The opinion of the court was delivered by: CHARLES S. HAIGHT, JR.
This case is before the Court on plaintiff's motion for partial summary judgment pursuant to Fed. R. Civ. P. 56. For the reasons discussed below, plaintiff's motion is granted.
This case arises out of a promissory note executed by defendant Trifinery and guaranteed by defendant Brass. Defendants do not dispute that they are liable under the note,
but contend that summary judgment is inappropriate in that they have a viable claim for set-off, which they have brought as a counterclaim in this action.
Since there is no dispute as to liability under the promissory note, the only issue presented is whether defendants' assertion of a counterclaim is valid, and would therefore bar the entry of summary judgment on the note.
Defendants claim that the entry of summary judgment is inappropriate where the value of the counterclaim is uncertain. Plaintiff argues, however, that neither Trifinery as maker of the note, nor Brass as it guarantor has the right to assert a counterclaim in this action, since a clause in the promissory note provides:
[Trifinery] further waives trial by jury and the right to interpose any counterclaim or set-offs of any kind in any litigation relating to this note or any such other liabilities.
Plaintiff contends that by this provision, defendants waived any right to assert a counterclaim; accordingly, nothing stands in the way of the entry of summary judgment.
Defendants argue that this provision is not enforceable in a federal court, since the counterclaim is compulsory, and Fed. R. Civ. P. 13(a) requires a party to assert all compulsory counterclaims in this action, or waive them. In support of their argument that the clause is unenforceable, defendants cite Loader Leasing Corp. v. Kearns, 83 F.R.D. 202 (W.D.Pa. 1979). Loader Leasing also involved a contract provision which purportedly waived defendant's right to set-off any claims he might have against plaintiff. The court held that although the waiver provision would be enforceable in state court, it could not "unreasonably restrict the privilege of litigating an issue in a court of law . . . or unreasonably restrict the jurisdiction of a federal court," id., at 203. Those problems arose in Loader because, in part, defendant's counterclaim was compulsory under Rule 13(a); and "the failure to assert a compulsory counterclaim is a bar to a subsequent action in either a federal or state court." Id., at 203-04. The district court in Loader enforced the waiver provision as to the defendant's second counterclaim which was permissive, but refused to do so as to the first, compulsory counterclaim. See also Atlantic C Line R. Co. v. United States F. & Guaranty Co., 52 F. Supp. 177 (M.D.Ga. 1943).
In their briefs, the parties assume the applicability of New York law. New York law enforces waivers of the right to assert affirmative defenses, set-offs or counterclaims. See Bank of New York v. Cariello, 69 A.D.2d 805, 415 N.Y.S.2d 65 (2d Dept. 1979); FDIC v. Frank L. Marino Corp., 74 A.D.2d 620, 425 N.Y.S.2d 34 (2d Dept. 1980). Courts in this circuit, applying New York law, generally hold that contractual agreements not to assert defenses, set-offs or counterclaims in subsequent litigation do not contravene public policy and are enforceable. See Bankers Trust Co. v. Litton Systems, 599 F.2d 488, 490 (2d Cir. 1979); In re Gas Reclamation, Inc. Securities Litigation, 741 F. Supp. 1094, 1102 (S.D.N.Y. 1990); FDIC v. Borne, 599 F. Supp. 891, 894-95 (E.D.N.Y. 1984). The waiver will not be enforced so as to bar a viable set-off or counterclaim sounding in fraud, Marino, supra, but defendants at bar do not allege fraudulent conduct on the part of plaintiff.
Under New York law, all counterclaims are permissive. See N.Y. CPLR § 3019, (McKinney's 1991), and practice commentary at 205. This contrasts with federal practice, where a counterclaim may be compulsory under Rule 13(a) or permissive under Rule 13(b), depending on the circumstances.
The question of fairness posed by Loader Leasing Corp. v. Kearns, supra, arises because plaintiff chose to file its action in federal court. It is not fair to enforce the contractual waiver of defendants' counterclaim if that counterclaim is compulsory under Rule 13(a). Were it otherwise, a party to a contract containing such a waiver provision could, by choice of a federal ...