Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-5_05-cv-05222/USCOURTS-cand-5_05-cv-05222-10/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 28:1332 Diversity-Other Contract

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28 This disposition is not designated for publication and may not be cited. 1

Case No. C05-5222

ORDER GRANTING DEFENDANTS’ MOTION FOR LEAVE TO FILE A COUNTERCLAIM

(JFEX1)

** E-Filed 07/30/2007 **

NOT FOR CITATION

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF CALIFORNIA

SAN JOSE DIVISION

TCGIVEGA INFORMATION TECHNOLOGIES

PVT, LTD.,

 Plaintiff,

 v.

KARNA GLOBAL TECHNOLOGIES, INC.;

KANNAN R. AYYAR; JNANA R. DASH AKA

JNAN DASH; and GREGORY D. HAWKINS,

 Defendants.

Case Number C 05-5222JF

ORDER GRANTING DEFENDANTS’ 1

MOTION FOR LEAVE TO FILE A

COUNTERCLAIM

[re: docket no. 82]

I. BACKGROUND

On December 16, 2005, Plaintiff TCGIvega Information Technologies PVT, LTD.

(“TCGIvega”) commenced the present action against Defendants Karna Global Technologies,

Inc. (“Karna”), Kannan R. Ayyar (“Ayyar”), Jnana R. Dash (“Dash”), and Gregory D. Hawkins

(“Hawkins”), alleging six claims for relief. TCGIvega alleges that Karna and Ayyar breached

their contractual obligation to pay $312,000 for services performed by TCGIvega. Plaintiff

further alleges that Ayyar, a director and officer of Karna, commingled his personal funds with

Case 5:05-cv-05222-JF Document 126 Filed 07/30/07 Page 1 of 5
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 Plaintiff objects to and moves to strike the Declaration of Antoinette McGill in support 2

of Defendants’ motion. Plaintiff contends that Ms. McGill, who joined the Chugh Firm in March

2007, does not have the requisite personal knowledge to support the statements made in her

declaration. Plaintiff also contends that the declaration contains conclusory and argumentative

statements. The Court agrees that Ms. McGill’s repeated use of bold, underlined statements is

argumentative, and that many of her statements are conclusory. Ms. McGill subsequently has

provided an additional declaration with respect to her personal knowledge of the case; however,

her original declaration has not been considered by the Court.

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Case No. C05-5222

ORDER GRANTING DEFENDANTS’ MOTION FOR LEAVE TO FILE A COUNTERCLAIM

(JFEX1)

those of the corporation such that there was a unity of interest and ownership between Ayyar and

Karna. The only claim alleged against Dash and Hawkins, non-officer directors of Karna, is a

claim for breach of fiduciary duty.

Karna and Ayyar filed their answer on January 20, 2006. The Court initially entered a

default against Dash and Hawkins, but the default was set aside on May 12, 2006. Dash and

Hawkins answered the complaint on May 22, 2006. The parties have twice attempted settlement,

first in August 2006, and then again in March 2007. The March settlement discussions resulted in

an draft settlement agreement that was never executed because of a subsequent disagreement

regarding the terms. On May 23, 2007, Plaintiffs moved to compel depositions and filed a motion

for sanctions, alleging that Defendants had thwarted Plaintiff’s discovery efforts during the

preceding months. Defendants claimed that they disregarded discovery orders because of the

pending settlement. On June 20, 2007, Magistrate Judge Lloyd granted Plaintiff’s motions to

compel depositions and for sanctions, finding that Defendants disregarded deposition notices

even after both parties knew that the settlement agreement would not be executed. 

On March 31, 2007, Defendants filed the instant motion for leave to file a counterclaim

for breach of contract against TCGIvega. The proposed pleading alleges that TCGIvega’s poor

performance on behalf of Karna caused Karna to lose the Wellpoint project and a significant

amount of revenue. Plaintiff opposes the motion. The Court heard oral argument on July 27,

2007. Upon consideration of the moving and responding papers, as well as the arguments 2

presented, the motion will be granted.

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Case No. C05-5222

ORDER GRANTING DEFENDANTS’ MOTION FOR LEAVE TO FILE A COUNTERCLAIM

(JFEX1)

II. LEGAL STANDARD

The standards governing a motion for leave to file a counterclaim pursuant to Federal

Rule of Civil Procedure 13(f) are the same as those governing a motion for leave to amend a

pleading under Rule 15(a). Magnesystems, Inc. v. Nikken, Inc., 933 F. Supp. 944, 947-48 (C.D.

Cal. 1996); Cooper Development Co. v. Employers Insurance of Wausau, 765 F. Supp. 1429,

1431 (N.D. Cal. 1991). Rule 15(a) provides that leave shall be freely given when justice so

requires, thus the Court liberally will allow counterclaims to be filed, particularly compulsory

counterclaims which later may be barred by the doctrine of res judicata if leave to file is denied. 

Barnes Group, Inc. v. C&C Products, Inc., 716 F.2d 1023, 1035 n.35 (4th Cir. 1983); Cooper,

765 F. Supp. at 1432. Accordingly, leave should be denied only where there is a showing of

undue delay, bad faith, futility, or prejudice to the opposing party. Magnesystems, 933 F. Supp.

at 947-48; Cooper, 765 F. Supp. at 1431. 

III. DISCUSSION

Defendants assert that their failure to file a counterclaim with their original answers was a

result of inadvertence. Rule 13(f) allows Defendants, with leave of the Court, to submit their

counterclaim by amendment if they have failed to plead the counterclaim through oversight,

inadvertence, excusable neglect, or whenever justice requires. Defendants contend that their

attention and resources were focused upon responding to the motion for default judgment against

them and their significant efforts at settlement. The Court accepts Defendants’ admission that

their failure to include this counterclaim in their original pleadings was inadvertent and,

therefore, will address the parties’ arguments regarding undue delay and prejudice. 

Plaintiffs correctly assert that a relevant factor in determining undue delay is whether the

moving party knew or should have known when the original pleading was filed the facts and

theories raised by the proposed amendment. Jackson v. Bank of Hawaii, 902 F.2d 1385, 1388

(9th Cir. 1990). The answers filed by Dash and Hawkins assert TCGIvega’s substandard work

performance as an affirmative defense. Thus, seemingly by their own admission, Defendants had

the requisite knowledge of this theory in May 2006 to file a counterclaim with their answers. The

Court agrees with Plaintiff that the intervening twelve-month delay appears to be undue. 

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 The cut-off date for non-expert discovery and disclosure of expert witnesses is August

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3, 2007, and the date to complete discovery is August 24, 2007.

 It is apparent that both parties already have explored the question of whether 4

TCGIvega’s work was substandard through discovery that already has been completed. Plaintiff

contends that this discovery shows that the proposed counterclaim is without merit. By

permitting Defendants to file the counterclaim, the Court in no way intends to suggest that the

parties may avoid the effects of discovery that already has been completed. 

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Case No. C05-5222

ORDER GRANTING DEFENDANTS’ MOTION FOR LEAVE TO FILE A COUNTERCLAIM

(JFEX1)

However, while undue delay is one factor to be considered, “it is the consideration of prejudice to

the opposing party that carries the greatest weight.” Eminence Capital, LLC v. Aspeon, Inc., 316

F.3d 1048, 1052 (9th Cir. 2003). 

Defendants argue that their counterclaim is compulsory and will be barred as res judicata

if they are denied leave to file. This prejudice must be weighed against the prejudice asserted by

Plaintiff. See Bell v. Allstate Life Insurance Co., 160 F. 3d 452, 454 (8th Cir. 1998). Plaintiff

acknowledges that the counterclaim is compulsory, but asserts that the additional discovery

required as to the damages sought pursuant to the counterclaim would cause it great prejudice.

3

However, Plaintiff concedes that a number of depositions already have occurred regarding the

affirmative defense that TCGIvega’s work was substandard. Defendants assert that three

additional individuals, whose depositions already have been scheduled, are the only other

witnesses with respect to the counterclaim. Under these circumstances, it appears that no 4

significant additional discovery will be required by the addition of the counterclaim.

Accordingly, Defendants’ motion for leave will be granted. 

IV. ORDER

Good cause therefor appearing, IT IS HEREBY ORDERED, Defendants’ motion for

leave to file a counterclaim is GRANTED. 

DATED: July 30, 2007

 

JEREMY FOGEL

United States District Judge

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Case No. C05-5222

ORDER GRANTING DEFENDANTS’ MOTION FOR LEAVE TO FILE A COUNTERCLAIM

(JFEX1)

This Order has been served upon the following persons:

Michael William Stebbins mstebbins@be-law.com 

 

Jaipat Singh Jain jjain@lpgk.com

Melinda Mae Morton mmorton@be-law.com

Antoinette McGill antoinette.mcgill@chugh.com

Karna Global Technologies, Inc

c/o Kannan Ayyar, President

2025 Gateway Place

Suite 200

San Jose, CA 95110-1000

 

Case 5:05-cv-05222-JF Document 126 Filed 07/30/07 Page 5 of 5