The Case Against Counterclaim Class Actions

Should a party that brings a simple lawsuit to collect an unpaid debt or for breach of contract run the risk of having that case transformed into a multimillion-dollar class action against it? That is one of the issues presented when a defendant responds to a lawsuit with a counterclaim that seeks relief on a class-wide basis. A number of state and federal courts have assumed, typically with little substantive analysis, that a class action can properly be pled in a counterclaim. See, e.g., Westwood Apex v. Contreras, 644 F.3d 799 (9th Cir. 2011) (affirming remand of a counterclaim class action without questioning the permissibility of such class actions). Many parties facing such a counterclaim fail to fully litigate the issue of whether class allegations should be allowed in response to a complaint. However, a counterclaim class action arguably violates the applicable rules of civil procedure and undeniably creates numerous unmanageable practical problems. Creative “solutions” to many of those practical problems often trample on the rights of the plaintiff or absent class members.