1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Chelsea Crespo, No. CV-22-01869-PHX-ROS
10 Plaintiff, ORDER
11 v.
12 True Ride Incorporated, et al.,
13 Defendants. 14 15 Plaintiff Chelsea Crespo has filed this suit for unpaid wages under the Fair Labor 16 Standards Act, 29 U.S.C. § 201 (“FLSA”), the Arizona Minimum Wage Act, Ariz. Rev. 17 Stat. § 23-362, et seq. (“AMWA”), and the Arizona Wage Act, Ariz. Rev. Stat. § 23-350, 18 et seq. (“AWA”). (Doc. 1). Defendant Christian Wright and Defendant True Ride, Inc. 19 (“True Ride”) each filed an answer, and each included a counterclaim for fraud. (Docs. 13, 20 24). Before the Court are Plaintiff’s two motions to dismiss Defendants’ counterclaims. 21 (Docs. 16 and 30). For the reasons below, Plaintiff’s motions will be denied. 22 BACKGROUND 23 Defendant Wright and co-defendant Yessica Wright owned and operated True Ride 24 Inc., a medical transportation company located in Maricopa County, Arizona, at all relevant 25 times. (Doc. 1 at ¶¶ 31-32). Plaintiff alleges in her complaint that she worked for 26 Defendants as a medical transportation associate from approximately March 23, 2022 27 through May 3, 2022. (Id. at ¶¶ 33, 40). Plaintiff alleges she was misclassified as an 28 independent contractor, when in fact she was an employee for the purposes of FLSA, 1 AWA, and AMWA. (Id. at ¶ 35). Plaintiff alleges she worked 50-60 hours a week during 2 her employment and was owed an hourly rate of $17.50. (Id. at ¶¶ 41-42). However, 3 Plaintiff alleges Defendants never paid Plaintiff any wage whatsoever for any of her work. 4 (Id. at ¶¶ 43-46). Plaintiff alleges that instead, Defendants “withheld her paychecks as 5 compensation for allegedly causing damage to one of Defendants’ vehicles.” (Id. at ¶ 47). 6 Thus, Plaintiff sued claiming she is entitled to unpaid wages and unpaid overtime. 7 Defendants Wright and True Ride each filed counterclaims for fraud/fraudulent 8 inducement, in addition to a host of affirmative defenses. (Docs. 13 and 24). Defendants 9 assert Plaintiff “accepted and moved into an apartment rented by [Defendant Wright] with 10 the promise that she would compensate True Ride for the rent payments it made by 11 occasionally transporting some of its passengers.” (Doc. 13 at ¶ 123; Doc. 24 at ¶ 139). 12 Defendants also allege Plaintiff was a convicted felon and did not have a valid driver’s 13 license during the brief period of time she worked for True Ride, despite having represented 14 otherwise. (Doc. 13 at ¶¶ 103-104; Doc. 24 at ¶¶ 119-133). Defendants assert it was a 15 requirement of the job that she had a valid license. (Doc. 13 at ¶ 110; Doc. 24 at ¶ 131). 16 Defendants claim Plaintiff “negligently rear ended another vehicle while driving one of 17 True Ride’s vehicles which led to the discovery that Plaintiff did not have a valid driver’s 18 license and that she had a conviction for violent felony.” (Doc. 13 at ¶ 125; Doc. 24 at ¶ 19 141). As a result of these alleged misrepresentations, Defendant Wright was forced to 20 “assume responsibility for an apartment where Plaintiff resided due to Plaintiff being 21 unable to transfer the apartment into her name due to being a violent felon.” (Doc. 13 at ¶¶ 22 128-129; Doc. 24 at ¶¶ 144-145). 23 ANALYSIS 24 I. Motions to Dismiss under Fed. R. Civ. P. 12(b)(1) 25 Plaintiff moves to dismiss Defendants’ counterclaims under Fed. R. Civ. P. 26 12(b)(1). A motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) 27 can be either a facial or factual attack on the allegations. Bowles v. United States, 2011 WL 28 6182330, at *1 (D. Ariz. Dec. 13, 2011) (citing Thornhill Publ’g Co. v. Gen. Tel. & Elec. 1 Corp., 594 F.2d 730, 733 (9th Cir. 1979)). A facial attack occurs when the moving party 2 asserts that the allegations in the complaint are “insufficient on their face to invoke federal 3 jurisdiction.” Id. (quoting Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 4 2004)). A factual attack, on the other hand, is when the moving party “disputes the truth of 5 the allegations that, by themselves, would otherwise invoke federal jurisdiction.” Id. 6 (quoting Safe Air for Everyone, 373 F.3d at 1039). Plaintiff seems to be mounting a facial 7 attack; accordingly, Defendants’ allegations related to the counterclaim are taken as true 8 and construed in favor of Defendants. Id. at *2. 9 II. Compulsory Counterclaims 10 The Court has jurisdiction over Plaintiff’s complaint because her FLSA claims arise 11 under federal question jurisdiction. Defendants’ counterclaim for fraud, however, is a state 12 law cause of action. Defendants do not argue the Court has independent jurisdiction over 13 the counterclaim. Instead, Defendants argue the claims for fraud are compulsory 14 counterclaims under Fed. R. Civ. P. 13(a)(1). (Doc. 30 at ¶ 103-104). 15 Under 28 U.S.C. § 1367, a federal court may have jurisdiction over state law 16 counterclaims when they “arise from the same ‘common nucleus of operative fact’” as the 17 complaint. See Ader v. SimonMed Imaging Inc., 324 F. Supp. 3d 1045, 1050-51 (D. Ariz. 18 2018) citing In re Pegasus Gold Corp., 394 F.3d 1189, 1195 (9th Cir. 2005)). Under Rule 19 13(a)(1), a compulsory counterclaim—which must be brought or else the claim is barred 20 in any future proceeding—is one that “(A) arises out of the transaction or occurrence that 21 is the subject matter of the opposing party’s claim; and (B) does not require adding another 22 party over whom the court cannot acquire jurisdiction.” Fed. R. Civ. P. 13(a)(1). All other 23 counterclaims are deemed permissive. Fed. R. Civ. P. 13(b). Since the “common nucleus 24 of operative fact” test is broader than the test for compulsory counterclaims, a court will 25 necessarily have jurisdiction over compulsory counterclaims under 28 U.S.C. § 1367. Ader, 26 324 F. Supp. 3d at 1051; Ripley v. PMD Dev. LLC, No. CV-18-01162-PHX-DLR, 2018 27 WL 4931750, at *1 n.2 (D. Ariz. Oct. 11, 2018). 28 Federal courts are generally hesitant to conclude they have jurisdiction over 1 counterclaims when asserted against a FLSA plaintiff. Alexander v. Golden Margarita 2 LLC, No. CV-22-00781-PHX-DWL, 2023 WL 1818911, at *6 (D. Ariz. Feb. 8, 2023). 3 However, there is “not a categorical rule against finding supplemental jurisdiction over 4 such counterclaims. Instead, the jurisdictional analysis requires consideration of the 5 specific factual allegations that underlie the counterclaims.” Id. (citing In re Pegasus Gold 6 Corp., 394 F.3d 1189, 1196 (9th Cir. 2005)). The party asserting jurisdiction bears the 7 burden of proof. Indus. Tectonics, Inc. v.
Free access — add to your briefcase to read the full text and ask questions with AI
1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA
9 Chelsea Crespo, No. CV-22-01869-PHX-ROS
10 Plaintiff, ORDER
11 v.
12 True Ride Incorporated, et al.,
13 Defendants. 14 15 Plaintiff Chelsea Crespo has filed this suit for unpaid wages under the Fair Labor 16 Standards Act, 29 U.S.C. § 201 (“FLSA”), the Arizona Minimum Wage Act, Ariz. Rev. 17 Stat. § 23-362, et seq. (“AMWA”), and the Arizona Wage Act, Ariz. Rev. Stat. § 23-350, 18 et seq. (“AWA”). (Doc. 1). Defendant Christian Wright and Defendant True Ride, Inc. 19 (“True Ride”) each filed an answer, and each included a counterclaim for fraud. (Docs. 13, 20 24). Before the Court are Plaintiff’s two motions to dismiss Defendants’ counterclaims. 21 (Docs. 16 and 30). For the reasons below, Plaintiff’s motions will be denied. 22 BACKGROUND 23 Defendant Wright and co-defendant Yessica Wright owned and operated True Ride 24 Inc., a medical transportation company located in Maricopa County, Arizona, at all relevant 25 times. (Doc. 1 at ¶¶ 31-32). Plaintiff alleges in her complaint that she worked for 26 Defendants as a medical transportation associate from approximately March 23, 2022 27 through May 3, 2022. (Id. at ¶¶ 33, 40). Plaintiff alleges she was misclassified as an 28 independent contractor, when in fact she was an employee for the purposes of FLSA, 1 AWA, and AMWA. (Id. at ¶ 35). Plaintiff alleges she worked 50-60 hours a week during 2 her employment and was owed an hourly rate of $17.50. (Id. at ¶¶ 41-42). However, 3 Plaintiff alleges Defendants never paid Plaintiff any wage whatsoever for any of her work. 4 (Id. at ¶¶ 43-46). Plaintiff alleges that instead, Defendants “withheld her paychecks as 5 compensation for allegedly causing damage to one of Defendants’ vehicles.” (Id. at ¶ 47). 6 Thus, Plaintiff sued claiming she is entitled to unpaid wages and unpaid overtime. 7 Defendants Wright and True Ride each filed counterclaims for fraud/fraudulent 8 inducement, in addition to a host of affirmative defenses. (Docs. 13 and 24). Defendants 9 assert Plaintiff “accepted and moved into an apartment rented by [Defendant Wright] with 10 the promise that she would compensate True Ride for the rent payments it made by 11 occasionally transporting some of its passengers.” (Doc. 13 at ¶ 123; Doc. 24 at ¶ 139). 12 Defendants also allege Plaintiff was a convicted felon and did not have a valid driver’s 13 license during the brief period of time she worked for True Ride, despite having represented 14 otherwise. (Doc. 13 at ¶¶ 103-104; Doc. 24 at ¶¶ 119-133). Defendants assert it was a 15 requirement of the job that she had a valid license. (Doc. 13 at ¶ 110; Doc. 24 at ¶ 131). 16 Defendants claim Plaintiff “negligently rear ended another vehicle while driving one of 17 True Ride’s vehicles which led to the discovery that Plaintiff did not have a valid driver’s 18 license and that she had a conviction for violent felony.” (Doc. 13 at ¶ 125; Doc. 24 at ¶ 19 141). As a result of these alleged misrepresentations, Defendant Wright was forced to 20 “assume responsibility for an apartment where Plaintiff resided due to Plaintiff being 21 unable to transfer the apartment into her name due to being a violent felon.” (Doc. 13 at ¶¶ 22 128-129; Doc. 24 at ¶¶ 144-145). 23 ANALYSIS 24 I. Motions to Dismiss under Fed. R. Civ. P. 12(b)(1) 25 Plaintiff moves to dismiss Defendants’ counterclaims under Fed. R. Civ. P. 26 12(b)(1). A motion to dismiss for lack of subject matter jurisdiction under Rule 12(b)(1) 27 can be either a facial or factual attack on the allegations. Bowles v. United States, 2011 WL 28 6182330, at *1 (D. Ariz. Dec. 13, 2011) (citing Thornhill Publ’g Co. v. Gen. Tel. & Elec. 1 Corp., 594 F.2d 730, 733 (9th Cir. 1979)). A facial attack occurs when the moving party 2 asserts that the allegations in the complaint are “insufficient on their face to invoke federal 3 jurisdiction.” Id. (quoting Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 4 2004)). A factual attack, on the other hand, is when the moving party “disputes the truth of 5 the allegations that, by themselves, would otherwise invoke federal jurisdiction.” Id. 6 (quoting Safe Air for Everyone, 373 F.3d at 1039). Plaintiff seems to be mounting a facial 7 attack; accordingly, Defendants’ allegations related to the counterclaim are taken as true 8 and construed in favor of Defendants. Id. at *2. 9 II. Compulsory Counterclaims 10 The Court has jurisdiction over Plaintiff’s complaint because her FLSA claims arise 11 under federal question jurisdiction. Defendants’ counterclaim for fraud, however, is a state 12 law cause of action. Defendants do not argue the Court has independent jurisdiction over 13 the counterclaim. Instead, Defendants argue the claims for fraud are compulsory 14 counterclaims under Fed. R. Civ. P. 13(a)(1). (Doc. 30 at ¶ 103-104). 15 Under 28 U.S.C. § 1367, a federal court may have jurisdiction over state law 16 counterclaims when they “arise from the same ‘common nucleus of operative fact’” as the 17 complaint. See Ader v. SimonMed Imaging Inc., 324 F. Supp. 3d 1045, 1050-51 (D. Ariz. 18 2018) citing In re Pegasus Gold Corp., 394 F.3d 1189, 1195 (9th Cir. 2005)). Under Rule 19 13(a)(1), a compulsory counterclaim—which must be brought or else the claim is barred 20 in any future proceeding—is one that “(A) arises out of the transaction or occurrence that 21 is the subject matter of the opposing party’s claim; and (B) does not require adding another 22 party over whom the court cannot acquire jurisdiction.” Fed. R. Civ. P. 13(a)(1). All other 23 counterclaims are deemed permissive. Fed. R. Civ. P. 13(b). Since the “common nucleus 24 of operative fact” test is broader than the test for compulsory counterclaims, a court will 25 necessarily have jurisdiction over compulsory counterclaims under 28 U.S.C. § 1367. Ader, 26 324 F. Supp. 3d at 1051; Ripley v. PMD Dev. LLC, No. CV-18-01162-PHX-DLR, 2018 27 WL 4931750, at *1 n.2 (D. Ariz. Oct. 11, 2018). 28 Federal courts are generally hesitant to conclude they have jurisdiction over 1 counterclaims when asserted against a FLSA plaintiff. Alexander v. Golden Margarita 2 LLC, No. CV-22-00781-PHX-DWL, 2023 WL 1818911, at *6 (D. Ariz. Feb. 8, 2023). 3 However, there is “not a categorical rule against finding supplemental jurisdiction over 4 such counterclaims. Instead, the jurisdictional analysis requires consideration of the 5 specific factual allegations that underlie the counterclaims.” Id. (citing In re Pegasus Gold 6 Corp., 394 F.3d 1189, 1196 (9th Cir. 2005)). The party asserting jurisdiction bears the 7 burden of proof. Indus. Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092 (9th Cir. 1990). 8 To determine whether a counterclaim “arises out of the transaction or occurrence 9 that is the subject matter of the opposing party’s claim,” thus making the counterclaim 10 compulsory, the Ninth Circuit uses the “liberal logical relationship test” which “attempts 11 to analyze whether the essential facts of the various claims are so logically connected that 12 considerations of judicial economy and fairness dictate that all the issues be resolved in 13 one lawsuit.” Martinez v. PM&M Elec. Inc., 2019 WL 450870, at *5 (D. Ariz. Feb. 5, 2019) 14 (quoting Pochiro v. Prudential Ins. Co. of Am., 827 F.2d 1246, 1249 (9th Cir. 1987)). The 15 fact of an employment relationship, standing alone, is not enough to render all 16 counterclaims to a FLSA complaint compulsory. See, e.g., Palmer v. Franks, CV-14- 17 02414-PHX-SMM, 2015 WL 5561299, at *2 (D. Ariz. Sept. 22, 2015). 18 Plaintiff argues Defendants’ counterclaims for fraud/fraudulent inducement are not 19 compulsory, because they do not arise out of the same transaction or occurrence as 20 Plaintiff’s FLSA claims. Plaintiff argues her statutory claims for unpaid wages concern 21 questions like “whether she was an employee, how many hours per week she worked for 22 Defendants, her regular rate of pay, and whether Defendants properly compensated her for 23 all hours worked in excess of 40 hours in each workweek.” (Doc. 30 at 5). She argues 24 Defendants’ fraud counterclaims concern a different body of evidence and facts. 25 Defendants argue1 Plaintiff fraudulently induced them into an employment relationship, 26 whereby she would transport passengers in exchange for an apartment. (Doc. 17 at 8). 27 1 The Court recognizes that Defendant True Ride’s former counsel cited the wrong legal 28 standard in its response. (See Doc. 31 at 2 (citing standard for a Rule 12(b)(6) motion)). Nevertheless, the response continued to analyze the issue under the proper substantive test. 1 “In order to maintain an action for fraud under Arizona law, a plaintiff must 2 sufficiently plead: (1) a representation, (2) its falsity, (3) its materiality, (4) the speaker's 3 knowledge of its falsity or ignorance of its truth, (5) the speaker’s intent that it be acted 4 upon by the recipient in the manner reasonably calculated, (6) the hearer’s ignorance of its 5 falsity, (7) the hearer’s reliance on its truth, (8) the right to rely on it, and (9) a consequent 6 and proximate injury.” Alexander, 2023 WL 1818911, at *8 (citing Arnold & Assocs., Inc. 7 v. Misys Healthcare Sys., a div. of Misys, PLC, 275 F. Supp. 2d 1013, 1027 (D. Ariz. 8 2003)). 9 There is a “logical relationship” between Plaintiff’s FLSA claim and Defendants’ 10 fraud counterclaims “because the same operative facts serve as the basis of both claims.” 11 See, e.g., Cordero v. Voltaire, LLC, 2013 WL 6415667 at *4 (W.D. Tex. Dec. 6, 2013) 12 (finding fraud counterclaim compulsory in FLSA case). To prove her FLSA claim, Plaintiff 13 will have to present evidence showing she was an employee of Defendants, how many 14 hours she worked, and how much she was or was not paid for those hours.2 And Defendants 15 counterclaims for fraud will similarly rely on evidence regarding the status of Plaintiff as 16 an employee and details of the allegedly fraudulent employment arrangement. Plaintiff is 17 correct that a state law counterclaim that is wholly unrelated to the FLSA claim—beyond 18 the bare fact of an employment arrangement between plaintiff and defendant—is not 19 compulsory. (See Doc. 30 at 6-11 (collecting cases)). But here, the fraud alleged by 20 Defendants is interrelated with Plaintiff’s purported right to recover wages under FLSA, 21 AWA, and AMWA. 22 At issue in this case is the exact nature of the employment relationship between 23 Plaintiff and Defendants; “the facts necessary to prove the two claims substantially 24 overlap.” See Pochiro, 827 F.2d at 1251. Indeed, “the counterclaim for fraud derives from 25 an alleged employment agreement . . . between the plaintiff[] and the defendants. The 26 counterclaim is logically connected to, and based on, the same operative facts as” the FLSA
27 2 For example, Plaintiff’s employment relationship with Defendants ended apparently as the result of a vehicle crash, and Plaintiff specifically alleges “Defendants withheld her 28 paychecks as compensation for allegedly causing damage to one of Defendants’ vehicles.” (Doc. 1 at ¶ 47). 1] claim. Hunter v. Kenaday Medical Clinic, Inc., 2011 WL 2600656, at *1 (M.D. Fla. June 2|| 30, 2011). See also Alexander, 2023 WL 1818911, at *8 (finding fraud counterclaim 3 || compulsory in FLSA context); Cordero, 2013 WL 6415667, at *4 (same). 4 Accordingly, 5 IT IS ORDERED Plaintiff's Motions to Dismiss Defendants’ Counterclaims (Doc. 6|| 16 and Doc. 30) are DENIED. 7 Dated this 30th day of May, 2023. 8 fo .
Honorable Roslyn ©. Silver 1 Senior United States District Judge 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28
-6-