Garcia v. Nachon Enterprises, Inc. et al

Filing 45

ORDER denying 32 Plaintiff's Motion to Dismiss Counterclaim. The Plaintiff shall answer the Counterclaim no later than 4/7/2016. Signed by Judge Darrin P. Gayles on 3/18/2016. (zvr)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF FLORIDA
Case No. 15-23416-CIV-GAYLES
ERWIN GARCIA,
Plaintiff,
v.
NACHON ENTERPRISES, INC.; CARLOS
NACHON; and ACE HARDWARE CORP.
(DELAWARE),
Defendants.
/
NACHON ENTERPRISES, INC.,
Counter-Plaintiff,
v.
ERWIN GARCIA,
Counter-Defendant.
/
ORDER
THIS CAUSE comes before the Court on Plaintiff/Counter-Defendant Erwin Garcia’s
Motion to Dismiss Counterclaim [ECF No. 32]. The Court has considered the counterclaim, the
parties’ arguments, and the applicable law.
I.

BACKGROUND
In his Amended Complaint, Garcia brings claims against Defendants Nachon Enterprises,

Inc. (“NEI”), and Carlos Nachon1 alleging unpaid wages and retaliation, in violation of the Fair
Labor Standards Act, 29 U.S.C. § 201 et seq. He also brings supplemental state law claims alleging breach of agreement, quantum meruit, and unjust enrichment. Garcia’s claims relate to the

1

All claims against the remaining Defendant, Ace Hardware Corp. (Delaware), were dismissed upon joint motion
of the parties. [ECF No. 38]

1

Defendants’ alleged failure to pay minimum wage and overtime wages throughout his employment
in 2014 and 2015. The Defendants’ answer includes a counterclaim by NEI, in which it alleges
that Garcia, during work time, used NEI’s corporate and credit accounts to make purchases for
his own benefit—including a water heater, lawn equipment, and other tools. It also alleges that
Garcia, during work time, used NEI’s Facebook page to solicit and sell Michael Kors handbags.
NEI brings counterclaims against Garcia for breach of fiduciary duty and conversion. Garcia
filed the instant motion, arguing that the Court should dismiss NEI’s counterclaim because it
lacks subject matter jurisdiction or, in the alternative, because NEI has failed to state claims upon
which relief can be granted.
II.

DISCUSSION
A compulsory counterclaim generally falls within the supplemental jurisdiction of federal

courts, pursuant to 28 U.S.C. § 1367, while a permissive counterclaim requires an independent
jurisdictional basis—either federal question jurisdiction under 28 U.S.C. § 1331, or diversity jurisdiction under 28 U.S.C. § 1332. Bautista v. Discount Warehouse, Inc., No. 15-24206, 2016 WL
1028358, at *1 (S.D. Fla. Mar. 15, 2016) (citing Plant v. Blazer Fin. Servs., 598 F.2d 1357, 1359
(5th Cir. 1979)2). The Court has no independent basis for jurisdiction over NEI’s counterclaims.
No federal question jurisdiction exists, because NEI has brought only state law claims. And no
diversity jurisdiction exists, because NEI is a Florida corporation and Garcia is a citizen of Florida.
Thus, unless the Court finds the counterclaim to be mandatory, it must dismiss the counterclaim
for lack of subject matter jurisdiction. See E.-Bibb Tiggs Neighborhood Ass’n v. Macon Bibb
Planning & Zoning Comm’n, 888 F.2d 1576, 1578 (11th Cir. 1989).

2

The Eleventh Circuit has adopted as binding precedent all decisions of the former Fifth Circuit rendered before
October 1, 1981. Bonner v. City of Prichard, 661 F.2d 1206, 1207 (11th Cir. 1981) (en banc).

2

Under Federal Rule of Civil Procedure 13(a), a counterclaim is compulsory “if it arises
out of the transaction or occurrence that is the subject matter of the opposing party’s claims . . . .”
Fed. R. Civ. P. 13(a). The Eleventh Circuit employs the “logical relationship” test to determine
whether a counterclaim meets Rule 13(a)’s requirement. Bautista, 2016 WL 1028358, at *1. Under
this test, a counterclaim is compulsory when “(1) [] the same aggregate of operative facts serves as
the basis for both claims; or (2) [] the aggregate core of facts upon which the original claim rests
activates additional legal rights in a party defendant that would otherwise remain dormant.”
Montgomery Ward Dev. Corp. v. Juster, 932 F.2d 1378, 1381 (11th Cir. 1991) (quoting S. Fla. Auto
Painters, Inc., 397 So. 2d 1160, 1164 (Fla. 3d DCA 1981)) (internal quotation marks omitted).
In support of its argument that its counterclaim satisfies this test, NEI relies principally
on another case from this District, Rivero v. Lefeld & Son, LLC, No. 13-81154, 2014 WL 2095219
(S.D. Fla. May 20, 2014). There, the plaintiff, who was a sandwich maker at the defendants’
Subway store and was later promoted to manager, brought an FLSA claim against the defendants.
The defendants brought counterclaims against the plaintiff for theft, fraud, conversion, and breach
of contract. They alleged that the plaintiff would clock into work but then leave the store for extended periods of time to handle personal matters and then submit fraudulent hours, that he disconnected store surveillance cameras and engaged in sexual relations with other store employees
and then submit those hours as work-related hours (including overtime), that he failed to deposit
and retained for personal use over $7500 of the store’s cash proceeds, and that he used the company’s debit card and checkbook without permission for $6500. Judge Marra, in denying the plaintiff’s motion to dismiss the counterclaim, found that “[t]he FLSA claim and the counterclaims stem
from the employer/employee relationship and the duties and obligations of both Defendants and
[the plaintiff]. Indeed, while [the plaintiff] claims he is entitled to overtime, Defendants claim

3

that he submitted false time record, was overpaid for hours he never worked, and took money he
was not entitled to receive.” Id. at *4.
The Court agrees with Judge Marra’s reasoning in Rivero and finds that it applies here.
NEI claims that Garcia was paid for hours he did not work—because he used work time to sell
handbags on the company’s Facebook page—and that he took money he was not entitled to receive
when he used NEI’s credit cards to purchase items for his personal use. The Court concludes that
the counterclaims and Garcia’s claims are logically related and stem from the parties’ employeremployee relationship. NEI’s counterclaims constitute compulsory counterclaims over which the
Court has subject matter jurisdiction.
Garcia, like the plaintiff in Rivero, also argues that the Defendants’ counterclaims seek setoffs, which are not categorically permitted in FLSA cases. Here, as well, the Court agrees with
Judge Marra:
To be sure, set-offs in FLSA cases raise a concern when the set-off causes the
employees’ wages to fall below the statutory minimum wage. See Brennan v.
Heard, 491 F.2d 1, 3 (5th Cir. 1974) [(in FLSA cases, set-offs may not result in
sub-minimum wage payments to an employee)], overruled on other grounds,
McLaughlin v. Richland Shoe Co., 486 U.S. 128 (1998); Singer v. City of Waco,
324 F.3d 813, 828 n.9 (5th Cir. 2003) (set-offs are not prohibited when it will not
cause a plaintiff’s wages to dip below the statutory minimum). However, the
counterclaim alleges in part that [the plaintiff] received payments for hours he did
not actually work. Thus, to the extent his claim for alleged overtime is based on
hours he did not work, there would be no danger of running afoul of the set-off
rule in FLSA cases because his pay would not be reduced below the minimum
wage. That stated, should [the plaintiff] prevail on his FLSA claim, Defendants
will only be permitted recovery on the counterclaims to the extent they do not
reduce [the plaintiff]’s claim below the minimum wage.
Rivero, 2014 WL 2095219, at *4 (citations altered). The Court adopts a similar holding here: to
the extent Garcia’s overtime claims are based on hours he did not work, the Defendants’ counterclaims do not conflict with the set-off rule; and should Garcia prevail on his FLSA claim, NEI

4

shall be permitted to recover on its counterclaims only to the extent that recovery does not reduce
Garcia’s claim below the minimum wage.
Finally, Garcia’s argument that the counterclaims fail to state claims upon which relief
can be granted is without merit. To survive a motion to dismiss a counterclaim brought pursuant
to Federal Rule of Civil Procedure 12(b)(6), the counterclaim “must contain sufficient factual
matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see also
Geter v. Galardi S. Enters., Inc., 43 F. Supp. 3d 1322, 1325 (S.D. Fla. 2014) (“A motion to dismiss
a counterclaim pursuant to [Rule] 12(b)(6) is evaluated in the same manner as a motion to dismiss
a complaint.” (citation and internal quotation marks omitted)). Accepting the factual allegations
contained within the counterclaim as true, the Court finds that NEI has “ple[d] sufficient factual
content that allows the court to draw the reasonable inference that [the plaintiff] is liable for the
misconduct alleged.” Iqbal, 556 U.S. at 679. And despite Garcia’s contentions to the contrary,
NEI’s use of the words “fraud” or “fraudulent” or “defraud” to describe Garcia’s actions, viewed
in context, does not elevate the entire counterclaim to require the heightened pleading standards
for fraud under Rule 9(b).
Accordingly, the Plaintiff’s Motion to Dismiss Counterclaim [ECF No. 32] is DENIED.
The Plaintiff shall ANSWER the Counterclaim by April 7, 2016.
DONE AND ORDERED in Chambers at Miami, Florida, this 18th day of March, 2016.

________________________________
DARRIN P. GAYLES
UNITED STATES DISTRICT JUDGE

5