What is the difference between mandatory and permissive counterclaims in federal court?

The Federal Rules of Civil Procedure Distinguish Between Mandatory and Permissive Counterclaims

A counterclaim is where a party that is being sued, files a claim against its adversary in the same litigation. Typically, defendants assert counterclaims against plaintiffs. That is, the plaintiff initially sues the defendant and the defendant then counterclaims against the plaintiff (but crossclaims can also be filed as counterclaims). The court will then adjudicate plaintiff’s claim against the defendant and the defendant’s counterclaim against the plaintiff.

Rule 13 of the Federal Rules of Civil Procedure governs counterclaims in federal court. The Rule distinguishes between mandatory and permissive counterclaims. Defendants must assert mandatory counterclaims, otherwise defendants lose their right to assert these claims in any other litigation. Permissive counterclaims are claims that defendants may assert as counterclaims, but can choose not to if they prefer. A defendant may decide not to file a permissive counterclaim and instead start a new action as a plaintiff.

When is a counterclaim mandatory?

According to Rule 13(a), a counterclaim is mandatory if it arises from the (A) same transaction or occurrence of the opposing party’s claim AND (B) does not require adding another party over whom the court cannot assert jurisdiction.

For example, if Patty sues David for breach of contract, David would need to counterclaim against Patty in the same litigation for breach of the same contract. If David does not counterclaim against Patty for breaching the contract, he will lose that claim and never be able to sue Patty for breach of contract again. In this way, the Federal Rules require parties to litigate related claims in the same case before the same judge and jury.

To determine whether a counterclaim is mandatory, Courts will often ask whether the same evidence is relevant to plaintiff’s claim and defendant’s counterclaim or whether the claim and counterclaim raise the same issues of law and fact.

One point to keep in mind is that if an otherwise mandatory counterclaim would require adding a party over whom the court cannot assert personal jurisdiction, then the defendant is not required to assert the counterclaim. For example, let’s say a counterclaim by David against Patty cannot be adjudicated unless Terry is made a party to the case (see Rule 19). But if Terry is outside the court’s jurisdiction, then David does not have to assert the counterclaim against Patty.

When is a counterclaim permissive?

A counterclaim is permissive if it is not mandatory. A permissive counterclaim does not arise from the same transaction or occurrence as the opposing party’s claim.

For example, let’s say Patty sues David for breach of a contract for the sale of goods. Coincidentally, Patty and David were also in a car accident. A counterclaim by David against Patty based on the car accident would be permissive. There is no logical relationship between the two claims. The breach of contract claim and the car accident counterclaim raise different questions of law and fact and the evidence relevant to one claim would be unrelated to the other claim.

Under Rule 13, the car accident counterclaim is permissive and David may assert the counterclaim against Patty because the Rules favor resolving all disputes between the parties in one litigation. However, because the claim is permissive, David can choose to not assert the car accident counterclaim in this court and can assert it in a separate action.