Ginwright v. Exeter Finance Corp., 8:16-cv-00565

Background

In 2013 Ginwright financed a vehicle purchase; the dealer assigned the contract to Exeter Finance.
Ginwright sued Exeter under the TCPA and Maryland TCPA, alleging hundreds of autodialed calls to his cell phone between Dec 2014 and June 2015 without prior express consent and after requests to stop.
Exeter answered and asserted a breach-of-contract counterclaim, seeking a deficiency of $23,782.17 after repossession and sale of the vehicle.
Ginwright moved to dismiss the counterclaim for lack of subject-matter jurisdiction under Rule 12(b)(1), arguing no independent basis for federal jurisdiction and that the counterclaim is permissive so supplemental jurisdiction is unavailable in the Fourth Circuit.
Exeter argued §1367 permits supplemental jurisdiction over permissive counterclaims and alternatively that its counterclaim was compulsory.
The court concluded the counterclaim was permissive, declined to exercise supplemental jurisdiction, and granted Ginwright’s motion to dismiss the counterclaim.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether court has subject-matter jurisdiction over Exeter's counterclaim	§1367 does not authorize supplemental jurisdiction over a permissive counterclaim; Exeter asserted no independent jurisdictional basis	§1367 authorizes supplemental jurisdiction over related permissive counterclaims; counterclaim in any event is compulsory	Counterclaim is permissive; under Fourth Circuit precedent court lacks supplemental jurisdiction and must dismiss counterclaim
Whether Exeter's counterclaim is compulsory or permissive	TCPA claim and breach claim raise different facts and law, so counterclaim is permissive	Counterclaim arises from same transaction and thus is compulsory	Applying Fourth Circuit’s four-factor inquiry, court finds claims largely dissimilar and counterclaim permissive
Whether §1367 changed the compulsory/permissive rule in Fourth Circuit	Even if §1367 codified pendent/ancillary jurisdiction, Painter and Whigham remain controlling in Fourth Circuit	§1367’s “all other claims” and “same case or controversy” can encompass some permissive counterclaims	Court declines to depart from Fourth Circuit precedent limiting supplemental jurisdiction to compulsory counterclaims
Whether court should decline supplemental jurisdiction under §1367(c) even if available	N/A (primary holding on permissiveness)	If jurisdiction existed, the breach claim would substantially predominate and public policy disfavors combining federal consumer-protection claims with state debt collection matters	Court notes that, even if jurisdiction could be exercised, it would decline under §1367(c) because counterclaim would predominate and policy favors dismissal

Key Cases Cited

Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375 (1994) (party asserting federal jurisdiction bears burden of proof)
Kerns v. United States, 585 F.3d 187 (4th Cir. 2009) (Rule 12(b)(1) standards and treating factual assertions in counterclaims as true when challenging jurisdiction)
Painter v. Harvey, 863 F.2d 329 (4th Cir. 1988) (Fourth Circuit rule: supplemental/ancillary jurisdiction applies to compulsory but not permissive counterclaims)
Whigham v. Beneficial Finance Co., 599 F.2d 1322 (4th Cir. 1979) (TILA context holding debt-collection counterclaim permissive and not within federal ancillary jurisdiction)
City of Chicago v. Int'l Coll. of Surgeons, 522 U.S. 156 (1997) (§1367 codifies pendent and ancillary jurisdiction doctrines)
United Mine Workers v. Gibbs, 383 U.S. 715 (1966) (common nucleus of operative fact test for pendent jurisdiction)
Taylor v. Sturgell, 553 U.S. 880 (2008) (federal common law governs preclusive effect of federal judgments)
Grausz v. Englander, 321 F.3d 467 (4th Cir. 2003) (tests for claim preclusion and same cause of action analysis)