Dooling v. Bank of the West et al

Filing 76

REPORT AND RECOMMENDATIONS re 49 MOTION to Dismiss for Lack of Jurisdiction Defendants' Counterclaims for Lack of Subject Matter Jurisdiction, or Alternatively, Partial Motion for Summary Judgment filed by Susan Dooling. Within fourteen (14) days after service of the magistrate judges report, any party may serve and file written objections to the findings and recommendations of the magistrate judge. 28 U.S.C.A. § 636(b)(1)(C). Signed by Magistrate Judge Don D. Bush on 7/17/13. (cm, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF TEXAS
SHERMAN DIVISION
SUSAN DOOLING, on behalf of herself
and all others similarly situated,

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Plaintiffs,
v.
BANK OF THE WEST, and
GSB MORTGAGE, INC.,
Defendants.

No. 4:11-cv-00576

REPORT AND RECOMMENDATIONS OF UNITED STATES MAGISTRATE JUDGE
Now before the Court is Plaintiff’s Motion to Dismiss Defendants’ Counterclaims for Lack
of Subject Matter Jurisdiction, or Alternatively, Partial Motion for Summary Judgment (Dkt. 49).
As set forth below, the Court finds that the motion should be GRANTED in part and DENIED in
part.
In her motion, Plaintiff seeks to dismiss Defendant GSB Mortgage, Inc.’s unjust enrichment
and unclean hands counterclaims.

Plaintiff argues that Defendant’s counterclaims are not

compulsory counterclaims under Federal Rule of Civil Procedure 13(a)(1) because they do not arise
“out of the transaction or occurrence that is the subject matter of the opposing party’s claim.” FED .
R. CIV . P. 13(a)(1)(A). In the alternative, Plaintiff argues that, even if they are compulsory, she is
entitled to summary judgment as to Defendant’s unclean hands claim.
Defendant responds that its counterclaims are compulsory because Plaintiff’s FMLA claim
pertains to the same time period and leave period as its counterclaims regarding unpaid vacation
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leave time. Defendant argues that, even if the claims were not compulsory, the Court should
exercise supplemental jurisdiction over them.
A counterclaim is considered compulsory and having arisen from the same transaction or
occurrence when “both the original claim and the counterclaim arise from the same aggregate of
operative facts.” McDaniel v. Anheuser-Busch, Inc., 987 F.2d 298, 304 (5th Cir. 1993) (internal
citation omitted). As the Fifth Circuit has explained:
The test for whether a claim is compulsory is: (1) whether the issues of fact and
law raised by the claim and counterclaim largely are the same; (2) whether res
judicata would bar a subsequent suit on defendant’s claim absent the compulsory
counterclaim rule; (3) whether substantially the same evidence will support or
refute plaintiff’s claim as well as the defendant’s counterclaim; and (4) whether
there is any logical relationship between the claim and the counterclaim. An
affirmative answer to any of the four questions indicates the claim is compulsory.

Underwriters at Interest on Cover Note JHB92M10582079 v. Nautronix, Ltd., 79 F.3d 480, 483, n.2,
(5th Cir. 1996) (finding that counterclaims that satisfied third and fourth prongs of test were
compulsory). Where issues of fact and law overlap, there is a logical relationship between the
claims, the claims involve the same instruments and transactions, and the jury would hear the same
facts in regard to both claims, a finding that the counterclaim is compulsory is warranted. Park Club,
Inc. v. Resolution Trust Corp., 967 F.2d 1053, 1058 (5th Cir. 1992).
In this case, Plaintiff alleges violations of and retaliatory termination of Plaintiff’s
employment due to her exercise of her rights under the Family and Medical Leave Act, 29 U.S.C.
§ 2611, et seq. (FMLA). See Dkt. 12.1 Both Count I – unjust enrichment – and Count II – unclean
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Plaintiff’s First Amended Complaint also seeks unpaid overtime under the Fair Labor
Standards Act, 29 U.S.C. § 201, et seq. (FLSA). Since the filing of the amended complaint,
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hands – of Defendant GSB’s Counterclaim pertain to Plaintiff’s purported receipt in advance of
unearned vacation leave and pay. See Dkt. 8 at page 12-13. Defendant’s factual allegations in
support of its counterclaims address the terms of Plaintiff’s employment, Plaintiff’s employment
benefits, Plaintiff’s request for an advance of monies attributable to unearned but paid vacation
leave, and Plaintiff’s “separation of employment.” Dkt. 8 at page 11.
Similarly, Plaintiff’s FMLA complaint addresses the terms and duties of Plaintiff’s
employment, Plaintiff’s pay, bonuses and hours worked, Plaintiff’s leave from employment and
Defendants’ disciplinary actions, and Plaintiff’s termination from employment. See Dkt. 12. Indeed,
Plaintiff’s “Promissory Estoppel Summary” indicates the relationship between the counterclaims and
her FMLA claim:
After Defendants erroneously told Plaintiff they did not have to comply with the
FMLA, Plaintiff informed them that pursuant to her doctor’s orders, she still
needed the three weeks off of work. A GSB representative asked Plaintiff how
she wanted to be paid for her time off of work. Plaintiff asked if she could be
paid out of her accrued vacation time and sick time, and was told that would be
fine.
Dkt. 12 at ¶14. See also Dkt. 12 at ¶¶48-55.
The Court finds that “there is a logical relationship between the claim and counterclaim” here
and that a “jury would hear substantially the same facts in regard to both.” Park Club, Inc. v.
Resolution Trust Corp., 967 F.2d 1053, 1058 (5th Cir. 1992). With an affirmative answer to the
third and fourth factors of the Nautronix inquiry satisfied, a finding that the counterclaim is
compulsory is warranted. See 79 F.3d at 483, n.2.

Plaintiff has an offer of judgment fully resolving her individual FLSA claim and leaving only her
FMLA claim for resolution. See Dkt. 28.
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The Court is not convinced by Plaintiff’s argument that the counterclaim is not compulsory
because it was filed before Plaintiff amended her complaint to add her FMLA claim. Even
Plaintiff’s original complaint – which asserted only violations of the FLSA – dealt with allegations
regarding the terms of Plaintiff’s employment, her job duties, the hours worked, and the benefits and
pay she received. See Dkt. 1. The counterclaims are logically related to the suit filed. Therefore,
the Court finds that the counterclaims should not be dismissed for want of jurisdiction. And
Plaintiff’s motion in that regard should be denied.
As an alternative argument, Plaintiff claims that “unclean hands” – Defendant’s second
counterclaim – is not an independent action and seeks summary judgment accordingly. Defendant’s
response is silent as to this argument.
In Texas, “[u]nclean hands is an affirmative defense available when the plaintiff is seeking
an equitable remedy.” In re Nolle, 265 S.W.3d 487, 494 (Tex. App.– Houston [1st Dist.] 2008, no
pet.). The Court agrees that unclean hands is a defensive claim. In re EGL Eagle Global Logistics,
L.P., 89 S.W.3d 761, 766 (Tex. App. – Houston [1st Dist.] 2002, no pet.) (“The defensive doctrine
of ‘clean hands’ requires that one who comes to court seeking equity must come with clean hands.”).
Here, Plaintiff does not appear to be seeking equitable remedies, and, in any event, as noted by
Plaintiff, Defendant GSB has already raised unclean hands as an affirmative defense. See Dkt. 16
at page 18.
Having considered Plaintiff’s argument and Defendant’s lack of response, the Court finds
that the unclean hands counterclaim should be dismissed. This finding should not preclude the
assertion of any GSB’s affirmative defenses herein.
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Therefore, Plaintiff’s Motion to Dismiss Defendants’ Counterclaims for Lack of Subject
Matter Jurisdiction, or Alternatively, Partial Motion for Summary Judgment (Dkt. 49) should be
DENIED as to Plaintiff’s jurisdictional challenge, GRANTED as to the motion for partial summary
judgment, and Defendant shall take nothing by its second counterclaim of unclean hands.
Defendant’s first counterclaim – that of unjust enrichment – should remain as a claim over which
this Court has jurisdiction since it arises out of the same transaction or occurrence as Plaintiff’s
remaining FMLA claims.
Within fourteen (14) days after service of the magistrate judge’s report, any party may serve
and file written objections to the findings and recommendations of the magistrate judge. 28
U.S.C.A. § 636(b)(1)(C).
Failure to timely file written objections to the proposed findings and recommendations
.

contained in this report shall bar an aggrieved party from de novo review by the district court of the
proposed findings and recommendations and from appellate review of factual findings accepted or
adopted by the district court except on grounds of plain error or manifest injustice. Thomas v. Arn,
474 U.S. 140, 148 (1985); Rodriguez v. Bowen, 857 F.2d 275, 276-77 (5th Cir. 1988).
SIGNED this 17th day of July, 2013.
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DON D. BUSH
UNITED STATES MAGISTRATE JUDGE

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