Opinion
Case No. 04-2353-KHV-DJW.
April 4, 2005
ORDER
Pending before the Court is Defendant's Motion for Leave to File First Amended Answer (doc. 23). For the reasons below, Defendant's Motion will be granted.
In the Amended Answer, Defendant seeks to
• add an additional affirmative defense based on after-acquired evidence; and
• assert counterclaims for
(1) breach of fiduciary duty;
(2) conversion; and
(3) unjust enrichment.
Plaintiff does not include any argument in its briefthat opposes the portion of Defendant's request seeking to add an additional affirmative defense based on after-acquired evidence; therefore, that portion of the Defendant's motion will be granted. Plaintiff does, however, include argument opposing that part of Defendant's request seeking to assert three counterclaims. More specifically, Plaintiff argues the proposed amendments are futile because (1) the Court lacks subject matter jurisdiction over Defendant's counterclaims; and (2) Defendant's counterclaims fail to state a claim within the applicable period of the statute of limitations. The Court is unpersuaded by Plaintiff's arguments.
Legal Standard
Pursuant to Federal Rule of Civil Procedure 13(f), a district court may grant a party leave to make a counterclaim by amendment when the party has failed to do so in its original pleading "through oversight, inadvertence, or excusable neglect, or when justice requires." Whether to grant a party's motion to amend its answer to assert a counterclaim is within the sound discretion of the district court. Here, because Defendant omitted its counterclaims in the original answer and any addition must be by amendment, Rule 13(f) must be read together with Federal Rule of Civil Procedure 15(a), which directs that leave to amend a pleading "shall be freely given when justice so requires."Like a request to amend an answer to assert a counterclaim pursuant 13(f), the decision whether to grant leave to amend pursuant to Rule 15(a) is within the discretion of the district court. The court may justifiably refuse leave to amend on the grounds of undue delay, bad faith or dilatory motive, repeated failure to cure deficiencies by amendments previously allowed, or futility of the proposed amendment. A motion to amend may be denied as futile "if the proposed amendment could not have withstood a motion to dismiss or otherwise failed to state a claim."
Hayes v. Whitman, 264 F.3d 1017, 1026 (10th Cir. 2001).
Foman v. Davis, 371 U.S. 178, 182 (1962); Frank v. U.S. West, Inc., 3 F.3d 1357, 1365 (10th Cir. 1993).
Schepp v. Fremont Cty., 900 F.2d 1448, 1451 (10th Cir. 1990).
The court will dismiss a cause of action for failure to state a claim only when "it appears beyond a doubt that the [party] can prove no set of facts in support of his claims which would entitle him to relief" or when an issue of law is dispositive. The court accepts as true all well-pleaded facts, as distinguished from conclusory allegations, and all reasonable inferences from those facts are viewed in favor of the claimant. The issue in resolving a motion such as this is "not whether [the claimant] will ultimately prevail, but whether the claimant is entitled to offer evidence to support the claims."
Poole v. Cty. of Otero, 271 F.3d 955, 957 (10th Cir. 2001) (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)).
Neitzke v. Williams, 490 U.S. 319, 326 (1989).
Smith v. Plati, 258 F.3d 1167, 1174 (10th Cir. 2001).
Swierkiewicz v. Sorema N.A., 534 U.S. 506, 511 (2002) (quotation omitted).
Discussion
A. Subject Matter JurisdictionPlaintiff argues the proposed amendments are futile because the counterclaims are permissive, rather than compulsory; thus, there is no independent basis of federal jurisdiction. Defendant contends the counterclaims are compulsory; thus, the Court has ancillary jurisdiction to consider them.
The parties are correct: whether the Court has jurisdiction over Defendant's counterclaims depends on whether the counterclaims are permissive or mandatory. If the counterclaims are compulsory, the Court has jurisdiction to consider them. Rule 13(a) provides for a compulsory counterclaim "if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim." Rule 13(b) provides for a permissive counterclaim against an opposing party "not arising out of the transaction or occurrence that is the subject matter of the opposing party's claim."The only relevant difference in the two subsections for purposes of this case is that the compulsory counterclaim, being ancillary to the claim, derives its jurisdiction from the same source, whereas a permissive counterclaim not arising out of the same transaction or occurrence must rest upon independent grounds of jurisdiction.
Adamson v. Dataco Derex, Inc., 178 F.R.D. 562, 564 (D. Kan. 1998) (citing Pipeliners Local Union No. 798 v. Ellerd, 503 F.2d 1193, 1198 (10th Cir. 1974); Gus T. Handge Son Painting Co. v. Douglass State Bank, 543 F. Supp. 374, 380 (D. Kan. 1982)).
Id. (citing Pipeliners Local Union No. 798, 503 F.2d at 1198; Gus T. Handge Son Painting Co., 543 F. Supp. at 380 (citing Moore v. New York Cotton Exchange, 270 U.S. 593 (1926))).
Notably, the Tenth Circuit has adopted four factors in determining whether a counterclaim "arises out of the same transaction or occurrence" as the opposing party's claim. Specifically, a counterclaim is compulsory if: (1) the issues of fact and law raised by the claim and counterclaim are largely the same; (2) res judicata would bar a subsequent suit on defendant's claim absent the compulsory counterclaim rule; (3) substantially the same evidence supports or refutes plaintiff's claims as well as defendant's counterclaim; and (4) there is a logical relation between the claim and the counterclaim.
Id. (citing Fox v. Maulding, 112 F.3d 453, 457 (10th Cir. 1997)).
Id. (citing Fox, 112 F.3d at 457).
Upon application of the factors to the claims and proposed counterclaims here, the Court concludes that the basis for the allegations in the counterclaims all arise out of the same transactions or series of events that lead to the initial suit between these parties, namely the employment relation between the two parties. This court's subject matter jurisdiction is established.
See National Motor Club of America Inc. v. Auto Club of America Corp., 2003 WL 715902, *5 (D. Kan. Feb. 12, 2003) (holding basis for allegations in counterclaim arose out of same transactions or series of events that led to initial suit between these parties: employment relation and employment contracts between parties) (citing Fed.R.Civ.Pro. 13(a); Shump v. Balka, 574 F.2d 1341, 1346 (10th Cir. 1978).
B. Statute of Limitations
Plaintiff argues Defendant's counterclaims fail to state a claim upon which relief should be granted because they fail to state a claim within the applicable period of the statute of limitations. More specifically, Plaintiff argues that because Defendant's proposed counterclaims do not allege any dates, the counterclaims fail to state claims within the statute of limitations provided under Kansas state law. The Court disagrees.
A pleading setting forth a claim must contain "a short and plain statement of the claim showing that the pleader is entitled to relief." Fed.R.Civ.P. 8(a)(2). The statement must give the opposing party "fair notice of what the plaintiff's claim is and the grounds upon which it rests." The Court finds that, as proposed, Deffenbaugh's counterclaims sufficiently put Plaintiff on notice of the allegations against him as required by Rule 8(a).
Conley v. Gibson, 355 U.S. 41, 47 (1957); see, also, Evans v. McDonald's Corp., 936 F.2d 1087, 1091 (10th Cir. 1991); Zapata v. IBP, Inc., 19 F.Supp.2d 1215, 1220 (D. Kan. 1998).
Accordingly, it is here by ordered that Defendant's Motion for Leave to File First Amended Answer (doc. 23) is granted and Defendant shall file an Amended Answer by April 8, 2005.
IT IS SO ORDERED.