IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF PENNSYLVANIA

PENNSYLVANIA GEAR CORPORATION,

Plaintiff

v.

ACSA STEEL FORGINGS, S.p.A.,

Defendant

)

)

)

)

)

)

)

No. 02 cv 4359

TRIAL BY JURY DEMANDED

MEMORANDUM IN SUPPORT OF THE

MOTION TO DISMISS OF DEFENDANT

I. FACTS

This case is presently before the Court upon the motion to dismiss under Federal

Rule 13(a) filed on behalf of Defendant, ACSA Steel Forgings, S.p.A. (“ACSA”). The claims

asserted by Plaintiff’s complaint constitute counterclaims which Plaintiff should have asserted in

the action earlier filed by ACSA in the U.S. District Court for the Western District of

Pennsylvania. The complaint filed herein by Pennsylvania Gear Corporation (“PennGear”)

alleges causes of action arising out of the contractual relationship between ACSA and PennGear. 

ACSA had filed an earlier action against PennGear which also arose from this contractual

relationship. Since PennGear’s claims fall within the definition of a Rule 13 compulsory

counterclaim with regards to ACSA’s lawsuit, PennGear’s complaint must be dismissed. 

Case 2:02-cv-04359-MAM Document 5-2 Filed 09/30/2002 Page 1 of 9
1

 A copy of ACSA’s complaint is attached to the motion to dismiss. 

2.

A. BACKGROUND

ACSA is a corporation in the business of manufacturing steel forgings to be used

in the manufacturing industry. PennGear, a corporation which manufactures gears and related

goods, offered to purchase from ACSA various forgings to be used in its manufacturing process

and to pay certain shipping expenses and warehouse costs for the same. ACSA accepted these

offers, and manufactured the forgings ordered by PennGear. See ACSA Complaint, ¶¶3-8;1

PennGear Complaint, ¶¶4-6. As part of this manufacturing process, and in order to supply the

forgings to PennGear under the agreement, ACSA also created specialized molds which are used

to cut and form the forgings. PennGear was charged some costs relating to the fabrication of the

molds. See ACSA Complaint, exhibits. The parties’ contractual relationship ended when

PennGear failed and refused to pay ACSA. ACSA Complaint, ¶¶8-11; PennGear Complaint,

¶10. 

As a result of PennGear’s failure and refusal to pay for the goods it received and

accepted, ACSA commenced a lawsuit on August 16, 2001, in the United States District Court

for the Western District of Pennsylvania, alleging a cause of action for breach of contract. 

Subsequently, on or about June 2, 2002, approximately ten (10) months after the commencement

of ACSA’s Western District action, PennGear filed its lawsuit with the Court of Common Pleas

of Bucks County. ACSA then timely removed that action to this Honorable Court. 

Case 2:02-cv-04359-MAM Document 5-2 Filed 09/30/2002 Page 2 of 9
3.

PennGear’s action arises under the same contractual relationship which forms the

basis for ACSA’s earlier filed action. ACSA’s suit alleges that PennGear breached the

agreement by failing to pay for the forgings manufactured by ACSA. PennGear’s lawsuit alleges

damages under that same contractual relationship. PennGear’s causes of action are based upon

the contested allegation that ACSA wrongfully retained the manufacturing molds and used them

to manufacture goods for other customers. ACSA denies all liability to PennGear. 

ACSA has filed a motion to dismiss the complaint under Rule 13(a) on the ground

that the claims made by PennGear in this action constitute compulsory counterclaims, which

should have been filed by PennGear in response to ACSA’s Western District action. 

This memorandum of law is respectfully submitted in support of ACSA’s motion.

II. DISCUSSION

In the interest of judicial economy and fairness, Federal Rule of Civil Procedure

13(a) requires a defendant to assert all compulsory counterclaims it has against the plaintiff and

thereby bars the defendant’s initiation of a second, separate suit arising from the transaction or

occurrence which forms the basis of the plaintiff’s lawsuit. Rule 13 is “particularly directed

against one who failed to assert a counterclaim in one action and then instituted a second action

in which that counterclaim became the basis of the complaint.” Southern Construction Co. v.

Pickard, 83 S. Ct. 108, 110 (1962). As such, the rule is designed to achieve the resolution, in a

Case 2:02-cv-04359-MAM Document 5-2 Filed 09/30/2002 Page 3 of 9
4.

single lawsuit, of all disputes arising out of common matters. Zelenkofske Axelrod Consulting,

L.L.C. v. Paul Stevenson and Stephen Messinger, 1999 U.S. Dist. LEXIS 12137 (1999). 

Specifically, Rule 13(a) provides:

A pleading shall state as a counterclaim any claim

which at the time of serving the pleading the

pleader has against any opposing party, if it arises

out of the same transaction or occurrence that is the

subject matter of the opposing party’s claim and

does not require for its adjudication the presence of

third parties of whom the court cannot acquire

jurisdiction. 

F.R.C.P.13(a). 

“The policy of Rule 13 is to flush out all possible counterclaims early in the

litigation; in other words ‘to prevent multiplicity of actions and to achieve a just resolution in a

single lawsuit of all disputes arising out of common matters.’” Cyclops Corp. v. Fishbach and

Moore, Inc., 71 F.R.D. 616, 619 (W.D. Pa. 1976). To serve this purpose, the courts give a liberal

interpretation to a Rule 13 “transaction or occurrence” for purposes of determining whether a

claim constitutes a compulsory counterclaim. Great Lakes Rubber Corporation v. Cooper, 286

F.2d 631, 634 (3rd Cir. 1961); Transamerica Occidental Life Ins. Co. v. Aviation Office of

America, Inc., 292 F.3d 384, 389 (3rd Cir. 2002) (the required degree of relatedness between the

claims at issue has been viewed liberally). For instance, the Supreme Court, in Moore v. New

York Cotton Exchange, 270 U.S. 593, 46 S.Ct. 367 (1926), broadly defined “transaction” under

the predecessor to Rule 13, as follows:

Case 2:02-cv-04359-MAM Document 5-2 Filed 09/30/2002 Page 4 of 9
5.

‘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...

That [the facts in the two claims] are not precisely

identical, or that the counterclaim embraces

additional allegations... does not matter. To hold

otherwise would be to rob this branch of the rule of

all serviceable meaning, since the facts relied upon

by the plaintiff rarely, if ever, are in all particulars,

the same as those constituting the defendant’s

counterclaim. 

The Third Circuit Court of Appeals adheres to the general rule that a counterclaim

is compulsory if it bears a logical relationship to an opposing party’s claim, such that separate

trials on each party’s claim would involve substantial duplication of effort. Claims bear a logical

relationship to one another if they involve (1) many of the same factual issues; (2) the same

factual and legal issues; or (3) offshoots of the same basic controversy between the parties. 

Great Lakes, 286 F.2d at 634. To “qualify as a compulsory counterclaim, there need not be

precise identity of issues and facts between the claim and the counterclaim.” Transamerica

Occidental Life Ins. Co., 292 F.3d at 389. 

In Zelenkofske, this Court applied the Great Lakes test and ruled that plaintiff’s

claims constituted compulsory counterclaims and, therefore, the court transferred the action to

the Eastern District of Virginia. Zelenkofske involved a contractual relationship whereby

plaintiff agreed to sell the assets of its company to defendants and simultaneously to enter into

employment agreements with defendants, which agreements contained covenants not to

Case 2:02-cv-04359-MAM Document 5-2 Filed 09/30/2002 Page 5 of 9
6.

compete. Shortly thereafter, plaintiff sought to terminate defendants’ employment. Defendants

filed a complaint in the Eastern District of Virginia alleging breach of contract, wrongful

discharge, fraudulent inducement and a declaration that the covenants not to compete were void. 

Subsequently, plaintiff filed a complaint in the Eastern District of Pennsylvania alleging breach

of covenants not to compete and conversion. The defendants filed a motion to dismiss or,

alternatively, to transfer the case to the Eastern District of Virginia. This Court found that the

plaintiff’s claims were sufficiently similar to the legal and factual issues asserted by the

defendants’ earlier filed Virginia action, as to constitute compulsory counterclaims. Under the

first-filed rule, this court transferred the action for consolidation with defendants’ action in the

Virginia court.

Applying the Great Lakes test to the facts of this case, it is clear that PennGear’s

action is so logically related to ACSA’s action filed in the Western District, that separate trials

would involve a substantial duplication of effort and time by the parties and courts. At the center

of PennGear’s action is a dispute over what contractual rights, if any, it possesses with regard to

the specialized molds. In its lawsuit, ACSA seeks payment from PennGear for the goods

manufactured from the very same molds. Essentially, ACSA has asserted a cause of action

seeking payment from PennGear for the forgings which were produced by ACSA using the

specialized molds, and PennGear has alleged a cause of action seeking possession of those same

molds. Both actions arise out of the same contractual relationship and the claims are clearly

offshoots of the same basic contractual dispute between the parties. Based upon these

considerations, it is clear that separate trials of each of these actions would require a substantial

Case 2:02-cv-04359-MAM Document 5-2 Filed 09/30/2002 Page 6 of 9
7.

duplication of effort. Under Rule 13(a), PennGear’s claims constitute compulsory counterclaims

which must have been asserted in ACSA’s Western District action. Therefore, PennGear’s cause

of action must be dismissed. 

In the alternative to dismissal, PennGear’s claims should be transferred to the

Western District pursuant to the first-filed rule. Under the first-filed rule, in cases of federal

concurrent jurisdiction involving the same parties and issues, the court to first obtain jurisdiction

must proceed to adjudicate the claims. Crosley Corporation v. Westinghouse Elec. & Mfg. Co.,

130 F.2d 474 (3rd Cir. 1942). The United States District Court for the Western District of

Pennsylvania obtained jurisdiction over this matter upon the filing of ACSA’s complaint on or

about August 16, 2001. PennGear’s lawsuit was not commenced until approximately ten (10)

months later, on or about June 2, 2002. Therefore, under the first-filed rule, PennGear’s claims

should be transferred to the Western District for consolidation or other appropriate disposition. 

III. CONCLUSION

PennGear’s complaint must be dismissed under Rule 13(a) because the claims

made by PennGear in this action constitute compulsory counterclaims, which are required to

have been filed as part of ACSA’s lawsuit filed against PennGear in the Western District of

Pennsylvania. . In the alternative, PennGear’s claims must be transferred, under the first-filed

rule, to the United States District Court for the Western District of Pennsylvania for

consolidation or other appropriate disposition.

Case 2:02-cv-04359-MAM Document 5-2 Filed 09/30/2002 Page 7 of 9
8.

Respectfully submitted,

ELDERKIN, MARTIN, KELLY & MESSINA

By 

 Craig A. Markham, Esquire

 150 East Eighth Street

 Erie, Pennsylvania 16501

 (814) 456-4000

CATALDE & BRADFORD

Robert J. Catalde, Esquire

731 French Street

Erie, Pennsylvania 16501

(814) 451-6236

 Attorneys for Defendant

Case 2:02-cv-04359-MAM Document 5-2 Filed 09/30/2002 Page 8 of 9
CERTIFICATE OF SERVICE

I certify that on the ______ day of September, 2002, I served a copy of the

Memorandum in Support of the Motion to Dismiss on the following individuals and in the

manner indicated below:

U.S. First Class Mail, Postage Prepaid:

Mohammad Ghiasuddin, Esquire

Kaplin, Stewart, Meloff, Reiter & Stein

350 Sentry Parkway

Building 640

P.O. Box 3037

Blue Bell, Pennsylvania 19422

Attorney for Plaintiff

Respectfully submitted,

ELDERKIN, MARTIN, KELLY & MESSINA

By 

 Craig A. Markham, Esquire

 Attorney for Defendant

 150 East Eighth Street

 Erie, Pennsylvania 16501

 (814) 456-4000

Case 2:02-cv-04359-MAM Document 5-2 Filed 09/30/2002 Page 9 of 9