Currie Medical Specialties, Inc. v. Newell Bowen

Currie Medical Specialties, Inc. (Currie) (plaintiff) and Newell Bowen (Bowen), (defendant), sold labels to hospitals. In 1978, the parties orally agreed for Currie to stop selling its labels and become a distributor of Bowen’s labels. That did not go well, and Bowen sued Currie in federal court for violating a federal law and for unfair competition, alleging that Currie usurped Bowen’s client lists, sales manuals, and label style then entered into unfair competition with Bowen. That action was dismissed with prejudice by stipulation of the parties four months after Currie filed its answer without asserting any counterclaim against Bowen. Thereafter, Currie sued Bowen in state court for breach of contract, fraud, negligent misrepresentation, intentional interference with prospective business advantage, and unfair competition. Bowen moved for summary judgment on the grounds that Currie failed to comply with California’s compulsory cross-complaint rule that would have required Currie to assert its claims against Bowen in the prior federal action as compulsory counterclaims and that failure now bars its ability to plead them in the state action. The trial court found that Currie’s claim was a compulsory counterclaim in the prior federal action and was thus barred under the California compulsory cross-complaint rule in California code of civil procedure, § 426.30. Currie appealed.