Supreme Manufacturing Company, Inc. v. U.S. Beverage, Inc. et al
MEMORANDUM OPINION AND ORDER, denying 19 MOTION to Strike 18 Counterclaim filed by Supreme Manufacturing Company, Inc. Signed by Hon. Chief Judge Mark E. Fuller on 5/5/09. (Attachments: # 1 appeals checklist)(vma, )
IN THE UNTIED STATES DISTRICT COURT F O R THE MIDDLE DISTRICT OF ALABAMA N O R T H E R N DIVISION S U P R E M E MANUFACTURING, C O M P A N Y , INC., P la in tif f , v. U .S . BEVERAGE, INC., et al., D e f e n d a n ts. ) ) ) ) ) ) ) ) ) )
CASE NO. 2:08-cv-832-MEF (W O - Do Not Publish)
MEMORANDUM OPINION AND ORDER
I . INTRODUCTION T h is action is presently before the Court on Plaintiff Supreme Manufacturing C o m p a n y, Inc.'s ("Plaintiff") Motion to Strike Defendants' Amendment Adding C o u n te rc la im (Doc. #19) filed on March 3, 2009. Plaintiff seeks to strike the Counterclaim f ile d by Defendants U.S. Beverage, Grady Dowling Kittrell, and Thomas Going Clark, III (c o lle c tiv e ly "Defendants") on February 25, 2009. (Doc. #18). After careful review of the s u b m iss io n s made by the parties, the Court finds that the Plaintiff's Motion to Strike is due to be DENIED. I I . JURISDICTION AND VENUE J u ris d ic tio n over Plaintiff's claims is proper under 28 U.S.C. §§ 1332 (diversity). The parties do not contest personal jurisdiction or venue, and the Court finds adequate a lle g a tio n s in support of both personal jurisdiction and venue.
III. PROCEDURAL BACKGROUND P la in tif f 's Complaint (Doc. #1) filed on October 15, 2008, seeks $349,669.26 in c o m p e n s a to ry damages for breach of contract. Plaintiff also seeks attorney's fees, in te re s ts , and costs against Defendants. Plaintiff allege Defendants failed to pay for juice p ro d u c ts that Plaintiff delivered. On November 6, 2008, Defendants filed an Answer. (Doc. # 7). Defendants' Answer did not include any counterclaims but included several a f f irm a tiv e defenses, including lack of consideration, lack of performance, nonc o n f o rm in g goods, and accord and satisfaction. Several months later, Defendants filed a C o u n te rc la im on February 25, 2009. (Doc. #18). The Counterclaim includes nine counts a n d alleges that Plaintiff engaged in false labeling and false advertising in violation of the L a n h a m Act, breached their contract with Defendants, and breached several express and im p lie d warranties under the Uniform Commercial Code ("U.C.C."). Defendants' C o u n te rc la im also alleges fraud, negligent misrepresentation, and unjust enrichment. Plaintiff filed a Motion to Strike Defendants' Counterclaim (Doc. #19) on March 3, 2009. There, Plaintiff argues that Defendants' counterclaims are compulsory counterclaims and s h o u ld be barred under Fed. R. Civ. P. 13(a) because they were not raised in Defendants' A n s w e r. Defendants' responded in a Brief in Opposition to the Plaintiff's Motion to S trik e Defendants' Counterclaim filed on March 16, 2009. (Doc. #22). In their response, D e f e n d a n ts argue that their counterclaims are permissive or that, in the alternative, the C o u rt should deny Plaintiff's Motion to Strike according to equitable principles.
According to the Court's Uniform Schedule Order of December 17, 2008 (Doc. #13), the tria l in this case is set for November 9, 2009, in Montgomery, Alabama, and the deadline f o r amending pleadings is February 25, 2009. I V . DISCUSSION A . Rule 13(a) Compulsory Counterclaims F e d . R. Civ. P. 13 ("Rule 13") divides counterclaims into two categories: c o m p u ls o ry and permissive. A counterclaim is either compulsory or permissive a c c o rd in g to its relationship to the opposing party's claim. Id. Rule 13(a) defines a c o m p u ls o ry counterclaim as any claim that "arises out of the transaction or occurrence th a t is the subject matter of the opposing party's claim." Id. A permissive counterclaim h a s its roots in a separate transaction or occurrence and is governed by Rule 13(b). 6 W r ig h t, Miller, & Kane, Federal Practice and Procedure § 1409 (2d ed. 1990). When a p a rty fails to plead a compulsory counterclaim, it is precluded from asserting that claim in f u tu re litigation. Nippon Credit Bank, Ltd. v. Matthews, 291 F.3d 738, 755 (11th Cir. 2 0 0 2 ) (stating that compulsory counterclaims which are not brought are "thereafter b a rre d " ) (citing Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n.1 (1974)). However, for a claim to qualify as a compulsory counterclaim under Rule 13(a), it m u s t be a claim which the pleader has against an opposing party "at the time of serving th e pleading." Fed. R. Civ. P. 13(a). A counterclaim that is acquired by the defendant a fte r he has answered the complaint is not compulsory, even if it arises out of the same
transaction as does the plaintiff's claim. Steinberg v. St. Paul Mercury Ins. Co., 108 F .R .D . 355, 358 (S.D. Ga. 1985); see also Dillard v. Sec. Pac. Brokers, Inc., 835 F.2d 6 0 7 , 608 (5th Cir. 1988) (finding that a counterclaim acquired by a defendant after the d e f e n d a n t has answered is not considered compulsory, even if it arises out of the same tra n s a c tio n as the plaintiff's claim); 3 Moore's Federal Practice § 13.14 (3d ed. 1997) (s ta tin g that "the timing if a counterclaim and its classification as compulsory do not b e c o m e vital until a second action is brought"); but cf. Crown Life. Ins. Co. v. Am. Nat'l B a n k & Trust Co., 35 F.3d 296, 300 (7th Cir. 1994) (barring a compulsory counterclaim in the same action where defendant failed to counterclaim in the answer but attempted to f ile a claim three months after summary judgment had been granted in favor of plaintiff). H e re , Plaintiff's Complaint alleges breach of contract. Defendants filed an A n s w e r that did not include any counterclaims. Several months later, but before the d e a d lin e for amending pleadings had expired, Defendants filed a Counterclaim. Defendants' Counterclaim alleges Plaintiff breached its contract with Defendants, b re a c h e d several express and implied warranties under U.C.C., acted fraudulently, and n e g lig e n tly misrepresented its delivered goods. Defendants' Counterclaim also includes c la im s of unjust enrichment and false labeling and false advertising in violation of the L a n h a m Act. Defendants argue that its counterclaims do not arise out of the transaction o r occurrence that is the subject matter of Plaintiff's claims because they include federal c la im s , such as Lanham Act violations. The Court disagrees that Defendants' claims do
not arise from the same transaction or occurrence as Plaintiff's claim, but the Court a g re e s that Defendants' counterclaims are not compulsory counterclaims. D e f e n d a n ts' counterclaims do not qualify as a compulsory counterclaims under R u le 13(a) because Defendants' discerned its counterclaims during discovery. See Doc. # 2 2 , pg. 4, 6. Defendants did not acquire its counterclaims until after it answered P la in tif f 's Complaint. Accordingly, Defendants' counterclaims are not compulsory and a re not barred in this lawsuit. B . Rule 13(f) Amending Pleadings In the alternative, under Fed. R. Civ. P. 13(f), courts may allow a party to amend a p le a d in g to add a compulsory counterclaim if the counterclaim was omitted "through o v e rs ig h t, inadvertence, or excusable neglect, or when justice so requires." Id. In this C irc u it, "Rule 13(f) does not give a party the privilege of totally neglecting its case and ig n o rin g time limitations imposed by the Federal Rules of Civil Procedure." Rohner, G e h r ig & Co. v. Capital City Bank, 655 F.2d 571, 576 (5th Cir. Unit B Sept. 1981) (a f f irm in g district court decision that Rule 13(f) motion for leave to add an omitted c o u n te rc la im was inexcusably untimely because the court found (1) the opposing party w o u ld be prejudiced; (2) the trial court would have to undergo additional strain on its d o c k e t; and (3) defendant's reason for the delay was simply that he overlooked the p o s s ib ility of the counterclaim)1 ; see also Imperial Enter., Inc. v. Fireman's Fund Ins. In Bonner v. City of Prichard, Ala., 661 F.2d 1206, 1209 (11th Cir. Nov. 3, 1981) (en banc), the Eleventh Circuit adopted as binding precedent all Fifth Circuit decisions handed down prior to 5
Co., 535 F.2d 287 (5th Cir. 1976) (finding that the district court did not abuse its d is c re tio n in denying the motion to amend with respect to a counterclaim where the d e f e n d a n t was aware of the facts underlying its alleged counterclaim for almost a year b e f o re it made its motion). However, the purpose behind Rule 13(a) is to prevent m u ltip lic ity of lawsuits. "The requirement that counterclaims arising out of the same tra n s a c tio n or occurrence as the opposing party's claim `shall' be stated in the pleadings w a s designed to prevent multiplicity of actions and to achieve resolution in a single la w s u it of all disputes arising out of common matters." S. Constr. Co., Inc. v. Pickard, 3 7 1 U.S. 57, 60 (1962). Plaintiff filed its Complaint on October 15, 2008, alleging that Defendants b re a c h e d their contract with Plaintiff by failing to pay for juice products. On November 6 , 2008, Defendants filed an Answer. Defendants' Answer did not include any c o u n te rc la im s but did include several affirmative defenses, including lack of c o n s id e ra tio n , lack of performance, non-conforming goods, and accord and satisfaction. On February 25, 2009, four months after Plaintiff's Complaint and before this Court's d e a d lin e for amending pleadings, Defendants filed its Counterclaim. In Plaintiff's M o tio n to Strike Defendants' Counterclaim filed on March 3, 2009, Plaintiff argues that D e f e n d a n ts ' omitted counterclaims, if permitted, would "overly complicate this simple b re a c h of contract case" and "delay the trial." Doc. #19, ¶ 9. Defendants contend that it
the close of business on September 30, 1981. 6
put Plaintiff on notice of its intentions to file a counterclaim in its Answer, which c o n ta in s several affirmative defenses, and its Report of Rule 26(f). The Court does not f in d that Defendants have delayed the interest of justice by filing its counterclaims. Further, the Court finds that the Plaintiff has not been prejudiced by the minimal delay of n o tic e . Accordingly, even if Defendants' counterclaims were compulsory, the Court w o u ld permit Defendants to amend its pleading under Rule 13(f) to prevent multiplicity o f lawsuits and promote judicial efficiency. V. CONCLUSION F o r the foregoing reasons, the Plaintiff's Motion to Strike Defendant's C o u n te rc la im (Doc. #19) is DENIED. DONE this the 5th day of May, 2009. /s/ Mark E. Fuller CHIEF UNITED STATES DISTRICT JUDGE
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