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General Electric Capital Corporation v. Ten Forward Dining

February 9, 2012

GENERAL ELECTRIC CAPITAL CORPORATION; CEF FUNDING II, LLC; AND CEF FUNDING V, LLC,
PLAINTIFFS,
v.
TEN FORWARD DINING, INC.; ET AL.; DEFENDANTS.



ORDER GRANTING COUNTER CLAIMANT EQUITY LENDERS, LLC'S MOTION FOR LEAVE OF COURT TO FILE AND SERVE SUPPLEMENTAL COUNTERCLAIMS

This matter is before the Court on Equity Lenders, LLC's ("Counter-Claimant"), an Indiana corporation, Motion For Leave of Court To File and Serve Supplemental Counterclaims (Doc. #112), which is supported by a Memorandum of Points and Authorities (Doc. #116).*fn1 Plaintiffs/Counter-Defendants General Electric Capital Corporation, a Delaware Corporation; CEF Funding II, LLC, a Delaware company; and CEF Funding V, LLC, a Delaware company, (collectively "Counter-Defendants") oppose the motion (Doc. #121). Counter-Claimant filed a reply to the opposition (Doc. #122).

I. FACTUAL ALLEGATIONS & PROCEDURAL BACKGROUND

This action originated when Counter-Defendants filed their 3 complaint on November 29, 2009. The complaint alleges that several 4 defendants, not including Counter-Claimant, defaulted on or 5 breached seven written loan contracts made with Counter-Defendants. 6

The loans were allegedly secured by real and personal property 7 generally associated with restaurants. Counter-Defendants' 8 complaint also seeks declaratory relief against Counter-Claimant 9 because Counter-Claimant may have liens against a subset of the Properties known as the "19373 Kobra Properties" and Counter-Defendants seek to establish the superiority of their own liens to Counter-Claimant's.

Counter-Claimant alleges that the owners of the 19373 Kobra Properties, also defendants in this action, defaulted on their obligations to Counter-Claimant in 2009, and Counter-Claimant foreclosed on November 19 or 20, 2009. In early 2010, Counter-Claimant alleges that it negotiated a pay-off amount for Counter-Defendants' interest in the 19373 Kobra Properties, but that there was a dispute as to the final pay-off amount. Counter-Claimant paid the pay-off amount demanded by Counter-Defendants under protest, and now seeks to supplement its existing counterclaims with three new counterclaims: 1) a counter-claim for an accounting of the actual amount due to Counter-Defendants after the default on the 19373 Kobra Properties, 2) a counter-claim for declaratory relief as to the parties' interests in the 19373 Kobra Properties, and 3) a counter-claim for restitution of any overpayments made by Counter-Claimant to Counter-Defendants in relation to the 19373 Kobra Properties. Counter-Claimant alleges that $338,800 in default interest was overpaid to Counter-Defendants and $49,225.12 2 in attorney fees were also paid, but the fees were not specifically 3 attributed to matters involving the 19373 Kobra Properties. 4

This Court has jurisdiction pursuant to 28 U.S.C. § 1332 5 because the lawsuit is between citizens of different states and the 6 amount in controversy exceeds $75,000.

II. OPINION

A. Legal Standard

The circumstances under which a party may amend and supplement their pleadings is governed by Federal Rule of Civil Procedure 15(d) which provides, "On motion and reasonable notice, the court may, on just terms, permit a party to serve a supplemental pleading setting out any transaction, occurrence, or event that happened after the date of the pleading to be supplemented." Fed.R.Civ.P. 15(d).

Rule 15(d) is a tool that gives district courts broad discretion to allow supplemental pleadings. Keith v. Volpe, 858 F.2d 467, 473 (9th Cir. 1988). It is also a rule intended to promote judicial economy. San Luis & Delta-Mendota Water Auth. v. U.S. Dept. of Interior, 236 F.R.D. 491, 496 (E.D. Cal. 2006). Rule 15(d) does not require supplemental claims to be part of the same transaction or occurrence associated with the original lawsuit. Volpe, 858 F.2d at 474. The rule merely requires "some relationship . . . between the newly alleged matters and the subject of the original action. . . ." Id.; but see Planned Parenthood of S. Ariz. v. Neely, 130 F.3d 400, 402--403 (9th Cir. 1997) (Rule 15(d) should not be used to introduce an entirely new and separate cause of action). Thus, in the absence of bad faith 2 or undue delay, leave should be given to supplement a pleading with 3 a related cause of action that accrued after the filing of the 4 original complaint. San Luis & Delta-Mendota Water Auth., 236 5 F.R.D. at 496 (citing Foman v. Davis, 371 U.S. 178, 182 (1962)). 6

When ruling on a rule 15(d) motion, courts consider a number 7 of factors to determine whether leave to file supplemental 8 pleadings is proper. In San Luis & Delta-Mendota Water Auth. v. 9

U.S. Dep't of Interior, the court collected nine factors that are used in the Ninth Circuit to determine whether supplementation is appropriate:

(1) The relatedness of the original and supplemental complaints;

(2) Whether allowing supplementation would serve the interests of ...


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