The Compulsory Counterclaim Rule

Compulsory Counterclaims

The Compulsory Counterclaim Rule

A defendant sued in federal court often holds a claim of her own against the plaintiff. Rule 13(a)(1) decides whether she may save that claim for a later lawsuit: a pleading “must state as a counterclaim any claim that—at the time of its service—the pleader has against an opposing party” if the claim meets two conditions.¹ The first condition is that the claim arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim.² The second is that the claim does not involve a necessary party over whom the court cannot acquire personal jurisdiction.³ A claim that satisfies both is a compulsory counterclaim. A counterclaim is a claim for relief asserted against an opposing party after an original claim has been made, especially a defendant’s claim in opposition to or as a setoff against the plaintiff’s claim.⁴

Two variations on one lawsuit show where the line falls. A plaintiff sues a defendant for injuries from a car collision. The defendant, who has not yet answered, wants payment for damage to her own car in that same collision. Her claim grows out of the very occurrence the plaintiff sued about, so it satisfies clause (A), and she must plead it as a counterclaim.⁵ If she answers without it, she cannot bring a later action on it.⁶ Now give her a different claim: the plaintiff breached a 2008 contract between them, a contract with nothing to do with the accident. The court will allow her to add that claim, but she need not. It is permissive because it has no connection to the subject matter of the plaintiff’s claim.⁷ Both claims run against the same person, and both could be pleaded in the pending case. Assume neither involves any other party. Only the relationship to the plaintiff’s events separates them.

Each phrase of the rule carries part of the duty. Must makes the obligation mandatory. At the time of its service fixes the moment of measurement, so the pleader owes the claims it already has when the pleading goes out. Against an opposing party names the target: the rule reaches claims against someone who has asserted a claim against the pleader, and a claim against a party on the pleader’s own side falls outside it. Clause (A) then supplies the benchmark, which is the events the opposing party sued on. The inquiry starts with the plaintiff’s claim and asks whether the defendant’s claim grows out of those same events. Courts give “transaction or occurrence” content by asking whether there is a logical relationship between the claim and the rest of the case, a standard first developed as a gloss on the equity rules to decide whether a counterclaim was compulsory.⁸ The next major section takes up that test.

Clause (B) protects a defendant whose related claim cannot be heard without a party the court cannot reach. Rule 13(h) expressly authorizes bringing additional parties into a counterclaim, but a defendant need not assert a counterclaim that involves a necessary party over whom the court cannot acquire personal jurisdiction.⁹

The duty attaches only to pleadings. Because Rule 13(a)(1) requires counterclaims in a “pleading,” a defendant who wins dismissal of the main claim by motion, without filing an answer, need not assert any counterclaim, and a defendant who defaults need not worry about the rule at all.¹⁰

Rule 13(b) supplies the contrast: a pleading may state as a counterclaim against an opposing party any claim that is not compulsory.¹¹ A permissive counterclaim need not be asserted to be cognizable. It is permissive usually because it does not arise out of the same subject matter as the opposing party’s claim, or because it involves third parties over whom the court lacks jurisdiction, and it may be brought in a later, separate action.¹² The claim-joinder rule, Rule 18(a), places no restriction on the claims a party may join, so technically there can be no misjoinder of claims.¹³ The defendant therefore must plead the related claims and may plead the unrelated ones.

Neither kind of counterclaim has to cancel out the plaintiff’s recovery. A counterclaim need not diminish or defeat what the opposing party seeks, and it may request relief that exceeds in amount or differs in kind from the relief the opposing party seeks.¹⁴ The word counter describes the direction of the claim, back at the party who sued, and says nothing about its size. A related claim worth ten times the plaintiff’s demand therefore carries the same duty as one worth a tenth of it.

Omission carries a price. Failure to assert a compulsory counterclaim precludes a later action on it. Courts most often describe that effect in res judicata terms, but some prefer the more flexible language of equitable estoppel or waiver, which lets them bar the claim even when the first action produced no technical judgment.¹⁵ A later section examines the bar and the theories behind it.

The rule’s design explains why it compels related claims and stops there. The logical relationship test looks for enough factual overlap that litigating together is efficient.¹⁶ The counterclaim provisions also let a defendant, once brought before the court, settle all of her claims against her opponent without filing a separate lawsuit.¹⁷ Forcing joinder of parties raises many problems, but most of them disappear when the added item is a claim between parties already properly before the court. Subject-matter jurisdiction is the clearest example: it usually poses no obstacle to a compulsory counterclaim, because supplemental jurisdiction usually covers it.¹⁸ Clause (B) handles the problem that remains, since a necessary party beyond the court’s personal jurisdiction relieves the defendant of the duty.¹⁹

The rule also has a strategic cost. Because omission is fatal, a quick plaintiff can choose the forum for the defendant’s related claim. In a race to the courthouse, the slower party must assert her related claim as a counterclaim.²⁰ Even so, the duty has limits. A party need not assert a claim that has not fully matured when the responsive pleading is served, or a claim that is the subject of another pending action, and later sections develop those limits along with the transaction-or-occurrence test itself.²¹