United States District Court, D. Arizona
Murray Snow Chief United States District Judge.
before the Court is Defendants' RHN, Inc.
(“RHN”), RHH Automotive, Inc., RHC Automotive,
Inc., NBA Automotive, Inc., R&H Automotive Group, Inc.,
Hooman Nissani, and Melody Nissani (collectively,
“Defendants”) Motion to Dismiss (Doc. 29). For
the following reasons, the motion is denied.
CNA National Warranty Corporation (“CNA”)
provides automobile dealers and their customers with Vehicle
Service Contracts (“VSCs”). Defendants own and
operate automobile dealerships. This action arises out of the
parties' agreement for Defendants to sell CNA's VSCs
to Defendants' customers. Each party now asserts claims
against the other, in separate actions, for breach of the
agreement. The procedural posture of the two actions is
particularly relevant to this motion.
March 2019, RHN, Inc. filed suit in Pima County Superior
Court against CNA for, inter alia, breach of the
aforementioned agreement (“First Action”). CNA
properly removed the First Action to federal court, and it is
now before the Court. CNA filed a motion to dismiss pursuant
to Federal Rule of Civil Procedure 12(b)(6). The order
addressing the motion was filed concurrent with the present
order. (RHN Inc. v. CNA Nat'l Warranty Corp. et al.,
CV-19-02960-GMS (Doc. 25)). Because CNA's Motion to
Dismiss has been pending before the Court, CNA has not yet
filed a responsive pleading in the First Action.
2019, CNA filed this action (“Second Action”)
alleging, inter alia, breach of the same agreement.
The Defendants in the Second Action now move to dismiss
CNA's complaint pursuant to Rule 12(b)(6), asserting that
CNA's claims are compulsory counterclaims that can only
be raised in the ongoing First Action.
ruling on a motion to dismiss under Rule 12(b)(6), “all
allegations of material fact are taken as true and construed
in the light most favorable to the nonmoving party.”
Hydranautics v. FilmTec Corp., 70 F.3d 533, 535 (9th
Cir.1995). A complaint will “not be dismissed unless it
appears beyond doubt that the plaintiff can prove no set of
facts in support of his claim which would entitle him to
relief.” Id. at 535-36.
Rule of Civil Procedure 13(a) requires that a pleading state
as a counterclaim “any claim that-at the time of its
service-the pleader has against an opposing party if the
claim: (A) arises out of the transaction or occurrence that
is the subject matter of the opposing party's claim; and
(B) does not require adding another party over whom the court
cannot acquire jurisdiction .” “The rule bars a
party who failed to assert a compulsory counterclaim in one
action from instituting a second action in which that
counterclaim is the basis of the complaint.”
Seattle Totems Hockey Club, Inc. v. Nat'l Hockey
League, 652 F.2d 852, 854-55 (9th Cir.1981) (citing
S. Const. Co. v. Pickard, 371 U.S. 57, 60 (1962)).
Defendants' arguments to dismiss the Complaint have
already been addressed by this Court (Doc. 36). Concurrent
with this action, CNA also filed an application for
garnishment. Defendants objected, in part, on the grounds
that CNA was barred from bringing the Second Action because
it was required to bring the asserted claims as compulsory
counterclaims in the First Action. This Court, the Honorable
Douglas Rayes presiding,  explained that the preclusion imposed
by Rule 13 “does not arise if the defendant in the
prior action did not file a responsive pleading.” (Doc.
36 at 5) A motion to dismiss is not a responsive pleading.
Fed.R.Civ.P. 7(a). The court concluded that, “though
the claims at issue here might become compulsory
counterclaims in the First Action should CNA's motion to
dismiss be denied, it is not presently the case that CNA must
plead these claims as compulsory counterclaims in the First
Action because CNA is not yet required to file a responsive
obligation to file a responsive pleading in the First Action
was only recently triggered by the Court's order denying
in part and granting in part CNA's motion to dismiss.
Until CNA files a responsive pleading in the First Action,
Rule 13 has no preclusive effect. Defendants' Motion to
Dismiss is denied.
in light of the common questions of law and fact, the Court
is inclined to consolidate the two actions. If either party
has any objection to consolidation, they must notify the