## Facts

- Currie Medical Specialties, Inc. and Newell Bowen (d/b/a Bowen Enterprises) competed in selling hospital labels.
- In 1978, the parties allegedly made an oral agreement under which Currie would stop selling its own labels and distribute Bowen’s labels.
- Bowen later sued Currie in federal district court (1979), alleging Lanham Act and unfair competition claims tied to the distributorship relationship, including misuse of customer lists and other competitive misconduct after the relationship ended.
- Currie answered in the federal action but did not assert counterclaims.
- The federal action was dismissed with prejudice by stipulation.
- After the federal dismissal, Currie sued Bowen in California state court for breach of contract, fraud, negligent misrepresentation, intentional interference with prospective business advantage, and unfair competition, all based on Bowen’s alleged breach and fraudulent inducement of the same 1978 oral agreement.

## Issues

1. Whether Currie’s state-law claims were “related causes of action” that had to be asserted as compulsory cross-claims under California Code of Civil Procedure § 426.30 when Currie answered Bowen’s earlier federal complaint.
2. Whether the jurisdictional exception in California Code of Civil Procedure § 426.40 applied because the federal court allegedly lacked power to hear Currie’s state-law claims, or whether ancillary jurisdiction would have permitted those counterclaims.

## Decision

- The Court of Appeal affirmed summary judgment for Bowen.
- Currie’s state claims were “related” to Bowen’s earlier federal claims under the logical-relationship test because both sets of claims arose from the same distributorship arrangement and related conduct.
- The federal court could have heard Currie’s state-law claims under ancillary jurisdiction as compulsory counterclaims; therefore, the § 426.40 jurisdictional exception did not apply.
- Because Currie failed to plead the related claims in the earlier action, § 426.30 barred Currie from asserting them later in state court.

## Legal Principles

- Under California Code of Civil Procedure § 426.30, a party must allege in a cross-complaint any “related cause of action” it has against the opposing party at the time it answers, or the claim is barred in a later action.
- “Related” causes of action are determined by a logical-relationship test; strict identity of facts is not required, but the claims must arise from the same transaction or occurrence and share common issues of fact and law.
- The § 426.40 exception applies when the earlier court is constitutionally or statutorily prohibited from entertaining the omitted claim; it does not apply if the earlier court could have heard the claim through ancillary jurisdiction.
- A federal court with jurisdiction over the original federal claims may exercise ancillary jurisdiction over logically related state-law counterclaims, including compulsory counterclaims, even absent independent diversity or federal-question jurisdiction.

## Conclusion

Currie’s later state-court contract and tort claims were barred because they were compulsory, logically related counterclaims to Bowen’s earlier federal Lanham Act/unfair competition action and could have been litigated there under the federal court’s ancillary jurisdiction.


Currie Med. Specialties, Inc. v. Bowen, 136 Cal. App. 3d 774, 186 Cal. Rptr. 543 (Ct. App. 1982)