Opinion
Case No. 3:04 CV 7318.
January 28, 2005
AMENDED ORDER
This is a dispute over the purchase of a gas station and an agreement to supply gasoline to the business. Plaintiffs Rafic K. Awada (Awada) and Rawada, Inc. (Rawada) claim defendants Fast Track Ventures, LLC (Fast Track) and Atlas Oil Company (Atlas) misrepresented the amount of gasoline sales enjoyed by the gas station before plaintiffs purchased the business and that Fast Track breached the contract for sale of the gas station. Plaintiffs also claim they are entitled to rescission of the product supply agreement with Atlas. This court has jurisdiction over this dispute pursuant to 28 U.S.C. § 1332.
Pending is Atlas's motion for leave to file a counterclaim. For the reasons that follow, the motion shall be denied.
Background
On October 3, 2002, plaintiffs purchased a gas station from Fast Track in Toledo, Ohio. In connection with purchase of the gas station, plaintiffs entered into a product supply agreement with Atlas in which Atlas was to be the exclusive supplier of gasoline to the business. Under this agreement plaintiffs agreed to purchase at least 900,000 gallons of gasoline from Atlas each contract year. Plaintiffs now seek to recover damages for defendants' misrepresentations and breach of contract and recission of both contracts.
Plaintiffs first allege that Fast Track and Atlas misrepresented to plaintiffs the amount of gasoline sales enjoyed by the gas station each month. Plaintiffs claim Fast Track represented to plaintiffs that the gas station enjoyed gasoline sales in excess of 80,000 gallons per month and Atlas represented to plaintiffs that gasoline sales were approximately 83,000 gallons per month. Plaintiffs claim defendants knew these statements were false and that plaintiff believed that they were true. Plaintiffs further claim that defendants' misrepresentations induced plaintiffs to purchase the gas station.
In addition to misrepresentation, plaintiffs also allege that Fast Track has breached its contract with plaintiffs by not delivering the product and goods promised under the contract.
Lastly, plaintiffs seek rescission of the product supply agreement with Atlas on two grounds. First, plaintiffs claim that the relationship between the parties is a frachisee-franchisor relationship pursuant to 15 U.S.C. § 2801 and is therefore subject to the disclosure requirements of 16 C.F.R. 436. Plaintiffs claim Atlas failed to fulfill the requirements of 16 C.F.R. 436, thereby entitling them to rescission. Second, plaintiffs claim the contract needs to be rescinded due to its failure to state a firm method of pricing. Omission of this material term, plaintiffs contend, entitle them to recission and restitution.
Plaintiffs filed their complaint on May 28, 2004. Atlas and Fast Track responded to the complaint by filing their answer on June 21, 2004. Defendants' answer contained no counterclaims against plaintiffs.
Atlas now moves for leave to file a counterclaim against plaintiffs. Atlas claims the Court has authority to grant Atlas leave to file its counterclaim pursuant to Federal Rules of Civil Procedure 13(b) or 13(e).
First, Atlas claims their counterclaims arose from a different transaction or occurrence that is the subject of plaintiffs' complaint and is therefore a permissive counterclaim as defined in Rule 13(b). As a permissive counterclaim, the Court has broad discretion to allow the counterclaim to be joined.
Second, Atlas claims their counterclaim matured after they filed their answer. As such, Rule 13(e) permits the Court to Atlas's motion for leave to file the counterclaim as a supplemental pleading.
Discussion
A claim must be asserted as a compulsory counterclaim if it: 1) arises out of the transaction or occurrence that is the subject matter of the opposing party's claim; and 2) is mature at the time the party files its pleading. Kane v. Magna Mixer Co., 71 F.3d 555, 562 (6th Cir. 1995).
1. Same Transaction or Occurrence
Under Rule 13(a) all existing claims between litigants arising out of the same transaction or occurrence must be litigated in a single suit. Atlas claims their counterclaim arose from plaintiffs' conduct after plaintiffs purchased the gas station and therefore arose from a different transaction or occurrence.
The Sixth Circuit has adopted the "logical relation" test in determining whether a claim arose out of the same transaction or occurrence as the opposing party's claim. Sanders v. First Nat'l Bank Trust Co., 936 F.2d 273, 277 (6th Cir. 1991). Under this test, the court must determine whether the issues of law and fact raised by the claims are largely the same and whether substantially the same evidence would support or refute both claims. Id. In addition, the court must also consider whether the interests of judicial economy and efficiency would be served by requiring that the two claims be heard together. Maddox v. Kentucky Finance Co., 736 F.2d 380, 383 (6th Cir. 1984).
Atlas's counterclaims in this case are logically related and involve many of the same factual and legal issues as plaintiffs' claims. Both sets of claims arise from the product supply agreement entered into on October 3, 2002. The claims raised by the parties are "logically interdependent," as plaintiffs' complaint seeks to rescind the product supply agreement and Atlas seeks enforcement of the agreement in their counterclaim. Adam v. Jacobs, 950 F.2d 89, 92 (2d. Cir. 1991) ("actions for enforcement and rescission of the same transaction are logically interdependent."). Moreover, litigating these claims separately would cause unnecessary duplication of time and effort by the parties and would not be in the interest of judicial economy. Thus, Atlas's counterclaim arises out of the same transaction or occurrence as plaintiffs' claims.
2. Matured Claim
Under Rule 13(e), "[a] claim which either matured or was acquired by the pleader after serving a pleading may, with the permission of the court, be presented as a counterclaim by supplemental pleading." Thus, a defendant's counterclaim that does not exist when he files his answer is not a compulsory counterclaim even if it arises out of the same transaction." Kane, 71 F.3d at 562. Atlas claims their counterclaims against plaintiffs matured after they filed their answer and are therefore not compulsory.
The parties entered into a ten year product supply agreement on October 3, 2002. Pursuant to that agreement, plaintiffs agreed to purchase no less than 900,000 gallons of gasoline each contract year from Atlas. Thus, if plaintiffs did not purchase the required 900,000 gallons of gasoline from Atlas in a contract year of the agreement, they breached the agreement.
Atlas claims that plaintiffs have only purchased 787,260 gallons of gasoline in total from Atlas. Pursuant to that figure, plaintiffs did not fulfill their obligation under the agreement for the first contract year. Consequently, plaintiffs' alleged breach must have occurred by October 3, 2003, the end of the first contract year of the Agreement.
As a result, Atlas's claim against plaintiffs for breach of contract had matured by October 3, 2003. Atlas filed their answer on June 21, 2004, more than eight months after this date. Therefore, Atlas's counterclaims were mature when they served their answer.
Conclusion
In light of the foregoing, I conclude Atlas's counterclaim arose out of the same transaction or occurrence of plaintiffs' claims and was in existence when their answer was filed on June 21, 2004. As such, Atlas's counterclaim was compulsory and required to be stated in their answer.
It is, therefore,
ORDERED THAT Atlas's motion for leave to file a permissive counterclaim be, and the same hereby is denied.
So ordered.