Currie Medical Specialties, Inc. v. Bowen

Opinion

BROWN (Gerald), P. J.

Currie Medical Specialties, Inc. sued Newell Bowen for breach of contract, fraud, negligent misrepresentation, intentional interference with prospective business advantage and unfair competition. Bowen’s motion for summary judgment based on Currie’s failure to comply with Code of Civil Procedure section 426.30 was granted. Currie appeals the judgment.

[776]

This is the second action between these parties. In 1979, Bowen sued Currie in the federal court for violating the Lanham Act (15 U.S.C. § 1051 et seq.) and unfair competition. Currie answered but made no counterclaim. Four months after Currie answered, the suit was dismissed with prejudice by stipulation of the parties.

The superior court found the claim made by Currie in the current action was a compulsory counterclaim in the earlier case and is barred by section 426.30.

Currie and Bowen sell labels to hospitals. In 1978, the parties orally contracted for Currie to stop selling its labels and become a distributor of Bowen’s labels. In this action, Currie alleges Bowen breached the agreement and was guilty of fraud in its formation. In the earlier federal action Bowen alleged Currie usurped Bowen’s customer lists, sales manuals and style of label while distributing for Bowen and then, after the contractual relationship was terminated, entered into unfair competition with Bowen.

The sole issue here is whether Currie’s claim based on termination of the contract was a compulsory counterclaim in the earlier action under section 426.30. That section reads: “Except as otherwise provided by statute, if a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.” This section, however, does not apply where: “Both the court in which the action is pending and any other court to which the action is transferrable pursuant to Section 396 are prohibited by the federal or state constitution or by a statute from entertaining the cause of action not pleaded.” (Code Civ. Proc., § 426.40.) The question becomes whether the federal district court had jurisdiction to hear Currie’s claim.