Chromatics, Inc. v. Telex Computer Products, Inc.

• Decision Date: 07 September 1988
• Docket Number: Civ. A. No. 1:87-CV-1812-JOF.
• Parties: CHROMATICS, INC., Plaintiff, v. TELEX COMPUTER PRODUCTS, INC., United Technologies Communications Company, Inc. United Technologies Corporation, Defendants.
• Court: U.S. District Court — Northern District of Georgia

695 F. Supp. 1184

CHROMATICS, INC., Plaintiff, v. TELEX COMPUTER PRODUCTS, INC., United Technologies Communications Company, Inc. United Technologies Corporation, Defendants.

Civ. A. No. 1:87-CV-1812-JOF.

United States District Court, N.D. Georgia, Atlanta Division.

September 7, 1988.

James C. Gaulden, Jr., James F. Martin, Brent & Valianos, Atlanta, Ga., for plaintiff.

Ronald Louis Reid, Jennifer Ann Brown, Alston & Bird, Daryll Norman Love, Allen S.C. Willingham, Atlanta, Ga., for defendants.

ORDER

FORRESTER, District Judge.

This matter is before the court on (1) defendant Telex's motion to dismiss, Fed.R. Civ.P. 12(b)(1); (2) plaintiff's motion to extend discovery, Local Rule 225-1(b); (3) defendant Telex's request for oral argument, Local Rule 220-1(c); (4) defendant Telex's motion to compel discovery, Fed.R. Civ.P. 37(a); (5) defendant Telex's motion for protective order, Fed.R.Civ.P. 26(c); (6) plaintiff's motion to extend time to respond to defendant's motion to compel, Fed.R. Civ.P. 6(b); (7) plaintiff's motion to compel discovery and to extend discovery, Fed.R. Civ.P. 37(a); Local Rule 225-1(b); (8) defendant Telex's motion to extend time for filing its motion for summary judgment and the proposed consolidated pretrial order, Local Rules 220-5(c) and 235-4(a); and (9) defendant Telex's motion for leave to exceed page limitation. Case Instructions, ¶ 2. The court will address these motions seriatim.

I. DEFENDANT'S MOTION TO DISMISS AND REQUEST FOR ORAL ARGUMENT.

Plaintiff's original complaint, comprised of four counts, was filed August 14, 1987. On October 8, 1987, with defendant Telex's consent, plaintiff amended its complaint to add an additional paragraph to each count. Each new paragraph provided in relevant part that "... defendant Telex is liable directly to plaintiff for said damages by virtue of defendant Telex's buy-out agreement¹ with United Technologies Communications Company, Inc.." On October 22, 1987, defendant Telex filed its amended answer to plaintiff's first amended complaint and thereby summarily denied the allegations of each new paragraph. As a consequence, plaintiff sought and obtained leave of court to amend its complaint to add United Technologies Communications, Inc. as a party defendant and to assert a fifth count against defendant Telex. This fifth count, which is the subject of defendant Telex's motion to dismiss, alleges plaintiff's entitlement to damages for abusive litigation arising from defendant Telex's amended answer. Specifically, it is asserted that "defendant Telex has (by each denial) asserted a defense or position with respect to which there exists such a complete absence of any justiciable issue of law or fact that it reasonably could not be believed that a court would accept the defense or position." Yost v. Torok, 256 Ga. 92, 96, 344 S.E.2d 414 (1986). Without addressing the merits of this claim, defendant contends that dismissal is appropriate "because this court lacks subject matter jurisdiction." Brief at 4.

A. The Yost Claim and Federal Subject Matter Jurisdiction.

In support of its motion to dismiss, defendant relies heavily upon recent decisions in this district construing the Yost claim.² The earliest of these decisions is A.L. Williams Corp. v. Faircloth, 120 F.R.D. 135 (N.D.Ga.1987) (Freeman, J.). In A.L. Williams Corp., Judge Freeman declined to allow the defendant to amend his answer to assert a counterclaim for abusive litigation. In so doing, Judge Freeman (1) determined the defendant had alleged the necessary elements of a Yost claim; (2) found the proposed Yost claim to be permissive rather than compulsory; and (3) concluded that the proposed claim lacked an independent ground of federal jurisdiction. This decision was significant in that it was the first to construe a Yost counterclaim as permissive rather than compulsory despite the Georgia Supreme Court's holding that the claim "must be pleaded as a compulsory counterclaim or compulsory claim pursuant to O.C.G.A. § 9-11-13(a)." Yost 256 Ga. at 96, 344 S.E.2d 414. As Judge Freeman properly noted, the Georgia courts' determination on this point is not controlling in federal courts.

The next opinions in this district construing Yost in light of federal subject matter jurisdiction concerns were those of Chief Judge O'Kelley in Majik Market v. Best, 684 F.Supp. 1089 (N.D.Ga.1987) and Corporation of the Presiding Bishop of the Church of Jesus Christ of Latter Day Saints v. Associated Contractors, Inc., No. 86-2055, Slip Op. (N.D.Ga. June 19, 1987). In those cases, Judge O'Kelley conducted his own permissive/compulsory counterclaim analysis and ultimately reached the same conclusion as Judge Freeman; i.e., that the Yost claim is permissive in federal court and thus must possess its own jurisdictional basis. Majik Market, at 1091-92; Corporation of the Presiding Bishop, Slip Op. at 1-2. Though Judge O'Kelley determined that neither claimant demonstrated independent jurisdictional bases for their Yost claims, he went on to suggest that dismissal of these claims may have been appropriate for other reasons:

The court notes that the Georgia Supreme Court probably intended for Yost counterclaims to be brought only in Georgia courts. Although the language of the case does not limit the newly created counterclaim to only the courts in Georgia, in defining the cause of action, the court "adopted the legislative language of new O.C.G.A. § 9-15-14." Yost 256 Ga. at 95 344 S.E.2d 414. That statute is limited to courts of record of the State of Georgia. Arguably, Yost claims are also so limited. Such a limitation would avoid any possible conflict with Fed.R.Civ.P. 11 or 28 U.S.C. § 1927. Using Rule 11, federal courts can provide any appropriate sanction for abusive litigation. That rule is sufficient to provide sanctions for bringing frivolous claims in federal court whether the case is before the court pursuant to the court's diversity jurisdiction or before the court on federal question jurisdiction. (Emphasis in original).

Majik Market, at 1092. Corporation of the Presiding Bishop, Slip Op. at 2.

Though this latter observation did not control the outcome of the cases before Judge O'Kelley, it proved to be a basis for summary judgment against a Yost claimant in Union Carbide Corp. v. Tarancon Corp., 682 F.Supp. 535 (N.D.Ga.1988) (Hall, J.). In Union Carbide, Judge Hall declined to engage in a permissive counterclaim/jurisdiction analysis and instead held that Yost claims "may not be brought in federal court but, rather, must be limited to actions brought in the state courts of Georgia." Union Carbide at 545. In making this determination, Judge Hall first noted that the Yost court adopted the legislative language of new O.C.G.A. § 9-15-14 which, as previously noted by Judge O'Kelley, is by its own terms confined to the state courts of Georgia. Id. Because of this, and based on what he found to be the apparent intention of the Georgia Supreme Court, Judge Hall declined to treat the Yost claim as a tort. "The Yost claim, although labeled a `tort' is arguably a `procedural' device, rather than a `substantive' cause of action, which the federal courts would not be subject to follow." Id. Specifically, Judge Hall concluded that the Yost court, in creating the "tort" of abusive litigation, was actually attempting to establish a procedural device in favor of claimants who had no adequate remedy under § 9-15-14, which is limited to attorney's fees and litigation expenses. Id. Under this reasoning, the Yost claim would supplement a recovery under § 9-15-14 to allow a claimant to recover special damages for abusive litigation. Because Judge Hall found the Federal Rules of Civil Procedure "broad enough to cover these goals," he concluded that Erie Railroad Company v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938) did not "command the application of Yost." Id. at 545-46.

The court agrees with the opinions discussed above to the extent that they have found the Yost claim to require its own basis for federal jurisdiction. This court believes, however, that the Yost claim is a state law tort no less available to a civil litigant in federal court than any other tort. As noted by plaintiff, "arguments that the Yost claim is a procedural device ignore the fact that it is but a re-shaping of common law substantive causes of action." Response at 4. Indeed, in fashioning the Yost claim, the Georgia Supreme Court expressly merged the common law torts of malicious use and malicious abuse — substantive causes of action previously cognizable in a federal court sitting in diversity³ — thereby making those torts unavailable to civil litigants in state or federal court. Put another way, the Yost Court redefined the grounds of liability for conduct already proscribed by well-recognized torts. For federal courts sitting in this state to treat the Yost claim as a procedural device rather than as a tort would be to deny a claimant a remedy for damages available to him prior to the Yost decision. This court does not believe that the Georgia Supreme Court intended that result.

As alluded to above, the Yost claim is a tort creating a cause of action for abusive litigation resulting in "special damages other than attorney's fees and expenses of litigation." Yost, 256 Ga. at 95, 344 S.E.2d 414. Thus, the tort is only available to one who can demonstrate damages above and beyond those normally associated with litigation; e.g., "damages for mental distress." Id. This court has previously had occasion to view the sort of factual situation envisioned by the Yost Court in defining the tort of abusive litigation. In ASI v. ITT, No. 86-0044, Slip Op. (N.D.Ga. December 22, 1986) (Forrester, J.), a diversity action, the defendant creditor had acquired and perfected a security interest in approximately one-third of the inventory in the plaintiff debtor's possession. When the plaintiff became delinquent in its scheduled...