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.
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 ...