Win the Battle and Lose the War: Enforcing Summary Judgment in the Face of a Viable Counterclaim


How often does a defendant assert a counterclaim primarily – if not solely – in an attempt to fend off the plaintiff’s affirmative case?  Answer:  Certainly, often enough.  But just how effective is such a strategy when the plaintiff is awarded judgment on its claims?  Should enforcement of the judgment be stayed pending resolution of the defendant’s counterclaim?  Answer:  It depends.

In a decision that further defines the limits of the potential effect of a counterclaim in defending against a plaintiff’s motion for summary judgment, New York’s Appellate Division, Fourth Department, recently held that, although a trial court properly granted a plaintiff’s motions for summary judgment, the court erred in simultaneously granting the defendants’ cross-motion to stay enforcement of those judgments.  See Ayers v. Snyder Corp., 2015 WL 498721 (4th Dep’t Feb. 6, 2015).  The decision joins a body of case law that properly cautions defendants who contemplate asserting counterclaims as part of a procedural strategy to counter a plaintiff’s claims and/or anticipated dispositive motion.

In Ayers, the plaintiff brought motions for summary judgment in lieu of complaints pursuant to CPLR 3213, in consolidated actions, seeking to enforce two promissory notes that the defendants had issued to him.  Id. at *1.  In response, the defendants asserted counterclaims for breach of fiduciary duty and fraud.  After granting the plaintiff’s motions, the trial court also granted the defendants’ cross-motion to stay enforcement of the judgments, pending resolution of the counterclaims.  See id.  Plaintiff appealed.

In their counterclaim, the defendants asserted that, as an officer of a third party, the plaintiff had fraudulently concealed the fact that he had submitted forged documents to a governmental entity.  The Appellate Division observed that “[a]s plaintiff correctly contends . . . [the third party] is not a party to this action, and defendants were not harmed by plaintiff’s alleged breach of fiduciary duty and fraud.  Thus, there was no basis for the [trial] court to conclude that plaintiff is not entitled to payment on the promissory notes.”  Id.

Where a trial court grants partial summary judgment, CPLR 3212(e)(2) provides that the court may also direct that “the entry of summary judgment shall be held in abeyance pending the determination of any remaining cause of action.”  The court’s discretion, however, “is not unlimited, and is to be exercised only if there exists some articulable reason for concluding that the failure to impose conditions might result in some prejudice, financial or otherwise, to the party against whom the partial summary judgment is granted should that party subsequently prevail on the unsettled claims.”  Id, quoting, Robert Stigwood Org. v. Devon Co., 44 N.Y.2d 922, 923 (1978).  Because, therefore, the “defendants sustained no damages as a result of plaintiff’s alleged misconduct,” the Appellate Division held that “there is no basis upon which to stay enforcement of the judgments entered in favor of plaintiff.”  Id.

The Appellate Division’s decision in Ayers reinforces the critical need for a defendant, contemplating asserting a counterclaim in the face or contemplation of a plaintiff’s motion for summary judgment, to consider carefully the nature of any such counterclaim, particularly as compared with, and considered in light of, the plaintiff’s affirmative claim.  The more separate and distinct the counterclaim is from the plaintiff’s claim, the less likely it will be that, if the trial court grants the plaintiff’s motion, the court will also grant a defendant’s motion to stay enforcement of the judgment pending resolution of the counterclaim.

After all, possible prejudice to the defendant is likely to arise from some discernible connection between the plaintiff’s claim and a counterclaim.  As the Court of Appeals has observed, prejudice is especially likely where “the counterclaims with respect to which partial summary judgment was granted are sufficiently independent of the plaintiff’s claim as to have allowed defendant to bring a separate action upon them had it so chosen.”  Robert Stigwood Org., 44 N.Y.2d at 923-24.

As a result, if a defendant does not consider its contemplated counterclaim carefully, it might just win the defensive summary-judgment “battle” with respect to that claim only to lose the offensive enforcement “war” with respect to the plaintiff’s affirmative claim.

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Kenneth E. Aldous
Attorney at Law
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New York, New York 10017

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