Counterclaims Sufficiently Related to Complaint's Allegations That They Relate Back

On February 3, 2016, Justice Ramos of the New York County Commercial Division issued an opinion in California Capital Equity, LLC v. IJKG, LLC, 2016 NY Slip Op. 50112(U), holding that counterclaims were sufficiently related to the complaint that they relate back for statute of limitations purposes.

In California Capital Equity, the plaintiff brought "claims of breach of contract, fraud, and breaches of fiduciary duty." The defendant asserted "counterclaims against [the plaintiff] for tortious interference with contract, breach of the implied covenant of good faith and fair dealing, and unjust enrichment" as well as third-party claims.

The plaintiff moved to dismiss the defendant's counterclaims on statute of limitations grounds. The court denied the motion, explaining:

Under CPLR 203(d), counterclaims that are time-barred may be asserted for equitable recoupment purposes only if they arise out of the same transaction or series of transactions that form the basis of, and are sufficiently related to, the causes of action alleged in the plaintiff's complaint.

[The plaintiff's] claims arise from its purchase of the Note and from [the defendant's] alleged improper distributions in violation of its rights under the Note. [The defendant's] counterclaims for tortious interference and unjust enrichment are based on the wrongful transfer of the Note, accompanied by [the plaintiff's] alleged intentional and improper facilitation of a breach of the Loan Agreement (giving [the defendant] a right of first offer to acquire the Note). In addition, [the defendant] alleges that [the plaintiff] is an improper holder of the Note and was never entitled to receive any of the interest payments from [the defendant]. Because [the defendant] seeks to enforce rights under the same Note agreement that [the plaintiff] seeks to enforce, and because there are allegations that [the plaintiff] purposely delayed objecting to the improper distributions, the claims are sufficiently related and defendants are entitled to rely on CPLR 203(d).

(Internal quotations and citations omitted).