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PERFECT PLSTICS INDUS. v. CARS & CONCEPTS

February 28, 1991

PERFECT PLASTICS INDUSTRIES, INC., A PENNSYLVANIA CORPORATION, PLAINTIFF,
v.
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.

MEMORANDUM ORDER

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 products.

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
  by amendment.

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.

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 ...


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