XY, LLC v. Trans Ova Genetics, LC

Filing 376

ORDER granting in part and denying in part 316 Motion Construe Antitrust Counterclaims as Recoupment Counterclaims as to Inguran. Trans Ova may assert its substantive antitrust claims at trial as a recoupment defense solely against XY, and may seek by way of remedy an offset in an amount no greater than the amount of XYs recovery, should any be awarded, by Judge William J. Martinez on 12/30/2015.(cthom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 13-cv-0876-WJM-NYW
XY, LLC,
Plaintiff / Counterclaim Defendant,
v.
TRANS OVA GENETICS, LC,
Defendant / Counterclaim Plaintiff / Third-Party Plaintiff,
v.
INGURAN, LLC,
Third-Party Defendant.

ORDER GRANTING IN PART AND DENYING IN PART
MOTION TO CONSTRUE ANTITRUST COUNTERCLAIMS AS
RECOUPMENT COUNTERCLAIMS

On March 26, 2015, this Court granted summary judgment in favor of
Counterclaim Defendant XY, LLC (“XY”) and Third-Party Defendant Inguran, LLC
(“Inguran”), holding that Counterclaim Plaintiff and Third-Party Plaintiff Trans Ova
Genetics, LC (“Trans Ova”) was barred by the statute of limitations from asserting its
claims under the Sherman Act, 15 U.S.C. § 2. (ECF No. 284.) Before the Court is
Trans Ova’s Motion to Construe Antitrust Counterclaims as Recoupment Counterclaims
(“Motion”), which seeks to reassert the antitrust claims as claims in recoupment. (ECF
No. 316.) For the reasons stated below, the Motion is granted as to the recoupment
claims against XY, but denied as to the claims against Inguran.

I. DISCUSSION
Trans Ova’s operative Amended Answer and Counterclaims, filed on April 25,
2014, includes Sherman Act claims against both XY and Inguran but does not assert a
recoupment defense. (ECF No. 192 at 59–60.) After the Court granted summary
judgment on the Sherman Act counterclaims based on the statute of limitations, Trans
Ova filed a Motion for Reconsideration. (ECF No. 288.) While the Reconsideration
motion was pending, a Final Pretrial Order was entered in which Trans Ova included
the following statement:
In the event the Court denies Trans Ova’s Motion for
Reconsideration, Trans Ova will ask the Court to construe its
antitrust counterclaims as affirmative defenses in the
equitable nature of recoupment. The evidence and analysis
of recoupment as a defense are identical to [the]
affirmatively stated counterclaims, but permit only an offset
against money damages awarded to XY rather than an
affirmative damages award which could exceed any amount
XY may be awarded. As a defense, recoupment is not
subject to a limitation on actions.
(ECF No. 301 at 22.) The Court denied Trans Ova’s Motion for Reconsideration on
September 23, 2015 (ECF No. 315), and the instant Motion f ollowed.
The Court will discuss in turn each issue raised by Trans Ova’s Motion:
(1) whether its pleadings may be amended to bring its substantive antitrust claims via a
recoupment defense; and (2) whether such claims constitute proper claims in
recoupment that may be asserted against XY and Inguran.
A.

Legal Standard for Amendment
Trans Ova argues that its recoupment claims are factually and legally identical to

claims already asserted in its Amended Counterclaims, and that “no true amendment is
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thus necessary,” but nevertheless moves pursuant to Federal Rule of Civil Procedure
15(a)(2) for leave to amend its pleadings. (ECF No. 316 at 1.) The Court disagrees
with Trans Ova’s assertion, made without any citation to authority, that no amendment
is necessary when it attempts to raise a previously unasserted defense. Accordingly,
as Trans Ova seeks to belatedly assert a recoupment defense, it must obtain leave to
amend.
Rule 15(a)(2) requires a party to seek the Court’s leave to amend its pleadings
where the time provided for a first amendment in Rule 15(a)(1) has passed, and where
the opposing party has not consented to the amendment in writing. “The court should
freely give leave when justice so requires.” Fed. R. Civ. P. 15(a)(2). However, after the
Scheduling Order’s deadline for amendment of pleadings has elapsed, a party seeking
to amend must also show that “good cause” exists to modify the schedule under Rule
16(b)(4). Gorsuch, Ltd. v. Wells Fargo Nat’l Bank Assoc., 771 F.3d 1230, 1240–41
(10th Cir. 2014); SIL-FLO, Inc. v. SFHC, Inc., 917 F.2d 1507, 1518–19 (10th Cir. 1990).
Trans Ova’s initial Motion does not discuss the good cause standard, but in reply to the
assertion by XY and Inguran that such a showing is required, Trans Ova does not
contest that it applies. (ECF No. 338 at 2–3.) Instead, T rans Ova argues that good
cause has been shown and its delay in asserting these recoupment claims was
appropriate. (Id.)
The Court first notes that Trans Ova’s decision not to plead recoupment in the
alternative, particularly after XY and Inguran filed their Motion for Summary Judgment
as to the antitrust claims (ECF No. 229), was a questionable strategy. Trans Ova
contends in its Reply that the Court has already expressed its approval of Trans Ova’s
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counsel’s decision not to “burden[] the Court with additional paper” by filing the instant
Motion until after receiving a ruling on the Motion for Reconsideration (see ECF No. 338
at 2–3), but Trans Ova misinterprets the Court’s statements as approving of Trans
Ova’s delay in asserting recoupment after the deadline for amendments. To the
contrary, the Court has not yet made a good cause finding as to that delay.
Regardless, the Court now finds that good cause exists here. While recoupment
could—and perhaps should—have been pled in the alternative to the affirmative
Sherman Act claims, that alternative pleading was unnecessary under this case’s
particular circumstances because the entirety of the factual and legal basis for the
defense had been timely pled and fully discovered. Because of the substantive
equivalence of these claims, XY and Inguran were not prejudiced by the delay.
Consequently, Trans Ova proceeded diligently after receiving the Court’s order denying
reconsideration by promptly filing the instant Motion to add the recoupment defense.
Accordingly, the Court finds that good cause exists to permit a modification of the
amendment deadline under Rule 16(b)(4), and “freely give[s] leave” to amend under
Rule 15(a)(2). Trans Ova’s recoupment defense shall therefore be permitted to remain
as pled in the Final Pretrial Order, subject to the below analysis on the merits. (ECF
No. 301 at 22.)
B.

Recoupment
1.

Elements of a Recoupment Claim

“Recoupment is in the nature of a defense arising out of some feature of the
transaction upon which the plaintiff’s action is grounded.” Bull v. United States, 295
U.S. 247, 262 (1935). In essence, a successf ul claim in recoupment allows a
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defendant to offset the amount of a successful plaintiff’s recovery. “Recoupment claims
are generally not barred by a statute of limitations so long as the main action is timely.”
Reiter v. Cooper, 507 U.S. 258, 264 (1993).
“In order to constitute a claim in recoupment (1) the claim must arise from the
same transaction or occurrence as the plaintiff’s suit; (2) the claim must seek relief of
the same kind or nature; and (3) the claim must seek an amount not in excess of the
plaintiff’s claim.” Fed. Deposit Ins. Corp. v. Hulsey, 22 F.3d 1472, 1487 (10th Cir. 1994)
(citing Frederick v. United States, 386 F.2d 481, 488 (5th Cir. 1967)); Berrey v. Asarco
Inc., 439 F.3d 636, 645 (10th Cir. 2006) (same). A recoupment counterclaim satisfies
the first element (“the same transaction or occurrence”) if it is a compulsory
counterclaim under Federal Rule of Civil Procedure 13(a), which requires a showing
that “the issues of fact and law raised by the principal claim and the counterclaim are
largely the same.” Hulsey, 22 F.3d at 1487. The second element is satisfied if both the
principal claim and the recoupment claim seek monetary damages, and the third
element is satisfied if the recoupment claim is limited to an offset of the amount of
damages plaintiff seeks. Id. at 1487–88 (noting that a party whose affirmative
counterclaim is properly recast as a recoupment claim “should be granted leave to
amend the pleadings” and reduce its prayer for damages).
XY and Inguran argue that Trans Ova’s antitrust claim cannot properly be
asserted in recoupment because it deals with different issues of fact and law from XY’s
principal claims of breach of contract and patent infringement. (ECF No. 319 at 8–10.)
On its face, this argument appears persuasive; the Sherman Act requires a completely

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different, and quite complex, analysis from contract and patent law. However, on
review of Tenth Circuit authority applying this prong of the recoupment standard, the
Court concludes that it is not a strict requirement that both claims involve identical
factual and legal issues.
In Hulsey, the Federal Deposit Insurance Corporation (the “FDIC”) was a
successor in interest to a loan that a now-insolvent bank had issued to the defendant.
22 F.3d at 1477. The FDIC filed an action seeking to foreclose on properties securing
the loan, and in response, the defendant filed counterclaims asserting breach of the loan
agreement and various tort claims. Id. at 1478. Despite the fact that the foreclosure
action involved different legal issues from the tort claims, and “more evidence will be
necessary to support or refute the counterclaims relating to the loan agreements than is
necessary to support the FDIC’s suit,” the Tenth Circuit held that those of the tort-based
counterclaims that arose out of the loan agreements satisfied the first element for claims
in recoupment. Id. at 1487. This was so because the issues of fact and law, though not
identical, “ar[o]se out of the same debtor/creditor relationship” in that those tort claims
challenged “actions taken in administering and collecting the loan and preserving the
collateral securing the loan. Thus, the issues of fact and law surrounding this
relationship are largely the same.” Id. Accordingly, the Tenth Circuit remanded to the
district court for a determination of which counterclaims arose from the loan agreements,
which could constitute claims in recoupment, and which counterclaims alleged actions
involving the loan transfer agreements between the now-insolvent bank and the FDIC,
which would “interject new controversies into the case . . . and therefore are not claims
in recoupment.” Id.
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Following the guidance provided by Hulsey, the Court finds that Trans Ova’s
antitrust claims involve largely the same issues of fact and law as XY’s breach of
contract and infringement claims because the alleged anticompetitive acts arise from
the same license agreement and resulting “relationship” between XY and Trans Ova.
Like Hulsey, these claims all flow from a single contractual agreement and the
relationship created by that agreement, which may be deemed to involve the same
issues of fact and law for purposes of recoupment. Although additional evidence
regarding market power and anticompetitive effects is required to present Trans Ova’s
antitrust claims, that evidence relates to the license agreement and the subsequent
relationship between XY and Trans Ova, in parallel to the evidence supporting the tort
counterclaims arising from the loan agreement in Hulsey. See id. Accordingly, the
Court concludes that the first element for a claim in recoupment is satisfied here.
XY and Inguran next argue that the second element of a recoupment claim is not
satisfied because Trans Ova has not sought a specific amount of money damages
resulting from the alleged antitrust violations. (ECF No. 319 at 10–11.) The Court is
not persuaded that this prevents Trans Ova from asserting a proper claim in
recoupment, particularly in light of Hulsey. 22 F.3d at 1488 (if the court determines a
claim is a proper claim in recoupment, the claimant “should be granted leave to amend
the pleadings and to dismiss their prayer for punitive damages”). Both XY and Trans
Ova seek monetary damages, which is sufficient to satisfy the second requirement.
See id. at 1487. Furthermore, the inherent structure of a claim in recoupment limits the
available remedy to an offset of whatever monetary amount XY is awarded in the event
that it is successful on its claims, and the jury shall be instructed accordingly. As such,
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the third element is also satisfied.
The Court concludes that Trans Ova’s proposed recoupment claim satisfies the
applicable requirements in this Circuit, and all three elements are met.
2.

Inguran

XY and Inguran argue that Trans Ova’s recoupment claim is improper because it
is asserted against Inguran, a third party, in addition to XY. (ECF No. 319 at 5–8.) XY
and Inguran’s brief cites cases emphasizing that a recoupment claim may not be used
to circumvent the statute of limitations on an affirmative cause of action. (Id. (citing
United States v. Dalm, 494 U.S. 596, 606–08 (1990); City of St. Paul v. Evans, 344
F.3d 1029, 1035 (9th Cir. 2003)).) However, these cases are not precisely on point; the
cited opinions in both Dalm and Saint Paul did not explicitly hold that the claims were
not proper recoupment claims, instead ruling that the court lacked jurisdiction to
consider the plaintiffs’ claims before reaching the issue. See Dalm, 494 U.S. at
607–08; City of St. Paul, 344 F.3d at 1035–36. The Court is therefore unpersuaded by
these citations.
Nevertheless, as XY and Inguran note, Trans Ova has failed to present any
authority for the proposition that a recoupment claim may be asserted against a third
party. Indeed, Trans Ova admits that it is not entitled to any recovery in the form of an
offset “if XY and Inguran are not entitled to monetary relief . . . .” (ECF No. 338 at 10.)
Inguran cannot be entitled to monetary relief in this action because it has brought no
claims; as such, Trans Ova effectively concedes that it cannot obtain any recovery from
Inguran via its recoupment claim.

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Trans Ova’s contention that Inguran is factually involved in XY’s alleged
anticompetitive actions does not alter this conclusion. W hile Trans Ova may still seek
to prove its factual allegations that Inguran controlled and led XY to take anticompetitive
actions that violated the Sherman Act, Trans Ova may not seek to hold Inguran, a
Third-Party Defendant, separately liable for an antitrust injury by way of a recoupment
claim, because recoupment can only be asserted as a defense. See Citizen Band
Potawatomi Indian Tribe of Okla. v. Okla. Tax Comm’n, 888 F.2d 1303, 1305 (10th Cir.
1989) (“Recoupment is purely defensive and not offensive and applies only to the
abatement, reduction, or mitigation of the damages claimed by plaintiff.” (internal
citations, brackets, and emphasis omitted)), aff’d in part, rev’d in part on other grounds,
498 U.S. 505 (1991).
As such, the Court holds that Trans Ova may not bring a claim in recoupment
against Inguran, and may only assert its recoupment defense against XY.
II. CONCLUSION
For the reasons set forth above, the Court hereby ORDERS as follows:
1.

Trans Ova’s Motion to Construe Antitrust Counterclaims as Recoupment
Counterclaims (ECF No. 316) is GRANTED IN PART as to XY and DENIED IN
PART as to Inguran; and

2.

Trans Ova may assert its substantive antitrust claims at trial as a recoupment
defense solely against XY, and may seek by way of remedy an offset in an
amount no greater than the amount of XY’s recovery, should any be awarded.

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Dated this 30th day of December, 2015.
BY THE COURT:

William J. Martínez
United States District Judge

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