In re Gardens Regional Hospital and Medical Center, Inc. 975 F.3d 926 (9th Cir. September, 2020)
Historically, “[s]etoff allowed a reduction of [the] plaintiff’s claim by the amount of a liquidated claim of the plaintiff to the defendant; recoupment allowed a defendant to assert a claim arising out of the same transaction as the plaintiff’s claim.” “The defining characteristic of setoff—as opposed to recoupment—is that, in a setoff, ‘the mutual debt and claim . . . are generally those arising from different transactions.’” [emphasis in original] “[R]ecoupment is not the adjustment of separate mutual debts but the process of defining the amount owed under a single claim.” “[R]ecoupment is in the nature of a right to reduce the amount of a claim, and does not involve establishing the existence of independent obligations.” But “courts should apply the recoupment doctrine in bankruptcy cases only when ‘it would . . . be inequitable for the debtor to enjoy the benefits of that transaction without meeting its obligations.’”
