Meierhenry Sargent LLP v. Williams et al

Filing 45

MEMORANDUM OPINION AND ORDER denying 34 Defendants' Motion to Stay Proceedings on Counterclaims. Signed by U.S. District Judge Lawrence L. Piersol on 5/14/19. (SRA)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION

MEIERHENRY SARGENT LLP,

CIV. 16-4180

Plaintiff,
MEMORANDUM OPINION AND ORDER

vs.

DENYING DEFENDANTS'MOTION TO

BRADLEY WILLIAMS and KERRY

STAY PROCEEDINGS ON

WILLIAMS,

COUNTERCLAIMS

, Defendants.

On January 29, 2019, Defendants filed a Motion to Stay Proeeedings on Counterelaims
Pending Appellate Proceedings and Arbitration and this Motion is currently pending before the
Court. Doe. 34. For the following reasons. Defendants' Motion to Stay Proceedings on
Counterelairns Pending Appellate Proeeedings and Arbitration is denied.
BACKGROUND

In November 2016,Plaintifffiled a two-eount Complaint against Defendants in Minnehaha
County state court, seeking payment for legal fees Plaintiff alleges it is owed. Doc. l-I. On

December 30,2016, Defendants filed a timely notice ofremoval pursuant to 28 U.S.C. § 1441 and
28 U.S.C. § 1332. On January 6,2017, Defendants filed a Motion to Stay and Compel Arbitration
for claims asserted in Count II. Doc. 7. On May 1,2017,the Court issued a Memorandum Opinion

and Order granting the stay and compelling arbitration of Count II. Doc. 14.
When the Court stayed the lawsuit and compelled arbitration ofCount II in its May 1,2017,

order, there were no counterclaims pending. The Court retained jurisdiction over the ease. On
August 23, 2017, Defendants presented Plaintiff with their Answer, Affirmative Defenses, and
Counterelaims during the arbitration proceedings. Doe. 26 at 6.

On August 23, 2017, Plaintiff filed a Motion for Relieffrom Stay and Motion for Order to
Declare the Scope ofthe Arbitration Proeeedings. Doc. 16. On August 23, 2017, and September
27,2017,respectively. Plaintifffiled affidavits in support ofits opening and reply briefs in support
ofits motion, and attached as exhibits to the affidavits, a copy ofDefendants' Answer, Affirmative

Defenses, and Counterelaims that it presented during the arbitration proceedings. Doe. 18-2, 231. In its motion. Plaintiff requested ah order from the Court determining the arbitrability of

Defendants' Counterelaims. On November 20, 2017, the Court issued a Memorandum Opinion

and Order holding that only some of Defendants' Counterelaims remain in arbitration and granted
in part and denied in part Plaintiffs Motion for Relieffrom Stay and Motion for Order to Declare
the Scope ofthe Arbitration Proceedings. Doc. 26.

On December 18, 2017, Defendants filed a notice of appeal of the Court's November 20,
2017, order with the Eighth Circuit Court of Appeals. Doc. 27.
On January 29, 2019, Defendants filed a Motion to Stay Proceedings on Counterclaims

Pending Appellate Proceedings and Arbitration and this Motion is currently pending before the
Court. Doc. 34. Attached as an exhibit to Defendants' brief in support of its Motion to stay is a
copy of Defendants' Answer;^ Affirmative Defenses, and Counterclaims that was presented in the
arbitration proceedings. Doc. 35-1. The caption on Defendants' Answer, Affirmative Defenses,

and Counterelaims states "IN PRIVATE ARBITRATION"(AS ORDERED BY THE UNITED
STATES DISTRICT COURT, DISTRICT OF SOUTH DAKOTA, SOUTHERN DIVISION,

CIV. NO. 16-4180, DOCKET ENTRY 14). Doc. 35-1.
On February 6, 2019, the Eighth Circuit Court of Appeals issued its opinion affirming the
Court's November 20, 2017, order, except the Court's finding that the Williamses, not the firm,
terminated the representation with that being a determination to be made within and for the

arbitration proceedings and the court remanded for further proceedings. Doc. 36.

On February 15, 2019, Plaintiff filed its response to Defendants' Motion to Stay
Proceedings on Counterclaims Pending Appellate Proceedings and Arbitration. Doc. 38. Plaintiff
stated that it has no objection to Defendants filing their Answer, Affirmative Defenses and
Counterclaims, but contends that that pleading has not been served to date in these proceedings.
Doc. 38.

,

On April 2,2019,the Court ordered Plaintiffto file with the court legal authority to support
its argument that it has not been served with Defendants' Answers, Affirmative Defenses, and
Counterclaims. Doe. 41. Plaintiff filed its Memorandum of Law in response to the Court's Order
on April 8, 2019, and Defendants filed their response brief on April 16, 2019. Does. 42 & 44.

DISCUSSION

Pending before the Court is Defendants' Motion to Stay Proceedings on Counterclaims
Pending Appellate Proceedings and Arbitration. Doc. 34. Therein, Defendants ask the Court to

stay its non-arbitrable Counterclaims pending the conclusion of arbitration.' Doc. 34. Attached
as an exhibit to its memorandum of law in support of its motion is a copy of the Defendants

Answer, Affirmative Defenses, and Counterclaims that was presented during the arbitration
proceedings. Doc. 35-1. In their brief in support of their Motion to Stay, Defendants state "[t]o
avoid any contention a statute of limitations may apply to bar any Counterclaims, defendants file
this motion and their Counterclaims, without prejudice to the pending appeal and the arbitration
proceedings, solely to avoid any contention a statute of limitations may apply to bar them based
on not having been filed with the Court or served on plaintiff." Doc. 35 at 3.
In response. Plaintiff contends that the Court is precluded fi om granting Defendants'
"
Motion to Stay proceedings on Defendants' Counterclaims on the hasis that Defendants'

Counterclaims are not properly before the Court. Docs. 38 & 42. In the alternative, Plaintiffi

argues that Defendants' Motion to Stay "should be denied on the basis that Defendants' request to
submit their Counterclaims to the Court resulted in a procedural nullity." Doc. 42.

Defendants contend pursuant to Local Rule 5.1.B.l^, their Answer, Affirmative Defenses
and Counterclaims have been filed with the Court on three separate occasions: 1) on August 23,
2017, as an attachment to an affidavit in support of Plaintiffs Opening Brief in Support of its
Motion for Relief fi om Stay and Motion for Order to Declare the Scope of the Arbitration
:
Proceedings; Doc. 18-1; 2)on September 27, 2017, as an attachment to an affidavit in support of

Plaintiffs Reply Brief in Support of its Motion for Relief from Stay and Motion for Order to
Declare the Scope of the Arbitration Proceedings, Doc. 23-1; and 3) on January 29, 2019, as an

^ Defendants also seek to stay proceedings on their Counterciaims pending appellate review. This is now a moot
issue as the Eighth Circuit Court of Appeals issued its decision affirming the Court's November 20, 2017,order,except
the Court's finding that the Wiliiamses, not the firm, terminated the representation with that being a determination
to be made within and for the arbitration proceedings and the court remanded for further proceedings. Doc. 36.

^ Locai Rule 5.1(B)(1) states as follows:
Electronic transmission of a document to the Electronic Filing System together with the
transmission of a Notice of Electronic Filing from the court constitutes fiiing of the document for
all purposes of the local rules of this court and the Federal Rules of Civil Procedure and constitutes
entry of the document on the docket kept by the cierk of court under Red. R. Civ. P. 58 and 79.

attachment to Defendant's memorandum in support of its Motion to Stay Proceedings on
Counterclaims Pending Appellate Proceedings and Arbitration, Doc. 35-1. Defendants ask the
Court to treat their Answer, Affirmative Defenses, and Counterclaims as having been properly
filed and served on Plaintiff as of either August 23, 2017, or January 29, 2019, and to stay all
fiirther proceedings on their Counterclaims pending the conclusion of arbitration. Doc. 44.
Rules 5 and 83 of the Federal Rules of Civil Procedure authorize courts to establish

practices and procedures for the filing, signing and verification ofdocuments by electronic means.
Fed. R. Civ. P. 5 & 83. However,just because a document is "filed" or docketed, does not mean
that the filing need not comply with other applicable Federal Rules of Civil Procedure. For

example, a motion or pleading "filed" with the Court must also comply with the filing deadlines
established the Rules of Civil Procedure.

Federal Rule 13(a)(1) requires that counterclaims be stated in "a pleading." Fed. R. Civ.
P. 13(a)(1); see Davis v. White, 794 F.3d 1008, 1016 (8th Cir. 2015). The Court finds that there

has not been a Notice of Electronic Filing^ transmitted to either party in this case acknowledging
receipt of an answer or any other pleading filed by Defendants. Instead, Defendants have filed, as
an exhibit to their motion, a copy of their Answer, Affirmative Defenses, and Counterclaims that

they presented in the arbitration proceedings. The caption on Defendants' Answer, Affirmative
Defenses, and Counterclaims plainly states that they were submitted "IN PRIVATE
ARBITRATION." Doc. 35-1.

'
On August 23, 2017, the Notice of Electronic Filing generated for Document Number 18 in this case,
"AFFIDAVIT in Support re [16] MOTION Plaintiffs Motion for Relief from Stay and Motion for Order to Declare the
Scope of the Arbitration Proceedings filed by All Plaintiffs. (Attachments: #(1) Exhibit Complaint and Demand for
Jury Trial,#(2) Exhibit Defendants' Answer, Affirmative Defenses, and Counterclaims,#(3) Exhibit Defendants' Brief
Regarding Arbitration Protocols)."
On September 27, 2017, the Notice of Electronic Filing generated for Document Number 23 in this case,
"AFFIDAVIT in Support re [16] MOTION Plaintiff's Motion for Relieffrom Stay MOTION for Order to Declare the Scope
of the Arbitration Proceedings Edwin E. Evans filed by Meierhenry Sargent LLP. (Attachments; # (1) Exhibit
Defendants' Answer, Affirmative Defenses, and Counterclaims, #(2) Exhibit June 30, 2017 Email, #(3) Exhibit June
28, 2016 Settlement Letter,#(4) Exhibit August 1, 2017 and August 16, 2017 Email Exchange,#(5) Exhibit Plaintiff's
Brief in Support of Arbitration Protocols, #(6) Exhibit June 20, 2017 and July 6, 2017 Email Exchange,#(7) Exhibit
August 1, 2017 Email, #(8) Exhibit August 3, 2017 Inquiry and August 5, 2017 Response,#(9) Exhibit May 26, 2017
and June 20, 2017 Email Exchange,#(10) Exhibit August 5, 2017 Email)".
On January 29, 2019, the Notice of Electronic filing generated for Document Number 35 in this case,
"MEMORANDUM in Support re [34] MOTION to Stay Proceedings on Counterclaims Pending Appellate Proceedings
and Arbitration filed by Bradley Williams, Kerry Williams. (Attachments # (1) Exhibit Exhibit (sic) - Arbitration
Answer)."

The Court finds this case analogous to Northern Valley Communications, LLC v. Qwest

Communication Co.,LLC,Civ. NoL11-4052,2012 WL 523685(D.S.D. Feb. 16,2012)(J. Schrier).
There, the defendants filed a motion to file counterclaims before submitting its answer in an effort
to assist the parties in briefing the pending summary judgment motions. Id. at *2. The plaintiffs
resisted on the basis that the defendant could not file counterclaims separately from a pleading.
Id.

The court denied the defendant's motion to file counterclaims. Id. In support, the court
stated that;

,

"Federal Rule 7(a)'* purports to enumerate all of the pleadings permitted in federal
practice. In doing so the rule, which applies exclusively to the pleadings, sharply
limits the nature and number of pleadings available under the federal rule." 5
Charles Alan Wright and Arthur R. Miller,FederalPractice and Procedure § 1183
(3d ed.). Because a counterclaim is not a stand alone pleading, it must be stated
within a pleading.
Id. The Court cited several cases where courts have refused to allow a party to assert counterclaims
that are not stated within a pleading. Id.(citing Microsoft Corp. v. Ion Tech Corp.,484 F.Supp.2d
955,965(D. Minn. 2007)("Counterclaims [] must appear in a pleading, and a separate document
that contains counterclaims is not a permissible pleading."); Columbia Gas Transmission LLC v.
Crawford,161 F.R.D. 227,228(N.D. Ohio 2010)("[A] counterclaim is not a 'pleading' but rather
a claim asserted within a 'pleading'-like an answer."); Bernstein v. IDT Corp., 582 F.Supp. 1079,
1089(D. Del. 1984)(dismissing counterclaims that were filed in a separate document instead of a
pleading; cf. In re Cessna Distrib. Antitrust Litig., 532 F.2d 64,67(8th Cir. 1976)(reasoning that
"[ajppellants could assert the cross-claim only in their answer.").

'Rule 7(a)states:
Only these pleadings are allowed:

(1) a complaint;
(2) an answer to a complaint;
(3) an answer to a counterclaim designated as a counterclaim;
(4) an answer to a crossclaim;
(5) a third-party complaint;
(6) an answer to a third-party complaint; and
(7) if the court orders one, a reply to an answer.
Fed. R. Civ. P. 7(a).

In the present case, because Defendants have not asserted their Counterclaims wifliin a

pleading, the Counterclaims are not presently before the Court. Accordingly,
IT IS ORDERED that Defendants' Motion to Stay Proceedings on Counterclaims Pending
Appellate Proceedings and Arbitration, Doc. 34, is DENIED. Plaintiffs Coxmterclaims have not

been asserted within a pleading and are dius, not pending before the Court.

Dated this iH "day of May,2019.

BY THE COURT:

AdWum L
Liwrence L. Piersol

ATTEST:
MATTHEW W.THELEN,CLERK

tfnited States District Judge