Types of Cross-Complaints

Cross-complaints fall into two categories: compulsory and permissive.

Compulsory Cross-Complaints

A "compulsory" cross-claim is a claim that (i) a defendant has against the plaintiff at the time the plaintiff filed his/her complaint against the defendant; and (ii) is "related" to the complaint/cross-complaint in that it "arises out of the same transaction, occurrence, or series of transactions or occurrences" as cause of action in the complaint/cross-complaint. (K.R.L. Partnership v. Sup. Ct. (2004) 120 Cal.App.4th 490, 498; Code Civ. Proc. § 426.30(a)). To avoid piecemeal litigation, courts liberally construe the term “transaction”—it is “ ‘not confined to a single, isolated act or occurrence . . . but may embrace a series of acts or occurrences logically interrelated.’ ” (Align Technology, Inc. v. Tran (2009) 179 Cal.App.4th 949, 960).

Permissive Cross-Complaint

Claims arising after service of the answer are permissive, not compulsory, even if the subject matter is related to the complaint. (Crocker Nat. Bank v. Emerald (1990) 221 Cal.App.3d 852, 864). Leave to file permissive cross-complaint is solely within the trial court's discretion. (Crocker Nat. Bank v. Emerald (1990) 221 Cal.App.3d 852).

Unrelated claims and those claims arising after service of the answer are permissive, not compulsory. (Crocker Nat. Bank v. Emerald (1990) 221 Cal.App.3d 852, 864). Permissive cross-complaints are governed by Code of Civil Procedure § 428.50(c), which provides, “A party shall obtain leave of court to file any cross-complaint except one filed within the time specified in subdivision (a) or (b). Leave may be granted in the interest of justice at any time during the course of the action.” The decision to grant permission to file a permissive cross-complaint rests within the sound discretion of the trial court. (Orient Handel v. United States Fid. & Guar. Co. (1987) 192 Cal.App.3d 684, 701).

Time of Filing

A cross-complaint against any of the parties who filed the initial complaint or cross-complaint against the cross-complainant must be filed before or at the same time as the answer to the initial complaint or cross-complaint, which answer must be filed within 30 days of service of the complaint or cross-complaint. (CCP §§ 412.20(a)(3), 428.50(a), 432.10). Any other cross-complaint may be filed at any time before the court has set a trial date. (CCP §428.50(b)).

Late Filings

If a party fails to file a cross-complaint within the time limits described above, he or she must obtain permission from the court to file the cross-complaint. (CCP §§ 426.50, 428.50(c)). Parties seeking to file untimely compulsory cross-complaints may file with the Court for leave to do so, even though the failure to timely file resulted from oversight, inadvertence, mistake, neglect, or other cause. (Code Civ. Proc. § 426.50). Leave to file a mandatory cross-complaint must be granted absent bad faith. (Silver Organizations, Ltd. v. Frank (1990) 217 Cal.App.3d 94, 99). In such a case, after notice to the adverse party, the Court generally must grant leave to file the cross-complaint if the party acted in good faith. Permission to file a permissive cross-complaint may be granted in the interest of justice at any time during the course of the action. (CCP § 428.50(c)).

Additional Parties

The California Supreme Court recognized over 20 years ago that “a defendant is generally authorized to file a cross-complaint against a concurrent tortfeasor for partial indemnity ... even when such concurrent tortfeasor has not been named a defendant in the original complaint.” (American Motorcycle Assn. v. Superior Court (1978) 20 Cal.3d 578, 607). Together, sections 428.10 and 428.20 of the Code of Civil Procedure authorize the joinder of additional parties through a permissive cross-complaint.

Service

If the cross-complaint adds new parties, the cross-complaint must be served on all parties and proofs of service on the new parties must be filed within 30 days of the filing of the cross-complaint. (Cal. Rules of Court, rule 3.110(c)).

Motion to Quash

Neither Code of Civil Procedure section 428.60 nor California Rules of Court, rule 3.110(c) provide a basis for a motion to quash resulting from a delay in serving the cross-complaint. (See Cal. Rules of Court, rule 3.110(f)).

Failure to File a Cross-Complaint

“Once judgment is entered, the party cannot assert his or her unpleaded claim in a separate lawsuit.” (City of Hanford v. Superior Court (1989) 208 Cal.App.3d 580, 586–587 (internal citation omitted)). “A party who fails to plead a cause of action subject to the requirements of this article, whether through oversight, inadvertence, mistake, neglect, or other cause, may apply to the court for leave to amend his pleading, or to file a cross-complaint, to assert such cause at any time during the course of the action. The court, after notice to the adverse party, shall grant, upon such terms as may be just to the parties, leave to amend the pleading, or to file the cross-complaint, to assert such cause if the party who failed to plead the cause acted in good faith. This subdivision shall be liberally construed to avoid forfeiture of causes of action.” (CCP § 426.50).

Bad Faith

“The legislative mandate is clear. A policy of liberal construction of section 426.50 to avoid forfeiture of causes of action is imposed on the trial court. A motion to file a cross-complaint at any time during the course of the action must be granted unless bad faith of the moving party is demonstrated where forfeiture would otherwise result. Factors such as oversight, inadvertence, neglect, mistake or other cause, are insufficient grounds to deny the motion unless accompanied by bad faith.” (Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 98–99). “While it may be argued that [defendant], acting as their own counsel, may have been guilty of neglect, inadvertence or oversight, thereby causing delay, section 426.50 expressly disallows denial of a motion based on these grounds.” (Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 101).

“‘‘Bad faith,’ is defined as ‘[t]he opposite of ‘good faith,’ generally implying or involving actual or constructive fraud, or a design to mislead or deceive another, or a neglect or refusal to fulfill some duty or some contractual obligation, not prompted by an honest mistake . . ., but by some interested or sinister motive[,] . . . not simply bad judgment or negligence, but rather . . . the conscious doing of a wrong because of dishonest purpose or moral obliquity; . . . it contemplates a state of mind affirmatively operating with furtive design or ill will.’’” (Id. at 100 (internal citations omitted)).

The determination that the moving party acted in bad faith must be supported by substantial evidence. (Silver Organizations Ltd. v. Frank (1990) 217 Cal.App.3d 94, 99; Foot’s Transfer & Storage Co. v. Superior Court (1980) 114 Cal.App.3d 897, 902).

The “principle of liberality requires that a strong showing of bad faith be made in order to support a denial of the right to file a cross-complaint under this section.” (Foot’s Transfer & Storage Co. v. Superior Court (1980) 114 Cal.App.3d 897, 902).

Declaratory Relief

“Any person interested under a written instrument …, or under a contract, or who desires a declaration of his or her rights or duties with respect to another, … may, in cases of actual controversy relating to the legal rights and duties of the respective parties, bring an original action or cross-complaint in the superior court for a declaration of his or her rights and duties in the premises, including a determination of any question of construction or validity arising under the instrument or contract.” (Code Civ. Proc., § 1060.)