Equal Employment Opportunity Commission v. M.G. Oil Company

Filing 23

ORDER granting 11 Motion to Strike ; granting 14 Motion to Dismiss for Failure to State a Claim. Signed by U.S. District Judge Karen E. Schreier on 8/10/2017. (JLS)

UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
SOUTHERN DIVISION

EQUAL EMPLOYMENT
OPPORTUNITY COMMISSION,

CIV. 4:16-4131-KES

Plaintiff,
v.

ORDER GRANTING MOTION
TO STRIKE AND GRANTING
MOTION TO DISMISS

M.G. OIL COMPANY,
d/b/a HAPPY JACK’S,
Defendant and
Third-Party Plaintiff,
v.
TESTPOINT PARAMEDICAL, LLC,
Third-Party Defendant.

Plaintiff, the Equal Employment Opportunity Commission (EEOC), moves
to strike the third-party complaint filed by M.G. Oil Company. Docket 11.
Third-party defendant, TestPoint Paramedical, LLC, moves to dismiss the thirdparty complaint under Rules 12(b)(1) and (6). Docket 14. TestPoint joins the
EEOC’s motion to strike the third-party complaint. Docket 16. Defendant, M.G.
Oil Company, opposes the motion to strike and the motion to dismiss. Dockets
17 and 19. For the following reasons, the EEOC’s and TestPoint’s motions are
granted.
FACTUAL BACKGROUND
During the time relevant to this case, M.G. Oil had a contract with
TestPoint to have TestPoint analyze M.G. Oil’s drug tests of prospective new

employees and inform M.G. Oil whether the test results were negative or nonnegative for drugs. Docket 7 ¶ 4. M.G. Oil asserts that if the sample analysis
yielded a non-negative result, then TestPoint was obligated to send the drug
test to a medical review officer to determine whether the non-negative result
was a consequence of the test subject taking a legal prescription drug. Id. ¶ 5.
Then, if the non-negative result was due to a legal prescription drug, TestPoint
would report the test results as negative to M.G. Oil. Id. ¶ 6.
On April 8, 2013, Kim Mullaney applied for a job with Happy Jack’s in
Sioux Falls, South Dakota, which is owned by M.G. Oil. Docket 2 at 4.
Contingent on a negative drug test result, Mullaney was offered a position with
M.G. Oil. Id. On April 9, 2013, Mullaney took the drug test and it was sent to
TestPoint for analysis. Docket 7 ¶ 8. TestPoint reported to M.G. Oil that
Mullaney’s drug test result was non-negative. Id. ¶ 9. M.G. Oil asserts there
was no indication that TestPoint had not sent the drug test to a medical review
officer to verify the result. Id. M.G. Oil alleges that it assumed the drug test
previously had been sent to a medical review officer to determine if there was a
valid legal reason for the non-negative result and based on this assumption, it
rescinded its employment offer to Mullaney. Id. ¶ 10.
Mullaney claims she is a disabled person under Sections 3 and 101(8) of
the Americans with Disabilities Act (ADA), 42 U.S.C. §§ 12102 and 12111(8).
Docket 2 ¶ 14. Mullaney alleges that, after the revocation of her employment
offer, she explained to M.G. Oil that the non-negative drug test results were
due to her lawful use of a prescription pain killer she took for back pain.
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Id. ¶ 18. She also claims that, despite her explanation, M.G. Oil refused to
reconsider her for the position. Id. ¶ 20. M.G. Oil asserts that before her drug
test Mullaney “never indicated she had an impairment and never appeared to
have an impairment.” Docket 17 at 2. M.G. Oil admits that Mullaney notified
M.G. Oil of her prescription painkiller use, but asserts that it “had no way of
knowing whether these claims were true.” Docket 5 ¶ 18.
Claiming to fit the ADA’s disabled person description, Mullaney filed her
charge against M.G. Oil with the EEOC. Docket 2 ¶ 7. On Mullaney’s behalf,
the EEOC sent a conciliation letter to M.G. Oil, alerting the company to the
allegedly discriminatory actions that it had taken against Mullaney and seeking
appropriate relief. Id. ¶ 8. M.G. Oil and the EEOC could not reach an
agreement about how to resolve Mullaney’s complaint with M.G. Oil. Id. ¶ 10.
After the EEOC’s letter concerning Mullaney’s alleged discrimination failed to
resolve the dispute, the EEOC filed suit against M.G. Oil on Mullaney’s behalf.
Docket 5 ¶ 9; Docket 2.
PROCEDURAL BACKGROUND
EEOC filed suit against M.G. Oil claiming that M.G. Oil discriminated
against Mullaney in violation of Title I of the ADA. Docket 2. M.G. Oil filed a
third-party complaint against TestPoint, claiming that if it were found liable to
Mullaney for discrimination, then TestPoint was liable to it for all
(indemnification) or part (contribution) of the judgment because TestPoint
breached its contract with M.G. Oil and was negligent. Docket 7. The EEOC
moved to strike M.G. Oil’s third-party complaint. Docket 11. TestPoint moved
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to dismiss M.G. Oil’s third-party complaint for failure to state a claim upon
which relief can be granted. Docket 14. And TestPoint moved to join EEOC’s
motion to strike M.G. Oil’s third-party complaint. Docket 16.
LEGAL STANDARD
A defendant can file a third-party complaint only against a nonparty
“who is or may be liable to it for all or part of the claim against it.” Fed. R. Civ.
P. 14(a)(1). According to Rule 14(a), “[a]ny party may move to strike the thirdparty claim, to sever it, or to try it separately.” Fed. R. Civ. P. 14(a)(4). If the
third-party complaint fails to state a claim upon which relief can be granted,
the third-party complaint is subject to dismissal under Rule 12(b)(6) of the
Federal Rules of Civil Procedure. Fed. R. Civ. P. 12(b)(6). Also, if the third-party
complaint states a claim that lacks jurisdiction, the complaint is subject to
dismissal under Rule 12(b)(1). Fed. R. Civ. P. 12(b)(1). The court should accept
as true the facts alleged in the third-party complaint. Mattes v. ABC Plastics,
Inc., 323 F.3d 695, 697-98 (8th Cir. 2003).
A court may dismiss a complaint “for failure to state a claim upon which
relief can be granted.” Fed. R. Civ. P. 12(b)(6). Inferences are construed in favor
of the nonmoving party. Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 595 (8th
Cir. 2009). “To survive a motion to dismiss, a complaint 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)). “A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to draw the reasonable
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inference that the defendant is liable for the misconduct alleged.” Id. (citing Bell
Atl. Corp., 550 U.S. at 556 (2007)).
DISCUSSION
M.G. Oil filed a third-party complaint against TestPoint that seeks
indemnification and contribution based on allegations of breach of contract
and negligence. Docket 7. M.G. Oil argues that TestPoint breached its
contractual duty with M.G. Oil to send non-negative drug tests to a medical
review officer to determine if there is a valid legal reason for the non-negative
test result. Id. ¶ 14. Because of this alleged breach, M.G. Oil argues that
TestPoint is liable to it for any damages Mullaney is awarded against M.G. Oil.
Id. ¶¶ 21, 23. M.G. Oil characterizes its involvement in this matter as passive,
while arguing that TestPoint’s acts and omissions concerning the drug test
entitle M.G. Oil to indemnification or contribution from TestPoint. Id.
The EEOC and TestPoint both argue that M.G. Oil’s claims for indemnity
and contribution from TestPoint are not permitted under Title I of the ADA.
See Dockets 12, 15. They both also argue that because M.G. Oil’s claims are
impermissible, dismissal under Rule 12(b) is appropriate. Id. Both the EEOC
and TestPoint rely on the Supreme Court’s holding in Northwest Airlines, Inc. v.
Transport Workers Union, 451 U.S. 77 (1981), to support their arguments.
Docket 12 at 6; Docket 15 at 5.
In Northwest Airlines, the airline was previously found—in a separate
lawsuit—to be liable to its female employees under Title VII and the Equal Pay
Act for failing to provide back pay to a class of female employees. See Nw.
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Airlines, 451 U.S. at 79-82 (describing the background of the Laffrey litigation);
see also Laffrey v. Nw. Airlines, Inc., 366 F. Supp. 763 (D.D.C. 1973). After the
Laffrey litigation concluded, Northwest Airlines filed a claim seeking
contribution from the Transport Workers Union. See Nw. Airlines, 451 U.S. at
82-86. The issue before the United States Supreme Court was whether a claim
for contribution could be pursued by employers in federal court under Title VII
or the Equal Pay Act. See id. at 79-80. Northwest Airlines establishes that the
right to contribution under a federal statute may be created in two ways: (1) by
express or implied language in the statute and (2) by federal common law
“through the exercise of judicial power to fashion appropriate remedies for
unlawful conduct.” Id. at 90. The Court found that the Equal Pay Act and
Title VII did not expressly create a right to contribution in favor of employers.
Id. at 91. And “the language of neither statute supports implication of a right to
contribution in favor of employers against unions.” Id. at 93. Furthermore,
although the Court recognized it possessed the judicial power to fashion a
remedy by adding a right to contribution to the statutory scheme, the Court
concluded “that it would be improper for [the Court] to add a right to
contribution to the statutory rights that Congress created in the Equal Pay Act
and Title VII.” Id. at 98.
M.G. Oil attempts to counter the EEOC’s and TestPoint’s interpretation
of Northwest Airlines by arguing that the holding actually supports maintaining
the third-party action because claims for indemnity and contribution are
recognized under South Dakota statutes, specifically SDCL §§ 15-8-11 through
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15-8-22. Docket 19 at 6-7. But here the EEOC is not asserting a claim under
state law. See Nw. Airlines, 451 U.S. at 94-95 (concluding that where Congress
failed to manifest an intent to create a right of contribution under the Equal
Pay Act and Title VII, the Court could not imply a right to contribution under
those statutes). Instead, the EEOC brings its action here only under Title I of
the ADA—a federal statute. Docket 21 at 2-3; see also Docket 2 ¶ 1 (citing the
various federal statutes that vest the court with jurisdiction).
The Eighth Circuit has not ruled directly on the issue of whether a thirdparty complaint for indemnity or contribution for a claim under the ADA is
permissible. But in Travelers Casualty & Surety Co. of America v. IADA
Services., Inc., 497 F.3d 862 (8th Cir. 2007), the Eighth Circuit did address
whether a fiduciary who violated the requirements of the Employee Retirement
Income Security Act of 1974 (ERISA) could bring a related federal-law or statelaw claim for contribution against another fiduciary who allegedly had some
responsibility for the violations. Id. at 864. In concluding that such an action
was not permissible, the Travelers court observed that because “Congress
made a policy choice to exclude a remedy of contribution for breaching
fiduciaries, it would undermine the comprehensive federal scheme to permit an
action under state law for that same remedy.” Id. at 867. The Eighth Circuit
further concluded that to “recognize a state-law cause of action [such as
actions for contribution, indemnity, or restitution] that supplements the federal
scheme in these circumstances would ‘pose an obstacle to the purposes and
objectives of Congress,’ and the state common-law claims are therefore
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preempted [under ERISA].” Id. at 868 (quoting Pilot Life Ins. Co. v. Dedeaux,
481 U.S. 41, 52 (1987)).
While Northwest Airlines addressed claims for contribution under
Title VII and the Equal Pay Act, it did not directly address the issue of whether
claims for indemnification are permissible. There are inherent similarities
between the two methods of transferring liability: contribution transfers partial
liability while indemnification transfer total liability. This court agrees with the
rational in Anderson v. Local Union No. 3, International Brotherhood of Electrical
Workers, 582 F. Supp. 627, 633 (S.D.N.Y. 1984), which held that “[a]lthough
the Supreme Court in Northwest Airlines addressed itself only to claims for
contribution, we assume that the rationale of that case would equally bar
claims for indemnity.” Thus, the court concludes that Northwest Airlines’
holding barring claims for contribution applies equally to bar claims for
indemnification.
The EEOC and TestPoint also argue that, through analogy, the holding in
Northwest Airlines applies to ADA claims because of the similarities between
the relevant federal anti-discrimination statutes. See Dockets 12, 15, 21, and
22. As the EEOC points out, the ADA adopted the same enforcement provisions
as Title VII. Docket 12 at 7 (citing 42 U.S.C. § 12117(a) and 42 U.S.C.e-4 et
seq.). As explained by one federal district court, “[g]iven that Congress enacted
the ADA well after the Supreme Court decided Northwest Airlines, Congress
presumably chose to incorporate into the ADA the construction of Title VII
remedies set forth in Northwest Airlines.” Lane v. U.S. Steel, 871 F. Supp. 1434,
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1436 (N.D. Ala. 1994) (citing United States v. Jordan, 915 F.2d 622, 628 (11th
Cir. 1990) (“Under accepted rules of statutory construction, it is generally
presumed that Congress, in drafting legislation, is aware of well established
judicial construction of other pertinent existing statutes.”)). Also, “it is
unthinkable that Congress enacted the ADA for the special benefit of a class of
employers. To the contrary, the ADA, like Title VII, is designed to protect
employees from adverse employment decisions motivated by discrimination.”
Id. at 1437. The enforcement provisions of the ADA and Title VII do not exist to
protect employers, nor do they provide employers with the option to transfer
liability by indemnification or contribution. Thus, given that Title I of the ADA
contains the same enforcement provisions as Title VII, the court concludes that
the holding in Northwest Airlines applies to claims brought under the ADA.
Reasoning by analogy, the court finds that the Supreme Court’s decision
in Northwest Airlines, 451 U.S. at 98, and the Eighth Circuit’s decision in
Travelers, 497 F.3d 867-68, require a finding here that M.G. Oil’s third-party
claims for contribution and indemnification are impermissible under Title I of
the ADA.
CONCLUSION
The court finds that the enforcement provisions codified in Title I of the
ADA are identical to the enforcement provisions found in Title VII. Given the
Supreme Court’s interpretation of this provision in Northwest Airlines, 451 U.S.
at 98, finding that claims of contribution are barred under Title VII and the
Equal Pay Act, the court concludes that the same reasoning must apply here.
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Thus, M.G Oil’s claims seeking contribution and indemnification are barred
under Title I of the ADA. It is
ORDERED that the EEOC’s motion to strike (Docket 11) is granted.
IT IS FURTHER ORDERED that TestPoint’s motion to dismiss without
prejudice (Docket 14) is granted.
DATED this 10th day of August, 2017.
BY THE COURT:
/s/ Karen E. Schreier
KAREN E. SCHREIER
UNITED STATES DISTRICT JUDGE

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