United States District Court, Western District of Pennsylvania
February 28, 1991
PERFECT PLASTICS INDUSTRIES, INC., A PENNSYLVANIA CORPORATION, PLAINTIFF,
CARS & CONCEPTS, INC. A MICHIGAN CORPORATION, AND SPOILERS PLUS, INC., A NEW YORK CORPORATION, DEFENDANTS.
The opinion of the court was delivered by: Lee, District Judge.
Plaintiff appeals from the order of United States Magistrate
Judge Benson dated the 31st day of January, 1991 granting
defendants' Motion for Leave to Amend Answer.
Plaintiff, Perfect Plastics Industries Inc., is engaged in the
business of manufacturing plastic, molded automobile
accessories. Defendants, Cars and Concepts, Inc. and Spoilers
Plus, Inc., produce and sell automobile component parts to
original equipment manufacturers and after-market consumers.
On the 12th day of April, 1989, plaintiff filed a Complaint
alleging that both defendants breached contracts with plaintiff
by failing to pay for items delivered, and by failing to accept
delivery of items previously ordered under contract. Defendants
filed an Answer on the 14th day of June, 1989, alleging that
plaintiff failed to provide a product that conformed to
specifications, was of proper quality, or was in sufficient
quantity. Defendants further assert that they were entitled to
a set-off for the defective goods and for any loss of business
suffered as a result of plaintiff's delivery of such defective
Defendants filed a Motion for Leave to Amend Answer to Add
Counterclaims pursuant to Fed.R.Civ.P. 13(f). Defendants seek
to add claims for fraud and breach of contract, alleging that
plaintiff misrepresented its ability to meet its contractual
obligations during the contract negotiations, and that
plaintiff breached the contract with regard to the quantity and
quality of goods delivered. Plaintiff has objected to the
proposed amendments, contending that they are untimely, and
that defendants' claim for fraud is barred by the statute of
limitations. For the reasons that follow, the order of the
Magistrate Judge will be affirmed and defendants shall be
permitted to amend to add counterclaims.
Defendants have filed their motion pursuant to Rule 13(f). Rule
13(f) provides as follows:
When a pleader fails to set up a counterclaim through
oversight, inadvertence, or excusable neglect, or when justice
requires, he may by leave of the court set up the counterclaim
Defendants do not assert that the failure to assert the
counterclaims for more that one and one-half years was due to
"oversight, inadvertence, or excusable neglect." It is asserted
however, that the amendment to include counterclaims should be
allowed as justice requires such a result.
"The clause in Rule 13(f) permitting amendments `when justice
requires' is especially
flexible and enables the court to exercise its discretion and
permit amendment whenever it seems desirable to do so." 6
Wright Miller & Kane, Federal Practice and Procedure § 1430
at 219 as quoted in Budd Co. v. Travelers Indemnity Co.,
820 F.2d 787, 791-92 (6th Cir. 1987).
In assessing whether to grant a defendant leave to amend its
answer to add a counterclaim, a court should consider whether
the counterclaim is compulsory, whether the pleader has acted
in good faith and has not unduly delayed filing the
counterclaim, whether undue prejudice would result to the
plaintiff, or whether the counterclaim raises meritorious
claims. See Northwestern National Insurance Company of
Milwaukee v. Alberts, 717 F. Supp. 148, 153 (S.D.N.Y. 1989),
Index Fund, Inc. v. Hagopian, 91 F.R.D. 599, 606 (S.D.N Y
1981). When claims are compulsory under Fed.R.Civ.P.
13(a)*fn1, the argument for allowing amendment is
"especially compelling." See Spartan Grain & Mill Co. v.
Ayers, 517 F.2d 214, 220 (5th Cir. 1975). This is so because
an omitted compulsory counterclaim cannot be asserted in
subsequent cases and the pleader will lose the opportunity to
have the claim adjudicated. 6 Wright Miller & Kane, Federal
Practice and Procedure § 1430 at 223 (1990).
Since the factual basis for the counterclaims was either
asserted as affirmative defenses in their Answer, or was within
the knowledge of the defendants at the time the Answer was
filed, it is apparent that the counterclaims were available to
the defendants at the time of such filing. It is obvious,
therefore, that the defendants could have avoided the delay by
timely filing, however, "[t]he mere passage of time between an
original filing and an attempted amendment is not a sufficient
reason for the denial of the motion." Spartan Grain, supra.
517 F.2d at 220.
Plaintiff has failed to assert how it will be prejudiced by the
defendants' delay in filing the counterclaims. Though
plaintiff's brief alludes to a new wave of discovery, it is
difficult to imagine that such discovery was unforseen in light
of the defenses asserted in defendants' Answer. In all
likelihood, the questions raised by the counterclaims would, in
any event, be litigated in the action as defenses. This Court
is also unable to find that the defendants acted in bad faith
in their delay.
Courts appear particularly hesitant to deny amendment, even at
late stages in the proceedings, when the interest in resolving
all related issues militates in favor of such a result and no
prejudice is demonstrated Budd Co. v. Travelers Indemnity Co.,
Supra, 820 F.2d at 792. Because defendants will lose the
opportunity to litigate their counterclaims if they are not
brought in the present action, and to remain consistent with
the goal of the Federal Rules of resolving disputes, insofar as
possible, on the merits and in a single proceeding, See Foman
v. Davis, 371 U.S. 178, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962),
defendants shall be granted leave to amend their Answer to add
the compulsory counterclaims.
Plaintiff's final contention is that defendants' first
counterclaim of fraud is based upon events which occurred in
1988, and should be barred by Pennsylvania's two-year statute
of limitations period. 42 Pa.C.S.A. § 5524. Plaintiff relies
upon Gumienik v. Lund, 314 F. Supp. 749 (W.D. Pa. 1970) in
which the court found "no authority under Fed.R.Civ.P. 13(f) to
allow the assertion of an affirmative counterclaim after the
bar of the statute of limitations." The District Court held
that the general rule in Pennsylvania was that a cause of
action which would be barred as an original action, because of
the statute of limitations, may not be asserted as a
counterclaim after the expiration of the statutory period.
Gumienik v. Lund, supra.,
314 F. Supp. at 751. A similar stance was taken by the Sixth
Circuit in Stoner v. Terranella, 372 F.2d 89 (6th Cir. 1967).
There the court ruled that Rules 13(f) and 15(a) were mutually
exclusive, and since Rule 15(c) is applicable only to
amendments made pursuant to Rule 15(a), amendments made
pursuant to Rule 13(f) do not relate back to the original
proceedings. Id. at 91.
Fed.R.Civ.P. 15(c) provides, in pertinent part, as follows:
Whenever the claim or defense asserted in the amended pleading
arose out of the conduct, transaction, or occurrence set forth
or attempted to be set forth in the original pleading, the
amendment relates back to the original pleading.
Fed.R.Civ.P. 13(f), however, is silent on the matter of
relation back. Such silence should not be construed as
authority to disallow the assertion of a counterclaim after the
bar of the statute of limitations. Rule 13(f) is also silent on
other practices clearly allowable under Rule 15. The Second
Circuit in Banco Para el Comercio Exterior de Cuba v. First
National City Bank, 744 F.2d 237
(2nd Cir. 1984) used the
following as an example:
Rule 13(f) states that an omitted counterclaim may be added by
amendment "by leave of the court"; it is silent as to whether
it may ever be added without leave of the court. Yet we would
not construe this silence to forbid the amendment of an answer,
pursuant to Rule 15(a),*fn2 to add a counterclaim within 20
days of the service of the answer without leave of the court.
Id. at 243.
The court in Banco Para el Comercio went on to rule that a
counterclaim amended pursuant to Rule 13(f) may relate back to
the date of the original answer when the counterclaim arises
out of the same transaction that was pleaded in the answer and
there is no prejudice to the opposing party's ability to defend
the merits of the counterclaim.
This court is in agreement with the Second Circuit and the
approach taken by the leading commentators, see 6 Wright Miller
& Kane, Federal Practice and Procedure § 1430 (1990), that it
is more sensible to construe the two rules together.
The better approach is to construe both rules together so that
Rule 13(f) supplements the general provisions of Rule 15 by
setting forth a particular standard for allowing the late
assertion of omitted counterclaims. Once the standard set forth
in Rule 13(f) is satisfied and leave of court to set up the
omitted counterclaim by amendment has been granted, the
remaining provisions of Rule 15 should be fully applicable and
the amendment should relate back if it meets the test provided
by Rule 15(c).
6 Wright Miller & Kane, Federal Practice and Procedure § 1430
at 228 (1990).
We have found above that the fraud claim already meets the
requirements of Rule 13(f), therefore the provisions of Rule
15(c) will be applied for purposes of relation back. It is
clear that the allegation of fraud in the inducement of the
contract arises from the same transaction as alleged in the
Answer. The fraud counterclaim, therefore, relates back to the
filing of the Answer in June of 1989, and the two-year statute
of limitations as provided by Pennsylvania Law, 42 Pa.C.S.A. §
5524, does not bar the counterclaim which is based upon
activities that occurred in 1988.
For the above-stated reasons, the following order is entered:
ORDER OF COURT
AND NOW, this 7th day of March, 1991, it is hereby
ORDERED that plaintiff's appeal of the Order entered by the
Magistrate Judge on the 31st day of January, 1991, is DENIED,
and defendants' Motion for Leave to
Amend Answer to Add Counterclaims is GRANTED.