Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-4_06-cv-02155/USCOURTS-cand-4_06-cv-02155-0/pdf.json

Nature of Suit Code: 443
Nature of Suit: Civil Rights Accommodations
Cause of Action: 28:1331 Fed. Question

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

WOODROW, et al. 

 Plaintiffs.

 v.

SATAKE FAMILY TRUST, et al.,

 Defendants.

_____________________________/

No. C 06-2155 WDB

ORDER DENYING PLAINTIFFS'

MOTION TO DISMISS

COUNTERCLAIMS

On March 23, 2006, Plaintiffs filed this fair housing action seeking injunctive, declaratory

and monetary relief against Defendants for allegedly discriminating against Plaintiffs on the

basis of familial status and for retaliating against Plaintiffs by attempting to evict them after they

complained about the discrimination. On May 5, 2006, Defendants answered the Complaint.

Defendants also counterclaimed against Plaintiff for breach of contract for the alleged failure

by Plaintiffs to vacate the premises after receiving a 60-Day Notice and for failure to pay rent

and hold-over damages. 

Plaintiffs now move to dismiss Defendants' counterclaim on the ground that the court

lacks subject matter jurisdiction to hear the claim. In particular, Plaintiffs argue that the

counterclaim is permissive, not compulsory, that no independent basis for jurisdiction lies for

the court to hear the claim, and that the court should decline to exercise supplemental jurisdiction

under 28 U.S.C. §1367. On July 26, 2006, the court held a hearing on Plaintiffs' motion.

Having reviewed and considered the parties' submissions and arguments, the court DENIES

Plaintiffs' Motion to Dismiss Counterclaims for the reasons set forth below. 

Case 4:06-cv-02155-WDB Document 20 Filed 07/27/06 Page 1 of 4
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Federal Rule of Civil Procedure 13 defines two types of counterclaims: compulsory and

permissive. Compulsory counterclaims “arise out of the transaction or occurrence that is the

subject matter of the opposing party's claim." Fed R. Civ. Pro. 13(a). In determining whether

a counterclaim is compulsory, the Ninth Circuit applies a “logical relationship test,” where the

court “analyze [s] whether the essential facts of the various claims are so logically connected that

considerations of judicial economy and fairness dictate that all the issues be resolved in one

lawsuit.” Pochiro v. Prudential Ins. Co. of Amer., 827 F.2d 1246, 1249 (9th Cir.1987) (quoting

Harris v. Steinem, 571 F.2d 119, 123 (2d Cir.1978)). 

A logical relationship exists when a counterclaim arises from the same aggregate set of

operative facts as the initial claim, in that the same operative facts serve as the basis of both

claims or the aggregate core of facts upon which the plaintiff's claim rests activates additional

legal rights otherwise dormant in the defendant. Pinkstaff v. United States (In re Pinkstaff), 974

F.2d 113, 115 (9th Cir.1992); see also Moore v. New York Cotton Exch., 270 U.S. 593, 610, 46

S.Ct. 367, 70 L.Ed. 750 (1926) (“‘Transaction’ is a word of flexible meaning. It may

comprehend a series of many occurrences, depending not so much upon the immediateness of

their connection as upon their logical relationship.”); Pochiro, 827 F.2d at 1252 (noting the

same); see also Price v. United States (In re Price), 42 F.3d 1068, 1073 (7th Cir.1994) (“The

pertinent inquiry is whether the claim arises out of the same transaction or occurrence and not

whether the claims are from the same transaction or occurrence.”); Albright v. Gates, 362 F.2d

928, 929 (9th Cir.1966) (“In deciding what is a transaction, we take note that the term gets an

increasingly liberal construction.”).

By contrast, permissive counterclaims are claims “against an opposing party not arising

out of the same transaction or occurrence that is the subject matter of the opposing party's

claim.” Fed.R.Civ.P. 13(b) (emphasis added). In some circumstances there is an independent

basis for jurisdiction over a permissive counterclaim. Where no such independent basis exists,

courts routinely exercise supplemental jurisdiction under 28 U.S.C. § 1367(a) where the federal

and state claims form part of the same case or controversy under Article III of the United States

Constitution and arise from a common nucleus of operative facts. See e.g., Jones v. Ford Motor

Co., 358 F.3d 205, 212-213 (2d Cir. 2004). 

Case 4:06-cv-02155-WDB Document 20 Filed 07/27/06 Page 2 of 4
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Here, it is arguable that Defendants' counterclaim is compulsory. The court is not onehundred percent certain how to give meaning in this context to the "logical relationship" test, as

that standard has been elucidated by the Ninth Circuit. The court nevertheless is very confident

that it is constitutional under 28 U.S.C. § 1367 to exercise supplemental jurisdiction over the

counterclaim. At the center of this case is a fight about why Defendants sent a 60-day eviction

notice to Plaintiffs. Clearly there is an historically limited time frame and set of interactions

between the parties that give rise to the claims and defenses and counterclaims at issue in the

case. Accordingly, the federal and state claims form part of the same case or controversy under

Article III of the United States Constitution and exercising supplemental jurisdiction is thus

entirely appropriate and permissible. 

Plaintiffs urge the court to decline to exercise supplemental jurisdiction in this case under

28 U.S.C. § 1367(c). Under Section 1367(c), the court may decline to exercise supplemental

jurisdiction in one of four situations: if (1) the counterclaim raises a novel or complex issue of

State law; (2) the counterclaim substantially predominates over the claim or claims over which

the district court has original jurisdiction; (3) the district court has dismissed all claims over

which it has original jurisdiction, or (4) in exceptional circumstances, there are other compelling

reasons for declining jurisdiction. See 28 U.S.C. § 1367(c). 

Plaintiffs assert that here there is an "exceptional circumstance" to decline jurisdiction

under subsection (c)(4), because plaintiffs may be chilled from enforcing housing discrimination

claims if they fear being sued for failure to pay rent, among other things, in a counterclaim. To

support their argument, Plaintiffs cite cases involving claims under the Fair Debt Collection

Practices Act ("FDCPA"), 15 U.S.C. §§ 1692 et seq., where courts declined to hear

counterclaims to collect the underlying debt on grounds that allowing such claims would chill

plaintiffs from bringing suits under the FDCPA, and because the state debt actions would

predominate over the federal FDCPA claims. See Sparrow v. Mazda American Credit, 385 F.

Supp.2d 1063 (E.D. Cal. 2005); Campos v. Western Dental Services, Inc., 404 F. Supp.2d 1164

(N.D. Cal. 2005). These cases are inapposite. They involved large classes of plaintiffs, where

the question of the state law claims predominating was squarely at issue, and where the

likelihood of chilling future suits was far greater. By contrast, it is not at all clear that individual

Case 4:06-cv-02155-WDB Document 20 Filed 07/27/06 Page 3 of 4
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plaintiffs (not part of a class), including Plaintiffs here, would be better off having a separate

action filed in state court or small claims court, rather than defending a counterclaim in an action

they brought in a forum they chose. Plaintiffs provide little reasoned analysis as to why it would

be better for Plaintiffs to be subject to a separate action in a different court on Defendants'

breach of contract claim. Because there is no basis for a finding of "exceptional circumstance,"

the court will not refuse to exercise supplemental jurisdiction under subsection (4) of 28 U.S.C.

§ 1367(c). There is no other basis under Section 1367(c) upon which the court properly could

decline to hear Defendants' state counterclaim. Plaintiffs' Motion to Dismiss Counterclaims is,

therefore, DENIED. 

IT IS SO ORDERED.

/s/ Wayne D. Brazil

Dated: July 27, 2006 

WAYNE D. BRAZIL

United States Magistrate Judge

Copies to:

Parties, WDB, Stats

Case 4:06-cv-02155-WDB Document 20 Filed 07/27/06 Page 4 of 4