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, lose the claim, or be able to wait and get the claim later. Understanding these concepts will help parties present the best case for themselves and be prepared when a potential counterclaim 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 a counterclaim 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.
Counterclaim Explained:
A counterclaim is a claim that arises in a civil case where the defendant has a claim against the plaintiff, meaning that they could recover damages that the plaintiff caused them. This claim is made to offset or rebut the original claim 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 who 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 admit the claims.
Counterclaims arise when the defendant has a legally enforceable right against the plaintiff and chooses to assert that right. Two kinds of counterclaims will be discussed below, but all counterclaims function essentially as a lawsuit against the plaintiff.
Counterclaims are often confused with crossclaims, another kind of plaintiff’s claim that can be brought in a lawsuit. Counterclaims cross the lines of the dispute, while crossclaims arise when 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, 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 focuses solely on counterclaims, which are the claims brought by a defendant against a plaintiff.
An Example:
Let’s consider the following example to further aid in understanding a counterclaim. Patti and Delia are work associates. Patti owns a bakery that produces the best croissants in town. Her croissants are 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 standard $1000. Because the payment was only 10% of what Patti owed, Delia decided she would 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 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 being unable 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 caused the truck to 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 States, 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:
Compulsory counterclaims must be brought simultaneously 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 the claims must concern the same or a 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 over which the court cannot establish personal jurisdiction. This usually does 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 mandatory 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:
Permissive counterclaims are counterclaims that are not compulsory. These claims can be about anything as long as the defendant is suing the same plaintiff. A permissive counterclaim will usually be allowed unless the original claim is in a court of limited jurisdiction, such as a federal court. From the example above, Delia’s claim against Patti for the damage to the truck would be a permissive counterclaim. It 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 a counterclaim, they would either like to bring it or need to. 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 must 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 filing 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 asserted the $900 claim and the damage to the truck. She served it upon Delia. Thankfully, because their working relationship was incredibly beneficial for both of them, they used mediation to settle their dispute.
Conclusion:
Counterclaims often help put the dispute in perspective and can help both parties feel confident in their ability to resolve it. To see more counterclaim examples and dispute resolution options, contact ADR Times!
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