Being named as a defendant does not necessarily mean your business is limited to playing defense. When a business is sued, the immediate focus is usually on defending against the claims in the complaint. Common relevant questions include: What is the plaintiff alleging? What is the deadline to respond? What documents contradict the allegations? What defenses are available?
Those questions matter, but they are only part of the analysis. Many business disputes involve competing accusations. The company being sued may believe the plaintiff breached the contract, failed to pay money owed, violated an agreement, diverted business opportunities, or otherwise caused the dispute. In those circumstances, the business may have its own claims. Those claims can potentially change the business from simply a defendant into a party seeking its own affirmative relief.
A Defendant Can Bring Claims Against the Plaintiff
A claim brought by a defendant against a plaintiff in the same lawsuit is generally called a counterclaim. New York’s pleading rules expressly allow counterclaims, letting a defendant assert its own cause of action against one or more plaintiffs.
Consider a common commercial dispute. A vendor sues a company for $200,000 in allegedly unpaid invoices. The company contends that it stopped paying because the vendor repeatedly failed to provide the services required by the contract, forcing the company to hire a replacement vendor and causing substantial additional costs.
The company may have defenses to the vendor’s lawsuit. But depending on the facts and governing law, it may also have affirmative claims seeking damages from the vendor. Those are different concepts. A defense attempts to defeat or limit what the plaintiff can recover. A counterclaim asks the court to award relief to the defendant.
The Business Should Evaluate Its Own Claims Early
A defendant should not wait until late in the litigation to begin asking whether it has claims against the plaintiff. That analysis should be part of the initial review of the lawsuit.
Counsel should examine the parties’ contracts, communications, payment history, performance records, corporate documents, and other relevant evidence from both directions. The question is not simply, “Why is the plaintiff wrong?” It is also, “What did the plaintiff do to our business, and did that conduct give rise to a viable claim?”
In a contract dispute, the plaintiff may have breached first. In a partnership dispute, the plaintiff may have diverted company assets or business opportunities. In a shareholder dispute, the events underlying the complaint may reveal separate claims concerning corporate governance or fiduciary obligations. Looking at the entire relationship rather than merely reacting to the complaint can reveal that the defendant has substantial interests of its own to protect.
Counterclaims Can Extend Beyond the Plaintiff’s Theory of the Case
New York’s CPLR takes a broad approach to counterclaims. Unlike federal practice, which distinguishes between compulsory and permissive counterclaims, New York generally permits counterclaims whether or not they arise from the transaction or occurrence underlying the plaintiff’s claim. The procedural relationship between the claims can nevertheless affect how the litigation proceeds.
That distinction matters for business owners because their potential claims should not automatically be dismissed simply because the plaintiff framed the lawsuit narrowly. The lawsuit may have begun as an unpaid-invoice case, for example, while the broader relationship involves defective performance, contractual breaches, misrepresentations, or other conduct that caused the defendant losses. Whether a particular claim belongs in the existing lawsuit, should be pursued separately, or faces procedural or substantive obstacles requires a case-specific analysis.
Counterclaims Must Be Supported by More Than Litigation Frustration
Being sued does not mean the business should automatically sue the plaintiff back. A counterclaim should have an independent factual and legal basis. The business should be able to identify what the plaintiff allegedly did, what legal obligation was violated, what evidence supports the claim, and what injury resulted.
That assessment is especially important because asserting weak counterclaims to increase pressure can complicate the litigation. Additional claims may expand discovery, increase motion practice, require additional witnesses or experts, and increase litigation costs. The objective is not retaliation. It is to determine whether the business has legitimate claims to pursue as part of its litigation strategy.
Parties Should Evaluate Damages Separately
If the business has a potential counterclaim, counsel should also evaluate what the business actually lost. Suppose a contractor sues a company for $150,000 in unpaid amounts under an agreement. The company alleges that the contractor’s defective work required it to spend $250,000 to complete and correct the project. The company is not merely arguing that it should not have to pay the contractor. It may contend that the contractor owes the company damages.
Depending on the claim, potential damages could include amounts paid, costs incurred to correct another party’s performance, unpaid contractual amounts, lost profits, or other recoverable losses. The contract itself may also contain provisions limiting damages, addressing indemnification, allocating risk, or permitting recovery of attorneys’ fees. The value of a counterclaim therefore depends on more than whether the plaintiff did something wrong. The business needs evidence connecting that conduct to a legally recoverable loss.
Other Parties May Also Be Responsible
Sometimes, to fully understand a case, you must look beyond the plaintiff and defendant. A business may believe that another company or individual bears responsibility for some or all of the plaintiff’s alleged damages. New York’s third-party practice rules permit a defendant, in appropriate circumstances, to proceed against a nonparty who is or may be liable to the defendant for all or part of the plaintiff’s claim.
For example, a property owner sued over a construction problem may contend that a subcontractor is responsible. A company sued over a failed project may believe another vendor is contractually required to indemnify it. Depending on the circumstances, bringing another party into the litigation may allow related questions of responsibility to be addressed together. Third-party practice differs from simply asserting a counterclaim against the plaintiff, so courts should evaluate the legal and procedural basis for involving another party separately.
Counterclaims Can Change the Dynamics of the Litigation
A lawsuit can look very different once the defendant asserts substantial claims of its own. Instead of a case in which one party seeks money and the other merely tries to avoid liability, both sides may face potential exposure. Discovery may examine both parties’ conduct. Depositions may focus on the plaintiff’s actions as well as the defendant’s. Settlement discussions may involve competing damages claims rather than a single demand.
That does not mean a defendant should assert counterclaims simply to create “leverage.” Their strategic significance comes from their legal and factual strength. A well-supported counterclaim may change the parties’ risk assessment because the plaintiff must now defend its own conduct and potential exposure.
Suing Back Can Also Expand the Case
There is a tradeoff. Adding counterclaims or third parties can make a lawsuit larger. Additional claims may lead to more documents, more depositions, additional motion practice, expert discovery, and a longer path toward resolution. A business with a viable claim still needs to consider whether pursuing it advances its overall objectives.
The amount at stake matters. So does the available evidence, collectability of a potential judgment, effect on the existing defense, cost of additional litigation, and likelihood that the counterclaim will materially affect the dispute. Litigation strategy should account for the case’s economics as well as the available legal theories.
The Initial Response Should Consider Both Defense and Offense
When a business receives a complaint, the analysis should not stop after identifying how to deny the plaintiff’s allegations. Rather, the business should examine the entire relationship, including what happened before the lawsuit. For example, did the plaintiff breach an agreement or does the business have unpaid claims? Those questions can affect how the answer is drafted, which counterclaims are asserted, whether to consider third-party practice, what evidence must be preserved, and how the business approaches discovery and settlement.
Being the Defendant Does Not Mean Playing Only Defense
A plaintiff decides when to file a lawsuit and how to frame its complaint. That does not necessarily mean the plaintiff is the only party with claims. A business that has been sued should evaluate both sides of the dispute. Sometimes the appropriate strategy is to defeat the plaintiff’s claims. In other cases, the evidence may support counterclaims seeking affirmative relief or claims involving additional responsible parties. Understanding that distinction early can help the business develop a litigation strategy based on the entire dispute, not just the plaintiff’s version.
Alisme Law represents businesses, owners, shareholders, and executives in commercial litigation throughout New York. When a business is sued, we evaluate the claims asserted against it as well as potential affirmative defenses, counterclaims, third-party claims, and the evidence necessary to pursue them.
Contact us to schedule a confidential case evaluation at 917-540-8432.
This article is for informational purposes only and does not constitute legal advice.