Villareal v. El Chile, Inc.

• Decision Date: 25 February 2009
• Docket Number: Case No. 07 C 1656.
• Citation: 601 F.Supp.2d 1011
• Parties: Virginia VILLAREAL, et al., Plaintiffs, v. EL CHILE, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Illinois

601 F.Supp.2d 1011

Virginia VILLAREAL, et al., Plaintiffs, v. EL CHILE, INC., et al., Defendants.

Case No. 07 C 1656.

United States District Court, N.D. Illinois, Eastern Division.

February 25, 2009.

David Erik Stevens, Douglas M. Werman, Maureen Ann Bantz, Werman Law Office, P.C., Chicago, IL, for Plaintiffs.

Edward Arthur Voci, Attorney at Law, River Forest, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

GERALDINE SOAT BROWN, United States Magistrate Judge.

Before the court are plaintiffs/counterdefendants' Motions under Rule 12(b)(6) and 12(b)(1) to Dismiss Defendants' Counterclaims [dkt 82] and memorandum of law in support ("Pl.'s Mem." [dkt 84]). Defendants have filed a Response to Motions to Strike Counterclaims [dkt 91], and plaintiffs/counterdefendants have filed a Reply [dkt 92]. The court heard oral argument on the motions. For the reasons below, the motions are granted. Count I of defendants' counterclaim is dismissed with prejudice, and Count II of defendants' counterclaim is dismissed without prejudice.

BACKGROUND

In December 2006, plaintiff Virginia Villareal filed a putative class action against Condesa, Inc., in the Circuit Court of Cook County, Illinois, alleging a violation of the overtime wage provisions of the Illinois Minimum Wage Law ("IMWL"). (See Pls.' Mem. at 2-3.) Villareal also individually alleged a violation of the federal Fair Labor Standards Act ("FLSA"). (Id. at 3.)

A First Amended Complaint added several named plaintiffs, dropped Condesa, Inc., as a defendant, and named as defendants El Chile, Inc., Caleta, Inc., Caletilla, Inc., and Roqueta, Inc. (the "Corporate Defendants"). (See Pls. Mem. at 2-3; see also First Am. Compl., attached to Notice of Removal.) [Dkt 1.] The First Amended Complaint also added a claim on behalf of several individual plaintiffs for violations of the minimum wage provisions of the IMWL. (Id.)

On March 23, 2007, the Corporate Defendants removed the case to federal court on the basis of federal question jurisdiction over the FLSA claim and supplemental jurisdiction over the state law claims. (Notice of Removal ¶ 3.) [Dkt 1.] After the removal, Plaintiffs filed a Second Amended Complaint, adding two named plaintiffs and deleting one. [Dkt 7.] The Corporate Defendants answered the Second Amended Complaint and did not assert any counterclaims. [Dkt 13.]

In January 2008, the parties then involved in the case consented to the jurisdiction of the Magistrate Judge pursuant to 28 U.S.C. § 636(c). [Dkt 38.] A month later, plaintiffs filed a Third Amended Complaint, which is currently pending. (Third Am. Compl.) [Dkt 43.] That complaint names additional plaintiffs, for a total of thirty-six. It also names two additional defendants, Timoteo Manjarrez and Maria Estela Manjarrez (the "Individual Defendants").¹ Count I of the Third Amended Complaint alleges claims under the IMWL on behalf of plaintiffs and similarly situated employees for defendants' alleged failure to pay overtime wages. (Id. at 8.) Count II alleges that defendants failed to pay overtime wages to the named plaintiffs in violation of the FLSA. (Id. at 10.) Count III alleges defendants failed to pay minimum wages to plaintiffs Jorge Garcia, Jorge Garcia Martinez, Pedro Hernandez, and Israel Filipe Sanchez in violation of the IMWL. (Id. at 11.)

The Corporate and Individual Defendants filed answers and affirmative defenses to the Third Amended Complaint, and both sets of defendants filed the same two counterclaims. (Answer, Affirmative Defenses, & Countercls. of Corporate Dfs. [dkt 69]; Answer, Affirmative Defenses, & Countercls. of Individual Dfs. [dkt 81].) The first counterclaim, the "indemnity counterclaim," is brought against plaintiffs Rosa Camarena, Jorge Garcia, Tomas Jacinto, Javier Jimenez, Bernardo Linares, Marco Ocampo, and Pedro Magos. Defendants allege that those seven plaintiffs were employed in "bona fide executive and administrative capacities" and "exercised control over hirings and firings, work schedules, ... and the number of hours worked by Plaintiffs," and thus their "actions ... provide the factual basis for vicarious liability of [defendants] as alleged in the Third Amended Complaint." (Counterclaim Count I ¶¶ 2-3.) Defendants claim that those plaintiffs owe defendants implied indemnity under Illinois law should plaintiffs prevail on any claim brought under the Third Amended Complaint. (Id. ¶ 4.)

The second counterclaim, the "duty of loyalty counterclaim," is asserted by the Individual Defendants and defendant Roqueta, Inc., against plaintiffs Reynalda Ruiz, Marta Sanchez, and Cordelia Reyes. It alleges that those plaintiffs breached the duty of loyalty they owe their employer under Illinois law. Specifically, the Individual Defendants and defendant Roqueta, Inc., allege that "[w]ithin the month or so preceding the filing of this Counterclaim," those plaintiffs breached their duties of loyalty "by telling customers who enter the restaurant that the food and the service is poor, that the owners of the restaurant abuse the employees; by failing to wait on customers or failing to wait on customers in a timely fashion; by failing to take telephone orders; and by soliciting the signatures of customers for purposes unknown to Defendants, but which solicitations have caused discomfort to customers." (Counterclaim Count II ¶ 3.) The defendants allege those plaintiffs took these actions "willfully and maliciously for the purpose of harming Defendant-counterclaimant Roqueta, Inc.'s business revenue and reputation." (Id. ¶ 6.)

For simplicity, this opinion will refer generally to the parties alleging the counterclaims as "Defendants," and the parties who are the subject of the counterclaims as "Plaintiffs," even though the counterclaims are not asserted against all of the plaintiffs and the duty of loyalty counterclaim is not asserted on behalf of all the defendants.

LEGAL STANDARD

Plaintiffs have moved to dismiss the indemnity counterclaim under Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim upon which relief can be granted. (Pls.' Mem. at 2.) They move to dismiss the duty of loyalty counterclaim under Rule 12(b)(1) for lack of subject matter jurisdiction or, alternatively, under Rule 12(b)(6) for failure to state a claim. (Id.)

A complaint will withstand a motion to dismiss [under Rule 12(b)(6)] if it provides a short and plain statement of the claim showing that the pleader is entitled to relief that is also sufficient to provide the defendant with fair notice of the claim and its basis. In order to demonstrate that he is entitled to relief, however, the pleader must show through his allegations that it is plausible, rather than merely speculative, that he is entitled to relief.

INEOS Polymers, Inc. v. BASF Catalysts, 553 F.3d 491, 497 (7th Cir.2009) (citations and quotations omitted). In ruling on a motion to dismiss for failure to state a claim, the court must accept the allegations as true and draw all reasonable inferences in favor of the pleader. Id.

Where, as here, the motion to dismiss under Rule 12(b)(1) contends that the allegations are facially insufficient to show jurisdiction, the standard applicable to a motion to dismiss mirrors that applied under Rule 12(b)(6). Royal Towing, Inc. v. City of Harvey, 350 F.Supp.2d 750, 752 (N.D.Ill.2004); see also Transit Express, Inc. v. Ettinger, 246 F.3d 1018, 1023 (7th Cir.2001).

DISCUSSION

I. Count I: The Indemnity Counterclaim

1. With respect to Plaintiffs' FLSA Claim.

Plaintiffs argue that the indemnity counterclaim to their FLSA claim is preempted by the federal policy underlying the FLSA. (Pls.' Mem. at 5-6.) Defendants respond that federal common law recognizes claims for indemnity and contribution and that the deterrence and compensatory objectives of the FLSA would be undermined if their indemnity counterclaim is dismissed. (Resp. at 3-8.) Defendants contend that the courts that have dismissed similar claims for indemnity and contribution are in error. (Id.)²

While the Seventh Circuit has not yet addressed the issue, other courts of appeals have rejected claims seeking indemnity or contribution for FLSA liability. See, e.g., LeCompte v. Chrysler Credit Corp., 780 F.2d 1260, 1264 (5th Cir.1986) (affirming dismissal of employer's cross-claim against supervisory personnel for indemnity of plaintiffs' claims under FLSA, and stating, "No cause of action for indemnity by an employer against its employees who violate the Act appears in the statute, nor in forty years of its existence has the Act been construed to incorporate such a theory.") Defendants have not presented, and this court's research has not disclosed, any decision by a federal court to date recognizing a claim for indemnity or contribution by an employer against an employee in the employee's action under the FLSA.

In LeCompte, the Fifth Circuit stated that the district court had properly dismissed the indemnity claim notwithstanding the employer's evidence that the supervisory personnel regularly ignored the employer's policy prohibiting unauthorized overtime. Id. at 1264. The court explained that a claim for indemnity would frustrate Congress' purpose in enacting the FLSA, since an employer who believed that any violation of the statute's overtime or minimum wage provisions could be recovered from its employees would have a diminished incentive to comply with the statute. Id. at 1264. "To engraft an indemnity action upon this otherwise comprehensive federal statute would run afoul of the Supremacy Clause of the Constitution, would undermine employers' incentive to abide by the Act, and would differentiate among employees entitled to receive overtime compensation in a way which does not otherwise exist in the statute." Id. The court also rejected the application of state-law indemnity principles, stating that creating a state-law-based indemnity remedy on behalf of employers would not serve the purpose of national...