Great Lakes Rubber Corp. v. Herbert Cooper Co

Facts

Plaintiff Great Lakes Rubber Corp. sued Defendant Herbert Cooper Co. allegedly based on diversity. The complaint alleged the following: (1) that the founders of Defendant were former employees of Plaintiff and that they misappropriated information from Plaintiff; (2) the former employees left Plaintiff to found Defendant; (3) Defendant used information taken from Plaintiff to compete with Plaintiff; (4) Defendant bid and obtained several contracts from the U.S. Army and Air Force using information obtained from Plaintiff; (5) Defendant should be enjoined from further competing with Plaintiff and compensate Plaintiff for its unfair competition practices. Defendant counterclaimed alleging violations of the Sherman Act and that Plaintiff filed lawsuits in bad faith and for the sole purpose of harassing Defendant. Defendant moved to dismiss Plaintiff’s complaint for lack of diversity, which the District Court granted. The Court retained jurisdiction over Defendant’s counterclaim. Plaintiff filed a counterclaim against Defendant making the same allegations contained in the previous complaint with additional allegations of Defendant’s misconduct. Defendant moved to dismiss the counterclaim for lack of subject matter jurisdiction. Plaintiff argued the Court had ancillary jurisdiction over Plaintiff’s counterclaim because it was a compulsory counterclaim to Defendant’s claim alleging Sherman Act violations. The Court granted Defendant’s motion to dismiss finding that Plaintiff’s counterclaim was not a compulsory counterclaim. Plaintiff appealed.