Perez v. Guardian Roofing LLC et al

Filing 26

ORDER ON DEP'T OF LABOR'S MOTION TO DISMISS, OR IN THE ALTERNATIVE, STRIKE DEFENDANTS' COUNTERCLAIMS, granting in part and denying in part 22 Motion to Dismiss. Signed by Judge Robert J. Bryan. (JL)

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UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF WASHINGTON
AT TACOMA

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THOMAS E. PEREZ, SECRETARY OF
LABOR, UNITED STATES
DEPARTMENT OF LABOR,
Plaintiff,

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CASE NO. 3:15-cv-05623-RJB
ORDER ON DEP’T OF LABOR’S
MOTION TO DISMISS, OR IN THE
ALTERNATIVE, STRIKE
DEFENDANTS’ COUNTERCLAIMS

v.
GUARDIAN ROOFING, MATTHEW
SWANSON, LORI SWANSON, and
AARON SANTAS,
Defendants.
THIS MATTER comes before the Court on the United States Department of Labor’s

19 Motion to Dismiss, or in the Alternative, Strike Defendants’ Counterclaims. Dkt. 22. The Court
20 has considered the motion, the Response filed by Guardian Roofing, Matthew Swanson, Lori
21 Swanson, and Aaron Santas (collectively, “Guardian”), the Reply filed by DOL, DOL’s
22 Complaint, Guardian’s Counterclaims, and the remainder of the file herein. Dkts. 1, 15, 23. 15.
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ORDER ON DEP’T OF LABOR’S MOTION TO
DISMISS, OR IN THE ALTERNATIVE, STRIKE
DEFENDANTS’ COUNTERCLAIMS- 1

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BACKGROUND
This Fair Labor Standards Act (FLSA) case stems from DOL’s investigation of Guardian

3 Roofing starting in March 2011. According to the Counterclaims, DOL’s investigation included
4 a tour of Guardian Roofing’s facilities, staff interviews, and a thorough review of timecards and
5 payroll information. Dkt. 15, at ¶¶9, 10, 11, 14. The Counterclaims further allege that DOL
6 informed Guardian Roofing of the findings of its investigations on April 8, 2014 and again on
7 May 13, 2015, at which point DOL estimated $421, 580.62 owed for unpaid wages owed and the
8 same amount owed for liquidated damages. Id. at ¶¶14, 19.
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In DOL’s correspondence to Guardian Roofing, according to the Counterclaims, DOL

10 informed Guardian Roofing that Guardian Roofing had failed to provide time records for 24
11 employees, and that time records provided for 41 employees reflected a failure to pay wages for
12 time spent traveling between job sites and from Guardian Roofing’s office and job sites. Id. at
13 ¶19. Throughout DOL’s investigation, DOL and Guardian Roofing entered into multiple tolling
14 agreements to extend the statute of limitations for the investigation and possible legal action,
15 with both parties ultimately agreeing to extend them until August 31, 2015, the same day that
16 DOL elected to file the Complaint. Id. at ¶¶15, 16, 17, 21-23.
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Guardian brings four counterclaims:
(1) Count I: Declaratory judgment that Guardian has not violated employee
overtime compensation provisions of 29 U.S.C. §§ 207 and 215(a)(2). Dkt.
15, at ¶¶24-29, 43a.
(2) Count II: Declaratory judgment that Guardian has not violated employment
records preservation provisions of 29 U.S.C. §§211(c) and 215(a)(5). Id. at
¶¶30-34, 43b.
(3) Count III: Declaratory judgment that Guardian is not required to pay
liquidated damages, because it has acted in good faith and not with an
intention to violate FLSA. Id. at ¶¶35-39, 43c. See 29 U.S.C. §§216(b) and
260.

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ORDER ON DEP’T OF LABOR’S MOTION TO
DISMISS, OR IN THE ALTERNATIVE, STRIKE
DEFENDANTS’ COUNTERCLAIMS- 2

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(4) Count IV: Awarding of attorney’s fees and costs to Guardian under the Equal
Access to Justice Act (EAJA). Id. at ¶¶35-39, 43d.

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Unlike the Counterclaims, the Complaint does not allege discretely labeled claims.

4 However, in relevant part DOL alleges: that Guardian violated 29 U.S.C. §§ 207 and 215(a)(2)
5 for failure to compensate employees (Complaint, at ¶¶13, 15); that Guardian violated 29 U.S.C.
6 §§ 211(c) and 215(a)(5) for failure to a maintain or preserve employment records (id. at ¶14);
7 and that Guardian owes an unspecified amount in back wages, and the same amount in liquidated
8 damages (id. at ¶¶14, 18). In the prayer for relief, DOL requests an awarding of fees and costs;
9 an awarding of damages, including liquidated damages; and injunctive relief, for Guardian to be
10 permanently enjoined from violating FLSA employee records and wage provisions. Id. at pp. 6,
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DISCUSSION
DOL brings this motion to dismiss or strike Guardian’s Counterclaims. DOL makes three

14 main arguments: (1) the Counterclaims should be stricken pursuant to Fed.R.Civ.P. 12(f),
15 because they are redundant and serve no useful purpose; (2) the EAJA Counterclaim should be
16 dismissed pursuant to Fed.R.Civ.P. 12(b)(6), because a claim for attorney’s fees is not justiciable
17 absent this Court’s final judgment; and (3) the Counterclaims should be dismissed pursuant to
18 Fed.R.Civ.P. 12 (b)(1) and (h)(3) for lack of subject matter jurisdiction, because DOL is entitled
19 to sovereign immunity on the basis that Guardian has not exhausted administrative challenges of
20 a final agency action by DOL.
21 1. Striking Counterclaims pursuant to Fed.R.Civ.P. 12(f).
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Courts may “strike from a pleading . . . any redundant, immaterial, impertinent, or

23 scandalous matter.” Fed. R. Civ. P. 12(f). The rule is designed to help “avoid the expenditure of
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ORDER ON DEP’T OF LABOR’S MOTION TO
DISMISS, OR IN THE ALTERNATIVE, STRIKE
DEFENDANTS’ COUNTERCLAIMS- 3

1 time and money that must arise from litigating spurious issues by dispensing with those issues
2 prior to trial.” Whittlestone, Inc. v. Handi-Craft Co., 618 F.3d 970, 973 (9th Cir. 2010) (citation
3 and alteration omitted). Motions to strike are disfavored, because they “may be used as delaying
4 tactics and because of the strong policy favoring resolution on the merits.” Barnes v. AT&T
5 Pension Ben. Plan-Nonbargained Program, 718 F.Supp.2d 1167 (N.D.Cal.2010), citing to
6 Stanbury Law Firm v. I.R.S., 221 F.3d 1059, 1063 (8th Cir.2000). In the context of counterclaims
7 for declaratory relief, some courts use their discretion to dismiss “mirror image” counterclaims
8 that are redundant of affirmative defenses or claims found in the complaint. Rayman v. Peoples
9 Sav. Corp. 735 F.Supp. 842, 852 (N.D.Ill.1990); Daily v. Federal Ins. Co., 2005 WL 14734 *6
10 (N.D.Cal.2005).
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In this case, Guardian’s Counterclaims I-III are redundant and nothing more than a mirror

12 image of the Complaint. In Count I, Guardian seeks declaratory judgment that Guardian has not
13 violated employee overtime compensation provisions of 29 U.S.C. §§ 207 and 215(a)(2), while
14 DOL alleges the opposite. C.f. Dkt. 15, at ¶¶24-29, 43a; and Complaint, at ¶¶13. See also, id. at
15 ¶¶15, 16, 18 and pp. 6, 7. In Count II, Guardian seeks declaratory judgment that Guardian has
16 not violated employment records preservation provisions of 29 U.S.C. §§211(c) and 215(a)(5),
17 while DOL alleges the opposite. C.f. id. at ¶¶30-34, 43b; and id at ¶14. See also, id. at pp. 6, 7. In
18 Count III, Guardian seeks declaratory judgment that Guardian is not required to pay liquidated
19 damages, because Guardian has acted in good faith and without an intent to violate FLSA, while
20 DOL alleges the opposite. C.f. id. at ¶¶35-39, 43c; and id. at ¶¶15, 18. See also, id. at p. 7.
21 Counterclaims I-III1 should be stricken under Fed.R.Civ.P. 12(f) because they are redundant.
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See below for analysis of Count IV (EAJA fees and expenses).

ORDER ON DEP’T OF LABOR’S MOTION TO
DISMISS, OR IN THE ALTERNATIVE, STRIKE
DEFENDANTS’ COUNTERCLAIMS- 4

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Guardian urges this Court to join other district courts in analyzing redundancy by

2 “focus[ing] on whether the counterclaims serve any useful purpose. . . dismiss[ing] or strik[ing] a
3 redundant counterclaim only when it is clear that there is a complete identity of factual and legal
4 issues between the complaint and counterclaim.” Stickrath v. Globalstar, Inc., 2008 WL
5 2050990, at *4 (N.D.Cal.2008) (citation and quotations omitted); Dkt. 23, at 19, 20. See also,
6 Pettrey v. Enterprise Title Agency, Inc., 2006 WL 3342633 (N.D.Ohio 2006). Although Stickrath
7 and similar cases are only persuasive authority, the Counterclaims do not serve any useful
8 purpose. They obstruct the parties from reaching the merits, because they raise no issues not also
9 raised by the Complaint. A decision on Complaint’s merits would render the Counterclaims for
10 declaratory judgment moot. See Aldens, Inc. v. Packel, 524 F.2d 38, 51, 52
11 (3d.Cir.1975)(counterclaim for declaratory judgment that became upon disposition of the
12 plaintiff’s claims); Green Bay Packaging, Inc. v. Hoganson & Assoc., 362 F.Supp. 78, 82
13 (N.D.Ill.1973) (striking declaratory relief counterclaims seeking resolution of same issues raised
14 in plaintiff’s cause of action for declaratory relief). There is “complete identity” of legal issues,
15 see above, as well as of factual issues, where the only differences between the Complaint and the
16 Counterclaims reflect the parties’ differing views of the facts. C.f., e.g., Complaint, at ¶13
17 (employees not paid for performing work while at Guardian’s shop prior to travelling to jobsite);
18 and Dkt. 15, at ¶¶12, 13 (employees not paid for time spent at Guardian’s shop prior to travelling
19 to jobsite because they did not perform work).
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Guardian also argues that DOL must show that it would suffer prejudice if the Court were

21 to deny DOL’s motion to strike, a showing that Guardian argues DOL has not made. Dkt. 23, at
22 20, citing to 5C Fed. Prac. & Proc. Civ. § 1382 (3d ed.) and district court cases. See, e.g., Love v.
23 Permanente Medical Group, 2013 WL 6731463 *at 6 (N.D.Cal.2013) (“[w]here the moving
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ORDER ON DEP’T OF LABOR’S MOTION TO
DISMISS, OR IN THE ALTERNATIVE, STRIKE
DEFENDANTS’ COUNTERCLAIMS- 5

1 party cannot adequately demonstrate such prejudice, courts frequently deny motions to strike
2 even though the offending matter literally was within . . . Rule 12(f)”). Guardian only provides
3 persuasive authority for this rule, nonetheless, DOL would suffer prejudice were the Court to
4 deny DOL’s motion. There is a strong “possibility that issues will be unnecessarily complicated
5 or that [these] superfluous pleadings will cause the trier of fact to draw unwarranted inferences at
6 trial[, which] is the type of prejudice that is sufficient to support the granting of a motion to
7 strike.” Benham v. American Servicing Co., 2009 WL 4456386 (N.D.Cal. 2009). Furthermore,
8 the Counterclaims are duplicative, likely to confuse the trier of fact and distract from the
9 underlying merits of the case. The motion to strike should be granted as to Counterclaims I-III,
10 and they should be stricken.
11 2. Dismissal of EAJA counterclaim pursuant to Fed.R.Civ.P.12(b)(6).
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The Equal Access to Justice Act (EAJA) authorizes payment of attorney's fees to a

13 “prevailing party” in an action against the United States. Under EAJA, “[a] party seeking an
14 award of fees and other expenses shall, within thirty days of final judgment in the action, submit
15 to the court an application for fees and other expenses which shows that the party is a prevailing
16 party and is eligible to receive an award under this subsection, and the amount sought.” 28
17 U.S.C. § 2812(d)(1)(B)(emphasis added).
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Guardian’s EAJA Counterclaim is premature, because EAJA contemplates that the

19 submission of an EAJA application follows, not precedes, final judgment. This interpretation is
20 supported by use of the word “within,” a term that defines both the start and finish deadlines for
21 submitting applications, “within thirty days of final judgment,” versus use of words such as
22 “before” or “prior to,” which would seem to only define the finish deadline without limiting the
23 start. § 2412(d)(1)(B). This interpretation is also supported by the content of the application,
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ORDER ON DEP’T OF LABOR’S MOTION TO
DISMISS, OR IN THE ALTERNATIVE, STRIKE
DEFENDANTS’ COUNTERCLAIMS- 6

1 because a party must “sho[w] that the party is a prevailing party[,]” defined as “a party who
2 obtains a final judgment[.]” § 2412(d)(1)(B) and (d)(2)(H). Further, even if the statute did not
3 require submission of applications “within thirty days of final judgment” by the “prevailing
4 party,” the EAJA Counterclaim should be dismissed because the other counterclaims are
5 stricken, and EAJA does not create an independent cause of action. Thomas v. Paulson, 507
6 F.Supp.2d 59, 62 n.2 (D.D.C.2007) (quoting Scarborough v. Principi, 541 U.S. 401, 405 (2004)
7 (citation omitted). See also, e.g., Cota v. United States, 2013 WL 6234574, at *6-7 (N.D.
8 Cal.2013), aff'd, 2015 WL 9584400 (9th Cir.2015). The EAJA Counterclaim should be
9 dismissed without prejudice.
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Guardian has not waived its opportunity to submit an application for fees and expenses

11 under EAJA, should Guardian prevail. The Court will entertain Guardian’s timely EAJA
12 application, if any, following final judgment.
13 3. Dismissal of all counterclaims pursuant to Fed.R.Civ.P.12(b)(1) and (h)(3) for lack of subject
matter jurisdiction.
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Much of the parties’ briefing litigates the issue of subject matter jurisdiction over the
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Counterclaims, an issue that may turn on whether DOL should be afforded sovereign immunity.
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DOL is entitled to sovereign immunity, DOL argues, because Guardian has not challenged a
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final agency action by DOL and thus has not exhausted administrative remedies required under
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the Administrative Procedure Act. Dkt. 22, at 5, 6; Dkt. 25, at 2-4.
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Because the Counterclaims are either stricken or dismissed, see above, the issue of
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subject matter jurisdiction is moot.
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ORDER ON DEP’T OF LABOR’S MOTION TO
DISMISS, OR IN THE ALTERNATIVE, STRIKE
DEFENDANTS’ COUNTERCLAIMS- 7

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Guardian also requests the opportunity for leave to amend the Counterclaims. The Court

2 is skeptical of what merit any counterclaims could have, but Guardian should be given an
3 opportunity to amend.
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ORDER

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THEREFORE, the Department of Labor’s Motion to Dismiss, or in the Alternative,

6 Strike Counterclaims is GRANTED IN PART and DENIED IN PART. Dkt. 22.
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Guardian’s claims for declaratory judgment (Count I, Count II, and Count III) are

8 HEREBY STRICKEN.
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Guardian’s claim for attorney’s fees and costs under EAJA (Count IV) is dismissed

10 without prejudice.
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Guardian may have leave to amend, file, and serve counterclaims, if any it has, on or

12 before Monday, March 21, 2016. Any proposed amended counterclaims must be consistent with
13 this order.
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IT IS SO ORDERED.

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The Clerk is directed to send uncertified copies of this Order to all counsel of record and

16 to any party appearing pro se at said party’s last known address.
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Dated this 9th day of March, 2016.

A
ROBERT J. BRYAN
United States District Judge

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ORDER ON DEP’T OF LABOR’S MOTION TO
DISMISS, OR IN THE ALTERNATIVE, STRIKE
DEFENDANTS’ COUNTERCLAIMS- 8