Southern Builders was hired by the City of Memphis (City) to build City Hall. Southern Builders subcontracted with Alexander Marble and Tile Co. (Alexander) (defendant) to supply and install marble in the City Hall. Alexander subcontracted with LASA Per L’Industria Del Marmo Societa Per Azioni (LASA) (plaintiff) to supply the marble. LASA brought suit against Alexander, Southern Builders, and the City, claiming that it had performed its duties under the contract, but had not been paid in full. Alexander and Southern Builders both filed a counterclaim, claiming that LASA had shipped the wrong type of marble, had not shipped it on time, and did not ship the full amount of the marble. Alexander also filed a cross-claim against Southern Builders and the City, seeking money due on its subcontract with Southern Builders. In response, Southern Builders filed a cross-claim against Alexander for breach of contract. Alexander also filed a third party claim against the architect of the City Hall project, claiming negligent supervision of the project. The district court dismissed the cross-claims and the third party claim, holding that they did not arise out of the same transaction or occurrence of the original action or of a counterclaim therein. The parties appealed.