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

NO. 98-6257

PARAMOUNT AVIATION CORPORATION, Appellant

v.

GRUPPO AGUSTA; AGUSTA AEROSPACE
CORPORATION; COSTRUZIONI AERONAUTICHE GIOVANNI, Augusta, S.P.A.; AUGUSTA, S.P.A.

On Appeal From the United States District Court For the District of New Jersey (D.C. Civ. No. 91-cv-04954) District Judge: Honorable John W. Bissell

Argued: March 25, 1999

Before: BECKER, Chief Judge, LEWIS and WELLFORD,* Circuit Judges.

(Filed May 13, 1999)

CATHERINE B. SLAVIN, ESQUIRE (ARGUED)

Wolk & Genter

1710-12 Locust Street Philadelphia, PA 19103

Counsel for Appellant

___________________________________________________ ______________

*Honorable Harry Wellford, United States Circuit Ju dge for the United States Court of Appeals for the Sixth Circuit, sitt ing by designation.JOHN R. ALTIERI, ESQUIRE

(ARGUED) Foglia & Altieri

25 East Salem Street Hackensack, NJ 07601

RUDOLPH V. PINO, JR., ESQUIRE JOANNA ROBERTO, ESQUIRE

PINO & ASSOCIATES
Westchester Financial Center White Plains, NY 10606

Counsel for Appellees

OPINION OF THE COURT

BECKER, Chief Judge.

New Jersey's entire controversy doctrine is an extr emely robust claim preclusion device that requires advers aries to join all possible claims stemming from an event or series of events in one suit. Animated by the laudable goal o f easing the burdens of excessive litigation, the doctrine w as developed in the domestic context, precluding suits in New Jersey courts based on disputes that were previousl y the subject of litigation in New Jersey courts. It has attained interjurisdictional proportions, however, and has b een used in New Jersey to preclude claims based on a failure to effect joinder in previous litigation in non-New Jersey co urts, where such joinder was not required by those courts ' own rules. The repercussions of the doctrine have promp ted adverse scholarly comment. See generally Symposium: Entire Controversy Doctrine, 28 Rutgers L.J. 1 (199 6).1

This case began with a helicopter crash, though the facts have little bearing on the issue before us. We must decide whether a federal court in New Jersey should, when

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1. Until quite recently the entire controversy doct rine required party as well as claim joinder. The party joinder aspect of the doctrine, the focus of the lion's share of the criticism, has now been eliminated. See N.J. R. Civ. Pro. 4:30A. However, the interjurisdictional c laim preclusion problem, also the subject of considerable scholarly criticism, remains.

2exercising its diversity jurisdiction, apply the en tire

controversy doctrine to bar the plaintiff from asse rting claims against the defendants because they were not asserted in prior litigation involving the instant parties and others in federal courts in Pennsylvania, New York, and New Jersey. We conclude that we should not. Disagre eing with the District Court, which barred the plaintiff 's claim, we hold that federal courts should apply the genera l rule that the preclusive effect of a judgment is determi ned by the preclusion law of the issuing court--in this ca se, a federal court. We will, therefore, reverse the Dist rict Court's grant of summary judgment to the defendants on the plaintiff 's tort claims and remand for further pro ceedings. We will also uphold the District Court's determinat ion of the amount owed to defendant Agusta Aerospace Corporation ("AAC") on its counterclaims, but we wi ll vacate the judgment on the counterclaims pending dispositi on of
Paramount's tort claims.

I. Facts and Procedural History

On October 10, 1989, an Agusta 109A helicopter cras hed in New Jersey, killing the pilot, co-pilot, and thr ee passengers, who were top-echelon employees of the T rump Hotel and Casino enterprises. The helicopter was manufactured by Costruzioni Aeronautiche Giovanni Agusta ("CAGA") and purchased by AAC. CAGA is a subsidiary of Agusta S.p.A. and a part of Gruppo Ag usta. AAC is CAGA's wholly-owned U.S. subsidiary. These a re the "Agusta defendants." AAC sold the helicopter to Cli fton Park Association, which sold it to FSQ Air Charter Corpo ration ("FSQ"). Paramount Aviation, Inc. ("Paramount") arr anged for this sale to FSQ and contracted with FSQ to man age the aircraft and to supply one of the two pilots who op erated it.

The first lawsuit arising from the crash was Kent v

. Costruzioni Aeronautiche Giovanni Agusta, Gruppo Ag usta, Agusta Aviation Corp., & Paramount Aviation, Inc. ( "Kent"),
filed in the United States District Court for the E astern District of Pennsylvania, on March 30, 1990, by the widow and estate of co-pilot Robert Kent. The Agusta defe ndants filed answers asserting cross-claims against Paramo unt for contribution and indemnification, and Paramount's a nswer

3included cross-claims against the Agusta defendants for

contribution and indemnification, but no affirmativ e claims. This case settled on November 27, 1990, for $3,150, 000, of which the Agusta defendants paid $2,900,000 and Paramount paid $250,000.

Second came Trump Taj Mahal Assoc., Trump Castle Assoc., Trump Plaza Assoc., & Helicopter Air Servic es, Inc. v. Costruzioni Aeronautiche Giovanni Agusta, Agusta, G ruppo Agusta, Agusta Aviation Corp., & Paramount Aviation Corp. ("Trump"), filed in 1990 in the Superior Court of N ew Jersey and immediately removed to federal court. Prior to serving answers, the defendants filed motions for summary judgment, and the district court dismissed all coun ts, ruling that the plaintiff-employers were not entitl ed to recover under any of the theories they had alleged. See Trump Taj Mahal Assoc. v. Costruzioni Aeronautiche Giovanni Agusta, S.p.A., 761 F. Supp. 1143 (D.N.J. 1991), aff 'd mem., 958 F.2d 365 (3d Cir.), cert. denied, 506 U.S. 826 (1992). Paramount and the Agusta defendants ass erted no cross-claims against each other, nor was there o ccasion for them to do so after the summary judgment motion s were granted.

Next came FSQ Air Charter Corp. v. Costruzioni Aeronautiche Giovanni Agusta, Agusta, Gruppo Agusta , & Agusta Aviation Corp. ("FSQ"),filed in 1991 in the United

States District Court for the Eastern District of N ew York. AAC filed a third-party complaint against Paramount , and Paramount answered without raising affirmative defe nses or counterclaims. The parties' insurers defended th e action, which was settled in June 1992 with an exchange of mutual releases that specifically excluded the clai ms in the

case before us.

Fourth was Paramount Aviation Corp. v. Gruppo Agust a, Agusta Aviation Corp., Costruzioni Aeronautiche Gio vanni Agusta, & Agusta S.p.A. ("PAC I"),filed in the Unit ed States District Court for the District of New Jersey in 19 90. That complaint alleged seven counts of tortious behavior
, including negligence, willful misconduct, and stric t tort liability. Paramount claimed that the crash caused it adverse publicity, public hostility, loss of client s and goodwill, loss of income, and other damages. On Aug ust 16,

41990, the complaint was voluntarily dismissed under

Federal Rule of Civil Procedure 41, without prejudi ce, prior to answer. Kent was still pending at that point, an d Trump was on appeal.

Finally, PAC II, the instant case, was filed in New Jersey Superior Court in 1991. Alleging the same damages a s PAC I, plaintiff Paramount stated two counts: (1) negli gence, gross negligence, and willful and reckless miscondu ct; and (2) strict tort liability. Paramount claimed damage s as a result of the Agusta defendants' manufacturing and design, which allegedly caused the crash. The case was remo ved, and the Agusta defendants (except for "Gruppo Agust a," which seems to be an umbrella name without independ ent corporate existence) filed answers in October 1992, while AAC also stated a counterclaim against Paramount fo r amounts allegedly owed for another Agusta helicopte r and for payments for spare parts, service, and training

. Although the complaint contained a certification ab out Trump and FSQ, as required by N.J. Rule 4:5-1, the Agusta defendants did not raise the entire controversy doc trine in

their answers. The defendants first raised the enti re controversy doctrine in February 1996 and filed a s ummary judgment motion on that ground in February 1997.

The District Court granted summary judgment against Paramount on its claim, reasoning that the claim wa s barred by the entire controversy doctrine. It then granted summary judgment for AAC on the counterclaim. Paramount appeals.

II. The Entire Controversy Doctrine

A. Introduction; The District Court's Rationale

Under the entire controversy doctrine, a party cann ot withhold part of a controversy for separate later l itigation even when the withheld component is a separate and independently cognizable cause of action. The doctr ine has three purposes: (1) complete and final disposition of cases through avoidance of piecemeal decisions; (2) fairn ess to parties to an action and to others with a material interest in it; and (3) efficiency and avoidance of waste an d delay. See DiTrolio v. Antiles, 662 A.2d 494, 502 (N.J. 19 95). As an

5equitable doctrine, its application is flexible, wi th a case-bycase appreciation for fairness to the parties.

The entire controversy doctrine is an affirmative d efense, waived if not pleaded or otherwise timely raised. S ee Brown v. Brown, 506 A.2d 29, 35 (N.J. Super. Ct. App. Div . 1986). Notwithstanding that principle, the District Court held that failure to raise the doctrine in a responsive plead ing should be viewed in light of the federal policy of liberal ly allowing amendments if the issue was raised at a pragmatical ly sufficient time. See Kleinknecht v. Gettysburg Coll ege, 989 F.2d 1360, 1374 (3d Cir. 1993). Although the defend ants had not formally raised the entire controversy defe nse until their motion for summary judgment, filed in 1997, t he District Court decided that it would have granted l eave to amend the pleadings to assert it. See id. at 1374; see also Burrell v. Quaranta, 612 A.2d 379 (N.J. Super. Ct. App. Div. 1992) (entire controversy defense was not foreclose d where the trial judge would have granted leave to amend t he pleading if asked).

The District Court further determined that Paramoun t was not prejudiced by this decision. The court reas oned that, given the lengthy history of litigation over the crash, the application of the doctrine could not have been unforeseen. Moreover, the court concluded that the long delay between the filing of the complaint and the m otion for summary judgment was not prejudicial because it was largely the result of Paramount's failure to prosec ute the action vigorously.2 The court further found that th e Kent litigation offered Paramount an opportunity to brin g its claim against the Agusta defendants; Paramount had brought cross-claims for contribution and indemnifi cation

in that case.

Paramount argued that the doctrine should not apply when all the previous actions, as well as the insta nt one, were federal, but the District Court reasoned that the doctrine had routinely been applied in federal cour t. See, e.g., Petrocelli v. Daniel Woodhead Co., 993 F.2d 2 7 (3d Cir.

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2. The parties strenuously dispute the causes and e ffects of the delay, but, as we need not reach the issue, we will not ad dress it in greater

detail.

61993). Paramount maintained that the doctrine was

procedural. The court responded that it was not "procedural" simply because it was codified in a ru le of procedure; as a creature of state common law, the e ntire controversy doctrine was to be applied federally un der the rule of Erie R.R. Co. v. Tompkins, 304 U.S. 64 (193 8).

Paramount urges that the District Court abused its discretion in its application of the equitable cons iderations behind the entire controversy doctrine. The Distric t Court, of course, has great discretion in matters of this sort. However, we need not reach the issue, because wefin d that the entire controversy doctrine is not the right pr eclusion doctrine for a federal court to apply when prior ju dgments were not entered by the courts of New Jersey.

B. Foreign Application of the Entire Controversy Do ctrine

In order to decide whether to apply New Jersey law or federal law, we must follow the rules laid down in Erie and its progeny. We are required to weigh the significa nce and substantive character of the state preclusion rule, and the likelihood that application of the federal rule wou ld produce forum-shopping by parties, against the importance o f the federal interests underlying the federal rule. See Byrd v. Blue Ridge Rural Elec. Co-op., Inc., 356 U.S. 525, 535-40 (1958). If a rule is outcome-determinative, so that applying the federal rule would change the result of a casef iled in

federal court from the result in an identical state court case, it is likely to affect parties' decisions whe re to litigate, and applying the state rule is generally appropriat e. On the other side, a strong federal policy embodied in constitutional principles or federal law justifies the application of a federal rule. In this case, the re levant
federal interests are embodied in Federal Rule of C ivil Procedure 13, which establishes federal claim joind er rules, and in federal principles of res judicata. We concl ude that New Jersey's interest in the entire controversy doc trine, while weighty, does not require us to adopt it in o rder to decide the preclusive effects of non-New Jersey cas es.

71. The Parties' Contentions

Paramount notes that none of the lawsuits filed in the aftermath of the accident was litigated in New Jers ey state court (three were brought in federal court and two were removed).3 It argues that the New Jersey Rules of C ourt containing the entire controversy doctrine are proc edural and therefore should not be applied in federal cour t. Paramount also submits that New Jersey's interest i n preserving the resources of its courts is minimal, if not absent, here, where all of the prior cases were lit igated outside of the New Jersey courts. See Henkels & McC oy, Inc. v. Adochio, 906 F. Supp. 244, 249 (E.D. Pa. 19 95) (declining to apply the doctrine where both the pre vious

case and the instant case were in the Eastern Distr ict of Pennsylvania).

Paramount further contends that, when a prior decis ion's preclusive effect is examined, it is the prior juri sdiction's preclusion law that should generally be applied. Se e Restatement (Second) of Judgments S 87 (1982). Para mount reasons that federal preclusion law should apply to determine the preclusive effects of federal diversi ty judgments. In the absence of a prior New Jersey jud gment on the merits, Paramount maintains, we have no reas on to apply New Jersey's supercharged preclusion doctrine

.

The defendants respond that the Full Faith and Cred it Act, 28 U.S.C. S 1738 (1994), requires a federal co urt hearing a New Jersey tort claim to be bound by New Jersey

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3. Paramount submits, and the Agusta defendants do not challenge, that the fact that actions were originally commenced in state court is irrelevant. Once removed, jurisdiction in the Distr ict Court is original and federal procedure applies. Moreover, the state courts have expended negligible resources on the removed case; New Jerse y courts do not apply the doctrine when a prior case was pending fo r only a few days and no notable activity took place. Cf. Hulmes v. H onda Motor Co., 924 F. Supp. 673 (D.N.J. 1996) (declining to apply the doctrine when the first action was only pending in New Jersey state court f or one week before its voluntary dismissal); Karpovich v. Barbarula, 6 96 A.2d 659 (N.J. 1997) (holding that a settlement did not require ap plication of the doctrine where there were only seven days between t he state court filing and the entry of a consent judgment and virtually n o judicial resources
were used).

8substantive law, of which the entire controversy do ctrine is

a part. See Rycoline Prods., Inc. v. C&W Unltd., 10 9 F.3d 883, 887 (3d Cir. 1997). We note some initial disco mfort with this description, as we believe that the entir e controversy doctrine, like all preclusion doctrine, should generally be characterized as procedural. We take u p Rycoline and the substance/procedure divide infra, noting here only that the Supreme Court has long instructe d us that the substance/procedure line is not dispositiv e when federal courts must choose which sovereign's law to apply. See Guaranty Trust Co. v. York, 326 U.S. 99 (1945).

The defendants also point out that federal courts h ave occasionally applied the entire controversy doctrin e to determine the effects of non-New Jersey judgments, but the parties in prior decisions have not contested the a pplication

of the doctrine.4 Nor have we resolved the broader issue of whether federal or state res judicata law governs s uccessive diversity actions. See Venuto v. Witco Corp., 117 F .3d 754, 758 & n.7 (3d Cir. 1997). We have, however, decided that federal law governs the preclusive effect of a prio r diversity judgment on a subsequent federal question case. See In re Kaplan, 143 F.3d 807, 814-15 (3d Cir. 1998). We not ed in Kaplan that the Supreme Court used federal law to determine the preclusive effect of a prior diversit y judgment in Heiser v. Woodruff, 327 U.S. 726 (1946). Though the issue was not then before us, we also suggested tha t the rationale for applying federal preclusion law to de termine

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4. The entire controversy doctrine has indeed been invoked when the previous suit was in another state or in a federal court. Melikian v. Corradetti, 791 F.2d 274 (3d Cir. 1986), applied th e entire controversy doctrine, though its only preclusive effect was on a corporation that may not even have been a party to the second lawsuit. S ee id. at 280 & n.3. Melikian assumed that the doctrine applied to succe ssive diversity cases in New Jersey and did not address the choice of law question. Thus, it does not control our decision today. Similarly, in Itzkoff v. F&G Realty, Corp., 890 F. Supp. 351 (D.N.J. 1995), the first ac tion was in New York state court and the second in New Jersey federal co urt. The parties and the court assumed that the entire controversy doctr ine governed. See Itzkoff, 890 F. Supp. at 355. The court found that New Jersey (state) courts would apply the doctrine to foreign proceedi ngs "where fairness so required." Id. at 356. The parties did not broach t he specific issue of a federal court's application of the doctrine.

9the effects of a prior diversity judgment on a late r federal

question case was quite similar to the rationale fo r doing so in a later diversity case. See Kaplan, 143 F.3d at 815 n.15.

2. Relevant Case Law

We find two New Jersey decisions particularly helpf ul in elucidating New Jersey's view of the entire controv ersy doctrine. In Watkins v. Resorts International Hotel & Casino, Inc., 591 A.2d 592 (N.J. 1991), the New Jersey Supr eme Court acknowledged the general rule that the preclu sive effect of a judgment is determined by the law of th e jurisdiction that rendered it, as a logical consequ ence of the procedures of the issuing court. See id. at 598. Th is rule affects the application of the entire controversy d octrine in New Jersey state court. Only in "limited circumstan ces" may the doctrine preclude an action not otherwise precluded by the res judicata effects of a federal decision.

See id. at 598-99. The court held that it was essen tial to consider the federal law of claim preclusion in det ermining whether to apply the entire controversy doctrine, a s an equitable matter, in state court cases. See id. at 599. Watkins thus suggests that New Jersey recognizes th e interests of other jurisdictions that have differin g preclusion

doctrines.

In Mortgagelinq Corp. v. Commonwealth Land Title In s. Co., 662 A.2d 536 (N.J. 1995), the New Jersey Supre me Court applied the entire controversy doctrine to a plaintiff who had previously sued on the same underlying fact s in

the federal District Court for the Eastern District of Pennsylvania. Almost a year earlier, a mortgage len der had brought an action in the latter court against Penns ylvaniabased companies and individuals who were allegedly the central figures in a fraudulent scheme involving mo rtgage financing, and the Federal Home Loan Mortgage Corporation ("Fannie Mae") had intervened as a plai ntiff. The second case was brought in New Jersey state cou rt by the lender and Fannie Mae against New Jersey-based companies and individuals who participated in the s ame mortgage transactions and who were allegedly access ories

in the same scheme.

10Mortgagelinq stated decisively that the entire cont roversy

doctrine is procedural, and that it was formulated specifically to preserve the resources of New Jerse y courts.5

The Court held that the doctrine bars suits in New Jersey against parties who could have been joined in an ea rlier

suit in another state or in federal court. The resu lt was binding only in New Jersey, however; other jurisdic tions could permit litigation against earlier-omitted def endants despite a New Jersey decision dismissing an action on entire controversy grounds. The decision thus attem pted to
cabin the effect of the doctrine outside of New Jer sey

courts:

We hold that when a party deliberately choos es to fragment litigation by suing certain parties in another jurisdiction and withholds claims against ot her parties, a New Jersey court need not later entertain the claims against the omitted parties if jurisdiction was available in the first forum. In doing so we do not ex port our entire controversy doctrine to other jurisdi ctions, but merely hold that our notions of procedural f airness do not permit the claims that could have been b rought elsewhere to be brought in New Jersey. This ruling presupposes that when the procedural rules o f foreign jurisdictions permit the omitted claims to b e brought later, the foreign jurisdiction is free to e ntertain such claims. Just as we do not seek to export our procedural requirements of party joinder, we do not seek to export any preclusive effect to our rules of party joinder.

. . . .

___________________________________________________ ______________

5. Guaranty Trust Co. announced that"[i]t is . . . immaterial whether
statutes of limitation are characterized either as` substantive' or `procedural' in State court opinions in any use of those terms unrelated to the specific [Erie] issue before us." Guaranty T rust Co., 326 U.S. at 109. Mortgagelinq, however, is intimately related t o the choice of law issue, and thus we do not believe that Justice Fran kfurter's conclusion precludes us from considering that case. More impor tantly, we believe that Watkins and Mortgagelinq provide insight into the scope of New Jersey's interest in its doctrine, an issue that is distinct from the doctrine's location on the substance/procedure line

.

11One of the underpinnings of the entire cont roversy

doctrine, in addition to fairness to the par ties, is fairness to the system of judicial administr ation. "Judicial economy and efficiency--the avoida nce of waste and delay--remain constants in the app lication of the entire controversy doctrine. Fragment ed and multiple litigation takes its toll on not on ly the parties but the judicial institution and the public. " Each jurisdiction is free to assess the importanc e of such

values. . . .

If Pennsylvania courts do not have a compar able party-joinder rule, principles of comity sug gest that New Jersey should not seek to export its ent ire controversy doctrine to regulate the conduct of attorneys in that jurisdiction. In other wor ds, attorneys conducting litigation in Pennsylvania courts should not have to accommodate their practices to the d emands of New Jersey courts. A corollary of that propo sition, however, is that New Jersey courts need not necessarily grant relief when parties delibe rately refrain from seeking relief in other jurisdictions w hen doing so would have been much fairer to all parties i nvolved.
There is a delicate balance between the inte rests of the two jurisdictions that must accommodate the interests of justice. . . .

. . . .

Maintaining a cohesive federal system (and the Full
Faith and Credit Clause melds the state cour ts into that system) does not require that the other parts of the federal system honor our entire controve rsy doctrine.

Mortgagelinq, 662 A.2d at 537, 540, 541, 542 (citat ions omitted).

The Mortgagelinq court mentioned that "the federal courts are considered those of another sovereign," id. at 541, and suggested that the application of the doctrine in a diversity action in New Jersey federal court might be governe d by choice of law principles, indicating that the court did not necessarily expect federal courts in New Jersey to apply the doctrine exactly as the state courts would. See id. at 542.

12Thus, while Mortgagelinq continued to embrace an

expansive view of the doctrine within New Jersey st ate courts, it heralded an awareness of the doctrine's limits when interjurisdictional problems were involved. Wh ile New Jersey cannot, of course, control our understanding of the relevant federal law, we consider Watkins and Mortg agelinq useful explications of the justifications for the d octrine, and hence of New Jersey's interests. We turn, therefore , to an
assesment of the relevant state and federal interes ts.

3. Analysis of the Relevant State and Federa l Interests

a. The Import of Rycoline

Rycoline held that a federal court deciding a feder al cause of action is bound by the entire controversy doctri ne when determining the effect of a prior New Jersey state court judgment. The court characterized the doctrine as " an aspect of the substantive law of New Jersey, by vir tue of the Full Faith and Credit Act." Rycoline, 109 F.3d at 8 87. Thus, the plaintiffs, who had filed a previous suit in Ne w Jersey state court, were subject to the rigors of the enti re controversy doctrine when they filed a second suit in New Jersey federal court, although they were able to pr oceed because we decided that New Jersey would not apply the doctrine while the first suit was still pending.

The defendants claim that the just-quoted phrase fr om Rycoline obligates us to apply the entire controver sy doctrine as part of New Jersey substantive law unde r Erie. We believe that the question is slightly more compl ex. The Full Faith and Credit Act provides that the judicia l proceedings of a state court shall have the same fu ll faith and credit within every court in the United States as they have by law or usage in the courts of the issuing s tate. Thus, federal courts must give the same preclusive effect to a state court judgment as another court of that sta te would, unless to do so would violate due process. S ee Rycoline, 109 F.3d at 887. In this case, there are only federal judgments, and the Full Faith and Credit Ac t is not by its terms applicable. It is usually thought that federal judgments receive full faith and credit by virtue o f federal common law. See, e.g., Ronan Degnan, Federalized Re s

13Judicata, 85 Yale L.J. 741, 744-50 (1976) (discussi ng the

development of the rule requiring respect for feder al judgments); cf. Embry v. Palmer, 107 U.S. 3, 10 (18 83) ("[T]he judgments of the courts of the United State s have invariably been recognized as upon the same footing , so far as concerns the obligation created by them, with do mestic judgments of the states, wherever rendered and wher eever [sic] sought to be enforced.").

To the extent that Rycoline labelled the entire con troversy doctrine "substantive" for purposes of the Full Fai th and Credit Act, we conclude that it meant only that New Jersey law governed the preclusive effects of an earlier N ew Jersey state court judgment. This is exactly what the Act requires. See University of Tennessee v. Elliott, 478 U.S. 78 8, 794 (1986). We decline to read one phrase in a decision that depended on completely different issues as determin ing the result in this case. Rather, our interpretation of Rycoline renders it consistent with the long line of New Jer sey cases labelling the entire controversy doctrine "procedur al." See, e.g., Oliver v. Ambrose, 705 A.2d 742, 746 (N.J. 19 98); Harley Davidson Motor Co. v. Advance Die Casting, I nc., 696 A.2d 666, 668 (N.J. 1997); Mortgagelinq; Woodward-C lyde Consultants v. Chemical & Pollution Sciences, Inc.
, 523 A.2d 131, 135 (N.J. 1987). At all events, the substance/procedure divide is not necessarily the controlling factor in determining when a federal co urt must apply state law. See Guaranty Trust Co., 326 U.S. a t 109-

10.

Under Mortgagelinq, a dismissal on entire controver sy grounds is not a dismissal on the merits; this rule helps to
ensure that the doctrine will not have untoward extraterritorial effects.6 However, New Jersey law still

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6. The characterization of an entire controversy-ba sed dismissal as one not on the merits only matters when the prior decis ion to which New Jersey applies the doctrine is not handed down by a New Jersey state
court. When the first decision issues from a New Je rsey court, that case carries its own preclusive effect, deserving of ful l respect in the courts

of other jurisdictions. If there is a second New Jerse y case that is

dismissed on entire controversy grounds, and then a third fed eral case, we might also give the second New Jersey case preclusive eff ect on the issue of the

14determines the preclusive effects of a prior New Je rsey state

court judgment on the merits, as in Rycoline.

b. New Jersey's Interests and the Risks of Forum- Shopping

New Jersey's main justification for the doctrine, i ts interest in preserving its judicial resources, is m inimized when none of the prior litigation took place in New Jersey state courts. See Rochelle Cooper Dreyfuss & Linda J. Silberman, Interjurisdictional Implications of the Entire Controversy Doctrine, 28 Rutgers L.J. 123, 156 (199 6). New Jersey state courts still apply the doctrine in suc h cases, which conserves some of New Jersey's judicial resou rces by precluding subsequent litigation in New Jersey. By contrast, when both prior and subsequent litigation takes place outside the New Jersey state courts, it is ha rd to see any New Jersey resource interest whatsoever, except

inasmuch as the size of the federal docket indirect ly affects

the state courts.

The risk of unfair surprise is also heightened wher e the initial litigation did not take place in New Jersey ; it may be difficult for responsible lawyers to predict that l itigation in New York or California will close the New Jersey fe deral courts to future claims. See id. at 169; cf. Electr o-Miniatures Corp. v. Wendon Co., 889 F.2d 41, 45 & n.6 (3d Cir. 1989) (expressing the concern that, if the entire controv ersy doctrine were applied to out-of-state judgments in New Jersey federal court, other jurisdictions would be adversely affected by the need to tailor litigation to avoid preclusion in New Jersey). But see Perry Dane, Dignity and Glo rious Chaos: A Comment on the Interjurisdictional Implica tions of the Entire Controversy Doctrine, 28 Rutgers L.J. 17 3 (1996) (arguing that the problems with the doctrine are overstated). Given New Jersey's recognition, in Wat kins and

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application of the entire controversy doctrine to t he facts, see 18 Wright et al., Federal Practice & Procedure S 4418, at 171 (1981) (discussing the preclusive effects of determinations that do not go to the merits), but we need not delve further into these murky preclusion waters to decide the

case before us.

15Mortgagelinq, that other jurisdictions have signifi cantly

different preclusion doctrines and a strong interes t in giving effect to those doctrines, we do not believe that a decision requiring federal courts to apply federal preclusio n law would depreciate New Jersey law.

Some commentators have argued that Mortgagelinq was wrongly decided and that the Full Faith and Credit Act does not give New Jersey the freedom to give other court s' decisions greater preclusive effect than those cour ts would allow. See Stephen B. Burbank, Where's the Beef? Th e Interjurisdictional Effects of New Jersey's Entire Controversy Doctrine, 28 Rutgers L.J. 87 (1996). Professor Burb ank argues that Mortgagelinq works against the compelli ng interest in national unity by requiring litigants i n other states to consider the preclusive effects of their cases on future cases in New Jersey, regardless of the precl usion law of the state in which they file complaints. He conc ludes that, regardless of New Jersey state court practice , federal courts in New Jersey should apply standard preclusi on law, rather than the entire controversy doctrine, to the judgments of non-New Jersey courts. See Burbank, su pra, at 100-01; see also Dreyfuss & Silberman, supra, at 157-

58.

Professor Burbank further argues that, when a feder al court in New Jersey tries to resolve this conundrum , it should apply the Full Faith and Credit Act rather t han Erie balancing. Judicial balancing would be unnecessary, because Congress has explicitly instructed courts h ow to treat the judgments of state courts. See Burbank, s upra, at 103 n.82. Thus, if the previous litigation involved in this case had taken place in a state court, we would, as a matter of course, give it the preclusive effect it would have
in that state's courts.

Though we find this argument persuasive, it does no t dispose of this case, because the Full Faith and Cr edit Act does not by its terms apply here. When the prior de cision is a federal decision, the Act applies only by anal ogy. And in that case, it is important to look to Erie princ iples to decide which sovereign's law to apply. The Full Fai th and Credit Act has an important implication, however: I f the Act instructs New Jersey federal courts how to determin e the

16preclusive effect of state decisions, there is a co mpelling

argument for treating federal cases similarly. Ther e is no good reason to apply New Jersey entire controversy law to determine the preclusive effects of a federal diver sity case from Pennsylvania when the preclusive effects of th e same case would have been governed by the law of the iss uing court if it had been litigated in Pennsylvania stat e court. To make different rules for the two types of cases wou ld be absurd, and would only move the potential forum-sho pping problem back one level further, to the initial non- New Jersey litigation.

We note another factor that diminishes the force of the Erie concerns that generally lead to application of state law. Our Erie jurisprudence counsels us to avoid situati ons in which parties who can invoke federal jurisdiction a re treated differently from those who cannot. Because we are considering a preclusion doctrine, the question is whether parties who can invoke federal jurisdiction will be able to litigate claims that will be precluded for parties who cannot. The risk of inequitable preclusion is minimal, for the following reason: This situation arises only when t here has been previous litigation outside the New Jersey sta te courts. However, the entire controversy doctrine wo uld only bar a subsequent New Jersey suit if the first forum would have had jurisdiction over the claims raised in tha t subsequent suit. It therefore follows that there wa s an alternate non-New Jersey forum for the relevant cla ims, although in some cases that forum would be another state court. The relevant point is that no plaintiff in t his situation will find itself entirely unable to litigate its cl aims; even if it is not able to take advantage of federal jurisdicti on, it will have another state in which to bring its claims.7

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7. It is possible, of course, that a party who has already participated in a foreign lawsuit will mistakenly file a second sui t in New Jersey state court and will lose on entire controversy grounds a fter the statute of limitations for filing a claim elsewhere has run, a lthough it is not entirely clear that a plaintiff in such a situation would be subject to the

doctrine. See Erenberg v. Cordero, 683 A.2d 567, 574 (N.J. Su per Ct. App. Div. 1996) (Stern, J., concurring) (stating that the doc trine should only be applied to the judgments of foreign courts if the p laintiff 's claim is actually capable of being litigated in some non-New Jersey court). After

17Any resulting disparity is no more than the dispari ty

created by the very existence of diversity jurisdic tion, which allows some parties the option of going to federal court
whereas others with identical causes of action cann ot.8 While a decision to apply federal preclusion law wo uld be outcome-determinative in this case, therefore, it w ould not ex ante cut off or extend any substantive rights th at a plaintiff would have in the absence of a New Jersey federal forum, and would be unlikely to encourage significa nt forum-shopping.9

Our analysis can be summarized as follows: New Jers ey has no significant interest in controlling the dock ets of other court systems. Moreover, application of a fed eral rule
in the rather unusual circumstances here would be unlikely to create unfairness by causing different results in

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our decision, a plaintiff who files in New Jersey f ederal court will not

be "mistaken," and will not face this dilemma. Thus, t here is a possibility that results will differ in some cases. However, Er ie rules were designed to avoid conscious forum-shopping, not to increase the risks of carelessness or unfamiliarity with state law.

8. The decision to apply federal preclusion law aff ects forum choice in this sense only: A well-informed plaintiff might be able to split claims between some foreign court and a New Jersey federal court that, if the federal court applied the entire controversy doctri ne, it would otherwise consolidate in the foreign court. But this is not t he forum-shopping between state and federal court that Erie decried; it is claim-splitting, which presents different issues. As long as the pla intiff adheres to the other jurisdictions' rules of joinder, we do not th ink that any inequity has occurred. It is theoretically possible that var iations between New Jersey choice-of-law doctrines and the choice-of-la w doctrines of other jurisdictions might change the outcome on such a sp lit claim, but we doubt that parties will base their forum choices on such exotic possibilities.

9. Relatedly, the forum-shopping concern is diminis hed simply because successive litigation is less common than litigatio n in the first instance; there are many factors that go into a decision tofi le a second lawsuit, and we doubt that a decision to apply federal precl usion law will substantially alter the relevant incentives. In thi s case, Paramount was not even the initial plaintiff in the pre-PAC lawsu its; in a real sense, Paramount had very little choice over those fora, e ven though it filed

counterclaims and cross-claims.

18federal court than in state court or to cause signi ficant

forum-shopping. The issues of outcome-determinative ness and a consequent incentive to forum-shop are not fr ee from doubt, however. Therefore, it is important for us t o determine whether there is a significant federal in terest counseling application of the federal rule. See Fau ber v. KEM Transp. & Equip. Co., 876 F.2d 327, 331 (3d Cir

. 1989). It is to this question that we now turn.

c. The Federal Interest

Federal courts have a significant interest in deter mining the preclusive effects of federal judgments. See Ka plan, 143 F.3d at 815 n.15 (citing cases). Kaplan applied fed eral law to determine the preclusive effects of a diversity judgment on a subsequent federal question case. We believe t hat its logic is equally applicable here, when successive d iversity cases are at issue. The source of federal jurisdict ion over the second case should not affect our analysis, bec ause we are concerned with the preclusive effect of the fir st. As the Second Circuit has put it:

One of the strongest policies a court can ha ve is that of determining the scope of its own judgment s. . . . It would be destructive of the basic principles of the Federal Rules of Civil Procedure to say that the effect of a judgment of a federal court was governe d by the law of the state where the court sits simply because the source of federal jurisdiction is divers ity.

Kern v. Hettinger, 303 F.2d 333, 340 (2d Cir. 1962) . We

agree.

Paramount persuasively argues that we should apply the general federal rule that the preclusive effects of prior cases are determined by the law of the prior forum. Apply ing the federal rule would also give effect to the joinder rules of the Federal Rules of Civil Procedure, which define the claims that parties must join if they are not to be later barred. Cf. Hanna v. Plumer, 380 U.S. 460 (1965) (the strong fe deral policies embodied in the Federal Rules of Civil Pro cedure justify a refusal to apply an outcome-determinative state procedural rule); Byrd (outcome-determinative state procedural rules do not need to be applied when the y are

19not an integral part of the underlying substantive right and

there is a strong countervailing federal policy, su ch as the policy against disrupting the allocation of power b etween judge and jury in federal court). Paramount draws f urther support from the scholarly opinion in Fioriglio v. City of Atlantic City, 963 F. Supp. 415 (D.N.J. 1997), whic h engaged in a calculus similar to ours; Judge Irenas concluded, as we do, that federal joinder and precl usion rules embody an important federal policy that weigh s heavily against applying the entire controversy doc trine in

these circumstances. See id. at 424.

d. Summary and Conclusion

We conclude that respecting courts' power to determ ine the preclusive effects of their own rulings is a si gnificant federal interest. In particular, the claim joinder provisions of the Federal Rules of Civil Procedure express a f ederal policy about what claims must be joined to avoid la ter preclusion. Applying New Jersey preclusion law to determine the preclusive effects of federal cases w ould frustrate the policy embodied in the Rules, and we decline

to do so. Instead we will follow the federal rule t hat the law of the issuing court--here, federal law--determines the preclusive effects of a prior judgment.10

In reaching this result, clearly foreshadowed by Ka plan, we follow the majority of circuits to confront the issue of the law to be applied in successive diversity cases . See, e.g., J.Z.G. Resources, Inc. v. Shelby Ins. Co., 84 F.3d 211, 213- 14 (6th Cir. 1996); Havoco, Ltd. v. Freeman, Atkins & Coleman, Ltd., 58 F.3d 303, 307-08 (7th Cir. 1995); Johnson v. SCA Disposal Servs., 931 F.2d 970, 974 ( 1st Cir. 1991); Empire Fire & Marine Ins. Co. v. J. Transpor t, Inc., 880 F.2d 1291, 1293 n.2 (11th Cir. 1989); Shoup v. Bell & Howell Co., 872 F.2d 1178, 1179 (4th Cir. 1989); Ae rojetGeneral Corp. v. Askew, 511 F.2d 710, 715-18 (5th C ir. 1975); Kern, 303 F.2d at 340 (Second Circuit). But see Follette v. Wal-Mart Stores, Inc., 41 F.3d 1234, 12 37 (8th

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10. We need not resolve here whether particular asp ects of preclusion, such as privity, are "substantive" and are governed by state law. Cf. Lubrizol Corp. v. Exxon Corp., 929 F.2d 960, 962 n. 2 (3d Cir. 1991).

20Cir. 1994) (applying state law); Pardo v. Olson & S ons, Inc.,

40 F.3d 1063, 1066 (9th Cir. 1994) (same).

Since we have decided that federal law, rather than the entire controversy doctrine, applies, the obvious q uestion is: What is the federal law? However, the Agusta de fendants have not argued, either in the District Court or th is court, that federal preclusion principles bar Paramount's suit. We thus deem a possible res judicata argument waived. See Security Servs., Inc. v. K Mart Corp., 996 F.2d 151 6, 1519 (3d Cir. 1993); Brenner v. Local 514, United Bhd. o f Carpenters & Joiners, 927 F.2d 1283, 1298 (3d Cir. 1991).11

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11. We doubt that such a claim would be meritorious in any event. The preclusion inquiry in this case is essentially iden tical to the question whether Paramount's tort claims were compulsory in any of the earlier

lawsuits. See Publicis Communication v. True North Communications Inc., 132 F.3d 363, 365 (7th Cir. 1997). There is no comp ulsory cross-claim rule in the federal system, see Wolfe v. Safecard S ervs., 873 F. Supp. 648, 649 (S.D. Fla. 1995), and therefore the Trump suit clearly does not preclude this suit.

The Kent suit raises a somewhat trickier issue, bec ause Paramount and the Agusta defendants filed cross-claims for co ntribution and indemnification against one another in that case. A rguably, the filing of a cross-claim makes parties "opposing parties" with in the meaning of

Federal Rule of Civil Procedure 13. See Schwab v. E rie Lackawanna R.R. Co., 438 F.2d 62, 66 (3d Cir. 1971) (dicta). A conv ersion into "opposing party" status would imply that, although cross-clai ms are never compulsory in themselves, the filing of one cross-c laim would trigger

duties on both sides to file all claims that were c ompulsory under Rule 13(a). However, we suspect that a compulsory cross- claim rule would be

limited to situations in which the initial cross-cl aim included a substantive claim, as opposed to claims for contrib ution and indemnity, in order to avoid needless complication of litigati on. See Hall v. General Motors Corp., 647 F.2d 175, 184 (D.C. Cir. 1980); R ainbow Mgmt. Group, Ltd. v. Atlantis Submarines Hawai'i, L.P., 158 F.R. D. 656, 660 (D. Haw. 1994) (cited in 6 Wright et al., Federal Practice & Procedure S 1404, at 2 (Supp. 1997), for the proposition that filing one c ross-claim turns coparties into opposing parties). But see Kane v. M agna Mixer Co., 71 F.3d 555, 562 (6th Cir. 1995) (holding that indemni ty claims trigger the compulsory cross-claim rule). Thus, the cross-claim s for contribution and indemnity in Kent would not likely bar the pres ent litigation.

FSQ, in which AAC filed a third-party complaint aga inst Paramount, raises the specter of an omitted compulsory counter claim that would

21We will therefore vacate the judgment in favor of t he

defendants and remand to the District Court for fur ther proceedings on Paramount's tort claims.

III. The Counterclaims

In its counterclaims, AAC alleged that it was entit led to payments for the lease of one helicopter and for go ods and services provided for three other helicopters. It p resented three counterclaims, but the third counterclaim in actuality duplicated the claims of the first two, and the Dis trict Court granted summary judgment on those two. In order to prevail on summary judgment, a party stating an

affirmative claim must come forward with evidence e ntitling

it to a directed verdict. See International Shortst op, Inc. v. Rally's, Inc., 939 F.2d 1257, 1264 (5th Cir. 1991).

The first counterclaim was for $34,629 plus 1.5% in terest per month for breach of a helicopter lease contract entered into on March 20, 1987, and expiring November 15, 1 989. The second was for $28,159.98 plus 1.5% interest pe r month for breach of a contract for the sale and sup ply of spare parts, services, and training related to thre e of Paramount's helicopters. The third was for an accou nt stated between AAC and Paramount for $62,788.98 for unpaid lease payments and goods, services, and trai ning, plus 1.5% interest per month after September 1989. The contracts were governed by Pennsylvania law.

AAC proffered the relevant lease agreements and inv oices,

and an affidavit from its Vice President of Finance and Administration, Vincent Genovese, detailing the amo unts

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preclude the present suit. However, we are inclined to think that the releases in FSQ, which specifically excluded the PA C claims, would operate as a waiver of a preclusion defense. See Pu blicis, 132 F.3d at 366; cf. Bristol Farmers Market & Auction Co. v. Ar len Realty & Devel. Corp., 589 F.2d 1214, 1220-21 (3d Cir. 1978) (parti es are not precluded from arbitrating claims that would normally be prec luded by the compulsory counterclaim rule if they have agreed to arbitrate those claims); Restatement (Second) of Judgments S 26(1)( a) (providing that parties may agree "in terms or in effect" that a pl aintiff may split a claim).

22not paid and calculating the interest due thereunde r. For

its account stated claim, AAC submitted a November 14, 1991, letter from Genovese to Al Bartone, Paramount 's president. The letter states:

This letter shall formalize our agreement in which you have agreed to make monthly payments of $3,0 00 commencing 1/1/1992 in order to satisfy the debts owed by Paramount to Agusta Aerospace. As of October 31, 1991, the outstanding balance was $88,82 9.02 which includes interest of $10,361.00. Inter est will continue to accrue on the principal amount o f the debt until it is paid in full.

Please indicate your agreement with these t erms by signing below.

Bartone signed "Agreed" on November 14, 1991. Param ount states that, in addition to this letter, it entered into a "short-term lease agreement" with AAC on the same d ay. This agreement gave Paramount the right to lease a newer model 109 helicopter from AAC for an hourly rental fee, and Paramount agreed to attempt to sell this aircraft o n commission. Paramount contends that this new lease agreement was part of a package deal that also incl uded the agreement relating to past debts quoted above. However, Paramount does not challenge AAC's basic underlying evidence regarding the existence and ter ms of the 1987 helicopter lease and the service contract.

Paramount defended against the account stated claim by noting that, although the November 14 Genovese/Bart one letter was signed two days after AAC filed counterc laims,

the amount in the letter differs from that in the counterclaim, and the letter makes no mention of th ose counterclaims. Paramount also argued that AAC did n ot submit proof that it demanded payment before filing the
counterclaims. The District Court found Paramount's arguments persuasive to defeat the account stated c laim, but ultimately irrelevant, because the relief sough t on the account stated claim was exactly the same relief so ught on the two breach of contract claims, on which it gran ted summary judgment to AAC. We agree.

23In fact, Paramount did not effectively challenge AA C's

entitlement to the amounts asserted in the counterc laims, except to offer a number of defenses: an argument t hat the

November 14 letter constituted an accord and satisf action or a novation; a claim that AAC had waived its counterclaims; and various equitable defenses. It a lso asserted a set-off. The District Court rejected the se defenses. We take them up in turn, except for the e quitable defenses, which we dispose of summarily in the marg in.12

A. Accord and Satisfaction or Novation

Paramount contends that there was an accord and satisfaction or a novation, based on the November 1 4 letter.
An accord and satisfaction is a substitute contract for settlement of a debt by some alternative other than full payment. See Occidental Chem. Corp. v. Environmenta l Liners, Inc., 859 F. Supp. 791 (E.D. Pa. 1994). The consideration is the resolution of a disputed claim . The

District Court found that the November 14 letter mi ght be evidence of an accord, but that there was no eviden ce that Paramount had made payment according to the agreeme nt, which is required for satisfaction. See Beechwood C ommons Condominium Ass'n v. Beechwood Commons Assocs., Ltd
., 580 A.2d 1, 5 n.2 (Pa. Super. Ct. 1990). We agree. When an accord is breached, the non-defaulting party can en force, at its option, the underlying agreement or the accord. See

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12. Paramount asserted a hodgepodge of equitable de fenses, which the court held inapplicable to AAC's counterclaims. Est oppel, for example, requires material misrepresentation, reasonable rel iance, and resulting damage. See Greenberg v. Tomlin, 816 F. Supp. 1039, 1055 (E.D. Pa. 1993). The District Court found no evidence of misr epresentation. As for unclean hands, that defense applies when the party seeking relief is guilty of fraud, unconscionable conduct, or bad fai th directly related to the matter at issue that injures the other party an d affects the balance of equities. See Equibank v. Adle, Inc., 595 A.2d 1 284, 1287 (Pa. Super. Ct. 1991). However, Paramount does not allege that the invoices that are the subject of the counterclaim deal with services that were negligently provided, nor would a vibration problem in one heli copter be enough to establish the defense. Furthermore, the court found no evidence of unconscionability or that the contract was against public policy. The equitable defenses are essentially conclusory and w e think that the District Court was correct to reject them.

24Nowicki Constr. Co. v. Panar Corp., 492 A.2d 36, 40 (Pa.

Super. Ct. 1985). Thus, without any evidence of sat isfaction (and there was none), there was not a scintilla of evidence supporting this defense. We find no error in the Di strict Court's reasoning on this point.

Paramount then argued that the letter was a novatio n, extinguishing the former obligation by another new promise. In a novation, the new promise itself sati sfies the preexisting claims, whereas in an accord it is the performance of the new promise that does so. See id . A novation bars revival of the preexisting duty. See Beechwood, 580 A.2d at 5. The essential difference between an accord and a novation is the parties' intent. Se e Nowicki, 492 A.2d at 40. The party asserting a novation has the burden of proof. See Buttonwood Farms, Inc. v. Cars on, 478 A.2d 484, 486 (Pa. Super. Ct. 1984). The District C ourt found that there was no evidence of any kind that t he parties intended to extinguish their obligations un der the original lease and contract.

Paramount claims that a jury could find the letter to be a novation, especially when viewed in context with the lease agreement for the new model 109A helicopter execute d the same day and given that the amount in the letter di ffered
from that stated in the counterclaim. The existence of a substituted contract is generally for the jury. See Proie Bros., Inc. v. Proie, 301 F. Supp. 680, 682 (W.D. P a. 1968), aff'd, 414 F.2d 1365 (3d Cir. 1969). However, we do not think that a reasonable jury could find that the No vember 14 lease agreement or the counterclaim evidence an intent to enter into a novation. There is simply no sugges tion in the record that either of the parties considered th e November 14 letter to be a new contract. On its fac e it is no more than an agreement to pay amounts owed on a cer tain schedule, and Paramount has offered no other eviden ce of the parties' intent.13

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13. If there was a new contract, Paramount further argues, the statute of limitations has run on it, because the countercl aim was never

amended to include the new contract. Because we con clude that there was no new contract, we need not resolve this issue

.

25B. Waiver

Paramount also argues that AAC waived its claim by failing to send dunning notices or to take any step s to collect the debts that were due and owing until Par amount sued. Under Pennsylvania law, waiver of legal right s can arise by clear, unequivocal, and decisive action by a party with knowledge of such rights and evident purpose t o surrender them. Waiver can be express or implied fr om conduct in situations that would support equitable estoppel. The party claiming implied waiver must sh ow that it was misled and prejudiced by the other party's c onduct. See Prousi v. Cruisers Div. of KCS Int'l, Inc., 975 F. Supp. 768, 771-72 (E.D. Pa. 1997). Under these requiremen ts, the court held, Paramount could not prove waiver. Even assuming that AAC made no attempt to collect on its debts until sued, Paramount was neither misled nor prejud iced. Moreover, failure to demand payment is simply not a clear, unequivocal, and decisive action. As long as the cl aim was asserted within the statute of limitations, as it w as, Paramount had no reasonable expectation that it wou ld be
free from the counterclaim.

C. Disputes as to Amount

Paramount also makes several claims about the amoun t due. First, it argues that the award of 1.5% intere st on the goods and services contract was inappropriate, beca use only the helicopter lease agreement provided for in terest, and because many of the invoices for goods and serv ices were issued after September 1989, while interest wa s calculated on the entire amount in controversy star ting from September 1989. See App. at 640. However, as t he District Court observed, Paramount never attempted to rebut AAC's calculation, expressed in the affidavit of its Vice President, Mr. Genovese. We will not allow it to do so on appeal.

Second, Paramount contends that AAC sought compensation for goods and services with respect to a helicopter numbered 7341, which Paramount never own ed or operated. However, Paramount never submitted evi dence
to the District Court to counter AAC's affidavit. A lthough Paramount denied knowledge or information about the

26helicopter in its responses to requests for admissi on, its

general denial is insufficient to create a genuine issue of fact. See United States v. Bottenfield, 442 F.2d 10 07, 1008 (3d Cir. 1971).

Paramount finally argues that there was a differenc e between the amount claimed in the counterclaim ($62,788.98 without interest) and the amount stated in the November 14 letter ($78,468.02 without interest), d espite the fact that the counterclaim was filed two days b efore the letter was sent, and that this creates a genuine is sue of material fact. We disagree, concluding that the Dis trict Court was correct to award judgment on the breach o f
contract claim based on the Vice President's affida vit about the amounts Paramount owed. This is true regardless of what the November 14 letter said, because if it was an accord it was never satisfied and thus Paramount wa s responsible for the initial obligation.

D. The Setoff

Paramount asserted a setoff based on the same facts that grounded its initial claim, i.e., Paramount alleged that the 1989 crash was caused by Agusta's defective manufacturing and maintenance, and that the crash caused Paramount significant harm. Paramount argued that the helicopter that was the subject of the cou nterclaim also had a vibration problem like the problem that caused the crash, although the District Court found the maintenance records difficult to decipher on that p oint. Thus, Paramount contends that it is entitled to rec over from the Agusta defendants for the harm caused by t he crash-related events, which offsets any amount it m ight owe AAC. The District Court rejected the setoff cla im on entire controversy grounds. Because we have found t he entire controversy doctrine inapplicable to Paramou nt's claims, Paramount will be entitled to try to prove its case on remand and, if it prevails, it may offset any re covery against the amount owed on the counterclaims. In su m, we uphold the District Court's determination of the am ount due on the counterclaims. However, because the seto ff may be a valid claim, we will vacate the judgment on th e counterclaims pending resolution of Paramount's cla ims on

remand.

27IV. Conclusion

For the foregoing reasons, we will reverse the Dist rict Court's grant of summary judgment to the Agusta

defendants on Paramount's tort claims and remand fo r further proceedings. We will affirm the District Co urt's
determination of the amount owed on AAC's countercl aims, but vacate the judgment on the counterclaims pendin g disposition of Paramount's tort claims.

A True Copy:

Teste:

Clerk of the United States Court of Appeals

for the Third Circuit

28