Fed. R. Civ. P. 13 distinguishes between "compulsory" and "permissive" counterclaims. If the defendants' claim arises out of the transaction or occurrence that is the subject matter of the opposing party's claim, then, if certain other requisites are met, it is compulsory. By definition, compulsory claims are ancillary to the claim asserted in the complaint and no independent basis of federal jurisdiction is required. Alternatively, if the counterclaim is unconnected with the transaction out of which the primary claim arose, it is permissive, and independent jurisdictional grounds are required.
The Plaintiff union member alleged that during union meetings he was prevented from exercising his right to freedom of speech and was denied his request to have the union membership informed of their rights. Defendants alleged that the union member stated that the Mafia dominated the union. They counterclaimed for libel, slander, and abuse of the processes of law. The union member sought to dismiss the counterclaim for lack of subject matter jurisdiction. The court granted the union member's motion to dismiss defendants' counterclaim for lack of subject matter jurisdiction.
Whether Defendants’ counterclaim arises out of the same transaction or occurrence that is the subject matter of the Plaintiff’s claim?
Challenges to the court's subject matter jurisdiction could be raised at any time. Further, defendants' counterclaim was based on wholly different issues from the union member's claim, and the evidence necessary to dispose of the opposing claims was different, so the counterclaims were permissive rather than compulsory. Because the counterclaims were permissive, there was no diversity between the parties, and the issues were grounded solely in state law; therefore, the court was without subject matter jurisdiction to hear the counterclaim. Lastly, defendants' counterclaim did not fall within the set-off exception to the jurisdictional requirement because the damages were based on tort and were not liquidated.