Woods v. Swiss Krono U.S. Inc.

Decision Date12 July 2021
Docket NumberC/A 1:21-1510-TLW-SVH
PartiesCharles C. Woods, Jr., Plaintiff and Counter Defendant, v. Swiss Krono USA, Inc., Defendant and Counter Claimant.
CourtU.S. District Court — District of South Carolina

REPORT AND RECOMMENDATION

Shiva V. Hodges United States Magistrate Judge

Plaintiff/Counter Defendant Charles C. Woods, Jr. (Plaintiff) filed this action in the Barnwell County Court of Common Pleas against his previous employer Defendant/Counter Claimant Swiss Krono USA, Inc. (Defendant) alleging disability discrimination in violation of the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. § 12101 et seq. (“ADA”) retaliation in violation of the ADA, worker's compensation retaliation, and defamation. Defendant removed this case to this court on May 20, 2021, and thereafter filed an answer to the complaint and counterclaims for declaratory judgment and breach of contract.

This matter comes before the court on Plaintiff's motion to dismiss Defendant's counterclaims pursuant to Fed.R.Civ.P. 12(b)(6). [ECF No. 7]. The motion having been briefed [ECF Nos. 8, 13], it is ripe for disposition.

Pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B), and Local Civ. Rule 73.02(B)(2)(e) (D.S.C.), this matter has been assigned to the undersigned for all pretrial proceedings. Having carefully considered the parties' submissions and the record in this case, the undersigned recommends the district judge deny Plaintiff's motion to dismiss.

I. Factual Background

The parties agree to the following facts for purposes of resolving Plaintiff's pending motion. [See ECF No. 7-1 at 1-2, ECF No. 8 at 1-3]. Plaintiff was employed by Defendant from July 1, 2019 through June 26, 2020. On or about December 20, 2019, Plaintiff was involved in a workplace accident for which he reported injuries and subsequently filed a worker's compensation claim, retaining counsel to represent him.

Plaintiff and Defendant, through their respective attorneys, negotiated a settlement of Plaintiff's worker's compensation claim. Separately, Plaintiff's counsel purportedly negotiated a settlement and release (the “Settlement Agreement”) by Plaintiff of all employment-related claims. Plaintiff's counsel purportedly also agreed to a stipulation mandating Plaintiff's resignation from his employment with Defendant, effective immediately.[1]

Plaintiff initiated EEOC claims against Defendant that form the basis of this lawsuit.[2] As stated above, Defendant has asserted counterclaims for declaratory judgment and for breach of the Settlement Agreement. Plaintiff moves to dismiss Defendant's counterclaims, arguing that (1) this court lacks subject-matter jurisdiction over Defendant's counterclaims and (2) Defendant fails to state a claim for declaratory judgment or breach of contract in light of SCRCP 43(k).

II. Discussion
A. Standard on Motion to Dismiss

A motion to dismiss under Rule 12(b)(6) examines the legal sufficiency of the facts alleged on the face of the plaintiff's complaint. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999). To survive a Rule 12(b)(6) motion, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.' Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The court is “not required to accept as true the legal conclusions set forth in a plaintiff's complaint.” Edwards, 178 F.3d at 244. Indeed, [t]he presence of a few conclusory legal terms does not insulate a complaint from dismissal under Rule 12(b)(6) when the facts alleged in the complaint cannot support the legal conclusion.” Young v. City of Mount Ranier, 238 F.3d 567, 577 (4th Cir. 2001).

B. Analysis

Plaintiff first argues that this Court cannot exercise subject-matter jurisdiction over an alleged pre-suit settlement agreement.” [ECF No. 7-1 at 2]. In support, Plaintiff cites Fairfax Countywide Citizens Ass'n v. Fairfax Cty., Va., 571 F.2d 1299 (4th Cir. 1978). In Fairfax, the Fourth Circuit held the district court lacked subject-matter jurisdiction to enforce a settlement agreement, noting as follows:

. . . . upon repudiation of a settlement agreement which had terminated litigation pending before it, a district court has the authority . . . to vacate its prior dismissal order and restore the case to its docket [but not to] enforce the settlement agreement against the breaching party . . . . Association's contract claim did not arise “under the Constitution, laws, or treaties of the United States.” The settlement agreement between Association and County, while serving to terminate litigation of a federal claim, was a private contract entered into after private negotiations between the parties. Both its validity and the interpretation of its terms are governed by Virginia law. If, instead of filing a motion under Rule 60(b)(6), Association had filed a new complaint in the district court, alleging breach of contract and seeking specific performance, there is little doubt that the claim would have been dismissed on jurisdictional grounds. The same is true if the parties had negotiated and entered into a settlement agreement prior to any litigation, and thereafter Association, alleging the breach of the agreement, sought to invoke federal jurisdiction to enforce it.

Id. at 1302-03 (4th Cir. 1978) (citations and footnotes omitted). The Fourth Circuit further noted the lack of federal question jurisdiction, diversity jurisdiction, or statutory jurisdiction in the case. Id. at 1303-04 & n. 10.

Although Plaintiff argues otherwise, the holding of Fairfax is not that a district court cannot exercise subject-matter jurisdiction over an alleged pre-suit settlement agreement, but that district courts may not enforce settlement agreements after dismissal absent an independent jurisdictional basis or the appropriate exercise of ancillary jurisdiction. Fairfax is inapplicable to the instant case.

Plaintiff has asserted two causes of action under the ADA, both of which relate to alleged actions that occurred while he was employed by Defendant, as do Plaintiff's claims for worker's compensation retaliation and defamation. The court has subject-matter jurisdiction over the ADA claims because they raise a federal question. Defendant has asserted a federal law counterclaim under the federal Declaratory Judgment Act and a state law claim for breach of contract, both of which relate to the Settlement Agreement between the parties, under the terms of which Plaintiff allegedly agreed to release the ADA claims and all other claims related to employment by Defendant. Accordingly, all of the claims in this matter, both Plaintiff's and Defendant's, are part of the same case or controversy, and this court has supplemental jurisdiction under 28 U.S.C. § 1367 over Defendant's counterclaims.

Here, unlike in Fairfax, Defendant's claim for breach of the settlement agreement is not “factually and legally distinct from the claim giving rise to the original litigation, ” 571 F.2d at 1305, but is, as stated, part of the same case or controversy. See, e.g., Salami v. Jubilee Association of Maryland, C/A No. TDC-20-3532, 2021 WL 2784632, at *1 (D. Md. July 2, 2021) (dismissing the plaintiff's employment discrimination claims where plaintiff had entered into a severance agreement waiving his rights to bring such a claim and declining to continue to exercise supplement jurisdiction over defendant's breach of the agreement counterclaim where all federal claims had been dismissed).

Although argued by Defendant, Plaintiff does not address the above basis for this court's subject-matter jurisdiction and instead argues that Fairfax is not distinguishable from the instant case and that Fields v. Richland Cty., C/A No. 3:17-0443-MGL-TER, 2020 WL 615070 (D.S.C. Feb. 10, 2020) reinforces Fairfax's holding to decline enforcement of settlement agreements made prior to commencement of litigation.” [ECF No. 13 at 2].

Plaintiff's argument concerning Fields fails for the same reasons his argument failed concerning Fairfax. In both cases, a party sought to enforce a settlement agreement unanchored to any basis for subject matter jurisdiction. In Fields, all defendants had been dismissed from the case when the plaintiff sought for the court “to exercise its inherent authority to grant his motion to enforce settlement.” 2020 WL 615070, at *2. The court declined, finding the situation before the court to have been addressed by Fairfax in that a district court lacks subject matter jurisdiction where “the parties had negotiated and entered into a settlement agreement prior to any litigation, and thereafter [a party], alleging breach of the agreement, sought to invoke federal jurisdiction to enforce it.” Id. at *3.

Such is not the case here. Accordingly, the undersigned recommends the district judge deny Plaintiff's motion to dismiss on this basis.[3]

Plaintiff next turns to SCRCP 43(k), arguing Defendants fails to state a claim (1) for declaratory judgment because the Settlement Agreement was not signed by him and is thus not binding under this rule and (2) for breach of contract because this rule is the “sole enforcement mechanism of settlement agreement under South Carolina law.” [ECF No. 7-1 at 4-6 (citing S.C. Hum. Affs. Comm'n v. Zeyi Chen, 430 S.C. 509 (2020))].

The rule at issue provides in relevant part as follows:
No agreement between counsel affecting the proceedings in an action shall be binding unless reduced to the form of a consent order or written stipulation signed by counsel and entered in the record, or unless made in open court and noted upon the record, or reduced to writing and signed by the parties and their counsel.

SCRCP 43(k). As...

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