at this stage of the litigation; rather his argument is based solely on NTS' alleged undue delay.
We disagree with Goldberg's contention that delay alone is sufficient grounds for denying leave to amend. As discussed supra, such delay must be accompanied by either bad faith, prejudice, or futility to warrant our denying NTS the "opportunity to test [its] claim on the merits." Foman, 371 U.S. at 182. The cases relied upon by Goldberg are not to the contrary.
Because Goldberg has not alleged and the facts do not show
that he will be prejudiced by an amendment at this stage in the proceedings, the two and one-half year delay alone is not grounds for this Court to deny NTS' motion.
C. Futility--Statute of Limitations
Defendant/third-party plaintiff Goldberg argues that NTS should not be granted leave to amend its Answer to add proposed Counterclaims I, II, III, and IV because doing so would be a futile exercise in that those claims are barred by the statute of limitations. See Diematic Mfg. Corp. v. Packaging Industries, Inc. 412 F. Supp. 1367, 1373 (S.D.N.Y. 1976) (court may consider the statute of limitations on a motion to amend); Long v. United States Dep't of Defense, 616 F. Supp. 1280, 1284 (E.D.N.Y. 1985) (leave to amend is properly denied as being futile when the claim asserted in the proposed amendment is barred by the applicable statute of limitations). Proposed Counterclaims I through IV are for breach of the Dealer/Manager Agreements dated August 1, 1983 (re: NTS IV units) and August 1, 1984 (re: NTS V units) and the Soliciting Dealer Agreements dated August 16, 1983 (re: NTS IV units) and August 3, 1984 (re: NTS V units) entered into by Goldberg and NTS for the purpose of authorizing Goldberg to sell partnership interests in the NTS IV and NTS V limited partnerships. Goldberg claims that the alleged breach of the Agreements occurred, if at all, on the dates of the sale of the partnership interests; September 6, 1983 for NTS IV units, and November 30, 1984 for NTS V units. NTS now attempts, the argument goes, to add counterclaims I through IV at a time when the applicable limitations periods for those claims have expired.
We need not reach the statue of limitations issue, however, because the proposed counterclaims are in the form of recoupment.
Recoupment is the right of a defendant to have the plaintiff's claim reduced by reason of a claim the defendant has against the plaintiff arising out of the same transaction on which the plaintiff's claim is based. 6 C. Wright, A. Miller, & M. Kane, Federal Practice and Procedure § 1401 (2d ed. 1990); First Nat. Bank of Louisville v. Master Auto Serv. Corp., 693 F.2d 308, 310 n.1 (4th Cir. 1982). This purely defensive right, which precludes affirmative relief, exists notwithstanding the fact that the defendant's claims would otherwise be barred by the statute of limitations. See Distribution Services, Ltd. v. Eddie Parker Interests, Inc., 897 F.2d 811, 812 (5th Cir. 1990). Here, Goldberg's claim that NTS should contribute to or indemnify him because he was found liable to plaintiff in connection with his advising plaintiff to invest in NTS IV and NTS V units is based on the relationship established between Goldberg and NTS by virtue of the aforementioned Agreements. The alleged breach of those Agreements and the damages related thereto arise out of the same transaction or series of events upon which Goldberg's claims against NTS are based.
Because the Agreements are governed by the laws of different states, we address each Agreement separately. The NTS IV Dealer Manager Agreement contains a choice of law provision specifying that Missouri law applies to disputes under the Agreement. Missouri law permits recoupment claims notwithstanding statute of limitations problems. See Northwest Radiation Oncology v. Goodstal, 735 S.W.2d 762, 766 (Mo. Ct. App. 1987) ("Where the counterclaim is a defense or a setoff, i.e. a recoupment, the statute of limitations is no bar to the counterclaim . . . Where the counterclaim seeks affirmative relief by asserting what is essentially a new cause of action . . . the statute of limitations properly bars the counterclaim."). Therefore, the proposed counterclaims, insofar as they relate to the alleged breach of the NTS IV Dealer/Manager Agreement, may be brought in the form of recoupment so that they may defeat or diminish Goldberg's claims.
The NTS IV Soliciting Dealer Agreement does not contain a choice of law provision. NTS argues Kentucky law may apply. If so, then Kentucky's fifteen-year statute of limitations for contract actions does not bar the proposed counterclaims because the fifteen years has not yet expired. Ky. Rev. Stat. Ann. § 413.090. Goldberg argues that New York law applies. New York law permits recoupment claims notwithstanding statute of limitations problems.
Therefore, the proposed counterclaims, insofar as they relate to the alleged breach of the NTS IV Soliciting Dealer Agreement, may be brought in the form of recoupment so that they may defeat or diminish Goldberg's claims.
The NTS V Dealer Manager Agreement contains a choice of law provision specifying that Kentucky law applies to disputes under the Agreement. Kentucky's fifteen-year statute of limitations for contract actions does not bar the proposed counterclaims because the fifteen years has not yet expired.
Lastly, the NTS V Soliciting Dealer Agreement does not contain a choice of law provision. Again, regardless of whether Kentucky, Missouri, or New York law applies to actions under this Agreement, the proposed counterclaims may be brought in the form of recoupment so that they may defeat or diminish Goldberg's claims.
We note here that Goldberg does not contend that proposed Counterclaims V and VI, for indemnification and/or contribution, are barred by the statute of limitations. Therefore, NTS is granted leave to amend its Answer to add those counterclaims as well.
For the foregoing reasons, third-party defendants NTS' motion to amend the Answer is granted.
Dated: March 11, 1994
William C. Conner
United States District Judge