Chrysler Corp. v. Fedders Corp.

• Decision Date: 10 June 1982
• Docket Number: No. 78 Civ. 3393 (CHT).,78 Civ. 3393 (CHT).
• Citation: 540 F. Supp. 706
• Parties: CHRYSLER CORPORATION, Plaintiff, v. FEDDERS CORPORATION, Defendant.
• Court: U.S. District Court — Southern District of New York

540 F. Supp. 706

CHRYSLER CORPORATION, Plaintiff, v. FEDDERS CORPORATION, Defendant.

No. 78 Civ. 3393 (CHT).

United States District Court, S. D. New York.

June 10, 1982.

COPYRIGHT MATERIAL OMITTED

Kelley Drye & Warren, New York City, for plaintiff; Robert Ehrenbard, Paul F. Doyle, New York City, of counsel.

Paul, Weiss, Rifkind, Wharton & Garrison, New York City, for defendant; Arthur L. Liman, Leslie G. Fagen, and Weisman Cellar, Spett, Modlin & Wertheimer, New York City, of counsel.

OPINION

TENNEY, District Judge.

This action grows out of the sale to defendant Fedders Corporation ("Fedders") of the Airtemp Division ("Airtemp") of plaintiff Chrysler Corporation ("Chrysler"). On February 23, 1976, the parties entered into a 76-page agreement (the "Agreement") which set out the numerous terms and conditions of the sale. Fedders was to purchase the assets of Airtemp, including stock in certain domestic and foreign subsidiaries of Chrysler, in exchange for the aggregate of the following: (a) $18,000,000; (b) 1,500,000 shares of preferred stock, Series B, of Fedders; (c) a note in the principal amount of $10,539,965 (the "Note"); and (d) the assumption by Fedders of certain liabilities of Airtemp. The Agreement provided for an adjustment in the purchase terms to reflect any change in Airtemp's net worth between the close of negotiations in the fall of 1975 and the closing on February 23, 1976. Complaint ¶¶ 5-7, and Exhibit A thereto (the Agreement), at 11-17.

In its Complaint, filed July 25, 1978, Chrysler alleged numerous claims for relief. It seeks to recover for services rendered subsequent to the closing date; for interest never paid on the Note; for an adjustment in the Note's principal amount; for dividends never paid on the Series B preferred stock; for conversion of funds mistakenly transferred to Fedders; for Fedders' refusal to accept, or to facilitate, the transfer of stock in several Chrysler subsidiaries, as well as for the failure to pay for some shares that were accepted; and for the failure to meet various liabilities undertaken by Fedders. The Complaint demanded a total judgment in excess of 82 million dollars; in the Amended Complaint, the figure is $85,581,548.16.

On December 18, 1981, with the consent of Magistrate Nina Gershon, who has supervised the pretrial stages of this case, and with the consent of Fedders, Chrysler served a supplemental and amended complaint, which generally revised and updated its original claims and which added a new claim to enforce a prepayment clause in the Note. Chrysler initially pursued its prepayment claim in a separate action filed in New York State Supreme Court in June 1979, two months after the clause was triggered. Affidavit of Robert Ehrenbard, sworn to February 18, 1982 ("Ehrenbard Aff."), at 10. In that action, the trial court denied a motion by Fedders to dismiss the claim, but granted a stay pending the outcome of this case. The Appellate Division affirmed on the condition that the claim be asserted in this action, to which Fedders consented. In response to Chrysler's amended complaint, Fedders filed an amended answer which, among other things, added its forty-first, forty-second, and forty-third counterclaims, alleging malicious prosecution, abuse of process, and a statutory malicious prosecution claim under Section 600.2907 of the Michigan Revised Judicature Act.

At this time, two motions are before the Court. Chrysler has moved to strike the new counterclaims under Fed.R.Civ.P. ("Rule") 15 as untimely and prejudicial, and under Rule 12(b)(6) for failure to state a claim upon which relief may be granted. Simultaneously, Fedders has moved for an expedited trial. The Court will deal with both motions in this Opinion. For the reasons stated below, Chrysler's motion to strike the counterclaims is granted under Rules 12 and 15, and Fedders' motion for an expedited trial is denied, although the Court notes that it does not anticipate any substantial delay between the completion of a pretrial order and the available dates for conducting the trial.

MOTION TO STRIKE COUNTERCLAIMS

Background. —

One of the few facts on which the parties agree is that Chrysler has filed seven lawsuits in the United States in pursuing its rights arising from the February 23, 1976 transaction. Naturally, the parties disagree on the merits and propriety of those actions. Briefly summarized, they are as follows: (1) In November 1977, Chrysler sued Fedders and five other corporations in the Eastern District of Michigan, alleging federal antitrust violations and twenty-two pendent state claims. In February 1978, the district court dismissed the antitrust claims and, with them, the pendent state claims. In March 1981, the Sixth Circuit Court of Appeals affirmed in part and reversed in part the lower court's decision on the applicable antitrust principles, clearing the way for Chrysler to resume its prosecution of the case. Fedders obtained a stay of mandate and petitioned the Supreme Court for a writ of certiorari, and Chrysler cross-petitioned. Both petitions were denied on October 13, 1981, after which Chrysler chose to voluntarily dismiss the Michigan action and pursue all of its claims in this court. (2) While pursuing its Sixth Circuit appeal (which took three years to complete), Chrysler filed its complaint in this court where Fedders is the sole defendant and where jurisdiction rests upon diversity of citizenship under 28 U.S.C. § 1332. The pendent claims dismissed in the Eastern District of Michigan were made pendent claims in this court. (3) On May 19, 1978, Chrysler sued Airtemp Corporation as the sole defendant in a Delaware state court action. According to Chrysler's attorney, this separate case was brought because Airtemp could not be sued in federal court. Ehrenbard Aff. at 8. (4) On July 25, 1978, Chrysler commenced an action in state court in Kentucky, seeking to foreclose a lien on real property located there and valued at $11,900,000, "which is far less than the full amount" Chrysler seeks. Id. at 9. (5) On March 4, 1981, Chrysler filed suit in the federal district court in New Jersey against Fedders and several individuals. The suit "affects title to property located in New Jersey ... and it is based to a large extent on events which occurred, or were uncovered, well after litigation between Chrysler and Fedders had already begun." Id. (6) As the first of two New York state court actions, Chrysler commenced a suit in November 1977, seeking dividends owing on the Series B Preferred Stock. These claims were based upon Fedders' certificate of incorporation and upon the New York Business Corporation Law, not upon the purchase agreement. Over Fedders' strenuous defense and motions to dismiss or stay the action, Chrysler was awarded summary judgment in the amount of $3,900,000. (Aside from the voluntary dismissal in Michigan, the New York state court judgment represents the only resolution in the many cases comprising the course of litigation between Chrysler and Fedders.) (7) In June 1979, Chrysler brought a second New York state court action, seeking to enforce a prepayment clause in the Note from Fedders. As discussed above, that action was stayed on the condition that the claim be added to this action, which was accomplished by a December 18, 1981 amendment to the complaint.

In its forty-first counterclaim, Fedders alleged that "Chrysler was well aware that its claim for prepayment of the Note would or could have been adjudicated in this action. ... Nevertheless, Chrysler initiated these unnecessary lawsuits i.e., the second New York state action and the federal suit in New Jersey and prosecuted them notwithstanding Fedders' efforts to litigate the issues in one action in one forum." Amended Answer ¶ 20. "Chrysler's repeated assertion of its prepayment claim is ... part and parcel, and in furtherance of, a campaign by Chrysler, a corporation many times the size of Fedders, to coerce Fedders into abandoning its rights, through proliferation of lawsuits, splitting of causes of action, and abusive use of process, all in connection with the same February 23, 1976 transaction between Chrysler and Fedders." Id. ¶ 21. Fedders quotes the Michigan district court as labeling Chrysler's antitrust action "almost spurious," and it cites Chrysler's complaint in that action as asserting that all of its claims "are derived from a common nucleus of operative facts ..., such that the entire action constitutes a single case which would ordinarily be expected to be tried in one judicial proceeding." Id. ¶ 22. After listing Chrysler's six other actions against Fedders, the defendant states that "upon information and belief, Chrysler multiplied its lawsuits not to obtain a speedy adjudication of its alleged claims, but to harass and defame Fedders, to interfere with Fedders' business and property, and to impose unwarranted costs and expenses upon Fedders, all in an effort to obtain unfair advantage and to pressure Fedders." Id. ¶ 24. Citing Chrysler's December 11, 1981 voluntary dismissal of the Michigan action, Fedders alleges that Chrysler "has acted maliciously and without probable cause." Id. ¶ 26. As to damages resulting from Chrysler's alleged malicious prosecution, Fedders states that it "should recover from Chrysler the actual damages claimed in the fortieth claim for relief in the Answer and Counterclaims and punitive damages in the amount of $20,000,000.00, plus interest thereon." Id. ¶ 28. The damages listed in the fortieth claim for relief in Fedders' original answer, filed August 23, 1978, were as follows:

As a result of and attributable to Chrysler's breaches of the Agreement and misrepresentations, Fedders has incurred and sustained, and, upon information and belief, will incur and sustain, expenses (including reasonable legal and other fees) in the amount of at least $5,000,000, which would not have been incurred or sustained or required to be incurred or

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