Also known as: recoupments
Written by attorneys · grounded in primary & secondary sources — see below
A defensive claim or right that permits a defendant to reduce the amount of the plaintiff's recovery by the amount of a claim arising out of the same transaction that gave rise to the plaintiff's claim.
Ridgeway Partners supplied defective parts to Radiant Technologies under a supply contract. Radiant assigned its right to payment to Reliance Insurance. When Reliance demanded payment, Radiant asserted that the parts failed and caused production losses. The court permitted Radiant to reduce the amount owed to Reliance by the repair costs arising from the same supply transaction.
After conviction, the state ordered Riley Rivera to repay the cost of appointed counsel. Rivera challenged the recoupment statute because it denied him exemptions available to civil judgment debtors. The court held the statute violated equal protection by treating criminal debtors differently without sufficient justification.
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Phillips Petroleum increased gas prices pending regulatory review and required royalty owners to post bonds against possible customer refunds. A royalty owner refused and sued. The court examined whether the indemnity demand functioned as an impermissible recoupment mechanism that chilled the royalty owners' rights.
Renee Rogers and other tenants withheld rent after their landlord failed to correct hundreds of housing code violations. The landlord sued for possession. The tenants offered evidence of the violations as a claim in recoupment to reduce the rent owed, and the court allowed the defense because the violations arose from the same lease transaction.
Ravi Reddy sold mortgaged property and claimed a basis that included the full mortgage amount for computing gain. The Commissioner argued the equity alone should be the basis. The court analyzed whether allowing full basis would permit improper recoupment of depreciation deductions previously taken on the mortgage portion.
Ryan Roberts could not pay divorce filing fees and sought a waiver. The state statute required repayment of fees after judgment. Roberts argued the recoupment requirement unconstitutionally conditioned access to the courts on ability to pay. The court examined whether the recoupment scheme violated due process by denying access to indigents.
Recoupment requires that the offsetting claim arise from the same transaction as the plaintiff's claim, while setoff may arise from a different transaction. Recoupment is purely defensive and cannot produce an affirmative judgment for the defendant.
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No. Under UCC § 9-404(a)(1), the assignee's rights are subject to any claim in recoupment arising from the transaction that gave rise to the assigned contract, even after notification of the assignment.
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No. A claim in recoupment may be asserted only to reduce the amount the plaintiff recovers. The defendant cannot obtain a net money judgment against the plaintiff on the recoupment claim alone.
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No. Unlike setoff, which is stayed under section 362, recoupment is not subject to the automatic stay because the claims must arise from the same transaction and therefore do not involve a post-petition setoff of independent debts.
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…petitioner suspended any increase in royalties paid to the royalty owners because the higher price could be subject to recoupment by petitioner's customers. Petitioner agreed to pay the higher royalty only if the royalty owners would provide petitioner with a bond or indemnity for the increase, plus interest, in case…