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R. L. Wharton Enterprises, Ltd v. Joseph L. Dunn D/B/A Joseph L. Dunn Oil and Gas

January 18, 2011


The opinion of the court was delivered by: Mitchell, Magistrate Judge:


Presently before the Court is a motion to dismiss the complaint submitted by the defendant. For reasons discussed below, the defendant‟s motion to dismiss (Document No. 4) will be denied.

On September 24, 2010, plaintiff R. L. Wharton Enterprises, Ltd. ("Wharton") filed a complaint for breach of contract and unjust enrichment against the defendant, Joseph L. Dunn, d/b/a Joseph L. Dunn Oil and Gas ("Dunn"). According to the complaint, Wharton is an oil drilling company incorporated in West Virginia, with a principal place of business in Buckhannon, West Virginia, and Dunn is an adult individual residing in Washington, Pennsylvania. Since the amount in controversy is said to exceed $75,000, the Court‟s diversity jurisdiction is properly invoked pursuant to 28 U.S.C. 1332.

In the complaint, Wharton contends as follows: in early June 2008, Dunn contacted it to open an existing well known as S.H. Smith #223 (the "#223 well"). Wharton‟s Vice President, Lisa Wharton Turner, informed Dunn that the #223 well had been closed for many years and had not been producing oil, such that there was a risk it could not be opened. Nonetheless, Dunn directed it to proceed in reopening the #223 well. The parties then entered into an oral contract for Wharton to perform work at the well at the express direction of Dunn, with Dunn to pay it on a monthly basis pursuant to its hourly rates.

Wharton alleges that on or about June 9, 2008, it began work on opening the #223 well, and in June, July and August 2008, it furnished invoices to Dunn for services rendered, all of which Dunn paid; that during the months of September and October 2008, Dunn began to dispute many invoices it provided and refused to pay them; and that as a result, on or about November 10, 2008, Wharton removed its rig and drilling equipment, as it believed Dunn had breached the parties‟ contract.

In its complaint, Wharton asserts causes of action for breach of contract (Count I) and unjust enrichment (Count II). As to its breach of contract claim, Wharton insists it performed all of its obligations under the contract, but Dunn materially breached it by failing to pay it amounts due and owing thereunder. Wharton avers that the total amount due and owing on its unpaid invoices as of July 1, 2010, including standard finance charges, is $113,396.76. With respect to its unjust enrichment claim, Wharton contends that having rendered valuable well drilling services to Dunn at his request, Dunn would be unjustly enriched if he was allowed to evade paying it the amounts owed.

In response to the complaint, Dunn moved to dismiss it on two grounds. First, Dunn argues that Wharton‟s complaint should be dismissed pursuant to Fed.R.Civ.P. 13(a), as its claims should have been asserted as compulsory counterclaims in Dunn‟s pending breach of contract suit against Wharton in the Court of Common Pleas of Greene County, PA (the "state court suit"). As to his state court suit, Dunn asserts that on March 2, 2009, he filed a breach of contract action against Wharton concerning the same contract at issue in this case, and the matter has proceeded through discovery and the filing of a motion for partial summary judgment. Dunn insists that the state court suit and this case are parallel actions, as they involve the same parties and the same contract and concern substantially similar claims. Thus, as a second ground for dismissal, Dunn urges this Court to abstain from proceeding with this matter under the doctrine set forth in Colorado River Water Conservation Dist. v. United States, 424 U.S. 800 (1976).

As for Dunn‟s first argument, Fed.R.Civ.P. 13(a), which governs compulsory counterclaims, provides in pertinent part:

(1) In General. A pleading must state as a counterclaim any claim that -- at the time of its service -- the pleader has against an opposing party if the claim:

(A) arises out of the transaction or occurrence that is the subject matter of the opposing party‟s claim;.

F.R.Civ.P. 13(a)(1)(A).

Whether Whartons‟ claims are compulsory counterclaims that should have been raised in the state court suit is a question of state law. See, TriState HVAC Equipment LLP v. Big Belly Solar, Inc., 2010 WL 4139285, *9 (E.D.Pa., Oct. 20, 2010), citing Conopco, Inc. v. Roll Int‟l., 231 F.3d 82, 87-88 (2d Cir. 2000); Fox v. Maulding, 112 F.3d 453, 456-57 (10th Cir. 1997); Montgomery Ward Dev. Corp. v. Juster, 932 F.2d 1378, 1380-82 (11th Cir. 1991); Pochiro v. Prudential Ins. Co. of America, 827 F.2d 1246, 1249 (9th Cir. 1987); Brannan v. Eisenstein, 804 F.2d 1041, 1044 (8th Cir. 1986). Under Pennsylvania law, "a defendant is not required to file a counterclaim; rather, the rule is permissive." Williams v. Philadelphia Housing Authority, 1996 WL 144430, *3 (E.D.Pa., Mar. 29, 1996), quoting Hunsicker v. Brearman, 586 A.2d 1387, 1389 (Pa.Super. 1991), appeal denied, 602 A.2d 860 (Pa. 1992), reconsideration denied, 614 A.2d 1142 (Pa. 1992). Accord, Schaeffer v. Lampley, 2008 WL 4899458, *4, n.4 (E.D.Pa., Nov. 13, 2008) ("Pennsylvania civil procedure makes counterclaims only permissive"). Indeed,

Pa.R.Civ.P. 1031(a) provides: "The defendant may set forth in the answer under the heading "Counterclaim‟ any cause of action which the defendant has against the plaintiff at the time of filing the answer."

As explained in Williams, supra, "[t]he effect of this rule is that "[t]he defendant who has a cause of action which arises from the same transaction or occurrence as that from which the plaintiff‟s cause of action arose may, at his option, either plead his demand against the plaintiff by counterclaim or institute a separate action. 1996 WL 144430 at *3, quoting Martin v. Poole, 336 A.2d 363, 366 (Pa.Super. 1975). "A defendant who chooses to preserve his claims and file them in a separate action rather than plead them as permissive counterclaims in the prior proceeding is not barred from filing that subsequent action." ...

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