Small Claims Guide

A defendant has a very powerful tool in his or her arsenal: the counterclaim.

A counterclaim is just as it sounds; it is a claim by the defendant against the plaintiff that is filed and served following the plaintiff’s original claim. The counterclaim must be written and must be filed with the court and served on the plaintiff–one cannot raise a counterclaim at the hearing. Once a counterclaim is raised, the plaintiff becomes both plaintiff and defendant, and the defendant becomes both defendant and plaintiff. A counterclaim can also include additional parties that were not defendants in the underlying claim.

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A counterclaim differs from an ordinary claim in several respects. First, a counterclaim is merged with the underlying claim; both claim and counterclaim bear the same case number and are heard at the same hearing. Thus, the cases will be heard by the same judge and according to the same evidence. Second, counterclaims are usually dependent upon their underlying claims. Such counterclaims are said to be “compulsory” counterclaims. A defendant may lose the right to ever bring her compulsory counterclaim unless she brings it as a counterclaim to the specific underlying claim brought by the plaintiff. A counterclaim tends to be compulsory if it involves only the parties currently part of the underlying suit, and arises from the same transaction or event of the underlying suit. In other words, if the counterclaim is closely related to the underlying claim, the counterclaim is compulsory and the two claims must be heard together. The reasoning behind making counterclaims compulsory is to conserve judicial resources; the court won’t have to hear the same case twice.

There is a third reason why counterclaims differ from ordinary claims. A claim and a counterclaim will be reduced to one judgment. A counterclaim, if successful, will be subtracted from the underlying judgment, thereby reducing the total amount of the underlying judgment. That is fundamentally different from having two independent judgments. Two independent judgments must be collected independently; one judgment might not be collectible due to the insolvency of one of the defendants while the other judgment would be collectible. This would hardly be fair to the litigant with an uncollectible judgment.

Some counterclaims are “permissive.” A permissive counterclaim is one that may be brought but yields no waiver of rights if it is not brought. Permissive counterclaims are claims that arise independently from the transaction of the underlying claim. The common example given in law schools to illustrate a permissive counterclaim is the negligent creditor: John owes Mary $1000 on a business debt and Mary negligently strikes John’s car while driving. John has a claim against Mary for the car accident, and Mary has a claim against John for the debt. The transactions are unrelated though, so the counterclaim is permissive and not compulsory. The counterclaim can be brought either as a wholly independent claim or as a counterclaim. This flexibility may help the defendant’s legal strategy. The defendant may have the case heard in another court at a different time. In fact, all of the questions of venue and parties and jurisdictional limits arise independently.

Counterclaims are common in car accidents and contract disputes. Contract disputes yield counterclaims when both parties can usually make some assertion that the opposing party was first to breach. Car accidents yield counterclaims when both drivers can make a reasonable argument that the accident was the fault of the other driver.

An important warning that plaintiff’s must always consider is that once a plaintiff brings a claim, the risk of drawing a claim in the form of a counterclaim goes up tremendously. Consider it for a moment. When a defendant is served with a lawsuit he or she is already obligated to appear in court, to take time from work, to testify, to bear the risk of paying a judgment, etc. Two dynamics come into play. First, the defendant likely intends to appear in court anyway. Adding a counterclaim is simply a matter of inserting a few lines on a blank counterclaim form and maybe adding some testimony at the hearing. In other words, the convenience threshold for a counterclaim is very low. The second dynamic is the more important one. When a defendant is served with a lawsuit — small claims or otherwise — he or she will experience a range of emotions. Those emotions will likely be a volatile mix of anger, fear, and desire for revenge. The defendant will want to strike back as well as minimize their exposure to liability. A counterclaim is an easy way to answer these concerns.

Of course, a defendant must have a sufficient claim in order to be successful. If you were defendant and you wish to bring a counterclaim, first you must obtain a blank counterclaim form. You can get this form from the court clerk or sometimes on the Internet. When evaluating a counterclaim you need not consider jurisdiction or venue. If the court has jurisdiction over the underlying claim and venue is proper, than jurisdiction and venue are presumed for the counterclaim. There is another strategic consideration. If a counterclaim exceeds the jurisdictional limit of the small claims court then the entire matter, both counterclaim and underlying claim, will likely be transferred out of the small claims court and to an upper court.

Finally, always bear in mind that a counterclaim must be properly filed with the court and must be served on all opposing parties to the counterclaim.

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