RBS Citizens NA v. Portugal
ORDER granting Motion to Dismiss Third Party Complaint and Counterclaims (Doc. No. 36 ) and denying Defendant's Motion in the Alternative to Drop a Party (Doc. No. 50 ). Signed by Judge Alvin W. Thompson on 9/14/2011. (Gallagher, Robyn)
UNITED STATES DISTRICT COURT
DISTRICT OF CONNECTICUT
RBS CITIZENS, N.A.,
RBS SECURITIES, INC.;
CITIZENS FINANCIAL GROUP;
RBS CITIZENS, N.A.; and
ROYAL BANK OF SCOTLAND
Civil Action No.
3:10 CV 1306 (AWT)
RULING RE MOTION TO DISMISS
THIRD PARTY COMPLAINT AND COUNTERCLAIMS
The plaintiff and counterclaim defendant, RBS Citizens N.A.,
and third party defendants RBS Securities, Inc., Citizens
Financial Group, RBS Citizens, N.A., and Royal Bank of Scotland
Group, PLC (collectively, “RBS Group”) move to dismiss the
counterclaim and third party complaint filed against them by
defendant and third party plaintiff Jorge Portugal (“Portugal”).
RBS Group moves under Fed. R. Civ. P. 12(b)(1), 12(b)(2) and
12(b)(6), and argues in the alternative pursuant to Fed. R. Civ.
P. 12(e) and 10(b) that Portugal should be required to replead
Portugal argues that the motion to dismiss should
not be granted and has filed a motion in the alternative,
pursuant to Fed. R. Civ. P. 21, to drop third party defendant RBS
Securities, Inc. as misjoined.
For the reasons discussed below, Portugal’s motion is being
denied, and Portugal’s claims against RBS Group are being
dismissed for lack of subject matter jurisdiction.
Portugal began working at Greenwich Capital Markets, a fixed
income broker dealer, in the Spring of 1997.
Markets was purchased by Natwest, a British bank, in 1996.
2001, Greenwich Capital Markets became part of RBS Group.
fall of 2007 Greenwich Capital Markets became RBS Securities,
Inc. (“RBS Securities”).
While working for Greenwich Capital Markets, Portugal’s
salary was set at $100,000 per year and was supplemented by a
bonus compensation plan based on performance and paid on a
In the Fall of 2007, the compensation structure
was changed so that employees would receive one annual bonus
check in May of the following year based on the prior year’s
On March 9, 2009, Portugal was told that he would receive a
bonus of $450,000 for his work in 2008 but that this money would
be paid under a deferral plan agreement.
The deferral plan
agreement provided that the employee would receive one third of
his bonus compensation plus notional interest on each of June 18,
2010, June 18, 2011, and June 18, 2012.
concerned that he would be unable to support his family solely on
his salary prior to receiving the first deferred payment.
In April 2009, RBS Securities employees were told that they
could take out hardship loans which would be repaid out of their
first payment under the deferral plan agreement.
applied for a hardship loan.
He signed a loan agreement with RBS
Citizens N.A. and received the money in June 2009.
receiving the hardship loan, Portugal continued to experience
The combination of these financial
difficulties and conflict at work resulted in Portugal becoming
In December 2009, Portugal told his supervisors that he
might need to resign for health reasons.
His supervisors told
him that he should not leave because he could receive a bonus of
as much as $1,000,000 in 2010 based on his performance in 2009.
The deferral plan agreement provided that payments would be
made to former employees who qualified as “good leavers” at the
time they left.
One way to qualify as a “good leaver” was to
leave for health reasons.
However, to qualify as a “good leaver”
on this basis a former employee had to provide medical
documentation and receive approval from the employer.
Portugal left RBS Securities in December 2009.
RBS Securities with medical documentation but never received a
response as to whether he qualified for deferred compensation
under the good leaver provision.
On June 18, 2010, Portugal did not receive a deferred
He was unable to repay the hardship loan he had
obtained in April 2009, and RBS Citizens N.A. filed this action
against Portugal seeking repayment of the hardship loan.
Portugal has countersued and brought a third party complaint
against RBS Group for breach of contract by failing to make the
deferral plan payments and the payment of the $1,000,000 bonus,
for unjust enrichment, for violation of the Connecticut Wage Act,
and for breach of the implied covenant of good faith and fair
II. LEGAL STANDARD
“[T]he standards for reviewing dismissals granted under
12(b)(1) and 12(b)(6) are identical.”
Moore v. PaineWebber Inc.,
189 F.3d 165, 169 n.3 (2d Cir. 1999).
When deciding a motion to
dismiss under Rule 12(b)(6), the court must accept as true all
factual allegations in the complaint and must draw inferences in
a light most favorable to the plaintiff.
U.S. 232, 236 (1974).
Scheuer v. Rhodes, 416
Although a complaint “does not need
detailed factual allegations, a plaintiff’s obligation to provide
the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than
labels and conclusions, and a formulaic recitation of the
elements of a cause of action will not do.”
Bell Atlantic Corp.
v. Twombly, 550 U.S. 550, 555 (2007), citing Papasan v. Allain,
478 U.S. 265, 286 (1986)(on a motion to dismiss, courts “are not
bound to accept as true a legal conclusion couched as a factual
“Nor does a complaint suffice if it tenders naked
assertions devoid of further factual enhancement.
Iqbal, 129 S.Ct. 1937, 1949 (2009)(quoting Twombly, 550 U.S. at
“Factual allegations must be enough to raise a right to
relief above the speculative level, on the assumption that all
allegations in the complaint are true (even if doubtful in
Id. (citations omitted).
However, the plaintiff must
plead “only enough facts to state a claim to relief that is
plausible on its face.”
Id. at 1974.
“The function of a motion
to dismiss is ‘merely to assess the legal feasibility of the
complaint, not to assay the weight of the evidence which might be
offered in support thereof.’”
Mytych v. May Dept. Store Co., 34
F. Supp. 2d 130, 131 (D. Conn. 1999), quoting Ryder Energy
Distribution v. Merrill Lynch Commodities, Inc., 748 F.2d 774,
779 (2d Cir. 1984).
“The issue on a motion to dismiss is not
whether the plaintiff will prevail, but whether the plaintiff is
entitled to offer evidence to support his claims.”
v. Yale New Haven Hosp., 727 F. Supp. 784, 786 (D. Conn. 1990)
(citing Scheuer, 416 U.S. at 232).
In its review of a motion to dismiss for failure to state a
claim, the court may consider “only the facts alleged in the
pleadings, documents attached as exhibits or incorporated by
reference in the pleadings and matters of which judicial notice
may be taken.”
Samuels v. Air Transport Local 504, 992 F.2d 12,
15 (2d Cir. 1993).
A. Portugal’s Motion to Drop RBS Securities
As discussed below, the court does not have diversity
jurisdiction because RBS Securities and Portugal are both
citizens of Connecticut.
Anticipating this conclusion, Portugal
moved to drop RBS Securities under Fed. R. Civ. P. 21 and thereby
preserve diversity jurisdiction.
However, the motion to drop RBS
Securities should not be granted because RBS Securities is an
indispensable party under Fed. R. Civ. P. 19.
Thus, even were
the court to grant Portugal’s motion, his claims should then be
dismissed under Rule 19.
“Fed. R. Civ. P. 19 sets forth a two-step test for
determining whether the court must dismiss an action for failure
to join an indispensable party.”
Viacom Intern., Inc. v.
Kearney, 212 F.3d 721, 724 (2d Cir. 2000).
determine whether the party is necessary.
First, the court must
If the party is
necessary, the court must determine whether the party is
Id. at 725.
A party is necessary when
(1) in the [party]’s absence complete relief cannot be
accorded among [the other parties], or (2) the [party]
claims an interest relating to the subject of the action
and is so situated that the disposition of the action in
the [party]’s absence may (I) as a practical matter
impair or impede the [party]’s ability to protect that
interest or (ii) leave any of the [parties] . . . subject
to a substantial risk of incurring double, multiple, or
otherwise inconsistent obligations by reason of the
Id. at 724.
In determining whether a party is indispensable
under Rule 19(b), the court considers
first, to what extent a judgment rendered in the person’s
absence might be prejudicial to the person or those
already parties; second, the extent to which, by
protective provisions in the judgment, by the shaping of
relief, or other measures, the prejudice can be lessened
or avoided; third, whether a judgment rendered in the
person’s absence will be adequate; fourth, whether the
plaintiff will have an adequate remedy if the action is
dismissed for nonjoinder.
Viacom Intern., Inc. v. Kearney, 212 F.3d 721, 725 (2d Cir. 2000)
(quoting Fed. R. Civ. P. 19(b)).
RBS Securities is a necessary and indispensable party to
Portugal’s counterclaim and third party complaint.
Portugal’s claims arises out of his employment relationship with
RBS Securities, and adjudication of Portugal’s claims will
necessarily require a finder of fact to make determinations
regarding the conditions of Portugal’s employment by RBS
RBS Securities has an interest in defending against
the allegations contained in the counterclaim and third party
complaint that pertain to that employment relationship.
dismissal of RBS Securities leaves other parties subject to a
substantial risk of incurring multiple or otherwise inconsistent
For instance, were Portugal to obtain a judgment
against the remaining members of RBS Group based on claims
arising out of his employment he could then pursue similar and
duplicative claims against RBS Securities, his former employer.
This would inevitably prejudice RBS Group as a whole.
court attempted to avoid this result by crafting a judgment to
avoid prejudicing RBS Group it would be unable to provide
Portugal with adequate and complete relief.
Portugal can pursue his claims in state court, where he has
access to adequate remedies.
Portugal argues that RBS Securities is a dispensable party
because it should be considered a single employer with Royal Bank
of Scotland Group, PLC.
The single employer doctrine allows “an
employee in certain circumstances to assert employer liability
against an entity that is not formally his or her employer.”
Arculeo v. On-Site Sales & Marketing, LLC, 425 F.3d 193, 197 (2d
Various iterations of this doctrine have been “used
in numerous contexts, such as union representation,
responsibility for violations of the Fair Labor Standards Act,
and . . . Title VII liability.”
To date, there has not been a Connecticut state case
utilizing the single employer test in an action for
unpaid wages or unjust enrichment. Following the logic
of the courts that have considered, and rejected, the
single employer test outside the context of employment
discrimination and collective bargaining suits, the
plaintiff’s reliance on the single employer test in
support of his unpaid wages and unjust enrichment claims
is misplaced and inapplicable.
Cooper v. Pitney Bowes, Inc., 917 A.2d 1069, 1071 (Conn. Super.
Because under Connecticut law the single employer
doctrine cannot be used by Portugal to assert employer liability
against Royal Bank of Scotland Group, PLC, RBS Securities is an
B. Motion to Dismiss
RBS Group argues that the third party complaint must be
dismissed for lack of subject matter jurisdiction under Fed. R.
Civ. P. 12(b)(1).
Portugal contends that the court has both
diversity jurisdiction under 28 U.S.C. § 1332 and supplemental
jurisdiction under 28 U.S.C. § 1367. For the reasons discussed
below, the motion to dismiss is being granted.
1. Diversity Jurisdiction
Diversity jurisdiction exists in “civil actions where the
matter in controversy exceeds the sum or value of $75,000,"
28 U.S.C. § 1332(a), and there is “complete diversity, i.e., that
each plaintiff’s citizenship must be different from the
citizenship of each defendant.”
51, 56 (2d Cir. 2009).
Hallingby v. Hallingby, 574 F.3d
“[A] corporation shall be deemed to be a
citizen of any State by which it has been incorporated and of the
State where it has its principal place of business.”
Portugal, the third party plaintiff, is a citizen of the
state of Connecticut.
Third party defendant RBS Securities is a
Delaware corporation with a principal place of business in
Therefore, the requirement of complete diversity of
citizenship is not satisfied.
Portugal cites Freeport-McMoRan Inc. v. K.N. Energy, Inc.
for the principle that “[d]iversity jurisdiction, once
established, is not defeated by the addition of a nondiverse
party to the action.” 498 U.S. 426, 428-29 (1991).
principle would prevent the court from dismissing the claim by
RBS Citizens, N.A. against Portugal for lack of diversity.
However, it does not provide the court with a basis for
jurisdiction over Portugal’s third party complaint.
“Since diversity is lacking, the Court has no independent
basis for jurisdiction of these claims beyond its authority to
consider them pursuant to supplemental jurisdiction.”
Jessica Assocs., No. 93 CIV. 8565 (RPP), 1995 WL 441964 at *1
(S.D.N.Y. July 26, 1995); see also Azevedo v. Club Getaway, Inc.,
Civil Action No. 3:06-cv-1222 (VLB), 2008 WL 350479 at *1 (D.
Conn. Feb. 7, 2008) (where there is “neither federal question nor
diversity jurisdiction over the third party complaint [t]he third
party complaint must be dismissed unless the court can exercise
“In any civil action of which the
district courts have original jurisdiction, the district courts
shall have supplemental jurisdiction over all other claims that
are so related to claims in the action within such original
jurisdiction that they form part of the same case or
28 U.S.C. § 1367(a).
“[D]isputes are part of the
‘same case or controversy’ within § 1367 when they ‘derive from a
common nucleus of operative fact.’”
Achtman v. Kirby, McInerney
& Squire, LLP, 464 F.3d 328, 335 (2d Cir. 2006) (quoting Promisel
v. First Am. Artificial Flowers Inc., 943 F.2d 251, 254 (2d Cir.
“The district courts may decline to exercise
supplemental jurisdiction . . . if . . . (2) the claim
substantially predominates over the claim or claims over which
the district court has original jurisdiction.” 28 U.S.C.
Here, the underlying claim is one by RBS Citizens, N.A.
against Portugal seeking repayment of a loan it made to him.
Portugal’s claims against RBS Group, however, are all related to
his claim for compensation he contends he is owed for work he
performed while employed by RBS Securities.
arguendo, that Portugal’s employment claims are so related as to
form the same case or controversy, they threaten to predominate
over the claims over which the court has original jurisdiction.
“The decision to decline supplemental jurisdiction should be
guided by an assessment of ‘judicial economy, convenience,
fairness and comity.’” Damassia v. Duane Reade, Inc., 250 F.R.D.
152, 162 (S.D.N.Y. 2008).
In AT&T Corp. v. New York City Health and Hosp. Corp., the
court declined to exercise supplemental jurisdiction where the
counterclaim was “infinitely more complex” than the underlying
72 F. Supp. 2d 398, 400 (S.D.N.Y. 1999).
underlying claim asserted was for payment of long distance bills.
Records showed that the calls were made, non-payment was
conceded, and the case could presumably be resolved on summary
Therefore, the court concluded that the underlying
case was “simplicity itself.”
The counterclaim, however,
involved “consideration of the contract for installation of a $3
million telecommunications system in a New York City hospital and
the standards of care that govern the design and installation of
As in AT&T Corp., the underlying claim in this case is
There is no question as to whether Citizens
Bank, N.A. made a hardship loan to Portugal.
There is no
question that Portugal signed the loan documents and that
repayment was due June 18, 2010.
Portugal does not contend that
he repaid the loan, and he asserts no claim this his obligation
to repay the loan was contingent upon how some issue raised in
the counterclaim or third party complaint is resolved.
other hand, the counterclaim and third party complaint require
analysis of Portugal’s employment relationship, contract
interpretation, and whether there was a third party contract.
Furthermore, most of the evidence that must be considered with
respect to the counterclaim and third party complaint need not be
considered to resolve the underlying claim.
plaintiff brings a claim for a principal amount of $72,000
whereas Portugal brings claims seeking to recover a principal
amount of approximately $1.5 million.
See AT&T Corp., 72 F.
Supp. 2d at 399-400 (declining supplemental jurisdiction where
underlying claim was for $27,000 and the third party complaint
implicated a $3 million contract).
Because the counterclaim and
third party complaint substantially predominate over the original
claim, the court declines to exercise supplemental jurisdiction
and the counterclaim and third party complaint are being
dismissed pursuant to Fed. R. Civ. P. 12(b)(1) for lack of
subject matter jurisdiction.
For the reasons set forth above, (1) “Defendant’s
Alternative Motion for Misjoinder Pursuant to Fed. R. Civ. P.
Rule 21" (Doc. No. 50) is hereby DENIED, and (2) the RBS Group’s
Motion to Dismiss the Third Party Complaint and Counterclaims
(Doc. No. 36) is hereby GRANTED.
It is so ordered.
Signed this 14th day of September, 2011 at Hartford,
Alvin W. Thompson
United States District Judge
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