Greene v. U.S. Dept. of Education

Summarized by Kurt Carlson , Carlson Dash LLC
11 years 4 months ago

Citation:

Greene v. U.S. Dep't of Education, Case No. 13-3257 (7th Cir. Oct. 27, 2014) (unpublished)

Tag(s):

Ruling:

The reasons for making some counterclaims compulsory are to prevent harassment by the filing of repeated claims and to avoid duplicative litigation. Stating that any counterclaim that ultimately arises out of the same transaction or occurrence must be filed or lost may well result in "infinite regress". Accordingly, the Court ruled that the Department of Education's counterclaim seeking repayment of a student loan debt was not compulsory to an individual's claim for debt discharge because the common origin shared by the two claims was too remote.

Procedural context:

The former student-cum debtor, brought an adversary proceeding in 2005 to cancel a student loan debt. based on a theory of undue hardship. The Dept. of Education did not bring a counterclaim for repayment of the same debt, but rather blocked the discharge. The debtor's request for discharge was denied at the trial and appellate levels. Thereafter, the Dep't pursued the alternative remedy in Indiana of garnishing debtor's wages. The student then filed action to enjoin the Dep't from collecting the debt, asserting that the Dep't could have and should have filed a counterclaim when the debtor filed his adversary proceeding. In the action for injunction, the Dep't filed its counterclaim and judgment was entered in the Dept's favor.

Facts:

A debtor sought discharge of his student loan debts, though the Dept. had yet to commence any enforcement action to collect those debts in 2005, when the debtor brought his adversary proceeding. The discharge was denied at the trial and appellate levels. Thereafter, the Dep't brought garnishment action against the former debtor. Once that occurred, the debtor filed an action to enjoin the action on the basis that FRCP 13(a)(1) provides that "a pleading must state as a counterclaim any claim that--at the time of its service--the pleader has against the opposing party if the claim: (A) arises out of the transaction or occurrence that is the subject matter of the opposing party's claim." The court determined that there was good reason for the Dep't to have not brought a counterclaim at the time of the adversary proceeding, not the least of which was its reasonable belief that it would obtain repayment without further litigation, or because the debtor shed itself of other debts with a discharge, the debtor would now be able to service the student loan debt. The Dep't asserted its counterclaim in the face of the injunction action in 2010, but the debtor believed it should have been raised when he filed his adversary in 2005. The court found that purpose of the compulsory counterclaim was closely related to the doctrine of res judicata, which is a rule that is designed to avoid duplicative litigation, which provided the court with clearer direction on the compulsory nature of claims than vague ideas of remotely related "transactions" and "occurrences".

Judge(s):

Posner, Flaum, Sykes

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