Raymond James & Associates, Inc. v. 50 North Front St. TN, LLC

IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TENNESSEE

WESTERN DIVISION

RAYMOND JAMES & ASSOCS., INC., )

)

Plaintiff/Counter-Defendant, )

)

v. ) Case No. 2:18-cv-02104-JTF-tmp

)

50 NORTH FRONT ST. TN, LLC, )

)

Defendant/Counter-Plaintiff. )

ORDER ADOPTING REPORT AND RECOMMENDATION, DENYING PLAINTIFF’S

MOTION TO DISMISS COUNTER-COMPLAINT, AND DENYING AS MOOT

DEFENDANT’S MOTION FOR LEAVE TO FILE COUNTERCLAIMS

Plaintiff/Counter-Defendant Raymond James & Associates, Inc.’s (“RJA”) initial Complaint

was removed to federal court on February 16, 2018. (ECF No. 1.) Defendant/Counter-Plaintiff 50

North Front St. TN, LLC (“Landlord” or “50 North”) filed an Answer on February 26, 2018 but

did not assert counterclaims at that time. (ECF No. 10.) RJA later filed a First Amended Complaint

(“complaint” or “FAC”) on May 29, 2018. (ECF No. 41-1.) Landlord submitted a sealed Answer

and Counter-Complaint on December 19, 2019. (ECF No. 286.) RJA filed a Motion to Dismiss

Landlord’s Counter-Complaint for failure to state a claim under Fed. R. Civ. P. 12(b)(6); the

Motion was filed on January 9, 2020. (ECF No. 290.) Landlord’s response in opposition was filed

on February 4, 2020 (ECF No. 296), which RJA met by reply on February 18, 2020 (ECF No.

299). The Court referred the Motion to Chief Magistrate Judge Pham for report and

recommendation, pursuant to 28 U.S.C. § 636. (ECF No. 293.) Judge Pham entered a Report and

Recommendation (“R. & R.”) on June 23, 2020, advising the Court to deny RJA’s Motion to

Dismiss in its entirety. (ECF No. 329.) RJA filed objections to the R. & R. (ECF No. 330),

Landlord filed a response to those objections (ECF No. 332), and RJA subsequently filed a reply

(ECF No. 340).

For the following reasons, the R. & R. should be ADOPTED and RJA’s Motion to Dismiss

DENIED.

FINDINGS OF FACT

In his R. & R., the Chief Magistrate Judge provides, and this Court adopts and incorporates,

proposed findings of fact in this case. (ECF No. 329, 1-4.)

LEGAL STANDARD

Congress passed 28 U.S.C. § 636(b) “to relieve some of the burden on the federal courts by

permitting the assignment of certain district court duties to magistrates.” United States v. Curtis,

237 F.3d 598, 602 (6th Cir. 2001). Pursuant to the provision, magistrate judges may hear and

determine any pretrial matter pending before the Court, except various dispositive motions. 28

U.S.C. § 636(b)(1)(A). Regarding those excepted dispositive motions, magistrate judges may still

hear and submit to the district court proposed findings of fact and recommendations for disposition.

28 U.S.C. § 636(b)(1)(B). Upon hearing a pending matter, “the magistrate judge must enter a

recommended disposition, including, if appropriate, proposed findings of fact.” Fed. R. Civ. P.

72(b)(1); see also Baker v. Peterson, 67 F. App’x 308, 310 (6th Cir. 2003). Any party who

disagrees with a magistrate’s proposed findings and recommendation may file written objections

to the report and recommendation. Fed. R. Civ. P. 72(b)(2).

The standard of review that is applied by the district court depends on the nature of the matter

considered by the magistrate judge. See Baker, 67 F. App’x at 310 (citations omitted) (“A district

court normally applies a ‘clearly erroneous or contrary to law’ standard of review for

nondispositive preliminary measures. A district court must review dispositive motions under the

de novo standard.”). Upon review of the evidence, the district court may accept, reject, or modify

the proposed findings or recommendations of the magistrate judge. Brown v. Bd. of Educ., 47 F.

Supp. 3d 665, 674 (W.D. Tenn. 2014); see also 28 U.S.C. § 636(b)(1). The court “may also receive

further evidence or recommit the matter to the [m]agistrate [j]udge with instructions.” Moses v.

Gardner, No. 2:14-cv-2706-SHL-dkv, 2015 U.S. Dist. LEXIS 29701, at *3 (W.D. Tenn. Mar. 11,

2015). A district judge should adopt the findings and rulings of the magistrate judge to which no

specific objection is filed. Brown, 47 F. Supp. 3d at 674.

ANALYSIS

Before assessing the merits of RJA’s Motion, the R. & R. first considered whether the parties

have properly established federal jurisdiction for their claims. (ECF No. 329, 5.) After ordering

and receiving additional briefs from the parties on the question of subject matter jurisdiction (ECF

Nos. 305; 312; and 314), the R. & R. found that diversity of citizenship has been satisfied. (ECF

No. 329, 5-7) (citing 28 U.S.C. § 1331). The Court agrees and, in the absence of any objections,

adopts the R. & R.’s determination that it has subject matter jurisdiction over this case.

RJA raises three primary arguments for why Landlord’s Counter-Complaint fails to state a

claim upon which relief can be granted and objects to the R. & R.’s finding on each. (ECF No.

290.)

1. Waiver

RJA argues that the counterclaims are compulsory and therefore, by failing to raise any in its

initial February 2018 Answer, Landlord waived the counterclaims and cannot now assert them in

its second Answer. (ECF No. 290, 9.) Landlord does not contest the compulsory nature of its

counterclaims but argues that they should not be dismissed because they were filed as a matter of

right following RJA’s First Amended Complaint. (ECF No. 296, 20.) In response to RJA’s Motion

to Dismiss and “out of an abundance of caution,” Landlord sought leave to file its counterclaims.

(ECF No. 297). RJA argues that this motion for leave should not affect the Court’s dismissal of

the counterclaims because they were waived by Landlord. (ECF No. 299.)

The R. &. R. summarized this waiver issue as a simple procedural question: “may a party assert

new counterclaims as a matter of right when answering an amended complaint?” (ECF No. 329,

7.) The parties answer this question differently, but do not object to the Chief Magistrate Judge’s

summary of the issue. Following its analysis of six competing perspectives, none of which have

been provided by the Sixth Circuit, the R & R. applied an approach that has twice been adopted in

the Western District of Tennessee and upheld by other circuits. (ECF No. 329, 8-10) (citing Tralon

Corp. v. Cedarapids, Inc., 966 F. Supp. 812, 832 (N.D. Iowa 1997), aff’d on other grounds, 205

F.3d 1347 (8th Cir. 2000); Krinsk v. SunTrust Banks, Inc., 654 F.3d 1194, 1202 (11th Cir. 2011)).

Under the “Tralon approach,” a party is permitted to assert new counterclaims, without seeking

leave to do so, if an amended complaint is filed which changes the factual allegations or scope of

the case. Tralon Corp., 966 F. Supp. at 831. The counterclaims asserted need not relate to the

changes made to the amended complaint; the defendant is “entitled to a fresh-start” in answering

the amended complaint if plaintiff majorly amends its pleadings. See Id. at 832. (“[I]t would be

inequitable to entertain the [p]laintiffs’ [s]econd [a]mended [c]omplaint without permitting [the

defendant] to completely plead anew.”). The R. & R. emphasized the inherent fairness of the

Tralon approach and discussed its past application in the Western District of Tennessee. (ECF No

329, 9-10) (citing Avery Outdoors LLC v. Peak Rock Capital, LLC, No. 16-CV-2229-SHL-tmp,

2017 WL 5177646, at *2 (W.D. Tenn. Apr. 26, 2017) and Barry Fiala, Inc. v. Stored Value Sys.,

Inc., No. 02-2248 MAA, 2006 WL 2578893, at *2 (W.D. Tenn. Sept. 1, 2006)).

Following these cases and adopting the described approach, the R. & R. found that RJA’s First

Amended Complaint “changed the theory or scope of the case.” (Id. at 10.) In making this

determination, the R. & R. relied on RJA’s own explanation that the amended complaint: “a) makes

additional allegations regarding Defendant’s knowledge of the problems facing the subject

elevator system . . . ; b) includes additional breaches of the Lease by Defendant beyond the ones

previously alleged; and c) expands the remedies and relief sought.” (Id.) (quoting RJA’s Motion

for Leave to File First Amended Complaint (ECF No. 41-2, 2)). Given the scope of the changes

made in RJA’s First Amended Complaint, the R. & R. found that Landlord “was entitled to file its

counterclaims as a matter of right.” (Id. at 11.)

RJA objects, arguing that the R. & R. erred by adopting the wrong approach. (ECF No. 330,

15.) RJA warns that the view taken by the R. & R., and at least two other judges in this district,

“may lead to sandbagging,” permitting a party to “sit on its compulsory counterclaims for an

unduly long period” before filing, as Landlord did here. (Id. at 16.) To RJA, this approach fails to

give proper effect to the compulsory nature of counterclaims, i.e., the compulsory counterclaims

rule is rendered “largely toothless if any later amendment to a complaint will excuse waiver . . .”

(Id.) (emphasis in original). The Court agrees that indiscriminately authorizing all counterclaims

filed after any amended complaint would render the compulsory counterclaim rule ineffective, but

that is not the approach advocated by the R. & R. Far from allowing “any” amended pleading to

serve as a gateway for the filing of compulsory counterclaims, the approach adopted by the R. &

R. permits a party to file compulsory counterclaims without leave of court only if the amended

complaint changes the scope or theory of the case. Avery Outdoors LLC, 2017 WL 5177646, at

*2.

RJA asserts that a better approach is to allow a party to file compulsory counterclaims for the

first time in response to an amended complaint only if the counterclaims themselves “reflect the

breadth of changes in the amended complaint.” (ECF No. 330, 16) (quoting Elite Entm’t, Inc. v.

Khela Bros. Entm’t, 227 F.R.D. 444, 446 (E.D. Va. 2005)). Applying this approach, RJA argues

that Landlord’s counterclaims should be dismissed because they fully respond to the allegations

found in the initial Complaint and do not reflect the breadth of changes made by the First Amended

Complaint. (Id.) The R. & R. already considered this more-narrow approach and weighed its

strengths and weaknesses against the view taken by the Tralon, Avery Outdoors LLC, and Barry

Fiala, Inc. courts. (ECF No. 329, 9-10.) While RJA’s suggested view offers some judicial

efficiency, the R. & R. found, and this Court agrees, that the Tralon approach maximizes fairness

and minimizes the risk of dismissals based on purely procedural grounds, which is consistent with

Federal Rule 15’s preference to resolve disputes on their merits. (Id. at 10); Krupski v. Costa

Crociere S. p. A., 560 U.S. 538, 550, 130 S. Ct. 2485, 2494 (2010).

In footnotes, RJA attempts to distinguish this case from Avery and Barry but the result is

unpersuasive. (ECF No. 330, 15-16.) The R. & R. relied on Avery and Barry, not because of factual

parallels, as RJA contends, but rather, as two examples of courts in the Western District of

Tennessee applying the Tralon approach to this issue of waiver. Decisions made by district courts

within the same district are not binding on one another.1 Chinn v. Jenkins, No. 3:02-CV-512, 2018

WL 488159, at *2 (S.D. Ohio Jan. 19, 2018) (citing United States v. Article of Drugs Consisting

of 203 Paper Bags, 818 F.2d 569, 572 (7th Cir. 1987). Nonetheless, the R. & R. properly weighed

1 “Judges of the same district court customarily follow a previous decision of a brother judge upon the same question

except in unusual or exceptional circumstances . . . but ‘there is no such thing as “the law of the district.”’” Reuss v.

First Fin. Collection Co., No. 1:08-CV-697, 2009 WL 4828600, at *3 (S.D. Ohio Dec. 11, 2009) (quoting Buna v.

Pacific Far East Line, Inc., 441 F.Supp. 1360, 1365 (N.D.Cal.1977); Threadgill v. Armstrong World Indus., Inc., 928

F.2d 1336, 1371 (3rd Cir.1991)).

the persuasive effect of these decisions and adopted the same approach to the issue after conducting

a thorough and independent analysis. See Threadgill, 928 F.2d at 1371 (3d Cir. 1991) (“Where a

second judge believes that a different result may obtain, independent analysis is appropriate.”).

Although RJA disagrees with the R. & R.’s conclusion on the issue of waiver, it fails to point out

any error in the Chief Magistrate Judge’s decision. The Court adopts the R. & R.’s determination

that Landlord was entitled to file its counterclaims as a matter of right. Having reached that

conclusion, the Court finds that Landlord’s Motion for Leave to File Counterclaims (ECF No. 297)

should be denied as moot.

2. Statute of Limitations

RJA argues that Landlord’s counterclaims should be dismissed as time-barred under

Tennessee’s three-year statute of limitations because the gravamen of the Counter-Complaint is

fraud and Tenn. Code Ann. § 28-3-105 imposes a three-year statute of limitations on fraud claims.

(ECF No. 290-1, 8.) Central to this argument is RJA’s assertion that the statute of limitations for

the counterclaims began running on January 13, 2015, the day RJA signed the Estoppel Certificate.

(Id. at 9.) As a result, RJA contends that Landlord’s Counter-Complaint, which was filed on

December 19, 2019, violated the statute of limitations and should be dismissed as untimely. (Id.)

Landlord concedes that four of its counterclaims are fraud related and subject to the state’s three-

year statute of limitations, but disagrees with RJA’s accrual date analysis, arguing instead that the

statute of limitations, at the earliest, did not begin to run until May 5, 2017 when RJA sent Landlord

its first Notice of Default letter. (ECF No. 296, 10.) Landlord asserts that its other two

counterclaims were timely because they are subject to longer statutes of limitations: the breach of

contract counterclaim, subject to a six-year statute of limitations, pursuant to Tenn. Code Ann. §

28-3-109(a)(3); and the declaratory judgment counterclaim, subject to a ten-year statute of

limitations, pursuant to Tenn. Code Ann. § 28-3-110. (ECF No. 296, 6-7.) Without making any

determination on the applicable statute of limitations for each counterclaim, the R. &. R. turned

first to the issue of accrual and found that even if a three-year statute of limitations were to be

applied under Tenn. Code Ann. § 28-3-105, none of the counterclaims would be time-barred. (ECF

No. 329, 12.) The Court agrees.

Generally, a motion seeking dismissal under Fed. R. Civ. P. 12(b)(6) “is [] an inappropriate

vehicle for dismissing a claim based upon the statute of limitations” unless the allegations in the

complaint “affirmatively show that the claim is time-barred.” Cataldo v. U.S. Steel Corp., 676 F.3d

542, 547 (6th Cir. 2012). See Jones v. Bock, 549 U.S. 199, 215, 127 S. Ct. 910, 920–21 (2007) (“If

the allegations . . . show that relief is barred by the applicable statute of limitations, the complaint

is subject to dismissal for failure to state a claim[.]”). The parties agree that under Tennessee law,

the clock starts on this three-year statute of limitations, or in other words the claim accrues, when

the plaintiff discovers or should have discovered his injury through the exercise of reasonable

diligence. (ECF Nos. 296, 13 & 330, 12); Chunn v. Se. Logistics, Inc., 794 F. App’x 475, 477 (6th

Cir. 2019) (applying the three-year statute of limitations from Tenn. Code Ann. § 28-3-105 to civil

claims of fraud) (citing Redwing v. Catholic Bishop for Diocese of Memphis, 363 S.W.3d 436,

458-59 (Tenn. 2012)). Stated differently, the discovery rule, as it is called, provides that “a cause

of action accrues and the statute of limitations begins to run not only when the plaintiff has actual

knowledge of a claim, but also when the plaintiff has actual knowledge of ‘facts sufficient to put

a reasonable person on notice that he [or she] has suffered an injury as a result of wrongful

conduct.’” Redwing, 363 S.W.3d at 459 (citation omitted).

Determining the accrual date of Landlord’s counterclaims is a two-step process. First, the

Court must determine, based on the allegations in the Counter-Complaint, what injury Landlord

claims to have incurred and second, when the injury was discovered, or should have been

discovered, through reasonable diligence. Chunn, 794 F. App’x at 477.

The R. & R. found that Landlord’s alleged injury is that RJA, by signing the Estoppel

Certificate, promised there was no breach of the lease on January 13, 2015, but then sued Landlord

for breach based on conditions that existed when the Estoppel Certificate was signed. (ECF No.

329, 13.) Thus, according to the R. & R., the statute of limitations began running “when 50 North

was aware that Raymond James believed the conditions of the building were a breach of the lease,”

a fact that could not have been discovered until May 5, 2017 when RJA sent its first Notice of

Default letter. (Id.) Under this interpretation, the counterclaims could have been filed up until May

4, 2020 and still be within the three-year statute of limitations. By filing on December 19, 2019,

the counterclaims were timely. RJA raises three objections to this finding, which the Court will

address in turn.

A. The Basis of Landlord’s Alleged Injuries

RJA argues that Landlord’s purported injuries “stem from the execution of the Estoppel

Certificate in January 2015.” (ECF No. 330, 4.) For support, RJA quotes a “laundry list” of

allegations from the Counter-Complaint, pointing specifically to Landlord’s claim that it was

induced to purchase the Tower “in reliance on RJA’s misrepresentations” and sustained damages

as a result. (Id. at 6) (quoting ECF No. 286:79.) RJA is correct that Landlord references its purchase

of the building several times throughout the Counter-Complaint. See e.g. (ECF No. 286, 69:35)

(“RJA made various fraudulent misrepresentations in the Estoppel Certificate which Landlord

relied upon in deciding to purchase the Building.”); (Id. at 78:68) (“In the Estoppel Certificate,

RJA intentionally misrepresented facts . . . that were material to the transaction involving

Landlord’s purchase of the Building from Parkway.”). However, as the R. & R. found, Landlord’s

allegations describe damages caused by the actions RJA took following its execution of the

Estoppel Certificate, not damages caused by the execution itself or Landlord’s purchase of the

building. This subtle mischaracterization of the counterclaims pervades RJA’s Objections and

skews its arguments. A brief review of the Counter-Compliant is helpful here.

The Estoppel Certificate and the representations RJA made therein, are central to the

counterclaims, particularly sections 5, 7, and 11, as quoted in the Counter-Complaint. (ECF No.

286, 62:19-20.) Summarizing theses sections, Landlord alleges RJA “expressly represented that

Parkway was not in default and no event had occurred and no circumstances existed which, with

the passage of time or the giving of notice by RJA, or both, would constitute such a default.” (Id.

at 63:21) (quoting the Estoppel Certificate (ECF No. 332-1, 3:5.)) According to Landlord, RJA

also certified that the only obligations it was waiting for Parkway to satisfy, pertained to food

service and access control in the building, but said nothing “about Parkway being in default under

the Lease for failing to modernize the elevator system in the Building” or failing to address

problems related to water leakages and other building maintenance. (Id.) Further, RJA expressly

acknowledged in the Certificate that, as Buyer of the building and assignee of Parkway’s interest

in RJA’s ongoing lease, Landlord “shall be entitled to, rely on the representations in this Certificate

as being true and correct.” (Id. at 63:20) (quoting (ECF No. 332-1, 4:11.))

The linchpin of Landlord’s allegations, for purposes of identifying its purported injuries,

is that the conditions of the building, which RJA describes in its First Amended Complaint, “are

the same conditions that existed during Parkway’s ownership of the Building” and “RJA was fully

aware” of them when executing the Estoppel Certificate. (ECF No. 286, 65:28.) Describing the

implications of RJA’s actions, Landlord summarized its counterclaims and the nature of its alleged

damages as follows: “RJA committed fraud by failing to disclose and/or concealing Parkway’s

default and the capital improvement obligations that RJA is now claiming that Landlord has under

the Lease. As a direct and proximate cause of RJA’s fraud by silence and/or concealment, Landlord

has incurred substantial damages as referenced below.” (ECF No. 286, 79:77.) In the proceeding

section on damages, Landlord claims that the injuries it incurred are the “result of the conduct

complained of above.” (ECF No. 286, 80:79.)

The Court finds, based its plain reading of the Counter-Complaint, that the damages

Landlord claims do not stem from RJA’s execution of the Estoppel Certificate. Rather, the Court

adopts the R. & R.’s determination that Landlord’s purported injuries were caused by RJA suing

Landlord for failing to cure deficiencies it had certified did not exist.

B. Declarations of Building Employees and Landlord’s Knowledge

Next, RJA urges the Court to reject the Chief Magistrate Judge’s conclusion that the

counterclaims were timely because the R. & R. failed to consider the “claim-dispositive”

declarations of Keith Jackson and Audrey Davis, who were employed by Parkway and then

Landlord prior to and following Landlord’s purchase of the building. (ECF Nos. 330, 7 & 340.)

According to these declarations, which Landlord relied upon in its Counter-Complaint, Jackson

and Davis knew about “ongoing issues with [the building’s] elevators and water infiltration.” (ECF

No. 330, 9.) Particularly significant to RJA is Mr. Jackson’s declaration that he was in “constant

contact with Raymond James” in 2013 and 2014 regarding these ongoing issues with the building.

(Id.) RJA asserts that Jackson and Davis’ knowledge was imputed to Landlord, and thus, Landlord

was aware of the building’s issues in January 2015 before the Estoppel Certificate was executed

and the building was purchased. (Id. at 10.) To RJA, the imputation of Jackson and Davis’

knowledge means that Landlord “had at least constructive knowledge of various (alleged) issues

with the Tower’s condition” and thus, “necessarily” knew the Estoppel Certificate contained

misrepresentations and omissions. (Id.) Because Landlord knew about the alleged

misrepresentations by January 2015 at the latest, RJA argues that is when Landlord’s

counterclaims began running. (Id.) As a result, the three-year statute of limitations had expired by

the time Landlord filed its counterclaims in December 2019. (Id. at 10-11.) Given their dispositive

effect, RJA contends that the R. & R. erred by failing to consider the employees’ declarations. (Id.

at 11.)

The Court disagrees and finds instead that the R. & R. addressed the very issue RJA raises

in its argument for why the declarations are “claim dispositive”—that is, the R. & R. considered

whether Landlord’s knowledge of the misrepresentations contained in the Estoppel Certificate

impacts the Court’s ruling on RJA’s Motion to Dismiss, and found that it does not. (ECF No. 329,

13-14.) Although the R. & R. did not analyze the declarations directly, it did consider RJA’s

argument that Landlord “was aware of the basis of its [counter]claims even before the estoppel

certificate was signed because its pre-purchase due diligence revealed problems with the

elevators.” (ECF No. 13.) It was during this pre-purchase phase, in the months leading up to and

including January 2015, that RJA asserts Landlord should have discovered—through Jackson and

Davis’ knowledge or otherwise—the building’s issues and subsequent misrepresentations in the

Certificate. However, as the R. & R. found, even if Landlord was aware that the Certificate

contained misrepresentations, such knowledge would have no effect on the statute of limitations

because, as discussed above, the counterclaims “are not about the actual condition of the building’s

elevators, but rather Raymond James’s opinions about whether the condition of those elevators

constituted breach of the lease.” (Id. at 14.) Ultimately, as the R. & R. points out, if RJA is able to

show that Landlord knew the Estoppel Certificate contained false representations at the time it was

executed, then Landlord’s fraud claims will fail on the merits, not because they were time-barred.

(Id.)

By focusing on the execution date, what conditions existed at the time of execution, and

what Landlord knew at that time about the building’s condition, RJA “improperly conflate[s] the

statute of limitations with the merits of the claim.” (Id. at 13) (quoting Peabody Coal Co. v. Dir.,

Office of Workers' Comp. Programs, U.S. Dep’t of Labor, 718 F.3d 590, 594 (6th Cir. 2013)). The

R. & R. addressed RJA’s underlying argument related to Landlord’s knowledge but did not directly

analyze the declarations because it was unnecessary to do so when evaluating the timeliness of the

counterclaims. RJA’s argument fails to disrupt the Court’s finding that the Counter-Complaint was

timely.

C. Date of Accrual

RJA objects to the R. & R.’s determination that the earliest Landlord could have reasonably

discovered the injuries it alleges in the Counter-Complaint was on May 5, 2017 when RJA sent its

first notice of default. (ECF No. 330, 11.) RJA argues that the R. & R. “overlooks the fact that

some of Landlord’s alleged injuries . . . occurred when the Estoppel Certificate was executed in

January 2015.” (ECF No. 330, 11.) To RJA, Landlord’s counterclaims were unduly delayed and

violate the three-year statute of limitations because they were reasonably discoverable and thus,

began to accrue in January 2015, but were not filed until almost four years later in December 2019.

(Id. at 12; 16.) RJA’s conclusion, however, relies on its previous arguments, which the Court has

rejected. This is where RJA’s mischaracterization of the Counter-Complaint comes full circle.

As discussed, identifying the accrual date requires the Court to determine what injury the

counterclaims allege, and when those injuries should have been discovered through reasonable

diligence. Chunn, 794 F. App’x at 477. Above, the Court found that Landlord’s alleged injuries

stem from RJA’s post-Certificate conduct—that is, RJA filing suit against Landlord for failing to

cure deficiencies under the lease that it certified did not exist. The statute of limitations, therefore,

began running when Landlord became aware that RJA might sue under the lease, having come to

believe that the conditions of the building constituted breach. As the R. & R. found, the earliest

date Landlord’s awareness of that fact can be inferred from the face of the Counter-Complaint is

May 5, 2017 when Landlord first received a notice from RJA accusing Landlord of being in

default. To arrive at a January 2015 accrual date requires the Court to reach an entirely different

conclusion about the nature of the counterclaims, which it declines to do for the reasons discussed

above. The Court adopts the R. & R.’s determination that Landlord’s counterclaims began to

accrue, at the earliest, on May 5, 2017 and thus, even if a three-year statute of limitations were

applied to each of the claims, as RJA contends, the entire Counter-Complaint was still timely filed

on December 19, 2019.

3. Procedural Issues Created by Accepting the Counterclaims as Filed

RJA argues, without authority, that the Court will create a “procedural swamp” if it allows the

counterclaims to go forward after dismissing its First Amended Complaint. (ECF No. 330, 16-17.)

As Landlord points out, this is a natural outcome of cross litigation that does not create any kind

of procedural anomaly for the Court to avoid. (ECF No. 332, 19.) Notwithstanding a jurisdictional

challenge, which RJA does not raise, the fact that the First Amended Complaint has been dismissed

and RJA is now facing these counterclaims has no effect on the Court’s decision here. See Barefoot

Architect, Inc. v. Bunge, 632 F.3d 822, 835 (3d Cir. 2011) (“[T]he dismissal of the complaint ‘will

not preclude adjudication of a counterclaim over which the court has an independent basis of

jurisdiction.’”) (citation omitted).

CONCLUSION

Upon de novo review, the Court hereby ADOPTS the Chief Magistrate Judge’s Report and

Recommendation and DENIES RJA’s Motion to Dismiss Landlord’s counterclaims. Further,

Landlord’s Motion for Leave to File Counterclaims is DENIED as MOOT. (ECF No. 297). The

Court will consider RJA’s Motion for Leave to File a Second Amended Complaint (ECF No. 324)

in a separate order.

IT IS SO ORDERED this 13th day of November 2020.

s/John T. Fowlkes, Jr.

JOHN T. FOWLKES, JR.

United States District Judge