Court Opinion

ID: 8883423
Source: CourtListenerOpinion
Date Created: 2022-11-26 21:13:47.993398+00
Date Added: 2024-06-11T17:06:47.368563
License: Public Domain

FRIENDLY, Circuit Judge
(concurring) .
I cannot agree that, as maintained in Part I of the majority opinion, the counterclaim relating to the Stelma job was compulsory under F.R.Civ.P. 13(a). Of course, it is tempting to stretch a point when a jurisdictional objection is so belatedly raised by the very party who clamored for the exercise of jurisdiction until the decision went against it. But we must consider the question as if Hey-ward had not pleaded the Stelma counterclaim and proceeded to sue D’Agostino in some other court for failure to perform that subcontract, and D’Agostino then claimed that Heyward’s failure to bring the Stelma transaction into this Miller Act suit barred the later action. Despite the desirability of requiring that all claims which in fact arise “out of the transaction or occurrence that is the subject matter of the opposing party’s claim” be litigated in a single action, courts must be wary of extending these words in a way that could cause unexpectedly harsh results.
Even on a liberal notion of “logical relation,” see C. Wright, Federal Courts, § 79 at 346-47 (2d ed. 1970), I am unable to perceive how Heyward’s claim for breach of the Stelma subcontract arose “out of the transaction or occurrence” to wit, the Navy subcontract, that was the subject matter of D’Agostino’s Miller Act claim. Whatever historical interest there may be in the circumstances that the two subcontracts were entered into between the same parties for the same type of work and were carried on during substantially the same period, these facts seem to me to be lacking in legal significance. So likewise do D’Agostino’s having furnished a single insurance policy to cover both jobs and Heyward's having cancelled the subcontracts in one letter rather than two. The boiler-plate in each subcontract, whereby “if one or more other contracts, now or hereafter, exist between the parties,” a breach of any such contract by D’Agos-tino might, at Heyward’s option, be considered a breach of the contract at issue and Heyward might terminate any or all contracts so breached and withhold moneys due on any contract and apply these to damages on any other, might meet the *1088test if Heyward had availed itself of these rights, but it did not.
All that is left is that, as the trial proceeded, it turned out that some of Hey-ward’s payments were not earmarked as between the two subcontracts. However, the determination whether a counterclaim is compulsory must be made at the pleading stage. The complaint was specific on how much Heyward owed on the Navy subcontract, and the counterclaims were equally so on how much D’Agos-tino owed for failure to complete this and how much it owed for failure to complete the Stelma subcontract. To say that the failure to earmark some payments made it impossible to try the claims separately ignores the law on application of payments. If Heyward did not specify the application of its payments, as it could, and D’Agostino had not made an application of them, as it could in default of specification by Hey-ward, the court would do this. Williston, Contracts, §§ 1795, 1796, 1800 (rev. ed. 1938).
Against all this- appellee relied heavily on Southern Construction Co. v. Pickard, 371 U.S. 57, 83 S.Ct. 108, 9 L.Ed.2d 31 (1962). Since the counterclaim there at issue was held not compulsory, the decision can scarcely be authority that a claim like Heyward’s on the Stelma subcontract was. I think it not only is not such authority but points just the other way. The Court there held that where a subcontractor on two federal projects was obliged to bring Miller Act suits in different districts because of venue requirements, the contractor was not obliged to counterclaim for an unallocated payment in the first suit. I do not see how the Court could have reached a different result if the subcontractor had one Miller Act subcontract and another in which he could sue only in a state or a different federal district court.
Nevertheless I think the court below had jurisdiction of the Stelma counterclaim. I would now reject the conventional learning, which I followed too readily in O’Connell v. Erie Lackawanna R. R., 391 F.2d 156, 163 (1968), that the permissive counterclaim “needs independent jurisdictional grounds to support it, with one exception,” to wit, set-of:, 3 Moore, Federal Practice j[13.19 at 53-54 (2d ed. 1968). The Supreme Court left this question open in Moore v. New York Cotton Exchange, 270 U.S. 593, 609, 46 S.Ct. 367, 70 L.Ed. 750 (1926)., I read Judge Clark’s fine opinion for this court in Lesnick v. Public Industrial Corp., 144 F.2d 968, 976 n. 10 (2 Cir. 1944), as also doing this, although we cited it in O'Con-nell as upholding the conventional view, as do Professor Wright, Federal Courts 351 n. 56 (2d ed. 1970) and the majority here.
The reasons why the conventional view is wrong are set out in detail in an article by Professor Thomas F. Green, Jr., Federal Jurisdiction over Counterclaims, 48 N.W.U.L.Rev. 271 (1953), and nothing would be gained by repetition. I mention only two points. One is that for reasons there developed, id. at 277-81, Professor Moore’s sound recognition— perhaps more accurately creation — of the exception that set-off requires no independent jurisdictional basis, see 3 Moore, Federal Practice, ¶ 13.19 at 54-55 n. 3; Marks v. Spitz, 4 F.R.D. 348 (D.Mass. 1945); Fraser v. Astra S. S. Corp., 18 F.R.D. 240 (S.D.N.Y.1955), carries the seeds of destruction of the supposed general rule. The other is that at least since United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966), it is no longer thought the heavens will fall if a federal court deals with a non-federal claim when it is convenient to do so. The only argument I see against Professor Green’s position is the possibility of snowballing through a plaintiff’s permissive counterclaim in reply to the defendant’s permissive counterclaim etc. Id. at 289-90. But that is more theoretical than real. In a diversity case the plaintiff in all probability would already have pleaded this in his complaint; while the problem could arise in a federal question action, for example, if D’Agostino had a claim against Heyward on still another subcontract, such cases are extremely rare.
*1089If the decision were mine, I would therefore ask that the court sit in banc and overrule the holding in O’Connell, supra, 391 F.2d at 163, that a permissive counterclaim requires independent jurisdictional grounds. Since my brothers find themselves able to affirm without doing this, I join in the result and leave the issue for another day. On all other points I concur in Judge Bryan’s thorough opinion.