The opinion of the court was delivered by: TENNEY
This action grows out of the sale to defendant Fedders Corporation ("Fedders") of the Airtemp Division ("Airtemp") of plaintiff Chrysler Corporation ("Chrysler"). On February 23, 1976, the parties entered into a 76-page agreement (the "Agreement") which set out the numerous terms and conditions of the sale. Fedders was to purchase the assets of Airtemp, including stock in certain domestic and foreign subsidiaries of Chrysler, in exchange for the aggregate of the following: (a) $ 18,000,000; (b) 1,500,000 shares of preferred stock, Series B, of Fedders; (c) a note in the principal amount of $ 10,539,965 (the "Note"); and (d) the assumption by Fedders of certain liabilities of Airtemp. The Agreement provided for an adjustment in the purchase terms to reflect any change in Airtemp's net worth between the close of negotiations in the fall of 1975 and the closing on February 23, 1976. Complaint PP 5-7, and Exhibit A thereto (the Agreement), at 11-17.
In its Complaint, filed July 25, 1978, Chrysler alleged numerous claims for relief. It seeks to recover for services rendered subsequent to the closing date; for interest never paid on the Note; for an adjustment in the Note's principal amount; for dividends never paid on the Series B preferred stock; for conversion of funds mistakenly transferred to Fedders; for Fedders' refusal to accept, or to facilitate, the transfer of stock in several Chrysler subsidiaries, as well as for the failure to pay for some shares that were accepted; and for the failure to meet various liabilities undertaken by Fedders. The Complaint demanded a total judgment in excess of 82 million dollars; in the Amended Complaint, the figure is $ 85,581,548.16.
On December 18, 1981, with the consent of Magistrate Nina Gershon, who has supervised the pretrial stages of this case, and with the consent of Fedders, Chrysler served a supplemental and amended complaint, which generally revised and updated its original claims and which added a new claim to enforce a prepayment clause in the Note. Chrysler initially pursued its prepayment claim in a separate action filed in New York State Supreme Court in June 1979, two months after the clause was triggered. Affidavit of Robert Ehrenbard, sworn to February 18, 1982 ("Ehrenbard Aff."), at 10. In that action, the trial court denied a motion by Fedders to dismiss the claim, but granted a stay pending the outcome of this case. The Appellate Division affirmed on the condition that the claim be asserted in this action, to which Fedders consented. In response to Chrysler's amended complaint, Fedders filed an amended answer which, among other things, added its forty-first, forty-second, and forty-third counterclaims, alleging malicious prosecution, abuse of process, and a statutory malicious prosecution claim under Section 600.2907 of the Michigan Revised Judicature Act.
At this time, two motions are before the Court. Chrysler has moved to strike the new counterclaims under Fed.R.Civ.P. ("Rule") 15 as untimely and prejudicial, and under Rule 12(b)(6) for failure to state a claim upon which relief may be granted. Simultaneously, Fedders has moved for an expedited trial. The Court will deal with both motions in this Opinion. For the reasons stated below, Chrysler's motion to strike the counterclaims is granted under Rules 12 and 15, and Fedders' motion for an expedited trial is denied, although the Court notes that it does not anticipate any substantial delay between the completion of a pretrial order and the available dates for conducting the trial.
MOTION TO STRIKE COUNTERCLAIMS
One of the few facts on which the parties agree is that Chrysler has filed seven lawsuits in the United States in pursuing its rights arising from the February 23, 1976 transaction. Naturally, the parties disagree on the merits and propriety of those actions. Briefly summarized, they are as follows: (1) In November 1977, Chrysler sued Fedders and five other corporations in the Eastern District of Michigan, alleging federal antitrust violations and twenty-two pendent state claims. In February 1978, the district court dismissed the antitrust claims and, with them, the pendent state claims. In March 1981, the Sixth Circuit Court of Appeals affirmed in part and reversed in part the lower court's decision on the applicable antitrust principles, clearing the way for Chrysler to resume its prosecution of the case. Fedders obtained a stay of mandate and petitioned the Supreme Court for a writ of certiorari, and Chrysler cross-petitioned. Both petitions were denied on October 13, 1981, after which Chrysler chose to voluntarily dismiss the Michigan action and pursue all of its claims in this court. (2) While pursuing its Sixth Circuit appeal (which took three years to complete), Chrysler filed its complaint in this court where Fedders is the sole defendant and where jurisdiction rests upon diversity of citizenship under 28 U.S.C. § 1332. The pendent claims dismissed in the Eastern District of Michigan were made pendent claims in this court. (3) On May 19, 1978, Chrysler sued Airtemp Corporation as the sole defendant in a Delaware state court action. According to Chrysler's attorney, this separate case was brought because Airtemp could not be sued in federal court. Ehrenbard Aff. at 8. (4) On July 25, 1978, Chrysler commenced an action in state court in Kentucky, seeking to foreclose a lien on real property located there and valued at $ 11,900,000, "which is far less than the full amount" Chrysler seeks. Id. at 9. (5) On March 4, 1981, Chrysler filed suit in the federal district court in New Jersey against Fedders and several individuals. The suit "affects title to property located in New Jersey ... and it is based to a large extent on events which occurred, or were uncovered, well after litigation between Chrysler and Fedders had already begun." Id. (6) As the first of two New York state court actions, Chrysler commenced a suit in November 1977, seeking dividends owing on the Series B Preferred Stock. These claims were based upon Fedders' certificate of incorporation and upon the New York Business Corporation Law, not upon the purchase agreement. Over Fedders' strenuous defense and motions to dismiss or stay the action, Chrysler was awarded summary judgment in the amount of $ 3,900,000. (Aside from the voluntary dismissal in Michigan, the New York state court judgment represents the only resolution in the many cases comprising the course of litigation between Chrysler and Fedders.) (7) In June 1979, Chrysler brought a second New York state court action, seeking to enforce a prepayment clause in the Note from Fedders. As discussed above, that action was stayed on the condition that the claim be added to this action, which was accomplished by a December 18, 1981 amendment to the complaint.
In its forty-first counterclaim, Fedders alleged that "Chrysler was well aware that its (claim for prepayment of the Note) would or could have been adjudicated in this action(.) ... Nevertheless, Chrysler initiated these unnecessary lawsuits (i.e., the second New York state action and the federal suit in New Jersey) and prosecuted them notwithstanding Fedders' efforts to litigate the issues in one action in one forum." Amended Answer P 20. "Chrysler's repeated assertion of its (prepayment claim) is ... part and parcel, and in furtherance of, a campaign by Chrysler, a corporation many times the size of Fedders, to coerce Fedders into abandoning its rights, through proliferation of lawsuits, splitting of causes of action, and abusive use of process, all in connection with the same February 23, 1976 transaction between Chrysler and Fedders." Id. P 21. Fedders quotes the Michigan district court as labeling Chrysler's antitrust action "almost spurious," and it cites Chrysler's complaint in that action as asserting that all of its claims "are derived from a common nucleus of operative facts ..., such that the entire action constitutes a single case which would ordinarily be expected to be tried in one judicial proceeding." Id. P 22. After listing Chrysler's six other actions against Fedders, the defendant states that "(u)pon information and belief, Chrysler multiplied its lawsuits not to obtain a speedy adjudication of its alleged claims, but to harass and defame Fedders, to interfere with Fedders' business and property, and to impose unwarranted costs and expenses upon Fedders, all in an effort to obtain unfair advantage and to pressure Fedders." Id. P 24. Citing Chrysler's December 11, 1981 voluntary dismissal of the Michigan action, Fedders alleges that Chrysler "has acted maliciously and without probable cause." Id. P 26. As to damages resulting from Chrysler's alleged malicious prosecution, Fedders states that it "should recover from Chrysler the actual damages claimed in the fortieth claim for relief in the Answer and Counterclaims and punitive damages in the amount of $ 20,000,000.00, plus interest thereon." Id. P 28. The damages listed in the fortieth claim for relief in Fedders' original answer, filed August 23, 1978, were as follows:
As a result of and attributable to Chrysler's breaches of the Agreement and misrepresentations, Fedders has incurred and sustained, and, upon information and belief, will incur and sustain, expenses (including reasonable legal and other fees) in the amount of at least $ 5,000,000, which would not have been incurred or sustained or required to be incurred or sustained if Chrysler's representations, warranties and covenants had been true and correct.
Answers and Counterclaims P 520.
The forty-second and forty-third counterclaims allege substantially the same underlying facts. The forty-second claim alleges that "Chrysler's repeated assertions of claims in six different Courthouses constitute abuse of process," Amended Answer P 30, for which "Fedders should recover from Chrysler the actual damages claimed in the fortieth claim for relief (quoted above)," as well as punitive damages of 20 million dollars. The forty-third claim adds the following allegation:
Upon information and belief, the bringing of the Michigan action-and in particular the assertion of a wildly inflated damage claim-had as its purpose and effect a serious adverse impact on Fedders' business and its relationships with suppliers, distributors and lenders. Indeed, one of Fedders' chief banking lenders deemed the Michigan lawsuit an "important" factor in its lending relationship which relationship was later terminated to Fedders' serious detriment.
Id. P 33. This conduct, Fedders alleges, violated Section 600.2907 of the Michigan Revised Judicature Act, a statutory ban on malicious prosecution, for which Fedders seeks the same damages claimed in the forty-first and forty-second counterclaims, as well as "additional damages to be determined at the time of trial." Id. PP 34-35.
In its motion to strike the counterclaims, Chrysler asserts a wide range of reasons for disallowing Fedders' amendments: first, that Fedders never gave notice of its intention to add these claims, nor did it obtain the Magistrate's permission or Chrysler's consent to do so, Ehrenbard Aff. at 4; second, that the claims raise new factual issues-including Chrysler's motivation in bringing its lawsuits, the probable cause underlying its actions, and special damages allegedly suffered by Fedders-as to which Chrysler would need discovery, despite the close of discovery on December 31, 1981, id. at 4-6; third, that Fedders' belated amendment of its counterclaims substantially prejudices the plaintiff, id.; fourth, that the addition of these claims would needlessly confuse the jury with issues pertaining to the other actions and thereby tend to disparage Chrysler unfairly in the jury's eyes, id.; fifth, that, with these claims, Fedders will attempt to put Chrysler's attorneys on trial, in a further effort to sway the jury, id.; sixth, that Fedders approaches the Court with unclean hands because it has "attempt(ed) to depict Chrysler's actions as a campaign of harassment while failing to advise the Court that it is responsible for five other actions" involving suits by Fedders' subsidiaries against Chrysler's foreign subsidiaries, id. at 7; and seventh, that Fedders' allegations of malicious prosecution and abuse of process fail, under Fed.R.Civ.P. 12(b)(6), to state claims upon which relief can be granted, Plaintiff's Memorandum of Law in Support of its Motion to Strike and Dismiss Defendant's Forty-First, Forty-Second and Forty-Third Counterclaims ("Plaintiff's Memorandum"), at 11.
In response to these arguments, Fedders asserts, first, that it was "absolutely entitled to assert the tort counterclaims in its Amended Answer, in response to Chrysler's Supplemental and Amended Complaint adding plaintiff's new (prepayment claim) for relief and other new matter," Fedders' Memorandum in Opposition to Chrysler's Motion to Strike and Dismiss Fedders' Counterclaims for Malicious Prosecution and Abuse of Process ("Defendant's Memorandum"), at 57; second, that "(Fedders') defenses (to the prepayment claim) raise all the same facts and issues concerning Chrysler's malicious prosecution and abuse of process," id. at 60; third, that Chrysler also will have to face all of the same issues in connection with Fedders' Sixty-Fourth Defense, Amended Answer PP 36-37, concerning Chrysler's failure to mitigate damages, a defense which Chrysler has not sought to strike, Fedders' Rebuttal Memorandum in Opposition to Chrysler's Motion to Strike and Dismiss Fedders' Counterclaims for Malicious Prosecution and Abuse of Process ("Defendant's Rebuttal Memorandum"), at 5-6; fourth, that no new discovery is required because the claims "involve information entirely within Chrysler's knowledge and control" and because "in any event, Chrysler's discovery against Fedders continues at a back-breaking rate in the New Jersey action," id. at 61; fifth, that no prejudice, except potential damages, will result because the jury will already have before it all of the pertinent facts and because "with or without Fedders' counterclaims, plaintiff will have to prove its reasons for suing and in effect will have to demonstrate, if it can, probable cause for asserting these claims," id. at 61; sixth, that Chrysler is guilty of unclean hands in that it failed to reveal at a December 10, 1981 conference its intention to dismiss the Michigan action the next day, id. at 58; seventh, that if Chrysler had an opportunity to assert a new claim in its amended complaint, Fedders was likewise entitled to assert "new claims, two of which matured only a week before Chrysler amended its complaint (on) December (18), 1981," id.; and eighth, that "Chrysler has tried to destroy Fedders' business ... (and that) (if) Chrysler were to succeed at trial in recovering a judgment for such purported obligations, Chrysler, on its theory, might well eliminate Fedders as a viable entity-and as a litigant-and thus effectively evade responsibility (indeed, be rewarded) for its wrongful conduct, and thus nullify" the deterrent purposes of permissible recoveries for malicious prosecution and abuse of process, id. at 62-63. In addition, Fedders used the bulk of its memoranda in opposition to the motion to describe Chrysler's allegedly ruthless, vicious persecution of Fedders and to justify the adequacy of its counterclaims against a motion to dismiss under Rule 12(b)(6).
Discussion of the Federal Rules.-
The appropriate starting point on this motion is Fedders' assertion that it is "absolutely entitled" to add its new counterclaims. (The Court will postpone its discussion of the merits of Fedders' claims until after treating the strictly procedural aspects.) Chrysler brought its motion to strike on the basis of Rule 15, citing the customary factors considered under that provision, including delay, prejudice, and confusion, among others. And Fedders has defended its amendment by citing customary arguments growing out of the words of Rule 15 which directs that "leave (to amend) shall be freely given when justice so requires." In addition, Fedders prominently cited and discussed the case of Joseph Bancroft & Sons Co. v. M. Lowenstein & Sons, Inc., 50 F.R.D. 415 (D.Del.1970), which rested on the commands of Rule 13 as well as Rule 15. But neither side has fully addressed the interplay of Rules 13 and 15 in this case.
After a party has lost the opportunity to "amend his pleading once as a matter of course at any time before a responsive pleading is served," he "may amend his pleading only by leave of court or by written consent of the adverse party." Rule 15(a). Once permission to amend has been granted, the opposing party is entitled to plead in response within specified time periods. In this case, Chrysler had the Magistrate's permission, as well as Fedders' consent, to file its amended complaint adding the claim for prepayment of the Note. Chrysler argues that its amended complaint adding the prepayment claim was proper under Rule 15(d), which gives the court discretion to allow a party to plead claims growing out of events since the original pleading. Plaintiff's Reply Memorandum at 30; Owens-Illinois, Inc. v. Lake Shore Land Co., 610 F.2d 1185 (3d Cir. 1979). But even if the Court so ruled, it must still confront the problem of how broadly Fedders may amend its answer and counterclaims. Professor Moore has said that "a supplemental answer should state new or additional defenses to the claim set forth in the original complaint and should not introduce a new controversy into the case." 3 Moore's Federal Practice P 15.16(4), at 15-251 to -252 (2d ed. 1982). He does not specifically address the problem raised in this case-namely, the permissible scope of a supplemental answer in response to a supplemental complaint-although he notes "that whether or not the adverse party should plead to the supplemental pleading ... has been left entirely to the discretion of the court." Id. at 15-253. Nonetheless, the Court will proceed to consider Fedders' strongest assertion on this motion-namely, that it is entitled to present its new counterclaims at this time.
Rule 15 does not by its terms limit the issues that can be alleged in response to an amended pleading. Because the Rule speaks of a "pleading," however, Rule 13 may shed some light on the problem. It directs that "(a) pleading shall state as a counterclaim any claim which ... the pleader has against any opposing party." Fed.R.Civ.P. 13(a). Besides the breadth of this language, a sense of fair play would suggest that the responder may update his claims in the answering papers. As the court commented in Joseph Bancroft & Sons Co. v. M. Lowenstein & Sons, Inc., supra :
Since the amending pleader chooses to redo his original work, and receives the benefit of ... nunc pro tunc treatment, he can hardly be heard to complain that claims filed against him are improper because they should have been asserted in response to his original pleading.
On the other hand, Rule 15 does state that the pleading must be "in response to (the) amended pleading" (emphasis supplied), and Rule 13(a) was not written principally to address the problem of counterclaims asserted in response to amended complaints. In addition, the equitable principle quoted above from Joseph Bancroft & Sons must be tempered by the court's additional comments about the case:
Justice would not be served by striking the counterclaims; serious questions of res judicata would arise from the failure to present them here; and their trial in a separate action would only duplicate much of what will happen here. No prejudice to defendant appears, and no claim of surprise is made.
Id. (Emphasis supplied).
Furthermore, Rule 13's broad requirement that a pleader "shall state ... counterclaim(s)" in his responsive papers applies only to claims existing "at the time of serving the pleading" and only if they "arise( ) out of the transaction or occurrence that is the subject matter of the opposing party's claim." A pleader must seek the permission of the court to assert claims which were omitted from the original pleading, Rule 13(f), or which matured after the original pleading, Rule 13(e), or which arise out of more recent transactions or occurrences, Rule 15(d). On balance, then, given the treatment of various types of counterclaims under the Federal Rules of Procedure, the Court finds that Fedders does not have a right to assert new counterclaims at this time in the same way that it had a right to assert counterclaims in its original answer. Even if it did, however, Fedders would still have to show that its new claims are either compulsory or at least appropriate permissible counterclaims, which the Court finds they are not, as explained in the margin.
Denied the opportunity to assert its counterclaims as of right, Fedders would urge the Court to exercise its discretion in allowing the amendment, so that all of the parties' contentions can be resolved in a single lawsuit before a single jury. As stated in its memorandum in opposition to Chrysler's motion to strike, Fedders argues that "(t)he case in this Court has become the "mother' case(.) ... Severing the malicious prosecution and abuse of process claims from this action would only serve further to proliferate the all-too-multiplicitous litigation between Chrysler and Fedders." Defendant's Rebuttal Memorandum at 6.
Fedders' request to add its claims can be tested under Rule 13(e), which deals with claims maturing after a pleader has served his pleading, or under Rule 15(d) as supplemental claims setting forth transactions or occurrences or events which have happened since the service of the pleading to be supplemented. On the other hand, to the extent that Fedders' claim of abuse of process rests upon the entire history of Chrysler's conduct, it might be viewed as an omitted claim, handled under Rule 13(f), or as an after-acquired or supplemental claim, depending upon when Fedders alleges that Chrysler's permissible assertion of its rights became actionable. In any case, it is hard to imagine that Fedders could not have asserted its abuse of process claim at an earlier date, since this claim did not require a prior favorable determination.
Regardless of which categories are used, however, the Court must still consider the parties' arguments about the proper exercise of judicial discretion in allowing or striking the recently alleged counterclaims. See generally Zenith Radio Corp. v. Hazeltine Research, Inc., 401 U.S. 321, 91 S. Ct. 795, 28 L. Ed. 2d 77 (1971). Under each of the provisions involved here, the standards to be applied and the factors to be considered are essentially the same, and the parties' arguments on this motion are equally pertinent to each of the applicable sections. See 3 Moore's Federal Practice PP 13.32, 13.33, 15.07(3), 15.08 (2d ed. 1978 & 1981 Supp.). Furthermore, central to the Court's inquiry is the prejudice, if any, to Chrysler from allowing Fedders' new claims to be asserted at this time.
No one could deny that, with discovery closed and with the parties seeking a prompt trial, Fedders' recent assertion of counterclaims was made late in the day, and even Fedders appears to concede as much when it argues that "the mere passage of time ... by itself, even to the eve of trial, is not enough to preclude amendment of pleadings where the opposing party fails to demonstrate any real prejudice." Defendant's Memorandum at 59. Where the parties diverge is on the existence of adequate grounds to deny leave to amend despite the language in Rule 15(a) that "leave shall be freely given when justice so requires." In interpreting this phrase, the Supreme Court listed several factors which can justify a denial of leave: "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc.," Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230, 9 L. Ed. 2d 222 (1962). All but the third of these factors is pertinent to this case.
The cases cited by Fedders on this point can be easily distinguished from this case, as Chrysler readily points out. Plaintiff's Reply Memorandum at 33 *. Briefly reviewed, Fedders' authorities are as follows: S.S. Silberblatt, Inc. v. East Harlem Pilot Block, 608 F.2d 28, 42 (2d Cir. 1979), in which the plaintiff merely wanted to restate its claim in terms of breach of contract, in which plaintiff alleged that discovery had been held in abeyance during settlement negotiations, and in which a "trial has not yet commenced and is not likely to do so for some time," id. at 42; Soler v. G. & U., Inc., 86 F.R.D. 524, 527 (S.D.N.Y.1980), in which this Court permitted plaintiffs to amend their complaint to allege that violations of the Fair Labor Standards Act during the 1978 harvest season were repeated during the 1979 season; International Bank v. Price Waterhouse & Co., 85 F.R.D. 140, 142 (S.D.N.Y.1980), in which "the only prejudice delay has caused ... is the necessity for (the defendant) to redo some of the work already done in defending this action" and in which this inconvenience "appear(ed) to be minimal when compared to that which would be caused to (the plaintiff) if (it) were denied the opportunity to present completely its claims against these defendants arising out of this transaction," id.; Manhattan Fuel Co. v. New England Petroleum Corp., 422 F. Supp. 797 (S.D.N.Y.1976), in which the court commented that "(although) two years have passed since the completion of discovery, defendants have not alleged any injury as a result of this delay in requesting an amendment (to assert a claim for quantum meruit, which is) ... based on the same facts, transactions and occurrences underlying the contract claim; it ...