Stake Center Locating v. Logix Communications

Filing 15

MEMORANDUM DECISION and Order granting 10 Motion for Leave to File Amended Answer and Counterclaim. Signed by Judge Ted Stewart on 6/16/2014. (blh)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF UTAH
STAKE CENTER LOCATING, INC., a
Utah Corporation,

MEMORANDUM DECISION AND
ORDER GRANTING DEFENDANT’S
MOTION TO AMEND ANSWER

Plaintiff,
v.
LOGIX COMMUNICATIONS, L.P., a
Texas limited partnership,

Case No. 2:13-CV-1090 TS
District Judge Ted Stewart

Defendant.

This matter is before the Court on Defendant’s Motion for Leave to File Amended
Answer and Counterclaim. 1 For the reasons discussed below, the Court will grant the Motion.
I. BACKGROUND
Plaintiff Stake Center Locating, Inc. is a Utah corporation that provides utility locating
services. Defendant Logix Communications, L.P. is a Texas limited partnership that installs
fiber optic lines and other underground telecommunications wiring. In May 2011, the parties
entered into an agreement whereby Plaintiff agreed to provide its services at Defendant’s
facilities in Dallas, Texas.
In May 2012, Plaintiff’s billing process began to experience trouble and invoices were
not sent to Defendant for several months. In September 2013, Plaintiff provided Defendant with
invoices that had not been provided for the prior sixteen months. Defendant has not paid for
Plaintiff’s services rendered during this sixteen-month period. Plaintiff filed suit in Utah state
court on November 11, 2013, seeking recovery of the amounts owed. Defendant removed the
1

Docket No. 10.

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action to federal court on December 11, 2013. On December 20, 2013, Defendant filed its
Answer. On March 27, 2014, Defendant moved for leave to amend its Answer.
II. DISCUSSION
Defendant seeks leave to amend its Answer to (1) add a counterclaim for breach of
contract, (2) add an affirmative defense clarifying the previously asserted affirmative defense
based on mutual mistake, and (3) remove an affirmative defense concerning the statute of frauds.
Plaintiff argues that granting leave to add the breach-of-contract counterclaim is futile because it
is duplicative of Defendant’s previously asserted affirmative defense for setoff. Similarly,
Plaintiff argues that Defendant’s proposed clarification of the mutual-mistake affirmative
defense is duplicative of Defendant’s originally asserted mutual-mistake defense. Plaintiff
further contends that because both amendments would be duplicative, permitting their inclusion
will complicate the case, confuse the issues, and prejudice Plaintiff. Plaintiff does not challenge
Defendant’s request to remove the affirmative defense based on the statute of frauds.
Federal Rule of Civil Procedure 15 provides that at this stage of litigation “a party may
amend its pleading only with the opposing party’s written consent or the court’s leave. The court
should freely give leave when justice so requires.” 2 The purpose of Rule 15 is “to provide
litigants ‘the maximum opportunity for each claim to be decided on its merits rather than on
procedural niceties.’” 3 Courts should freely give leave to amend except where there is “undue
delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies
by amendments previously allowed, undue prejudice to the opposing party by virtue of
2

Fed. R. Civ. P. 15(a)(2).

3

Minter v. Prime Equip. Co., 451 F.3d 1196, 1204 (10th Cir. 2006) (quoting Hardin v.
Manitowoc-Forsythe Corp., 691 F.2d 449, 456 (10th Cir. 1982)).

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allowance of the amendment, futility of amendment, etc.” 4 “The . . . most important[] factor in
deciding a motion to amend the pleadings, is whether the amendment would prejudice the
nonmoving party.” 5 “Courts typically find prejudice only when the amendment unfairly affects
the defendants ‘in terms of preparing their defense to the amendment.’” 6 This typically “occurs
when the amended claims arise out of a subject matter different from what was set forth in the
complaint and raise significant new factual issues.” 7
A. BREACH OF CONTRACT
Plaintiff argues that Defendant’s breach-of-contract counterclaim is duplicative of
Defendant’s affirmative defense of setoff. Defendant argues that the counterclaim and
affirmative defense are not identical. Rather, Defendant contends that the counterclaim seeks
damages that are not sought under the affirmative defense and that the relief that could be
afforded under the setoff might be entirely different from the relief available under the
counterclaim.
Defendant’s Answer currently asserts the following affirmative defense: “Plaintiff’s
claims are barred or must be reduced due to payment, set off and release.” 8 Defendant’s
proposed counterclaim includes sixteen paragraphs detailing the jurisdictional and factual basis
for a breach of contract, based on Plaintiff’s alleged failure to provide Defendant with invoices
for services rendered by Plaintiff.

4

Foman v. Davis, 371 U.S. 178, 182 (1962).

5

Minter, 451 F.3d at 1207.

6

Id. at 1208 (quoting Patton v. Guyer, 443 F.2d 79, 86 (10th Cir. 1971)).

7

Id.

8

Docket No. 4, at 5.

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Although “[s]ome jurisdictions have dissolved the distinction between setoff [and]
recoupment . . . for pleading purposes,” 9 the concepts are nonetheless substantively distinct.
“[A] setoff, as distinguished from a recoupment . . . ar[i]se[s] from different transactions, or
occurrences, between the same parties.” 10 Recoupment “describe[s] a claim that defendant could
assert against plaintiff only if it arose from the same transaction as plaintiff’s claim.” 11 The
breach-of-contract counterclaim Defendant seeks to assert against Plaintiff arises from the same
transaction or occurrence that gave rise to the claims Plaintiff asserted in its Complaint. As such,
Defendant’s affirmative defense of setoff is not duplicative of its proposed breach-of-contract
counterclaim. Moreover, even if the Court were to construe Defendant’s affirmative defense of
setoff as an affirmative defense for recoupment, Defendant’s proposed counterclaim seeks relief
in excess of the damages that would be available under a recoupment defense, including attorney
fees, costs, and equitable rescission.
Based on the foregoing, the Court finds that amending the Answer to include Defendant’s
breach-of-contract counterclaim will serve to maximize the parties’ opportunity to have their
dispute decided on the merits and will not prejudice Plaintiff’s ability to prepare a defense.
B. MUTUAL MISTAKE
Defendant’s Answer asserts the following affirmative defense: “Plaintiff’s claims are
barred in whole or in part because the parties were mistaken as to an essential fact of the

9

20 Am. Jur. 2d Counterclaim, Recoupment, and Setoff § 98.

10

In re Concept Clubs, Inc., 154 B.R. 581, 586 (Bankr. D. Utah 1993).

11

6 Charles Alan Wright, Arthur R. Miller, & Edward H. Cooper, Federal Practice &
Procedure § 1401 (3d ed. 1998).

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contract.” 12 Defendant seeks leave to add the following affirmative defense to the Answer:
“Logix asserts the defense of mutual mistake and seeks equitable rescission or reformation of the
agreement.” 13
Plaintiff argues that the Court should not permit Defendant’s proposed second mutualmistake affirmative defense because it is duplicative and its inclusion would prejudice Plaintiff
by unduly emphasizing Defendant’s mutual-mistake defense in the suit and triggering multiple
jury instructions on the same topic. Defendant asserts that it seeks to include the new affirmative
defense to clarify the relief being sought—rescission or reformation of the agreement.
“In considering the futility of affirmative defenses, courts look to Rule 12(f) of the
Federal Rule of Civil Procedure, rather than Rule 12(b)(6). 14 Under Rule 12(f), “[t]he court may
strike from a pleading an insufficient defense or any redundant [or] immaterial . . . matter.” 15 “A
court should proceed with extreme caution in striking a pleading.” 16 “[M]otions to strike are not
favored and any doubt as to the striking of a matter in a pleading should be resolved in favor of
the pleading.” 17
Defendant’s proposed additional mutual-mistake affirmative defense clarifies the relief
sought by Defendant and warrants amendment. Yet, its inclusion does make the originally

12

Docket No. 4, at 6.

13

Docket No. 10 Ex. A, at 7.

14

Developers Sur. & Indem. Co. v. Network Elec., Inc., No. 2:12-CV-289 TC-DBP, 2013
WL 2948948, at *3 (D. Utah June 14, 2013) (citing Tiscareno v. Frasier, No. 2:07-CV-336 CW,
2012 WL 1377886, at *16 (D. Utah Apr. 19, 2012)).
15

Fed. R. Civ. P. 12(f).

16

Colo. Milling & Elevator Co. v. Howbert, 57 F.2d 769, 771 (10th Cir. 1932).

17

MRSI Int’l, Inc. v. Bluespan, Inc., No. 2:05-CV-896 DAK, 2006 WL 2711791, at *1
(D. Utah Sept. 21, 2006) (alterations, citations, and internal quotation marks omitted).

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included mutual-mistake affirmative defense redundant. Based on the foregoing, the Court will
grant leave to amend the Answer to include Defendant’s proposed mutual-mistake affirmative
defense. But Defendant’s initially pleaded mutual-mistake affirmative defense—the eighth
defense in the proposed Amended Complaint—will be stricken from the pleading.
III. CONCLUSION
Based on the foregoing, it is hereby
ORDERED that Defendant’s Motion for Leave to File Amended Answer and
Counterclaim (Docket No. 10) is GRANTED.
Defendant is directed to file its Amended Answer and Counterclaim within fourteen (14)
days, in accordance with this Order.
The hearing set for June 25, 2014, is STRICKEN.
DATED this 16th day of June, 2014.
BY THE COURT:

Ted Stewart
United States District Judge

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