Robbins Hardwood Flooring Inc. v. Bolick Distributors Corp.

United States Court of Appeals
Fifth Circuit
F I L E D
IN THE UNITED STATES COURT OF APPEALS October 22, 2003
FOR THE FIFTH CIRCUIT Charles R. Fulbruge III
Clerk
No. 03-10324
Summary Calendar
ROBBINS HARDWOOD FLOORING INC
Plaintiff - Appellee
v.
BOLICK DISTRIBUTORS CORPORATION, also known as Bolick
Distributors Inc
Defendant - Appellant
Appeal from the United States District Court
for the Northern District of Texas, Dallas Division
No. 3:02-CV-1124-H
Before KING, Chief Judge, and EMILIO M. GARZA and BENAVIDES,
Circuit Judges.
PER CURIAM:*
Defendant-Appellant Bolick Distributors Corporation
(“Bolick”) appeals the district court’s ruling that Bolick is not
entitled to an offset against the amount it was found to owe
Plaintiff-Appellee Robbins Hardware Flooring, Inc. (“Robbins”).
*
Pursuant to 5TH CIR. R. 47.5, the court has determined
that this opinion should not be published and is not precedent
except under the limited circumstances set forth in 5TH CIR. R.
47.5.4.
For the following reasons, we AFFIRM.
I. FACTUAL AND PROCEDURAL HISTORY
The facts giving rise to this dispute are generally
uncontested. Robbins is a manufacturer of hardwood flooring
products, and for almost twelve years, Bolick was an at-will
distributor of Robbins’s products. During February and March
2002, Bolick ordered hardwood flooring products from Robbins. In
anticipation of a continuing relationship between the two, Bolick
incurred various expenses to market and promote Robbins’s
products for 2002.
On March 7, 2002, Robbins terminated its relationship with
Bolick, effective June 8, 2002. Having received no payment from
Bolick for the flooring Bolick had ordered, Robbins filed suit on
May 28, 2002, for breach of contract, suit on a sworn account,
and attorneys’ fees. Robbins then moved for partial summary
judgment on the breach of contract and sworn account issues.
Bolick filed an opposition to summary judgment, in which it
argued that it was entitled to offset expenses that it had
incurred while marketing and promoting Robbins’s products.
Bolick had not made any such claim in its answer. The district
court granted Robbins’s motion for partial summary judgment, but
denied Bolick’s offsets. Bolick appeals only the district
court’s refusal to offset its expenditures from its indebtedness
to Robbins.
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II. STANDARD OF REVIEW
“We review a district court’s application of state law de
novo.” City of Shreveport v. Shreve Town Corp., 314 F.3d 229,
234-35 (5th Cir. 2002). We also review questions of federal law
de novo, including the district court’s interpretation of the
Federal Rules of Civil Procedure. Bellaire Gen. Hosp. v. Blue
Cross Blue Shield of Mich., 97 F.3d 822, 827 (5th Cir. 1996).
“[T]he decision to allow a counterclaim to be pleaded is,”
however, “a matter of judicial discretion and may be reversed on
appeal only if the party can demonstrate that the court abused
its discretion.” Rohner, Gehrig & Co. v. Capital City Bank, 655
F.2d 571, 576 (5th Cir. 1981).
III. DISCUSSION
In its briefs on appeal, Bolick claims that it is entitled
to setoff or recoupment1 under Texas law, because, when Robbins
terminated its relationship with Bolick, Robbins did not give
Bolick a reasonable opportunity to recoup the expenses it had
incurred to maintain and expand the market for Robbins’s
products. The district court refused to allow Bolick to amend
1
Although Bolick uses the terms “setoff” and
“recoupment” interchangeably, they have different meanings under
Texas law: “The right of setoff allows entities that owe each
other money to apply their debts to each other. Where setoff is
allowed, there are mutual debts arising from different
transactions, which contrasts with the single transaction
required in recoupment.” Sommers v. Concepcion, 20 S.W.3d 27, 35
(Tex. App.--Houston [14th Dist.] 2000, pet. denied) (citations
omitted). Here, however, the analysis is the same whether the
claim is classified as a setoff or a recoupment.
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its pleadings to include setoff2 because Bolick had not (1)
stated a claim for setoff under Texas law and (2) put forth any
competent summary judgment evidence in support of its setoff
claim. The district court also opined that Bolick’s claim was
essentially premised on breach of the distributorship agreement,
but Bolick did not plead such a counterclaim, and amendment of
the pleadings to allow the claim would be prejudicial to Robbins.
On appeal, Bolick does not assert that the district court
erred by not allowing it to amend its pleadings; instead, Bolick
simply argues that recoupment is a “defense,” rather than an
affirmative defense or counterclaim. “In diversity of
citizenship actions, state law defines the nature of defenses,
but the Federal Rules of Civil Procedure provide the manner and
time in which defenses are raised and when waiver occurs.”
Morgan Guar. Trust Co. of N.Y. v. Blum, 649 F.2d 342, 344 (5th
Cir. 1981). Under Texas law, setoff and recoupment are both
counterclaims. E. E. Farrow Co. v. U.S. Nat’l Bank of Omaha, 358
S.W.2d 934, 935 (Tex. Civ. App.--Waco 1962, writ ref’d n.r.e.).
Federal Rule of Civil Procedure 12(b) requires that counterclaims
be asserted in a responsive pleading. See also Co-Efficient
Foundation v. Woods, 171 F.2d 691, 694 (5th Cir. 1949)
(“Counterclaim, setoff, recoupment, and the like are in the
nature of affirmative remedies which the defendant has the burden
2
At the district court level, Bolick asserted that it
was entitled to setoff, not recoupment.
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of pleading and proving.”).
As previously noted, Bolick did not assert a claim for
setoff or recoupment in its pleading. Bolick first alleged that
it was entitled to setoff or recoupment in its opposition to
summary judgment, and even then, it did not request that it be
allowed to amend its pleadings. By this time, the deadline for
amending pleadings as a matter of course had passed. See FED. R.
CIV. P. 15(a). This is not necessarily fatal to Bolick’s claim
because, with leave of the court, a party may amend its pleadings
after the deadline, and leave to amend “shall be freely given
when justice so requires.” Id. Proper reasons for denying
amendment include “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, [and] futility of
amendment.” Foman v. Davis, 371 U.S. 178, 182 (1962). After a
thorough review, we find much support for the trial court’s
refusal to allow amendment of Bolick’s pleading. Bolick has
cited no authority, beyond mere dicta, to show that it has stated
a claim under Texas law. Nor has Bolick provided any reason why
its claim was not pleaded or attempted to show that amendment
would not be prejudicial to Robbins. Bolick has never even
requested that it be allowed to amend its pleadings. In light of
this, we find it clear that the trial court did not abuse its
discretion in refusing to allow amendment of Bolick’s pleading to
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allege a counterclaim of setoff or recoupment.
IV. CONCLUSION
For the foregoing reasons, we AFFIRM the district court’s
denial of Bolick’s claim of setoff or recoupment.
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