Court Opinion

ID: 32922
Source: CourtListenerOpinion
Date Created: 2010-04-25 18:59:09+00
Date Added: 2024-06-11T16:49:42.082064
License: Public Domain

United States Court of Appeals
                                                                 Fifth Circuit
                                                              F I L E D
                IN THE UNITED STATES COURT OF APPEALS         October 22, 2003

                        FOR THE FIFTH CIRCUIT             Charles R. Fulbruge III
                                                                  Clerk

                            No. 03-10324

                          Summary Calendar

     ROBBINS HARDWOOD FLOORING INC

                                Plaintiff - Appellee

     v.

     BOLICK DISTRIBUTORS CORPORATION, also known as Bolick
     Distributors Inc

                                Defendant - Appellant

             Appeal from the United States District Court
         for the Northern District of Texas, Dallas Division
                          No. 3:02-CV-1124-H

Before KING, Chief Judge, and EMILIO M. GARZA and BENAVIDES,

Circuit Judges.

PER CURIAM:*

     Defendant-Appellant Bolick Distributors Corporation

(“Bolick”) appeals the district court’s ruling that Bolick is not

entitled to an offset against the amount it was found to owe

Plaintiff-Appellee Robbins Hardware Flooring, Inc. (“Robbins”).

     *
          Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
For the following reasons, we AFFIRM.

                I.     FACTUAL AND PROCEDURAL HISTORY

     The facts giving rise to this dispute are generally

uncontested.   Robbins is a manufacturer of hardwood flooring

products, and for almost twelve years, Bolick was an at-will

distributor of Robbins’s products.     During February and March

2002, Bolick ordered hardwood flooring products from Robbins.       In

anticipation of a continuing relationship between the two, Bolick

incurred various expenses to market and promote Robbins’s

products for 2002.

     On March 7, 2002, Robbins terminated its relationship with

Bolick, effective June 8, 2002.    Having received no payment from

Bolick for the flooring Bolick had ordered, Robbins filed suit on

May 28, 2002, for breach of contract, suit on a sworn account,

and attorneys’ fees.    Robbins then moved for partial summary

judgment on the breach of contract and sworn account issues.

Bolick filed an opposition to summary judgment, in which it

argued that it was entitled to offset expenses that it had

incurred while marketing and promoting Robbins’s products.

Bolick had not made any such claim in its answer.       The district

court granted Robbins’s motion for partial summary judgment, but

denied Bolick’s offsets.    Bolick appeals only the district

court’s refusal to offset its expenditures from its indebtedness

to Robbins.

                                   2
                     II.     STANDARD OF REVIEW

     “We review a district court’s application of state law de

novo.”   City of Shreveport v. Shreve Town Corp., 314 F.3d 229,

234-35 (5th Cir. 2002).     We also review questions of federal law

de novo, including the district court’s interpretation of the

Federal Rules of Civil Procedure.      Bellaire Gen. Hosp. v. Blue

Cross Blue Shield of Mich., 97 F.3d 822, 827 (5th Cir. 1996).

“[T]he decision to allow a counterclaim to be pleaded is,”

however, “a matter of judicial discretion and may be reversed on

appeal only if the party can demonstrate that the court abused

its discretion.”   Rohner, Gehrig & Co. v. Capital City Bank, 655

F.2d 571, 576 (5th Cir. 1981).

                           III.   DISCUSSION

     In its briefs on appeal, Bolick claims that it is entitled

to setoff or recoupment1 under Texas law, because, when Robbins

terminated its relationship with Bolick, Robbins did not give

Bolick a reasonable opportunity to recoup the expenses it had

incurred to maintain and expand the market for Robbins’s

products.   The district court refused to allow Bolick to amend

     1
          Although Bolick uses the terms “setoff” and
“recoupment” interchangeably, they have different meanings under
Texas law: “The right of setoff allows entities that owe each
other money to apply their debts to each other. Where setoff is
allowed, there are mutual debts arising from different
transactions, which contrasts with the single transaction
required in recoupment.” Sommers v. Concepcion, 20 S.W.3d 27, 35
(Tex. App.--Houston [14th Dist.] 2000, pet. denied) (citations
omitted). Here, however, the analysis is the same whether the
claim is classified as a setoff or a recoupment.

                                   3
its pleadings to include setoff2 because Bolick had not (1)

stated a claim for setoff under Texas law and (2) put forth any

competent summary judgment evidence in support of its setoff

claim.   The district court also opined that Bolick’s claim was

essentially premised on breach of the distributorship agreement,

but Bolick did not plead such a counterclaim, and amendment of

the pleadings to allow the claim would be prejudicial to Robbins.

     On appeal, Bolick does not assert that the district court

erred by not allowing it to amend its pleadings; instead, Bolick

simply argues that recoupment is a “defense,” rather than an

affirmative defense or counterclaim.    “In diversity of

citizenship actions, state law defines the nature of defenses,

but the Federal Rules of Civil Procedure provide the manner and

time in which defenses are raised and when waiver occurs.”

Morgan Guar. Trust Co. of N.Y. v. Blum, 649 F.2d 342, 344 (5th

Cir. 1981).   Under Texas law, setoff and recoupment are both

counterclaims.   E. E. Farrow Co. v. U.S. Nat’l Bank of Omaha, 358

S.W.2d 934, 935 (Tex. Civ. App.--Waco 1962, writ ref’d n.r.e.).

Federal Rule of Civil Procedure 12(b) requires that counterclaims

be asserted in a responsive pleading.    See also Co-Efficient

Foundation v. Woods, 171 F.2d 691, 694 (5th Cir. 1949)

(“Counterclaim, setoff, recoupment, and the like are in the

nature of affirmative remedies which the defendant has the burden

     2
          At the district court level, Bolick asserted that it
was entitled to setoff, not recoupment.

                                 4
of pleading and proving.”).

     As previously noted, Bolick did not assert a claim for

setoff or recoupment in its pleading.     Bolick first alleged that

it was entitled to setoff or recoupment in its opposition to

summary judgment, and even then, it did not request that it be

allowed to amend its pleadings.     By this time, the deadline for

amending pleadings as a matter of course had passed.      See FED. R.

CIV. P. 15(a).   This is not necessarily fatal to Bolick’s claim

because, with leave of the court, a party may amend its pleadings

after the deadline, and leave to amend “shall be freely given

when justice so requires.”    Id.    Proper reasons for denying

amendment include “undue delay, bad faith or dilatory motive on

the part of the movant, repeated failure to cure deficiencies by

amendments previously allowed, undue prejudice to the opposing

party by virtue of allowance of the amendment, [and] futility of

amendment.”   Foman v. Davis, 371 U.S. 178, 182 (1962).     After a

thorough review, we find much support for the trial court’s

refusal to allow amendment of Bolick’s pleading.      Bolick has

cited no authority, beyond mere dicta, to show that it has stated

a claim under Texas law.   Nor has Bolick provided any reason why

its claim was not pleaded or attempted to show that amendment

would not be prejudicial to Robbins.     Bolick has never even

requested that it be allowed to amend its pleadings.     In light of

this, we find it clear that the trial court did not abuse its

discretion in refusing to allow amendment of Bolick’s pleading to

                                    5
allege a counterclaim of setoff or recoupment.

                        IV.   CONCLUSION

     For the foregoing reasons, we AFFIRM the district court’s

denial of Bolick’s claim of setoff or recoupment.

                                6