NCR Corporation v. B.A.T. Industries P.L.C.

Background

NCR sought a declaration that a 1998 Confidential Settlement Agreement requires B.A.T. Industries P.L.C. (BAT) to pay 60% of certain environmental cleanup costs. The dispute concerns contamination connected to carbonless copy paper manufacturing and cleanup efforts involving the Kalamazoo River. BAT’s remaining counterclaims alleged fraud and negligent misrepresentation and sought declarations that the agreement was unenforceable or that BAT did not owe NCR payments under it.

The court had previously dismissed BAT’s third, fourth, and fifth counterclaims and struck BAT’s eighth affirmative defense. Seven affirmative defenses and BAT’s first two counterclaims remained. After NCR replied to those counterclaims, BAT demanded a jury trial on all issues it considered triable. NCR moved to strike the demand.

A magistrate judge recommended granting NCR’s motion in part and denying it in part. The recommendation would have struck the demand as to certain affirmative defenses and as to BAT’s requests for rescission or equitable recoupment, while preserving a jury trial for the counterclaims and the complaint-related issues that overlapped with them. NCR objected and asked the district court to strike the demand entirely.

Legal Standards

Federal Rule of Civil Procedure 38 requires a jury demand within 14 days after the last pleading directed to the issue. For counterclaims, the relevant pleading is ordinarily the plaintiff’s reply. A demand made after that deadline may be timely for genuinely new issues raised by later pleadings, but it does not revive the jury right for issues that were already fully framed in the complaint and answer.

The Seventh Amendment preserves jury trials for legal issues, but not for purely equitable issues. The court must examine the nature of the claim and, especially, the remedy sought. When a claim includes both legal and equitable aspects, a jury decides the legal issues first, while the court may later decide whether equitable relief is available.

Court’s Analysis

The court held that BAT’s jury demand, filed 12 days after NCR’s reply, was timely for issues raised by BAT’s first and second counterclaims. Those counterclaims challenged the enforceability of the settlement agreement and sought a declaration that BAT did not have to make payments to NCR. Because that requested relief concerned whether BAT had to pay money, the court treated it as at least partly legal, giving BAT a jury right on the related issues.

The court rejected NCR’s argument that the dismissed counterclaims had eliminated BAT’s request for a declaration that NCR was not entitled to payments. It concluded that dismissal of the specific counterclaims did not eliminate the general request for that declaration from the surviving counterclaims.

The court separately held that BAT’s demand was not timely for issues unique to NCR’s complaint. Those issues included defenses asserting that NCR breached the agreement, failed to mitigate damages, or violated public policy. BAT’s fraud and negligent-misrepresentation counterclaims did not directly address those issues, so NCR’s reply to the counterclaims did not restart the time to demand a jury trial on them.

The court did not decide whether BAT could ultimately obtain rescission or equitable recoupment. Those are equitable remedies for the judge to consider after the jury resolves the legal issues.

Disposition

The court adopted the magistrate judge’s Report and Recommendation in substantial part and as modified. NCR’s motion to strike BAT’s jury demand was granted with respect to issues unique to the claims in NCR’s complaint. The motion was denied with respect to issues raised by BAT’s first and second counterclaims, including issues those counterclaims shared with the complaint.

The ruling was without prejudice to NCR renewing its motion after discovery closes and any summary-judgment motions are resolved. The clerk was directed to close the motion at Docket Number 58. This order addressed the scope and timing of the jury demand; it did not resolve the underlying liability dispute.