Grady et al v. Federal Deposit Insurance Corporation et al

Filing 155

ORDER - denying 144 Motion to Strike. FURTHER ORDERED that each party shall file a supplemental brief by 10:00 a.m., Wednesday, 4/3/2013 discussing items (1), (2) and (3) as set forth in the attached Order. Signed by Senior Judge James A Teilborg on 4/2/2013.(TLB)

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WO

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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Plaintiffs,
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vs.
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Bank of Elmwood; Elmwood Financial)
Corporation; Jonathan Levin; Sarah Levin,)
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Defendants.
_________________________________ )
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Tri City National Bank,
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Counterclaimant,
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vs.
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Michael Grady and Jennifer Grady,
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Counterdefendant.
_________________________________ )
The Federal Deposit Insurance)
Corporation as Receiver for Bank of)
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Elmwood,
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Intervenor.
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Michael Grady; Jennifer Grady,

No. CV 11-2060-PHX-JAT
ORDER

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Pending before the Court is Tri City National Bank’s (TCNB) motion to strike

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Plaintiffs’ answer to TCNB’s counterclaim. TCNB filed its answer and counterclaim on

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April 28, 2010 (as will be discussed more fully below, because TCNB was not a named

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Defendant in the First Amended Complaint, it is not clear to the Court why TCNB

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answered). Thereafter, Plaintiffs moved to amend their complaint. The Court denied

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Plaintiff’s motion to amend.1

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After the Court denied all of Plaintiffs’ requests to amend, TCNB sought to be

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dismissed as a Defendant in this case arguing that there were no claims against it because

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leave to amend was denied. The Court agreed with TCNB. Doc. 122. Specifically, the

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Court’s Order stated:

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Pending before the Court is a motion to strike two claims from Plaintiffs’
Second Amended Complaint. Defendant Tri City National Bank (TCNB)
argues that all claims against it should be dismissed because the Court, on
futility grounds, denied Plaintiffs’ motion to amend to add additional claims
against TCNB (the Court allowed amendment as to other claims). Thus,
TCNB argues that the Second Amended Complaint, which includes claims
against it, runs afoul of the Court’s order.
Plaintiffs respond and argue that the First Amended Complaint had claims
against TCNB. Plaintiffs argue that the Second Amended Complaint reasserts
those claims from the First Amended Complaint, but does not add new claims
that the Court did not allow when the Court denied leave to amend. Plaintiffs
go on to argue that the Court denying leave to amend to add new claims
against TCNB did not operate to dismiss the claims against TCNB that were
listed in the First Amended Complaint.
TCNB replies and argues that the claims in the First Amended Complaint
which Plaintiffs argue survived the motion to amend were claims against Bank
of Elmwood. TCNB acknowledges that it acquired some of the Bank of
Elmwood’s assets from the Federal Deposit Insurance Company (FDIC) after
the FDIC took the Bank of Elmwood into receivership, but TCNB denies that
it and Bank of Elmwood are one and the same for pleading and liability
purposes.2 Further, TCNB notes that the FDIC, not TCNB, moved to be
substituted for the Bank of Elmwood.

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The Court finds that Bank of Elmwood and TCNB are not one and the
same. Thus, any claims against Bank of Elmwood in the First Amended
Complaint do not continue to the Second Amended Complaint as claims
against TCNB.
Accordingly, IT IS ORDERED that the claims against TCNB listed in
the Second Amended Complaint are dismissed, and TCNB is dismissed as a
Defendant. Thus, the motion to strike (Doc. 57) is granted as to TCNB only.
Doc. 122 at 1-2.
The July 14, 2009 First Amended Complaint was the complaint on which the Court

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The history of Plaintiffs’ various motions to amend is recounted in Doc. 102 at 1-4.

[Footnote from Doc. 122] The Court has reviewed the First Amended Complaint
(Doc. 1-2 at 1) and notes that TCNB is not named as a Defendant.
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relied to reach the conclusion in the Order at Doc. 122. The Court has located TCNB’s

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“answer” in which it calls itself an “intervenor/counterclaimant.” Doc. 1-3 at 1-32. This

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filing, which was filed over nine months after the First Amended Complaint, responds to the

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First Amended Complaint. The Court has not located any evidence from the state court

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record that TCNB was granted leave to intervene. The Court further cannot determine

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whether the “answer” was timely.

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TCNB, as evidenced by the Order at Doc. 122, has convinced the Court that it was

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not, and is not, a Defendant in this case. The Court is now concerned by this conclusion

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given that TCNB “answered” the First Amended Complaint as if it was a Defendant, and

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continues to assert “counterclaims” as a “counterclaimant” even though it has convinced the

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Court it was never a Defendant to the First Amended Complaint.

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If TCNB was in fact a Defendant to the First Amended Complaint, then Plaintiffs

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were correct that this Court denying leave to amend to add “new” claims against TCNB did

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not operate as a dismissal of the existing claims against TCNB. See Doc. 122 (summary of

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arguments).

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procedurally the Court is at a loss as to how TCNB can now be a counterclaimant against

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Plaintiffs.

However, if this Court is correct that TCNB was never a Defendant,

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Against this backdrop, the Court must now decide whether Plaintiffs’ answer to the

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counterclaims is untimely. As discussed above, TCNB filed the counterclaims on April 28,

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2010. Plaintiffs answered the counterclaims on March 20, 2013, and amended that answer

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on March 21, 2013. TCNB moved to strike the answer arguing it is 511 days late. Doc. 152

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at 2.

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TCNB has indicated that if this Court grants the motion to strike it will decide whether

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to move for default judgment or voluntarily dismiss its claims. Doc. 148 at 10 (stating that

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once Court grants motion to strike, “TCNB can choose between proceeding to obtain a

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default judgment or even dismissing the Counterclaim under Rule 41....”). Given the

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procedural posture of this case, the Court can not allow TCNB to proceed to default without

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significant further briefing. Accordingly, the Court will allow Plaintiffs’ their untimely
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answer.

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Based on the foregoing,

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IT IS ORDERED that the motion to strike (Doc. 144) is denied.

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IT IS FURTHER ORDERED that each party shall file a supplemental brief by 10:00

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a.m. Wednesday, April 3, 2013, discussing:

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1)

whether a non-party can file a counterclaim;

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2)

whether, assuming TCNB’s April 28, 2010 counterclaims were viable,

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TCNB’s failure to answer and assert counterclaims to the second amended

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complaint (Doc. 56) waived those counterclaims;3

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3)

and, assuming TCNB’s April 28, 2010 counterclaims were viable, and that

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TCNB’s failure to answer the Second Amended Complaint and reassert the

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counterclaims did not constitute a waiver of the counterclaims, did the Court

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striking the claims against TCNB’s in the Second Amended Complaint in the

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order of December 14, 2012 (Doc. 122), by finding TCNB was not a party to

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this case, extinguish TCNB’s right to assert a counterclaim.

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DATED this 2nd day of April, 2013.

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Wagner v. Choice Home Lending, 266 F.R.D. 354, 358-60 (D. Ariz. 2009)
(discussing whether a response to an amended complaint must reassert counterclaims);
Johnson v. Berry, 228 F.Supp.2d. 1071, 1079 (E.D. Mo. 2002) (holding that defendant
abandoned counterclaim when it failed to replead in response to an amended complaint).
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