Court Opinion

ID: 2666556
Source: CourtListenerOpinion
Date Created: 2014-04-04 09:03:58.147259+00
Date Added: 2024-06-11T13:24:47.347447
License: Public Domain

UNITED STATES DISTRICT COURT
                             FOR THE DISTRICT OF COLUMBIA

                                             )
CLINTON SPELLMAN, et al.,                    )
                                             )
               Plaintiffs,                   )
                                             )
       v.                                    )       Civil Action No. 09-1666 (RMC)
                                             )
AMERICAN EAGLE EXPRESS, INC.,                )
                                             )
               Defendant.                    )
                                             )

                                 MEMORANDUM OPINION

               Plaintiffs sued Defendant for alleged violations of the Fair Labor Standards Act

(“FLSA”), 29 U.S.C. § 201 et seq., and Maryland and District of Columbia wage payment laws.

Defendant answered and counterclaimed against seven of the eleven named Plaintiffs seeking

indemnification pursuant to the indemnification clause in the Transportation Brokerage Agreements

executed by those Plaintiffs. Plaintiffs cry foul and move to dismiss the counterclaim [Dkt. # 16].

They argue that the counterclaim is preempted by the FLSA, is contrary to public policy, and is

outside the scope of the indemnity clause. Defendant responds that the counterclaim survives

because it is not now baseless as a matter of fact or law. The Court agrees with Defendant.

Accordingly, the motion to dismiss will be denied without prejudice.

                                           I. FACTS

               Plaintiffs are current and former delivery drivers who sued Defendant on September

1, 2009, alleging that Defendant misclassified them as “independent contractors” under the FLSA

and Maryland and District of Columbia wage payment laws, and as a result, failed to pay them
overtime rates for each hour worked in excess of forty per week. On October 22, 2009, Defendant

answered and counterclaimed against seven of the eleven named Plaintiffs seeking to enforce the

indemnification clause in the Transportation Brokerage Agreements executed by those Plaintiffs.

That clause provides in relevant part:

               INDEPENDENT CONTRACTOR agrees to defend, indemnify and
               hold harmless BROKER from any direct, indirect and consequential
               loss, damage, fine, expense, including reasonable attorney’s fees,
               action, claim for injury to persons, including death, and damage to
               property which BROKER may incur arising out of or in connection
               with the operation of Equipment, CONTRACTOR’s obligations
               under this Agreement, or any breach by CONTRACTOR or its
               drivers or workers of the terms of this Agreement.

Countercl. [Dkt. # 9], Ex. A (Transportation Brokerage Agreement) ¶ 10.

               Defendant alleges that the claims asserted by Plaintiffs in the Complaint and the

expenses it has incurred to defend against them fall within the scope of the indemnification clause.

Countercl. ¶ 8. It seeks an award of all costs and expenses, including reasonable attorneys’ fees,

incurred in defending against Plaintiffs’ claims. Id. ¶ 9.

               Plaintiffs move to dismiss the counterclaim for failure to state a claim upon which

relief can be granted. Defendant opposes.

                                    II. LEGAL STANDARD

               A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges

the adequacy of a complaint on its face, testing whether a plaintiff has properly stated a claim.

Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain statement

of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a). A complaint must

be sufficient “to give a defendant fair notice of what the . . . claim is and the grounds upon which

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it rests.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted).

Although a complaint does not need detailed factual allegations, a plaintiff’s obligation to provide

the grounds of his entitlement to relief “requires more than labels and conclusions, and a formulaic

recitation of the elements of a cause of action will not do.” Id. The facts alleged “must be enough

to raise a right to relief above the speculative level.” Id. Rule 8(a) requires an actual showing and

not just a blanket assertion of a right to relief. Id. at 555 n.3. “[A] complaint needs some

information about the circumstances giving rise to the claims.” Aktieselskabet Af 21. Nov. 2001 v.

Fame Jeans, Inc., 525 F.3d 8, 16 n.4 (D.C. Cir. 2008) (emphasis in original).

               A court must treat the complaint’s factual allegations as true, “even if doubtful in

fact.” Twombly, 550 U.S. at 555. But a court need not accept as true legal conclusions set forth in

a complaint. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009). “Threadbare recitals of the elements

of a cause of action, supported by mere conclusory statements, do not suffice.” Id. “While legal

conclusions can provide the framework of a complaint, they must be supported by factual

allegations. When there are well-pleaded factual allegations, a court should assume their veracity

and then determine whether they plausibly give rise to an entitlement to relief.” Id. at 1950.

                                         III. ANALYSIS

               In Bill Johnson’s Restaurants, Inc. v. NLRB, 461 U.S. 731 (1983),1 the Supreme

Court recognized that “[a] lawsuit no doubt may be used by an employer as a powerful instrument

of coercion or retaliation” and that by filing a retaliatory lawsuit “an employer can place its

employees on notice that anyone who engages in such conduct is subjecting himself to the possibility

       1
          While Bill Johnson’s Restaurants concerned a retaliatory lawsuit in the context of the
National Labor Relations Act, 29 U.S.C. § 151 et seq., courts have applied its reasoning in the FLSA
context. See, e.g., Martin v. Gingerbread House, Inc., 977 F.2d 1405, 1407 (10th Cir. 1992).

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of a burdensome lawsuit.” Id. at 740. However, the Court also recognized that “the right of access

to the courts is an aspect of the First Amendment right to petition the Government for redress of

grievances.” Id. at 741. “Considering the First Amendment right of access to the courts[,]” the

Court concluded that “[t]he filing and prosecution of a well-founded lawsuit may not be enjoined

. . . even if it would not have been commenced but for the plaintiff’s desire to retaliate against the

defendant for exercising rights protected by” federal law. Id. at 742-43. “Although it is not unlawful

under” federal anti-retaliation laws “to prosecute a meritorious action, the same is not true of suits

based on insubstantial claims — suits that lack . . . a ‘reasonable basis’.” Id. at 743. “Such suits are

not within the scope of First Amendment protection.” Id. Thus, a retaliatory lawsuit is not unlawful

“unless the suit lacks a reasonable basis in fact or law.” Id. at 748; see also BE & K Constr. Co. v.

NLRB, 536 U.S. 516, 531 (2002) (recounting that “our holdings limited regulation to suits that were

both objectively baseless and subjectively motivated by an unlawful purpose”) (emphasis in

original).

                In light of this authority, the Court can quickly dispose of Plaintiffs’ argument that

the counterclaim fails because it would not have been filed but for Plaintiffs’ initiation of this

lawsuit. See Reply [Dkt. # 26] at 10-12. Under Bill Johnson’s Restaurants, “a meritorious suit may

not be enjoined, regardless of the intent behind the filing.” Gingerbread House, 977 F.2d at 1407.

Accordingly, Plaintiffs are simply wrong in arguing that the counterclaim cannot lie against them

based solely on their filing of this lawsuit.

                The real issue is whether the counterclaim is objectively baseless, that is, whether it

“lacks a reasonable basis in fact or law.” Bill Johnson’s Restaurants, 461 U.S. at 748. Putting aside

for a moment whether the indemnification lawsuit is preempted by the FLSA or contrary to the

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policy of that statute, the lawsuit plainly is reasonably based. Those Plaintiffs that executed

Transportation Brokerage Agreements agreed to indemnify Defendant for any “action” against

Defendant “arising out of or in connection with” Plaintiffs’ “obligations under this Agreement.”

Countercl. ¶ 6. One such “obligation” was the agreement to work for a liquidated fee amount. See

id., Ex. A (Transportation Brokerage Agreement) ¶ 3 (“It is expressly understood and agreed that

CONTRACTOR’S fees for transportation services rendered shall be as set forth in Appendix B and

such fees shall constitute the total fees for everything furnished, provided, or done by

CONTRACTOR in connection with this Agreement, including driver’s services.”). The crux of this

lawsuit is Plaintiffs’ allegation that “Defendant failed to pay” Plaintiffs “for all hours worked and

failed to pay these employees at the overtime rate for any hours worked in excess of forty hours per

week.” Am. Compl. [Dkt. # 23] ¶ 58. In other words, Plaintiffs allege that they are owed more than

the liquidated fee amount in the Transportation Brokerage Agreement. Therefore, Defendant has

a reasonable basis for alleging that this lawsuit is an “action” against it “arising out of or in

connection with” Plaintiffs’ “obligations under this Agreement.” Countercl. ¶ 6.

               Still remaining is whether the counterclaim is baseless because it is preempted by the

FLSA or contrary to the policy of that statute. The Court agrees with the Fourth, Fifth, and Tenth

Circuits that “[i]ndemnity actions against employees work against the purposes of the FLSA[,]”

Gingerbread House, 977 F.2d at 1407-08; see also Lyle v. Food Lion, Inc., 954 F.2d 984, 987 (4th

Cir. 1992); LeCompte v. Chrysler Credit Corp., 780 F.2d 1260, 1264 (5th Cir. 1986), and that “a

third party complaint by an employer seeking indemnity from an employee is preempted.”

Gingerbread House, 977 F.2d at 1408. But, whereas here, Defendant asserts that the FLSA is wholly

inapplicable because Plaintiffs are “independent contractors” exempt from the statute’s scope, see

                                                -5-
Affirmative Defense ¶ 1, and resolution of that issue will turn on the Court’s application of a fact-

intensive “economic reality” test after discovery has been completed, see Morrison v. Int’l Programs

Consortium, Inc., 253 F.3d 5, 11 (D.C. Cir. 2001), the Court cannot say at this juncture that the

counterclaim is preempted by, or contrary to the policy of, the FLSA.2 Because application of the

FLSA appears at this early stage to “involve[] genuine issues of material fact or law[,]” Bill

Johnson’s Restaurants, 461 U.S. at 745 n.11, Defendant’s counterclaim is not now baseless.

                                       IV. CONCLUSION

               For the foregoing reasons, the Court will deny without prejudice Plaintiffs’ motion

to dismiss Defendant’s counterclaim [Dkt. # 16]. A memorializing Order accompanies this

Memorandum Opinion.

Date: January 27, 2010                                     /s/
                                                  ROSEMARY M. COLLYER
                                                  United States District Judge

       2
           The Court rejects Plaintiffs’ argument that the counterclaim fails because Defendant did
not specifically plead facts about the “economic reality” of the parties’ relationship. Defendant need
not plead, either generally or specifically, that Plaintiffs are “independent contractors” within the
meaning of the FLSA in order to state a claim for indemnification under the Transportation
Brokerage Agreements.

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