Thank You For Submiting Feedback!
In determining whether a court has supplemental jurisdiction over a counterclaim, the United States Court of Appeals for the Fourth Circuit has traditionally distinguished between compulsory counterclaims, which must be stated by a defendant in its answer, and permissive counterclaims, which need not be. Fed. R. Civ. P. 13. The Fourth Circuit has held that, absent an independent basis of jurisdiction, a federal court has supplemental jurisdiction over a compulsory counterclaim but not a permissive counterclaim. Painter v. Harvey, 863 F.2d 329, 331 (4th Cir. 1988); Whigham v. Beneficial Finance Co., 599 F.2d 1322 (4th Cir. 1979)
In May 2013, Plaintiff Billy Ginwright entered into a contract with BW Auto Outlet of Hanover, Maryland to finance the purchase of a vehicle. Within the contract, BW Auto Outlet assigned all of its rights under the contract to Defendant Exeter Finance Corporation ("Exeter"). Ginwright filed this action against Exeter for violations of the Telephone Consumer Protection Act ("TCPA"), 47 U.S.C. § 227 (2012), and the Maryland Telephone Consumer Protection Act ("MTCPA"), Md. Code Ann., Com. Law §§ 14-3201 to -3202. In his Complaint, Ginwright alleges that in seeking to collect a debt under the contract, Exeter called Ginwright's cellular phone "hundreds of times" by means of an automatic dialing system. Ginwright maintains that Exeter made the calls for non-emergency purposes and without his prior express consent. He also asserts that he repeatedly told Exeter to cease calling him, to no avail. Rather, Exeter representatives told him that they would not stop calling his cellular phone, and that the calls would continue through the automatic dialing system. As a result, with rare exceptions, Ginwright received three to seven calls from Exeter every day between December 4 and December 17, 2014; March 5 and April 29, 2015; and May 10 and June 5, 2015. In its Counterclaim, Exeter alleges that Ginwright breached the original contract when he failed to make car payments, requiring Exeter to repossess the vehicle. Exeter contends that, following the sale of the vehicle and the application of the sale proceeds to the full amount owed, Ginwright owed a remainder of $23,782.17 under the contract as of May 3, 2016. Ginwright is seeking dismissal of the counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction. Ginwright asserts that Exeter has failed to assert any independent basis for jurisdiction over the counterclaim and that this Court may not exercise supplemental jurisdiction over the counterclaim because it is a permissive counterclaim. Exeter counters that, since the enactment of 28 U.S.C. § 1367, a court may exercise supplemental jurisdiction over a permissive counterclaim, and that, in any event, its counterclaim is compulsory.
Should the counterclaim be dismissed for lack of subject matter jurisdiction?
The court held that it is the burden of the party asserting jurisdiction to show that subject matter jurisdiction exists. Rule 12(b)(1) allows a party to move for dismissal when it believes that the claimant has failed to make that showing. When a plaintiff asserts that the facts alleged in a counterclaim are not sufficient to establish subject matter jurisdiction, the allegations in the counterclaim are assumed to be true under the same standard as in a Rule 12(b)(6) motion, and "the motion must be denied if the [counterclaim] alleges sufficient facts to invoke subject matter jurisdiction." In asserting its counterclaim, Exeter does not allege that the Court has federal question jurisdiction, or diversity jurisdiction. Rather, Exeter asserts that jurisdiction is proper under the supplemental jurisdiction statute. In determining whether a court has supplemental jurisdiction over a counterclaim, the United States Court of Appeals for the Fourth Circuit has traditionally distinguished between compulsory counterclaims, which must be stated by a defendant in its answer, and permissive counterclaims, which need not be. The court continues to apply the rule that a federal court has supplemental jurisdiction over compulsory counterclaims only. Applying the four inquiries in assessing whether a counterclaim is compulsory or permissive, the Court concludes that Exeter's counterclaim is permissive. Having concluded that Exeter's counterclaim is permissive, the Court concludes that it must be dismissed for lack of jurisdiction.