Disputes about business can boil over to the point that litigation becomes unavoidable. If another party files a lawsuit against your company, you may have valid claims of your own arising from the same relationship or transaction. An experienced commercial litigation attorney in Troy can evaluate your position and determine whether filing a counterclaim strengthens your case, protects your interests, and improves your leverage in the dispute.
What Is a Counterclaim in Commercial Litigation?
In commercial litigation, a defendant (the party sued) may assert a counterclaim in their responsive filings. A counterclaim represents the defendant’s claims against the plaintiff who filed suit. Counterclaims allow defendants in commercial litigation to pursue affirmative relief for contractual violations or misconduct committed by the plaintiff, rather than simply defending against the plaintiff’s allegations.
Unlike other jurisdictions, Michigan does not have a compulsory counterclaim rule. As such, a defendant does not have to file a counterclaim that would qualify as a compulsory counterclaim in other jurisdictions (i.e., a claim arising from the same transaction or event giving rise to the plaintiff’s claim). However, should a defendant in Michigan choose to file one or more counterclaims, it must bring all the counterclaims it has relating to the transactions or occurrences giving rise to the asserted counterclaims.
Situations Where Filing a Counterclaim Makes Sense
A company may consider filing a counterclaim in commercial litigation in circumstances such as:
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The company wants to file some counterclaims, which would require it to file all counterclaims arising from the same transaction or events.
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The plaintiff breached the parties’ contract first, as counterclaims can show that the plaintiff caused the parties’ dispute or mitigate a defendant’s liability to the plaintiff on the plaintiff’s claims.
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The plaintiff engaged in misrepresentations, fraud, or bad faith, as counterclaims can bolster the company’s defense against the plaintiff’s claims or provide leverage in settlement discussions.
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The company has other losses arising from the parties’ transactions or relationship, such as unpaid invoices or defective or non-conforming goods.
Situations Where You Might Not File a Counterclaim
However, filing counterclaims may have adverse effects on a commercial litigation, such as:
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Escalating litigation costs or increasing the complexity of the case
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Exposing the company to additional discovery if counterclaims bring new issues into the case
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Undermining the company’s credibility due to weak or speculative counterclaims
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Allowing the plaintiff to move to stay (pause) or dismiss the counterclaims, or removal or transfer of the counterclaims to a different court
Practical Considerations Before Filing a Counterclaim
Best practices that companies should follow before deciding to assert counterclaims in commercial litigation include:
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Evaluate the strength of the counterclaims, including the availability of evidence or witnesses and the extent of losses.
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Consider the company’s objectives and the effects that asserting counterclaims may have on long-term business relationships or industry reputation.
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Review applicable arbitration clauses and choice-of-law/venue provisions in contractual agreements underlying the counterclaims.
Finally, companies should consult an experienced litigation law firm to:
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Review the strengths and weaknesses of counterclaims
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Assess the benefits of asserting counterclaims as part of the overall case strategy
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Understand how counterclaims may affect the company’s rights and remedies
Contact Our Troy-Based Firm Today for Guidance in Commercial Litigation
Has a party sued your company in a commercial dispute? Before you panic, it’s important to realize that you may have claims against that party as well. Contact August Law, PLLC today for an initial consultation with a Michigan commercial litigation attorney to discuss whether you should file a counterclaim in a commercial lawsuit.