64 F.R.D. 135 | E.D. Pa. | 1974
MEMORANDUM AND ORDER
We are presented with the motion for summary judgment which is opposed not on the grounds that there are material facts in controversy, but on the grounds that it cannot be granted in the face of a permissive counterclaim for damages in excess of those sought in the summary judgment motion. Philadelphia Electric Company (PECO), the party opposing summary judgment, asserts that the presence of its counterclaim, even though it is not factually related to the original claim, creates the affirmative defense of set-off under Pennsylvania law which would defeat the entry of summary judgment in a state court, and that since this is a diversity case this Court must reach a similar result. Even if federal rather than state laws are
The plaintiff, Allis-Chalmers Corporation, has moved for summary judgment on two claims. The first claim is for $450,000 for the sale and delivery to PECO in 1972 of three power transformers. In its answer to plaintiffs complaint, PECO admits ordering transformers, the manufacture and delivery of the transformers by Allis-Chalmers, payment by PECO for five of the transformers, and failure to pay the remaining amount invoiced, which is the precise amount claimed by Allis-Chalmers. In an affidavit accompanying the summary judgment motion, Mr. Ronald Brown of Allis-Chalmers testifies to plaintiff’s completion of all its obligations under the contract and to the fairness and reasonableness of the purchase prices which PECO agreed to pay. Plaintiff’s second claim is for $47,000 for repair services performed in the Spring of 1973 at PECO’s Muddy-Run Generating Station. The affidavit of Grover Wachter, Jr., of Allis-Chalmers, is offered in support of the fairness and reasonableness of the cost of the services performed for PECO by Allis-Chalmers.
Aside from the “defense” of an adequate testing period before payment, which will be dealt with at the end of this memorandum, PECO has not controverted any of the essential elements of Allis-Chalmers’ two claims. However, PECO has counterclaimed in tort and contract for $5Í9,000 in compensatory damages and $500,000 in punitive damages. PECO’s counterclaim alleges that Allis-Chalmers manufactured and sold to PECO defective circuit-breakers which caused a fire in January 1972, at PECO’s Callowhill Sub-Station, resulting in the damages claimed. (Allis-Chalmers has filed a third party complaint against Westinghouse Electric Corporation in connection with this counterclaim). The Allis-Chalmers equipment allegedly involved in Callowhill fire is completely unrelated to the equipment or services involved in the overdue account claims asserted by Allis-Chalmers. (Brown affidavit).
Allis-Chalmers argues that under Rules 56 and 54(b)
The first question is: which law, state or federal, governs whether summary judgment should be entered under these circumstances? PECO is correct when it asserts that state law governs whether a claim constitutes an affirmative defense (or set-off) to another claim. Guaranty Trust Company v. York, 326 U.S. 99, 65 S.Ct. 1464, 89 L.Ed. 2079 (1945); Associated Hardware Supply Company v. Big Wheel Distributing Company, 355 F.2d 114 (3rd Cir. 1966). State law is controlling as to whether PECO may assert its damages claim against Allis-Chalmers as a set-off,
The question remains as to whether Rules 56 and 54(b) permit the entry of summary judgment on one claim when there exists a factually unrelated counterclaim for an amount equal to or greater than the original claim. There is no question that were PECO’s claim closely related factually to plaintiffs claim the entry of summary judgment would be improper. TPO, Inc. v. Federal Deposit Insurance Corp., 487 F. 2d 131 (3rd Cir. 1973). In TPO plaintiff’s motion for summary judgment on its claim for monies owed was denied where defendant counterclaimed on grounds of fraud with respect to the transaction that gave rise to its obligation to pay plaintiff. The Court stated:
“[Our] opinion is in accord with other authority which questions the advisability of the entry of judgment against one party if it appears that ultimately he may recover judgment against the moving party after trial. [Citations omitted]. Particular caution also must be exercised when the claim and the counterclaim are so closely related that an issue of fact in one may prove to be important to both.” (Emphasis added) 487 F.2d at 134.
“In the instant case .... there could not be separate actions on different claims, counts or causes of action in the plaintiffs complaint because there was but one claim presented. We are of the view that plaintiff was not entitled to judgment under Rule 54(b) regardless of whether the counter-claims arose out of the transaction or occurrence which is the subject matter of plaintiff’s claim.” 157 F.2d at 587.
Since the Parmelee Court interpreted Rule 54(b) to mean that summary judgment could not be entered on less than all the claims involved in a suit where plaintiff had asserted only one claim in his complaint, it was of no import whether or not the remaining claims were factually related to the claim on which summary judgment was sought. However, Rule 54(b) has been amended twice since Parmelee. The language of Rule 54(b) which was determinative of the Parmelee decision
A federal district court has entered summary judgment on a plaintiff’s claim in spite of the presence of disputed compulsory counterclaims where those counterclaims were factually separable from the plaintiff’s claim. Curtis Publishing Company v. Church, Rickards & Co., Inc., 58 F.R.D. 594 (E.D.Pa.1973). It is doubtful that the reasoning of this case has been superseded by the TPO case, cited supra, since TPO merely held that summary judgment could not be granted in those instances “when the claim and counterclaim are so closely related that an issue of fact in one may prove important to both”, 487 F.2d at 134. The decision of the Court in Almar Supply Company, Inc. v. Weber-Stephen Products Company, 15 F.R.Serv.2d at 853 (E.D.Pa.1971), seems likewise unaffected by the Appellate Court’s subsequent decision in TPO. In Almar the Court was faced with a permissive counterclaim for goods delivered and unpaid for by the plaintiff, who was suing the defendant for alleged violations of the antitrust laws. The court, noting that “the merits of the antitrust action have no effect on plaintiff’s duty to pay for goods he ordered and received prior to the alleged antitrust violations by defendant”, entered summary judgment on the counterclaim. 15 F.R.Serv.2d at 854.
PECO asserts that this Court should consider its counterclaim as a factual defense, since it is considered such under State law, and that this characterization alone renders PECO’s claim sufficiently related to the plaintiff’s claim to defeat summary judgment. However, what is essential is not the term used to describe defendant’s counterclaim but whether
Mention was made at the outset of this discussion of PECO’s defense
. Even if this Court granted summary judgment under Rule 56, this judgment would not be final unless the Court made an “express determination” under Rule 54(b) that there was no just cause for delaying the entry of final judgment. The full text of Rule 54(b) reads:
Judgment Upon Multiple Claims or Involving Multiple Parties. When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim, or third-party claim, or when multiple parties are involved, the court may direct the entry of a final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay and upon an express direction for the entry of judgment. In the absence of such determination and direction, any order or other form of decision, however designated, which adjudicates fewer than all the claims or the rights and liabilities of fewer than all the parties shall not terminate the action as to any of the claims or parties, and the order or other form of decision is subject to revision at any time before the entry of judgment adjudicating all the claims and the rights and liabilities of all the parties.
. For a claim to constitute a set-off under Pennsylvania law it must be “capable of liquidation by a known legal standard”, In re Gordon, 317 Pa. 161, 177, 176 A. 494, 500 (1935). Even though PECO has claimed in both contract and tort, and for both compensatory and punitive' damages, their claim qualifies as a set-off under this standard. Rossi v. Gehris Motors, Inc., 83 Pa.Dist. & Co. 88 (Del.Co.1955).
. The language in Rule 54(b) which the Par-melee Court felt to be crucial was “[W]hen more than one claim for relief is presented in an action . . . . ” For a discussion of the Parmelee ease to which much of the above analysis is owed, see Curtis Publishing Company v. Church, Rickards & Co., Inc., 58 F.R.D. 594. 597 (E.D.Pa.1973).
. Federal Rule of Civil Procedure 62(h) reads as follows:
“Stay of Judgment as to Multiple Claims or Multiple Parties. When a court has ordered a final judgment under the conditions stated in Rule 54(b), the court may stay enforcement of that judgment until the entering of subsequent judgment or judgments and may prescribe such conditions as are necessary to secure the benefit thereof to the party in whose favor the judgment is entered.”