IN THE UNITED STATES DISTRICT COURT

FOR THE WESTERN DISTRICT OF TEXAS

SAN ANTONIO DIVISION

BRAD KLINGE,

Plaintiff,

v.

KBL ASSOCIATES, LLC, and

KIMBERLY LEATHERWOOD

Defendants.

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Civil Action No. 5:20-cv-00470

DEFENDANT KBL ASSOCIATES, LLC’S RESPONSE IN OPPOSITION 

TO PLAINTIFF’S MOTION TO DISMISS COUNTERCLAIMS

Defendant KBL Associates LLC (“KBL” or “Defendant”), improperly named 

as “KBL Associates, LLC”, hereby submits this Response in Opposition to Plaintiff 

Brad Klinge’s Motion to Dismiss KBL’s Counterclaims. This Response is directed 

at Plaintiff’s Motion to Dismiss KBL’s counterclaims for (i) Breach of Fiduciary 

Duty, and (ii) Unjust Enrichment. As for KBL’s remaining counterclaims for Fraud 

and Conversion, KBL will submit Amended Counterclaims pursuant to Federal Rule 

of Civil Procedure 15(a)(1)(B).1

 

1 Rule 15 allows a party the opportunity to amend once as a matter of course a pleading to which 

a responsive pleading is required within the earlier of (i) 21 days after the service of the responsive 

pleading, or (ii) 21 days after service of a motion under 12(b), (e), or (f). See Fed. R. Civ. P. 

15(a)(1)(B). Defendant’s counterclaims are a “pleading . . . to which a responsive pleading is 

required.” Id. Plaintiff responded to Defendant’s counterclaims with a 12(b) motion, which was 

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A. The Court Has Subject-Matter Jurisdiction over Defendant’s 

Counterclaims for Breach of Fiduciary Duty and Unjust Enrichment.

Defendant’s Counterclaims for Breach of Fiduciary Duty and Unjust Enrichment

Arise Out of the Same Transaction or Occurrence as Plaintiff’s Original Claims.

Federal Rule of Civil Procedure 13 divides counterclaims into two categories: 

compulsory and permissive. See Fed. R. Civ. P. 13. When a counterclaim “arises out 

of the transaction or occurrence that is the subject matter of the opposing party’s 

claim,” a party must either assert it under the compulsory counterclaim provision 

in Rule 13(a) or waive the right to recover on it forever. See Fed. R. Civ. P. 13(a). 

The purpose behind this rule is to both encourage parties and enable courts to settle 

all related claims in one civil action, which avoids wasteful and duplicative litigation 

that arises from a single transaction or occurrence. See 6 Wright & Miller, FEDERAL 

PRACTICE AND PROCEDURE § 1409 (3d ed. 2010).

To determine whether a counterclaim is compulsory, the Fifth Circuit uses the 

“logical relation” test. See Ormet Primary Aluminum Corp. v. Ballast Tech., 

Inc., 436 F. App’x 297, 299 (5th Cir.2011). “There is a logical relationship between 

a potential counterclaim and the principal claim when the same operative facts serve 

as the basis of both claims or the aggregate core of facts upon which the claim rests 

activates additional legal rights, otherwise dormant, in the defendant.” Id. As the 

Fifth Circuit has stated, “[t]he logical relation test is a loose standard which permits 

 

served on May 29, 2020. (Doc. 11.) Therefore, Defendant has until June 19, 2020 to amend its 

counterclaims as a matter of course. See Fed. R. Civ. P. 15(a)(1)(B).

Case 5:20-cv-00470-XR Document 18 Filed 06/12/20 Page 2 of 12
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a broad realistic interpretation in the interest of avoiding a multiplicity of suits. The 

hallmark of this approach is its flexibility.” Plant, 598 F.2d at 1361. This analytical 

framework for determining whether a counterclaim is compulsory asks whether: (1) 

the issues of fact and law raised by the claim and counterclaim are largely the same,

(2) res judicata would bar a subsequent suit on the defendant’s claim absent the 

compulsory counterclaim rule, (3) substantially the same evidence will support or 

refute both plaintiff’s claims and defendant’s counterclaims, or (4) there is any 

logical relationship between the claims and counterclaims. See Tank Insulation Int’l 

v. Insultherm, Inc., 104 F.3d 83, 85–86 (5th Cir. 1997). So long as one of these 

prongs is met, a defendant’s counterclaim is compulsory. See id. at 86.

At issue here are Defendant’s counterclaims breach of fiduciary duty and 

unjust enrichment. (Doc. 9, pp. 11–13, ¶¶ 25–33, 42–49.) These claims are related 

to the hours Plaintiff alleges he worked for Defendant and for which Plaintiff is suing 

for alleged FLSA violations. (Doc. 1, pp. 4–5, ¶¶ 30–40). These counterclaims arise 

from Plaintiff’s submission of time he falsely alleged he worked for Defendant (and 

billed to Defendant’s customers). (Doc. 6, pp. 8–9, ¶¶ 2, 3). Defendant paid Plaintiff 

based on those statements and likewise charged its clients based on those false 

statements. (Doc. 6, p. 9, ¶ 4.)

Both Plaintiff’s FLSA claim and counterclaims for breach of fiduciary duty

and unjust enrichment ultimately focus on the amount of overtime pay owed to 

Case 5:20-cv-00470-XR Document 18 Filed 06/12/20 Page 3 of 12
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Plaintiff (if any). See Cordero v. Voltaire, LLC, No. A-13-CA-253-LY, 2013 WL 

6415667, at *4 (W.D. Tex. Dec. 6, 2013). To prevail on its counterclaim for a breach 

of fiduciary duty, Defendant will need to show that Plaintiff breached such duty to 

Defendant, which resulted in an injury to the Defendant. See Hunn v. Dan Wilson 

Homes, Inc, 789 F.3d 573, 581 (5th Cir. 2015). To prevail on its counterclaim for 

unjust enrichment, Defendant will need to show that Plaintiff wrongfully secured a 

benefit that would be unconscionable to retain. See Texas Integrated Conveyor Sys., 

Inc. v. Innovative Conveyor Concepts, Inc., 300 S.W.3d 348, 367 (Tex. App. 2009).

For both of these claims, Defendant will offer the exact same evidence. That 

is, Defendant will present evidence showing that the Plaintiff billed Defendant’s 

clients for false or inflated hours he did not work. (Doc. 6, p. 8, ¶ 2.) Likewise, to 

prove his FLSA claim, Plaintiff will need to present evidence showing the overtime 

hours he worked and how much Defendant should have paid him. See Johnson v. 

Heckmann Water Res. (CVR), Inc., 758 F.3d 627, 630 (5th Cir. 2014). The focus for 

each will be how many hours did Plaintiff actually work. If Defendant proves its

counterclaim for unjust enrichment and/or breach of fiduciary duty, Plaintiff will not 

be able to recover for any overtime hours that he did not work. See LeCompte, 780 

F.2d at 1264. Indeed, the counterclaims at issue here relate directly to the hours 

Plaintiff allegedly worked and the wages received for those hours he allegedly work. 

See Solano v. Ali Baba Mediterranean Grill, Inc., No. 3:15-CV-0555-G, 2015 WL 

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7770893, at *6 (N.D. Tex. Dec. 3, 2015). There is a clear logical relationship 

between the operative facts and evidence needed to prove Plaintiff’s FLSA claim 

and Defendant’s counterclaims for unjust enrichment, and breach of fiduciary duty.

See id.; Cordero, 2013 WL 6415667, at *4; LeCompte v. Chrysler Credit 

Corporation, 780 F.2d 1260, 1264 (5th Cir. 1986) (employees cannot recover under 

the FLSA if they have “worked unauthorized overtime or falsified records to create 

a cause of action”). Thus, the these counterclaims are compulsory. See FED. R. 

CIV. P. 13(a).

The Court Has Supplemental Jurisdiction over Defendant’s Counterclaims for 

Breach of Fiduciary Duty and Unjust Enrichment.

Federal courts have supplemental jurisdiction over compulsory counterclaims 

because to be compulsory counterclaims in the first place, they have already passed 

the more stringent test of arising out of the same “transaction or occurrence” as the 

jurisdiction-invoking claim, and therefore, by definition, satisfy § 1367(a)’s “same 

case or controversy” standard. See Smith v. James C. Hormell Sch. of Va. Inst. of 

Autism, 2010 WL 1257656, at *19 (W.D. Va. Mar. 26, 2010). Because Defendant’s 

counterclaims for Breach of Fiduciary Duty and Unjust Enrichment are compulsory, 

the Court has supplemental jurisdiction over these counterclaims. However, even if 

these claims were merely permissive, the Court would also have supplemental 

jurisdiction over these counterclaims under § 1367.

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Under § 1367(a), the district court may exercise supplemental jurisdiction 

over state claims that do not independently come within the court’s jurisdiction so 

long as they “form part of the same case or controversy” as the claims which do fall 

within the court's original jurisdiction. Halmekangas v. State Farm Fire and Cas. 

Co., 603 F.3d 290, 293 (5th Cir. 2010); 28 U.S.C. § 1367(a). Under § 1367(a), the 

question is whether the supplemental claims are so related to the original claims that 

they derive from a “common nucleus of operative fact.” United Mine Workers of 

America v. Gibbs, 383 U.S. 715, 725 (1966). In making this inquiry, courts should 

look to whether a claimant would ordinarily be expected to try all the claims under 

consideration in a single proceeding. Id. The Court has supplemental jurisdiction 

over these counterclaims for two reasons.

First, the Court has an independent basis for federal jurisdiction over these 

state law claims—diversity of citizenship. Subject matter jurisdiction premised on 

diversity requires (1) complete diversity of citizenship between the parties and (2) 

an amount in controversy in excess of $75,000. See 28 U.S.C. § 1332. Here, 

Plaintiff’s own allegations in his Complaint demonstrate there is complete diversity 

of citizenship between Plaintiff and the Defendants. Plaintiff is a citizen of 

Guadalupe County, Texas. (Doc. 1, p. 2, ¶ 6.) Defendant KBL is a Tennessee limited 

liability company. (Doc. 1, p. 2, ¶ 7.) Defendant Kimberly Leatherwood is a citizen 

of Tennessee. (Doc. 1, p. 2, ¶ 10.) Therefore, there is complete diversity of 

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citizenship between Plaintiff (Texas) and all Defendants (Tennessee) as required by 

§ 1332(a). Moreover, the amount in controversy in this case exceeds the 

jurisdictional threshold of $75,000. Defendant’s damages from overpaying Plaintiff 

wages, refunding customers, loss of personal property, and lost revenue from 

cancelled contracts and damaged relationships exceed this amount. Because the 

requirements for diversity jurisdiction are met, the Court has an independent basis 

for federal jurisdiction over Defendant’s counterclaims sufficient to exercise 

supplemental jurisdiction.

Second, even if the Court did not have independent grounds for jurisdiction 

(which it does), Defendant’s counterclaims “form part of the same case or 

controversy” as Plaintiff’s FLSA claims. Halmekangas, 603 F.3d at 293. As 

explained above, there is significant overlap between the evidence needed to prove 

Plaintiff’s original claims and Defendant’s two counterclaims at issue here. See 

supra at 3–5. All claims and counterclaims will center on the amount of time actually 

worked by Plaintiff, whether his submitted time was inflated and/or falsified, and 

how much remuneration he received for actual time worked.

Finally, the Court should not refuse to exercise its supplemental jurisdiction 

over Defendant’s counterclaims under § 1367(c). Under that provision, district 

courts are permitted (but are not required) to decline the exercise of supplemental 

jurisdiction over a claim if: “(1) the claim raises a novel or complex issue of State 

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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).

None of Defendant’s counterclaims raises a complex or novel issue of state 

law. All of these counterclaims are well-established in Texas law, which would 

merely require this Court to analyze such claims under straightforward precedent.

Likewise, these state law claims would not predominate over claims over which the 

Court has original jurisdiction. First, the Court has original jurisdiction over these 

state law claims under § 1332. See supra at 6–7. Second, there are no predominance 

concerns because the relevant evidence and analysis for the state law counterclaims 

overlap substantially with Plaintiff’s FLSA claims. See supra at 3–5. Finally, the 

Court has not dismissed all claims over which it has jurisdiction, and there are no 

compelling reasons for declining supplemental jurisdiction over these 

counterclaims. In fact, exercising supplemental jurisdiction over these claims will 

lead to the efficient resolution of all claims related to the underlying facts at issue.

B. Defendant Has Sufficiently Stated a Claim for Breach of Fiduciary Duty 

and Unjust Enrichment.

Defendant has pled facts sufficient to state a claim for breach of fiduciary duty 

and unjust enrichment. To survive a Rule 12(b)(6) motion to dismiss, a counterclaim

must contain sufficient factual matter, accepted as true, to state a claim to relief that 

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is plausible on its face. See Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). “A claim 

has facial plausibility when the plaintiff pleads factual content that allows the court 

to draw the reasonable inference that the defendant is liable for the misconduct 

alleged.” Id. Detailed factual allegations are not necessary to state a claim under 

Rule 12(b)(6). See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). A 

counterclaim can survive a motion to dismiss even if actual proof of the facts alleged 

is “improbable.” Id. at 556. The court must take all of the factual allegations in the 

complaint as true. See Iqbal, 556 U.S. at 678.

Defendant has stated a claim for breach of fiduciary duty. The elements of a 

breach of fiduciary duty claim are: (1) a fiduciary relationship between the plaintiff 

and defendant; (2) the defendant must have breached his fiduciary duty to the 

plaintiff; and (3) the defendant's breach must result in injury to the plaintiff or benefit 

to the defendant. See Jones v. Blume, 196 S.W.3d 440, 447 (Tex. App.—Dallas 

2006). Texas courts have held that fiduciary relationships may arise between 

employees and employers. See Molex, Inc. v. Nolen, 759 F.2d 474, 479 (5th Cir.

1985); Kinzbach Tool Co. v. Corbett–Wallace Corp., 138 Tex. 565, 160 S.W. 2d 

509, 513 (1942). Generally speaking, the fiduciary relationship “contemplates fair 

dealing and good faith” and “refers to integrity and fidelity.” Johnson v. Brewer & 

Pritchard, P.C., 73 S.W.3d 193, 199 (Tex. 2002). “When a fiduciary relationship of 

agency exists between employee and employer, the employee has a duty to act 

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primarily for the benefit of the employer in matters connected with his agency.”

Abetter Trucking Co. v. Arizpe, 113 S.W. 3d 503, 508 (Tex. App. 2003). “The 

employee has a duty to deal openly with the employer and to fully disclose to the 

employer information about matters affecting the company’s business.” Id.

Here, it is undisputed that Plaintiff and Defendant KBL were in an 

employment relationship. (Doc. 1, p. 3, ¶¶ 18–19.) This alone establishes that there 

may have been some fiduciary relationship between the parties—i.e., that it is 

“plausible.” Iqbal, 556 U.S. at 678. Whereas a fiduciary relationship “contemplates 

fair dealing and good faith,” Johnson, 73 S.W. 3d at 199, Defendant has alleged that 

Plaintiff falsified time he claimed to have worked and billed Defendant’s customers 

for that time, which caused damage to Defendant. (Doc. 6, pp. 8–9, 11, ¶¶ 2–4, 22.)

Following complaints from its customers, Defendant was forced to refund money 

fraudulently billed by Plaintiff and suffered damaged relationships with its 

customers. (Doc. 6, pp. 9, 11 ¶¶ 5, 22.) This is sufficient to state a plausible claim 

for relief for breach of fiduciary duty.

Defendant has also clearly stated a claim of unjust enrichment. “Unjust 

enrichment is an equitable principle holding that one who receives benefits unjustly 

should make restitution for those benefits.” Texas Integrated, 300 S.W.3d at 367. A 

claim for unjust enrichment arises when a party has wrongfully secured a benefit or 

has passively received one which it would be unconscionable to retain. See 

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Villarreal v. Grant Geophysical, Inc., 136 S.W. 3d 265, 270 (Tex. App. 2004). 

Defendant’s counterclaims allege that Plaintiff inflated and/or falsified his submitted 

time and that he received pay for this inflated and/or falsified time. (Doc. 6, pp. 8–

9, ¶¶ 2, 4.) In other words, Defendant alleges that Plaintiff lied about the amount of 

time he worked for Defendant and Defendant’s customers and received pay based 

on such lies. This is a quintessential example of a party wrongfully securing and 

retaining a benefit to which he is not entitled.

Conclusion

For the foregoing reasons, Plaintiff’s Motion to Dismiss KBL’s 

Counterclaims for breach of fiduciary duty and unjust enrichment should be denied.

Respectfully Submitted,

/s/ Stephen C. Jackson

Stephen C. Jackson

Maynard Cooper & Gale, P.C.

1901 Sixth Avenue North

Regions Harbert Plaza Suite 2400 

Birmingham, AL 35203

Telephone: (205) 254-1000

Fax: (205) 254-1999

Email: sjackson@maynardcooper.com

Attorneys for Defendants

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CERTIFICATE OF SERVICE

I hereby certify that on June 12, 2020, I electronically filed the foregoing with 

the Clerk of the Court using the CM/ECF system, which will send notification of 

such filing to the following:

Josh Sanford

SANFORD LAW FIRM, PLLC

One Financial Center

650 South Shackleford

Suite 411

Little Rock, AR 72211

(501) 221-0088

josh@sanfordlawfirm.com

/s/ Stephen C. Jackson 

Of Counsel

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