Pace v. Timmermann's Ranch & Saddle Shop, Inc. - 795 F.3d 748 (7th Cir. 2015)

Rule:

Fed. R. Civ. P. 13 and 20, in combination, do not compel a litigant to join additional parties to bring what would otherwise be a compulsory counterclaim.

Facts:

In 2011, Timmermann's Ranch and Saddle Shop brought an action against its former employee, Jeanne Pace, for conversion, breach of fiduciary duty, fraud, and unjust enrichment. Pace filed her answer and a counterclaim in early 2011. In 2013, Pace and her husband, filed a separate action against Timmermann's and four of its employees (“individual defendants”), alleging that the defendants had conspired to facilitate Pace’s false arrest. Pace alleged that, as a result of their actions, she had suffered severe and extreme emotional distress. Subsequently, Pace filed a motion to consolidate the two actions. The court granted the motion with respect to discovery, but denied the motion with respect to trial and instructed Pace that she should request consolidation for trial after the close of discovery. In the midst of discovery, however, the district court dismissed Pace’s 2013 action after concluding that her claims were actually compulsory counterclaims that should have been filed with her answer to the company's 2011 complaint. Pace appealed. 

Issue:

Were Pace’s claims against the individual defendants compulsory counterclaims? 

Answer:

No.

Conclusion:

The court held that Pace’s claims against parties other than Timmermann's were not compulsory counterclaims because Federal Rules of Civil Procedure 13 and 20, in combination, did not compel a litigant to join additional parties to bring what would otherwise be a compulsory counterclaim. The court further held that Pace’s claim for abuse of process against Timmermann’s arose prior to the filing of her counterclaim, and thus, it was a mandatory counterclaim. The court affirmed in part and reversed in part the judgment of the district court and remanded for further proceedings.