Klein v. London Star Ltd.

• Decision Date: 19 November 1998
• Docket Number: No. 98 Civ.2045 (RWS).,98 Civ.2045 (RWS).
• Citation: 26 F.Supp.2d 689
• Parties: Jerome KLEIN, Plaintiff, v. LONDON STAR LIMITED, Star Diamond Trading Co., Inc., Star Diamond Group, Inc., as Successor by Merger to London Star Limited and Star Diamond Trading Co., Inc., Danny Fiszman and Robert Polak, Defendants.
• Court: U.S. District Court — Southern District of New York

26 F.Supp.2d 689

Jerome KLEIN, Plaintiff, v. LONDON STAR LIMITED, Star Diamond Trading Co., Inc., Star Diamond Group, Inc., as Successor by Merger to London Star Limited and Star Diamond Trading Co., Inc., Danny Fiszman and Robert Polak, Defendants.

No. 98 Civ.2045 (RWS).

United States District Court, S.D. New York.

November 19, 1998.

COPYRIGHT MATERIAL OMITTED

The Law Offices of Ira Drogin, New York City, Laurent S. Drogin, of counsel, for Plaintiff.

Wolf Block Schorr and Solis-Cohen L.L.P., New York City, Lawrence L. Ginsburg, Carren Shulman, of counsel, for Defendants.

OPINION

SWEET, District Judge.

In this age discrimination action brought pursuant to the Age Discrimination in Employment Act, as amended, 29 U.S.C. § 621 et seq. (the "ADEA"), the New York State Human Rights Law, N.Y.Exec.Law § 290 et seq. (the "State HRL"), and the New York City Human Rights Law, N.Y.C.Admin.Code § 8-101, et seq. (the "City HRL") (together with the State HRL, the "HRLs"), Defendants Daniel D. Fiszman ("Fiszman"), Robert Polak ("Polak") (together with Polak, the "Individual Defendants"), and Star Diamond Group, Inc. ("Star Group") (collectively with the Individual Defendants, the "Defendants"), as successor by merger to London Star Limited ("London") and Star Diamond Trading Co., Inc. ("Trading Co."), have moved pursuant to Rule 12(b)(1) of the Federal Rules of Civil Procedure to dismiss the causes of action brought by Plaintiff Jerome Klein ("Klein") under the State and City HRLs on the grounds that this Court should decline to exercise supplemental jurisdiction over those claims pursuant to 28 U.S.C. § 1367(c)(2) and (4) and that because Klein did not comply with N.Y.Admin.Code § 8-502, this Court lacks subject matter jurisdiction over the causes of action brought under the City HRL. Klein has cross-moved to dismiss Star Group's counterclaim alleging theft of trade secrets on the ground that it is a permissive counterclaim and no independent jurisdictional predicate exists. In the alternative, Klein seeks to amend his complaint to add a claim for retaliation.

For the reasons set forth below, both Defendants' motion and Klein's cross-motion are denied. Klein, however, is granted leave to amend the complaint to add a cause of action for retaliation.

Parties

Klein is an individual residing in the City and State of New York.

Star Group is a New York corporation with its principal place of business in New York, New York. It is the successor by way of merger to London and Trading Co. In May 1997, Trading Co. changed its name to Star Group, and in July 1997, Star Group merged with London, with the surviving entity known as Star Group.

Klein alleges that Fiszman was the majority shareholder of London and Trading Co., and that following the merger that resulted in the formation of Star Group, he was the chairman and majority shareholder of Star Group. Fiszman has also performed services for London, Trading Co., and Star Group. Defendants deny that Fiszman was a shareholder of London, Trading Co., or Star Group, but admit that he is a chairman of Star Group, and has in such capacity, performed services for Star Group.

According to Klein, Polak was a shareholder, employee, and chairman of the board of Trading Co. and an employee of London. Following the merger that resulted in the formation of Star Group, states Klein, Polak became a co-president of Star Group. Defendants counter that in June 1996 Polak became an officer, but not a shareholder, of London and that following the merger he became an officer of Star Group. Prior to June 1996, Polak was a minority shareholder, officer, and employee of Trading Co.

Facts and Prior Proceedings

According to Klein's complaint in this action (the "Complaint"), in January 1981, he became employed by London as a jewelry merchandiser. Following the merger of London and Trading Co. resulting in the entity Star Group, Klein continued his employment with London and also performed services for Trading Co. Klein asserts that beginning in November 1996, Polak commenced a campaign of verbal harassment against Klein based on and motivated by his age. The hostile work environment caused Klein to suffer physical and emotional problems. Klein contends that the harassment became unbearable and that in April 1997 he was constructively discharged. Klein states that although Fiszman was present for much of the abuse Klein was subjected to by Polak, he did nothing to discourage Polak and thus aided and abetted Polak's unlawful acts.

On January 2, 1998, Klein filed a charge of discrimination together with a supporting affidavit with the Equal Employment Opportunity Commission ("EEOC"), alleging a violation of the ADEA. Klein indicated thereon that he wished to have his EEOC charge "dual-filed" with the New York State Division of Human Rights. Klein received a right-to-sue letter from the EEOC, dated February 24, 1998.

Klein filed the Complaint in this action on March 20, 1998. On June 3, 1998, Defendants filed the instant motion along with their answer and Star Group's counterclaim. Klein filed his cross-motion on June 11, 1998. Oral arguments were heard on September 9, 1998, at which time the motions were deemed fully submitted.

Discussion

I. Defendants' Motion Requesting That This Court Decline to Exercise Supplemental Jurisdiction Over the State and City HRL Claims Is Denied At This Time

The exercise of supplemental jurisdiction over nonfederal claims is governed by 28 U.S.C. § 1367. Section 1367(a) provides, in pertinent part, that:

Except as provided in subsection[ ] ... (c), in any civil action of which the district courts have original jurisdiction, the district courts shall have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.

A nonfederal claim is part of the same constitutional "case" under Article III if it derives from the same "common nucleus of operative fact" as the federal claim. United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 725, 86 S.Ct. 1130, 16 L.Ed.2d 218 (1966).

Klein's state law discrimination claims against Star Group and the Individual Defendants are based on the same "common nucleus of operative fact" as his federal claims against Star Group, and thus this Court has power to hear the pendent state law claims.

However, § 1367(c) expressly permits a district court to decline to exercise jurisdiction over a pendent claim if: "the claim substantially predominates over the claim or claims over which the district court has original jurisdiction ... or in exceptional circumstances, there are other compelling reasons for declining jurisdiction." 28 U.S.C. § 1367(c)(2), (4).

"The statutory concept of supplemental jurisdiction codified and expanded somewhat the earlier judge-made doctrines of pendent and ancillary jurisdiction. Just as with the prior law of pendent jurisdiction, the exercise of supplemental jurisdiction is left to the discretion of the district court." Purgess v. Sharrock, 33 F.3d 134, 138 (2d Cir.1994). The decision whether or not to exercise supplemental jurisdiction under § 1367(c) involves considerations of judicial economy, convenience, comity, and fairness to litigants. See id.; see also Gibbs, 383 U.S. at 725, 86 S.Ct. 1130; Executive Software v. U.S. Dist. Court, 24 F.3d 1545, 1556-58 (9th Cir.1994). The Supreme Court has also noted that "there may be reasons independent of jurisdictional considerations, such as the likelihood of jury confusion in treating divergent claims for relief, that would justify separating state and federal claims for trial, Fed. Rule Civ.Proc. 42(b)." Gibbs, 383 U.S. at 727, 86 S.Ct. 1130. If so, jurisdiction may be refused.

Defendants contend that the predominance of issues relating to the state claims and the potential for jury confusion militate in favor of dismissing the State and City HRL claims. They claim that several differences between the statutory schemes of the ADEA and the State and City HRLs justify such a finding since those differences will lead to unnecessary complexity and jury confusion.

According to Defendants, under the ADEA Klein is only entitled to back pay and, only if Klein can establish that discrimination was willful, liquidated damages in the amount of the back pay awarded. Alternatively, under the HRL Klein is entitled to compensatory damages, including back pay, front pay, and damages for emotional distress, as well as punitive damages under the City HRL. Thus, assert Defendants, the HRL claims require additional substantial elements of proof, such as Klein's mitigation of damages, including his attempts to find other employment (for front pay); expert witness testimony regarding the time until which Klein can be expected to work and his anticipated earnings (for front pay); significant discovery and trial testimony from fact and expert witnesses regarding Klein's emotional state and medical history — as Klein alleges that his diabetes worsened as a result of the alleged harassment and that he suffered severe emotional distress — before, during, and after the alleged discrimination; proof of mitigation by Defendants (for punitive damages); and proof of Fiszman's and Polak's involvement in and liability for alleged discrimination.

By contrast, Klein purports that Defendants' assertion that significant discovery and testimony, which would be irrelevant to the ADEA cause of action, would be necessary on the HRL claims is incorrect. According to Klein, his attempts to mitigate his damages, as well as Fiszman's and Polak's involvement in and liability for the alleged discrimination, are relevant to both the ADEA and nonfederal claim, and the involvement by Fiszman and Polak is also relevant to the question of whether the alleged discrimination was willful, as well as to Klein's proposed retaliation claims,...