Citation. 22 Ill.414 F.2d 143 (6th Cir. 1969)
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Brief Fact Summary.
Plaintiff sued many Defendants for breach of contract arising from Defendants’ alleged failure to pay for supplies delivered by Plaintiff on a construction job. Defendants filed counterclaims, cross-claims and third party complaints against each other in tort and on different contracts regarding responsibility for delivering the supplies. The District Court dismissed the cross-claims and Defendants appealed.
Synopsis of Rule of Law.
Cross-claims are permitted to be filed against co-defendants under Rule 13(g) of the Federal Rules of Civil Procedure if the claims arise from the same “transaction or occurrence” of the initial claim. If the claims are centered on the same legal issue involved in the initial claim, this is considered the same “transaction or occurrence.”
Southern Builders (Defendant; “Southern”), a Tennessee corporation, was a general contractor and was hired by Memphis, Tennessee (Defendant) and secured a bond with Continental Casualty (Defendant; “Continental”) to build a new city hall. Southern subcontracted with Alexander Marble and Tile Co. (Defendant; “Alexander”), a partnership of Tennessee residents, and Marble International, Inc. (Defendant; “Marble”), a Texas corporation, to install marble in the new city hall. Alexander hired Plaintiff Lasa Per L’Industria Del Marmo Societa Per Azioni (“Lasa”), an Italian corporation, to supply materials.
Plaintiff sued all Defendants for money owed on the contract. Alexander filed an answer and counterclaim, alleging that Plaintiff had breached the contract because of late delivery, substandard materials, and wrong contract price. Southern filed an answer and counterclaim, alleging failure to ship according to the contract and claimed damages. Alexander filed a cross claim against the other Defendants except Marble for money allegedly due on the contract. Southern and Continental filed answers and Southern filed a cross claim against Alexander for breach of contract. Alexander filed a third party complaint against A.L. Aydelott and Associates (Defendant; “A.L.”) and Aydelott (Defendant), the architect company and the architect individually, seeking actual and punitive damages under a Tennessee statute for inducement to breach the subcontract. Alexander sued Southern for actual and punitive damages.
The District Court treated the third party complaint and the counterclaim by Southern against Alexander as cross claims. The District Court then dismissed the cross claim of Alexander v. Southern, Continental and Memphis and the cross claim of Southern v. Alexander and the third party complaint of Alexander v. A.L. and Aydelott. The District Court held, “the cross claims did not arise out of the same transaction or occurrence that is the subject matter of the original action or of a counterclaim therein.”
Could Defendants file cross claims against each other under Rule 13(g) of the Federal Rules of Civil Procedure as claims based on the same “transaction or occurrence” when the claims are founded on the facts occurring in the initial lawsuit but involving different contracts?
Yes. Reversed and remanded.
The policy behind Rules 13 and 14 of the Federal Rules of Civil Procedure is that the legal rights of all parties should be handled in one action. This policy is intended to facilitate resolution.
A court has ancillary jurisdiction over cross claims if they arise from the subject matter of the original action.
The term “transaction or occurrence” as used in Rule 13(g) of the Federal Rules of Civil Procedure is given a broad and liberal meaning in order to avoid many lawsuits. Although the cross-claims involve different subcontracts, they all center on the issue of responsibility for the marble job.
In the event that the issues in the case will cause jury confusion, the District Court has discretion to order separate trials, but not dismiss the cross-claims.
Plaintiff’s suit is in contract and all of Alexander and Southern’s claims are in tort. The claims involve separate legal issues and therefore, the cross claims should not be permitted in the same case. In addition, even the two contract actions should not be in the same case because they involve different contracts, which would give rise to different factual issues.
This case illustrates that complexity of parties, pleadings and issues are not grounds to dismiss cross claims. In the event that various claims center on one factual situation, this satisfies the requirements under Rule 13 (g) of the Federal Rules of Civil Procedure.