Shepherd v. Kelley, et al
ORDER granting 11 Motion to Dismiss Counterclaims. The defendants' counterclaims are dismissed without prejudice. Signed by Chief Judge William H. Steele on 1/8/2013. (tgw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
DAVID KELLEY, et al.,
) CIVIL ACTION 12-0424-WS-B
This matter is before the Court on the plaintiff’s motion to dismiss
counterclaims. (Doc. 11). The defendants have filed a response and the plaintiff a
reply, (Docs. 22, 23), and the motion is ripe for resolution.
The plaintiff filed a three-count complaint based on his alleged failure to
receive appropriate compensation, in particular for his final week of work. Count
One alleges a failure to pay straight time under the FLSA. Count Two alleges
breach of contract.1 Count Three requests a declaration that the plaintiff is
“entitled to receive overtime [sic] compensation” under the FLSA. (Doc. 1).
The defendants answered the complaint and asserted three counterclaims,
all based on the plaintiff’s alleged use of the defendants’ food, equipment and
confidential information for his own gain, including by selling and catering to the
defendants’ customers. Count One alleges that the plaintiff’s conduct violated his
fiduciary duties to the defendants. Count Two alleges that the plaintiff’s failure to
This claim was dismissed on the plaintiff’s motion without objection from the
defendants. (Docs. 10, 16, 21).
disclose his conduct constituted fraud and deceit. Count Three alleges that the
plaintiff’s conduct violated a non-disclosure agreement he executed. (Doc. 8).
The plaintiff presents four arguments in support of his motion to dismiss
the counterclaims: (1) the Court lacks original jurisdiction over them; (2) the
Court lacks supplemental jurisdiction over them; (3) the Court should decline to
exercise any supplemental jurisdiction it possesses; and (4) the counterclaims
constitute prohibited setoffs. The first two are dispositive.
A. Original Jurisdiction.
None of the counterclaims implicate federal law. The plaintiff is a citizen
of Alabama, (Doc. 1 at 1), as the defendants apparently are.2 Moreover, the
counterclaims demand recovery of $50,000, well below the jurisdictional
minimum.3 The counterclaims do not independently invoke the Court’s original
jurisdiction, and the defendants do not assert otherwise.
B. Supplemental Jurisdiction.
Given the Court’s unquestioned original jurisdiction over the plaintiff’s
FLSA claim, supplemental jurisdiction extends to “all other claims that are so
related to claims in the action within such original jurisdiction that they form part
Although the pleadings do not address the defendants’ citizenship, the
summonses were directed to them at a Daphne, Alabama address, and they were
physically served at that address. (Docs. 4, 5).
Count Three contains no numerical ad damnum, but there is no reason to
suppose that the value of receiving the requested declaratory relief exceeds the $50,000 in
compensatory and punitive damages sought by Counts One and Two for the same
of the same case or controversy under Article III of the United States
Constitution.” 28 U.S.C. § 1367(a). This includes counterclaims. E.g.,
Global NAPs, Inc. v. Verizon New England, Inc., 603 F.3d 71, 76 (1st Cir. 2010).
Prior to the 1990 enactment of Section 1367, “a federal court [could] not
consider a permissive counterclaim unless the counterclaimant assert[ed] an
independent jurisdictional basis.” East-Bibb Twiggs Neighborhood Association v.
Macon Bibb Planning & Zoning Commission, 888 F.2d 1576, 1578 (11th Cir.
1989). If that rule survived Section 1367, it would limit supplemental jurisdiction
to compulsory counterclaims, that is, those “aris[ing] out of the same transaction
or occurrence that is the subject matter of the opposing party’s claim.” Fed. R.
Civ. P. 13(a)(1).
The Eleventh Circuit apparently has not addressed the impact of Section
1367 on permissive counterclaims. See James D. Hinson Electrical Contracting
Co. v. Bellsouth Telecommunications, Inc., 2011 WL 2448911 at *2 (M.D. Fla.
2011) (noting the Eleventh Circuit’s silence). All three appellate courts known to
have done so, however, have concluded that Section 1367 extends supplemental
jurisdiction to permissive counterclaims, so long as those counterclaims make up
part of the same Article III case or controversy. Global NAPs, 603 F.3d at 75, 87;
Jones v. Ford Motor Credit Co., 358 F.3d 205, 213 (2nd Cir. 2004); Channell v.
Citicorp National Services, Inc., 89 F.3d 379, 385 (7th Cir. 1996). The “case or
controversy” standard of Section 1367 “confers supplemental jurisdiction over all
state claims which arise out of a common nucleus of operative fact with a
substantial federal claim.” Parker v. Scrap Metal Processors, Inc., 468 F.3d 733,
743 (11th Cir. 2006).
The plaintiff correctly labels the defendants’ counterclaims as permissive.
(Doc. 11 at 1). That is not dispositive under the authorities cited above. However,
as the parties invoking federal jurisdiction, the defendants bear the burden of
demonstrating that their counterclaims arise out of a common nucleus of operative
fact with the plaintiff’s FLSA claim and/or breach of contract claim. Sweet Pea
Marine, Ltd .v. APJ Marine, Inc., 411 F.3d 1242, 1247 (11th Cir. 2005) (“The
burden for establishing federal subject matter jurisdiction rests with the party
bringing the claim.”).4
The sum total of the defendants’ attempt to satisfy this burden is their
assertion that “the fact of Plaintiff’s employment, and his entitlement to wages
during Plaintiff’s final weeks, are interrelated to Defendants’ counterclaims that
Plaintiff was using company resources for his own personal benefit, which
ultimately led, in large part, to Plaintiff’s termination.” (Doc. 22 at 2). This is
only a conclusory statement, not an explanation. There is no assertion in the
counterclaims or in brief that the plaintiff’s alleged conduct somehow forfeited his
right to earned wages. There is not even an allegation that the defendants withheld
the plaintiff’s wages in retaliation for his conduct.5
In applying the “common nucleus” test, “[w]e take the nucleus of facts on
which the federal question claims are based and compare it to the nucleus of facts
on which the state law claims are based.” Upper Chattahoochee Riverkeeper
Fund, Inc. v. City of Atlanta, ___ F.3d ___, 2012 WL 5835120 at *8 (11th Cir.
2012). The nucleus of operative fact for the plaintiff’s claims is that he worked
and was not paid. The nucleus of operative fact for the defendants’ counterclaims
is that the plaintiff used property of the defendants without their permission. The
only overlapping fact in this nucleus is that the plaintiff was employed by the
defendants. The defendants’ cursory treatment includes no citation to any
authority, much less to any authority that extends so far the concept of “same case
The plaintiff suggests the defendants cannot tie supplemental jurisdiction to his
contract claim because he has dismissed it. (Doc. 23 at 2-3). The counterclaims were
filed before the contract claim was dismissed. The plaintiff has not explained how he can
retroactively negate supplemental jurisdiction by dismissing a claim to which
supplemental jurisdiction has already attached, and the Court will not develop such an
argument on the plaintiff’s behalf.
The quoted statement affirmatively contradicts the counterclaims, which allege
that the plaintiff resigned, not that he was terminated. (Doc. 8 at 3).
or controversy,” and the Court declines to conduct the necessary research on their
The defendants have not met their burden of demonstrating the existence of
subject matter jurisdiction over their counterclaims. Accordingly, and for the
reasons set forth above, the plaintiff’s motion to dismiss counterclaims is granted.
The defendants’ counterclaims are dismissed without prejudice.
DONE and ORDERED this 8th day of January, 2013.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE
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