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Recoupment and Setoff
Even though a counterclaim may not be authorized in a
particular case, a defendant may seek to reduce the government's
recovery by way of setoff or recoupment. In turn, the government
should be alert to assert setoff and recoupment when possible. |
The statute of limitations, 28 U.S.C. § 2415, limits the time for certain monetary suits by the United States but expressly recognizes the government's right to assert claims by way of setoff, notwithstanding the running of the period of limitations. Hence even if a statute of limitations bars a government suit to collect an amount due, this does not bar the government from invoking its administrative remedies to offset the debt against other claims by the debtor against the government. See, e.g., Thomas v. Bennett, 856 F.2d 1165, 1169 (8th Cir. 1988); In re Mid Atlantic Fund, Inc., 60 B.R. 604, 609-10 (Bankr. S.D.N.Y. 1986) (statutory limitation periods generally have no application to offsetting counterclaims and other matters of defense). In an action by the United States, evidence supporting a defendant's claim for credit shall not be admitted unless the defendant first proves that the claim has been disallowed in whole or in part by the General Accounting Office. 28 U.S.C. § 2406; Deseret Apartments, Inc. v. United States, 250 F.2d 457 (10th Cir. 1957); North Dakota-Montana Wheat Growers' Ass'n v. United States, 66 F.2d 573 (8th Cir. 1933), cert. denied, 291 U.S. 672 (1934); but cf. Frederick v. United States, 386 F.2d 481 (5th Cir. 1967) (recoupment).
A setoff which is time-barred may not be asserted by a private litigant in an affirmative monetary suit by the government. However, a defendant may reduce the government's recovery by the assertion of a claim under the equitable doctrine of recoupment. See Bull v. United States, 295 U.S. 247, 258-63 (1935). Recoupment requires that the defendant's claim arise out of the same transaction as that sued upon by the United States. See Rothensies v. Electric Storage Battery Co., 329 U.S. 296 (1946). See also Frederick v. United States, supra.
The parameters of recoupment are derived from the common law pleading rules concerning counterclaims. Coplay Cement Co. v. Willis & Paul Group, 983 F.2d 1435, 1440 (7th Cir. 1993) (recoupment is the "ancestor" of the compulsory counterclaim presently set forth in Fed. R. Civ. P. 13(a)); Frederick v. United States, supra, at 487. In the context of recoupment "transaction" is a word of flexible meaning depending not so much on the immediateness of connection of an occurrence or occurrences, as upon its logical relationship of the events. Moore v. New York Cotton Exchange, 270 U.S. 593, 610 (1926); In re Pinkstaff, 974 F.2d 113 (9th Cir. 1992); Montgomery Ward Development Corp. v. Juster, 932 F.2d 1378 (11th Cir. 1991); Tullos v. Parks, 915 F.2d 1192 (8th Cir. 1990); Savarese v. Agriss, 883 F.2d 1194, 1208 (3d Cir. 1989).
When recoupment is used as a defense to a plaintiff's action, it is not barred by a statute of limitations as long as the main action itself is timely. United States v. Dalm, 494 U.S. 596 (1990); Bull v. United States, supra, at 262; Matter of Coxson, 43 F.3d 189, 193-94 (5th Cir. 1995).