Joyce Jones, along with several other individuals (plaintiffs), were customers of Ford dealerships all over the country. As part of the process of purchasing a car, they applied for credit from the Ford Motor Credit Company (defendant). Jones was given an interest rate higher than that of the rate schedule created by Ford Motor Credit. This difference was due to the discretion of the individual dealer. Jones, an African-American, alleged that this difference was due to her race. She filed a suit in the United States District Court for the Southern District of New York along with three others, seeking class certification and damages. Shortly after filing, Ford filed a counterclaim against the named plaintiffs, alleging that they had defaulted on their car loans. Jones and the others made a motion to dismiss the counterclaim, arguing that it did not state a claim on which relief could be granted. The District Court dismissed the counterclaim, holding that it was a permissive, rather than compulsory, counterclaim and therefore the court did not have jurisdiction to hear the counterclaim. Ford appealed.