Transactional Relatedness

Transactional Relatedness

A crossclaim must be tied to the lawsuit already before the court. Rule 13(g) lets a pleading state a claim against a coparty "if the claim arises out of the transaction or occurrence that is the subject matter of the original action or of a counterclaim, or if the claim relates to any property that is the subject matter of the original action."¹ That sentence offers three anchors joined by "or," and a claim needs only one of them: the transaction or occurrence behind the original action, the transaction or occurrence behind a counterclaim, or property the original action concerns.

Relatedness works as a filter separate from the coparty requirement. The coparty requirement decides who may be the target of a crossclaim; this requirement decides what the claim may be about. A claim against an undisputed coparty still fails when it connects to none of the three anchors. The filter also separates a crossclaim from a permissive counterclaim. An unrelated claim against an opposing party may be asserted as a permissive counterclaim, but only claims related to the subject matter of the original action, or to property involved in it, are appropriate as crossclaims.²

Transaction or Occurrence

"Transaction or occurrence" means the same thing in Rule 13(g) that it means for compulsory counterclaims. Rule 13(a) asks whether a counterclaim "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim,"³ and the same criterion decides when a crossclaim may be pleaded and when a counterclaim must be.⁴ The test of logical relation, now authoritatively accepted as the measure of the phrase in Rule 13(a), applies equally in Rule 13(g).⁵

Great Lakes Rubber Corp. v. Herbert Cooper Co. put that test in functional terms. Claims are logically related when separate trials on each would involve a substantial duplication of effort and time by the parties and the courts. The usual signs are that the claims involve many of the same factual issues, or the same factual and legal issues, or are offshoots of the same basic controversy.⁶ The decision framed the point for counterclaims, and Rule 13(g) takes over the same test.

Courts sometimes ask instead whether the same evidence, or the same issues of fact and law, would be litigated in both claims. That formulation comes closer to a functional account, but in the compulsory-counterclaim setting it asks a defendant to judge the evidence at the point of answering, before discovery has shown what the evidence will be. Courts have ultimately left the flexible logical-relationship test standing rather than replace it with a formula.⁷ A pleader should therefore judge relatedness by overlap in the issues the court will actually have to decide.

The rule receives a broad construction. As with the other joinder rules, it is more desirable to permit broad joinder at the pleading stage and to order separate trials later if sound judicial administration so dictates.⁸ A crossclaim nonetheless stays optional: even though the test resembles the one for compulsory counterclaims, a party always has discretion to assert the claim as a crossclaim or to reserve it for later independent litigation.⁹ The rulemakers chose differently for compulsory counterclaims. They concluded that the principle that a party is master of its own claim was outweighed by the advantage of litigating the same facts and issues between the same parties in a single action.¹⁰ The test is the same in both settings, but the consequence of passing it is not.

Relatedness also surfaces in jurisdictional reasoning. In Crouse-Hinds Co. v. InterNorth, Inc., the court agreed with the district court that the claim and the counterclaim arose out of the same transaction, and it identified Moore v. New York Cotton Exchange as the leading case on ancillary jurisdiction.¹¹ The section on jurisdiction over crossclaims returns to that link.

Two claims by Deborah against Dell in Pete's suit over a drag-racing accident show where the line falls. Her claim for $30,000 in damage Dell caused to her car in the accident arises from the occurrence Pete sued over, so it is a proper crossclaim. It need not ask Dell to reimburse her for anything Pete recovers. The first sentence of Rule 13(g) reaches any claim that arises from the underlying events, and the second sentence separately lets a crossclaim include a claim that the coparty is or may be liable for all or part of the claim asserted against the crossclaimant.¹² Her claim that Dell breached a separate contract by refusing to sell her his house is unrelated to the accident and does not involve the same transaction or occurrence, so it cannot be a crossclaim. It cannot be a counterclaim either, because Dell has asserted no claim against her. She would have to sue on it separately, and that suit would need its own basis for subject-matter jurisdiction.¹³

A contingent claim raises no separate transactional question when it grows from the same events. In one decision the Government did not dispute that Superior's cross-claim arose out of the same occurrence that was the subject matter of the plaintiff's original action; the cross-claim was contingent on the plaintiff obtaining a judgment against Superior.¹⁴ The section on claims for liability over takes up such claims directly.

A shared accident does not settle relatedness by itself, because the comparison runs between the crossclaim and the claim actually pleaded in the main action. Suppose an insurer sues for a declaration that it owes nothing on a policy for an accident and names the insured and the injured person as codefendants, and the injured person crossclaims against the insured for her injuries. If the insurer's claim turns on who controlled the car and the insured raises that same issue against the injured person, the two claims share a central factual issue and are logically related. If the insurer's claim turns instead on whether the policy's terms reach the accident, the investigation for that claim and for the injury claim may involve entirely different factual and legal issues, and the test is not met.¹⁵

The counterclaim anchor matters most for coplaintiffs. They technically fall within the language of the crossclaim rules,¹⁶ but a plaintiff ordinarily cannot crossclaim against a fellow plaintiff. Once a counterclaim is asserted against both plaintiffs, they may crossclaim with regard to its subject matter.¹⁷ Two plaintiffs who sue a driver and face a counterclaim alleging that each helped cause the collision, for instance, may plead claims against each other that arise from that collision.

A claim that fails the requirement cannot stand alone as a crossclaim, but it is not necessarily lost. Once a proper Rule 13(g) crossclaim is in the case, Rule 18(a) may allow the pleader to join independent, unrelated claims with it, as the next subsection shows.¹⁸

Property in Dispute

Rule 13(g) offers a second way to tie a crossclaim to the pending case: the claim may be stated against a coparty "if the claim relates to any property that is the subject matter of the original action."²⁰ The word "or" joins that clause to the two transactional anchors, so the property clause is an alternative route that carries no added burden. A claim that grows from the underlying transaction qualifies, and so does a claim that relates to the property the case concerns. The pleader needs only one. Some suits are fights over a thing, and in those suits the property itself shows what the case is about.

Interpleader gives the cleanest example. It lets a person who risks multiple liability require two or more people with conflicting claims against him to assert those claims in a single action. If Bank A holds a deposit to which B and C have claims adverse to each other's, the bank, as stakeholder, may bring interpleader against B and C as claimants.²¹ The deposit then becomes the subject matter of the lawsuit. B and C are coparties, because a coparty is any party who is not yet an opposing party to the other, and neither has yet pleaded a claim against the other.²² If B now pleads against C a claim asserting superior rights in the same deposit, the claim relates to property that is the subject matter of the original action, and B need not separately show a transactional link.

The clause fits the design of interpleader. The device exists to force competing claimants into one action,²³ and letting claims about the same stake be pursued elsewhere would be at odds with that design. The clause does not loosen the limit on unrelated claims, however. Only claims related to the subject matter of the original action, or to property involved in it, are appropriate crossclaims.²⁴

The limit appears in First National Bank of Cincinnati v. Pepper, an interpleader action in which three cross-claims were asserted. The first two were conceded to be proper under Rule 13(g). The third was asserted by Mrs. Arlinghaus alone, who sought recovery of a sum she had paid Pepper for unrelated services to her husband's estate, of which she was executrix, and to which Pepper was allegedly not entitled. The district court dismissed it. Since the first two cross-claims had been dismissed, the court reasoned that it had no jurisdiction over the third, because the claim did not arise out of the transaction or occurrence that was the subject matter of the original interpleader action.²⁵

The reviewing court reinstated the third cross-claim, but it rested the result on a different rule. It had reinstated the first and second cross-claims, so Rule 18(a) allowed a party asserting a proper Rule 13(g) cross-claim to join with it as many independent, unrelated cross-claims as it had against an opposing party. The district court kept its discretionary power to sever any claim under Rule 21.²⁶ The opinion treats the services claim as independent and unrelated, so it could not have entered the case on Rule 13(g) alone. The later section on unrelated claims takes up Rule 18(a) in full.

B's claim and Mrs. Arlinghaus's claim isolate the deciding fact. Both ran between parties already in the same interpleader, so the identity of the target was not the difference. B's claim concerns the stake the court is administering, while the payment for services to a husband's estate concerns neither the stake nor the events that produced the suit. A claim between parties in an interpleader is not related merely because they share a caption. The question is whether it concerns the property in dispute or the transaction or occurrence that underlies the case.