Ecoquij-Tzep v. Hawaiian Grill

Filing 185

MEMORANDUM OPINION AND ORDER DENYING #163 LEAVE TO FILE COUNTER-CLAIM AND #165 MOTION FOR DECLARATORY JUDGMENT. (Ordered by Magistrate Judge David L. Horan on 4/10/2018) (mcrd)

IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF TEXAS
DALLAS DIVISION
PASCUAL ECOQUIJ-TZEP, and all
others similarly situated under 29
USC 216(b),

§
§
§
§
Plaintiff,
§
§
V.
§
§
LE ARLINGTON, INC. d/b/a MW
§
HAWAIIAN GRILL also d/b/a MW’S
§
HAWAIIAN GRILL also d/b/a LITTLE §
TOKYO and f/k/a SHUN FAR EL PASO, §
INC., GRAND FAST FOOD INC d/b/a
§
FAMOUS CAJUN GRILL and also d/b/a §
FAMOUS WOK, SHIZHONG ZHANG, §
YING HUI WANG, and KONG SHEN
§
WANG,
§
§
Defendants.
§

No. 3:16-cv-625-BN

MEMORANDUM OPINION AND ORDER DENYING LEAVE TO FILE
COUNTER-CLAIM AND MOTION FOR DECLARATORY JUDGMENT
Defendant Grand Fast Food Inc. d/b/a Famous Cajun Grill and also d/b/a
Famous Wok (“Grand Fast Food”) has filed a Motion for Leave to File Counterclaims
under Federal Rule of Civil Procedure 15, seeking leave to file its Counter-Claim For
Declaratory Judgment and Relief for Declaratory Judgment and Relief [Dkt. No. 163]
under Federal Rule of Civil Procedure 57 and 28 U.S.C. § 2201 (the “Declaratory
Judgment Act”). See Dkt. No. 163 (the “Motion for Leave”).
Plaintiff Pascual Ecoquij-Tzep opposes Grand Fast Food’s request for leave, see
Dkt. 176, and Grand Fast Food has not filed a reply in support of its Motion for Leave,
-1-

and its time to do so has passed, see Dkt. No. 168.
Background and Legal Standards
As the Court previously explained, see Dkt. No. 160, Grand Fast Food requires
leave of court to file this amended pleading out of time. Here, the deadline for leave to
amend expired on May 7, 2017, see Dkt. No. 26 at 1, so, to obtain leave to file any
amended pleadings, a party must make the required showing under both the Federal
Rule of Civil Procedure 16(b)(4) and Rule Rule 15(a)(2) standards.
Federal Rule of Civil Procedure 15(a)(1) provides that “[a] party may amend its
pleading once as a matter of course within: (A) 21 days after serving it, or (B) if the
pleading is one to which a responsive pleading is required, 21 days after service of a
responsive pleading or 21 days after service of a motion under Rule 12(b), (e), or (f),
whichever is earlier.” FED. R. CIV. P. 15(a)(1). But Federal Rule of Civil Procedure
15(a)(2) provides that, “[i]n all other cases, a party may amend its pleading only with
the opposing party’s written consent or the court’s leave.” FED. R. CIV. P. 15(a)(2). And
Federal Rule of Civil Procedure 15(a)(3) provides that, “[u]nless the court orders
otherwise, any required response to an amended pleading must be made within the
time remaining to respond to the original pleading or within 14 days after service of
the amended pleading, whichever is later.” FED. R. CIV. P. 15(a)(3). Finally, if a Federal
Rule of Civil Procedure 12 motion is filed and the Court denies the motion, “the
responsive pleading must be served within 14 days after notice of the court’s action.”
FED. R. CIV. P. 12(a)(4)(A).
The Court denied Grand Fast Food’s Amended Third Motion to Dismiss [Dkt.
-2-

No. 93] on December 21, 2017. See Dkt. No. 137. Rule 15(a)(3) therefore required
Defendants Le Arlington, Inc. d/b/a/ MW Hawaiian Grill also d/b/a MW’s Hawaiian
Grill also d/b/a Little Tokyo and f/k/a Shun Far El Paso, Inc., Grand Fast Food,
Shizhong Zhang, Ying Hui Wang, and Kong Shen Wan to file an answer to
Ecoquij-Tzep’s Third Amended Complaint Under 29 U.S.C. §§ 201- 216 Overtime and
Minimum Wage Violations [Dkt. No. 84] by January 4, 2018.
As the Court previously explained, see Dkt. No. 160, because the standards by
which the Court evaluates a motion for leave to amend the pleadings vary according
to whether the motion was filed before or after the deadline established in the
scheduling order, the Court must determine, as an initial matter, whether the motion
was filed before or after the deadline. See, e.g ., Orthoflex, Inc. v. Thermotek, Inc., Nos.
3:11-cv-870-D & 3:10-cv-2618-D, 2011 WL 4398279, at *1 (N.D. Tex. Sept. 21, 2011)
(“Motions for leave to amend are typically governed by [Federal Rule of Civil
Procedure] 15(a)(2), or, if the time to seek leave to amend has expired, by [Federal Rule
of Civil Procedure] 16(b)(4) and then by Rule 15(a)(2).”). When the deadline for seeking
leave to amend pleadings has expired, the Court must first determine whether to
modify the scheduling order under the Rule 16(b)(4) good cause standard. See S&W
Enters., L.L.C. v. SouthTrust Bank of Ala., N.A., 315 F.3d 533, 536 (5th Cir. 2003). The
Court’s scheduling order “may be modified only for good cause and with the judge’s
consent.” FED. R. CIV. P. 16(b)(4).
To meet the good cause standard, the party must show that, despite its
diligence, it could not reasonably have met the scheduling order deadline. See S&W,
-3-

315 F.3d at 535. The Court assesses four factors when deciding whether to grant an
untimely amendment under Rule 16(b)(4): “‘(1) the explanation for the failure to timely
move for leave to amend; (2) the importance of the amendment; (3) potential prejudice
in allowing the amendment; and (4) the availability of a continuance to cure such
prejudice.’” Id. at 536 (quoting Reliance Ins. Co. v. La. Land & Exploration Co., 110
F.3d 253, 257 (5th Cir. 1997)).
If the movant satisfies these Rule 16(b)(4) requirements, the Court must then
determine whether to grant leave to amend under Federal Rule of Civil Procedure
15(a)(2)’s more liberal standard, which provides that “[t]he court should freely give
leave when justice so requires.” FED. R. CIV. P. 15(a)(2); see S&W, 315 F.3d at 536.
When the party is not subject to an expired deadline for seeking leave to amend, Rule
15(a) requires that leave to amend be granted freely “when justice so requires.” FED.
R. CIV. P. 15(a)(2). Leave to amend is not automatic, see Jones v. Robinson Prop. Grp.,
L.P., 427 F.3d 987, 994 (5th Cir. 2005), but the federal rules’ policy “is to permit liberal
amendment to facilitate determination of claims on the merits and to prevent litigation
from becoming a technical exercise in the fine points of pleading,” Dussouy v. Gulf
Coast Inv. Corp., 660 F.2d 594, 598 (5th Cir. 1981). The Court “may consider a variety
of factors” when deciding whether to grant leave to amend, “including undue delay, bad
faith or dilatory motive on the part of the movant, repeated failures to cure deficiencies
by amendments previously allowed, undue prejudice to the opposing party by virtue
of allowance of the amendment, and futility of the amendment.” Jones, 427 F.3d at 994.
But Rule 15(a) provides a “strong presumption in favor of granting leave to
-4-

amend,”Fin. Acquisition Partners, LP v. Blackwell, 440 F.3d 278, 291 (5th Cir. 2006),
and the Court must do so “unless there is a substantial reason to deny leave to amend,”
Dussouy, 660 F.2d at 598; accord Jebaco Inc. v. Harrah’s Operating Co. Inc., 587 F.3d
314, 322 (5th Cir. 2009) (“leave to amend is to be granted liberally unless the movant
has acted in bad faith or with a dilatory motive, granting the motion would cause
prejudice, or amendment would be futile”).
The Court also explained that any counter-claim seeking relief under Rule 57
and the Declaratory Judgment Act raises additional issues that the Court must
address if a defendant seeks leave to amend to add such a claim.
The Declaratory Judgment Act states that “any court of the United States, upon
the filing of an appropriate pleading, may declare the rights and other legal relations
of any interested party seeking such declaration.” 28 U.S.C. § 2201(a). “Since its
inception, the Declaratory Judgment Act has been understood to confer on federal
courts unique and substantial discretion in deciding whether to declare the rights of
litigants.” Wilton v. Seven Falls Co., 515 U.S. 277, 286 (1995). Federal courts
consequently have broad discretion to grant or refuse declaratory judgment. See Torch,
Inc. v. LeBlanc, 947 F.2d 193, 194 (5th Cir. 1991). As another judge in this district has
explained,
[t]he federal Declaratory Judgment Act [(“DJA”)] does not create a
substantive cause of action. A declaratory judgment action is merely a
vehicle that allows a party to obtain an early adjudication of an actual
controversy arising under other substantive law. ... [In sum, t]he DJA is
an authorization, not a command. It gives federal courts the competence
to declare rights, but it does not impose a duty to do so.
-5-

Klein v. Fed. Ins. Co., Nos. 7:03-cv-102-D & 7:09-cv-94-D, 2014 WL 4476556, at *9
(N.D. Tex. Sept. 11, 2014) (internal quotation marks omitted).
“Although ‘the district court’s discretion is broad, it is not unfettered.’” St. Paul
Ins. Co. v. Trejo, 39 F.3d 585, 590 (5th Cir. 1994) (quoting Travelers Ins. Co. v. La.
Farm Bureau Fed’n, Inc., 996 F.2d 774, 778 (5th Cir. 1993)). “In analyzing whether to
decide or dismiss the declaratory judgment suit, ... a federal district court must
determine: (1) whether the declaratory action is justiciable; (2) whether the court has
the authority to grant declaratory relief; and (3) whether to exercise its discretion to
decide or dismiss the action.” Sherwin-Williams Co. v. Holmes County, 343 F.3d 383,
387 (5th Cir. 2003) (citing Rowan Cos., Inc. v. Griffin, 876 F.2d 26, 26 (5th Cir. 1989)).
Courts have declined to exercise their discretion to decide declaratory judgment
actions where deciding that action would be redundant in light of the affirmative
causes of action before the Court. See St. Paul, 39 F.3d at 590-91 (considering “whether
retaining the lawsuit would serve the purposes of judicial economy” among seven
nonexclusive factors to consider when deciding whether to decide or dismiss a
declaratory action); Great Am. Ins. Co. v. Goin, No. 3:15-cv-75-L, 2017 WL 4238698, at
*4 (N.D. Tex. Sept, 25, 2017) (“This court has previously declined in its discretion to
adjudicate declaratory judgment actions that are duplicative of other claims in the
same case. Further, district courts in this Circuit regularly reject declaratory judgment
claims seeking the resolution of issues that are the mirror image of other claims in a
lawsuit.” (citations omitted)); Everett Fin., Inc. v. Primary Res. Mort., Inc., No. 3:14-cv1028-D, 2016 WL 7378937, at *18 (N.D. Tex. Dec. 20, 2016) (“This court has often
-6-

declined in its discretion to adjudicate declaratory judgment actions that are
duplicative of other claims in the same case. It has also declined to do so when the
declaratory judgment action is merely the mirror image of another claim.” (citations
omitted)); Burlington Ins. Co. v. Ranger Specialized Glass, Inc., No. 4:12-cv-1759, 2012
WL 6569774, at *2 (S.D. Tex. Dec. 17, 2012) (“If a request for a declaratory judgment
adds nothing to an existing lawsuit, it need not be permitted. Courts in the Fifth
Circuit have regularly rejected declaratory judgment claims that seek resolution of
matters that will already be resolved as part of the claims in the lawsuit.” (citations
omitted)); see also Centex Homes v. Lexington Ins. Co., No. 3:13-cv-719-BN, 2014 WL
1225501, at *14 (N.D. Tex. March 24, 2014) (“Federal Rule of Civil Procedure 12 does
permit a court to strike or dismiss a counterclaim on the basis that it is redundant”).
A declaratory judgment action is redundant for this reason if resolution of the
affirmative claims and counter-claims before the Court would resolve all questions that
the declaratory judgment action raises. See Centex, 2014 WL 1225501, at *14 (citing
In re ATP Oil & Gas Corp., No. 12-36187, 2013 WL 5308862, at *1 (Bankr. S.D. Tex.
Sept. 18, 2013); Redwood Resort Props., LLC v. Homes Co. Ltd., No. 3:06-cv-1022-D,
2007 WL 1266060, at *4-*5 (N.D. Tex. April 30, 2007)). In making this determination,
“the Court should consider ‘potential qualitative differences between merely prevailing
in [the] lawsuit, and receiving an affirmative declaration of rights to a declaratory
judgment.’” Centex, 2014 WL 1225501, at *14 (quoting Blackmer v. Shadow Creek
Ranch Development Co. Ltd. P’ship, No. H-07-681, 2007 WL 7239968, at *1 (S.D. Tex.
June 26, 2007)); see also Klein, 2014 WL 4476556, at *9 (“The counts of Federal’s
counterclaim present defenses or affirmative defenses to the class plaintiffs’
-7-

declaratory judgment claim. They do not seek any relief other than a judgment that
Federal is not liable on the class plaintiffs’ declaratory judgment claim for indemnity.
In other words, the counts of Federal’s counterclaim are essentially grounds for
asserting the mirror image of the class plaintiffs’ declaratory judgment action: they are
predicates for seeking a declaration that Federal does not have a duty to indemnify the
class plaintiffs under the Federal Policy. In Evanston Insurance, for example, the court
raised sua sponte that a counterclaim seeking a declaration that an insurance company
had incorrectly denied coverage was the mirror image of the plaintiff’s declaratory
judgment action, and it declined in its discretion to hear the counterclaim. Evanston
Ins. Co. v. Graves, No. 3:13-cv-959-D, 2013 WL 4505181, at *1 (N.D. Tex. Aug. 23,
2013). Accordingly, the court in its discretion dismisses the five counts of Federal’s
counterclaim without prejudice.” (footnotes omitted and citation modified)).
Analysis
Grand Fast Food explains that leave should be granted here for the following
reasons:
In this case Grand Fast Foods seeks judicial determination of the
relationship with it has with Pascual as well as other rights of Grand
Fast Food. Although the amendment is sought after the scheduling-order
deadline, leave to amend should be freely given when there is good cause.
In this case Grand Fast Food seeks to avoid further and expensive
litigation. Additionally, by allowing Grand Fast Food to amend its
pleadings to address issues through a declaratory judgment process also
will benefit the Plaintiff, either way, by eliminating costly discovery, and
streamlining issues before the Court.
The Court should allow the filing of Grand Fast Food’s amended
pleading because it is appropriate and necessary. If Grand Fast Food is
ruled by later declaratory judgment that is not a proper party to this
lawsuit then both parties will be benefitted for reducing the time and
-8-

expenses in litigating the case subsequently. If the Court grants leaves,
subsequently ruled in favor of the Plaintiff, then the declaratory ruling
only further strengthens the Grand Fast Food is a proper party in the
Plaintiff’s case. Either way, Plaintiff is not being prejudiced by the Court
in granting the leave to file the counterclaim for declaratory judgment.
The Court should allow the filing of Grand Fast Food’s amended
pleading because Grand Fast Food is not guilty of undue delay because
Grand Fast Food has exercised enhance due diligent after retaining the
current counsels. Additionally, Grand Fast Food was forced to seek new
legal counsel to represent its interest after September 2017 because
Grand Fast Food, due to the language barriers, was unable to effectively
communicate with the former legal counsel, Mr. Lloyd Ward.
The Court should allow the filing of Grand Fast Food’s amended
pleading because Pascual will not be prejudiced by any delay that Grand
Fast Food’s amended pleading may cause, for the reasons stated above.
The Court should allow the filing of Grand Fast Food’s amended
pleading because the Court will not be substantially burdened by any
delay that Grand Fast Food’s amended pleading may cause. By Grand
Fast Food amending its pleadings to seek declaratory relief, this case will
actually be streamlined and may cause the deadline imposes by the
Court’s previous Scheduling order to be lessened and may generally serve
the purposes of judicial economy.
The Court should allow the filing of Grand Fast Food’s amended
pleading because Grand Fast Food is not guilty of bad faith for reason
stated above. Grand fast Food is not seeking to amend its pleadings as
part of any dilatory tactic, the amended pleadings seek to address very
specific points not previously brought to the Court’s attention. Further,
as stated above, allowing Grand Fast Food to amend it pleadings may
benefit both Plaintiff and Defendant.
The Court should allow the filing of Grand Fast Food’s amended
pleading because the amendment is not futile for reason stated above.
Grand Fast Food sought new counsels with which it could
effectively communicate with after the May 7, 2017 deadline to amend
any pleading. Upon retaining new counsel and upon diligent review of the
records and evidence, many supplement of the discoveries and now an
amendment to the pleadings is necessary at this time.
Further, Grand Fast Food is not seeking declaratory relief to
resolve other issues and motions already moved before the Court. Grand
Fast Food is seeking to address its own issues through declaratory relief
and not part of a collective effort in the summary judgment motion now
pending before the Court. Therefore, Grand Fast Food is not seeking the
resolution of issues that are the mirror image of other claims in a lawsuit.
Indeed, the issues sought by Grand Fast Food’s in its counter-claim for
-9-

declaratory judgment has not been previously presented before the Court
for resolution. The motion for declaratory judgment differs from the
Defendant’s Motion for Summary Judgment, DKT No 117, and Brief in
Support of Defendants Motion For Summary Judgment, DKT No 118, as
the Motion for Summary Judgment do not address Grand Fast Food’s
individual and specific issues now being raised in its amended pleadings
and therefore do not fall within the Court’s ruling in Everett. Further, the
declaratory relief sought by Grand Fast Food in its amended pleading do
not lead to the same relief sought by the other Defendants in the pending
Motion for Summary Judgment because Grand Fast Food’s counterclaim,
as amended, would only result in a declaration of rights by itself and
without more on the part of Grand Fast Food such as seeking the entire
case to be disposed.
Dkt. No. 163 at 4-6 (citations omitted).
The Court DENIES the Motion for Leave [Dkt. No. 163]. As explained above,
Grand Fast Food seeks leave to add a counter-claim under Rule 57 and the Declaratory
Judgment Action, specifically seeking “a determination regarding the nature of the
relationship between Grand Fast Food and Pascual, namely whether Pascual was an
employee of Grand Fast Food; whether Grand Fast Food transacts business in the
Northern District of Texas or operates numerous restaurants throughout Texas and
whether Grand Fast Food is a joint FLSA employer.” Dkt. No. 164 at 3; accord Dkt. No.
165 at 1-2 (asserting that the controversy warranting declaratory judgment is whether
“(i) Pascual is not an employee of Grand Fast Food covered by the Fair Labor
Standards Act; (ii) Grand Fast Food and Hawaiian Grill are not joint-employers of
Pascual; [and] (iii) Grand Fast Food and Hawaiian Grill are not part of a
joint-enterprise pursuant to theFair Labor Standards Act”).
Those are all issues raised by Ecoquiz-Tzep’s Fair Labor Standards Act claim
and are only at issue between Ecoquij-Tzep and Grand Fast Food because he is
-10-

bringing that claim against Grand Fast Food. The Court disagrees with Grand Fast
Food’s analysis that what matters is whether certain of those legal or factual issues are
raised in the currently pending Defendants’ Rule 56 Motion for Summary Judgment
[Dkt. No. 117].
The declarations that Grand Fast Food seeks are duplicative of Ecoquiz-Tzep’s
Fair Labor Standards Act claim against Grand Fast Food and are merely the mirror
image of that claim and what Ecoquij-Tzep must prove to prevail on that claim. Grand
Fast Food therefore seeks resolution of matters that will already be resolved as part
of Ecoquiz-Tzep’s Fair Labor Standards Act claim in this case and is therefore
redundant because resolution of the existing claims and defenses before the Court in
this case – regardless whether the issues that Grand Fast Food raise are addressed in
Defendants’ Rule 56 Motion for Summary Judgment [Dkt. No. 117] – will resolve all
questions that the proposed declaratory judgment counter-claim raises. There are, in
short, no potential qualitative differences between Grand Fast Food’s merely prevailing
on Ecoquiz-Tzep’s Fair Labor Standards Act claim in this case and and receiving an
affirmative declaration of rights to a declaratory judgment, because Grand Fast Food,
through its proposed counter-claim, does not seek any relief other than a judgment that
it is not liable on Ecoquiz-Tzep’s Fair Labor Standards Act claim.
Conclusion
For the reasons explained above, the Court determines that leave should not be
granted under Rules 16(b)(4) and 15(a) because, where the Court would for these
reasons exercise its discretion to decline to decide the proposed declaratory judgment
-11-

counter-claim, the amendment is not important and granting leave to amend would be
futile and would only unnecessarily complicate the proceedings and drive up the
parties’ costs. The Court therefore DENIES Defendant Grand Fast Food Inc.’s Motion
for Leave To File Counterclaims [Dkt. No. 163] and also DENIES Defendant Grand
Fast Food, Inc.’s Rule 57 and 28 U.S.C.§§ 2201-2202 Second Expedited Motion for
Declaratory Judgment [Dkt. No. 165] because leave to amend to add the underlying
counter-claim is denied and, as another court in this circuit has explained, “a party
may not make a motion for declaratory relief, but rather, the party must bring an
action for a declaratory judgment,” and “[t]he only way [a motion for declaratory relief]
can be construed as being consistent with the Federal Rules is to construe it as a
motion for summary judgment on an action for a declaratory judgment.” Matrix
Partners VIII, LLP v. Natural Resource Recovery, Inc., No. 1:08-cv-547-TH, 2009 WL
10677790, at *1 (E.D. Tex. May 22, 2009) (internal quotation marks omitted).
SO ORDERED.
DATED: April 10, 2018

_________________________________________
DAVID L. HORAN
UNITED STATES MAGISTRATE JUDGE

-12-