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BUTLER TWP. AREA WATER & SEWER AUTH. v. SALVATORE

April 3, 1979

BUTLER TOWNSHIP AREA WATER & SEWER AUTHORITY, Plaintiff,
v.
Frank SALVATORE, Defendant



The opinion of the court was delivered by: WEBER

MEMORANDUM OPINION

This action arises out of a provision in a construction contract which reads as follows:

 
Supplemental General Condition (S.G.C.) 55
 
DEFENSE COSTS The Owner and the Contractor agree that in the event either of them institutes a lawsuit against the other under this Contract, the plaintiff in such lawsuit shall pay to the defendant a portion of the defense costs, including investigations, engineering fees, attorney's fees, expert witnesses' fees and any other expense of defense which may be incurred. Such portion of the defense costs shall bear the same relation to the total defense costs as the dollar amount of the plaintiff's claims which were not sustained by the court bears to the total dollar amount of the plaintiff's claims. The plaintiff shall pay such portion of the defense costs to the defendant within 30 days after the defendant furnished the plaintiff with an itemized listing of the defense costs incurred.

 The present defendant, Frank Salvatore, was the plaintiff in an action brought in this Court against the present plaintiff at Civil Action No. 74-1144, which after trial by jury and consideration of post trial motions, resulted in an entry of judgment for plaintiff against defendant in the amount of $ 115,672.13. The judgment was affirmed on appeal.

 The Authority thereafter brought suit in the Court of Common Pleas of Butler County, which was removed to this Court under diversity jurisdiction, for their legal expenses incurred in the defense of the claim in the amount of $ 78,499.14. This amount was calculated by the Authority under the formula set forth in the above cited S.G.C. 55 on the grounds that Salvatore's total claim in the suit at Civil Action No. 74-1144 was for a total amount of claim of $ 4,800,000. We will discuss the claim later.

 Our present concern deals with a Counterclaim asserted in this suit by Salvatore for his defense costs of the Authority's Counterclaim in Civil Action No. 74-1144. The jury in Civil Action No. 74-1144 denied recovery on the Authority's Counterclaim.

 We now face a Motion by the plaintiff Authority to dismiss Salvatore's Counterclaim for failure to state a claim.

 The Authority's contention is that under the express language of S.G.C. 55, the Authority never "instituted a law suit" against Salvatore by reason of its assertion of a Counterclaim. Counsel have filed big fat briefs with the Court, including reply briefs and answers to reply briefs, citing long lines of authority as to whether or not the assertion of a Counterclaim constitutes the institution of a lawsuit. For some purposes the assertion of a Counterclaim amounts to the institution of a lawsuit in which the defendant becomes a plaintiff and the plaintiff becomes a defendant. For other purposes the filing of a Counterclaim does not constitute the institution of a lawsuit because, among other circumstances, no service of process is required of a Counterclaim but merely the filing and mailing of the Answer or pleading containing the Counterclaim to the opposing party.

 As was the case in most of the authorities cited, we must find our definition of the term "institutes a lawsuit" in the context of the language accompanying it. We find most of these authorities not germane to the problem which we face which is the interpretation of the terms of S.G.C. 55 as applied to this lawsuit.

 First we must consider the provisions of F.R.Civ.P. 12(b):

 
HOW PRESENTED. Every defense, in law or fact, to a claim for relief in any pleading, whether a claim, counterclaim, cross-claim, or third-party claim, shall be asserted in the responsive pleading thereto . . .

 Then we must consider F.R.Civ.P. 13(a):

 
COMPULSORY COUNTERCLAIMS. A pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that ...

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