Exploring examples of counterclaims can be beneficial in helping a party understand what issues they can raise against someone who has brought a civil lawsuit against them and how they may try and recover against the same party. It can also help a party understand when they may have to bring the counterclaim at that time or lose the claim, or when they may be able to wait and bring the claim later. Understanding these concepts will help parties present the best case for themselves and be prepared when there is a potential counterclaim that needs to be brought up. Counterclaims can be a difficult issue to master, even for many attorneys, so this article seeks to help readers understand how counterclaims work on a basic level and can help readers decide to contact an attorney to pursue a counterclaim. This article will define what a counterclaim is and provide an example that will be referenced throughout the article before turning to the types of counterclaims and some of the specifics of bringing a counterclaim.
A counterclaim is a claim that arises in a civil case where the defendant in the case has a claim against the plaintiff, meaning that they could recover for damages that the plaintiff caused them. This claim is made to offset or rebut the original claim made against the defendant. To best understand what a counterclaim is, it is also important to define several other terms, including:
- Plaintiff: A plaintiff is a person that files the original complaint or claims with the court.
- Defendant: The defendant is the person against whom the original claim is brought. They are also the ones that will bring a counterclaim.
- Claim: A claim is an assertion of a legal right through facts. In other words, a claim is a statement that because certain facts occurred, the person bringing the claim has a right to recover something.
- Answer: If there is no counterclaim, the defendant will write an answer to the claim that denies to admits the claims.
Counterclaims arise when the defendant has a legally enforceable right against the plaintiff and they choose to assert that right. There are two kinds of counterclaims, which will be discussed below, but all counterclaims will function essentially as a lawsuit against the plaintiff.
Counterclaims are often confused with crossclaims, which are another kind of claim that can be brought in a lawsuit. Counterclaims cross the lines of the dispute, while crossclaims arise in situations where there is more than one party on either side of the suit. So if a plaintiff sues two defendants as a part of the same suit for the same claim, and one of the defendants sues the plaintiff, that is a counterclaim. If one of the defendants sues the other defendant, this is a crossclaim. While these types of claims are somewhat related, they serve very different functions within a suit, and the distinction between them is important to note. This article is focusing solely on counterclaims, which are the claims that are brought by a defendant against a plaintiff.
To further aid in understanding a counterclaim, let’s consider the following example. Patti and Delia are work associates. Patti owns a bakery that produces the best croissants in town. Her croissants are so spectacular because she buys her butter for the pastry dough directly from the best dairy farm in town, Delia’s. Delia delivers the butter to Patti’s every Tuesday and Friday at 4 am. Patti pays Delia every other Friday. They have had this relationship for years. On Friday, when Patti sends the money to Delia, she misses a zero and sends her only $100, rather than the normal $1000. Because the payment was only 10% of what Patti owed, Delia decides she will not deliver the butter on Tuesday. Patti waits two hours that morning before calling Delia to see where the butter delivery is. Delia ignores her all day, and Patti has to tell disappointed customers all day that her famous croissants are out of stock due to a butter shortage.
After calling Delia for several days, Patti has had enough, especially when the butter is not delivered on Friday, and she decides to sue Delia. She asks the judge to order that the butter deliveries resume and that Delia pay for the loss to her business in not being able to sell her croissants for the week, which usually brings in $5000. She also had to go and find a replacement butter for the interim, and the lack of quality for her croissants dropped significantly without the fresh butter from Delia’s. Delia is furious because Patti was the one who did not pay and started the whole debacle. Her lawyer suggests that she file a claim against Patti for the $900. She also decides to bring a claim against Patti for the damage her truck sustained when Patti’s driveway was improperly salted and the ice made the truck crash into an eclectic pole nearby. The claims that Delia brings against Patti are considered counterclaims.
Types of Counterclaims:
Under the Federal Rules of Civil Procedure, the rules for Federal Courts in the United State, there are two types of counterclaims—compulsory and permissive. The distinction is important in a few situations, partially for establishing federal jurisdiction over the claim and for determining whether a party lost the right to bring the claim if they did not bring it as a counterclaim.
Compulsory counterclaims are claims that must be brought at the same time as the claim or any right to bring the claim is lost. This means that if a compulsory counterclaim is not brought as a counterclaim, the defendant cannot bring the claim in a later suit. These claims are often ones that could affect the outcome of the original claim. Oftentimes, they will be brought up as defenses to the claim, so it is often necessary to litigate them as a counterclaim to decide all the related issues at one time. Under the Federal Rules of Civil Procedure, Rule 13(a), the four elements of a compulsory counterclaim are:
- Subject Matter: For a counterclaim to be compulsory, the counterclaim needs to “arise out of the same transaction or occurrence that is the subject matter of the opposing party’s claim.” This means that the claims need to be concerning the same event or series of events. In the example above, Delia’s counterclaim for the $900 arises from the same transaction as Patti’s claims for delivery and lost profits. The damage to the truck does not.
- New Parties: A compulsory counterclaim cannot add new parties that the court cannot establish personal jurisdiction over. This usually will not happen in cases where one defendant counterclaims against the plaintiff and does not involve any other parties. The example above would not be affected by this rule.
- Not Pending: If a claim is already pending in another claim, it is not a compulsory counterclaim because the claims will likely be joined. This means that a compulsory claim cannot be pending in another action. For example, if Delia had filed a claim against Patti first, and then Patti filed her case, then Delia would not need to claim the $900 from Patti as a counterclaim.
- Personal Jurisdiction: For a counterclaim to be compulsory, the original claim must have appropriate established personal jurisdiction over the defendant bringing the claim. This means that the court can make decisions that affect the defendant. If there is no personal jurisdiction over the defendant, the counterclaim is not compulsory and the party will not lose the claim if they do not bring it. As long as Patti establishes personal jurisdiction over Delia, any claims that meet the other elements would be compulsory.
If these elements are fulfilled, a claim is compulsory. From the example, the claim for the $900 would be compulsory.
Permissive counterclaims are counterclaims that are not compulsory. These claims can be about anything as long as it is the defendant suing the same plaintiff. Bringing a permissive counterclaim will usually be allowed unless the original claim is a court of limited jurisdiction, such as a federal court. From the example above, the claim that Delia brought against Patti for the damage to the truck would be a permissive counterclaim, and would likely be allowed to be brought unless Patti filed in a court with limited jurisdiction.
How to Bring a Counterclaim:
Once a party has established that they have a counterclaim they would either like to bring or need to bring, they will need to understand how to bring a counterclaim. Fortunately, bringing a counterclaim is fairly simple. The party will only need to assert the counterclaim within the timeframe they have to answer. It may be included as a part of the answer; however, it will need to be served upon the original plaintiff because it is effectively starting another lawsuit within the original suit. Filing may have some specific rules depending on the jurisdiction, so it is often wise to check with a lawyer when attempting to file a counterclaim. To file her counterclaim, Delia’s attorney wrote an answer that included the partial payment as a defense to the contract claim and also asserted the $900 claim and the damage to the truck as a counterclaim. She served it upon Delia. Thankfully, because their working relationship was incredibly beneficial for both of them, they chose to use mediation and settle their dispute. Counterclaims often help put the dispute in perspective and can help both parties feel confident in what they need to resolve the dispute.