JOANNA SEYBERT, District Judge.
This consolidated action was commenced by plaintiffs Gunderson Amazing Fireworks, LLC, Fireworks Unlimited, LLC, Kenaco Sales, LLC, Fireworks Center 25, LLC, and Lady Lucks Wholesale & Retail Fireworks, LLC ("Plaintiffs") against defendants Merrick Bank, Merrick Bank Merchant Services Division, Cardworks, L.P., and Pinnacle Processing Group, Inc. (together, "Defendants"). Plaintiffs filed their Second Amended Complaint ("SAC") on May 8, 2015, asserting claims against Defendants for (1) breach of contract, (2) breach of fiduciary duty, (3) indemnification, and (4) negligent performance. (SAC, Docket Entry 82.) Pending before the Court is a motion filed by individuals Sandra Kueck, Kent Herzog, and Monty Kapchinsky (the "Movants") to dismiss a counterlcaim for breach of contract which Defendants asserted against the Movants in their Answer to the SAC. (Docket Entry 109.) For the reasons that follow, the Movants' motion is DENIED.
Plaintiffs are either retailers or wholesalers of consumer fireworks. (SAC ¶ 13.) In 2010, Plaintiffs separately entered into Merchant Agreements with Defendants to have Defendants process their credit card transactions. (SAC ¶ 14.) "For a period of time, the business relationship . . . between the parties proceeded without incident." (SAC ¶ 22.) In April 2012, however, customers began complaining that their credit cards had been double-charged and triple-charged for purchases. (SAC ¶ 24.) This unauthorized activity began to occur at the same time that nonparty Jetpay LLC started to perform processing services on behalf of Defendants in March 2012. (SAC ¶ 23.) Plaintiffs claim that by allowing their customers to be repeatedly charged for purchases, Defendants materially breached the Merchant Agreements. (SAC ¶ 25.) In addition, Plaintiffs claim that the number of times this occurred was "inexcusable" and "cannot be ascribed to mere negligence." (SAC ¶ 25.)
On May 28, 2015, Defendants filed an Answer to the SAC and asserted counterclaims against Plaintiffs. (Answer, Docket Entry 85, at 12.) Defendants explain in their Answer that when Plaintiffs' customers complained about unauthorized credit card activity, the customers' banks issued a "chargeback, or a debit, through the electronic payment system, causing the funds constituting the Duplicative Charge to be automatically deducted from Merrick's (i.e. the acquiring Bank's) account." (Answer at 15, ¶ 16.) Defendants claim that, under ordinary circumstances, "the debit would have continued to flow downstream to Plaintiffs and the net amount of the Duplicative Charges . . . would have been debited from the Plaintiffs' account." (Answer at 15, ¶ 16.) According to Defendants, however, Plaintiffs cut off Defendants' access to Plaintiffs' accounts "before the net amount of the Duplicative Charges could be debited from Plaintiffs' account and given back to Merrick." (Answer at 15, ¶ 17.) In other words, Defendants claim that Plaintiffs remained in possession of the duplicative sales charges and Defendants had to issue refunds to customers for the charges without being made whole by Plaintiffs. (Answer at 15, ¶ 17.)
Based upon these facts, Defendants assert three counterclaims sounding in breach of contract and unjust enrichment. (Answer at ¶¶ 19-38.) The Movants' motion solely concerns Defendants' second counterclaim, styled "Breach of Contract as against Guarantors" (the "Second Counterclaim"). (Answer ¶¶ 24-33.) Defendants assert in their Second Counterclaim that all the Movants signed documents personally guaranteeing Plaintiffs' performance of the Merchant Agreements and that the Movants "breached their guarantee obligations" by not reimbursing Defendants for monies Defendants claim is still owed to them. (Answer ¶¶ 25-31.)
The Movants now assert in their motion to dismiss that Defendants' Second Counterclaim should be dismissed because Defendants did not properly bring the Movants into this case pursuant to either Federal Rule of Civil Procedure 14 or 20. (Pls.' Br., Docket Entry 109, at 8-9.) Movant Sandra Kueck also claims that she was not properly served with the Answer, and seeks to be dismissed from the case on that basis. (
The Movants first assert that Defendants improperly commenced this case against them by filing an Answer that does not comply with either Rule 14 or Rule 20 of the Federal Rules of Civil Procedure.
Federal Rule of Civil procedure 14(a), which governs third-party impleader, provides that that "[a] defending party may, as third-party plaintiff, serve a summons and complaint on a nonparty
Defendants maintain that their Second Counterclaim was compulsory, and thus Defendants properly brought the Movants into the case pursuant to Rules 13 and 20. Rule 13(h) provides that "Rules 19 and 20 govern the addition of a person as a party to a counterclaim or crossclaim." FED. R. CIV. P. 13. And pursuant to Rule 20, the joinder of defendants is permissible if: (1) "any right to relief is asserted against them jointly, severally, or in the alternative with respect to or arising out of the same transaction, occurrence, or series of transactions or occurrences," and (2) "any question of law or fact common to all defendants will arise in the action." FED. R. CIV. P. 20(a)(2) (A)&(B).
Plaintiffs take issue with the fact that Defendants did not ask permission before seeking to join the movants. (Pl.'s Br. at 7.) Although "the general practice is to obtain a court order to join an additional party," permission from the Court is not explicitly required by Rule 13(h). 6 CHARLES ALAN WRIGHT ET AL., FEDERAL PRACTICE AND PROCEDURE § 1434 (3d ed. 2010). In practice, courts routinely allow parties to be joined without a court order, unless legitimate objections are raised regarding the proposed defendants.
The Movants next argue that the Court lacks subject matter jurisdiction over Movant Sandra Kueck ("Kueck") because she was not properly served with Defendants' Answer and counterclaims within 120 days of the date it was filed. (
"Federal Rule of Civil Procedure 4(m) governs both (1) the dismissal of actions for untimely service of process and (2) extensions of the time in which service may be effected."
FED. R. CIV. P. 4(m). The parties do not dispute that service of only the Summons, and not the underlying Defendants' pleading, does not satisfy the requirements of Rule 4. However, Defendants argue, that good cause exists to grant an extension of Defendants' time to serve the Answer on Kueck because Defendants did not know "there was a deficiency in the papers served by the process server" until the Movants filed their motion to dismiss. (Defs.' Opp. Br. at 14.)
"Courts generally will find good cause only where the failure to effect timely service was the result of circumstances beyond [the party's] control, and was not the result of mere `inadvertence, neglect, mistake or misplaced reliance.'"
Nevertheless, the Court may extend the deadline to effect service in its discretion.
For the foregoing reasons, the Movants' motion to dismiss (Docket Entry 109) is DENIED. Defendants are granted an additional ninety (90) days from the date of this Memorandum & Order to attempt to serve Sandra Kueck with process.
SO ORDERED.