Court Opinion

ID: 2661449
Source: CourtListenerOpinion
Date Created: 2014-04-03 10:56:12.602979+00
Date Added: 2024-06-11T08:37:35.588577
License: Public Domain

UNITED STATES DISTRICT COURT
                            FOR THE DISTRICT OF COLUMBIA

 LEIGH ADAMS SLAUGHTER,

    Plaintiff/Counterclaim Defendant,

           v.                                           Civil Action No. 11-2181 (CKK)
 ALPHA DRUGS, LLC, et al.,

    Defendants/Counterclaimants.

                                 MEMORANDUM OPINION
                                   (November 30, 2012)

       Presently before the Court is Plaintiff/Counterclaim Defendant Leigh Adam Slaughter’s

[33] Motion to Dismiss Defendant Alpha Drugs, LLC’s Counterclaim. Slaughter filed suit

against her former employer Defendant Alpha Drugs, LLC (“Alpha Drugs”) and Defendant

Panagiotis Metaxotos, the President and owner of Alpha Drugs, pursuant to the Fair Labor

Standards Act (“FLSA”), 29 U.S.C. § 201 et.seq., and various state laws on the basis of the

Defendants’ purported failure to pay Slaughter for her services between August 1, 2011 and

October 18, 2011. Compl., ECF No. [1], ¶¶ 5-7. In their Amended Answer, the Defendants

asserted two counterclaims against Slaughter: (1) breach of contract regarding unpaid loans

purportedly made by Defendant Metaxotos to Slaughter; and (2) fraud based on Slaughter’s

alleged misrepresentations regarding her qualifications as an attorney. Am. Answer, ECF No.

[27], ¶¶ 4-16. Slaughter subsequently moved to dismiss the counterclaim as to Alpha Drugs on

the grounds the Court lacks subject matter jurisdiction over the counterclaim. Pl.’s Mot., ECF

No. [33], at 1.1 Upon consideration of the pleadings and the record as a whole, Plaintiff’s [33]

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            The Plaintiff has not moved to dismiss Defendant Metaxotos’ counterclaim for breach
Motion to Dismiss Defendant Alpha Drugs, LLC’s Counterclaim is GRANTED.

                                      I. BACKGROUND

       Plaintiff alleges the Defendants employed her between April 21, 2008 and October 18,

2011, to serve a variety of roles, including supervising HIV/AIDS support groups, interfacing

with pharmaceutical company representatives, and “marketing Alpha [Drugs] to State and Local

officials.” Compl. ¶¶ 5-6. Plaintiff claims that although she had a salary of approximately

$202,000 and was usually paid semi-monthly, she received no salary between August 1, 2011,

and October 18, 2011, in violation of federal and local wage and labor laws. Id. at ¶¶ 7-21.

       In its counterclaim, Defendant Alpha Drugs alleges that the Plaintiff fraudulently

misrepresented her qualifications when she was hired as general counsel for the company. Am.

Answer ¶ 11. Specifically, Alpha Drugs claims that the Plaintiff represented that she previously

worked as an attorney for the United States Department of Justice and received a salary in excess

of $180,000 (including “benchmark bonuses”). Id. at ¶¶ 11-12. Alpha Drugs further alleges that

the Plaintiff indicated she “would be general counsel for Alpha Drugs and outside counsel would

not be retained for work within the ordinary course of business.” Id. at ¶ 13. Relying on these

statements, Alpha Drugs hired the Plaintiff and paid her a salary in excess of $200,000. Id. at

¶ 13. Alpha Drugs contend that the Plaintiff in fact never worked for the Department of Justice

and often hired outside counsel to perform legal work “that was within her scope of duties to be

performed” for Alpha Drugs, thus causing injury to the company . Id. at ¶ 14.

                                   II. LEGAL STANDARD

       “Federal courts are courts of limited jurisdiction” and can adjudicate only those cases

entrusted to them by the Constitution or an Act of Congress. Kokkonen v. Guardian Life Ins. Co.

of contract. See Am. Answer at 4-5.

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of Am., 511 U.S. 375, 377 (1994). The Court begins with the presumption that it does not have

subject matter jurisdiction over a case. Id. at 37. In order to survive a motion to dismiss

pursuant to Rule 12(b)(1), the plaintiff bears the burden of establishing that the court has subject

matter jurisdiction. Moms Against Mercury v. FDA, 483 F.3d 824, 828 (D.C. Cir. 2007). “At the

motion to dismiss stage, counseled complaints, as well as pro se complaints, are to be construed

with sufficient liberality to afford all possible inferences favorable to the pleader on allegations

of fact.” Settles v. U.S. Parole Comm’n, 429 F.3d 1098, 1106 (D.C. Cir. 2005). “Although a

court must accept as true all factual allegations contained in the complaint when reviewing a

motion to dismiss pursuant to Rule 12(b)(1),” the factual allegations in the complaint “will bear

closer scrutiny in resolving a 12(b)(1) motion than in resolving a 12(b)(6) motion for failure to

state a claim.” Wright v. Foreign Serv. Grievance Bd., 503 F. Supp. 2d 163, 170 (D.D.C. 2007)

(internal citations omitted).

                                        III. DISCUSSION

       For the most part, the parties’ pleadings are but two ships passing in the night. The

Plaintiff’s motion focuses on the Court’s subject matter jurisdiction---or the lack thereof---under

28 U.S.C. § 1367. Alpha Drugs’ opposition omits any reference to Section 1367, focusing

instead on the definition of “compulsory counterclaims” under Federal Rule of Civil Procedure

13(a). Alpha Drugs does not contend that any other basis exists for exercising subject matter

jurisdiction over the counterclaim, thus the Court’s analysis begins with Section 1367.

       Section 1367(a) of Title 28 of the United States Code provides that district courts “have

supplemental jurisdiction over all [] claims that are so related to the claim in the action . . . that

they form part of the same case or controversy under Article III.” The Plaintiff asserts without

citation to authority that “[i]n order for this Court to confer supplemental jurisdiction over

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[Alpha Drugs’] Counterclaim, [Alpha Drugs’] Counterclaim must be found to be compulsory.”

Pl.’s Mot. at 33. The parties then proceed to analyze Alpha Drugs’ counterclaim under the

framework of compulsory versus permissive counterclaims as set forth in Rule 13(a)-(b).

Neither party even acknowledges that Section 1367 and Rule 13 employ different standards:

Section 1367 concerns claims that are “part of the same case or controversy,” while compulsory

counterclaims are defined by Rule 13(a) as claims arising out of the same “transaction or

occurrence.”

       The Plaintiff’s assertion that a counterclaim must be compulsory in order to fall within

the scope of Section 1367(a) relies on an outdated understanding of subject matter jurisdiction

that was overridden by the enactment of Section 1367 in 1990. Since its enactment, at least three

separate Courts of Appeals have held that Section 1367 confers district courts with jurisdiction

over both compulsory and at least some permissive counterclaims. Global NAPs, Inc. v. Verizon

New England, Inc., 603 F.3d 71, 76 (1st Cir. 2010); Jones v. Ford Motor Credit Co., 358 F.3d

205, 210-14 (2d Cir. 2004); Channell v. Citicorp Nat’l Servs., Inc., 89 F.3d 379, 384-87 (7th Cir.

1996). In other words, determining whether or not Alpha Drugs’ counterclaim is “compulsory”

for purposes of Rule 13(a) may be relevant to, but is not determinative of the Court’s subject

matter jurisdiction over the counterclaim.

       Ultimately, the Court need not resolve the question of whether or not the counterclaim is

part of the same case or controversy as the Plaintiff’s claim for purposes of Section 1367(a). A

Court may decline to exercise supplemental jurisdiction over a claim that otherwise satisfies the

standard in Section 1367(a) if: (1) “the claim raises a novel or complex issue of State 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

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jurisdiction,” or (4) “in exceptional circumstances, there are other compelling reasons for

declining jurisdiction.” 28 U.S.C. § 1367(c). As the Supreme Court explained:

       Depending on a host of factors []—including the circumstances of the particular
       case, the nature of the state law claims, the character of the governing state law,
       and the relationship between the state and federal claims—district courts may
       decline to exercise jurisdiction over supplemental state law claims. The statute
       thereby reflects the understanding that, when deciding whether to exercise
       supplemental jurisdiction, a federal court should consider and weigh in each case,
       and at every stage of the litigation, the values of judicial economy, convenience,
       fairness, and comity.

City of Chicago v. Int’l College of Surgeons, 522 U.S. 156, 173 (1997) (citation omitted).

       Several factors weigh in favor of declining to exercise jurisdiction over Alpha Drugs’

counterclaim under Section 1367(c)(4). First, “[g]enerally speaking, courts have been hesitant to

permit an employer to file counterclaims in FLSA suits for money the employer claims the

employee owes it, or for damages the employee’s tortious conduct allegedly caused.” Martin v.

PepsiAmericas, Inc., 628 F.3d 738, 740 (5th Cir. 2010). The Court need not reach the Plaintiff’s

claim that Alpha Drugs’ counterclaim is retaliatory, but the Court is cognizant of the fact

adjudicating counterclaims filed by an employer in the same context as a suit seeking unpaid

wages may be inconsistent with the purpose of the FLSA---“to assure to the employees of a

covered company a minimum level of wages.” Id. at 741 (citation omitted). Second, although

there is likely some overlap in the factual basis for the Plaintiff’s claim and the counterclaim, the

focus of the relevant inquiry for each is different. The relevant question for Plaintiff’s claim is

whether she received the wages due for any work performed between August 1, 2011 and

October 18, 2011. By contrast, the issue at the heart of Alpha Drugs’ counterclaim is whether

the Plaintiff possessed the qualification she claimed at the time she was hired. The resources

conserved by conducting discovery, motions practice, a trial for these claims in the same

proceeding are minimal at best. The Court finds that the intention of the FLSA and comity
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between local and federal courts in this jurisdiction would be best served by Alpha Drugs

pursuing its state law counterclaim in state court. In light of these exceptional circumstances, the

Court declines to exercise jurisdiction over Alpha Drugs’ counterclaim.

                                      IV. CONCLUSION

       For the reasons stated above, the Court finds Alpha Drugs’ counterclaim for common law

fraud should be dismissed without prejudice. The only basis for the Court’s jurisdiction over the

counterclaim presented by the parties is 28 U.S.C. § 1367. The Court need not resolve the

question of whether or not the counterclaim forms part of the same “case or controversy” as the

Plaintiff’s claim for purposes of Section 1367(a) because, assuming the counterclaim falls within

the scope of Section 1367(a), in light of the exceptional circumstances of this case, the Court

declines to exercise supplemental jurisdiction over the counterclaim. Accordingly, the Plaintiff’s

[33] Motion to Dismiss Defendant Alpha Drugs, LLC’s Counterclaim is GRANTED. Defendant

Alpha Drugs’ counterclaim is DISMISSED WITHOUT PREJUDICE. An appropriate Order

accompanies this Memorandum Opinion.

                                                       /s/
                                                     COLLEEN KOLLAR-KOTELLY
                                                     UNITED STATES DISTRICT JUDGE

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