## Facts

- Textile Technology Exchange, Inc., a North Carolina corporation, bought and sold textile mill equipment and used Jack Davis, a New York rigger, to remove, transport, repair, and resell equipment.
- Textile Technology sued Davis for breach of an alleged February 1986 oral partnership agreement under which Davis would sell plaintiff’s equipment and split profits equally.
- Textile Technology alleged Davis failed to account for proceeds from equipment sales.
- Davis answered by denying liability, timely asserting lack of personal jurisdiction based on improper service, and pleading a counterclaim for compensation for goods and services provided during the prior six years.
- Lower courts treated the counterclaim as arising from pre–February 1986 dealings, separate from the alleged February 1986 partnership arrangement.

## Issues

1. Whether a defendant who timely pleads lack of personal jurisdiction waives that defense by asserting a counterclaim.
2. How to determine whether a counterclaim is “related” to the plaintiff’s claim so that pleading it does not waive a jurisdictional objection.

## Decision

- The New York Court of Appeals affirmed.
- The court held Davis waived his personal jurisdiction defense by asserting an unrelated counterclaim seeking affirmative relief.
- The court upheld the judgment for plaintiff on the breach claim and the dismissal of Davis’s counterclaim for failure of proof.
- The court adopted a preclusion-based method for determining whether a counterclaim is “related.”

## Legal Principles

- A defendant may waive a lack-of-personal-jurisdiction defense through conduct amounting to voluntary submission to the court’s jurisdiction.
- Pleading an unrelated counterclaim for affirmative relief constitutes voluntary submission and waives an otherwise preserved jurisdictional objection.
- A counterclaim is “related” (and may be asserted without waiver) when the issues it raises could realistically be affected by collateral estoppel from a judgment on the plaintiff’s claim.
- A counterclaim is “unrelated” when a judgment on the plaintiff’s claim would not realistically preclude later litigation of the counterclaim’s issues; asserting such a counterclaim is optional and therefore constitutes invocation of the court’s power inconsistent with a jurisdictional objection.

## Conclusion

The court held that asserting an unrelated counterclaim waives a timely personal-jurisdiction defense, and it defined “relatedness” by asking whether collateral estoppel from the plaintiff’s claim could preclude later litigation of the counterclaim.


Textile Tech. Exch., Inc. v. Davis, 81 N.Y.2d 56 (1993)