Conopco, Inc. v. Roll International and Paramount Farms, Inc.

231 F.3d 82, 47 Fed. R. Serv. 3d 1192, 2000 U.S. App. LEXIS 27783

• Court: Court of Appeals for the Second Circuit
• Decided: November 3, 2000
• Docket: 1999
• Status: Published

Opinions

Judge DORSEY dissents in a separate opinion.

BACKGROUND

McLAUGHLIN, Circuit Judge:

This civil procedure morass arises from the sale by Conopeo, Inc. d/b/a Lipton (“Conopeo”) of its Sunkist brand fruit roll snack business to Roll International Corporation (“Roll”) and Roll’s wholly-owned subsidiary-Paramount Farms, Inc. (“Paramount”). Under a purchase agreement signed in June 1995 (the “Purchase Agreement”), Conopeo agreed to transfer its existing fruit roll inventory (the “Inventory”) to Roll at a closing date one month later. When the Purchase Agreement was signed, the book value of the Inventory was $3,060,000, but this figure was stale because it had not been updated since December 1994. The parties therefore agreed that the purchase price would be adjusted at the closing to reflect any subsequent change in the Inventory’s value.

Section 2.5 of the Purchase Agreement entitled “Post-Closing Inventory Adjustment,” also provided that, within 30 days after the closing, Conopeo would deliver to Roll a statement of the book value of the Inventory confirming that a physical count of the Inventory had been conducted by Conopeo on the closing date (the “Closing. Date Inventory Statement”). Unless Roll then notified Conopeo of any objections within 30 days of receipt of the statement, in writing, the Closing Date Inventory Statement would become final and binding. If Roll did object within the 30 days, and the parties were unable to resolve their differences, § 2.5 required them to submit to binding arbitration.

The sale closed successfully on July 28, 1995. But the parties’ relationship soured when Conopeo delivered a Closing Date Inventory Statement to Roll claiming that Roll owed an additional $2,452,634 based on the value of the Inventory at closing (the “Inventory Adjustment Claim”). Roll challenged this claim and settlement negotiations ensued.

In early 1997, Roll and Paramount notified Conopeo that they would neither arbitrate nor settle the Inventory Adjustment Claim. Roll never paid Conopeo any portion of the $2,452,634, and the parties never submitted the claim to an arbitrator.

As it turned out, the Inventory Adjustment Claim was the least of Conopco’s problems. In December 1996, Roll and Paramount had already sued Conopeo and its parent company, Unilever United States, Inc., in California Superior Court (the “California Action”) seeking to rescind the Purchase Agreement. The plaintiffs there alleged that Conopeo and Unilever had breached numerous representations and warranties in the Purchase Agreement and had fraudulently misrepresented the fruit roll business’s sales and expense figures.

Most significantly, in its answer in the California Action, Conopeo did not assert its Inventory Adjustment Claim as a set-off to any claims raised by Roll or Paramount. Nor did it file a cross-complaint.¹ Indeed, Conopeo failed to raise the issue until May 1998 — almost 1/6 years later and only 3 months before the trial was scheduled to start — when it moved to compel arbitration of the Inventory Adjustment Claim or, in the alternative, for leave to file an untimely cross-complaint.

The next month, the California Superior Court denied both prongs of Conopco’s motion. The trial court held that Conopeo had waived its right to arbitrate; and it rejected Conopco’s contention that its failure to plead its Inventory Adjustment Claim had been in good faith. Commenting acidly that, “to say that the defendant has been dilatory in asserting the cross-complaint ... is an understatement,” the California court refused to grant Conopeo leave to file an untimely cross-complaint in light of the “substantial prejudice to the court and the plaintiff.”

Conopeo appealed the denial of its motion to compel arbitration. In the alternative, it sought a “writ of mandate” from the California Court of Appeal compelling the trial court to allow the filing of its untimely cross-complaint.² The Court of Appeal: (1) affirmed the denial of Conop-co’s motion to compel arbitration; and (2) refused to issue the writ of mandate, declining to hear the appeal of the cross-complaint ruling until a final judgment was entered by the trial court.

Needless to say, Conopeo was not pleased. It filed the instant diversity action against Roll and Paramount in the Southern District of New York in March 1999, alleging breach of contract and unjust enrichment. The defendants moved under Fed.R.Civ.P. 12(b)(6) to dismiss the complaint. They argued that: (1) California Code of Civil Procedure § 426.30 (the compulsory cross-complaint provision) barred Conopeo from asserting its Inventory Adjustment Claim in this action; (2) Conopco’s waiver of its right to arbitrate its Inventory Adjustment Claim barred it from asserting that claim here; and (3) the action should be dismissed or stayed in deference to the pending California Action.

Conopeo opposed the motion, maintaining that the California compulsory cross-complaint statute has no extraterritorial effect and, even if it did, it would not operate to bar Conopeo from asserting its Inventory Adjustment Claim in a subsequent action until a final non-appealable judgment was entered in California.

On November 16, 1999, the district court granted the defendants’ motion to dismiss. See Conopco, Inc. v. Roll Int’l Corp., 75 F.Supp.2d 196 (S.D.N.Y.1999). Giving full faith and credit to the order of the California Superior Court, see 28 U.S.C. § 1738, the district court held that: (1) Conopeo’s Inventory Adjustment Claim should have been asserted as a compulsory cross-complaint in the California Action pursuant to Cal. Civ. P.Code § 426.30; and (2) that, by failing to file a timely cross-complaint, or to successfully obtain leave to file an untimely cross-complaint, Conopeo was precluded from raising the claim in a subsequent action, whether or not a final non-appealable judgment had been entered in the California Action. See id. at 198-201.

In the meantime, about three months before the district court order, Conopeo,' Roll and Paramount had entered into a settlement agreement in the California Action on August 3, 1999. That settlement agreement provided that: (1) Roll and Paramount’s claims, other than their claim for rescission of the Purchase Agreement, were settled for $22 million; (2) if the California court held, after a bench trial, that Roll and Paramount were entitled to rescission, they would be paid an additional $18 million subject to a reversal on appeal; (3) if the California court held that Roll and Paramount were not entitled to rescind the Purchase Agreement, no further money would be paid; and (4) the parties agreed to cooperate in the sale of the fruit roll business and to split the proceeds equally.

Thereafter, the California Superior Court held that Roll and Paramount were entitled to rescind the Purchase Agreement as a result of Conopco’s fraudulent representations and warranties. On November 29, 1999, a final judgment in favor of Roll and Paramount, incorporating the settlement agreement by reference, was entered by the California trial court. On January 19, 2000, Conopeo filed a notice of appeal, appealing the final judgment and also the June 11, 1995 order denying its motion for leave to file an untimely cross-complaint.³ Conopco’s state court appeal is still pending before the California Court of Appeal.

Back in the federal arena, Conopeo now appeals from the district court’s dismissal of its complaint. It contends that: (1) the district court erred by applying Cal. Civ. P.Code § 426.30 because Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny require federal courts sitting in diversity to apply federal procedural rules; and (2) even if it were proper to apply the California statute, the district court erroneously held that Conopeo was barred from asserting its Inventory Adjustment Claim absent a final non-appealable judgment in the California Action.

For the reasons set forth below, we affirm.

DISCUSSION

We review a district court’s dismissal of a complaint for failure to state a claim de novo. See Lee v. Bankers Trust Co., 166 F.3d 540, 543 (2d Cir.1999). Dismissal under Fed.R.Civ.P. 12(b)(6) is appropriate when a defendant raises claim preclusion or, as here, statutory waiver and bar as an affirmative defense and it is clear from the face of the complaint, and matters of which the court may take judicial notice, that the plaintiffs claims are barred as a matter of law. See Day v. Moscow, 955 F.2d 807, 811 (2d Cir.1992) (claim barred by res judicata); United States v. Eastport S.S. Corp., 255 F.2d 795, 802 (2d Cir.1958) (claim barred by compulsory counterclaim statute).

All' parties agree that Conopco’s Inventory Adjustment Claim should have been raised as a compulsory cross-complaint in the California Action. Therefore, the only issues before us are: (1) whether we are required to apply Fed.R.Civ.P. 13(a) or the California compulsory cross-complaint statute in determining the viability of Co-nopco’s claims; and (2) whether Conopco’s claims are barred under the applicable statute even though the judgment in the California Action is currently pending appeal.⁴

I. Applicable Law

Conopeo asserts that federal courts sitting in diversity are required under Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), and its progeny, to apply Fed.R.Civ.P. 13(a) to determine whether a party is precluded from raising in federal court a claim that should have been raised as a compulsory counterclaim in a prior state proceeding. We disagree.

The Full Faith and Credit Act provides that “judicial proceedings of any court of any [ ] State ... shall have the same full faith and credit in every court within the United States ... as they have by law or usage in the courts of such State ... from which they are taken.” 28 U.S.C. § 1738. To qualify for full faith and credit under the Act, the “state proceedings need do no more than satisfy the minimum procedural requirements of the Fourteenth Amendment’s Due Process Clause.” Kremer v. Chemical Constr. Corp., 456 U.S. 461, 481, 102 S.Ct. 1883, 72 L.Ed.2d 262 (1982). If the proceedings of a state trial court comported with due process, every federal court must afford the final judgment entered therein the same preclusive effect it would be given in the courts of that state. See Migra v. Warren City Sch. Dist. Bd. of Educ., 465 U.S. 75, 81, 85, 104 S.Ct. 892, 79 L.Ed.2d 56 (1984); Kremer, 456 U.S. at 466, 102 S.Ct. 1883; Allen v. McCurry, 449 U.S. 90, 95, 101 S.Ct. 411, 66 L.Ed.2d 308 (1980); Jacobson v. Fireman’s Fund Ins. Co., 111 F.3d 261, 265 (2d Cir.1997); Doctor’s Assocs. v. Distajo, 66 F.3d 438, 446 (2d Cir.1995).

To determine the effect of a state court judgment, federal courts, including those sitting in diversity, are required to apply the preclusion law of the rendering state. See Migra, 465 U.S. at 81, 104 S.Ct. 892; Jacobson, 111 F.3d at 265; Doctor’s Assocs., 66 F.3d at 446-47. “Federal courts may not ‘employ their own rules ... in determining the effect of state judgments,’ but must ‘accept the rules chosen by the State from which the judgment is taken.’ ” Matsushita Elec. Indus. Co. v. Epstein, 516 U.S. 367, 373, 116 S.Ct. 873, 134 L.Ed.2d 6 (1996) (quoting Kremer, 456 U.S. at 481-82, 102 S.Ct. 1883).

Although these principles have traditionally been applied with respect to the affirmative defenses of res judicata (claim preclusion) and collateral estoppel (issue preclusion), we join the majority of our sister circuits in. extending them to the cognate affirmative defense of statutory waiver and bar of a compulsory counterclaim. See, e.g., Pochiro v. Prudential Ins. Co. of Am., 827 F.2d 1246, 1249, 1253-54 (9th Cir.1987); H.E. Braman v. Eisenstein, 804 F.2d 1041, 1044 (8th Cir.1986); Fox v. Moulding, 112 F.3d 453, 456-57 (10th Cir.1997) (addressing both res judicata and compulsory counterclaim statute); see also Oberman v. Weiner (In re Crispo), No. 96 B 42570(JLG), 1997 WL 258482, at *5, 8, 12 (Bankr.S.D.N.Y.1997) (same); Cohen v. Shea, 788 F.Supp. 66, 67-69 (D.Mass.1992) (same); James Fleming, Jr. & Geoffrey C. Hazard, Jr., Civil Procedure § 11.14, at 560 (2d ed. 1977) (“[T]he scope of preclusion” resulting from the application of a compulsory counterclaim statute “is determined by the law of the court in which the judgment was rendered.”) (citing Restatement (Second) of Conflict of Laws §§ 94, 95).

Under 28 U.S.C. § 1738, we are required to give full faith and credit to the final judgment entered in the California Action. The parties do not contest that the court had both in personam and subject matter jurisdiction. In addition, the parties were given notice and an opportunity to be heard with respect to the claims against them. Although Conopeo has appealed the final judgment, and with it, the denial of its motion to file an untimely cross-complaint, Conopeo has never contended that it was in any way denied its due process rights.

Nevertheless, the dissent concludes that Conopeo was denied due process because the California trial court wrongly denied its motion to file an untimely cross-complaint absent evidence of bad faith. Apart from the fact that Co-' nopco itself has made no such due process claim, this analysis is difficult to embrace. First, a de novo review of the California trial court’s decision is not properly within the scope of our appellate jurisdiction. Second, even if the trial court’s decision were erroneous, it would not create a due process claim on behalf of Conopeo. It is black-letter law that due process guarantees a fair hearing, not a legally correct outcome. See Collins v. City of Harker Heights, Texas, 503 U.S. 115, 129, 112 S.Ct. 1061, 117 L.Ed.2d 261 (1992); Lavine v. Milne, 424 U.S. 577, 587, 96 S.Ct. 1010, 47 L.Ed.2d 249 (1976) (“The Fourteenth Amendment does not guarantee that all decisions by state officials will be correct. ...”); Interport Pilots Agency, Inc. v. Sammis, 14 F.3d 133, 144 (2d Cir.1994); Memphis Light, Gas & Water Division v. Craft, 436 U.S. 1, 25 n. 7, 98 S.Ct. 1554, 56 L.Ed.2d 30 (1978) (“The Due Process Clause does not guarantee a correct or [even] a courteous resolution of every dispute.”) (Stevens, /., dissenting); Del’s Big Saver Foods, Inc. v. Carpenter Cook, Inc., 795 F.2d 1344, 1350 (7th Cir.1986) (“Due process does not guarantee correct outcomes in every case; that would make every error of state law that deprived a person of liberty or property a federal constitutional error, which is an absurd proposition.”) (citation omitted); Laurence H. Tribe, American Constitutional Law 666 (2d ed.1988); 3 Ronald D. Rotunda & John E. Nowak, Treatise on Constitutional Law: Substance and Procedure § 17.8, at 100 (3d ed.1999). Accordingly, the trial court’s judgment is entitled to the full faith and credit guaranteed by 28 U.S.C. § 1738.

We must therefore look to California law to determine whether entry of the state court judgment precludes Conopeo from raising its Inventory Adjustment Claim in a subsequent action.⁵ See Migra, 465 U.S. at 81, 104 S.Ct. 892; Jacobson, 111 F.3d at 265; Doctor’s Assocs., 66 F.3d at 446-47.

II. Preclusive Effect in California

The California law applicable to this dispute is section 426.30(a) of the California Code of Civil Procedure, the state’s compulsory cross-complaint provision. That statute provides in pertinent part:

[I]f a party against whom a complaint has been filed and served fails to allege in a cross-complaint any related cause of action which (at the time of serving his answer to the complaint) he has against the plaintiff, such party may not thereafter in any other action assert against the plaintiff the related cause of action not pleaded.

A compulsory cross-complaint must be filed “before or at the same time as the answer to the complaint.” Cal. Civ. P.Code § 428.50. Failure to file a timely cross-complaint results in a waiver and bar of that cause of action unless the trial court grants the defendant leave to file an untimely cross-complaint pursuant to § 426.50. See Carroll v. Import Motors, Inc., 33 Cal.App.4th 1429, 39 Cal.Rptr.2d 791, 795 (1995); Gherman v. Colburn, 72 Cal.App.3d 544, 140 Cal.Rptr. 330, 339 (1977).

Upon the defendant’s motion, the trial court must grant leave to file an untimely cross-complaint if the defendant can demonstrate that his failure to plead was in good faith. See Cal. Civ. P.Code § 426.50; id. § 426.30, leg. comm. cmt. (1973); Silver Org. Ltd. v. Frank, 217 Cal.App.3d 94, 265 Cal.Rptr. 681, 683 (1990); Gherman, 140 Cal.Rptr. at 339-40. However, leave may not be granted once a judgment has been entered on the underlying complaint. See City of Hanford v. Superior Court, 208 Cal.App.3d 580, 256 Cal.Rptr. 274, 278 (1989).

Conopeo concedes, as it must, that its Inventory Adjustment Claim constituted a “related cause of action,” Cal. Civ. P.Code § 426.10, which it had against Roll and Paramount “at the time of serving [its] answer to the complaint” in the California Action, Cal. Civ. P.Code § 426.30. It further admits that it failed to file such claim as a compulsory cross-complaint at the time it filed its answer in the California Action. Therefore, absent permission from the trial court to file an untimely cross-complaint, Conopco’s Inventory Adjustment claim was waived and statutorily barred as of the time it filed its answer.

Conopeo filed a motion pursuant to Cal. Civ. P.Code § 426.50 seeking leave to file an untimely cross-complaint; but the trial court refused to lift the bar. The court concluded that granting the motion so close to trial would cause “substantial prejudice to the court and the plaintiff,” and apparently found that Conopco’s dilatory tactics were not in good faith. Thereafter, the California Court of Appeal denied Co-nopco’s petition for a writ of mandate directing the trial court to allow the cross-complaint.

A final judgment against Conopeo was entered by the trial court on November 29, 1999. Therefore, under California law, the trial court no longer has the discretion to permit the filing of an untimely cross-complaint, and Conopeo is barred from asserting its Inventory Adjustment claim in any subsequent action. See Cal. Civ. P.Code §§ 426.30(a), 426.50; City of Hanford, 256 Cal.Rptr. at 278 (“Once judgment is entered, the party cannot assert his or her unpleaded claim in a separate lawsuit.”); Robert I. Weil & Ira A. Brown, Jr., California Practice Guide: Civil Procedure Before Trial § 6:520 (2000). A California court would be required to dismiss any complaint filed in violation of § 426.30(a). See Cal. Civ. P.Code §§ 436(b), 581(f)(3); Carroll, 39 Cal.Rptr.2d at 796. Accordingly, because 28 U.S.C. § 1738 requires us to afford the California judgment the same preclusive effect it would be given in the courts of that state, Conopco’s federal claims must be dismissed.⁶

Conopeo argues, and the dissent is persuaded that, by analogy to California’s res judicata doctrine, the statutory bar does not take effect until the trial court’s judgment has been affirmed on appeal. We agree with the district court that this argument is without merit. It is true that (in stark contrast to the rules in federal court and the vast majority of states) California does indeed require that a judgment be both final and non-appeal-able (ie., the appellate process has concluded or the time in which to appeal has passed) before it will earn res judicata or collateral estoppel effect. See Wright v. Turner (In re Turner), 204 B.R. 988, 992 (9th Cir.BAP 1997); Lucido v. Superior Court, 51 Cal.3d 335, 272 Cal.Rptr. 767, 795 P.2d 1223, 1225 (1990); McKee v. Nat'l Union Fire Ins. Co., 15 Cal.App.4th 282, 19 Cal.Rptr.2d 286, 289-90 (1993); Cal. Civ. P.Code §§ 577, 1049, 1908; 7 B.E. Witkin, California Procedure: Judgment §§ 307, 309, 312 (4th ed.1997). However, this odd “finality” requirement is a quirk of California res judicata jurisprudence. It is not a requirement of its compulsory cross-complaint statute.⁷

As correctly noted by the district court, the language of Cal. Civ. P.Code § 426.30 does not support Conopco’s argument. By its own terms, the California statute, entitled “Waiver of related cause of action,” is based on principles of waiver and estop-pel — not res judicata. Cal. Civ. P.Code § 426.30; see Carroll, 39 Cal.Rptr.2d at 795 (referring to § 426.30(a) as a “waiver provision”); accord Currie Med. Specialties, Inc. v. Bowen, 136 Cal.App.3d 774, 186 Cal.Rptr. 543, 545 (1982); Hon. James R. Lambden, et al., 1 California Civil Practice § 9:111 (1992) (defendant’s “waiver” of claims by failing to comply with § 426.30(a) results in a statutory “bar”). The key to removing the statutory bar during the pendency of the action is the ability of the defendant to prove his good faith. See Cal. Civ. P.Code § 426.50; id. § 426.30, leg. comm. cmt. (1973); Silver Org. Ltd. v. Frank, 217 Cal.App.3d 94, 265 Cal.Rptr. 681, 683 (1990); Gherman, 140 Cal.Rptr. at 339. Therefore, although the statute is admittedly a cousin of res judi-cata, see Hulsey v. Koehler, 218 Cal.App.3d 1150, 267 Cal.Rptr. 523, 526 (1990) (like res judicata, § 426.30 is a defense that must be specially pleaded or else is waived), it creates a separate affirmative defense, in addition to that of res judicata, see Flickinger v. Swedlow Engineering Co., 45 Cal.2d 388, 289 P.2d 214, 216-18 (1955), that is not based on the principle that all available causes of action merge into a final judgment. See Al Holding Co. v. O’Brien & Hicks, Inc., 75 Cal.App.4th 1310, 89 Cal.Rptr .2d 918, 920 (1999) (barring claim not asserted in compulsory cross-complaint where complaint in first action was voluntarily dismissed by plaintiff); Carroll, 39 Cal.Rptr.2d at 795 (applying bar even though initial action was still pending); 6 Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1417, at 133 (2d ed.1990) (statutes based on theories of waiver or estoppel arising from a litigant’s culpable conduct in failing to assert a compulsory counterclaim provide “a more apposite and useful approach to the problems of omitted counterclaims than does the doctrine of claim preclusion”); Fleming & Hazard, supra, § 11.14, at 559 (unlike res judicata, a compulsory counterclaim rule “ordinarily applies even if the first action was not decided on the merits, so that defendant will be barred simply by failing to assert his counterclaim, however the plaintiffs claim may be determined”). Co-nopeo and the dissent simply refuse to recognize this pivotal distinction.

California has a separate statute expressly addressing the res judicata effect to be accorded a final judgment. See Cal. Civ. P.Code § 1908. Notably, the compulsory cross-complaint statute makes no reference whatever to a “final judgment,” nor does it in any way cross-reference the res judicata statute. There is simply no support for Conopeo’s argument to be found in the relevant provisions of the California Code of Civil Procedure.

No California court addressing a defendant’s failure to comply with § 426.30 has required the trial court’s judgment to have been affirmed on appeal (or the time for appeal to have expired) prior to applying the statutory bar. Moreover, in City of Hanford, the California Court of Appeal squarely rejected the interpretation suggested by Conopeo in this regard. With respect to compulsory cross-complaints, the court stated: “If the claim has not been pleaded by the time the case goes to trial, judgment in the underlying action will bar later recovery by the party on the related claim.” City of Hanford, 256 Cal.Rptr. at 278. For purposes of § 426.30(a), the Court of Appeal defined the term “judgment” as “the final determination in the trial court of the rights of the parties in an action or proceeding. Thus, entry of judgment on the original complaints was a final resolution in the trial court of the issues therein.” Id. at 279 (citation omitted) (emphasis added).

Although Cal. Civ. P.Code § 428.50(c) provides that the trial court may grant leave to file an untimely cross-complaint “at any time during the course of the action,” the Court of Appeal refused to interpret this section in accordance with the res judicata statute to deem the action pending until it is finally determined on appeal or until the time for appeal had passed. Id. at 278.⁸ Once the action has proceeded to judgment, the trial court no longer has discretion to lift the statutory bar prescribed by Cal. Civ. P.Code § 426.30(a). “It is immaterial that the action technically remains pending for other purposes (e.g., appeal).” Weil & Brown, California Practice Guide: Civil Procedure Before Trial at § 6:557.

Conopco’s argument is unsupported by California law and it directly abrades Cal. Civ. P.Code § 426.30. As stated in Saunders v. New Capital for Small Businesses, Inc., 231 Cal.App.2d 324, 41 Cal.Rptr. 703 (1964), the purpose of California’s compulsory cross-complaint statute is “to provide for the settlement in a single action of all conflicting claims between the parties arising out of the same transaction and thus to avoid multiplicity of actions and conflicting judgments.” Id. at 710 (internal citation omitted) (discussing predecessor statute). Conopeo admits that it failed to raise its Inventory Adjustment Claim in a compulsory cross-complaint as required by Cal. Civ. P.Code § 426.30. The California Superior Court then refused to remove the statutory bar, finding evidence of good faith to be lacking. To permit Conopeo to file its claims in federal court “would encourage just the kind of piecemeal litigation section 426.30 is intended to prohibit.” Carroll, 39 Cal.Rptr.2d at 795. We therefore decline to adopt the construction urged by Conopeo. Conopeo must look to the California Court of Appeal for relief from its waiver, and the resulting bar, of its Inventory Adjustment Claim.

CONCLUSION

We have considered the parties’ remaining contentions and find them to be without merit. Accordingly, we AFFIRM the district court’s order dismissing Conopco’s complaint.

1 . Due to a peculiarity of California law, what are commonly known as counterclaims are referred to as cross-complaints.

2 . Under California practice, an interlocutory order denying leave to file a cross-complaint is reviewable only upon appeal from the final judgment, or upon an application for an extraordinary writ, in this case a writ of mandate. See Cal. Civ. P.Code §§ 904.1 and 906; Foot’s Transfer & Storage Co. v. Superior Court, 114 Cal.App.3d 897, 171 Cal.Rptr. 1 (1980); Balding v. D.B. Stutsman, Inc., 246 Cal.App.2d 559, 54 Cal.Rptr. 717, 721 (1966).

3 . Upon the motion of Roll and Paramount, and without objection from Conopeo, we agree to take judicial notice of the final judgment entered by the California Superior Court and the Notice of Appeal. See Fed. R.Evid. 201. As will be developed infra, the term "final judgment” means the judgment entered by a trial court that concludes all proceedings between the parties therein.

4 . In light of the fact that judgment was subsequently entered in the California Action, at oral argument Conopeo abandoned, as moot, its original argument that its claims were not barred until the action in the California trial court proceeded to judgment.

5 . Conopeo argues that Fed.RXiv.P. 13 ought to control the analysis. However, Rule 13 simply does not enter the dispute. Neither Roll nor Paramount is seeking permission to file a counterclaim under Rule 13 and Conop-eo is not arguing that Roll or Paramount failed to file a compulsory counterclaim in this or any prior federal proceeding. The cases relied upon by Conopeo are inapposite. See, e.g., Com/Tech Communication Techs, v. Wireless Data Sys., Inc., 163 F.3d 149 (2d Cir.1998) (per curiam) (holding that, when an action commenced in state court as an expedited action for payment on a note is removed to federal court, Fed.R.Civ.P. 13 governs the issue of whether defendant can assert counterclaims even though such claims would not have been allowed in state court).

6 . Because a final judgment has now been entered in the California Action, we need not decide whether the district court correctly concluded that Conopco’s claims would have been barred alter its motion to file an untimely cross-complaint was denied but prior to the entry of judgment.

7 . Nor is it, as the dissent suggests, a requirement in order to "trigger” our obligations to afford the trial court's judgment full faith and credit under 28 U.S.C. § 1738. The dissent has erroneously conflated the two-part analysis required under the Full Faith and Credit Act (ie.: (1) whether, under federal law, the judgment is entitled to full faith and credit; and (2) what preclusive effect would the judgment be given under the law of the rendering state) into a single question by concluding that the trial court’s judgment is not entitled to full faith under the Act because it does not satisfy California's res judicata finality requirement. The dissent’s reliance on Baker v. General Motors Corp., 522 U.S. 222, 233, 118 S.Ct. 657, 139 L.Ed.2d 580 (1998), in support of its argument is misplaced. Nothing in Baker even suggests that a trial court’s final judgment must have been upheld on appeal (or the time for appeal must have passed) before it will be entitled to full faith and credit under the Act.

8 . The dissent erroneously relies on the definition of "final” judgment applicable solely to California's res judicata jurisprudence. Although the dissent is discomfited by the fact that, under California's compulsory cross-complaint statute, a defendant’s, unpleaded claims would be barred before a plaintiff’s, we must "accept the rules chosen by the State from which the judgment is taken.” Matsushita, 516 U.S. at 373, 116 S.Ct. 873 (internal quotation marks and citation omitted).