the FLSA was enacted; (3) the FLSA has a comprehensive remedial scheme that strongly
counsels against “judicially engrafting additional remedies,” such as contribution or
indemnification; and (4) the FLSA’s legislative history is silent on a right to contribution or
indemnification. Jd. at 144. Applying Herman, the Southern District of New York explained
how a right to indemnification or contribution would contravene the intent of the FLSA:
Whether or not [the third-party defendant] breached a contractual obligation,
defendants’ attempt to recover damages from [the third-party defendant] for
overtime violations is an attempt to receive indemnification for FLSA liability.
As Herman makes clear, “there is no right to contribution or indemnification for
employers held liable under the FLSA.” 172 F.3d at 144. Even assuming [the
third-party defendant] were found culpable for FLSA violations as plaintiff's “co-
employer,” the right to indemnification is still absent. See id. at 143 (explaining
that “regardless of the status of the party from whom [the employer] seeks
contribution” no right to indemnification exists for employers under the FLSA).
Furthermore, allowing defendants to obtain indemnification from [the third-party
defendant] contradicts the policies of the FLSA. As Herman explains, “the [FLSA]
was designed to regulate the conduct of employers for the benefit of employees. . .
.” Id. at 144. Allowing indemnification in cases such as this would permit
employers to contract away their obligations under the FLSA, a result that flouts

the purpose of the statute. We therefore hold that the Company has no right to
indemnification for damages assessed under the FLSA... .

Gustafson v. Bell Atlantic Corp., 171 F. Supp. 2d 311, 328 (S.D.N.Y. 2001).

Defendants argue that Herman is distinguishable from this case because “the defendant in
that case, who was a 50% owner of the business charged with FLSA violations, brought a third-
party complaint and cross-claims against employees of the business and the other 50% owner.”
(Doc. 37 at 8). Defendants allege that the third-party complaint does not seek any relief from
any employee or any owner related to defendants. (/d.). Defendants allege that this case is
different because defendants have no ownership or control over any aspects of employment or
compensation for Amazing’s employees. Defendants argue that the Court should instead follow

the holding of Daniels, a case from the District of Kansas. (/d.) (citing Daniels, 842 F. Supp. at

369).


complex issue of State law,” “the claim substantially predominates over the claim or claims over
which the district court has original jurisdiction,” or “the district court has dismissed all claims
over which it has original jurisdiction”). This case largely centers on whether the defendants are
“employers” of the individuals alleged to be “employees” who are entitled to compensation
under the FLSA. The issues involved in defendants’ claims of breach of contract and breach of
duty of good faith that are unrelated to the FLSA claims in this case would be separate and
distinct from the FLSA violations alleged by the Secretary and would needlessly complicate this
case. Therefore, the Court should decline to exercise supplemental jurisdiction over Counts |
and 2 of the proposed third-party complaint.

C. Conclusion

Consistent with the foregoing, it is RECOMMENDED that defendants House, J&E, and
Thompson’s motion for leave to file a third-party complaint (Doc. 35) be DENIED in its

entirety.

Date: Blo fe CAaten X Khorf
Karen L. Litkovitz

United States Magistrate Judge


Padilla are solely responsible for violations of the FLSA regarding their workers and for
compensation Plaintiff seeks to wrongly collect from Defendants.” (/d. at 10).
B. Resolution

Although the Sixth Circuit has not decided whether there is a right of contribution or
indemnification for employers under the FLSA, courts within the Sixth Circuit and several courts
around the country have dismissed third-party claims that seek contribution or indemnification
under the FLSA. Those courts have reasoned that allowing defendants to shift their liability to
another entity or individual would allow employers to contract away their obligations under the
FLSA—a result that would be contrary to the purpose of the statute by weakening an employer’s
incentive to comply with the FLSA. See Neilwoldman vy. AmeriColor, LLC, No. 3:18-cv-00151,
2018 WL 4384996, at *3 n.1 (M.D. Tenn. Sept. 13, 2018) (collecting cases). See also Berryman
v. Newalta Envtl. Servs., Inc., No. CV 18-793, 2018 WL 5631169, at *3 (W.D. Pa. Oct. 31,
2018) (holding that courts “have uniformly agreed that an employer found liable under the FLSA
has no right to contribution or indemnity from a third party.”).

In Herman v. RSR Sec. Servs. Ltd., a case cited by the Secretary and cited as persuasive
authority by many courts, the Second Circuit Court of Appeals held that there is no right of
contribution or indemnification for employers under the FLSA. 172 F.3d at 143. The Herman
Court applied the principles and analysis of the United States Supreme Court’s decision in
Northwest Airlines, Inc. v. Transport Workers Union, 451 U.S. 77 (1981), holding that no action
for contribution is allowed under Title VII or the Equal Pay Act. Jd. In a matter of first
impression for the Second Circuit, the Court concluded that there is no right of contribution or
indemnification under the FLSA because: (1) the text of the statute makes no provision for

contribution or indemnification; (2) employers are not members of the class for whose benefit


The Court finds that the reasoning provided in Herman,’ as recognized by District Courts
in the Sixth Circuit, is persuasive. The holding of Herman, which relies on the U.S. Supreme
Court’s decision in Northwest Airlines, generally prohibits third-party complaints by employers
that seek indemnity or contribution for FLSA violations. Contrary to defendants’ argument,
Herman holds that “regardless of the party from whom [an employer] seeks contribution,” an
employer is outside the statute’s intended protection. Herman, 172 F.3d at 143. Indeed, courts
have applied the Herman Court’s reasoning that employers have no right to contribution or
indemnification under the FLSA, regardless of the party from whom they seek contribution or
indemnification. See Herman, 172 F.3d at 143 (“status as an employer places [it] outside of the
statute’s intended protection, regardless of the status of the party from whom [it] seeks
contribution”). See also Gustafson, 171 F. Supp. 2d 311, 328 (S.D.N.Y. 2001) (“even assuming
[the third-party defendant] were found culpable for FLSA violations as plaintiff’s ‘co-employer,”
the right to indemnification is still absent”) (citing Herman, 172 F.3d at 143); Neilwoldman,
2018 WL 4384996, at *3-4 (dismissing third-party complaint seeking right of indemnification or
contribution under the FLSA against third-party defendants that were fee-based staffing
agencies); Strauss v. Italian Vill. Rest., Inc., No. 1:11-cv-03202, 2012 WL 5389746, at *4 (N.D.
Ill. Nov. 2, 2012) (applying FLSA principles to Illinois state law and holding that because the
statute is designed to protect employees, its “goals would be undermined by diminishing the
employer[’s] compliance incentives if an employer were permitted to seek indemnity or
contribution” against third-party defendants who were various persons and entities involved with

managing the payroll for defendants’ employees) (internal quotation omitted); Finke v. Kirtland

? The Daniels decision cited by defendants pre-dates the Herman decision and therefore does not address the issues
raised in Herman. The Court remains persuaded by the reasoning outlined in Herman and followed by numerous
other courts that actions for indemnity or contribution under the FLSA are contrary to the intent of the statute.

6


UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION
EUGENE SCALIA, Secretary of Case No. 1:18-cv-590
Labor, United States Department of Labor, Dlott, J.
Plaintiff, Litkovitz, M.J.

vs.
MICA CONTRACTING, LLC, et al.,

Defendants.
NOTICE

Pursuant to Fed. R. Civ. P. 72(b), WITHIN 14 DAYS after being served with a copy of
the recommended disposition, a party may serve and file specific written objections to the
proposed findings and recommendations. This period may be extended further by the Court on
timely motion for an extension. Such objections shall specify the portions of the Report objected
to and shall be accompanied by a memorandum of law in support of the objections. If the Report
and Recommendation is based in whole or in part upon matters occurring on the record at an oral
hearing, the objecting party shall promptly arrange for the transcription of the record, or such
portions of it as all parties may agree upon, or the Magistrate Judge deems sufficient, unless the
assigned District Judge otherwise directs. A party may respond to another party’s objections
WITHIN 14 DAYS after being served with a copy thereof. Failure to make objections in
accordance with this procedure may forfeit rights on appeal. See Thomas v. Arn, 474 U.S. 140

(1985); United States v. Walters, 638 F.2d 947 (6th Cir. 1981).


UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION

EUGENE SCALIA, Secretary of Case No. 1:18-cv-590
Labor,! United States Department of Labor, Dlott, J.
Plaintiff, Litkovitz, M.J.
vs.
MICA CONTRACTING, LLC, et al., REPORT AND
Defendants. RECOMMENDATION

Plaintiff Eugene Scalia, Secretary of Labor (“Secretary”/“plaintiff’), brings this action to
enjoin and restrain defendants MICA Contracting LLC (“MICA”), J&E Builders LLC (“J&E”),
Sarah Elaine Thompson, Timothy Thompson, and John Wayne House from violating Sections 6,
7, 11, and 15 of the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201 et. seq.,
pursuant to Section 17 of the FLSA, and to recover unpaid minimum wage and overtime
compensation owed pursuant to Section 16(c) of the FLSA. (Doc. 1). This matter is before the
Court on defendant J&E, John Wayne House and Sarah Elaine Thompson’s motion for leave to
file a third-party complaint (Doc. 35), the Secretary’s response in opposition (Doc. 36), and
defendants’ reply memorandum (Doc. 37).

I. Standard of Review for Third-Party Complaints

Federal Rule of Civil Procedure 14 provides that a third-party plaintiff must obtain the
Court’s leave to file the third-party complaint more than 14 days after serving its original answer.
Fed. R. Civ. P. 14(a). “The purpose of Rule 14 is to permit additional parties whose rights may
be affected by the decision in the original action to be jointed so as to expedite the final

determination of the rights and liabilities of all the interested parties in one suit.” Am. Zurich Ins.

' This action was commenced in the name of R. Alexander Acosta, Secretary of Labor. On September 30, 2019,
Eugene Scalia became the Secretary of Labor. (See Doc. 35).


Cmty. Coll. Bd. of Trustees, 359 F. Supp. 2d 593, 599 (E.D. Mich. 2005) (applying Herman and
dismissing third-party complaint for indemnity and contribution against third-party defendant
and noting that the plaintiff did not name the third-party defendant in the action as an employer
or co-employer, nor did he seek damages from him). The Court concludes that defendants are
barred from bringing their Counts 3 and 4 claims for indemnification and contribution against
proposed third-party defendants Amazing Interiors, LLC and Gerardo Padilla. Allowing
defendants to shift their potential FLSA liability to a third-party would undermine the purposes
of the statute and weaken their incentive to comply with the FLSA.

Defendants are likewise barred from bringing their Counts 1 and 2 claims for breach of
contract and breach of duty of good faith against the proposed third-party defendants. While
phrased as separate claims, these claims in reality seek indemnification and contribution from
Amazing Interiors, LLC and Gerardo Padilla for violations of the FLSA. In these claims,
defendants specifically seek relief against the proposed third-party defendants in the amount of
no less than $75,000 “and/or any obligation to remit compensation and/or penalties for Amazing
and/or Padilla’s violations of the FLSA.” (Doc. 35-2 at 9) (emphasis added). Given this
language, these claims can only be construed as claims for indemnification or contribution.
Finke, 359 F. Supp. 2d at 601 (holding that “[n]o matter the label or the underlying legal theory,”
the third-party plaintiffs’ state law claim could “only be construed in this light as one for
contribution or indemnity, which . . . is not allowed under the FLSA”). To the extent that Counts
1 and 2 of the third-party complaint may be read as state law breach of contract and breach of
duty of good faith claims that are unrelated to the FLSA claims, the Court should decline to
exercise supplemental jurisdiction over these claims. See id. (citing 28 U.S.C. § 1367(c)) (a

district court may decline to exercise supplemental jurisdiction where “the claim raises a novel or


Co. v. Cooper Tire & Rubber Co., 512 F.3d 800, 805 (6th Cir. 2008). Whether to allow an
impleader lies within the sound discretion of the trial court. Laurent v. Diltz, No. 3:17-cv-343,
2018 WL 5722715, at *5 (S.D. Ohio Nov. 1, 2018) (Report and Recommendation),
adopted, 2018 WL 6046859 (S.D. Ohio Nov. 19, 2018). In deciding a Rule 14 motion, courts
consider timeliness as an urgent factor, as well as whether the third-party complaint “would
prejudice the plaintiff, unduly complicate the trial, or would foster an obviously unmeritorious
claim.” /d. (internal quotations omitted). Nevertheless, leave to file a third-party complaint
should be freely granted. Id.
II. Defendants’ Motion for Leave to File a Third-Party Complaint (Doc. 35)

A. The Parties’ Arguments

Defendants J&E Builders, John Wayne House, and Sarah Elaine Thompson move to file

a third-party complaint against Amazing Interiors, LLC and its principal, Gerardo Padilla. (Doc.
35-1). In support, defendants cite the Secretary’s allegation in the complaint that they violated
the FLSA as related to “purported subcontractor Amazing Interiors, LLC.” (Doc. 35-1 at 2)
(citing Complaint, Doc. | at 7). Defendants state that the Secretary seeks to recover alleged non-
payment of minimum wage and overtime to Amazing’s workers; therefore, Amazing Interiors,
LLC and Gerardo Padilla are real parties in interest to this litigation. (/d. at 2-3). Defendants
state that the Secretary’s failure to include these necessary parties was raised as an affirmative
defense in their answers. (/d. at 3) (citing Doc. 8 at 7; Doc. 9 at 7; Doc. 30 at 8). The proposed
third-party complaint includes Counts for breach of contract, breach of duty of good faith,
indemnification, and contribution against Amazing Interiors, LLC and Gerardo Padilla. (Doc.

35-2). The proposed third-party complaint also names as defendants John Does Nos. 1-20. (/d.).


In response, the Secretary argues that defendants’ motion is untimely because it was filed
a full year after defendants J&E and House filed their answers and 14 months after the
Secretary’s complaint was filed. (Doc. 36 at 5). The Secretary argues that defendants have
failed to offer an explanation for their delay in filing the motion. (/d. at 6). Second, the
Secretary argues that allowing defendants to bring additional parties into this action would
encroach on its power to enforce the FLSA. (/d.) (citing Brennan v. Emerald Renovators Inc.,
410 F. Supp. 1057, 1062 (S.D.N.Y. 1975)). The Secretary also argues that defendants have no
right to indemnification or contribution for violations of the FLSA, as the defendants allege in
Counts Three and Four of the proposed third-party complaint. (/d. at 7) (citing Herman v. RSR
Sec. Servs. Ltd., 172 F.3d 132 (2d Cir. 1999)). In addition, the Secretary argues that defendants
cannot bring their Counts One and Two claims for breach of contract and breach of duty of good
faith against the proposed third-parties because these claims effectively seek indemnification for
violations of FLSA. (Jd. at 9-10) (collecting cases).

In reply, defendants argue that their motion to file a third-party complaint is timely
because the pleadings were not complete until July 2019 and its motion was filed in accordance
with the Court’s Calendar Order providing an October 21, 2019 deadline for amending
pleadings. (Doc. 37 at 4). Defendants argue that the cases cited by the Secretary in support of its
argument that the proposed third-party complaint encroaches on the Secretary’s power to enforce
the FLSA are factually distinguishable. (/d. at 6-10). Defendants argue that their
indemnification and contribution claims against Amazing Interiors, LLC and Gerardo Padilla are
not barred. (Jd. at 8) (citing Daniels v. Bd. of Trustees of the Herington Mun. Hosp., 841 F.
Supp. 363, 369 (D. Kan. 1993)). Defendants maintain that denying their motion to file a third-

party complaint would “prejudicially deny them the right and ability to prove that Amazing and