Mt. Everest Ski Shops, Inc. v. Nordica USA, Inc.

• Decision Date: 22 March 1989
• Docket Number: Civ. No. 87-106.
• Citation: 736 F. Supp. 523
• Parties: MT. EVEREST SKI SHOPS, INC. v. NORDICA USA, INC. NORDICA USA, INC. v. MT. EVEREST SKI SHOPS, INC.
• Court: U.S. District Court — District of Vermont

736 F. Supp. 523

MT. EVEREST SKI SHOPS, INC. v. NORDICA USA, INC.

NORDICA USA, INC. v. MT. EVEREST SKI SHOPS, INC.

Civ. No. 87-106.

United States District Court, D. Vermont.

March 22, 1989.

David S. Acker, Winston & Strawn, Chicago, Ill., and Rolf M. Sternberg, Barr, Sternberg & Moss, Bennington, Vt., for Mt. Everest Ski Shops, Inc.

Robert B. Hemley and Dennis R. Pearson, Gravel & Shea, Burlington, Vt., for Nordica USA, Inc.

MEMORANDUM AND INTERLOCUTORY ORDER

HOLDEN, Senior District Judge.

The plaintiff Mt. Everest Ski Shops, Inc., filed its complaint against Nordica USA, Inc., and The Ski Barn, Inc., on March 9, 1987, in the District of New Jersey. The complaint comprised ten counts, sounding predominantly in anti-trust under the laws of the United States and of New Jersey. Other pendent claims included tortious interference with contractual rights and with prospective business advantage, consumer fraud, breach of contract, and violation of the New Jersey Franchise Practices Act. Judge Bissell transferred the action to the District of Vermont pursuant to 28 U.S.C. § 1404(a). In the course of subsequent proceedings, the court has denied or dismissed each count alleged in the plaintiff's complaint.¹

The motion of defendant Nordica USA for summary judgment of its counterclaim, and the cross-motion of plaintiff Mt. Everest Ski Shops for summary judgment to dismiss the counterclaim, remain for disposition. The defendant filed its motion on September 6, 1988; the plaintiff filed its cross-motion on September 23, 1988. Each party has opposed the motion of the other, and each has submitted, in accordance with local rule 5, a supporting statement of material facts concerning which no genuine issue to be tried exists.

Jurisdiction of the Defendant's Counterclaim

The court's jurisdiction was originally based upon 28 U.S.C. § 1331 and the doctrine of pendent jurisdiction, see United Mine Workers v. Gibbs, 383 U.S. 715, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). After dismissal of the sole federal claim under 15 U.S.C. § 1, the court derived its jurisdiction from 28 U.S.C. § 1332: Mt. Everest Ski Shops is incorporated under the laws of New Jersey and has its principal place of business there. Nordica USA is incorporated under the laws of Delaware and has its principal place of business in Vermont. The amount in controversy exceeded $10,000.²

A court retains ancillary jurisdiction over compulsory counterclaims after all other claims for relief have been adjudicated. Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1, 94 S.Ct. 2504, 2506 n. 1, 41 L.Ed.2d 243 (1974) (dictum); Harris v. Steinem, 571 F.2d 119, 121-22 (2d Cir. 1978). Federal jurisdictional requirements must be satisfied independently before a court may proceed to adjudge a permissive counterclaim. Id. at 122.

A counterclaim which depends upon the judgment in the main action itself is not a compulsory counterclaim. Harris v. Steinem, 571 F.2d at 124-25. The plaintiff's claims and the defendant's counterclaim for the cost of defending against them do not arise out of the same "transaction or occurrence". Fed.R.Civ.P. 13(a); Morgan v. Westinghouse Elec. Corp., 579 F.Supp. 867, 870 (N.D.Ga.1984); see Harris v. Steinem, 571 F.2d at 123-25. The counterclaim is permissive within the terms of rule 13; therefore the court must derive jurisdiction independently. Id. at 122.

The counterclaim, being founded upon a contract between the parties, arises under state law. See Erie R.R. v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938). Therefore, the court's jurisdiction must derive from 28 U.S.C. § 1332. Diversity of citizenship exists. Because the defendant claims that the attorney's fees total $105,158.16, the requisite amount in controversy exists.³

Motion for Summary Judgment by Nordica USA, Inc.

The plaintiff and the defendant formed several contracts between April 1, 1982, and March 31, 1987, under which the plaintiff purchased Nordica ski boots from the defendant for sale or rental at fixed locations. Nordica USA bases its counterclaim upon a provision common to all of the Authorized Dealer Agreements:

In the event Nordica is the successful party on any claim by it, counterclaim by it, or defense by it in any action or proceeding brought by or against it with respect to the Authorized Dealer, Authorized Dealer shall pay, and hereby agrees to pay, in addition to all other sums which may be due, Nordica's reasonable attorney's fees, costs and disbursements attributable to such claim, counterclaim or defense.⁴

Suit would not lie with the defendant on any of the contracts formed before and terminating on March 31, 1985, for each of these contracts terminated on March 31 without automatic renewal.⁵ Two Agreements were effective between April 1, 1985 and March 31, 1986. One covered the plaintiff's store in Nanuet, New York, and permitted retail and rental of Nordica ski boots. The other covered the plaintiff's store in Westwood, New Jersey, and permitted only rental of Nordica ski boots. Both contracts for 1985-1986 renewed automatically, pursuant to paragraph 1(c), and were effective until termination on March 31, 1987.⁶ Both included the renumbered paragraph 18(c) cited in the counterclaim. The court infers that the defendant counterclaims upon both of these contracts.

The plaintiff filed its complaint on March 9, 1987. Any claims under paragraph 18(c) accrued with the filing of the complaint and the concurrent requirement of defense. Paragraph 18(c) was effective on March 9, 1987, because the contract did not terminate until March 31, 1987. Findings and Conclusions of Law at 6; see Adm'r of the Estate of Hubbard v. Billings, 35 Vt. 599 (1863).

Rule 56 of the Federal Rules of Civil Procedure provides:

Summary judgment ... shall be rendered ... if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the supporting affidavits in the party's favor, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.

Fed.R.Civ.P. 56(c). The movant must "show initially the absence of a genuine issue concerning any material fact". Adickes v. S.H. Kress & Co., 398 U.S. 144, 159, 90 S.Ct. 1598, 1609, 26 L.Ed.2d 142 (1970). The court views the evidence "in the light most favorable to the opposing party". Id. at 157, 90 S.Ct. at 1608. Likewise, "inferences to be drawn from the underlying facts contained in the moving party's materials must be viewed in the light most favorable to the party opposing the motion". United States v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 994, 8 L.Ed.2d 176 (1962). Once the moving party has met its burden, the opposing party must establish a genuine issue about a material fact. The substantive law determines which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

Under the "American Rule", each party bears its respective costs of litigation. A statute, however, may authorize an exception to this rule. Alyeska Pipeline Serv. Co. v. Wilderness Society, 421 U.S. 240, 247, 95 S.Ct. 1612, 1616, 44 L.Ed.2d 141 (1975). A contract, too, may vary the application of the rule; the court may depart from the American Rule only to the extent which the contract provides. In re Appeal of Gadhue, 149 Vt. 322, 327, 544 A.2d 1151, 1154 (1987).

The contract between the parties provides that the law of Vermont shall govern in construction and application of its terms.⁷ In the instant case, which elements the movant must establish depends upon what the contractual provision means as a matter of law. "Construction of contract terms is a matter of law and not a factual determination." Vermont Nat'l Bank v. Chittenden Trust Co., 143 Vt. 257, 266-67, 465 A.2d 284 (1983).

The courts of Vermont have established several rules which this court, in accordance with paragraph 18(d) of the two contracts, applies to the two contracts upon which the defendant relies. The court applies them to construe the contract, in order to determine which legal elements the defendant must establish in its motion for summary judgment. "If the instrument is clear and unambiguous, it is to be given effect according to its language, for the intention and understanding of the parties must be deemed to be that which their writing declares." Randall v. Clifford, 119 Vt. 216, 223, 122 A.2d 833 (1956).

It is the duty of the court, if possible, to construe the instrument so as to give effect to every part, and form from the parts a harmonious whole.... While the language of a written instrument governs in determining its effect and operation, in construing such language the nature and condition of the subject matter, the purposes sought to be accomplished, and the circumstances in which the parties contract tending to throw light on their apparent intention at the time the instrument was executed, may be considered.... When the intent of the parties upon the face of the instrument is doubtful, or the language used will admit of more than one interpretation, the court will look at the situation and motives of the parties, the subject matter of the contract, and the object to be attained by it; and will receive parol evidence to this end.

Stratton v. Cartmell, 114 Vt. 191, 194, 42 A.2d 419 (1945) (citations omitted).

Paragraph 18(c), upon which the defendant relies, has four elements. Nordica USA must show (1) that it is the successful party (2) on any counterclaim or defense by it in any action brought against it with respect to the Authorized Dealer, and (3) that its attorney's fees, costs, and disbursements were attributable to such counterclaim or defense and (4) were reasonable.

The defendant has been the successful party in defense of all of the plaintiff's claims. Order of Dismissal (filed Aug. 2, 1988) (order dismissing counts 2, 4, 7, and 9 with respect to Nordica USA,...