Duran et al v. West Maple Dental Specialists, PC et al
MEMORANDUM AND ORDER - Plaintiff's motion to dismiss the defendant's counterclaims (Filing No. 12 ) is granted. Defendant's counterclaims are hereby dismissed. Ordered by Senior Judge Joseph F. Bataillon. (LKO)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
MARIA DURAN, and JENNIFER CROUSE,
MEMORANDUM AND ORDER
WEST MAPLE DENTAL SPECIALISTS, PC,
and LOURDES SECOLA,
This matter is before the Court on plaintiff/counterclaim defendant Maria Duran’s
motion to dismiss the defendants’/counterclaimants’ counterclaims, Filing No. 12. This is
an action for damages and declaratory relief brought under the Fair Labor Standards Act,
29 U.S.C. § 201, et seq. and the Families First Coronavirus Response Act-Emergency
Paid Sick Leave Act, 29 U.S.C. § 2601.
The plaintiffs allege that defendants, West Maple Dental Specialists, P.C. and
Lourdes Secola (collectively, “West Maple” or defendant), failed to provide paid sick time
and unlawfully terminated their employment. As an affirmative defense and counterclaim,
West Maple alleges that defendant Maria Duran impermissibly increased her hourly
wage, modified her hours worked, and retained a monthly bonus meant to compensate
her for additional responsibilities in lieu of a wage increase. Filing No. 10, Answer at 89. West Maple seek damages against Duran in the amount of $5,000. Id.
Plaintiff Duran moves to dismiss the defendant’s counterclaims. She argues that
this Court lacks subject matter jurisdiction over West Maple’s counterclaims and
alternatively contends that the defendants’ allegations are subject to dismissal under
Federal Rules of Civil Procedure 12(b)(6) for failure to state claims for relief and under
Federal Rule of Civil Procedure 9(b) for lack of particularity. Plaintiff Duran characterizes
West Maple’s counterclaims as state-law claims for fraud and/or unjust enrichment. She
asserts that the counterclaims are subject to dismissal for lack of subject matter
jurisdiction and for failure to state a claim upon which relief can be granted. She argues
the assertion of state-law claims is impermissible in an FLSA proceeding because it
violates the public policies behind the FLSA. She contends the defendants’ purported
claims do not satisfy the test for compulsory counterclaims, nor do the claims arise from
the same nucleus of operative fact as her FLSA claim.
West Maple has not responded to Duran’s motion, but states in the parties’ joint
Rule 26(f) planning report that the counterclaims arise from the plaintiffs’ employment and
are permissible under the Federal Rules. Filing No. 18.
Jurisdiction is a threshold issue for this Court. See Steel Co. v. Citizens for a Better
Env’t, 523 U.S. 83, 94-96 (1998); see also Arbaugh v. Y & H Corp., 546 U.S. 500, 507
(2006). Federal Rule of Civil Procedure 12(b)(1) provides that dismissal of an action is
appropriate if the court does not have subject matter jurisdiction over a claim. Myers v.
Richland Cty., 429 F.3d 740, 745 (8th Cir. 2005). “Subject matter jurisdiction refers to the
court's power to decide a certain class of cases.” LeMay v. United States Postal Serv.,
45 F.3d 797, 799 (8th Cir. 2006). Federal courts are courts of limited jurisdiction and
cannot hear a claim unless specifically authorized by the Constitution or a federal statute.
Rasul v. Bush, 542 U.S. 466, 489 (2002).
When reviewing a motion to dismiss a
complaint on its face pursuant to Rule 12(b)(1), a district court must accept all well-pled
factual allegations in the complaint as true, draw all inferences in favor of the non-moving
party, and dismiss the action only if the complaint fails to allege a necessary element for
subject matter jurisdiction. Young America Corp. v. Affiliated Computer Services, Inc.,
424 F.3d 840, 843-44 (8th Cir. 2005). The party invoking federal jurisdiction carries the
burden of proof on that issue. See DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 342
(2006); V S Ltd. P’ship v. Dep’t of Hous. & Urban Dev., 235 F.3d 1109, 1112 (8th Cir.
A Court’s original jurisdiction under 28 U.S.C. § 1331 (federal question jurisdiction)
and 28 U.S.C. § 1367(a) (supplemental jurisdiction) permits the exercise of supplemental
jurisdiction over claims “so related to” the claim invoking original jurisdiction that the
claims “form part of the same case or controversy.” 28 U.S.C. § 1367(a). Claims arise
from the same case or controversy where they “derive from a common nucleus of
operative fact.” ABF Freight Sys., Inc. v. Int’l Bhd. of Teamsters, 645 F.3d 954, 963 (8th
Cir. 2011). “A plaintiff's claims derive from a common nucleus of operative fact if the
‘claims are such that he would ordinarily be expected to try them all in one judicial
proceeding.’” OnePoint Sols., LLC v. Borchert, 486 F.3d 342, 350 (8th Cir. 2007) (quoting
United Mine Workers v. Gibbs, 383 U.S. 715, 725 (1966)).
Once original jurisdiction exists, supplemental jurisdiction over all related claims is
mandatory, absent certain statutory exceptions. ABF Freight Sys., 645 F.3d at 63-64. A
compulsory counterclaim allows the Court to exercise jurisdiction even if such claims
could not have been brought independently in federal court. Tullos v. Parks, 915 F.2d
1192, 1195 (8th Cir. 1990).
Supplemental jurisdiction automatically extends to
compulsory counterclaims. St. Jude Med., Inc. v. Lifecare Int'l, Inc., 250 F.3d 587, 594
(8th Cir. 2001).
The Eighth Circuit has articulated four tests to determine whether a claim and
counterclaim arises out of the same transaction or occurrence within the meaning of the
compulsory counterclaim rule” Cochrane v. Iowa Beef Processors, Inc., 596 F.2d 254,
264 (8th Cir.1979). Those are: (1) whether the issues of fact and law raised by the claim
and counterclaim largely the same, (2) whether res judicata would bar a subsequent suit
on the counterclaim, (3) whether substantially the same evidence supports or refutes the
claim, and (4) whether there is any logical relation exist between the claim and
counterclaim. Id.; see also Tullos v. Parks, 915 F.2d 1192, 1194 (8th Cir. 1990).
“[A]ny claim that is not compulsory” is permissive.
Fed. R. Civ. P. 13(b). A
permissive counterclaim requires “a basis of jurisdiction independent from that supporting
the main claim.” Shelter Mut. Ins. Co. v. Pub. Water Supply Dist. No. 7 of Jefferson Cty.,
747 F.2d 1195, 1197 (8th Cir. 1984). District Courts may decline to exercise supplemental
jurisdiction over a claim that is part of the same case or controversy as the original claim
if: (1) the claim raises a novel or complex issue of state law, (2) the claim substantially
predominates over the claim or claims over which the district court has original
jurisdiction, (3) the district court has dismissed all claims over which it has original
jurisdiction, or (4) in exceptional circumstances, there are other compelling reasons for
declining jurisdiction. 28 U.S.C. § 1367(c)(1)-(4).
It is well recognized that courts are “hesitant to allow employers to assert state-law
counterclaims against employees in FLSA cases.” Pioch v. IBEX Eng'g Servs., Inc., 825
F.3d 1264, 1273 (11th Cir. 2016); see also Martin v. PepsiAmericas, Inc., 628 F.3d 738,
743 (5th Cir. 2010); Donovan v. Pointon, 717 F.2d 1320, 1323 (10th Cir. 1983); Brennan
v. Heard, 491 F.2d 1, 4 (5th Cir. 1974), abrogated on other grounds by McLaughlin v.
Richland Shoe Co., 486 U.S. 128, 134 (1988).
Set-off counterclaims or defenses are
typically inappropriate in FLSA cases. Brennan, 491 F.2d at 4. The Fifth Circuit explains:
The federal courts were not designated by the FLSA to be either collection
agents or arbitrators for an employee's creditors. Their sole function and
duty under the Act is to assure to the employees of a covered company a
minimum level of wages. Arguments and disputations over claims against
those wages are foreign to the genesis, history, interpretation, and
philosophy of the Act. The only economic feud contemplated by the FLSA
involves the employer's obedience to minimum wage and overtime
standards. To clutter these proceedings with the minutiae of other
employer-employee relationships would be antithetical to the purpose of the
Act. Set-offs against back pay awards deprive the employee of the ‘cash in
hand’ contemplated by the Act, and are therefore inappropriate in any
proceeding brought to enforce the FLSA minimum wage and overtime
provisions, whether the suit is initiated by individual employees or by the
Secretary of Labor.
Id.; see also Donovan, 717 F.2d at 1323 (holding that employer could not set-off its
employee's FLSA recovery through a counterclaim, though it could sue the employee in
state court, because the counterclaim would delay and interfere with process of bringin g
employer into compliance with FLSA); Gagnon v. United Technisource, Inc., 607 F.3d
1036, 1042 (5th Cir. 2010) (holding employer's contract and fraud counterclaims against
employee could not be addressed in FLSA action); Martin, 628 F.3d at 741 (stating that
the Fifth Circuit continues to look with disfavor on set-offs). A narrow exception to this
rule allows set-off counterclaims or defenses in FLSA cases where it is alleged that the
set-off constitutes overpayment or pre-payment of wages to the plaintiff-employee. See,
e.g., Singer v. City of Waco, 324 F.3d 813 (5th Cir. 2003) (allowing employer to set-off
certain wage overpayments against employees' overall damages award where offset
undisputedly did not cause wages to fall below statutory minimum); Gagnon, 607 F.3d at
742 (clarifying that that Brennan v. Heard's longstanding prohibition of set-offs in FLSA
cases is the rule and Singer an exception—"it was the unique character of the set-offs in
Singer—that they represented overtime obligations already fulfilled—that allowed for a
narrow exception to the bright-line rule”); Kolheim v. Glynn Cty., 915 F.2d 1473, 1481
(11th Cir. 1990) (allowing a set-off defense or counterclaim in an FLSA case where the
defendant asserted an overpayment of wages or benefits).
The Court finds that plaintiff Duran’s motion to dismiss the defendants’
counterclaims should be granted. The defendants’ counterclaims for unjust enrichment
and fraud do not qualify as compulsory counterclaims. The counterclaims do not share
a common nucleus of operative fact, so as to be part of the same case or controversy as
the FLSA minimum and overtime wage claim. The counterclaims do not pertain to issues
of employee classification or to whether the plaintiffs were entitled to minimum and/or
overtime payments. West Maple has not alleged anything remotely like an overpayment
or pre-payment of wages, so as to amount to a permissible setoff. The counterclaims are
based exclusively on plaintiff Duran’s alleged fraudulent conduct and are not related to
the defendants’ obligations under the FLSA.
The evidence needed to prove the
counterclaims would be different than the evidence necessary to prove the wage and
hour claims. The only nexus between the FLSA claims and West Maple’s counterclaim s
is the employment relationship and the Court finds that is not sufficient for a compulsory
counterclaim or supplemental jurisdiction.
Moreover, even if supplemental jurisdiction did exist, the Court would decline to
exercise jurisdiction based on the hesitancy to permit an employer to file counterclaim s
in FLSA suits for money the employer claims an employee owes it, or for damages the
employee's tortious conduct allegedly caused. See, e.g., Martin, 628 F.3d at 740.
Although the defense of set-off is not barred in all FLSA cases, the present case
is closer to the line of cases originating with Brennan where any set-off applied to a
recovery for unpaid overtime wages would result in a plaintiff failing to receive his “cash
Brennan, 491 F.2d at 4.
Unlike the exception identified in Singer, the
counterclaims and any resultant set-off would not be for any overpayment of wages by
the defendants to Duran, but to damages allegedly caused by Duran’s alleged fraud.
West Maple’s counterclaims are the type of claims that would “clutter the[ ] proceedings
with the minutiae of other employer-employee relationships [that] would be antithetical to
the purpose of the Act.” Brennan, 491 F.2d at 4 (emphasis added); see also Martin, 628
F.3d 738, 742 (5th Cir. 2010) (“We continue to look with disfavor on set-offs unless the
money being set-off can be considered wages that the employer pre-paid to the plaintiff
employee.”); Matthews v. Applied Concepts Unleashed, Inc., 2012 WL 3150265, at *2
(S.D. Fla. Aug. 1, 2012) (“The requested set offs would force the Court to address the
factual circumstances of numerous other claims unrelated to whether Plaintiff was
adequately compensated according to minimum wage and overtime standards.”) ;
Rodriguez v. Horizontal Rentals, Inc., No. 5:18-CV-7-OLG, 2018 WL 7348031 (W.D. Tex.
May 9, 2018) (“The damages alleged in connection with these claims bear no relationship
to the hours worked, Plaintiff's status as an exempt or non-exempt employee, or any
overtime premium owed”); Lou v. Ma Labs., No. C 12–05409 WHA, 2013 WL 3989425,
at *2 (N.D. Cal. Aug. 2, 2013) (finding that breach of contract and conversion
counterclaims did not rest on the same operative facts as plaintiff's FLSA claim, and thus
counterclaims were not compulsory); Mendoza v. A & A Landscape & Irrigation, LP., No.
4:12–CV–562, 2012 WL 7005259 at * 2 (E.D. Tex. Dec. 5, 2012) (finding that defendant's
counterclaims for conversion and theft were not compulsory in FLSA action); Cortes v.
Distribuidora Monterrey Corp., No. 3:08–CV–1077–M, 2008 WL 5203719 at * 1–2 (N.D.
Tex. Dec. 11, 2008) (holding that defendants counterclaims for conversion, theft and
breach of contract were not compulsory since they would require entirely different
evidence than plaintiff's FLSA claim). Accordingly,
IT IS ORDERED:
Plaintiff’s motion to dismiss the defendant’s counterclaims (Filing No. 12) is
Defendant’s counterclaims are hereby dismissed.
Dated this 27th day of April 2021.
BY THE COURT:
s/ Joseph F. Bataillon
Senior United States District Judge
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