Opinion ID: 331105
Heading Depth: 1
Heading Rank: 2

Heading: the counterclaim issue

Text: 8 McShain argues that the three short-term notes were executed as a part of the transaction embracing the original construction loan, and that therefore the critical issue in the New York action--the enforceability of those notes--is properly the subject of a compulsory counterclaim in the District of Columbia action, which challenges various aspects of the loan. That the notes were not mentioned until McShain filed the amended complaint is irrelevant, we are told, because for purposes of Rule 13(a) the 'transaction or occurrence' 23 implicated by an original complaint need not be fully defined by the facts alleged therein. McShain thus concludes that the District Court was required to enjoin further prosecution of the New York action. Security's response is that the subject matter of that action was never a part of the construction-financing transaction 24 addressed by the original complaint in the District of Columbia. 9 Federal Civil Rule 13(a) provides in relevant part that '(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 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.' 25 The purpose of the rule is 'to prevent multiplicity of actions and to achieve resolution in a single lawsuit of all disputes arising out of common matters.' 26 The Supreme Court has given the operative term 'transaction' 27 a broad definition: 10 '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. . . . Essential facts alleged by appellant enter into and constitute in part the cause of action set forth in the counterclaim. That they 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. 28 11 Consequently, in determining whether the New York subject matter is properly a compulsory counterclaim in the District of Columbia suit, we must assess the degree of 'logical relationship' between the two actions. 29 We must also remain mindful that the term 'transaction' is to be construed generously to avoid the unnecessary expense inherent in multiplicious litigation. 30 12 McShain allegedly executed the three notes sued on in New York for the sole purpose of avoiding a shutdown of a construction project. That project was the erection of the same office building involved in the original complaint. Furthermore, when the notes were executed, the parties allegedly expected that the original loan for construction of the building would be increased to provide the funds for payment of the notes. 31 The notes were thus related to an anticipated enlargement of the original loan financing the project, and the District of Columbia action was filed to secure adjudication of the consequences of a number of events associated with that loan. Additionally, the nature of McShain's factual claims in the two actions indicates strongly that the evidence offered to support them is likely to be substantially identical. 32 13 In these circumstances, we cannot agree with the District Court that the two matters could appropriately be addressed in different courts. 33 An adjudication pursuant to Rule 13(a) that two actions are parts of a single controversy should lead to resolution of both in a single forum. Sound judicial administration counsels against separate proceedings, 34 and the wasteful expenditure of energy and money incidental to separate litigation of identical issues should be avoided. 35 Rule 13(a), by compelling a counterclaim in such instances unless an exception applies, limits consideration of matters encompassed in one transaction to one court. Here the same issues, and apparently to a large extent the same evidence, will be considered in both actions, 36 and two proceedings could duplicate discovery. We take note of crowded court dockets across the country, and the consequent desirability of deciding common issues in one tribunal rather than two. We also note, in addition to economic factors, the value of eliminating the risk of inconsistent adjudications and races to obtain judgments. 37 We hold that the District Court erred in ruling, without reference to the common origin of the two actions involved here, that they could be pursued in two courts. 14 We are advertent to the fact that Rule 13(a) has exceptions, and that one is invoked by Security's argument that the District Court properly denied McShain's motion for an injunction because the New York action was instituted first. 38 The basis for this assertion is the absence of any mention of the notes in McShain's original complaint, and the filing of the New York action prior to presentation of McShain's amended complaint specifically referring to the notes. McShain responds that the amended complaint relates back to the original complaint pursuant to Rule 15(c), 39 thus acquiring its filing date, and on this theory urges that the District of Columbia was the first jurisdiction in which the issues relating to the notes were raised. Assuming without deciding that express reference to the notes was in any event essential, 40 the applicability of Rule 15(c)'s provision governing relation back depends upon whether the two pleadings relate to the same transaction. 41 Our determination on that score 42 fully sustains McShain's position.