Clarke v. Public Employee Union 1

Filing 31

ORDER by Judge Jacqueline Scott Corley granting 19 Motion for Leave to File Third-Party Complaint. (lrcS, COURT STAFF) (Filed on 2/10/2017)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ROBERT CLARKE,
Plaintiff,

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United States District Court
Northern District of California

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Case No.16-cv-04954-JSC

v.
PUBLIC EMPLOYEES UNION LOCAL 1,
Defendant.

ORDER RE: MOTION FOR
LEAVE TO FILE THIRD-PARTY
COMPLAINT
Re: Dkt. No. 19

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Now pending before the Court is Defendant’s motion for leave to file a third-party

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complaint. (Dkt. No. 19.) After considering the parties’ submissions, the Court concludes that

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oral argument is unnecessary, see Civ. L.R. 7-1(b), and GRANTS Defendant’s motion.

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BACKGROUND
Plaintiff Robert Clarke brought this action against his former employer, Defendant Public

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Employees Union Local 1 for breach of contract. (Dkt. No. 1.) Plaintiff alleges that he entered

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into an employment contract with Defendant on January 20, 2014 for a 36-month term of

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employment as Chief Financial Officer that was modified by a March 9, 2015 contract that

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provided for another 36-month term. (Id. ¶¶ 7-8; Dkt. No. 19-2 ¶¶ 6-7; Dkt. No. 19-2 at 4-5, 7-8.)

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The contracts specified that Plaintiff could only be removed for “illegal acts or malfeasance” and

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that, in the event that he was terminated for any other reason, he would be entitled to a severance

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package. (Dkt. No. 1 ¶ 11; Dkt. No. 19-2 at 5, 8.) Plaintiff alleges that he did not commit any

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illegal act or malfeasance and was terminated without cause in February 2016, and that Defendant

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has refused to pay the severance package owed under the contract. (Dkt. No. 1 ¶¶ 12-14.)

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Defendant now seeks leave to file a third-party complaint against proposed Third-Party
Defendant Peter Nguyen, Defendant’s General Manager while Plaintiff worked for Defendant, and

the individual who entered into the contracts with Plaintiff on Defendant’s behalf. (Dkt. No. 19-2

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¶ 3; Dkt. No. 19-2 at 5, 8.) Defendant alleges that as its General Manager with decision-making

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and management authority, Nguyen owed Defendant a fiduciary duty. (Dkt. No. 19-3 ¶ 22.)

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Defendant alleges that its practice and policy was to provide at-will employment to all

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management employees save the General Manager, including the Chief Financial Officer, and thus

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Nguyen was expected to hire the Chief Financial Officer and all other employees on an at-will

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basis. (Dkt. No. 19-2 ¶¶ 4-5; see Dkt. No. 19-3 (Proposed Third-Party Complaint) ¶¶ 10-11.)

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Nevertheless, Nguyen entered into two unapproved employment contracts with Plaintiff with

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terms unfavorable to Defendant without seeking approval or disclosing the contracts’ existence to

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Defendant; to the contrary, Nguyen “actively concealed the purported contracts’ existence.” (Dkt.

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United States District Court
Northern District of California

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No. 19-2 ¶¶ 6-8; Dkt. No. 19-3 ¶¶ 12-15.) The proposed third-party complaint brings one claim of

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breach of fiduciary duty against Nguyen. (Dkt. No. 19-3 ¶¶ 22-26.)

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This case was filed in August 2016. (Dkt. No. 1.) Defendant was served at the end of

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October and answered in mid-November. (Dkt. Nos. 6, 14.) Fact discovery closes in August

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2017, and trial is set for January 16, 2018. (Dkt. No. 17 at 1-2.) The Pretrial Order did not

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include a deadline to move to amend the pleadings. (See id.) To date, the parties have engaged in

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only limited discovery in advance of mediation. (See id.)

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DISCUSSION

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Federal Rule of Civil Procedure 14(a)(1) provides that

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[a] defending party may, as third-party plaintiff, serve a summons
and complaint on a nonparty who is or may be liable to it for all or
part of the claim against it. But the third-party plaintiff must, by
motion, obtain the court’s leave if it files the third-party complaint
more than 14 days after serving its original answer.

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Thus, a defendant may assert a third-party claim under Rule 14(a)(1) “only when the third-party’s

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liability is in some way dependent on the outcome of the main claim, or when the third-party is

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secondarily liable to the defending party.” Three Rivers Provider Network, Inc. v. Jett Integration,

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No. 14ccv1092 JM (KSC), 2015 WL 859448, at *6 (S.D. Cal. Feb. 27, 2015) (citing Stewart v.

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Am. Int’l Oil & Gas Co., 845 F.2d 196, 199-200 (9th Cir. 1988)). Put another way, “[t]he crucial

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characteristic of a Rule 14 claim is that [the] defendant is attempting to transfer to the third-party

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defendant the liability asserted against him by the original plaintiff” and so “[t]he mere fact that

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the alleged third-party claim arises from the transaction or set of facts as the original claim is not

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enough.” Stewart, 845 F.2d at 200 (internal quotation omitted). For example, “[i]mpleader is

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commonly used for claims against a third party for indemnification, subrogration, breach of

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warranty, contribution among joint tortfeasors.” Kormylo v. Forever Resorts, LLC, No. 3:13-cv-

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0511-JM (WWG), 2013 WL 5212090, at *2 (S.D. Cal. Sept. 13, 2013) (citation omitted).

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Defendant meets this derivative liability requirement: the substantive basis for Plaintiff’s

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complaint is that Defendant breached his employment contract, and the allegations in the third-

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party complaint would transfer liability for any such breach onto Nguyen from Defendant on the

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United States District Court
Northern District of California

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grounds that by entering the same contracts Nguyen breached his fiduciary duty to Defendant.
Ultimately, “[t]he decision to allow a third-party defendant to be impleaded under [R]ule

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14 is entrusted to the sound discretion of the trial court.” United States v. One 1977 Mercedes

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Benz, 708 F.2d 444, 452 (9th Cir. 1983) (citation omitted). The purpose of this rule is “to promote

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judicial efficiency by eliminating the necessity for the defendant to bring a separate action against

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a third individual who may be secondarily or derivatively liable to the defendant for all or part of

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the plaintiff’s original claim.” Sw. Adm’rs, Inc. v. Rozay’s Transfer, 791 F.2d 769, 777 (9th Cir.

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1986) (citation omitted). “Therefore, courts have construed the rule liberally in favor of allowing

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impleader.” Universal Green Solutions, LLC v. VII Pac Shores Investors LLC, No. C-12-05613-

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RMW, 2013 WL 5272917, at *2 (N.D. Cal. Sept. 18, 2013) (citation omitted). In exercising its

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discretion as to impleader, the court must “balance the desire to avoid a circuitry of actions and to

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obtain consistent results against any prejudice that the plaintiff might suffer from complications of

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the case.” Irwin v. Mascott, 94 F. Supp. 2d 1052, 1056 (N.D. Cal. 2000) (quotation marks and

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citation omitted). In determining whether to permit a third-party complaint, courts usually

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consider the following factors: (1) prejudice to the original plaintiff; (2) complication of issues at

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trial; (3) likelihood of trial delay; and (4) timeliness of the motion to implead. Id. (citation

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omitted). Defendant satisfies each of these requirements.

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Permitting the third-party complaint will not prejudice Plaintiff. He argues that it will
prejudice him “because it would be a total waste of time and resources.” (Dkt. No. 24 at 4.)
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While the filing of meritless claims against Nguyen may be prejudicial to Nguyen, it is not

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prejudicial to Plaintiff. Plaintiff does not identify any other prejudice. He does not respond to

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Defendant’s argument that the proposed third-party complaint will not complicate the issues at

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trial, and he therefore concedes that it will not. See Ardente v. Shanley, No. 07-4479 MHP, 2010

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WL 546485, at *6 (N.D. Cal. Feb. 9, 2010) (“Plaintiff fails to respond to this argument and

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therefore concedes it through silence.”). The Court would reach the same conclusion even absent

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Plaintiff’s concession: Nguyen would already be a witness at trial, and his involvement and

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authority to enter the contracts at issue would be litigated regardless of whether Defendant is

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permitted to file a third-party complaint. Indeed, in the Pretrial Order the Court directed the
parties to engage in limited discovery in advance of mediation, including allowing each party to

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United States District Court
Northern District of California

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depose Nguyen. (Dkt. No. 17 at 1.) Further, the proposed third-party complaint involves one

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third-party defendant and a single cause of action arising out of the same contracts at issue in

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Plaintiff’s complaint. Thus, the third-party complaint will not substantially complicate the action.

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Third, Plaintiff concedes that the third-party complaint will not delay trial. (Dkt. No. 24 at

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4.) This case is still early in the discovery phase: there are seven months left before the close of

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fact discovery, and trial is nearly a year away. Similarly, Plaintiff concedes that Defendant’s

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motion is timely. (See id.) Defendant filed the instant motion for leave to file a third-party

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complaint only three months after being served with the complaint and only two months after

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filing its answer; other courts have found even longer lapses timely. See, e.g., Universal Green

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Solutions, LLC, 2013 WL 5272917, at *4 (motion was timely when filed three months after

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answer); Kormylo, 2013 WL 5212090, at *2 (motion was timely when filed six months after case

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was filed).

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The gravamen of Plaintiff’s opposition is that Defendants “fail to make even a threshold

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showing that Peter Nguyen was its fiduciary” and therefore leave to file the proposed third-party

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complaint should be denied and stricken as futile. (Dkt. No. 24 at 2-3.) Put simply, Plaintiff

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contends that the proposed third-party complaint and motion fail to support the existence of a

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fiduciary relationship. (Id. at 3.) Plaintiff does not cite any case holding that courts may deny

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leave to file a third-party complaint based on futility. To the contrary, courts have rejected that
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argument, noting that “Rule 14(a) expressly permits impleader where the proposed third-party

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defendant ‘may be liable’ to the original defendant” and the proposed third-party complaint

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“asserts at least a colorable claim for relief[,]” as “[a]ny Rule 12 defenses . . . are properly raised

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by [the] third-party defendant in its answer to the third-party complaint, not by . . . the original

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plaintiff in opposition to a motion for leave to file.” Clark Cnty. v. Jacobs Facilities, Inc., No.

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2:10-CV-00194-LRH-PAL, 2011 WL 44587797, at *1 (D. Nev. Sept. 23, 2011) (citation omitted);

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see also Villegas v. Hackett, No. 03 CV 2133, 2007 WL 4277509, at *3 (S.D. Cal. Dec. 5, 2007)

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(declining to address the parties’ arguments about “the issue of viability” of the complaint on a

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Rule 14 motion for leave to file a third-party complaint because “that issue is not now before the

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court”).

United States District Court
Northern District of California

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In short, construing Rule 14(a)(1) liberally in favor of impleader, see Universal Green

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Solutions, LLC, 2013 WL 5272917, at *2, to the extent Defendant has an actionable claim that

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belongs in this forum against Nguyen—an issue better left for Nguyen to challenge once he is

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served—resolving all disputes arising from Plaintiff’s employment contracts in one litigation

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would “avoid a circuitry of actions” and inconsistent results. Irwin, 94 F. Supp. 2d at 1056. The

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judicial economy of allowing Defendant to implead Nguyen outweighs any prejudice to Plaintiff.
CONCLUSION

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For the reasons described above, the Court GRANTS Defendant’s motion for leave to file
a third-party complaint against Nguyen.

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This Order disposes of Docket No. 19.

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IT IS SO ORDERED.

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Dated: February 10, 2017

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JACQUELINE SCOTT CORLEY
United States Magistrate Judge

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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ROBERT CLARKE,

Case No. 16-cv-04954-JSC

Plaintiff,
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v.

CERTIFICATE OF SERVICE

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PUBLIC EMPLOYEES UNION LOCAL 1,
Defendant.

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United States District Court
Northern District of California

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I, the undersigned, hereby certify that I am an employee in the Office of the Clerk, U.S.
District Court, Northern District of California.
That on February 10, 2017, I SERVED a true and correct copy(ies) of the attached, by
placing said copy(ies) in a postage paid envelope addressed to the person(s) hereinafter listed, by
depositing said envelope in the U.S. Mail, or by placing said copy(ies) into an inter-office delivery
receptacle located in the Clerk's office.

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Robert Clarke
5905 W. Charleston Blvd, Apt 318
Las Vegas, NV 89146
Mark LeHocky
Judicate West
100 Pine St.
Suite 1950
San Francisco, CA 94111
Dated: February 10, 2017

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Susan Y. Soong
Clerk, United States District Court

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By:________________________
LISA R. CLARK, Deputy Clerk to the
Honorable JACQUELINE SCOTT CORLEY

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