Walker v. Thi of New Mexico At Hobbs Center (803 F. Supp. 2d 1287, 2011)

MEMORANDUM OPINION AND ORDER

JAMES O. BROWNING, District Judge.

THIS MATTER comes before the Court on the Plaintiffs Motion to Dismiss Defendants’ Counterclaim and Memorandum in Support, filed January 18, 2011 (Doc. 174). The Court held a hearing on April 6, 2011. The primary issues are: (i) whether the Court has subject-matter jurisdiction over the malicious-abuse-of-process counterclaim; and (ii) whether, if the Court has subject-matter jurisdiction over the malicious-abuse-of-process counterclaim, Counter-Plaintiffs THI of New Mexico at Hobbs Center, LLC (“THI of Hobbs”), THI of New Mexico, LLC (“THI of New Mexico”), Fundamental Administrative Services, LLC (“FAS”), and Fundamental Clinical Consulting, LLC (“FCC”)(collectively “Counterclaimants”) have stated a claim upon which the Court may grant relief. The Court will deny Plaintiff Sarah Walker’s motion. The Court believes that the Counterclaimants’ malicious-abuse-of-process counterclaim is a permissive, not a compulsory, counterclaim. Regardless whether the counterclaim is permissive, however, the Court does not believe it has supplemental jurisdiction over the counterclaim, because the counterclaim and Walker’s claims do not arise from a common nucleus of operative fact. Although the Court does not have supplemental jurisdiction over the counterclaim, it has diversity jurisdiction over the counterclaim. Because the Counterclaimants have pled sufficient facts to state a claim for relief for malicious abuse of process that is plausible on its face, the Court will deny Walker’s request that it dismiss the malicious-abuse-of-process counterclaim.

FACTUAL BACKGROUND

Walker was employed as a Business Office Manager (“BOM”) at THI of Hobbs, a nursing home in Hobbs, New Mexico, from August 2005 until January 2007. See, e.g., Amended Complaint ¶ 3, at 2, filed December 14, 2009 (Doc. 50); Fundamental Clinical Consulting, LLC’s Answer to Plaintiffs Amended Complaint ¶ 3, at 2, filed February 3, 2010 (Doc. 56). Walker, an African American, alleges that Defendants THI of Hobbs, Diana Melton, Jaime Andujo, Debbie Lothridge, Karen Hood (Miller), THI of New Mexico, FCC, and FAS unlawfully subjected her to numerous acts of racial discrimination, and terminated her employment with THI of Hobbs because of her race. See Amended Complaint ¶ 1, at 1. Additional background on the case is set forth in the Court’s Memorandum Opinion and Order deciding Walker’s first motion to compel discovery. See Walker v. THI of New Mexico at Hobbs Ctr., No. CIV 09-0060 JB/RLP, 2010 WL 552661, at * 1-4 (D.N.M. Feb. 8, 2010) (Browning, J.).

PROCEDURAL BACKGROUND

Walker filed this case on January 22, 2009. See Complaint, filed January 22, 2009 (Doc. 1). The Complaint originally named THI of Hobbs and three Doe Corporations as Defendants. See Complaint ¶¶ 4-5, at 2. On December 14, 2009, Walker filed an Amended Complaint adding Melton, Andujo, Lothridge, Hood, THI of New Mexico, FCC, and FAS. See Amended Complaint, filed December 14, 2009 (Doc. 50)(“FAC”). On November 15, 2010, Walker filed a Second Amended Complaint, adding THI of Baltimore, Inc., and Fundamental Long Term Care Holdings, LLC. See Doc. 142 (“SAC”).

On December 10, 2010, the Counter-claimants filed Addendum to Answers, Stating Counterclaim for Malicious Abuse of Process and Punitive Damages in Response to Second Amended Complaint. See Doc. 161 (“Addendum and Counterclaim”). The Counterclaimants contend that Walker “directly and/or indirectly, through her authorized agents, filed claims without probable cause and engaged in acts in the use of process other than such as would be proper in the regular prosecution of the claim.” Addendum and Counterclaim ¶ 1, at 2. The Counterclaimants allege that, after THI of Hobbs terminated Walker, she filed an Equal Employment Opportunity Commission (“EEOC”)/New Mexico Human Rights Division Charge of Discrimination in which she alleged a belief that she was discharged on the basis of race, because while she was told that the basis for her termination was poor performance, she had never before been disciplined. The Counterclaimants allege that Walker never alleged that she was subjected to racial comments or slurs during her employment at THI of Hobbs. The Counterclaimants allege that Daniel Yohalem, Walker’s attorney, obtained a copy of the EEOC’s file in December 2008, before Walker filed her Complaint in January 2009 and that, in her Complaint, Walker for the first time alleged that she was subjected to racial slurs. The Counter-claimants allege that Walker filed a Motion to File Second Amended Complaint on August 2, 2010, and attached a proposed Second Amended “ Complaint (“proposed SAC”). The Counterclaimants allege that, in the proposed SAC, Walker made incorrect representations of fact and law. The Counterclaimants allege that, upon information and belief, they will likely have evidentiary support to show Walker made the allegations without having evidentiary support or conducting a reasonable investigation to determine whether good grounds existed. The Counterelaimants alleged that they suffered damages in the form of attorneys’ fees and costs, and that they are entitled to punitive damages.

On January 18, 2011, Walker filed the Plaintiffs Motion to Dismiss Defendants’ Counterclaim and. Memorandum in Support. See Doc. 174. Walker moves the Court to dismiss the Defendants’ counterclaim for malicious abuse of process and punitive damages. Walker sets forth a procedural history of the case, which includes her bases for filing the initial Complaint, the FAC, the proposed SAC, and the SAC. Walker contends that the Counterclaimants fail to plead sufficient facts to support a malicious-abuse-of-process claim under a manifest lack of probable cause theory, because she had probable cause to file the original, FAC, and SAC as a matter of law. Walker also argues that the Counterclaimants fail to plead sufficient facts to support a malicious-abuse-of-process claim under the procedural impropriety theory of malicious abuse of process, because she did nothing irregular or improper. Walker also argues that the Counterclaimants fail to plead sufficient facts to support a malicious-abuse-of-process claim, because they lack standing to pursue such a claim based on allegations asserted in Walker’s proposed SAC. Walker argues that the Counterclaimants fail to plead any facts supporting a plausible claim that Walker’s primary motive was to achieve an illegitimate end.

On February 4, 2011, the Counterclaim-ants filed their Response to Plaintiffs Motion to Dismiss Defendants’ Counterclaim. See Doc. 189. The Counterclaimants argue that Walker’s motion improperly offers matters outside the Counterclaim and that, if the Court considers these matters, it should convert Walker’s motion to dismiss into a motion for summary judgment and grant the Counterclaimants an opportunity for discovery. The Counterclaim-ants also argue that their Counterclaim sufficiently pleads a malicious-abuse-of-process claim. They argue that the Court cannot, as a matter of law, find that Walker had probable cause to file each of her complaints. They also argue that, in their Addendum and Counterclaim, they sufficiently allege a procedural irregularity, or a misuse of procedural devices such as discovery, subpoenas, and attachments. They also argue that they sufficiently plead a primary motive in the use of process to accomplish an illegitimate end and damages.

On March 16, 2011, Walker filed the Plaintiffs Reply to Defendants’ Response to Motion to Dismiss Counterclaim. See Doc. 235. Walker argues that the Counterclaimants have pled insufficient facts to support a plausible malieious-abuse-of-process claim, and that the Court should not grant the Counterclaimants leave to amend their Addendum and Counterclaim, because, even with additional allegations, the Counterclaimants would fail to state a plausible claim. Walker also argues that the Counterclaimants’ Counterclaim is a permissive counterclaim which does not fall within the Court’s supplemental jurisdiction.

On May 5, 2011, the Counterclaimants filed the Defendants’ Surreply to Plaintiffs Motion to Dismiss Counterclaim (Doc. 174). See Doc. 288. The Counterclaim-ants argue that the Court has jurisdiction over the Counterclaim, because the Counterclaim is within the Court’s diversity jurisdiction, and because the Counterclaim is within the Court’s supplemental jurisdiction.

LEGAL STANDARD FOR MOTIONS TO DISMISS UNDER RULE 12(b)(1)

“Federal courts are courts of limited jurisdiction; they are empowered to hear only those cases authorized and defined in the Constitution which have been entrusted to them under a jurisdictional grant by Congress.” Henry v. Office of Thrift Supervision, 43 F.3d 507, 511 (10th Cir.1994) (citations omitted). A plaintiff generally bears the burden of demonstrating the court’s jurisdiction to hear his or her claims. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 104, 118 S.Ct. 1003, 140 L.Ed.2d 210 (1998) (“[T]he party invoking federal jurisdiction bears the burden of establishing its existence.”). Rule 12(b)(1) of the Federal Rules of Civil Procedure allows a party to raise the defense of the court’s “lack of jurisdiction over the subject matter” by motion. Fed. R. Civ. P. 12(b)(1). The United States Court of Appeals for the Tenth Circuit has held that motions to dismiss for lack of subject-matter jurisdiction “generally take one of two forms: (1) a facial attack on the sufficiency of the complaint’s allegations as to subject-matter jurisdiction; or (2) a challenge to the actual facts upon which subject-matter jurisdiction is based.” Ruiz v. McDonnell, 299 F.3d 1173, 1180 (10th Cir.2002).

On a facial attack, a plaintiff is afforded safeguards similar to those provided in opposing a rule 12(b)(6) motion: the court must consider the complaint’s allegations to be true. See Ruiz v. McDonnell, 299 F.3d at 1180; Williamson v. Tucker, 645 F.2d 404, 412 (5th Cir.1981). But when the attack is aimed at the jurisdictional facts themselves, a district court may not presume the truthfulness of those allegations. A court has wide discretion to allow affidavits, other documents, and a limited evidentiary hearing to resolve disputed jurisdictional facts under Rule 12(b)(1). In such instances, a court’s reference to evidence outside the pleadings does not convert the motion to a Rule 56 [summary-judgment] motion.

Alto Eldorado Partners v. City of Santa Fe, No. CIV 08-0175 JB/ACT, 2009 WL 1312856, at *8-9 (D.N.M. Mar. 11, 2009) (Browning, J.) (citations omitted). As the United States Court of Appeals for the Fifth Circuit has stated:

[T]he trial court may proceed as it never could under 12(b)(6) or Fed.R.Civ.P. 56. Because at issue in a factual 12(b)(1) motion is the trial court’s jurisdiction— its very power to hear the case — there is substantial authority that the trial court is free to weigh the evidence and satisfy itself as to the existence of its power to hear the case. In short, no presumptive truthfulness attaches to plaintiffs allegations, and the existence of disputed material facts will not preclude the trial court from evaluating for itself the merits of jurisdictional claims.

Williamson v. Tucker, 645 F.2d 404, 412-13 (5th Cir.1981) (quoting Mortensen v. First Fed. Sav. & Loan Ass’n, 549 F.2d 884, 891 (3d Cir.1977)).

When making a rule 12(b)(1) motion a party may go beyond the allegations in the complaint to challenge the facts upon which jurisdiction depends, and may do so by relying on affidavits or other evidence properly before the court. See New Mexicans for Bill Richardson v. Gonzales, 64 F.3d 1495, 1499 (10th Cir.1995); Holt v. United States, 46 F.3d 1000, 1003 (10th Cir.1995). In those instances, a court’s reference to evidence outside the pleadings does not necessarily convert the motion to a rule 56 motion for summary judgment. See Holt v. United States, 46 F.3d at 1003 (citing Wheeler v. Hurdman, 825 F.2d 257, 259 n. 5 (10th Cir.1987)). Where, however, the court determines that jurisdictional issues raised in rule 12(b)(1) motion are intertwined with the case’s merits, the court should resolve the motion under either rule 12(b)(6) or rule 56. See Franklin Sav. Corp. v. United States, 180 F.3d 1124, 1129 (10th Cir.1999); Tippett v. United States, 108 F.3d 1194, 1196 (10th Cir.1997). “When deciding whether jurisdiction is intertwined with the merits of a particular dispute, ‘the underlying issue is whether resolution of the jurisdictional question requires resolution of an aspect of the substantive claim.’ ” Davis ex rel. Davis v. United States, 343 F.3d 1282, 1296 (10th Cir.2003) (quoting Sizova v. Nat’l Inst. of Standards & Tech., 282 F.3d 1320, 1324 (10th Cir.2002)).

LAW REGARDING MOTIONS TO DISMISS UNDER RULE 12(b)(6)

Under rule 12(b)(6), a court may dismiss a complaint for “failure to state a claim upon which relief can be granted.” Fed. R.Civ.P. 12(b)(6). “The nature of a Rule 12(b)(6) motion tests the sufficiency of the allegations within the four corners of the complaint after taking those allegations as true.” Mobley v. McCormick, 40 F.3d 337, 340 (10th Cir.1994). The sufficiency of a complaint is a question of law, and when considering and addressing a rule 12(b)(6) motion, a court must accept as true all well-pleaded factual allegations in the complaint, view those allegations in the light most favorable to the non-moving party, and draw all reasonable inferences in the plaintiffs favor. See Moore v. Guthrie, 438 F.3d 1036, 1039 (10th Cir.2006); Hous. Auth. of Kaw Tribe v. City of Ponca City, 952 F.2d 1183, 1187 (10th Cir.1991).

A complaint challenged by a rule 12(b)(6) motion to dismiss does not require detailed factual allegations, but a plaintiffs obligation to set forth the grounds of his or her entitlement to relief “requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl. Corp. v. Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (internal citation omitted). “[T]he Supreme Court recently ... prescribed a new inquiry for us to use in reviewing a dismissal: whether the complaint contains ‘enough facts to state a claim to relief that is plausible on its face.’” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177 (10th Cir.2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 570, 127 S.Ct. 1955). “The [Supreme] Court explained that a plaintiff must ‘nudge his claims across the line from conceivable to plausible’ in order to survive a motion to dismiss.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d at 1177 (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 570, 127 S.Ct. 1955) (alterations omitted). “Thus, the mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.” Ridge at Red Hawk, L.L.C. v. Schneider, 493 F.3d at 1177. The Tenth Circuit has stated:

“[Plausibility” in this context must refer to the scope of the allegations in a complaint: if they are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs “have not nudged their claims across the line from conceivable to plausible.” The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief.

Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir.2008) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. at 570, 127 S.Ct. 1955) (internal citations omitted).

RELEVANT LAW REGARDING SUPPLEMENTAL JURISDICTION

It is a fundamental precept of American law that the federal courts are “courts of limited jurisdiction.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 552, 125 S.Ct. 2611, 162 L.Ed.2d 502 (2005). Federal courts “possess only that power authorized by [the] Constitution and statute.” Kokkonen v. Guardian Life Ins. Co. of Am., 511 U.S. 375, 377, 114 S.Ct. 1673, 128 L.Ed.2d 391 (1994). Among the powers that Congress has bestowed upon the courts is the power to hear controversies arising under federal law — federal question jurisdiction- — -and controversies arising between citizens of different states — diversity jurisdiction. See 28 U.S.C. §§ 1331 and 1332.

1. Supplemental Jurisdiction.

Although a statutory basis is necessary for federal courts to exercise jurisdiction over a controversy, “it is well established — in certain classes of cases— that, once a court has original jurisdiction over some claims in the action, it may exercise supplemental jurisdiction over additional claims that are part of the same case or controversy.” Exxon Mobil Corp. v. Allapattah Servs., Inc., 545 U.S. at 552, 125 S.Ct. 2611. The Supreme Court of the United States has long subscribed to the concept of supplemental jurisdiction recognized in two common-law doctrines — pendent and ancillary jurisdiction. Federal courts may exercise pendent jurisdiction over state-law claims when “state and federal claims ... derive from a common nucleus of operative fact.” United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966). Ancillary jurisdiction gives federal courts the flexibility to hear a cause of action even after the introduction of third parties whose insertion into the litigation is not supported by any independent grounds for federal jurisdiction, when those parties share a common interest in the outcome of the litigation and are logical participants in it. See Owen Equip. & Erection Co. v. Kroger, 437 U.S. 365, 375 n. 18, 98 S.Ct. 2396, 57 L.Ed.2d 274 (1978).

In 1988, Chief Justice William H. Rehnquist created the Federal Courts Study Committee to analyze the federal court system and to recommend reforms. See 16 Moore’s Federal Practice, § 106.04[5] (Matthew Bender 3d ed.). In response to the Committee’s findings regarding “pendent” and “ancillary” jurisdiction, Congress codified the application of the two doctrines when it passed the Judicial Improvements Act of 1990:

[I]n any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution. Such supplemental jurisdiction shall include claims that involve the joinder or intervention of additional parties.

28 U.S.C. § 1367(a). In enacting 28 U.S.C. § 1367, Congress conferred upon federal district courts “supplemental forms of jurisdiction ... [that] enable them to take full advantage of the rules on claim and party joinder to deal economically- — in single rather than multiple litigation — with matters arising from the same transaction or occurrence.” Report of the Federal Courts Study Committee, Part II.2.B.2.b. (April 2, 1990), reprinted in 22 Conn. L.Rev. 733, 787 (1990).

2. District Court Discretion.

The Tenth Circuit has followed the Supreme Court’s lead in classifying supplemental jurisdiction not as a litigant’s right, but as a matter of judicial discretion. See Estate of Harshman v. Jackson Hole Mountain Resort Corp., 379 F.3d 1161, 1165 (10th Cir.2004) (citing City of Chi. v. Int’l Coll. of Surgeons, 522 U.S. 156, 173, 118 S.Ct. 523, 139 L.Ed.2d 525 (1997)). In circumstances where the supplemental jurisdiction statute may support supplemental jurisdiction, the district court retains discretion to decline to exercise that jurisdiction. The traditional analysis, based on the Supreme Court’s opinion in United Mine Workers v. Gibbs, compelled courts to consider “judicial economy, convenience and fairness to litigants” when deciding whether to exercise supplemental jurisdiction. 383 U.S. at 726, 86 S.Ct. 1130. Similarly, Congress’ supplemental jurisdiction statute enumerates four factors that the court should consider:

(1) the claim raises a novel or complex issue of State law,

(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,

(3) the district court has dismissed all claims over which it has original jurisdiction, or

(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.

28 U.S.C. § 1367(c). In applying these factors, district courts should seek to exercise supplemental jurisdiction in an effort to “vindicate values of economy, convenience, fairness, and comity.” Estate of Harshman v. Jackson Hole Mountain Resort Corp., 379 F.3d at 1164.

Numerous courts have acknowledged that 28 U.S.C. § 1367(c) necessarily changed the district courts’ supplemental jurisdiction discretion analysis and that, unless one of the conditions of 28 U.S.C. § 1367(c) exists, courts are not free to decline jurisdiction. See Itar-Tass Russian News Agency v. Russian Kurier, Inc., 140 F.3d 442, 447 (2d Cir.1998) (“Section 1367 has indeed altered Gibbs’ discretionary analysis.”); McLaurin v. Prater, 30 F.3d 982, 985 (8th Cir.1994) (“The statute plainly allows the district court to reject jurisdiction over supplemental claims only in the four instances described therein.”); Executive Software N. Am. v. U.S. Dist. Court, 24 F.3d 1545, 1557 (9th Cir.1994) (“By codifying preexisting applications of Gibbs in subsections (c)(l)-(3), however, it is clear that Congress intended the exercise of discretion to be triggered by the court’s identification of a factual predicate that corresponds to one of the section 1367(c) categories.”); Palmer v. Hosp. Auth., 22 F.3d 1559, 1569 (11th Cir.1994) (“[Sjupplemental jurisdiction must be exercised in the absence of any of the four factors of section 1367(c).”). At least one other district court in the Tenth Circuit has reached the same conclusion. See Gudenkauf v. Stauffer Commc’ns, Inc., 896 F.Supp. 1082, 1084 (D.Kan.1995) (“[A]ny exercise of discretion declining jurisdiction over pendent claims or parties cannot occur until ‘triggered’ by the existence of one of the four conditions enumerated.”). This Court has stated that, “[i]n circumstances where the supplemental jurisdiction statute may support supplemental jurisdiction, the district court retains discretion to decline to exercise that jurisdiction.” Krumm v. Holder, No. CIV 08-1056, 2009 WL 1563381, at *14 (D.N.M. May 27, 2009) (Browning, J.) (citing Bonadeo v. Lujan, No. CIV-08-0812, 2009 WL 1324119, at *8 (D.N.M.2009) (Browning, J.)(citing Estate of Harshman v. Jackson Hole Mountain Resort Corp., 379 F.3d at 1165).)

RELEVANT LAW REGARDING COUNTERCLAIMS

Subject to restrictions that the Federal Rules of Civil Procedure and the limits of federal court jurisdiction impose, a defendant may bring a counterclaim in a pending action, and assert any and all claims that he has against the plaintiff. See Fed.R.Civ.P. 13. Under rule 13, counterclaims are categorized as either being “compulsory” or “permissive.” Fed. R.Civ.P. 13(a), (b). A compulsory counterclaim is one that “arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” Fed. R.Civ.P. 13(a). See Arch Mineral Corp. v. Lujan, 911 F.2d 408, 412 (10th Cir.1990). A compulsory counterclaim, as distinguished from a permissive counterclaim, must be pled or is barred. See Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1, 94 S.Ct. 2504, 41 L.Ed.2d 243 (1974); Zimmerman v. First Fed. Sav. & Loan Ass’n, 848 F.2d 1047, 1053 (10th Cir.1988).

“By and large, the courts have refrained from making any serious attempt to define the transaction-or-occurrence concept in a highly explicit fashion.” 6 C. Wright, A. Miller, M. Kane & R. Marcus, Fed. Prac. & Proc. Civ. § 1410, at 52 (3d ed.2010). “Most courts, rather than attempting to define the key terms of Rule 13(a) precisely, have preferred to suggest standards by which the compulsory or permissive nature of specific counterclaims can be determined.” 6 C. Wright, supra § 1410, at 52. The Tenth Circuit has taken this approach, stating that a counterclaim is compulsory if: (i) it involves the same issues of law and fact as the principal claim; (ii) res judicata would bar the defendant from bringing a subsequent suit on the same claim; (iii) it involves the same evidence as the principal claim; and (iv) there is a logical relationship between the principal claim and the counterclaim. See FDIC v. Hulsey, 22 F.3d 1472, 1487 (10th Cir.1994). In recognition of the principles of judicial economy that support rule 13, a number of courts, including the Tenth Circuit, give special weight to the “same evidence” and “claim preclusion” factors. Jones v. Ford Motor Credit Co., 358 F.3d 205, 209-10 (2d Cir.2004) (classifying counterclaim as permissive because the essential facts needed to prove the principal claim and the counterclaim were not so similar that combining the lawsuits would yield judicial efficiency); FDIC v. Hulsey, 22 F.3d at 1487 (finding counterclaims compulsory because res judicata would bar the defendant from bringing a subsequent claim arising out of the same creditor/debtor relationship and any evidence presented would necessarily encompass the parties’ entire relationship); Colonial Penn Life Ins. Co. v. Hallmark Ins. Adm’rs, Inc., 31 F.3d 445, 448 (7th Cir.1994) (describing the United States Court of Appeals for the Seventh Circuit’s test whether a counterclaim is compulsory as asking “little more than whether the plaintiffs claims would be barred by res judicata”); Painter v. Harvey, 863 F.2d 329, 332 (4th Cir.1988) (“Where, as here, the same evidence will support or refute both the claim and counterclaim, the counterclaim will almost always be compulsory.”).

Before Congress enacted 28 U.S.C. § 1367, courts found that compulsory counterclaims were within the court’s supplemental jurisdiction and does not require an independent basis of subject matter jurisdiction. See 28 U.S.C. § 1367(a); Unique Concepts, Inc. v. Manuel, 930 F.2d 573, 574 (7th Cir.1991) (“A federal court has supplemental jurisdiction over compulsory counterclaims.”); Naranjo v. County of Rio Arriba, 862 F.Supp. 328, 334 (D.N.M.1994) (Conway, J.).

Rule 13 also permits a party to raise as a counterclaim “any claim against an opposing party not arising out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” Fed. R.Civ.P. 13(b). The permissive counterclaim rule, therefore, allows the court to dispose of all the claims between the parties in one proceeding, irrespective whether the claims all arise from the same transaction or occurrence. See Baker v. Gold Seal Liquors, Inc., 417 U.S. at 469 n. 1, 94 S.Ct. 2504.

The Tenth Circuit has stated that, because permissive counterclaims do not arise from the same transaction or occurrence as the main claim, they generally do not fall within the court’s supplemental jurisdiction and thus require an independent basis for federal jurisdiction. See NLRB ex rel. Int’l Union of Elec., Radio, & Mach. Workers v. Dutch Boy, Inc., 606 F.2d 929, 932 (10th Cir.1979). “Since Congress enacted Section 1367 in 1990, [however,] the Tenth Circuit has not determined whether supplemental jurisdiction over counterclaims depends on the compulsory/permissive distinction.” Wilhelm v. TLC Lawn Care, Inc., No. CIV 07-2465-KHV, 2008 WL 640733, at *1 n. 1 (D.Kan. Mar. 6, 2008). See Crow v. Uintah Basin Elec. Telecomms., No. 2:09-CV-1010, 2010 WL 5069852, at *4 n. 30 (D.Utah Dec. 6, 2010) (recognizing that the Tenth Circuit has not yet adopted the approach in which courts determine supplemental jurisdiction over counterclaims on the basis of whether they are compulsory or permissive).

The United States Court of Appeals for the First Circuit has stated, as a matter of first impression:

28 U.S.C. § 1367, enacted in 1990, gives federal courts supplemental jurisdiction over both compulsory and at least some permissive counterclaims. This alters this circuit’s former rule, adopted before the enactment of § 1367, that required permissive counterclaims to have an independent basis for jurisdiction. See McCaffrey v. Rex Motor Transp., Inc., 672 F.2d 246, 248 (1st Cir.1982). Our ruling brings us into line with the Second and Seventh Circuits, as we describe below. Jones v. Ford Motor Credit Co., 358 F.3d 205, 210-14 (2d Cir.2004); Channell v. Citicorp Nat’l Servs., Inc., 89 F.3d 379, 384-87 (7th Cir.1996).

Global NAPs, Inc. v. Verizon New England Inc., 603 F.3d 71, 76 (1st Cir.2010). The First Circuit noted:

Some decisions before the enactment of § 1367 adopted a rule that federal courts could exercise supplemental jurisdiction over compulsory but not permissive counterclaims. E.g., McCaffrey [v. Rex Motor Transp., Inc.], 672 F.2d [246,] 248 [ (1st Cir.1982) ]; see also 6 [C. Wright, A. Miller & M. Kane, Federal Practice & Procedure ] § 1422, at 169-70 [ (1990) ]. Permissive counterclaims needed to have an independent federal jurisdictional basis. McCaffrey, 672 F.2d at 248; 6 Wright et al., supra § 1422, at 169-70.

This distinction arose from judge-made law of jurisdiction over what are now called supplemental claims — claims that lack an independent basis for federal jurisdiction — law which evolved in the absence of explicit congressional authorization. Put simply, courts distinguished jurisdiction over pendent claims — those brought by the plaintiff— and ancillary claims — those brought by other parties. Pendent claims had to arise from the same “common nucleus of operative fact” as the underlying claim having a basis for federal jurisdiction. United Mine Workers v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 ... (1966). Lower courts held that ancillary claims, such as counterclaims, had to arise from the same transaction or occurrence. See W.A. Fletcher, “Common Nucleus of Operative Fact ” and Defensive Set-Off: Beyond the Gibbs Test, 74 Ind. L.J. 171, 174-75 (1998); 13 Wright et al., Federal Practice and Procedure § 3523, at 176-77 (3d ed.2008). The Supreme Court never reconciled these lines of cases. See generally 13 Wright et al., supra § 3523, at 157-85 (tracing this history); W.C. Perdue, Finley v. United States: Unstringing Pendent Jurisdiction, 76 Va. L.Rev. 539, 541-51 (1990) (same).

Courts drew the line for ancillary jurisdiction at the transaetion-or-occurrence test for practical reasons. Some counterclaims needed to be raised to avoid preclusion in a later proceeding. Courts, hesitant to expand federal judicial power, limited supplemental jurisdiction to counterclaims which had to be raised or waived: that is, compulsory counterclaims arising out of the same transaction or occurrence as the underlying suit. See ... 13 Wright et al., supra § 3523, at 177.

In 1990 Congress enacted a supplemental jurisdiction statute, 18 U.S.C. § 1367. The statute does not use the terminology of “permissive” or “compulsory.” It gives federal courts supplemental jurisdiction over all claims that are part of the same Article III case or controversy....

By its plain text, then, § 1367(a) governs supplemental jurisdiction over counterclaims. See Exxon Mobile [Mobil] Corp. v. Allapattah Servs., Inc., 545 U.S. 546, 558-59, 125 S.Ct. 2611, 162 L.Ed.2d 502 ... (2005) (interpreting § 1367(a)’s plain text, which confers a “broad grant of supplemental jurisdiction”). We join two circuits and virtually all commentators in holding that Article Ill’s case-or-controversy standard is the jurisdictional limit for counterclaims. Jones, 358 F.3d at 212-13; Channell, 89 F.3d at 385; see also, e.g., C.D. Floyd, Three Faces of Supplemental Jurisdiction after the Demise of United Mine Workers v. Gibbs, 60 Fla. L.Rev. 277, 290 (2008).

In so doing, we hold that § 1367 supersedes case law on supplemental jurisdiction that had distinguished between compulsory and permissive counterclaims.

603 F.3d at 85-86 (footnotes omitted).

Other courts have reached the same conclusion. See Jones v. Ford Motor Credit Co., 358 F.3d at 207 (2d Cir.2004) (‘We conclude that supplemental jurisdiction authorized by 28 U.S.C. § 1367 may be available for the permissive counterclaims, .... ”); Martin v. Law Offices of John F. Edwards, 262 F.R.D. 534, 536-37 (S.D.Cal.2009) (“Permissive counterclaims require an independent basis for subject matter jurisdiction. When there is no independent basis for jurisdiction ..., the Court may still exercise supplemental jurisdiction over such claims if they are ‘so related to the claims in the action ... that they form part of the same case or controversy.’ ” (citations omitted)); Frisby v. Keith D. Weiner & Assocs. Co., 669 F.Supp.2d 863, 872 (N.D.Ohio 2009) (stating that “the Sixth Circuit, like the Seventh and Second, reads § 1367 as a ‘sweeping grant of supplemental jurisdiction,’” and holding “that a permissive counterclaim need not independently satisfy federal jurisdictional requirements^] [i]nstead, this Court may exercise supplemental jurisdiction over the counterclaim as long as the counterclaim is part of the same ‘case or controversy’ as the underlying claim”).

RELEVANT LAW REGARDING MALICIOUS-ABUSE-OF-PROCESS COUNTERCLAIMS

The authorities have split on the question whether an abuse-of-process counterclaim is a compulsory counterclaim in the action which is allegedly abusive. See Pochiro v. Prudential Ins. Co. of Am., 827 F.2d 1246, 1252 (9th Cir.1987).

Several courts have found that an abuse of process counterclaim is a compulsory counterclaim in the action which is allegedly abusive. See Carteret Sav. & Loan Ass’n v. Jackson, 812 F.2d 36, 38 (1st Cir.1987) (rejecting the defendants’ argument that, because they served no pleading — instead the court issued default judgment against them — rule 13(a) did not become applicable to find that the defendants’ claims against the plaintiff for negligence, fraud, abuse of process, and unfair-and-deceptive business practices should have been asserted as compulsory counterclaims pursuant to rule 13(a)); Podhorn v. Paragon Group, 795 F.2d 658, 659 (8th Cir.1986) (finding that a party’s claims for constructive eviction, breach of the warranty of habitability, breach of the covenant of quiet enjoyment, prima-facie tort, invasion of privacy, abuse of process, conversion of the security deposit, wrongful garnishment, and negligence were compulsory counterclaims, because Missouri intermediate appellate courts have determined that a defendant in an action in an associate circuit court must file a statement of a counterclaim); Great Lakes Rubber Corp. v. Herbert Cooper Co., 286 F.2d 631, 633-34 (3d Cir.1961) (finding that a party’s counterclaim was a compulsory counterclaim within the meaning of rule 13(a), because allegations that claims were unjustified, and brought in bad faith without color of right and with the sole object of harassing, entailed determination of many of the same facts and law relating to the underlying claim); Hampton v. Nustar Mgmt. Fin. Group, No. 2:05-CV-0824-BES-GWF, 2007 WL 119146, at *2 (D.Nev. Jan. 10, 1997) (citing Pochiro v. Prudential Insurance Co. of America, Inc., 827 F.2d 1246 (9th Cir.1987) in finding that an abuse-of-process claim is a compulsory counterclaim, because, although the merits of the substantive claim are not controlling on the question of abuse of process, they are necessarily significant in the assessment of a possible ulterior motive, and thus the similarity of the facts necessary for the determination of both actions reveals that Hampton’s substantive claims and Handy Cash’s abuse-of-process claim stem from the same basic controversy between the parties); Miami Herald Publ’g Co., a Division of Knight-Ridder Newspapers, Inc. v. Ferre, 636 F.Supp. 970, 972-73 (S.D.Fla.1985) (finding that a counterclaim for abuse of process, violation of right to privacy, malicious threats, interference with right to hold office, and malicious prosecution was a compulsory counterclaim under rule 13(a), because “the plaintiffs’ action arises out of defendant’s] ... alleged preparation and subsequent destruction of certain documents relating to the firing of the Miami City Manager and plaintiffs’ efforts to obtain access to those documents,” and the defendant’s “counterclaim asserts various causes of action arising from plaintiffs’ efforts to obtain access to the documents in question and their allegedly wrongful actions taken after they did not obtain the documents,” noting that “the fact that additional allegations must be proved in order for FERRE to recover on the counterclaim does not eliminate its compulsory nature,” and finding that the claims were essentially offshoots of the same controversy between the parties, and that therefore fairness and considerations of convenience and economy dictate that the court should exercise ancillary jurisdiction).

In Pochiro v. Prudential Insurance Co. of America, the United States Court of Appeals for the Ninth Circuit addressed whether an abuse-of-process claim could be considered a compulsory counterclaim. See 827 F.2d at 1252. In January 1983, Prudential Insurance Co. of America (“Prudential Insurance”) sued the Pochiros in Arizona state court, “pleading various causes of action based upon allegations that Pochiro appropriated for his own use confidential customer information obtained while Pochiro was an employee of Prudential (the Prudential action).” 827 F.2d at 1248. In December 1983, “the Pochiros sued Prudential in Arizona state court, pleading various causes of action based upon allegations that Prudential defamed John Pochiro by calling him ‘a crook’ and engaged in other wrongful conduct intended to damage his competing insurance business (the Pochiro action).” 827 F.2d at 1248. Prudential Insurance removed the Pochiro action to federal district court, and in 1985, the Arizona court entered a final judgment for Prudential Insurance in the Prudential action. See 827 F.2d at 1248. Several months later, the federal district court entered a final judgment dismissing the Pochiro action as a compulsory counterclaim to Prudential Insurance’s state court action. See 827 F.2d at 1248. The Pochiros appealed, arguing that the district court erred in dismissing the claims set out in their original complaint as compulsory counterclaims to the Prudential action. See 827 F.2d at 1248. The Ninth Circuit noted that, in the state court action, Prudential Insurance pled causes for breach of contract, unfair competition, and intentional interference with business relations. See 827 F.2d at 1250. The Pochiros asserted that their abuse-of-process claim could not be considered a compulsory counterclaim to the Prudential action. See 827 F.2d at 1252. The elements of an abuse-of-process claim in Arizona are an ulterior purpose and a wilful action in the use of process not in the regular conduct of the proceeding. See 827 F.2d at 1252. “Thus, a claim for abuse of process under Arizona law does not require that the prior dispute be resolved in favor of the abuse of process claimant, only that the opposing party has attempted to pervert the judicial process to an improper purpose.” 827 F.2d at 1252. The Ninth Circuit noted that an abuse-of-process claim in Arizona “may therefore be distinguished from a claim for malicious prosecution which does require a termination of the prior action favorable to the claimant.” 827 F.2d at 1252 n. 10.

In this case, to prove “abuse of process” arising out of the Prudential action, the Pochiros would have to demonstrate that Prudential had a wrongful purpose in pursuing its action. Certainly the presence of a legitimate justification for that action — suing to enjoin the Pochiros from unfairly competing with Prudential- — would greatly influence the determination of whether- Prudential’s purpose was wrongful. Thus, the similarity of the facts necessary for the determination of both actions reveals that Prudential’s substantive claims and the Pochiros’ abuse of process claim are “offshoots of the same basic controversy between the parties.” Great Lakes Rubber Corp. v. Herbert Cooper Co., 286 F.2d 631, 634 (3d Cir.1961).

We recognize that despite a similar overlap in most abuse of process cases, the courts have split on the question whether an abuse of process claim is a compulsory counterclaim in the very action which allegedly is abusive. Compare Carteret Savings & Loan Assoc. v. Jackson, 812 F.2d 36, 38-39 (1st Cir.1987) (compulsory counterclaim); Podhorn, 795 F.2d at 660-61 (same); Great Lakes Rubber Corp. v. Herbert Cooper Co., 286 F.2d at 633-34 (same); Miami Herald Publishing Co. v. Ferre, 636 F.Supp. 970, 972-73 (S.D.Fla.1985) (same); Linker [v. Custom-Bilt Machinery Inc.], 594 F.Supp. [894] at 899-900 [ (E.D.Pa.1984) ] (same); Hospital Bldg. Co. [v. Trustees of Rex Hosp.], 86 F.R.D. [694,] 697-700 [ (D.C.N.C.1980) ] (same), with Cochrane v. Iowa Beef Processors, Inc., 596 F.2d 254, 262-64 (8th Cir.) (not a compulsory counterclaim), cert. denied, 442 U.S. 921, 99 S.Ct. 2848, 61 L.Ed.2d 290 ... (1979); Anderson v. Central Point School Dist. No. 6, 554 F.Supp. 600, 604-05 (D.Or.1982) (same), aff'd in part, rev’d in part, 746 F.2d 505 (9th Cir.1984); North Carolina Electric Membership Corp. v. Carolina Power & Light Co., 85 F.R.D. 249, 251-54 (M.D.N.C.1979) (same); Bose Corp. v. Consumers Union of the United States, Inc., 384 F.Supp. 600, 603 (D.Mass.1974) (same). Because we believe that the liberal reading of the “transaction or occurrence” standard is more in keeping with the pronouncements of the Supreme Court, we now reject the line of cases that has refused to find an abuse of process claim a compulsory counterclaim.

As early as 1926, the Supreme Court admonished the courts that the “transaction or occurrence” standard was to be read broadly. Moore v. New York Cotton Exchange, 270 U.S. 593, 610, 46 S.Ct. 367, 70 L.Ed. 750 ... (1926) (discussing Equity Rule 30, from which Rule 13 was adapted). More recently, the Court reemphasized this point, stating, “Under Rule 13(a)’s predecessor this Court held that ‘transaction’ is a word of flexible meaning which may comprehend a series of occurrences if they have logical connection, Moore v. New York Cotton Exchange, 270 U.S. 593 [46 S.Ct. 367], and this is the rule generally followed by the lower courts in construing Rule 13(a), e.g., Great Lakes, supra; United Artists Corp. v. Masterpiece Productions, 221 F.2d 213, 216.” Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1, 94 S.Ct. 2504, 41 L.Ed.2d 243 ... (1974). We find instructive the two cases cited with approval by the Court for their liberal construction of Rule 13. Great Lakes raised the question whether an abuse of process claim and an unfair competition claim were logically related. The Third Circuit found the relationship “unquestionable.” Great Lakes, 286 F.2d at 634. Moreover, United Artists found various “harassing manuevers,” [sic] including the filing of the lawsuit, to be compulsory counterclaims to an action for alleged copyright infringement. 221 F.2d at 216. In light of the Supreme Court’s approval of these holdings, we must disagree with those courts which have found abuse of process claims to be unrelated to the underlying substantive claims. As mentioned above, even though the merits of the substantive claim are not controlling on the question of abuse of process, they are necessarily significant in the assessment of possible ulterior motive. We therefore hold that the Poehiros’ abuse of process claim is a compulsory counterclaim to the Prudential action.

827 F.2d at 1252-53.

In Hospital Building Co. v. Trustees of Rex Hospital, 86 F.R.D. 694, 696-97 (E.D.N.C.1980), the United States District Court for the Eastern District of North Carolina addressed whether a counterclaim for abuse of process and defamation was permissive, thus meaning that the court should dismiss it because it lacked an independent jurisdictional basis, or whether the counterclaim was compulsory, thus meaning that ancillary jurisdiction exists. See 86 F.R.D. at 695.

Bearing in mind these elements of the claim and counterclaim, we proceed now to the four tests set out in Sue & Sam. First are the issues of fact and law raised by the antitrust claim and counterclaim for abuse of process and defamation largely the same? On this question, the parties agree that there is a general dissimilarity in the ultimate legal issues raised by plaintiffs antitrust claims and the counterclaim for abuse of process and defamation. Nevertheless, it would appear that there are substantial issues which overlap. Thus, significant underlying facts for the claim and counterclaim involve the series of actions in connection with the petition for a certificate of need, the proceedings before the Medical Care Commission, and the filing of the State court appeal from the Commission’s decision. Moreover, should plaintiff be successful in its antitrust claim, this would in all likelihood be a defense to the counterclaim for defamation.

Instructive is Albright v. Gates, 362 F.2d 928 (9th Cir.1966). There plaintiff claimed that defendants had slandered it in uttering defamatory words about plaintiffs oil security selling operations. Defendants filed a counterclaim against plaintiff and against additional new parties for the price paid for alleged worthless oil rights or securities. The court held that the counterclaim was a compulsory one both as to plaintiff and the new parties on the ground that there was “sufficient identity or overlapping of the events of the factual background to put the whole together as a transaction.” 362 F.2d at 929. See also Sun Shipbuilding & Dry Dock Co. v. Virginia Electric & Power Co., 69 F.R.D. 395 (E.D.Pa.1975). Similar considerations are present here. Here substantial issues overlap in plaintiffs antitrust claim and Rex’s counterclaim for abuse of process. Further, the most significant ultimate issue of fact and law involved in plaintiffs antitrust claim is also a significant issue in Rex’s counterclaim for defamation.

86 F.R.D. at 697. The district court next considered whether res judicata would bar a subsequent suit on the counterclaim absent the compulsory counterclaim rule. See 86 F.R.D. at 697.

With respect to this test, a final determination of plaintiffs complaint for antitrust violations would materially resolve Rex’s counterclaim for defamation. The defense by Rex to plaintiffs claim of antitrust violations is that there were no such violations. Similarly, as a part of its counterclaim for defamation, Rex asserts that the allegations of the complaint are false. Plaintiff has necessarily responded to the counterclaim allegations by denying their truth. Thus, if plaintiff is successful on its antitrust claim, collateral estoppel, if not res judicata, would bar Rex, in a subsequent defamation action, from denying the truth of plaintiffs allegations of antitrust violations.

It is true that a final determination of plaintiffs antitrust suit would not be res judicata of Rex’s counterclaim for abuse of process. However, that claim for abuse of process is so intertwined with the claim for defamation as to make severance inappropriate. Among other things, both involve the question of malice and both involve proof of punitive damages. And on each of these two elements the facts and legal issues are identical.

86 F.R.D. at 697-98. The district court then addressed whether substantially the same evidence would support or refute the claim as well as the counterclaim. See 86 F.R.D. at 698.

Rex says that it intends to present evidence in defense of the action showing that it did not violate the antitrust laws and that plaintiff suffered no damages as the result of any conduct by Rex. In particular, Rex asserts that its evidence in defense of the alleged antitrust violations will also tend to show that there was lack of any credible evidence on which plaintiff could base its allegations and that plaintiff used frivolous allegations to further ulterior and improper purposes. Such evidence in defense of plaintiffs antitrust claim would of course have probative value on Rex’s counterclaim for abuse of process and defamation.

What is more, the jury considering the claim and counterclaim must necessarily learn about the various proceedings before the Medical Care (Commission; Rex’s appearance therein; allegations made in the complaint; plaintiffs evidence of antitrust violations and damages and Rex’s defenses; and the plaintiffs and Rex’s plans for and completion of construction of new hospital facilities. Thus it would appear that substantial evidence will be introduced that both supports the counterclaim for abuse of process and simultaneously refutes plaintiffs claim of antitrust violations and damages.

86 F.R.D. at 698. The district court then considered whether there was a logical relation between the antitrust claim and the counterclaim. See 86 F.R.D. at 698.

As noted above, there is substantial similarity between the evidence in Rex’s defense of the plaintiffs claim of antitrust violations and damages and the evidence Rex must present in the prosecution of its counterclaim. See, e.g., City of Cleveland v. Cleveland Electric Illuminating Co., 570 F.2d 123 (6th Cir.1978). This duplication in and of itself demonstrates the logical relationship of the complaint for antitrust violations and the counterclaim. As the Supreme Court noted in Moore, the fact that additional allegations must be proved for Rex to recover on the counterclaim does not eliminate their compulsory nature. Moore v. New York Cotton Exchange, supra, 270 U.S. at 610, 46 S.Ct. 367....

In fact, the Second Circuit has on several occasions held that counterclaims which are based on allegations that the subject complaint was one of a series of harassing maneuvers against the defendant counterclaimants are compulsory. Newburger, Loeb & Co. v. Gross, 563 F.2d 1057 (2d Cir.1977), cert. den. 434 U.S. 1035[, 98 S.Ct. 769, 54 L.Ed.2d 782] ... (1978); United Artists Corp. v. Masterpiece Productions, 221 F.2d 213 (2d Cir.1955). In Newburger, Loeb, the plaintiff corporation received the assignment of a claim by a client of a brokerage firm. This assigned claim was the subject of a complaint alleging that the defendant had churned an account of the assignors and caused substantial damages. The defendant alleged that the claim was taken by the predecessor in interest to the corporate plaintiff in bad faith and for the sole purpose of creating a colorable claim against defendant to induce defendant to accept other improper and unrelated demands. The court held that defendants’ counterclaims, based on the alleged bad faith conduct of plaintiffs in obtaining an assignment of and initiating the subject claim for the purpose of harassment and improper inducement, was compulsory. In United Artists Corp. v. Masterpiece Productions, supra, one of the main issues was whether a counterclaim alleging unfair trade practices and conspiratorial activities by plaintiff and additional defendants was compulsory. The Second Circuit held that the counterclaims were compulsory where one of the elements of the counterclaim was an allegation that the plaintiffs original action for copyright infringement and unfair trade practices was one of a series of harassing maneuvers by plaintiff designed to interfere with defendants’ exploitation of rights acquired on the advice of the additional defendants.

In this case there seems a similar nexus between the counterclaim and the complaint. Just as in Newburger, Loeb and United Artists, Rex’s evidence in defense of plaintiffs allegations of antitrust violations and resulting damages appears closely related to Rex’s counterclaim. Thus, the counterclaim alleges that plaintiffs complaint was an intimidating maneuver constituting tortious conduct against Rex. Hence it would appear that in the course of trying plaintiffs claim and Rex’s defenses thereto, the reasoning process of the jury will require it to substantially determine Rex’s rights pursuant to its counterclaim. See City of Cleveland v. Cleveland Electric Illuminating Co., supra, 570 F.2d at 127.

In support of its motion for dismissal, plaintiff relies heavily on North Carolina Electric Membership Corp. v. Carolina Power & Light Co., 85 F.R.D. 249 (M.D.N.C.1979), affirmed per curiam 618 F.2d 102 (4th Cir. March 26, 1980) (unpublished) (hereafter NCEMC). There, plaintiffs brought an antitrust action alleging defendants and others conspired to and actually monopolized the power production market by, among other things, preventing plaintiffs from entering that market. Defendants denied the allegations of the complaint and Carolina Power & Light counterclaimed for abuse of process and tortious interference with its business relationships, both of which causes of action were grounded on North Carolina law. These counterclaims arose primarily out of two occurrences: an application filed in 1974 by plaintiff North Carolina Electric Membership Corp. to the Federal Power Commission to obtain the license for the Walters Hydroelectric Development and the institution by all plaintiffs of the instant antitrust suit. The court held that the counterclaims were permissive and not compulsory for the reasons that the issues of fact and law involved in the antitrust and State law claims were separate and distinct; success on the monopolization claim would not have barred a subsequent suit for the State law violations; the same evidence would not have supported or refuted the antitrust claim and counterclaim; and there was no logical relationship between them.

I believe, however, that the situation in NCEMC bears little resemblance to the situation here. For here in contrast to NCEMC there are substantial issues which overlap, including the series of actions in connection with the petition for a certificate of need, the proceedings before the Medical Care Commission, and the filing of the State court appeal from the Commission’s decision. Also, a final determination in favor of plaintiff would collaterally estop Rex from denying the truth of plaintiffs allegations of antitrust violations. Moreover, it would appear that substantial evidence will be introduced that both supports the counterclaim for abuse of process and simultaneously refutes plaintiffs claim of antitrust violations. And finally there is a logical relation between the counterclaim and the complaint. In sum, unlike the counterclaim in the present case, the counterclaim in NCEMC seems far removed in time and circumstance from the transaction or occurrence that is the subject matter of the allegations of the plaintiffs complaint.

Also distinguishable is Harris v. Steinem, 571 F.2d 119 (2d Cir.1978). In that case, plaintiff sued defendants for securities law violations arising out of the repurchasing of plaintiffs stock in a magazine. Defendants counterclaimed for libel which consisted of the filing of a lawsuit and the making of several public statements regarding the lawsuit which referred solely to the allegations contained in the complaint which was a matter of public record. The court held that while plaintiffs success on the main claim would probably have defeated the counterclaim, various essential issues involved in the claim and counterclaim were so different that the logical relationship between them was at best attenuated. Additionally, the court was of the view that the case fell within the well established narrow line of decisions holding that counterclaims which are based solely on the filing of the main complaint and allegedly libelous publication théreafter are not compulsory. In this connection, the court added that “postponement of suits that will ordinarily not arise if plaintiff wins the main action and avoidance of the ‘dangerous potentialities of counterclaims (in the nature of) malicious prosecutions as a defensive stratagem’ are strong policy reasons supporting that line of cases.” 571 F.2d at 125.

It is apparent against this background that the counterclaim here is quite different from the counterclaim involved in the Harris v. Steinem line of cases. In the first place, a significant portion of the present counterclaim involves alleged abuse of process and on this score is similar to Newburger, Loeb & Co. v. Gross, supra, 563 F.2d 1057, and United Artists Corp. v. Masterpiece Productions, supra, 221 F.2d 213. Second, although as in Harris v. Steinem the other portion of the present counterclaim involves defamation based on publication of the allegations of the complaint, that claim seems to intertwined with the claim for abuse of process that a separate trial for each would involve a needless duplication of judicial effort.

Lastly, plaintiff relies on National Bowl-O-Mat Corp. v. Brunswick Corp., 264 F.Supp. 221 (D.N.J.1967), an antitrust action in which the defendant counterclaimed for defamation, alleging that plaintiff had widely publicized its litigation allegations that defendant violated the antitrust laws. The trial judge dismissed the counterclaim for failure to state a cause of action for defamation under State law. Given that circumstance, the court commented that “(t)here is no need here to determine whether this is a compulsory or permissive counterclaim or whether this Counterclaim ‘arises out of the transaction’ which is the subject matter of this litigation.” 264 F.Supp. at 225. Thus that case is irrelevant to any issue here.

86 F.R.D. at 698-700 (footnote omitted). The district court thus denied the plaintiffs motion to dismiss the counterclaim for lack of subject-matter jurisdiction. See 86 F.R.D. at 700.

Other courts have found that an abuse-of-process counterclaim is not a compulsory counterclaim in the action which is allegedly abusive. See Anderson v. Central Point Sch. Dist. No. 6, 554 F.Supp. 600, 604-05 (D.Or.1982), rejected by Pochiro v. Prudential Ins. Co. of Am., 827 F.2d 1246 (9th Cir.1987) (finding that an abuse-of-process counterclaim was permissive rather than compulsory, because the abuse-of-process claim was not logically related to the first-amendment claim, and stating “Anderson’s claim is that he was disciplined for exercising his first amendment rights; Groshong’s abuse of process claim is that Anderson’s present action is not for the legitimate purpose of recovering damages, but for the collateral purpose of coercing the district into accepting a proposed collective bargaining agreement,” and finding that the “two claims require different proof and have different factual bases”); Bose Corp. v. Consumers Union of U.S., Inc., 384 F.Supp. 600, 601-02 (D.Mass.1974) (finding that the counterclaim for malicious abuse of process was permissive, because the issues of fact and the issues of law raised by the claims and the counterclaims were significantly dissimilar, judgment on the plaintiffs claims would not operate as res judicata in a suit for malicious abuse of process, because the logical relation standard was too vague to be satisfactorily applied as the claims and counterclaim was too dissimilar, and because the alleged malicious abuse of process constituted no part of the transaction or occurrence of which the plaintiff claimed).

In Cochrane v. Iowa Beef Processors, Inc., 596 F.2d 254 (8th Cir.1979), the United States Court of Appeals for the Eighth Circuit addressed whether the appellants’ claims were compulsory counterclaims. See 596 F.2d at 262. The Eighth Circuit noted that the central theme of the appellants’ complaint was abuse of legal process and stated that “[i]n no substantial sense can appellants’ claims for relief for abuse of pr