Eshelman v. Auerbach et al

Filing 116

ORDER: the court GRANTS Eshelman's motion to dismiss for failure to state a claim upon which relief can be granted [D.E. 100], and DENIES as moot Eshelman's motion for relief under California's anti-SLAPP statute. Signed by Chief Judge James C. Dever III on 6/12/2017. (Jenkins, C.)

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF NORTH CAROLINA
SOUTHERN DIVISION
No. 7:16-CV-18-D

FREDRIC N. ESHELMAN,
Plamtiff,

v.

)
)
)
)

ORDER

)

PUMA BIOTECHNOLOGY, INC.,
Defendant.

)
)
)
)

On February 2, 2016, Fredric N. Eshelman ("Eshelman") filed a complaint against Puma
Biotechnology, Inc., ("Puma") alleging libel per se and libel per quod [D.E. 1, 5]. On February 6,
2017, the court denied Puma's motion to dismiss for lack of personal jurisdiction, to dismiss for
failure to state a claim, to transfer the case, and for relief under California's Anti-SLAPP statute
·[D.E. 77]. On February 21, 2017, Puma answered Eshelman's complaint and asserted counterclaims
oflibel ~ se and libel per quod [D.E. 86].
On March 14, 2017, Eshelman moved to dismiss Puma's counterclaims pursuant to Federal
Rule ofCivil Procedure 12(b)(6) and to strike Puma's counterclaims.under California's Anti-SLAPP
statute [D.E. 100] and filed a memorandum in support [D.E. 101]. On March 29, 2017, Puma
responded in opposition to Eshelman's motion to dismiss [D.E. 104]. OnApril18, 2017, Eshelman
replied [D.E. 109]. As explained below, the court grants Eshelman's motion to dismiss.
I.
The court discussed the details ofEshelman' s factual allegations and his claims against Puma
in detail in this court's order denying Puma's motion to dismiss for lack of personal jurisdiction, to
transfer the case, and for relief under California's Anti-SLAPP statute.

See [D.E. 77] 1-3.

Essentially, Eshelman alleged that on January 7, 2016, in the course of a proxy contest Eshelman
initiated, Puma posted a link on its investor-relations website to download an "Investor Presentation"

that falsely stated or gave the impression that Eshelman had been personally and culpably involved
in clinical-trial fraud, when in fact Eshelman's company had been the victim of such fraud. See id.;
Compl. [D .E. 5] ~~ 46-82. One of Puma's allegedly libelous statements in the Investor Presentation
was that "Eshelman's misrepresentations are no surprise given his history." Compl.

~~

50, 70.

Eshelman did not claim that this statement was libelous because it falsely gave the impression that
Eshelman had made "misrepresentations." Rather, the basis ofEshelman' s libel claims was Puma's
suggestion that Eshelman's "history" included personal, culpable involvement in clinical-trial fraud.
Id. ~~ 46-82.
Puma's asserts counterclaims of libel rurr se and libel per quod on the basis of statements
Eshelman made on November 30, 2015, and January 4, 2016, during the same proxy contest.
See Ans. [D.E. 86] ~~ 25-73. Puma counterclaims that Eshelm~ misrepresented the experience of
members of Puma's board of directors and falsely accused Puma of making false and misleading
statements to investors in violation of securities law. Puma alleges that in a November 30, 2015,
presentation Eshelman libeled Puma by falsely asserting that the "current board has limited public
company corporate governance and oversight experience," that the board's "Drug Development and
Regulatory" experience was limited to the experience of one board member, that the board's
experience with mergers and acquisitions was limited to one board member, that "the current board
members have limited oncology background," and that "only one current board member ha[d]
significant experience" with "[i]nvestment." Id. ~~ 32, 57. Puma also alleges that, in a January 4,
2016, presentation, Eshelman falsely asserted or suggested that Puma had lied to shareholders and
concealed information by contrasting statements Puma made on July 22, 2014, with statements Puma
made on November 30,2015, and claiming the statements were inconsistent. Id. ~~ 26-31,47-52.

II.
Eshelman moves to dismiss Puma's counterclaims as time-barred, or in the alternative for
failure to state a claim. This court has subject-matter jurisdiction based on diversity jurisdiction.

2

Thus, the court applies state substantive principles and federal procedural rules. See Erie R.R. v.
Tompkins, 304 U.S. 64, 78-80 (1938); Dixon v. Edwards, 290 F.3d 699, 710 (4th Cir. 2002).
A motion to dismiss under Rule 12(b)(6) tests the legal and factual sufficiency of the
complaint. See Fed. R. Civ. P.12(b)(6);Ashcro:ftv. lgbal, 556U.S. 662,678 (2009); BellAtl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007); Coleman v. Md. Court of Appeals, 626 F.3d 187, 190 (4th
Cir. 2010), affQ, 566 U.S. 30 (2012); Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008);
accord Erickson v. Pardus, 551 U.S. 89, 93-94 (2007) (per curiam). The court "accepts all well-pled
facts as true and construes these facts in the light most favorable to the plaintiff in weighing the legal
sufficiency of the complaint." Nemet Chevrolet. Ltd. v. Consumeraffairs.com. Inc., 591 F.3d 250,
255 (4th Cir. 2009); see Burbach Broad. Co. of Del. v. Elkins Radio Cor,p., 278 F.3d 401,405-06
(4th Cir. 2002). The court need not, however, accept as true a complaint's "legal conclusions,
elements of a cause of action, and bare assertions devoid of further factual enhancement." Nemet
Chevrolet. Ltd., 591 F.3d at 255. Moreover, this court can consider documents relied on by the
parties in their briefing if they are integral to and explicitly relied on in the complaint, and their
authenticity is undisputed. See Occupy Columbia v. Haley, 738 F.3d 107, 117 n.7 (4th Cir. 2013).
A motion to dismiss under Rule 12(b)(6) "generally cannot reach the merits ofan affirmative
defense, such as the defense that the plaintiff's claim is time-barred" Goodman v. Praxair. Inc., 494
F.3d 458, 464 (4th Cir. 2007) (en bane). Nevertheless, a district court may reach the merits of an
affirmative defense "if all facts necessary to the affirmative defense clearly appear on the face of the
complaint." Id. (emphasis omitted). "A complaint showing that the statute of limitations has run
on the claim is the most common situation in which the affirmative defense appears on the face of
the pleading, rendering dismissal appropriate." Brooks v. City ofWinston-Salem. N.C., 85 F .3d 178,
181 (4th Cir. 1996) (quotation omitted). Thus, failure to comply with the statute oflimitations is
"a recognized basis for dismissal" under Rule 12(b)(6). Evans v. Trinity Indus .. Inc., 137 F. Supp.
3d 877, 881 (E.D. Va. 2015); see Brooks, 85 F.3d at 181; West v. ITT Cont'l Baking Co., 683 F.2d

3

845, 846 (4th Cir. 1982).
Eshelman's motion to dismiss requires the court to consider the parties' state-law claims,
counterclaims, and defenses. Accordingly, the court must predict how the Supreme Court of the
state in question would rule on any disputed state-law issue. See Twin City Fire Ins. Co. v. Ben
Arnold-Sunbelt Beverage Co. of S.C., 433 F .3d 365, 369 (4th Cir. 2005). In doing so, the court must
look first to opinions of that state's highest court. See Stahle v. CTS Corp., 817 F.3d 96, 100 (4th
Cir. 2016). Ifthere are no governing opinions from the highest court of the relevant state, this court
"may consider lower court opinions[,] ... treatises, and the practices of other states." Twin City Fire
Ins. Co., 433 F.3d at 369 (quotation omitted). 1 In doing so, a federal court "should not create or
expand [a] [s]tate's public policy." Time Warner Entm't-Advance/Newhouse P'ship v. CarteretCraven Elec. Membership Corp., 506 F.3d 304, 314 (4th Cir. 2007) (first alteration in original)
(quotation omitted); Wade v. Danek Med.. Inc., 182 F.3d 281, 286 (4th Cir. 1999). Moreover, in
predicting how the highest court of a state would address an issue, this court must "follow the
decision of an intermediate state appellate court unless there is persuasive data that the highest court
would decide differently." Toloczk:o, 728 F.3d at 397-98.
III.

To determine which state's limitations period ,applies to a state-law claim, a federal district
court exercising diversity jurisdiction applies the choice-of-law rules of the forum state, in this case
North Carolina. See Guaranty Tr. Co. v. York, 326 U.S. 99, 110 (1945); MedCap Corp. v. Betsy
Johnson Health Care Sys.. Inc., 16 F. App'x 180, 182 (4th Cir. 2001) (per curiam) (unpublished);
Sokolowski v. Flanzer, 769 F.2d 975, 977 (4th Cir. 1985). Under North Carolina's choice-of-law
rules, North Carolina's procedural rules apply to actions brought in North Carolina, and a statute of
limitations is considered a procedural rule. See Boudreau v. Baughman, 322 N.C. 331, 340, 368

1

North Carolina does not have a mechanism to certify questions of state law to its Supreme
Court. See Town ofNags Head v. Toloczk:o, 728 F.3d 391, 397-98 (4th Cir. 2013).

4

S.E.2d 849, 857 (1988). In determining whether a rule is substantive or procedural under this
analysis, ''the federal district court accepts the characterization placed on the involved rule by the
[forum] state court." Sokolowski, 769 F.2d at 978; see Thornton v. Cessna Aircraft Co., 886 F.2d
85, 88 (4th Cir. 1989). When a federal court is sitting in diversity and the forum state would
consider a statute oflimitations to be a procedural rule and would therefore apply its own statute of
limitations, the federal court also applies the forum state's statute oflimitations. Sokolowski, 769
F.2d at 978.
In North Carolina, libel suits must be filed within one year of the libelous statement's
publication. See Henderson v. Town of Hope Mills, No. 5:13-CV-635-FL, 2013 WL 5954816, at
*4 (E.D.N.C. Nov. 6, 2013) (unpublished), aff'd, 549 F. App'x 195 (4th Cir. 2015) (per curiam)
(unpublished); Gordon v. Fredle, 206 N.C. 734, 734, 175 S.E. 126, 126 (1934); Philips v. Pitt Cty.
Mem. Hosp .• Inc., 222 N.C. App. 511,526,731 S.E.2d462, 472 (2012); N.C. Gen. Stat.§ 1-54(3).
A one-year statute oflimitations also applies in California. See Perfect 10. Inc. v. Visa Int'l Serv..
Ass'!!, 494 F.3d 788,810 (9thCir. 2007); Shivelyv. Bozanich, 31 Cal. 4th 1230, 1246,80 P.3d676,
685 (Cal. 2003); Cal. Code Civ. Proc. § 340(c). Puma filed its counterclaims onFebruary21, 2017,
alleging that Eshelman published libelous statements on November 30, 2015, and January 4, 2016.
See [D.E. 86] ~~ 25-73. Therefore, Puma's claims are time-barred because Puma asserted them over
a year after Eshelman's statements were published.
In opposition to this conclusion, Puma contends that its claims are not time-barred because
they are compulsory counterclaims and thus relate back to the date Eshelman's complaint was filed.
I

Federal Rule of Civil Procedure 13 defmes two types of counterclaims: permissive and compulsory.
A compulsory counterclaim is a claim that ''that the pleader has against an opposing party" that
"arises out of the transaction or occurrence that is the subject matter of the opposing party's claim"
and "does not require adding another party over whom the court cannot acquire jurisdiction." Fed.

R. Civ. P. 13(a)(1 ). A claim is not a compulsory counterclaim, however, ifthe court lacked personal

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jurisdiction over the opposing party's initial claim against the counterclaimant. Fed. R. Civ. P.
13(a)(2).

Any counterclaim that is not compulsory is permissive.

Fed. R. Civ. P. 13(b).

Compulsory counterclaims "relate[] back to the time of the filing of the plaintiff's complaint."
Kirkpatrick v. Lenoir Cty. Bd. ofEduc., 216 F.3d 380, 388 (4th Cir. 2000); see Burlington Indus.
v. Milliken & Co., 690 F .2d 380, 389 (4th Cir. 1982). Whether a claim brought pursuant to a district
I

court's diversity jurisdiction relates back to an earlier filing is determined according to federal
I

procedural rules. See Davis v. Piper Aircraft Cor,p, 615 F .2d 606, 611-12 (4th Cir. 1980). Eshelman
filed his complaint on February 2, 2016 [D.E. 1, 5]. Therefore, ifPuma' s counterclaims related back
to the initial filing of Eshelman's complaint, they are not time-barred.
The Fourth Circuit has not announced a clear rule for determining whether a counterclaim
is compulsory or permissive. Rather, the Fourth Circuit has considered numerous tests to determine
whether a counterclaim "arises out of the transaction or occurrence that is the subject matter of the
opposing party's claim." Sue & Sam Mfg. Co. v. B-L-S Const. Co., 538 F.2d 1048, 1051 (4th Cir.
1976). To determine whether a claim and counterclaim arose out of the same transaction or
occurrence, the Fourth Circuit asks: (1) whether issues oflaw and fact raised by the claim and the
counterclaim are largely the same; (2) whether res judicata would bar a subsequent suit on the
counterclaim, absent the compulsory counterclaim rule; (3) whether "substantially the same evidence
support[s] or refute[s]" both the claim and counterclaim; and (4) whether ''there [is] any logical
relation between [the] claim and [the] counterclaim[]." ld. at 1051-53; see Painter v. Harvey, 863
F.2d 329,331 (4th Cir. 1988); Whigham v. Beneficial Fin. Co. ofFayetteville. Inc., 599 F.2d 1322,
1323 (4th Cir. 1979). "[T]he res judicata test cannot be the controlling one." Painter, 863 F .2d at
333. "These questions help focus the inquiry, but the court 'need not answer all these question in
the affirmative for the counterclaim to be compulsory."' O'Fay v. Sessoms & Rogers. P.A., No.
5:08-CV-615-D, 2010 WL 9478988, at *3 (E.D.N.C. Feb. 9, 2010) (unpublished) (quoting Painter,
863 F.2d at 331). Rather, a court should interpret the Rule "flexibl[y]" and "realistic[ally]" to

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achieve the Rule's purpose. Sue & Sam Mfg. Co., 538 F.2d at 1051.
As for the first question, there are few common issues oflaw or fact raised by the claims and
counterclaims. The claims and counterclaims present no common question of law except that they
both involve the elements of libel m se and libel per quod. As for common questions of fact, the
claims and counterclaims involve statements made on different dates, concerning different subject
matters. Eshelman alleges that Puma's statements published on January 7, 2016, were defamatory
because they conveyed to the audience that Eshelman had been culpably and personally involved in
clinical trial fraud. Puma alleges that Eshelman's statements published on November 30, 2015, and
January 4, 2016, were defamatory because they misrepresented the qualifications of Puma's board
of directors and accused Puma of misrepresenting facts to shareholders. Although both EsheiiDan' s
claims and Puma's counterclaims involve statements made and published during the same proxy
contest, the claims and counterclaims themselves concern statements that allegedly are defamatory
whether or not they are considered in the context of a proxy contest. The proxy contest may have
provided the parties' motivation for making the statements at issue, but the proxy contest is not
material for the ultimate questions in either the claims or counterclaims.
Puma also argues that there is a common question of fact regarding the truthfulness of
Eshelman's statements on January 4, 2017. One of Puma's allegedly defamatory statements that
forms the basis of Eshelman's complaint said that "Eshelman's misrepresentations are no surprise
given his history." Compl. ~~50, 70. 2 Puma argues that the misrepresentations referenced in that
statement were Eshelman's statements on January 4, 2017, that Puma had lied to shareholders.
Therefore, Puma argues, Eshelman's January 4, 2017, statements will be discussed in Eshelman's

2

Puma also argues that Eshelman based his libel claims in part on Puma's statement in the
investor presentation that "Eshelman has made and continues to make misrepresentations in
connection with his consent solicitation." [D.E. 105] 9 (quoting [D.E. 1-1] 13). But that statement
is not the basis for any of Eshelman's claims, and is not mentioned in Eshelman's complaint.
Therefore, Eshelman has not made a libel claim based on that statement.

7

case when Puma raises the defense of truth, creating a substantial overlap of factual issues. Puma's
argumentmischaracterizes Eshelman's claims. Eshelman does not claim that Puma's statement was
defamatory because it falsely accused him oflying on January 4, 2017, when in fact he had told the
truth. Rather, Eshelman claims that the presentation conveyed to its audience that Eshelman's
"history" involved a culpable role in clinical-trial fraud. Therefore, any discussion of the January
4, 2017, statements in connection with Eshelman's claims would not be substantial. Because there
are no substantial common questions of law or fact, the answer to the first question suggests that
Puma's counterclaims are permissive, not compulsory.
As for the second question, whether res judicata would bar a subsequent suit on the
counterclaim, Puma argues that it could be subject to res judicata because its counterclaim that
Eshelman's January 4, 2017, presentation falsely accused Puma oflying to shareholders would be
identical to its defense of truth to Eshelman's claim that Puma defamed him by saying that he had
lied. 3 As discussed, however, Eshelman has brought no such claim. Because res judicata would not
bar a subsequent suit on Puma's counterclaims, the answer to the second question suggests that
Puma's counterclaims are permissive, not compulsory.
As for the third question, whether substantially the same evidence will support or refute the
claims and counterclaims, this analysis essentially replicates the analysis for the first question. Puma
argues that a substantial amount of evidence for both Eshelman's claims and Puma's counterclaims
would concern ''the purpose and mechanics ofthe proxy contest, what the parties knew and how they
obtained their knowledge when they made their allegedly defamatory statements, and the damage

3

Res judicata bars a subsequent claim when a court has previously entered (1) a valid final
judgment on the merits (2) on the same cause of action (3) and involving the same parties. See
Pension Ben. Guar. Cor.p. v. Beverley,404F.3d243,248 (4thCir. 2005); Meekinsv. United Transp.
Union, 946 F.2d 1054, 1057 (4th Cir. 1991). "[N]ot only does res judicata bar claims that were
raised and fully litigated, it prevents litigation of all grounds for, or defenses to, recovery that were
previously available to the parties, regardless of whether they were asserted or determined in the
prior proceeding." Pension Ben. Guar. Cor.p., 404 F.3d at 248 (quotation omitted).

8

purportedly caused by each party's statements." [D.E. 105] 11. Any information about the proxy
contest would be mere background information, setting the stage for the parties' relationship and
explaining the parties' motivations, but it would not be necessary to prove any claim, counterclaim,
or affirmative defense. The facts concerning what a party knew or how the party gathered
information would be different for each party.

Evidence concerning Puma's knowledge of

Eshelman's involvement or lack thereof in clinical-trial fraud would support or refute Eshelman's
claims. Evidence concerning Eshelman's knowledge ofthe experience ofPuma' s board ofdirectors,
and whether Puma lied in an investor presentation, would support or refute Puma's counterclaims.
Likewise, Puma has not forecast any common evidence regarding damages. Because Puma has not
shown that substantially the same evidence would support or refute the claims and counterclaims,
the answer to the third question suggests that Puma's counterclaims are permissive, not compulsory.
As for the fourth question, whether a logical relationship connects the claims and
counterclaims, only a weak logical relationship exists. The logical relationship, if any, arises
because the claims and counterclaims involve the same parties-as is the case with every claim and
counterclaim-and because both accrued during the same proxy contest. The proxy contest was the
reason the parties were talking about eaeh other, but this fact merely provides background to the
parties' relationship. Eshelman did not claim that his damages from Puma's libel include the loss
of the proxy contest.

Merely because two parties have a relationship, and the claims and

counterclaims exist because of that relationship, does not show a logical relationship between the
claims and counterclaims. Because only a weak logical relationship connects the claims and
counterclaims, the answer to the fourth question suggests that Puma's counterclaims are permissive,
not compulsory.
Having considered the four relevant questions and concluded that none support holding that
Puma's counterclaims are compulsory, the court holds that Puma's counterclaims do not arise out
of the same transaction or occurrence as Eshelman's claims. Accordingly, interpreting Rule 13(a)
9

"flexibl[y]" and "realistic[ally]," the counterclaims do not relate back to the filing of Eshelman's
initial complaint, and are time-barred under both North Carolina's and California's statute of
limitations. See Sue & Sam Mfg. Co., 538 F.2d at 1051
Next, Puma argues that its counterclaims may still proceed as "setoff' or "recoupment"
claims even if its counterclaims are not compulsory counterclaims and are therefore time-barred.
The parties dispute whether California's setoff law or North Carolina's setoff or recoupment law
applies to Puma's counterclaims. The court need not reach that issue, however, because under either
state's law, the law of setoffs or recoupments cannot save Puma's counterclaims.
California Code of Civil Procedure§ 431.70 provides:
Where cross-demands for money have existed between persons at any point in time
when neither demand was barred by the statute of limitations, and an action is
thereafter commenced by one such person, the other person may assert in the answer
the defense of payment in that the two demands are compensated so far as they equal
each other, notwithstanding that an independent action asserting the person's claim
would at the time of filing the answer be barred by the statute of limitations. If the
cross-demand would otherwise be barred by the statute of limitatioJlS, the relief
accorded under this section shall not exceed the value of the relief granted to the
other party.
A defendant may use this "setoff' rule only "defensively to defeat the plaintiff's claim in whole or
in part," not offensively as an independent basis for relief. Constr. Prot. Servs.. Inc. v. TIG Specialty
Ins. Co., 29 Cal.4th 189, 197-98, 57 P.3d 372, 377 (Cal. 2002). "[T]o the extent a defendant seeks
affirmative relief, the applicable statute oflimitations applies to the defendant's [setoff] claim, just
as it would if the defendant were asserting its claim in an independent action." Id. The case on
which Puma relies, Safme v. Sinnott, 15 Cal. App. 4th 614 (Cal. Ct. App. 1993), does not support
Puma's position. Rather, in Safine California's Court ofAppeals noted that a counterclaimaint could
use setoffs as an affirmative defense to reduce the plaintiff's recovery but "could not maintain an
independent action to recover [the counterclaimaint's] money damages from" the plaintiff. ld. at
619.

10

Puma did not plead its counterclaims as a setoff or recoupment claim, nor did it plead the
affirmative defense of a setoff or recoupment. Puma may not amend its answer in its brief in
opposition to Eshelman's motion to dismiss. See Campbell v. Wells Fargo Bank. N.A., 73 F. Supp.
3d 644,652 (E.D.N.C. 2014) (collecting cases). To the extent Puma has anyrightto a setoffunder
California law, that would be an affirmative defense to Eshelman's claims and could not save
Puma's counterclaims from dismissal for failure to comply with the statute of limitations.
See Constr. Prot. Servs.. Inc., 29 Cal. 4th at 198, 57 P.3d at 377; Safine, 15 Cal. App. 4th at 619.
North Carolina's appellate courts have published few cases discussing claims for setoff or
recoupment. North Carolina's Business Court has distinguished between "set-off' claims and
"recoupment" claims, following the definitions of those terms in Black's Law Dictionary.
See Crescent Foods. Inc. v. Evanson Pharmacies. Inc., 15 CVS 1852, 2016 WL 6270257, at *5-6
(N.C. Super. Ct. Oct. 5, 2016) (unpublished); In re Se. Eye Ctr.-Pending Matters, 15 CVS 1648,
2016 WL 4163928, at *7 (N.C. Super. Ct. July 22, 2016) (unpublished). "Set-off is defined as 'a
defendant's counterdemand against the plaintiff, arising out of a transaction independent of the
plaintiff's claim."' In re Se. Eye Ctr.-Pending Matters, 2016 WL,4163928, at *7 (alteration and
emphasis omitted) (quoting Setoff, Black's Law Dictionacy (lOth ed. 2014)). Setoff claims are
subject to the applicable statute oflimitations. See Peny v. First Citizens Bank & Tr. Co., 223 N.C.
642,644,27 S.E.2d 636,637 (1943); lnre Se. Eye Ctr.-PendingMatters, 2016 WL4163928, at *7;
cf. Mikels v. Unique Tool & Mfg. Co .. Inc., No. 5:06CV32, 2007 WL 4284727, at *23-25
(W.D.N.C. Dec. 3, 2007) (unpublished) (noting that

~'s

holding regarding the statute of

limitations as applied to setoff claims had been neither followed nor rejected by any North Carolina
appellate court, and that other jurisdictions had rejected

~'s

rule). By contrast, claims for

"recoupment" are claims for "a 'reduction of a plaintiff's damages because of a demand by the
defendant arising out of the same transaction."' In re Se. Eye Ctr.-Pending Matters, 2016 WL
4163928, at *7 (alteration and emphasis omitted) (quoting Recoupment, Black's Law Dictionary
11

(lOth ed. 2014)); see RL REGIN.C .. LLC v. Lightouse Cove. LLC, 229 N.C. App. 71,78-79,748
S.E.2d 723, 728 (2013) (acknowledging, but not adopting, the First Circuit's rule that recoupment
is an affirmative defense to claims under the federal Equal Credit Opportunity Act which allows a
defendant to reduce the plaintiff's recovery on the basis of a claim that arose from ''the same
transaction," and that recoupment counterclaims are not subject to the statute of limitations),
rev'donothergrounds 367N.C. 425,762 S.E.2d 188 (2014). Claimsforrecoupmentarenotsubject
to the statute of limitations. See Crescent Foods. Inc., 2016 WL 6270257, at *6.4
Puma argues that its counterclaims are recoupment claims and therefore are not subject to
the statute of limitations. But Puma's counterclaims do not arise from the same transaction as
Eshelman's claims. Puma's counterclaims involve statements made on different days by different
speakers regarding different subject matter, and are related only by the fact that they took place
during the course of-and were perhaps motivated by-the same proxy contest. For the same
reasons that Puma's counterclaims do not pass the "same transaction or occurrence" test used for
compulsory counterclaims, Puma's counterclaims cannot pass the "same transaction" test used for
recoupment claims.
Puma's counterclaims do not relate back to Eshelman's initial complaint because they are
not compulsory counterclaims. Moreover, under either North Carolina law or California law, the
doctrines of setoffs or recoupments do not save Puma's time-barred counterclaims. Therefore,
Puma's counterclaims are time-barred and Puma has failed to state a claim upon which relief may
be granted.

See West, 683 F.2d at 846; Evans, 137 F. Supp. 3d at 881. Because Puma's

4

Puma also cites Ken-Lu Enters .. Inc. v. Neal, 29 N.C. App. 78, 81,223 S.E.2d 831, 833
(1976), for the proposition that North Carolina waives the statute of limitations for recoupment
claims. Ken-Lu analyzed N.C. Gen. Stat. § 1-47(2), which provides a specific exception to the
statute oflimitations for counterclaims when the initial claim is an "action on a sealed instrument."
Id. In Ken-Lu, the North Carolina Court of Appeals held that, regardless of section 1-47(2), a
counterclaimaint sued on a debt could bring an action under the Federal Truth in Lending Act. Id.
Neither statute applies in this case.
12

counterclaims are time-barred, the court declines to address whether they state claims upon which
relief may be granted, or whether they must be stricken pursuant to California's Anti-SLAPP statute.

m.
In sum, the court GRANTS Eshelman's motion to dismiss for failure to state a claim upon
which relief can be granted [D.E. 100], and DENIES as moot Eshelman's motion for relief under
California's anti-SLAPP statute.
SO ORDERED. This

f~

day of June 2017.

J
SC.DEVERID
Chief United States District Judge

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