Rule One: Fed. R. Civ. P. 8(c)(2) provides, in part, that if a party mistakenly designates a defense as a counterclaim, or a counterclaim as a defense, the court must, if justice requires, treat the pleading as though it were correctly designated, and may impose terms for doing so. There is a differentiation between technical pleading errors, to which Rule 8(c) applies, and redesignations that would alter the essential character of a case. The misdesignation provision in Rule 8(c) reflects the conscious attempt by the draftsmen to ignore pleading technicalities; it also promotes the liberality with which courts generally construe pleadings under the federal rules.
Rule Two: Fed. R. Civ. P. 15(a)(2) provides that a party may amend its pleading only with the opposing party's written consent or the court's leave. The court should freely give leave when justice so requires. That standard applies to affirmative and responsive pleadings alike. The United States Supreme Court identified several factors that guide the application of that rule in case law: If the underlying facts or circumstances relied upon by a [party] may be a proper subject of relief, he ought to be afforded an opportunity to test his claim on the merits. In the absence of any apparent or declared reason, such as undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, futility of amendment, etc., the leave sought should, as the rules require, be freely given.
Plaintiff was a distributor of raw plastics materials and defendants were providers of plastic product-packaging services. It was undisputed that defendants ordered large quantities of raw plastic from plaintiff in 2005 and 2006 and that defendants did not pay for most, if not all, of the 2006 deliveries. The parties filed cross-motions for summary judgment. Plaintiff filed suit asserting claims for breach of contract, claims on book accounts, unjust enrichment, and conversion of property and sought damages for 2006 deliveries or the warehouse goods. Defendants asserted a number of affirmative defenses and cross-moved seeking to redesignate its affirmative defenses as counterclaims under Fed. R. Civ. P. 8(c)(2). Defendants intended to rely on their affirmative defenses of breach of warranty and breach of contract to seek offsets from any amount due under its contracts with plaintiff on the basis of plaintiff's failure to provide conforming goods between 2000 and 2006. The court granted plaintiff's motion for summary judgment, in part, without prejudice and denied defendants' motion. The court allowed defendants to redesignate their affirmative defenses, but limited those counterclaims to the 2006 deliveries.
Issue One: Did defendants' proposed modification correct a simple mistaken designation, for which Fed. R. Civ. P. 8(c)(2) provides the appropriate standard for relief?
Issue two: Should defendants' motion to redesignate be denied because of undue delay, prejudice, and futility?
Answer One: No. Answer Two: Yes.
Conclusion One: The parties pleadings demonstrate that their dispute concerned goods delivered between January and June 2006, as well as warehouse goods billed in September 2006. The plausibility standard imposed by Fed. R. Civ. P. 8(a), which applies to counterclaims, persuaded the court that defendants' generic affirmative defenses did not expand the temporal scope of the legal claims. Therefore, defendants' purported modification seeking offsets on the basis of nonconforming goods delivered between 2000 and 2005 was properly characterized as a motion to amend their answer to include new counterclaims.
Conclusion Two: Defendants' delay in presenting its counterclaims had been substantial, and defendants have not provided a satisfactory explanation. At a late stage, a substantial amendment to defendants' pleadings would unduly prejudice plaintiff. Further, defendants' proposed counterclaims were time-barred. Accordingly, defendants' motion would be denied on grounds of undue delay, prejudice, and futility.