Bench Bar Committee Mandatory Counterclaim Proposal

Should Wisconsin Change its Counterclaim Statute?

Pro: The Bench Bar Committee proposal removes guesswork as to what claims are mandatory counterclaims and provides finality and equity by ensuring certain claims are litigated when they should be.

By Donald Leo Bach

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Suppose you have a client who has just been sued in circuit court. The client advises you that she has a claim against the suing party. As a good lawyer you do what you were taught in law school, go to the statute book, find the one on counterclaims - section 802.07 - and read it. The statute tells you that a defendant "may counterclaim any claim which the defendant has against a plaintiff." You conclude that in Wisconsin counterclaims are permissive, and you advise the client that she does not have to bring a counterclaim in this lawsuit if she does not wish to do so.

But wait. Have you read A.B.C.G. Enterprises Inc. v. First Bank Southeast N.A., 184 Wis. 2d 465, 515 N.W.2d 904 (1994)? In that case, the Wisconsin Supreme Court held that the principles of res judicata (claim preclusion) preclude a defendant who could but did not counterclaim in a prior action from bringing a later action on the claim if it "would nullify the initial judgment" or "impair rights established in the initial action."

Thus, the current counterclaim statute sets a trap for the unwary; while that statute indicates that a party may counterclaim, the result in A.B.C.G. indicates that there are, in fact, certain instances where a party must counterclaim.

As a result of this situation, last year the State Bar Bench Bar Committee surveyed 1,559 State Bar members - including 1,154 lawyers and 405 judges - on counterclaims (and other issues). The survey asked, in view of case law, whether Wisconsin should mandate counterclaims in chapter 802 of the Wisconsin Statutes. Of those expressing an opinion (57 percent of respondents expressed no opinion or gave no response), 68 percent agreed to some degree that Wisconsin should mandate counterclaims by statute. Judges were more likely than lawyers to agree with this opinion.

In view of this survey response and because of the potential malpractice trap present, the Bench Bar Committee and its legislative subcommittee believe that action should be taken. The legislative subcommittee considered several possible alternatives to address the situation: 1) attempt to codify the A.B.C.G. case; 2) overturn A.B.C.G. by statute; and 3) conform the Wisconsin counterclaim statute to the Federal Rules of Civil Procedure counterpart.

Federal Rules of Civil Procedure Rule 13(a) provides that a pleading shall state as a counterclaim any claim which at the time of serving the pleading the pleader has against any opposing party, if it arises out of the transaction or occurrence that is the subject matter of the opposing claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. Federal Rules of Civil Procedure Rule 13(b) indicates that any claim against an opposing party not arising out of the transaction or occurrence that is the subject matter of the opposing claim is a permissive counterclaim.

The legislative subcommittee believes, and the Bench Bar Committee agrees, that the most desirable option is to conform Wisconsin practice to the federal requirements.

The Bench Bar Committee believes Wisconsin practice should conform to the federal requirements because the current situation is unacceptable especially for newer lawyers who may not have come across A.B.C.G. Further, use of the federal rule involves less "guesswork" as to what claims are or are not mandatory counterclaims and provides finality and equity by ensuring certain claims be litigated when they should be.

Though the statutes indicate the opposite, certain counterclaims already are mandated by way of case law. Further, the State Bar Litigation Section has overstated, in its opposition, the "specter" of having to decide whether to bring a counterclaim within 45 days. First, 45 days is not an unreasonable period to perform an investigation. Second, courts routinely set much later dates for amendments of pleadings in Scheduling Orders including the assertion of counterclaims. Third, section 802.09 of the Wisconsin Statutes allows a party to amend pleadings within six months without leave of the court.

The Bench Bar Committee's proposed rule solves the potential malpractice problem, eliminates much if not all of the guesswork under A.B.C.G. as to what counterclaims must be brought, and serves judicial efficiency by ensuring that the parties litigate the claims they have against each other arising out of the same transaction or occurrence.

Donald Leo Bach, U.W. 1974 cum laude, chairs the State Bar Bench Bar Committee - a committee of lawyers and judges tasked with evaluating and making recommendations for changes in Wisconsin's justice system. Bach is a shareholder in DeWitt Ross & Stevens S.C., Madison.

Wisconsin Lawyer