Smollett's attorneys alleged police obtained false and unreliable statements from the brothers allegedly behind the attack, Abel and Ola Osundairo, prompting a criminal investigation into Smollett without probable cause.
Still, attorneys noted, "The proceedings were terminated in Mr. Smollett's favor and in a manner which indicates his innocence because all 16 counts of the criminal indictment were dismissed two and a half weeks after the indictment was filed."
They also argued the city was not entitled to further damages from Smollett because he already paid them $10,000.
"Having agreed to accept $10,000 from Mr. Smollett as payment in full in connection with the dismissal of the charges against him, the City cannot seek additional recovery from Mr. Smollett under the doctrine of accord and satisfaction," attorneys wrote in their response to the city's suit.
Smollett's attorneys asked for a jury to hear the case.
The counterclaim came after a federal judge declined last month to throw out the city's suit against Smollett, WMAQ-TV reported. Attorneys for Smollett unsuccessfully argued that he couldn't be held responsible for police costs because he couldn't have known how much time or money the Chicago Police Department would dedicate to investigating his report, according to WMAQ-TV.
"The city must prove the truth of these allegations to prevail at summary judgment or trial, at which point Smollett will be free to dispute the city's claims," U.S. Distrctit Judge Virginia Kendall said in her ruling, according to the Chicago Sun-Times.
Smollett was arrested in February after authorities said he faked a racist, homophobic attack against himself in downtown Chicago earlier in the year. Prosecutors abruptly dropped the case in March.
The actor had told officers he was confronted in the predawn hours Jan. 29 by a pair of men who yelled racial and homophobic slurs at him, hit him in the face, poured an unknown substance on him and wrapped a rope around his neck.
Smollett has denied faking the attack. Since charges were dropped against Smollett, police and prosecutors have said they still believe Smollett is guilty.