¶ 57. {dissenting). I strongly disagree with the majority that Menard's lawsuit against Liteway is barred by the doctrine of claim preclusion.1 The majority concludes that all three ele*617ments for claim preclusion are present and, additionally, that Menard was required to raise its claims in the action brought by Liteway pursuant to the common-law compulsory counterclaim exception to Wisconsin's permissive counterclaim statute, Wis. Stat. § (Rule) 802.07(1) (1999-2000)2 I respectfully dissent because there is no identity of claims or causes of action between the first and second suits involving these parties, and Menard's claim here does not come within the narrow exception to Wisconsin's permissive counterclaim statute.
¶ 58. The majority concludes that, for the purposes of claim preclusion, the transactional approach set forth in the Restatement (Second) of Judgments, § 24 (1982) describes the correct methodology for determining whether there is an identity of claims or causes of action. While I do not dispute this, I disagree with the majority's conclusion that the thousands of transactions between these parties over a six-year period involving the purchase of goods and the return of defective, damaged and unsatisfactory products to Lite-way constitute one transaction as a matter of law. In reaching such a conclusion, the majority makes the same mistake as the court of appeals — it fails to apply the Uniform Commercial Code (UCC). The court of appeals dismissed Menard's UCC claims as "nothing more than affirmative defenses and counterclaims— various theories or kinds of relief counterposed to Liteway's claim." Menard, Inc. v. Liteway Lighting Prods., 2004 WI App 95, ¶ 21, 273 Wis. 2d 439, 685 N.W.2d 365. Like the court of appeals, the majority ignores the UCC in this case.
*618¶ 59. As the governing law in Wisconsin on contractual disputes, see Wis. Stat. §§ 401.101-411.901, such as those involved here, the UCC is highly relevant to determining what constitutes a transaction for the purposes of claim preclusion. Restatement (Second) § 24(2) states:
What factual grouping constitutes a "transaction", and what groupings constitute a "series", are to be determined pragmatically, giving weight to such considerations as whether the facts are related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether their treatment as a unit conforms to the parties' expectations or business understanding or usage.
(Emphasis added.) When the Wisconsin Legislature adopted the UCC, it did so to "permit the continued expansion of commercial practices through custom, usage and agreement of the parties." Wis. Stat. § 401.102(2)(b) (emphasis added); see also Mayberry v. Volkswagen of Am., Inc., 2005 WI 13, 278 Wis. 2d 39, 692 N.W.2d 226. The UCC was adopted to give commercially sophisticated parties the opportunity to conduct business and resolve disputes in an efficient manner, based on business understanding, usage, and custom in their respective businesses. Its provisions are clearly relevant in determining the expectation of the parties, their business understanding, usage, and custom in the businesses involved here. I can think of nothing more relevant for such an inquiry than the applicable law of Wisconsin. This court has stated:
The Uniform Commercial Code is one of the preeminent achievements of American law. It is constantly under review so that it can address changing practices in the world of commerce. Our role as a court is not to *619question the effect of Code provisions in a particular case. Our role is to apply the law.
Nat'l Operating, L.P. v. Mut. Life Ins. Co. of N.Y., 2001 WI 87, ¶ 99, 244 Wis. 2d 839, 630 N.W.2d 116 (footnote omitted). I therefore cannot accept the majority's position that the provisions of the UCC in regard to the sale and subsequent return of goods being separate transactions are "irrelevant." Majority op., ¶ 33.
¶ 60. Turning to the UCC, it seems clear from its structure and language that the purchase of goods and the return of goods involve separate transactions. The UCC sets out separate rights and remedies for sellers in the Code, see Wis. Stat. § 402.703, and specifically gives a buyer the right to revoke its acceptance of goods within a commercially reasonable time. See Wis. Stat. § 402.608(2). In this case, the trial record from Menard's action against Liteway reveals the extensive relationship that Menard and Liteway had in the six years they did business together. The bills of lading from January 1999-May 2000 alone show over 300 separate shipments of returned products from Menard to Liteway in those months. There were literally thousands of purchases and returns over the six-year course of dealing between the two companies. The exchanges between Liteway and Menard totaled nearly $18 million over the six years that they did business with each other. Common sense dictates that thousands of purchases and returns over such a long period of time cannot constitute a single transaction for the purposes of claim preclusion.
¶ 61. Although Menard's attorney seemed to concede at oral argument that Menard had, prior to the filing of Liteway's suit, invoiced Liteway for all of the returned products, exhibits from the circuit court *620record in this case clearly demonstrate that reimbursement transactions continued well after Liteway filed its lawsuit against Menard. During discovery in the current lawsuit, Menard submitted an interrogatory to Liteway asking for the complete list of reimbursements from Liteway to Menard from 1995 forward. The records that Liteway provided in response revealed 99 invoices dated after October 19, 2000, the date of commencement of Liteway's action against Menard. It appears quite clear that Liteway was still providing reimbursement or credit to Menard for returned defective products months after the date its action against Menard was filed, and thus that the two companies still had unsettled disputes involving such defective products for a considerable time after the commencement of Liteway's suit.
¶ 62. In the decision of the Eau Claire County Circuit Court, Judge Lisa Stark presiding, the court correctly denied Liteway's motion for summary judgment in Menard's action. The court's reasoning was as follows:
Looking at the transactional analysis, you have to look, as the Liteway attorneys point out, at the facts that are underlying each claim, and if, indeed, I am correct, Judge Wahl's analysis is based on the Complaint, which basically said there were goods sold by Liteway to Menards (sic). They were delivered, they weren't paid for and they're entitled to the unpaid value of the invoices, and that was how the judgment amount was reached.
In the present case none of that is at issue. There's no question the goods were delivered, that some weren't paid for, that there were dollar values due. Mr. Hart alleges that they have now been paid, but now the question is: Were some of the goods defective? If they *621were, were they returned in a timely and appropriate manner under the contract or the UCC? What was the value of the returned goods? And how much damages is Menard entitled to?
The factual analysis (sic) on those issues are different, and I am assuming that they were not litigated in the first case.
I agree wholeheartedly with the circuit court's decision that Liteway's suit for unpaid invoices involved claims and issues that were separate from Menard's current lawsuit for reimbursement for Liteway's defective products, involving Menard's remedies as a buyer under the UCC. Contrary to the majority's assertion that the only difference between the claims in the two actions is Menard's legal theory, see majority op., ¶¶ 32, 38, the circuit court correctly pointed out that the facts underlying the lawsuits were different. The claim for reimbursement for defective, damaged and unsatisfactory products returned to Liteway in the present action is distinct from the claim based on unpaid invoices that Liteway sought payment for in the first suit. Since the two lawsuits involved distinct facts, separate transactions and different legal theories for recoveiy, there is no identity of claims or causes of action.
¶ 63. The circuit court also addressed claim preclusion in fight of the fact that the first suit ended in a default judgment, and that such judgments are not favored in the law. Split Rock v. Lumber Liquidators, 2002 WI 66, ¶ 64, 253 Wis. 2d 238, 646 N.W.2d 19. A default judgment can be a valid, final judgment for the purposes of claim preclusion. However, this court has held that a default judgment" 'does not extend to issues which were not raised in the pleadings.'" A.B.C.G. Enters. v. First Bank Southeast, 184 Wis. 2d 465, 481, *622515 N.W.2d 904 (1994) (quoting Klaus v. Vander Heyden, 106 Wis. 2d 353, 359-60, 316 N.W.2d 664 (1982)). In commenting on a default judgment in a declaratory-judgment action, this court stated: "To be actually litigated in this context, a matter must be pled with the sufficient clarity to give notice to the opposing party and the court of what claims are at stake so that they will understand the claims that will be barred in future litigation." Nat'l Operating, 244 Wis. 2d 839, ¶ 93.
¶ 64. Because Liteway was granted judgment by default in the first lawsuit, the pleading the court must focus on for the purposes of claim preclusion is Liteway's complaint in that action, and it makes no mention of Menard's claims under the UCC, or of Menard's common-law claim for unjust enrichment. Liteway's complaint involving unpaid invoices set forth claims for breach of contract, for demand on an open account, for goods sold, and for bad faith. Liteway did not address any issue relating to Menard's rights to return defective, damaged and unsatisfactory products for credit under the UCC, or Menard's rights to recover for unjust enrichment. When the circuit court entered a default judgment for Liteway, it entered a default judgment on Liteway's claims asking for payment on its invoices to Menard. It did not enter a judgment that encompassed the issues of credit for the return of defective, damaged, and unsatisfactory products and for unjust enrichment.
¶ 65. I do not dispute that " 'a final judgment is conclusive in all subsequent actions between the same parties ... as to all matters which were litigated or which might have been litigated. . . .'" Majority op., ¶ 26. However, this statement must not be construed as strictly as the majority does. To do so results in one of two unfavorable and inappropriate outcomes: either *623Wisconsin's permissive counterclaim statute is rendered meaningless, or the scope of what will be precluded after a default judgment is granted is expanded well beyond what is covered in a complaint such as Liteway's.
¶ 66. It is important to emphasize, as the circuit court recognized, that default judgments have never been favored in the law. See Split Rock, 253 Wis. 2d 238, ¶ 64; Miro Tool & Mfg., Inc. v. Midland Mach., Inc., 205 Wis. 2d 650, 663, 556 N.W.2d 437 (Ct. App. 1996). " '[T]he law prefers, whenever reasonably possible, to afford litigants a day in court and a trial on the issues ...; and ... default judgments are regarded with particular disfavor.'" Shirk v. Bowling, Inc., 2001 WI 36, ¶ 16, 242 Wis. 2d 153, 624 N.W.2d 375 (quoting Dugenske v. Dugenske, 80 Wis. 2d 64, 68, 257 N.W.2d 865 (1977)). In this case, the majority seeks to deny Menard the relief it seeks on its UCC and unjust enrichment claims, after Menard proved during the trial before the circuit court that Liteway owes it $140,478.41 in reimbursements and costs, based on the return of defective, damaged and unsatisfactory products to Liteway.
¶ 67. With the above principles in mind, I am convinced that the majority decision in National Operating controls this case. There, this court held that the original action filed by MONY, based on a contract, did not preclude a subsequent action by National Operating, based on the UCC. This court declined to apply the narrow exception to Wisconsin's permissive counterclaim statute to National Operating's action, because National Operating had a claim based on the UCC. Similarly, in this case, Liteway's suit focused on a claim based on unpaid invoices, a breach of contract claim, whereas the subsequent action by Menard was based *624chiefly on the rights of a buyer to return defective, damaged or unsatisfactory products for credit, in accord with the UCC. The majority opinion inconsistently applies the reasoning of both A.B.C.G. Enterprises and National Operating, claiming that the distinguishing fact between National Operating and the present case is that Menard had returned all of the disputed products to Liteway before Liteway commenced its lawsuit. However, as I noted earlier, the record before the circuit court in this action contains evidence that there were 99 invoices dated after Liteway commenced its action on October 19, 2000. It is important that reimbursements for returned products continued for months after Liteway filed suit. The majority is clearly wrong when it asserts "that all the facts giving rise to Menard's suit were in existence at the time that Liteway filed its original action." Majority op., ¶ 38.
¶ 68. Like the majority here, the court of appeals also failed to apply National Operating correctly to the case at bar. The court of appeals attempted to distinguish National Operating from this case, because National Operating involved a declaratory judgment rather than a claim for damages. Menard, 273 Wis. 2d 439, n.3. As noted earlier, in National Operating, the declaratory judgment action resulted in a default judgment, and this court held:
In a declaratory judgment action, claim preclusion is limited to those matters that are actually litigated. To be actually litigated in this context, a matter must be pled with sufficient clarity to give notice to the opposing party and the court of what claims are at stake so that they will understand the claims that will be barred in future litigation.
Here, there was a default judgment. By failing to answer the complaint, National Operating was conced*625ing every claim actually pleaded. But National Operating was not given fair notice in the complaint that MONY sought to extinguish all its rights. ...
The declaratory judgment — a document drafted by MONY — granted precisely the relief sought in MONY's complaint, nothing more.
Nat'l Operating, 244 Wis. 2d 839, ¶¶ 93-95 (citation omitted). A default judgment, whether or not the action is one for declaratory judgment as in National Operating, is limited to those claims pled in the original complaint, and does not extend to matters not raised in the pleadings. A.B.C.G. Enters., 184 Wis. 2d at 481 (quoting Klaus, 106 Wis. 2d at 359-60). Therefore, I remain convinced that Liteway's complaint was limited to contract claims, since it made no mention of extinguishing Menard's rights to credit for the return of defective, damaged and unsatisfactory products under the UCC. In the first action, Menard was not given any notice in Liteway's complaint that Liteway was attempting to extinguish all of Menard's rights as a buyer under the UCC, as well as any claim for unjust enrichment.
¶ 69. Although the resolution of this case rests on whether there was an identity of claims or causes of action for purposes of claim preclusion, it is also necessary to highlight the majority's misinterpretation of Wisconsin's counterclaim statute. In Wisconsin, the joinder of counterclaims is permissive, not mandatory. Wisconsin Stat. § 802.07(1) states in relevant part: "[a] defendant may counterclaim any claim which the defendant has against a plaintiff, upon which a judgment may be had in the action." (Emphasis added.)
¶ 70. I recognize, as does the majority, that this court has established a narrow exception to the permis*626sive counterclaim statute. In A.B.C.G. Enterprises, we stated that there is a " 'common-law compulsory counterclaim' rule which requires a defendant to counterclaim if its claim, when brought in a subsequent, separate action, would nullify the initial judgment or impair rights established in the initial action." A.B.C.G. Enters., 184 Wis. 2d at 474. However, the court emphasized that the application of this "common-law counterclaim" rule is definitely an exception to the general rule and is meant to preclude a collateral attack when the attack would completely nullify the rights established in the first judgment.3 See id. at 476-77. Specifically, it stated that the rule "applies only if a favorable judgment in the second action would nullify the judgment in *627the original action or impair rights established in the original action." Id. (emphasis added). In this case, consistent with our holding in National Operating, the narrow exception should not be applied, because the test for its application is not met here. Menard's UCC and unjust enrichment claims would not nullify, but would merely reduce, the amount that Liteway would realize on its judgment. The majority opinion extends the compulsory counterclaim exception in a manner contrary to Wisconsin's permissive counterclaim statute, the UCC, and the public policy expressed by the legislature in its adoption of the UCC.4
¶ 71. I conclude that the majority opinion causes significant problems for Wisconsin businesses. The majority's opinion encourages sellers to initiate litigation for unpaid invoices as soon as possible, because winning a judgment for price will bar the buyer's rights to revoke acceptance of defective or non-conforming goods, return the goods, and protect the buyer's interests upon return. The majority expands commercial "transactions" without regard to the buyer's rights under the UCC and obliterates a buyer's other potential *628claims, such as one for unjust enrichment. As stated above, the Wisconsin Legislature enacted the UCC in order to "permit the continued expansion of commercial practices through custom, usage and agreement of the parties." Wis. Stat. § 401.102(2)(b). The majority opinion, in contrast, only encourages acrimony and distrust between buyer and seller, and places Wisconsin in the unique and undesirable position of being a state that denies to buyers the remedies available under the UCC. Common sense leads me to conclude that $18 million worth of transactions over a six-year period, involving literally thousands of orders and returns, cannot be labeled as a single transaction for claim preclusion purposes, thus denying a Wisconsin business its rightful recovery of $140,478.41 for its claims under the UCC. This is the amount that the circuit court correctly determined was due to Menard.
¶ 72. For these reasons, I respectfully dissent.
¶ 73. I am authorized to state that Justice LOUIS B. BUTLER, JR. joins this dissent.
Claim preclusion provides that a final judgment on the merits in one action bars parties from relitigating any claim that arises out of the same relevant facts, transactions, or occurrences. Kruckenberg v. Harvey, 2005 WI 43, ¶ 19, 279 Wis. 2d 520, 694 N.W.2d 879. In Wisconsin, the doctrine of claim preclusion has three elements: identity of the parties or those in privity with the parties in the first and second suits, identity of the causes of action in the first and second suits, and the prior litigation must have ended in a final, valid judgment on the merits. Id., ¶ 21.
Unless otherwise indicated all references to the Wisconsin Statutes are to the 1999-2000 edition.
One commentator stated:
Despite all its virtues, the common-law compulsory counterclaim rule, tucked away in an unfrequented cul-de-sac of the Second Restatement, does not seem to be sweeping the country. The Westlaw database indicates that only twenty-one cases have used the term "common-law compulsory counterclaim" in the thirty-one years since the rule's publication.
So perhaps the common-law compulsory counterclaim rule is one of those rules constantly invoked in planning and discussing litigation, even though it seldom figures in a judicial opinion. But the rule does not appear to be in ubiquitous play, at least on any conscious level above intuition. For one thing, the twenty-one cases are concentrated geographically. Fifteen of them come from Wisconsin or the Seventh Circuit. The fact that the rule appears in opinions there but not elsewhere implies that the rule has not really caught on in the rest of the country. For another thing, the academy is not abuzz. The Westlaw database indicates that before this article catapulted the rule to title status, only two law review articles had used the term in any way. Kevin M. Clermont, Common-Law Compulsory Counterclaim Rule: Creating Effective and Elegant Res Judicata Doctrine, 79 Notre Dame L. Rev. 1745, 1756-57 (Oct. 2004) (footnotes omitted).
The majority opinion's application of the common-law compulsory counterclaim rule expands well beyond the scope of what courts and commentators have deemed appropriate. In Carey v. Neal, Cortina & Associates, 576 N.E.2d 220 (Ill. App. Ct 1991), the Illinois Appellate Court chose not to apply the rule, explaining that "when analyzing the identity of causes of action for res judicata purposes, the second suit is not barred if the proof of its elements differ from the proof required to prove the prior action. Id. at 223. Notably, it asserted that [c]ourts should carefully examine the circumstances presented in a specific case to ensure that a party is not precluded from litigating a claim simply because it 'might have' been raised, if the nature of the claim is sufficiently separate from that which was actually litigated. Id. at 228.