Monday, February 27, 2017

Sample Answer--Essay IV

Sample Answer after the jump. Essays can be picked up outside my office.

My conclusion is that Count I is compulsory and Count II permissive. But over the 10 essays, we got every combination in addition to mine: Both compulsory, both permissive, and Count I permissive and Count II compulsory.

Look to economize with your words. Instead of, "As FRCP 13(b) tells us, a permissive counterclaim is one that is not compulsory."  Instead, how about "A permissive counterclaim is one that is not compulsory. FRCP 13(b)"

And definitely keep yourself out of the argument. Not "I will argue ____" or "Next I will turn to Rule 13". Just argue ___.

Section A: Mean 17.7; Median 18
Section C: Mean 13; Median 15

Again, if you are at or below the mean or median on any of these (or even above it), please come see me.


Klein and JLA v. Goldsmith

Counterclaim I, for breach of fiduciary duty based on failure to put forward good-faith efforts to get Goldsmith new jobs, is compulsory and must be included in the Answer. Counterclaim II, for breach of fiduciary duty based on disclosing the terms of Goldsmith’s contract with Dos Equis in the Complaint, is permissive, thus we can include it in the Answer or bring it in a separate civil action.

A counterclaim is a claim brought by one party against an opposing party, FRCP 13(a), (b)--in this case, by Goldsmith against the plaintiffs, Klein and JLA, who had previously asserted claims for breach of contract against him, making them opposing parties.

The Federal Rules recognize two types of counterclaims. A compulsory counterclaim is one that the party has at the time of pleading that arises out of the transaction or occurrence that is the subject matter of the opposing party’s claim and does not require adding another party over whom the court cannot acquire jurisdiction. FRCP 13(a)(1)(A), (B). A party must assert a compulsory counterclaim in its pleadings in the current action or the claim will be barred by res judicata from being brought in a future lawsuit. In addition, certain jurisdictional consequences attach to a compulsory counterclaim. A counterclaim need not be brought, even if FRCP 13(a)(1) is satisfied, if it was the subject of “another pending action” when the action was commenced. FRCP 13(a)(2)(A). A permissive counterclaim may, but need not, be brought against an opposing party; a permissive counterclaim is “not compulsory,” meaning it does not arise out of the same transaction or occurrence as the original claim. FRCP 13(b).

Related counterclaims must be brought in a single action to allow the court to resolve a real-world controversy or dispute based on one basic set of facts between two opposing parties, avoiding multiple litigation involving these parties over one set of events. Unrelated counterclaims may be brought to make possible peace between two parties—to resolve all disputes they may have within a single lawsuit.

In determining whether a party’s counterclaim arises out of the transaction or occurrence as the opposing party’s claims, courts apply the “logical relationship” test. The standard in FRCP 13(a(1)(A) is the same as for joinder of parties under FRCP 20(a). The question is whether there is a logical relationship between the facts and events giving rise to the counterclaims as to the opposing party’s claims. As the Second Circuit explained, this does not require “absolute identity of factual backgrounds,” but only that the “essential facts are so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit.” Jones. Where the facts needed to prove the claims and counterclaims are closely related, a single lawsuit over those facts yields judicial efficiency. Jones.

Klein and JLA’s claims arose out of the contractual and business relationship with Goldsmith, specifically Goldsmith’s failure to pay required commissions from 2015 and most of 2016.

Counterclaim I arises out of that same transaction or occurrence. All relate to the agent-client relationship between Goldsmith and Klein/JLA and the respective obligations each side incurred—Klein’s and JLA’s obligation to represent Goldsmith well and to find work for him, Goldsmith’s to pay 10% of his earnings. The claims and counterclaim seek to enforce respective obligations from the same contract. The facts, grounded in that business relationship, are so logically connected that judicial economy suggests that one civil action be used to resolve all disputes arising from JLA’s representation of Goldsmith. In addition, no other party is necessary to litigate this counterclaim and the counterclaim was not the subject of another pending action. It therefore is compulsory under FRCP 13(a).

Counterclaim II does not arise out of the same transaction or occurrence, making it permissive. It does not arise out of Goldsmith’s business relationship with defendants and the essential facts do not relate to the plaintiffs’ representation of Goldsmith. Instead, it arises from plaintiffs disclosing terms, conditions, and details of Goldsmith’s contract with Dos Equis by quoting from the contract in the Complaint in this lawsuit and attaching the contract to the pleading. Those are separate real-world events and facts from the agent-client relationship.

This counterclaim arises from events occurring “downstream” from an earlier event: Some action occurs injuring plaintiff, the injured plaintiff files suit or takes other steps to vindicate her rights and remedy her injuries, and those steps give rise to the defendant’s counterclaim. Courts consistently treat such counterclaims as permissive, because a plaintiff’s actions to remedy her injury are not logically related to the earlier actions causing that injury in the first place. The only relationship is a “but-for” connection: Goldsmith’s non-payment of commissions led plaintiffs to file the lawsuit in which they disclosed terms of the Dos Equis agreement, which constitutes the alleged breach that forms the basis for the counterclaim. But such a but-for relationship is not the type of logical relationship that FRCP 13(a) contemplates. Jones.

This case is similar to Bose Corp. Bose sued for trademark infringement and unfair competition and issued a press release announcing the lawsuit. Defendants brought counterclaims for defamation (based on allegedly false statements in the contemporaneous press release) and abuse of process (alleging that the claims were tortious). The court held these counterclaims were permissive, as they arose from the filing of the lawsuit and events surrounding the filing, a separate set of real-world events from the plaintiff’s conduct that injured plaintiffs in their trademark. Similarly here, Counterclaim II arises from plaintiffs’ lawsuit and the confidential information they disclosed in the Complaint. That involves a separate set of real-world events from Goldsmith’s alleged failure to pay commissions owed or JLA’s failures of representation. They are not the same transaction or occurrence, making this a permissive counterclaim.