Slaughter v. Alpha Drugs, LLC

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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