Butte Min. Plc v. Smith
| Citation | 15 F.Supp.2d 965 |
| Decision Date | 02 October 1992 |
| Docket Number | No. CV-92-031-BU.,CV-92-031-BU. |
| Court | Montana Supreme Court |
| Parties | BUTTE MINING PLC, Tzarina & Travona Mining Corp., and North Butte Mining Company, Plaintiffs, v. Clive J. SMITH, et al., Defendants. |
William A. Rossbach, Rossbach & Whiston, PC, Missoula, MT, Herbert I. Deutsch, Robert B. Frey, Vincent R. Coffey, Alfred N. Metz, Ganine Gambale, Roy A. Heimlich, Deutsch & Frey, LLP, New York City, Karl J. Englund, Englund Law Office, Missoula, MT, for Butte Min. PLC, Tzarina & Travona Min. Corp., Central Butte Min. Corp. and North butte Min. Co.
Joan E. Cook, Miller & Cook,Great Falls, MT, for Clive J. Smith, Fiona Smith, Helen Smith, Finchley Investments Ltd., Newsham Investments Ltd., Newsham No. 1 Trust and Newsham No. 2 Trust.
Randy J. Cox, Boone, Karlberg & Haddon, Missoula, MT, for Kerry Harmanus.
John D. Stephenson, Jardine, Stephenson, Blewett & Weaver, PC, Great Falls, MT, Thomas P. Sullivan, Jenner & Block, Chicago, IL, for Robertson Group PLC, Robertson Research (Singapore) Private Ltd., Robertson Research Intern. Ltd., Robertson Montana, Inc. and Simon Engineering, PLC.
R.D. Corette, Corette, Pohlman, Black, Carlson, Nichelson & Johnston, Butte, MT, for Montana Min. Properties, Inc. and John J. Oitzinger, Western & Pacific Resources, Ltd., Black Rock Min. Ltd., Blue Bird Min. Investments Ltd., East Ridge Ltd., Eureka Min. Investments Ltd., Goldbrick Min. Investments Ltd., Original Butte Investments Ltd., Oro Fino Placer Ltd., Mountain Consolidated Investments Ltd., Silver Bow Investments Ltd., Wabash Min. Ltd., West Butte Investments Ltd., Yankee Doodle Min. Investments Ltd., Black Rock Min. Co., Blue Bird Min., Co., East Ridge Min. Co., Eureka Min. Co., Goldbrick Min. Co., Original Butte Min. Co., Oro Fino Placer Min. Corp., Mountain Con Min. Co., Silver Bow Consolidated Corp., Wabash Min. Co., Wesr Butte Metals, Inc. and Yankee Min. Co.
Ronald B. MacDonald, Datsopoulos, MacDonald & Lind, PC, Missoula, MT, for Dennis Washington and Milton Datsopoulos.
Maxon R. Davis, Davis, Hatley, Haffeman & Tighe, PC, Great Falls, MT, for Herbert Roy Bichan and John Thomas Clarke.
David McLean, Knight, Dahood, McLean, Everett & Dayton, Anaconda, MT, for K. Malcolm Clews.
Maria Sorolis, Brant & Moore, Jacksonville, FL, for D.C. Wilkinson.
Robert E. Sheridan, Garlington, Lohn & Robinson, PLLP, Missoula, MT, for Byatt, Michau & Smart, M.P. Byatt and M.P. Byatt & Co.
Edward Beaudette, Beaudette Law Office, Anaconda, MT, Stephen VanDrake, John Raboin, Raboin Law Office, Brainerd, MN, for Jay Mineral Services Ltd.
Richard F. Gallagher, Church, Harris, Johnson & Williams, Great Falls, MT, for Ernst & Young Intern.
John Matson, Ernst & Young, New York City, and Richard F. Gallagher, Church, Harris, Johnson & Williams, Great Falls, MT, for Ernst & Young U.S. and Ernst & Young UK.
The plaintiffs, consisting of Butte Mining PLC ("Butte Mining") and three of that entity's wholly-owned subsidiaries, bring this action charging the defendants engaged in a pattern of racketeering activity designed to defraud the plaintiffs in relation to their purchase of certain mining properties in the State of Montana. This court has jurisdiction of the subject matter of the controversy pursuant to 28 U.S.C. § 1331 in conjunction with the Racketeer-Influenced and Corrupt Organizations Act (18 U.S.C. § 1964(c)) and the Securities and Exchange Act of 1934, section 27 (15 U.S.C. § 78aa).
Presently before the court is the motion of the plaintiffs requesting the court to enjoin that defendant identified as Ernst & Young, a partnership organized under the laws of the United Kingdom ("Ernst & Young (U.K.)"), from prosecuting a civil action against Butte Mining before the London High Court of Justice, Chancery Division. In that action, Ernst & Young (U.K.) seeks to collect approximately $550,000.00 for professional accounting services it allegedly rendered to Butte Mining. The plaintiffs assert the claim advanced by Ernst & Young (U.K.) in England is a compulsory counterclaim which Ernst & Young (U.K.) must plead against Butte Mining in the case at bar as mandated by Fed.R.Civ.P. 13(a).
The question to be decided is whether this court should enjoin Ernst & Young (U.K.) from prosecuting its collection action in the English courts. The court answers this question in the affirmative.
By way of their complaint in this action, the plaintiffs assert claims against innumerable defendants including Ernst & Young International, Ernst & Young, a U.S. partnership and Ernst & Young, a U.K. partnership. The plaintiffs allege the various Ernst & Young defendants and their predecessors in interest were the accountants for the plaintiffs during the entire period of time pertinent to this action. In that capacity, the Ernst & Young defendants rendered a "fairness opinion" to Butte Mining regarding one of the mining properties acquired by Butte Mining. The operative allegations of the plaintiffs' complaint against the Ernst & Young defendants are breach of contract to perform accounting and related services for the plaintiffs; negligent performance of their work; breach of fiduciary duties of care and loyalty owed to the plaintiffs; and conspiracy with other named defendants to defraud plaintiffs.
Subsequent to plaintiffs' May 20, 1992, commencement of this action, Ernst & Young (U.K.) commenced a suit against Butte Mining on May 26, 1992, in the English High Court of Justice, seeking to collect an unpaid balance of professional fees allegedly due and owing it from Butte Mining in the approximate sum of $550,000.00, for services performed by Ernst & Young (U.K.) in the United Kingdom. Ernst & Young (U.K.) and Butte Mining were each served by the other in relation to the referenced actions on May 28, 1992.
The requirement of Fed.R.Civ.P. 13(a) that a litigant interpose compulsory counterclaims is "designed to prevent multiplicity of actions and to achieve resolution in a single lawsuit of all disputes arising out of common matters." Southern Const. Co. v. Pickard, 371 U.S. 57, 60, 83 S.Ct. 108, 9 L.Ed.2d 31 (1962). To achieve the goal of judicial economy underlying Rule 13(a), a federal district court may utilize its equitable power to enjoin a party from instituting subsequent proceedings on a claim that should have been pleaded as a compulsory counterclaim in an action pending before the federal district court. Seattle Totems, etc. v. National Hockey League, 652 F.2d 852, 854-55 (9th Cir.1981), cert. denied, 457 U.S. 1105, 102 S.Ct. 2902, 73 L.Ed.2d 1313 (1982). This equitable power extends to proceedings which have been brought in the courts of a foreign country. Id.
The plaintiffs contend the circumstances of this case warrant the issuance of an injunction to prevent Ernst & Young (U.K.) from prosecuting the English action. Accordingly, they invoke the court to exercise its discretion and grant the requested injunction.
Ernst & Young (U.K.) denies the claim it asserts in the English action constitutes a compulsory counterclaim within the purview of Rule 13(a). The professional fees it seeks to recover in the English action, Ernst & Young (U.K.) asserts, are fees resulting from services performed for Butte Mining in matters unrelated to its purchase of the mining properties which spawned the plaintiffs' claims in the present action. The debt action cannot, in the opinion of Ernst & Young (U.K.), be considered to have arisen out of the transaction that is the subject matter of the plaintiffs' claims.
Ernst & Young (U.K.) presents the correlative argument that the plaintiffs' motion for injunctive relief is premature because it has been presented prior to the filing of a responsive pleading. Having filed a motion to dismiss under Fed.R.Civ.P. 12(b) that challenges the validity of the plaintiffs' claims, Ernst & Young (U.K.) submits it is under no obligation to assert a counterclaim in the forum of the plaintiffs' choosing.1
Finally, Ernst & Young (U.K.) implores the court to recognize that the grant of an injunction in the circumstances of this case would offend the notion of international comity by restraining a foreign national from pursuing payment of professional fees for "work conducted in a foreign country for a foreign corporation solely because the plaintiffs have chosen to file their complaint in this court."
The phrase "transaction or occurrence that is the subject matter" must be afforded a liberal interpretation to ensure that Rule 13(a) accomplishes its intended goal, i.e., avoiding a multiplicity of suits. See, Albright v. Gates, 362 F.2d 928 (9th Cir.1966). The "transaction or occurrence" requirement is satisfied if the essential facts of the various claims are "so logically connected that considerations of judicial economy and fairness dictate that all issues be resolved in one lawsuit." Pochiro v. Prudential Ins. Co. of America, 827 F.2d 1246, 1249 (9th Cir.1987), citing, Harris v. Steinem, 571 F.2d 119, 123 (2nd Cir.1978). Based upon the pleading, the court finds the claim advanced by Ernst & Young (U.K.) against Butte Mining in the English action is logically related to the claim advanced by Butte Mining in the action before this court.
Ernst & Young (U.K.) acknowledges a professional relationship with Butte Mining but simply states that the fees which are the subject of the collection action are for more recent services unrelated to the services it provided Butte Mining in relation to that entity's acquisition of mining properties in Montana. However, the complaint alleges the conduct of Ernst & Young (U.K.) continued throughout its relationship with Butte Mining, and alleges a continuing conspiracy to deprive Butte Mining of business opportunities as well as to conceal the control and domination of plaintiffs by members of the conspiracy. The allegations are, in the court's opinion, sufficient to place at...
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