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63. Can the broker join the contract claim?
An investor has sued a broker in federal court for violation of federal securities law, claiming that the broker misrepresented the investments he made on the investor's behalf. The investor and the broker are citizens of State A. The broker would like to assert a breach of contract claim as a counterclaim to the investor's action, alleging that the investor failed to pay the broker for the investments he made on her behalf.
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A is incorrect. Nothing in the application of FRCP 13 turns on whether the counterclaim is based on federal or state law. Here, the counterclaim arises out of the same transaction or occurrence that is the subject matter of the investor's claim and must be raised in the broker's answer.
B is incorrect. The lack of diversity is relevant to whether the court would have subject-matter jurisdiction, but it is not relevant to whether FRCP 13 permits the counterclaim to be asserted. In this case, despite the lack of diversity, the court can hear the counterclaim because it would have supplemental jurisdiction over the counterclaim as it is related to the investor's securities law claim.
D is incorrect. While FRCP 13(b) permits parties to assert unrelated counterclaims as permissive counterclaims, this is a compulsory counterclaim, so it must be included in the broker's answer or it will be considered waived.