Williams v. Long

• Decision Date: 11 June 2008
• Docket Number: Civil No. JFM 07-3459.
• Citation: 558 F.Supp.2d 601
• Parties: Jill WILLIAMS, et al., Plaintiffs, v. Sandra LONG, Defendant.
• Court: U.S. District Court — District of Maryland

558 F.Supp.2d 601

Jill WILLIAMS, et al., Plaintiffs, v. Sandra LONG, Defendant.

Civil No. JFM 07-3459.

United States District Court, D. Maryland.

June 11, 2008.

Howard Benjamin Hoffman, Howard B. Hoffman Esquire, Attorney at Law, Rockville, MD, for Plaintiffs.

Sandra Long, Baltimore, MD, pro se.

Neal M. Janey, Sr., Janey Law Firm PC, Catonsville, MD, for Defendant.

MEMORANDUM OPINION

J. FREDERICK MOTZ, District Judge.

Plaintiffs Jill Williams and Erin Dechowitz, on behalf of themselves and others similarly situated, have brought a collective action against defendant Sandra Long, owner of Charm City Cupcakes, under the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. §§ 201 et seq. Plaintiffs allege that defendant willfully violated 29 U.S.C. § 206 and section 7(a)(1) of FLSA by failing to pay plaintiffs minimum wage and overtime. (Compl. ¶¶ 18-19.) Further, plaintiffs allege that defendant's actions also violated Baltimore City's Wage and Hour Law (Baltimore City Code Art. 11, §§ 3-1, 3-3) and Maryland's Wage Payment and Collection Law (Maryland Labor and Employment Art. § 3-501 et seq.). (Id. ¶¶ 20-26.) Defendant has brought counterclaims alleging breach of contract, breach of fiduciary duty, and invasion of privacy. (Def.'s Countercl. ¶¶ 20-40.) Plaintiffs have moved to dismiss defendant's counterclaims pursuant to Federal Rule of Civil Procedure 12(b)(1) on the ground that this Court does not have supplemental jurisdiction over the counterclaims under 28 U.S.C. § 1367. (Pls.' Mot. to Dismiss at 1.) For reasons that follow, I will grant plaintiffs' motion to dismiss.

I.

The facts, as alleged in plaintiffs' complaint, are as follows. From October 2007 through November 2007, plaintiffs at various times were employed by defendant to prepare, bake, and serve cupcakes at defendant's business establishment or at the site of customers. (Compl.¶ 11.) Defendant promised plaintiffs Williams and Dechowitz that they would receive an hourly wage of $15.00 per hour and $6.25 per hour, respectively. (Id.) Despite working "a couple hundred hours" between them — including overtime — the only wage that either of these plaintiffs received was $20.00, which defendant gave Dechowitz as a cash advance against her pay. (Id. ¶¶ 11, 13.) Defendant has refused to pay any wages to plaintiffs. (Id. ¶ 16.)

II.

In cases such as this one, where neither diversity nor federal question jurisdiction exists over defendant's counterclaims, the counterclaims' status as "compulsory" or "permissive" determines whether the court has jurisdiction over them. Painter v. Harvey, 863 F.2d 329, 331 (4th Cir.1988). A compulsory counterclaim "arises out of the transaction or occurrence that is the subject matter of the opposing party's claim," while a permissive counterclaim does not. See Fed. R.Civ.P. 13(a)-(b). Accordingly, a compulsory counterclaim is "within the ancillary jurisdiction of the court to entertain and no independent basis of federal jurisdiction is required." Painter, 863 F.2d at 331. By contrast, a permissive counterclaim that lacks its own independent jurisdictional basis is not within the jurisdiction of the court.¹ Id.

The Fourth Circuit has suggested four inquiries to determine if a counterclaim is compulsory:

(1) Are the issues of fact and law raised in the claim and counterclaim largely the same? (2) Would res judicata bar a subsequent suit on the party's counterclaim, absent the compulsory counterclaim rule? (3) Will substantially the same evidence support or refute the claim as well as the counterclaim? and (4) Is there any logical relationship between the claim and counterclaim?

Id. (citing Sue & Sam Mfg. Co. v. B-L-S Constr. Co, 538 F.2d 1048, 1051-53 (4th Cir.1976)). Painter explained that a court need not answer all of these questions in the affirmative for the counterclaim to be compulsory. Instead, the tests "are less a litmus, more a guideline." Id. Because I answer these four questions in the negative, I conclude that defendant's counterclaims are permissive, and thus must be dismissed.

A.

I find that the issues of fact and law raised in the claims and counterclaims are not "largely the same." Painter, 863 F.2d at 331. Plaintiffs have brought claims alleging that defendant violated FLSA, Maryland's Wage Payment and Collection Law, and Baltimore City's Wage and Hour Law by not paying plaintiffs minimum wage and overtime for their work at Charm City Cupcakes. (Compl.¶¶ 18-26.) By contrast, Long's counterclaims assert breach of contract, breach of fiduciary duty, and invasion of privacy. (Def.'s Countercl. ¶¶ 20-40.) Specifically, Long alleges that after plaintiff Williams "made false representations with respect to her background and experiences" in the baked goods industry, Long contracted with Williams to become "joint venture working partner[s]."² (Id. ¶¶ 3-16.) Further, Long allegedly obtained "a substantial amount of working capital and capital financing in reliance upon Williams' false representations." (Id. ¶ 11.) Accordingly, when Williams "walked away from the business," she allegedly breached the contract and her fiduciary duty to Long, causing Long damages in excess of $500,000. (Id. ¶¶ 20-29.) Long also alleges that by filing the Complaint and "leaking it to the media for subsequent publication," plaintiffs invaded her privacy and demonstrated "a total disregard for the truth." (Id. ¶¶ 30-40.) Long requests damages in excess of $500,000 for the alleged embarrassment, humiliation, loss of prestige, and emotional distress that plaintiffs caused by "placing her in a false light." (Id. ¶¶ 35-40.)

The only issue that arises in both the claims and counterclaims is whether plaintiff Williams was an employee (as plaintiffs allege) or a joint venture partner (as defendant alleges). In every other respect, the claims and counterclaims differ in terms of the legal and factual issues they raise. The legal issues raised by a minimum wage and overtime laws are clearly distinct from those raised by the laws of breach of contract, breach of fiduciary duty, and invasion of privacy. Likewise, while plaintiffs' claims will focus on the factual issues of how many hours plaintiffs worked, and whether they were paid for that work, defendant's counterclaims would require extensive factual investigation into allegations of false representation, reliance, and emotional distress that defendant alleges caused her over $500,000 in damages.

Federal courts have been reluctant to exercise supplemental jurisdiction over state law claims and counterclaims in the context of a FLSA suit where the only connection is the employee-employer relationship. As Judge Vratil of the United States District Court for the District of Kansas has stated, "[s]everal courts have rejected the notion that the employer-employee relationship single-handedly creates a common nucleus of operative fact between the FLSA claim and peripheral state law claims." Wilhelm v. TLC Lawn Care, Inc., No. 07-2465, 2008 WL 640733, at *3 (D.Kan. March 6, 2008) (citing Lyon v. Whisman, 45 F.3d 758, 762-64 (3d Cir. 1995) (where the employment relationship is the only link between the FLSA claim and state law claims, no common nucleus of operative fact exists and Article III bars supplemental jurisdiction); Rivera v. Ndola Pharmacy Corp., 497 F.Supp.2d 381, 395 (E.D.N.Y.2007) (an employment relationship is insufficient to create common nucleus of operative fact where it is the sole fact connecting the FLSA claim to state law claims); Hyman v. WM Fin. Servs., Inc., No. 06-CV-4038, 2007 WL 1657392, at *5 (D.N.J. June 7, 2007) (exercising supplemental jurisdiction over state law claims unrelated to the FLSA claim "would likely contravene Congress's intent in passing FLSA"); Whatley v. Young Women's Christian Assoc. of Nw. La., Inc., No. 06-423, 2006 WL 1453043, at *3 (W.D.La. May 18, 2006) (a general employer-employee relationship does not create a common nucleus of operative fact between the FLSA claim and state claims)).

Wilhelm, 2008 WL 640733, at *3, and Kirby v. Tafco Emerald Coast Inc., No. 3:05CV341, 2006 WL 228880 (N.D.Fla. Jan. 30, 2006), provide strong support for dismissing Long's counterclaims. In both cases, defendants responded to plaintiffs' FLSA minimum wage and overtime claims with counterclaims based on state law: breach of fiduciary duty, breach of the duty of loyalty, and misappropriation of trade secrets in Wilhelm, and breach of contract and non-payment of a promissory note in Kirby. Wilhelm, 2008 WL 640733, at *1; Kirby, 2006 WL 228880, at * 1. In both cases, the courts granted plaintiffs' motion to dismiss defendants' counterclaims because they did not share a common nucleus of operative fact with plaintiffs' FLSA claims. Wilhelm, 2008 WL 640733, at *3; Kirby, 2006 WL 228880, at *2. Wilhelm dismissed the counterclaims "[b]ecause defendant relie[d] solely on its employer-employee relationship with plaintiffs to support supplemental jurisdiction, and [did] not identify a more specific factual connection between its counterclaims and plaintiffs' FLSA claim...." Wilhelm, 2008 WL 640733, at *3. Likewise, Kirby found that while "[t]he FLSA claims deal[t] only with the question of the number of hours worked and the compensation paid[,]" the state counterclaims "necessarily involve[d] different and separate factual matters." Kirby, 2006 WL 228880, at *2.

Just as in Wilhelm and Kirby, I find the factual and legal issues raised by plaintiffs' claims and Long's counterclaims not "largely the same." Painter, 863 F.2d at 331.

B.

Defendant contends that res judicata "is a likely bar to the assertion of Defendant's counterclaim[s] in a subsequent proceeding in state court." (Def.'s Opp'n at 4.) Under Maryland law, the doctrine of res judicata, or claim preclusion, bars the relitigation of a claim if (1) the parties in the present litigation are the same or in privity with the parties to the earlier litigation; (2) the claim presented in the subsequent...