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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IN THE UNITED STATES DISTRICT COURT

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FOR THE DISTRICT OF ARIZONA

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Ryan Ripley,

No. CV-18-01162-PHX-DLR
Plaintiff,

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ORDER

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v.

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PMD Development LLC, et al.,

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Defendants.

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At issue is Plaintiff/Counterdefendant Ryan Ripley’s motion to dismiss

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Defendants/Counterclaimants PMD Development, LLC and Troy Pearce’s state law

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counterclaims for lack of subject matter jurisdiction. (Doc. 13.) The motion is fully

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briefed.1 For the following reasons, Ripley’s motion is granted.

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I. Background

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On January 15, 2018, Ripley commenced employment with Defendants. In April

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2018, Ripley filed a complaint against Defendants alleging that they (1) failed to pay him

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minimum wage in violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C.

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§§ 201-219, and the Arizona Minimum Wage Statute, A.R.S. §§ 23-362 to 23-364 and

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(2) failed to pay him wages due under the Arizona Wage Statute, A.R.S. §§ 23-351,

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23-353, and 23-355.

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counterclaims alleging breach of contract and misrepresentation. (Doc. 9 at 4, 7-8.)

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(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).

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Specifically, Defendants allege that Ripley failed to report sales activity, refused to meet

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with Defendants to discuss sales, and performed work for another company while

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receiving compensation from Defendants. (Id.) In response, Ripley filed a motion to

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dismiss the counterclaims for lack of subject matter jurisdiction. (Doc. 13.)

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II. Legal Standard

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Under Federal Rule of Civil Procedure 12(b)(1) a party may move to dismiss a

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claim for lack of subject matter jurisdiction. A court has subject matter jurisdiction over

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claims that “arise under the Constitution, laws, or treaties of the United States” or over

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“civil actions where the matter in controversy exceeds the sum or value of $75,000,

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exclusive of interest and costs, and is between” diverse parties. 28 U.S.C. §§ 1331, 1332.

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The party asserting jurisdiction bears the burden of proof. Indus. Tectonics, Inc. v. Aero

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Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990). When evaluating a jurisdictional challenge,

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the court assumes the veracity of a plaintiff’s allegations and “draws all reasonable

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inferences in the plaintiff’s favor.” Doe v. Holy See, 557 F.3d 1066, 1073 (9th Cir.

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2009).

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Even where subject matter jurisdiction might be lacking, federal courts may

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exercise supplemental jurisdiction over claims “that are so related to claims in the action

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within original jurisdiction that they form part of the same case or controversy.”

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28 U.S.C. § 1367.

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federal claim arise from a “common nucleus of operative fact.” In re Pegasus Gold

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Corp., 394 F.3d 1189, 1195 (9th Cir. 2005) (citing United Mine Workers v. Gibbs, 383

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U.S. 715, 725 (1966)).

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III. Discussion

State law counterclaims satisfy this standard when they and the

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In bringing their state law counterclaims, Defendants do not allege either federal

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question or diversity jurisdiction, but rather invoke this Court’s supplemental jurisdiction

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under 28 U.S.C. § 1367. (Docs. 9, 18.) Ripley argues that supplemental jurisdiction is

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lacking because the counterclaims do not form “part of the same case or controversy” for

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the purpose of § 1367 and, alternatively, that the Court should decline to exercise

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supplemental jurisdiction pursuant to § 1376(c)(4).2 (Doc. 13 at 3-7.) The Court agrees.

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This Court has held that an employment relationship alone does not generate

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supplemental jurisdiction over state law counterclaims. See, e.g., Ader v. SimonMed

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Imaging Inc., No. CV-17-02085-PHX-JJT, 2018 WL 3238697, at *4 (D. Ariz. Jun. 4,

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2018); Poehler v. Fenwick, No. 2:15-CV-01161 JWS, 2015 WL 7299804, at *2 (D. Ariz.

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Nov. 19, 2015). For example, in Poehler, an employee sued her employer, alleging

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violations of the FLSA.

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counterclaimed for breach of contract and breach of fiduciary duty. Id. In response, the

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employee moved to dismiss her employer’s state law counterclaims for lack of subject

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matter jurisdiction. Id. The court granted the motion, finding that the employment

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relationship did not amount to a “common nucleus of operative fact” sufficient to grant

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supplemental jurisdiction over the employer’s state law counterclaims. Id. at *2.

Poehler, 2015 WL 7299804, at *1.

The employer

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Here, as in Poehler, Defendants’ state law counterclaims relate to Ripley’s FLSA

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claim only through the employment relationship. Ripley’s FLSA claim requires evidence

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that he was employed by Defendants and paid less than the minimum wage rate for hours

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he worked.

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counterclaim focuses on representations made by Ripley prior to entering into his

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contract. (Doc. 9 at ¶¶ 22-26.) This claim requires evidence of the representations made

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during the parties’ contract negotiations, whereas Ripley’s FLSA claim requires evidence

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of his performance and compensation after the formation of the contract.

See 29 U.S.C. § 206(a).

In contrast, Defendants’ misrepresentation

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Likewise, Defendants’ breach of contract counterclaim focuses on whether Ripley

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breached his employment contract by failing to follow Defendants’ procedures, using

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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.
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unapproved suppliers, and engaging in self-dealing. This counterclaim does not turn on

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evidence about the hours Ripley worked and the compensation he received for that work.

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The counterclaims overlap with Ripley’s FLSA claim only insofar as each arises from the

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contract and employment relationship between Defendants and Ripley, which is

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insufficient to serve as the “common nucleus of operative facts.” See Ader, 2018 WL

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3238697, at *4; Poehler, 2015 WL 7299804, *2.

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supplemental jurisdiction over Defendants’ counterclaims.

Accordingly, the Court lacks

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Alternatively, even if the counterclaims are sufficiently related to confer

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supplemental jurisdiction, there are compelling reasons to decline supplemental

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jurisdiction under § 1367(c)(4). “Federal FLSA policy presents a compelling reason for

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the court to refuse to exercise supplemental jurisdiction over Defendants’ counterclaims.”

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Poehler, 2015 WL 7299804, at *3. “[T]he only economic feud contemplated by the

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FLSA involves the employer’s obedience to minimum wage and overtime standards. To

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clutter FLSA proceedings with the minutiae of other employer-employee relationships

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would be antithetical to the purpose of the Act.” Martin v. PepsiAmericas, Inc., 628 F.3d

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738, 741 (5th Cir. 2010); Donovan v. Pointon, 717 F.2d 1320, 1323 (10th Cir. 1983)

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(finding that permitting an employer in an FLSA “proceeding to try his private claims,

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real or imagined, against his employees would delay and even subvert the whole

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process”); Pioch v. IBEX Eng’g Servs.,Inc., 825 F.3d 1264, 1273-74 (11th Cir. 2016).

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Accordingly,

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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.

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Douglas L. Rayes
United States District Judge

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