General Electric Capital Corporation et al v. Ten Forward Dining, Inc. et al

Filing 126

ORDER granting 112 Motion to file and Serve Supplemental Counterclaims signed by Judge John A. Mendez on 2/9/12. (Matson, R)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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GENERAL ELECTRIC CAPITAL
CORPORATION; CEF FUNDING II,
LLC; and CEF FUNDING V, LLC,

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Plaintiffs,

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v.
TEN FORWARD DINING, INC.; et
al.;
Defendants.

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Case No. 2:09-CV-03296-JAM-EFB
ORDER GRANTING COUNTERCLAIMANT EQUITY LENDERS, LLC’S
MOTION FOR LEAVE OF COURT TO
FILE AND SERVE SUPPLEMENTAL
COUNTERCLAIMS

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This matter is before the Court on Equity Lenders, LLC’s

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(“Counter-Claimant”), an Indiana corporation, Motion For Leave of

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Court To File and Serve Supplemental Counterclaims (Doc. #112),

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which is supported by a Memorandum of Points and Authorities (Doc.

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#116).1

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Corporation, a Delaware Corporation; CEF Funding II, LLC, a

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Delaware company; and CEF Funding V, LLC, a Delaware company,

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(collectively “Counter-Defendants”) oppose the motion (Doc. #121).

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Counter-Claimant filed a reply to the opposition (Doc. #122).

Plaintiffs/Counter-Defendants General Electric Capital

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This motion was determined to be suitable for decision without
oral argument. E.D. Cal. L.R. 230(g). The hearing was originally
scheduled on January 25, 2012.
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I.

FACTUAL ALLEGATIONS & PROCEDURAL BACKGROUND

This action originated when Counter-Defendants filed their

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complaint on November 29, 2009.

The complaint alleges that several

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defendants, not including Counter-Claimant, defaulted on or

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breached seven written loan contracts made with Counter-Defendants.

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The loans were allegedly secured by real and personal property

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generally associated with restaurants.

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complaint also seeks declaratory relief against Counter-Claimant

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because Counter-Claimant may have liens against a subset of the

Counter-Defendants’

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Properties known as the “19373 Kobra Properties” and Counter-

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Defendants seek to establish the superiority of their own liens to

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Counter-Claimant’s.

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Counter-Claimant alleges that the owners of the 19373 Kobra

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Properties, also defendants in this action, defaulted on their

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obligations to Counter-Claimant in 2009, and Counter-Claimant

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foreclosed on November 19 or 20, 2009.

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Claimant alleges that it negotiated a pay-off amount for Counter-

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Defendants’ interest in the 19373 Kobra Properties, but that there

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was a dispute as to the final pay-off amount.

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paid the pay-off amount demanded by Counter-Defendants under

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protest, and now seeks to supplement its existing counterclaims

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with three new counterclaims: 1) a counter-claim for an accounting

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of the actual amount due to Counter-Defendants after the default on

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the 19373 Kobra Properties, 2) a counter-claim for declaratory

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relief as to the parties’ interests in the 19373 Kobra Properties,

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and 3) a counter-claim for restitution of any overpayments made by

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Counter-Claimant to Counter-Defendants in relation to the 19373

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Kobra Properties.

In early 2010, Counter-

Counter-Claimant

Counter-Claimant alleges that $338,800 in
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default interest was overpaid to Counter-Defendants and $49,225.12

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in attorney fees were also paid, but the fees were not specifically

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attributed to matters involving the 19373 Kobra Properties.

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This Court has jurisdiction pursuant to 28 U.S.C. § 1332

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because the lawsuit is between citizens of different states and the

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amount in controversy exceeds $75,000.

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II.
A.

OPINION

Legal Standard

The circumstances under which a party may amend and supplement

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their pleadings is governed by Federal Rule of Civil Procedure

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15(d) which provides, “On motion and reasonable notice, the court

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may, on just terms, permit a party to serve a supplemental pleading

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setting out any transaction, occurrence, or event that happened

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after the date of the pleading to be supplemented.”

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15(d).

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Fed.R.Civ.P.

Rule 15(d) is a tool that gives district courts broad

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discretion to allow supplemental pleadings.

Keith v. Volpe, 858

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F.2d 467, 473 (9th Cir. 1988).

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promote judicial economy.

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U.S. Dept. of Interior, 236 F.R.D. 491, 496 (E.D. Cal. 2006).

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15(d) does not require supplemental claims to be part of the same

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transaction or occurrence associated with the original lawsuit.

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Volpe, 858 F.2d at 474.

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relationship . . . between the newly alleged matters and the

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subject of the original action.

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Parenthood of S. Ariz. v. Neely, 130 F.3d 400, 402–403 (9th Cir.

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1997) (Rule 15(d) should not be used to introduce an entirely new

It is also a rule intended to

San Luis & Delta-Mendota Water Auth. v.
Rule

The rule merely requires “some

. . .”

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Id.; but see Planned

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and separate cause of action).

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or undue delay, leave should be given to supplement a pleading with

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a related cause of action that accrued after the filing of the

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original complaint.

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F.R.D. at 496 (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).

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Thus, in the absence of bad faith

San Luis & Delta-Mendota Water Auth., 236

When ruling on a rule 15(d) motion, courts consider a number

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of factors to determine whether leave to file supplemental

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pleadings is proper.

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U.S. Dep’t of Interior, the court collected nine factors that are

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used in the Ninth Circuit to determine whether supplementation is

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appropriate:

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In San Luis & Delta-Mendota Water Auth. v.

(1) The relatedness of the original and supplemental
complaints;
(2) Whether allowing supplementation would serve the
interests of judicial economy;
(3) Whether there is evidence of delay, bad faith or
dilatory motive on the part of the movant, or
evidence of repeated failure to cure deficiencies by
amendments previously allowed;
(4) Whether amendment would impose undue prejudice upon
the opposing party;
(5) Whether amendment would be futile;
(6) Whether final judgment had been rendered;
(7) Whether the district court retains jurisdiction over
the case;
(8) Whether any prior court orders imposed a future
affirmative duty upon defendant; and
(9) Whether the proposed supplemental complaint alleges
that defendants defied a prior court order.
San Luis & Delta-Mendota Water Auth., 236 F.R.D. at 497.
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Discussion

In this case, Counter-Claimant argues that its supplemental
counterclaims are appropriate because they arose from events that
occurred after Counter-Defendants filed their complaint.

Namely,

Counter-Claimant alleges that when they bought out Counter-

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Defendants’ position in the 19373 Kobra Properties subsequent to

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the filing of this lawsuit, they overpaid and are now seeking an

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accounting of the actual amount due and restitution of any amount

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overpaid.

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counterclaims should not be allowed because the counterclaims are

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not part of the same transaction or occurrence that gave rise to

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the allegations in their complaint, as required by Federal Rule of

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Civil Procedure 13(a).

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supplemental pleading lacks a logical relationship to the claims

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Counter-Defendants respond that supplemental

Counter-Defendants also argue that the

alleged in their complaint.
Counter-Defendants’ first argument in opposition to Counter-

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Claimant’s motion fails because it applies the incorrect legal

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standard to a Rule 15(d) motion.

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relies on a transactional requirement, but Rule 15(d) does not

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contain a transactional requirement.

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Thus, whether or not the supplemental counterclaims are part of the

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same transaction or occurrence alleged in the original complaint is

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irrelevant.

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Counter-Defendants’ argument

Volpe, 858 F.2d at 474.

Counter-Defendants’ second argument that the supplemental

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counter-claims are not logically related to the claims in the

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original complaint bears closer scrutiny because that is a factor

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that courts should consider when deciding a Rule 15(d) motion.

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Luis & Delta-Mendota Water Auth., 236 F.R.D. at 497.

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Counter-Defendants’ argument is that since the original claims in

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this lawsuit deal with the default on loans in 2008 and 2009 but

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the proposed supplemental counterclaims deal with the 2011 pay-off

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and request for an accounting by Counter-Claimant, the proposed

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counterclaims are not sufficiently related to the ongoing
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The gist of

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litigation to merit inclusion.

Counter-Claimant responds that its

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already-pleaded counterclaims contain both a claim for an

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accounting and a claim for declaratory relief that alleges improper

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accounting of the amount due on the 19373 Kobra Properties.

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claim was pleaded against Counter-Defendants in a timely answer.

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Counter-Claimant also argues that Counter-Defendants sought to

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strip Counter-Claimant of its rights to the 19373 Kobra Properties

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in the original complaint.

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that the supplemental counterclaims are related not only to their

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Thus, it is Counter-Claimant’s position

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already pleaded counterclaims, but also to the claims in the

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original complaint.

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In this case, Counter-Claimant’s argument is more persuasive.

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The original action was filed to protect Counter-Defendants’

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interest in the properties, and to that end they sought declaratory

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relief that would strip Counter-Claimant of any rights in the 19373

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Kobra Properties.

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foreclosure action, but was instead designed to obtain a

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declaration as to the rights of all parties to the subject

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properties.

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a similar resolution, bear a logical relationship to this lawsuit,

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and this factor favors granting Counter-Claimant’s motion.

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The lawsuit was not limited to a mere

Thus, the proposed supplemental counterclaims, seeking

The next factor, whether the supplemental pleading serves

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judicial economy, favors Counter-Claimant.

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reason to require a separate action to litigate this closely

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related issue when all claims can be resolved in the present

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litigation.

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The Court sees little

There is no evidence of delay, bad faith, or dilatory motive
on the part of Counter-Claimant.

This factor favors granting the
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Rule 15(d) motion.
The Court next considers whether granting the motion would

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create undue prejudice to Counter-Defendants.

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claim that they will experience hardship if the motion is granted,

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but they do not say what that hardship will be.

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specificity as to hardship, the Court cannot find that Counter-

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Defendants will be prejudiced.

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motion.

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Counter-Defendants

Without more

This factor favors granting the

The remaining factors all favor granting the motion.

There is

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no evidence that the supplemental counterclaims are futile.

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final judgment has been rendered.

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supplemental claims will affect the Court’s jurisdiction in any way

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because jurisdiction is predicated on diversity of citizenship,

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which is not affected by the supplemental counterclaims.

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there are no prior orders at issue in this motion.

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No

There is no indication that the

Finally,

In summary, all of the factors considered by the Court support

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granting Counter-Claimant’s Rule 15(d) motion to supplement the

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pleadings.

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pleading should be granted.

Accordingly, leave to file and serve the supplemental

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III. ORDER

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The Court has carefully reviewed all of the papers filed in

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support of and in opposition to this motion.

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stated above, Counter-Claimant’s motion is GRANTED.

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supplemental counterclaims (Doc. #112) shall be deemed filed as of

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the date of this order.

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supplemental pleading within 20 days of this order.

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For the reasons
The

Counter-Defendants shall respond to this

IT IS SO ORDERED.
Dated: February 9, 2012
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____________________________
JOHN A. MENDEZ,
UNITED STATES DISTRICT JUDGE