Ripley v. PMD Development LLC et al

Filing 32

ORDER - IT IS ORDERED that Ripley's motion to dismiss (Doc. 13 .) is GRANTED.Defendants' counterclaims are DISMISSED for lack of subject matter jurisdiction. (See document for complete details). Signed by Judge Douglas L Rayes on 10/10/18. (SLQ)

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1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Ryan Ripley, No. CV-18-01162-PHX-DLR Plaintiff, 10 ORDER 11 v. 12 PMD Development LLC, et al., 13 Defendants. 14 15 16 At issue is Plaintiff/Counterdefendant Ryan Ripley’s motion to dismiss 17 Defendants/Counterclaimants PMD Development, LLC and Troy Pearce’s state law 18 counterclaims for lack of subject matter jurisdiction. (Doc. 13.) The motion is fully 19 briefed.1 For the following reasons, Ripley’s motion is granted. 20 I. Background 21 On January 15, 2018, Ripley commenced employment with Defendants. In April 22 2018, Ripley filed a complaint against Defendants alleging that they (1) failed to pay him 23 minimum wage in violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. 24 §§ 201-219, and the Arizona Minimum Wage Statute, A.R.S. §§ 23-362 to 23-364 and 25 (2) failed to pay him wages due under the Arizona Wage Statute, A.R.S. §§ 23-351, 26 23-353, and 23-355. 27 counterclaims alleging breach of contract and misrepresentation. (Doc. 9 at 4, 7-8.) 28 1 (Doc. 1 at 4-6.) Defendants denied all claims and filed After reviewing the briefing, the Court finds oral argument unnecessary. See Fed. R. Civ. P. 78(b); LRCiv. 7.2(f). 1 Specifically, Defendants allege that Ripley failed to report sales activity, refused to meet 2 with Defendants to discuss sales, and performed work for another company while 3 receiving compensation from Defendants. (Id.) In response, Ripley filed a motion to 4 dismiss the counterclaims for lack of subject matter jurisdiction. (Doc. 13.) 5 II. Legal Standard 6 Under Federal Rule of Civil Procedure 12(b)(1) a party may move to dismiss a 7 claim for lack of subject matter jurisdiction. A court has subject matter jurisdiction over 8 claims that “arise under the Constitution, laws, or treaties of the United States” or over 9 “civil actions where the matter in controversy exceeds the sum or value of $75,000, 10 exclusive of interest and costs, and is between” diverse parties. 28 U.S.C. §§ 1331, 1332. 11 The party asserting jurisdiction bears the burden of proof. Indus. Tectonics, Inc. v. Aero 12 Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990). When evaluating a jurisdictional challenge, 13 the court assumes the veracity of a plaintiff’s allegations and “draws all reasonable 14 inferences in the plaintiff’s favor.” Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir. 15 2009). 16 Even where subject matter jurisdiction might be lacking, federal courts may 17 exercise supplemental jurisdiction over claims “that are so related to claims in the action 18 within original jurisdiction that they form part of the same case or controversy.” 19 28 U.S.C. § 1367. 20 federal claim arise from a “common nucleus of operative fact.” In re Pegasus Gold 21 Corp., 394 F.3d 1189, 1195 (9th Cir. 2005) (citing United Mine Workers v. Gibbs, 383 22 U.S. 715, 725 (1966)). 23 III. Discussion State law counterclaims satisfy this standard when they and the 24 In bringing their state law counterclaims, Defendants do not allege either federal 25 question or diversity jurisdiction, but rather invoke this Court’s supplemental jurisdiction 26 under 28 U.S.C. § 1367. (Docs. 9, 18.) Ripley argues that supplemental jurisdiction is 27 lacking because the counterclaims do not form “part of the same case or controversy” for 28 the purpose of § 1367 and, alternatively, that the Court should decline to exercise -2- 1 supplemental jurisdiction pursuant to § 1376(c)(4).2 (Doc. 13 at 3-7.) The Court agrees. 2 This Court has held that an employment relationship alone does not generate 3 supplemental jurisdiction over state law counterclaims. See, e.g., Ader v. SimonMed 4 Imaging Inc., No. CV-17-02085-PHX-JJT, 2018 WL 3238697, at *4 (D. Ariz. Jun. 4, 5 2018); Poehler v. Fenwick, No. 2:15-CV-01161 JWS, 2015 WL 7299804, at *2 (D. Ariz. 6 Nov. 19, 2015). For example, in Poehler, an employee sued her employer, alleging 7 violations of the FLSA. 8 counterclaimed for breach of contract and breach of fiduciary duty. Id. In response, the 9 employee moved to dismiss her employer’s state law counterclaims for lack of subject 10 matter jurisdiction. Id. The court granted the motion, finding that the employment 11 relationship did not amount to a “common nucleus of operative fact” sufficient to grant 12 supplemental jurisdiction over the employer’s state law counterclaims. Id. at *2. Poehler, 2015 WL 7299804, at *1. The employer 13 Here, as in Poehler, Defendants’ state law counterclaims relate to Ripley’s FLSA 14 claim only through the employment relationship. Ripley’s FLSA claim requires evidence 15 that he was employed by Defendants and paid less than the minimum wage rate for hours 16 he worked. 17 counterclaim focuses on representations made by Ripley prior to entering into his 18 contract. (Doc. 9 at ¶¶ 22-26.) This claim requires evidence of the representations made 19 during the parties’ contract negotiations, whereas Ripley’s FLSA claim requires evidence 20 of his performance and compensation after the formation of the contract. See 29 U.S.C. § 206(a). In contrast, Defendants’ misrepresentation 21 Likewise, Defendants’ breach of contract counterclaim focuses on whether Ripley 22 breached his employment contract by failing to follow Defendants’ procedures, using 23 2 24 25 26 27 28 Riley also addresses Defendants’ counterclaims under the framework of Federal Rule of Civil Procedure 13, distinguishing between compulsory and permissive counterclaims. (Doc. 13 at 5-6.) Compulsory counterclaims necessarily meet 28 U.S.C. § 1367’s standard for supplemental jurisdiction. It does not necessarily follow, however, that permissive counterclaims fail this test because “a counterclaim arising from a different transaction or occurrence may still arise from a ‘common nucleus of operative fact[.]’” See Ader v. SimonMed Imaging Inc., No CV-17-02085-PHX-JJT, 2018 WL 3238697, at *4 (D. Ariz. Jun. 4, 2018). Accordingly, although for substantially the same reasons discussed in this order, the Court finds that Defendants’ counterclaims are not compulsory under Rule 13(a), that finding is not dispositive of the subject-matter jurisdiction question. -3- 1 unapproved suppliers, and engaging in self-dealing. This counterclaim does not turn on 2 evidence about the hours Ripley worked and the compensation he received for that work. 3 The counterclaims overlap with Ripley’s FLSA claim only insofar as each arises from the 4 contract and employment relationship between Defendants and Ripley, which is 5 insufficient to serve as the “common nucleus of operative facts.” See Ader, 2018 WL 6 3238697, at *4; Poehler, 2015 WL 7299804, *2. 7 supplemental jurisdiction over Defendants’ counterclaims. Accordingly, the Court lacks 8 Alternatively, even if the counterclaims are sufficiently related to confer 9 supplemental jurisdiction, there are compelling reasons to decline supplemental 10 jurisdiction under § 1367(c)(4). “Federal FLSA policy presents a compelling reason for 11 the court to refuse to exercise supplemental jurisdiction over Defendants’ counterclaims.” 12 Poehler, 2015 WL 7299804, at *3. “[T]he only economic feud contemplated by the 13 FLSA involves the employer’s obedience to minimum wage and overtime standards. To 14 clutter FLSA proceedings with the minutiae of other employer-employee relationships 15 would be antithetical to the purpose of the Act.” Martin v. PepsiAmericas, Inc., 628 F.3d 16 738, 741 (5th Cir. 2010); Donovan v. Pointon, 717 F.2d 1320, 1323 (10th Cir. 1983) 17 (finding that permitting an employer in an FLSA “proceeding to try his private claims, 18 real or imagined, against his employees would delay and even subvert the whole 19 process”); Pioch v. IBEX Eng’g Servs.,Inc., 825 F.3d 1264, 1273-74 (11th Cir. 2016). 20 Accordingly, 21 22 23 IT IS ORDERED that Ripley’s motion to dismiss (Doc. 13.) is GRANTED. Defendants’ counterclaims are DISMISSED for lack of subject matter jurisdiction. Dated this 10th day of October, 2018. 24 25 26 27 Douglas L. Rayes United States District Judge 28 -4-

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