In re Universal Research Laboratories, Inc.

Summary

The United States Bankruptcy Court for the Northern District of Illinois denied Omnetics, Inc.'s motion for leave to file a counterclaim more than three years after the pleadings had closed. The court held that Bankruptcy Rule 713 excluded Federal Rule of Civil Procedure 13(f), and treated the proposed pleading as a new omitted counterclaim rather than an amendment to the existing counterclaim. The court found undue delay, prejudice, additional discovery burdens, and potential effects on administration of the bankruptcy estate.

Holdings

1. A proposed counterclaim seeking lost-profit damages for an alleged breach of contract, materially different from the existing counterclaim for goods sold and delivered, is an omitted counterclaim rather than a mere amendment of the existing pleading.
2. Leave to file the proposed counterclaim was properly denied because the more-than-three-year delay, the need for extensive additional discovery, and the resulting prejudice to Universal and the administration and closing of the bankruptcy estate outweighed any justification for allowing the claim.

Questions Presented

1. Whether Omnetics could use Federal Rule of Civil Procedure 15(a), as incorporated by Bankruptcy Rule 715, to add a new breach-of-contract counterclaim after the pleadings had been closed for more than three years.
2. Whether leave should be denied because the proposed counterclaim was actually an omitted counterclaim, was not authorized by Bankruptcy Rule 713, and would cause undue delay, expense, and prejudice in the bankruptcy case.

Disposition

other