Under Fed. R. Civ. P. 13(a) a counterclaim is compulsory if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim. In practice this criterion has been broadly interpreted to require not an absolute identity of factual backgrounds for the two claims, but only a logical relationship between them.
Plaintiff was a subcontractor on two contracts, one was a federal government contract, and the other was non-federal. The subcontractor sued defendants, the prime contractor and its surety, under the Miller Act to recover payments due on the government job. The prime contractor counterclaimed for overpayments and the extra costs of completing both contracts. The subcontractor denied liability on the prime contractor's counterclaims and interposed a reply counterclaim to recover from the prime contractor monies alleged to be due on the non-federal contract. The jury awarded a verdict for the subcontractor, and judgment was rendered against the prime contractor. The district court denied motions for judgment notwithstanding the verdict and for a new trial. The case was appealed to the United States Court of Appeals for the Second Circuit.
Was the judgment proper?
The Court affirmed, holding that the counterclaims were compulsory within the meaning of Fed.R. Civ. P. 13(a), giving the district court jurisdiction. Under Fed.R. Civ. P. 13(a), a counterclaim is compulsory if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim. Thus, the district court did not commit reversible error in admitting certain evidence or in its jury instructions.