The Hayner Hoyt Corporation v. Ventana DBS LLC
5:19-cv-01376
N.D.N.Y.Sep 16, 2020Background
- Ventana filed the first diversity action (Apr 2018) alleging Hayner Hoyt failed to pay under a subcontract to install a curtain wall at Cornell; Hayner and Travelers answered and asserted a counterclaim for delay.
- A scheduling order set the deadline to amend pleadings and join parties at September 20, 2018; discovery proceeded through late 2019.
- Hayner Hoyt filed a separate second diversity action (Nov 6, 2019) against Ventana and new defendant Liberty Mutual, alleging defective installation and a claim under a performance bond.
- The two actions were consolidated; Ventana and Liberty moved to dismiss the Second Action as barred by Rule 13(a) as compulsory counterclaims.
- Hayner cross-moved (construed by the court) for leave to amend its answer in the First Action to add the Second Action claims as counterclaims and to join Liberty as a counter-defendant.
- The court dismissed the Second Action as containing compulsory counterclaims but granted Hayner leave to amend its First Action answer to add the claims and join Liberty (14 days to amend).
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Hayner’s claims against Ventana in the Second Action are compulsory counterclaims under Fed. R. Civ. P. 13(a) | Hayner: claims weren’t matured until after the Sept 20, 2018 amendment/joinder deadline due to later water-testing results | Ventana: claims arise from the same contract and were known from earlier correspondence (June 2017), so they were compulsory and should have been asserted as counterclaims | Court: Claims arise from same contract; Hayner knew of defects before the deadline; claims are compulsory counterclaims and Second Action claims vs. Ventana are dismissed |
| Whether Hayner’s claims against Liberty (new party) are compulsory and whether Liberty counts as an "opposing party" under Rule 13(a) | Hayner: claim against Liberty did not mature until it declared Liberty in default after the deadline | Liberty/Ventana: treating Liberty as not an opposing party would let Hayner pick when claim matured; Liberty’s interests are essentially identical to Ventana’s under the performance bond | Court: Given close, joint obligations under the bond and functional identity of interests, Liberty is treated as an opposing party; claims vs. Liberty are compulsory and dismissed |
| Whether Hayner should be allowed to amend its answer in the First Action to add the claims and join Liberty (Rules 15, 16, 21) | Hayner: good cause under Rule 16 because the proposed counterclaims rely on water-testing results that became available only after the Sept 20, 2018 deadline; seeks leave to amend | Ventana/Liberty: facts were known earlier; permitting amendment now unduly prejudices defendants given advanced discovery | Court: Exercising discretion and for judicial economy, good cause shown for amendment based on new testing; grant leave to amend and to join Liberty as counter-defendant (amend within 14 days) |
Key Cases Cited
- ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87 (2d Cir. 2007) (materials courts may consider on Rule 12(b)(6) include documents attached to or incorporated in the complaint)
- Jones v. Ford Motor Credit Co., 358 F.3d 205 (2d Cir. 2004) (compulsory counterclaim test: logical relationship between claims)
- Critical-Vac Filtration Corp. v. Minuteman Int’l, Inc., 233 F.3d 697 (2d Cir. 2000) (compulsory counterclaims governed by logical connection and judicial economy considerations)
- Transamerica Occidental Life Ins. Co. v. Aviation Office of Am., Inc., 292 F.3d 384 (3d Cir. 2002) (insurer in privity/subrogation can be treated as an opposing party under Rule 13(a))
- Avemco Ins. Co. v. Cessna Aircraft Co., 11 F.3d 998 (10th Cir. 1993) (insurer/subrogee’s claims are subject to same defenses as insured and may be treated as opposing party)
- Banco Nacional de Cuba v. First Nat’l City Bank of N.Y., 478 F.2d 191 (2d Cir. 1973) (Rule 13(a) "opposing party" can include entities that are effectively one and the same for litigation purposes)
- Pace v. Timmermann’s Ranch & Saddle Shop Inc., 795 F.3d 748 (7th Cir. 2015) (caution against overbroad expansion of "opposing party" that would collapse permissive joinder into compulsory joinder)