RIPPLE, Circuit Judge.
In 2011, Timmermann's Ranch and Saddle Shop ("Timmermann's") brought an action against its former employee, Jeanne Pace, for conversion, breach of fiduciary duty, fraud, and unjust enrichment. It alleged that Ms. Pace had stolen merchandise and money from the company. Ms. Pace filed her answer and a counterclaim in early 2011.
In 2013, Ms. Pace and Dan Pace, her husband, filed a separate action against Timmermann's and four of its employees, Dale Timmermann, Carol Timmermann, Dawn Manley, and Tammy Rigsby (collectively "the individual defendants"). They alleged that these defendants had conspired to facilitate Ms. Pace's false arrest. Ms. Pace alleged that, as a result of their actions, she had suffered severe and extreme emotional distress. Mr. Pace claimed a loss of consortium.
Ms. Pace filed a motion to consolidate these two actions. The court granted the motion with respect to discovery, but denied the motion with respect to trial and instructed Ms. Pace that she should request consolidation for trial after the close of discovery. In the midst of discovery, however, the district court dismissed Ms. Pace's 2013 action after concluding that her claims were actually compulsory counterclaims that should have been filed with her answer to the company's 2011 complaint. Ms. Pace appeals the dismissal of her 2013 action and the court's denial of her motion to consolidate.
We hold that Ms. Pace's claims against parties other than Timmermann's were not compulsory counterclaims because Federal
The issues in this case present a somewhat complex procedural situation. For ease of reading, we first will set forth the substantive allegations of each party. Then, we will set forth the procedural history of this litigation in the district court.
Timmermann's boards, buys, and sells horses, as well as operates both a ranch and a "saddle shop," in which it sells merchandise for owners and riders of horses. When this dispute arose, Carol and Dale Timmermann managed Timmermann's. Dawn Manley and Tammy Rigsby were employees of Timmermann's.
In its 2011 complaint, Timmermann's alleged that, while employed as a bookkeeper at Timmermann's, Ms. Pace had embezzled funds and stolen merchandise. According to the complaint, beginning at an unknown time, Ms. Pace regularly began removing merchandise from Timmermann's without paying; she would then sell those articles on eBay for her personal benefit. Timmermann's further alleged that it discovered that Ms. Pace was selling items on eBay through a private sting operation.
According to the complaint, in February 2011, a Timmermann's employee discovered some of the company's merchandise in Ms. Pace's car. At this point, Timmermann's fired Ms. Pace. Thereafter, during a review of its records, including the checking account maintained by Ms. Pace, Timmermann's discovered that a check that Ms. Pace had represented as being payable to a hay vendor actually had been made payable to cash. Timmermann's also discovered that, on at least eight occasions, Ms. Pace had utilized the company's business credit card to make personal purchases.
In her 2013 complaint, Ms. Pace alleged that her conduct while working at Timmermann's was consistent with its usual course of business. She stated that Timmermann's had a practice of allowing employees to use cash to purchase merchandise at cost or, alternatively, by deducting the merchandise's value from the employee's pay. She maintains that she had purchased the company's merchandise under that established practice. She also alleged that Carol Timmermann, her supervisor, knew that she had sold the company's merchandise at flea markets and never had objected.
Ms. Pace also maintained that she was instructed to write corporate checks out to cash and to note the payee in the check records. Pursuant to those instructions, Ms. Pace had written checks to cash and recorded the payee and purpose of the check in the check records. Ms. Pace further alleged that Carol Timmermann had instructed her to use Carol's credit card, which was used as the corporate credit card, for personal purchases and to reimburse Carol, and not Timmermann's, for those purchases.
Following her release from custody, the individual defendants continued to provide the Sherriff's Office with information about Ms. Pace's allegedly unlawful conduct. On March 13, 2012, the State's Attorney brought charges against Ms. Pace premised on the information provided by the company's employees. Ms. Pace was charged with theft, forgery, and unlawful use of a credit card.
We turn now to the procedural history of this litigation in the district court, a history that produced the situation before us today.
On March 3, 2011, Timmermann's filed its civil complaint against Ms. Pace, alleging conversion, breach of fiduciary duty, fraud, and unjust enrichment. It sought to recover the value of the merchandise and money that Ms. Pace allegedly had stolen. Ms. Pace filed her answer and counterclaims on April 5, 2011.
On February 1, 2013, Ms. Pace and Mr. Pace (collectively "the Paces") filed a complaint against Timmermann's and the individual defendants, alleging that they had conspired to facilitate Ms. Pace's false arrest. Ms. Pace alleged that she had suffered severe and extreme emotional distress; Mr. Pace claimed a loss of consortium. Specifically, the Paces' complaint included seven counts: "false arrest/false imprisonment/in concert liability" (Count I); "abuse of process" (Count II); "intentional infliction of emotional distress" (Count III); "conspiracy to commit abuse of process and intentional infliction of emotional distress" (Count IV); "in concert activity" (Count V); "aiding and abetting abuse of process and intentional infliction of emotional distress" (Count VI); and "loss of consortium" (Count VII).
On March 15, 2013, Ms. Pace filed a motion to consolidate the two cases. On April 2, 2013, the district court consolidated the cases for the purpose of discovery and pretrial practice. The court denied without prejudice the motion to consolidate the cases for trial; it stated that it would rule on a motion to consolidate for trial after discovery.
On May 2, 2013, Timmermann's and the individual defendants moved to dismiss Ms. Pace's action under Federal Rules of Civil Procedure 12(b)(6) and 13(a). They contended that her allegations should have been filed as compulsory counterclaims in the 2011 action. Thereafter, Ms. Pace moved to amend her 2011 counterclaim and to consolidate the cases for trial. The district court set a briefing schedule for the company's motion to dismiss and held Ms. Pace's motion to consolidate in abeyance.
In December 2013, the district court granted the company's motion to dismiss.
The Paces now appeal the dismissal of the 2013 action. They concede that Ms. Pace's false arrest and emotional distress claims against Timmermann's were compulsory counterclaims and therefore properly dismissed. They contend, however, that Ms. Pace's claims against the individual defendants and Mr. Pace's claims for loss of consortium were not compulsory counterclaims. They also submit that Ms. Pace's abuse of process claim against Timmermann's did not "exist" when the 2011 action was filed and therefore could not have been a compulsory counterclaim.
"We review de novo [a] district court's grant of a motion to dismiss." Thulin v. Shopko Stores Operating Co., LLC, 771 F.3d 994, 997 (7th Cir.2014); see also Transamerica Occidental Life Ins. Co. v. Aviation Office of Am., Inc., 292 F.3d 384, 389 (3d Cir.2002) ("[W]e review de novo the District Court's determination that [the] suit should have been pursued as a compulsory counterclaim in the [prior] action.").
Federal Rule of Civil Procedure 13 governs compulsory counterclaims. Rule 13(a)(1) provides:
The text of this subsection limits the definition of compulsory counterclaim to those claims that the pleader has against an opposing party; it does not provide for the joinder of parties. Instead, in a later subsection, it expressly incorporates the standards set out for the required joinder of parties under Rule 19 and the permissive joinder of parties under Rule 20. Specifically, subsection 13(h) provides: "Rules 19 and 20 govern the addition of a person as a party to a counterclaim or crossclaim."
Rule 19 requires that a party be joined if, "in that person's absence, the court cannot accord complete relief among existing parties," or if proceeding in the party's absence may "impair or impede the person's ability to protect [his] interest" or "leave an existing party subject to a substantial risk of incurring double, multiple, or otherwise inconsistent obligations." Fed.R.Civ.P. 19(a)(1). In contrast, Rule
The district court did not hold, and Timmermann's does not contend, that the individual defendants named in Ms. Pace's complaint were opposing parties under Rule 13(a) in the 2011 action.
The text of the rules, however, do not permit such an arrangement. Timmermann's relies on the text of Rule 13(a)(1)(B), which provides that a claim is not a compulsory counterclaim if it "require[s] adding another party over whom the court cannot acquire jurisdiction." Fed.R.Civ.P. 13(a)(1)(B). From this statement, Timmermann's devises that, because the district court could have exercised jurisdiction over the individual defendants, the claims against them must be brought as compulsory counterclaims.
The history of Rule 13 supports our conclusion that Rule 13 does not provide for compulsory joinder. Prior to 1966, Rule 13(h) read:
As then written, Rule 13(h) was interpreted as an additional mandatory joinder rule, similar to Rule 19, which required that necessary parties be joined.
Fed.R.Civ.P. 13 advisory committee's note to 1966 amendment.
Requiring Ms. Pace to bring the claims against the individual defendants as a counterclaim in the initial action might well serve judicial economy, but the Federal Rules of Civil Procedure do not require such a result.
Indeed, if Ms. Pace had brought her claim before Timmermann's filed suit, she could have chosen to file separate actions against Timmermann's and the individual defendants. See Temple v. Synthes Corp., 498 U.S. 5, 7, 111 S.Ct. 315, 112 L.Ed.2d 263 (1990) (per curiam) (noting that "[i]t has long been the rule that it is not necessary for all joint tortfeasors to be named as defendants in a single lawsuit"); see also Fed.R.Civ.P. 19 advisory committee's note to 1966 amendment (stating that the rule "is not at variance with the settled authorities holding that a tortfeasor with the usual `joint-and-several' liability is merely a permissive party to an action against another with like liability" and that the "[j]oinder of these tortfeasors continues to be regulated by Rule 20").
Timmermann's recognizes that Rule 20 does not require a litigant to join additional parties.
We turn now to whether the district court appropriately characterized Ms. Pace's claim against Timmermann's for abuse of process as a compulsory counterclaim. Ms. Pace submits that her abuse of process claim did not exist until there was "process" in the form of an information or indictment. She contends that the facts alleged in the 2013 complaint that occurred before she was charged only demonstrated one element of the claim, the defendants' mens rea. "In order to be a compulsory counterclaim, Rule 13(a) requires that a claim ... exist at the time of pleading...." Burlington N. R.R. Co. v. Strong, 907 F.2d 707, 710 (7th Cir.1990). Thus, "a party need not assert ... a compulsory counterclaim if it has not matured when the party serves his answer." Id. at 712.
Under Illinois law, "[t]he only elements necessary to plead a cause of action for abuse of process are: (1) the existence of an ulterior purpose or motive and (2) some act in the use of legal process not proper in the regular prosecution of the proceedings." Kumar v. Bornstein, 354 Ill.App.3d 159, 290 Ill.Dec. 100, 820 N.E.2d 1167, 1173 (2004) (emphasis in
Ms. Pace was arrested on February 15, 2011. The company's 2011 complaint was filed on March 3, 2011, and Ms. Pace filed her answer and counterclaim on April 5, 2011. Consequently, the only fact not in Ms. Pace's possession at the time she filed her answer was the March 13, 2012 information. Illinois courts are clear, however, that an arrest is sufficient to bring an abuse of process claim. See id. Ms. Pace's abuse of process claim therefore matured when she was arrested, which occurred before she filed her responsive pleading. Her failure to raise the abuse of process claim as a counterclaim along with her answer therefore contravenes Rule 13.
Indeed, in alleging an abuse of process, Ms. Pace primarily relies on her 2011 arrest, and not on the fact that she was charged. The complaint alleges that the defendants intentionally injured and caused injury to Ms. Pace by giving "false information to law enforcement and explicitly or implicitly urg[ing] the arrest and/or the indictment of [Ms. Pace]."
Because we conclude that the district court erred in dismissing both Ms. Pace's claims against the individual defendants and Mr. Pace's claims, we need not address the party's arguments about Ms. Pace's motion to consolidate. The district court will have the opportunity to consider the motion to consolidate on remand.
We conclude that the district court erred in dismissing the Paces' 2013 complaint in its entirety. Because neither Rule 13 nor Rule 20 provide for compulsory joinder, Ms. Pace's claims against the individual defendants and Mr. Pace's claims for loss of consortium were not compulsory counterclaims. Ms. Pace's abuse of process claim against Timmermann's was in existence when Ms. Pace filed her 2011 answer and counterclaim, and therefore the district court was correct to bar her subsequent abuse of process claim against Timmermann's. The judgment of the district court is therefore affirmed in part and reversed in part and the case is remanded for proceedings consistent with this opinion. Ms. Pace may recover her costs in this appeal.
AFFIRMED IN PART, REVERSED AND REMANDED IN PART.
We have recognized that Rule 18, which generally governs the joinder of claims, operates independently from Rule 20. See Intercon Research Assocs., Ltd. v. Dresser Indus., Inc., 696 F.2d 53, 56-57 (7th Cir.1982). In Intercon, we affirmed the district court's decision "reject[ing] the plaintiff's argument that if the requirements of Rule 18(b) are met with respect to joinder of a certain claim, then a fortiori joinder of the party against whom that claim is asserted is permissible under Rule 20(a)." Id. at 56. We recognized "that Rule 18(b), which deals with joinder of claims, acts independently of Rule 20(a) which pertains to joinder of parties." Id. at 57 (footnote omitted). "Thus, joinder of claims under Rule 18 becomes relevant only after the requirements of Rule 20 relating to joinder of parties has been met with respect to the party against whom the claim is sought to be asserted." Id.; see also Charles Alan Wright et al., Federal Practice and Procedure § 1655 (3d ed. 2001) ("Rule 20 deals solely with joinder of parties and becomes relevant only when there is more than one party on one or both sides of the action. It is not concerned with joinder of claims, which is governed by Rule 18. Therefore, in actions involving multiple defendants Rule 20 operates independently of Rule 18. Indeed, as is discussed more fully elsewhere, both of these rules were amended in 1966 to eliminate language that lower courts had interpreted as restricting the joinder of multiple claims against multiple defendants."); 4 James Wm. Moore et al., Moore's Federal Practice § 20.02(6)(a) (3d ed. 1997 & Supp. 2007) ("Rule 18, governing joinder of claims, permits a claimant to assert all claims that it has against a defending party. The claims joinder rule does not require that the claims share a common question or that they be transactionally related. It is, in short, a rule of unlimited claim joinder. The permissive party joinder rule, on the other hand, governs party joinder and, as we have seen, imposes requirements of transactional relatedness and commonality. These Rules operate independently, and party joinder is the antecedent inquiry. Once parties are properly joined under Rule 20, then Rule 18 permits any claimant to take advantage of its unlimited joinder provision. (emphasis in original) (footnotes omitted) (citations omitted)). This distinction, between claims and parties, is implicit in subsection 13(h) and controls our interpretation of Rules 13 and 20.
Although a broader interpretation of "opposing party" under Rule 13 might further the policy of judicial economy, such an interpretation interferes with a plaintiff's ability to structure litigation in a manner of his choosing. See Applewhite v. Reichhold Chems., Inc., 67 F.3d 571, 574 (5th Cir.1995) ("Generally, permissive joinder of plaintiffs under Federal Rule of Civil Procedure 20 is at the option of the plaintiffs, assuming they meet the requirements set forth in Rule 20."); Hefley v. Textron, Inc., 713 F.2d 1487, 1499 (10th Cir.1983) (noting that the "joinder of defendants under rule 20 is a right belonging to plaintiffs" and that "a defendant can not use rule 20 to join a person as an additional defendant"); 4 James Wm. Moore et al., Moore's Federal Practice § 20.02(2)(a)(i) (3d ed. 1997 & Supp. 2014) ("The defendant has no right to insist that the plaintiff join all persons who could be joined under the permissive party joinder rule."); see also Richard D. Freer, Avoiding Duplicative Litigation: Rethinking Plaintiff Autonomy and the Court's Role in Defining the Litigative Unit, 50 U. Pitt. L.Rev. 809, 826-27 (1989). Interpreting the term "opposing party" broadly would require that parties be added under Rule 20, effectively transforming the permissive joinder rule into one of compulsory joinder. As previously noted, Rule 13(h) was amended to correct and avoid such an interpretation.
4 James Wm. Moore et al., Moore's Federal Practice § 20.02(1)(b) (3d ed. 1997 & Supp. 2014) (footnote omitted) (citations omitted).