Yassa et al v. EM Consulting Group, Inc.

Filing 15

MEMORANDUM. Signed by Judge James K. Bredar on 8/8/2017. (jnls, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
GEORGE YASSA, et al.,

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Plaintiffs

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v.

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EM CONSULTING GROUP, INC.,

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Defendant
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EM CONSULTING GROUP, INC.,

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CIVIL NO. JKB-17-593
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Counter-Claimant

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v.

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GEORGE YASSA,

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Counter-Defendant
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MEMORANDUM

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Former employees of EM Consulting Group, Inc. (―EM‖), trading as Helion Automotive
Technologies (―Helion‖), brought this collective and class action under the Federal Fair Labor
Standards Act of 1938 (―FLSA‖), the Maryland Wage and Hour Law, and the Maryland Wage
Payment and Collection Law. (Compl. ECF No. 1.) In a combined submission with its Answer,
EM filed a Counterclaim against Plaintiff George Yassa (―Yassa‖), alleging fraud (Count I) and
breach of contract/breach of fiduciary duty (Count II). (Answer/Countercl., ECF No. 5.) Yassa
has moved to dismiss the Counterclaim for failure to state a claim on which relief may be
granted or, alternatively, moved for summary judgment. (ECF No. 8.) That motion has been
fully briefed, and is now ripe. (ECF Nos. 13, 14.) No hearing is necessary. See Local Rule

105.6 (D. Md. 2016). The Court will dismiss the Counterclaim sua sponte for the reasons stated
Accordingly, Yassa’s motion to dismiss and his alternative motion for summary

below.

judgment are moot.
I.

BACKGROUND1
Helion Automotive Technologies (―Helion‖)2 is in the business of providing information

technology support to car dealerships. (Compl. Introduction; Answer Introduction.) Yassa
worked for Helion and held the position of Project Department Manager from April 1, 2016, to
September 15, 2016.

(Countercl. ¶ 5.)

The Project Department Manager is tasked with

overseeing various projects for Helion’s clients, and the position includes the responsibilities of
monitoring project milestones and ensuring that project deadlines are met. (Id. ¶¶ 6, 12.) As part
of his job, Yassa participated in weekly meetings with executives to review reports summarizing
the progress of ongoing projects. (Id. ¶¶ 10–13.) These reports were generated through a
computer program called ―Exepron,‖ which Helion uses to track all its ongoing projects. (Id.
¶¶ 7–10.)
The allegations contained in the Counterclaim arise from projects related to one of
Helion’s clients, an entity known as ―Ciocca.‖ (Id. ¶ 6.) Helion alleges that in order to conceal
the fact that the Ciocca project had fallen behind, Yassa deleted from Exepron various dates
representing the actual deadlines related to the Ciocca project and replaced them with later dates.
(Id. ¶ 15.) The result of these modifications was that as the Ciocca project fell behind schedule,
its lateness was never revealed by the summary reports generated through Exepron.

(Id.)

Furthermore, Helion alleges that Yassa never called attention to this discrepancy during any of
his weekly meetings with company executives, providing the false impression that the Ciocca
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The Court here summarizes the allegations as presented by EM in the Counterclaim.
The Court will refer to Counter-Claimant by its trade name, ―Helion Automotive Technologies,‖ or by the
short form, ―Helion.‖
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project was on schedule. (Id.) Finally, Helion alleges that had Yassa not concealed the project
delays from his superiors, Helion could have reallocated its resources in time to have gotten the
Ciocca project back on schedule. (Id. ¶ 17.) Because that did not happen, the Counterclaim
indicates Helion was forced to credit Ciocca’s account in the amount of $50,000 in order to
retain the valuable client. (Id.)
II.

ANALYSIS
Yassa argues that the Counterclaim is deficient in several respects:

that Helion

insufficiently pled the elements of fraud under the heightened requirements of Rule 9(b) (Yassa’s
Mem. in Supp. 9–17, ECF No. 8-1), that it failed to allege the existence of a contract with Yassa
(id. at 17–18), and that it failed to allege the existence or breach of any fiduciary duty by Yassa
(id. at 18–19). The Court declines to reach any of these arguments. Instead, it will dismiss the
permissive counterclaim on account of the general policy disfavoring counterclaims in the FLSA
context and because it threatens to overly complicate the litigation.
Rule 13 of the Federal Rules of Civil Procedure divides counterclaims into two
categories: compulsory and permissive. Compulsory counterclaims are those that ―arise[] out of
the transaction or occurrence that is the subject matter of the opposing party’s claim‖ and that do
not require adding any party over which the court lacks jurisdiction. Fed. R. Civ. P. 13(a). All
other counterclaims are permissive. Fed. R. Civ. P. 13(b). A party to litigation may assert any
permissive counterclaim it wishes to bring (provided the court has subject matter jurisdiction to
hear such a claim), but the court retains discretion to refuse to entertain permissive counterclaims
that threaten to unduly complicate the litigation. 6 Charles Alan Wright & Arthur R. Miller, Fed.
Prac. & Proc. Civ. § 1420 (3d ed. 2017).

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The FLSA is based on a congressional finding that ―labor conditions detrimental to the
maintenance of the minimum standard of living necessary for health, efficiency, and general
well-being of workers‖ burden commerce, among other negative social effects. See 29 U.S.C.
§ 202 (2017). The FLSA thus serves to enforce a public—rather than a private—right. Donovan
v. Pointon, 717 F.2d 1320, 1323 (10th Cir. 1983). It expresses the legislative desire that the
individual worker have the freedom ―to allocate his minimum wage among competing economic
and personal interests.‖ Brennan v. Heard, 491 F.2d 1, 4 (5th Cir. 1974), overruled on other
grounds by McLaughlin v. Richland Shoe Co., 486 U.S. 128, 130 (1988). But the FLSA does not
designate the federal courts to settle disputes against the employee’s wages. Id. (―To clutter
these proceedings with the minutiae of other employer-employee relationships would be
antithetical to the purpose of the Act.‖). It is for this reason that several courts, including this
one, ―have been hesitant to permit an employer to file counterclaims in FLSA suits for money
the employer claims the employee owes it, or for damages the employee’s tortious conduct
allegedly caused.‖ Ramirez v. Amazing Home Contractors, Inc., Civ. No. JKB-14-2168, 2014
WL 6845555, at *4 (D. Md. Nov. 25, 2014) (quoting Martin v. PepsiAmericas, Inc., 628 F.3d
738, 740 (5th Cir. 2010)).
In the instant case, Yassa and the other Plaintiffs have filed an action under the FLSA and
state law, alleging Helion failed to pay them required overtime wages. (Compl. ¶¶ 190–208.)
The facts alleged to support such a claim involve the Plaintiffs’ job functions, their
compensation, the hours they worked, and the amount they were paid. (See id. ¶¶ 143–162.) By
contrast, the Counterclaim for fraud and breach of contract is based on the details of Yassa’s
actions with respect to a particular project. (Countercl. ¶ 15.) Because the Counterclaim is not
based on the same transaction or occurrence as the Complaint, it is permissive in nature. While

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the Court has independent subject matter jurisdiction over the Counterclaim,3 it is persuaded that
the public policy of protecting workers’ rights to receive and to direct the allocation of their
minimum wages means Counterclaims by employers in FLSA cases should be disfavored.
Furthermore, the Court finds that the evidence relevant to resolving the charges in the
Counterclaim is unrelated to that which is pertinent to the Complaint. Therefore, entertaining the
two causes of action in the same case would unduly complicate the litigation and add little
benefit in terms of judicial economy.
Helion may choose to refile its claims against Yassa in a separate action in federal or in
state court, but the Court will not entertain them as part of the instant case. For the foregoing
reasons, the Court will dismiss the Counterclaim without prejudice to refile in a separate action.
Yassa’s motion to dismiss for failure to state a claim and his alternative motion for summary
judgment are thus moot. A separate order shall issue.

DATED this 8th day of August, 2017.
BY THE COURT:

/s/
James K. Bredar
United States District Judge

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Because the Court’s jurisdiction over the claims in the Complaint is based on the federal question inherent
in Count I, the action under the FLSA, any permissive counterclaim needs an independent jurisdictional basis. See 6
Charles Alan Wright & Arthur R. Miller, Fed. Prac. & Proc. Civ. § 1422 (3d ed. 2017). The Court has jurisdiction
over the Counterclaim because it alleges facts sufficient to satisfy federal diversity jurisdiction under 28 U.S.C.
§ 1332 (2017). (See Countercl. ¶¶ 1, 2, 26 (alleging that Yassa is a citizen of California, that Helion is a citizen of
Maryland, and that the amount in controversy is in excess of $88,000).)

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