Kirk v. Dev Hotels LLC

• Court: District Court, D. Arizona
• Decided: November 6, 2019
• Docket: 2:19-cv-04918
• Status: Unknown

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Teresa Kirk, No. CV-19-04918-PHX-DLR

10 Plaintiff, ORDER

11 v.

12 Dev Hotels LLC, et al.,

13 Defendants. 14 15 16 Before the Court is Plaintiff’s motion to dismiss, which is fully briefed. (Docs. 24, 17 32, 33.) For the following reasons, Plaintiff’s motion to dismiss is granted.1 18 I. Background 19 On August 8, 2019, Plaintiff filed her complaint, alleging Fair Labor Standards Act 20 (“FLSA”) violations against Defendants, her former employer. (Doc. 1.) She contends 21 that Defendants required her to be available 168 hours each week but failed to pay her the 22 federal minimum wage and overtime. (Id. at 7.) In their answer, Defendants raise a 23 counterclaim against Plaintiff for breach of fiduciary duty, asserting that Plaintiff “engaged 24 in a scheme to defraud, embezzle and convert tens of thousands of dollars from Dev Hotels 25 in order to enrich herself and allow her friends, acquaintances, and others to engage in 26 illegal, criminal, and dishonest practices at the Budget Motel.” (Doc. 21 at 8.) On

27 1 Defendants’ request for oral argument is denied because the issues are adequately briefed and oral argument will not help the Court resolve the motion. See Fed. R. Civ. P. 28 78(b); LRCiv. 7.2(f); Lake at Las Vegas Investors Grp., Inc. v. Pac. Malibu Dev., 933 F.2d 724, 729 (9th Cir. 1991). 1 September 18, 2019, Plaintiff filed a motion to dismiss Defendants’ counterclaim for lack 2 of subject matter jurisdiction. Plaintiff’s motion is now ripe.2 3 II. Legal Standard 4 In certain instances, federal courts may maintain supplemental jurisdiction over 5 counterclaims that have no other basis for jurisdiction. 28 U.S.C. § 1367. Particularly, “a 6 court has jurisdiction over state law claims that are so related to claims brought under the 7 Court’s federal question jurisdiction that they form part of the same case or controversy 8 under Article III.” Ader v. SimonMed Imaging Inc., 324 F. Supp. 3d 1045, 1050 (D. Ariz. 9 2018) (quotations omitted). To determine whether a counterclaim constitutes part of the 10 same case or controversy, “the Court must determine whether the federal claim and the 11 state claim arise from the same ‘common nucleus of operative fact.’” Id. (quoting In re 12 Pegasus Gold Corp., 394 F.3d 1189, 1195 (9th Cir. 2005)). The Ninth Circuit applies the 13 “liberal logical relationship test” which studies “whether the essential facts of the various 14 claims are so logically connected that considerations of judicial economy and fairness 15 dictate that all the issues be resolved in one lawsuit.” Pochiro v. Prudential Ins. Co. of 16 Am., 827 F. 2d 1246, 1249 (9th Cir. 1987) (citation omitted). In applying the test, the Court 17 assumes the factual allegations in the challenged pleadings are true and draws all 18 reasonable inferences in the non-moving party’s favor. Poehler v. Fenwick, No. CV-15- 19 1161-JWS, 2015 WL 7299804, at *1 (D. Ariz. Nov. 19, 2015). 20 III. Analysis 21 It is undisputed that there is no independent basis for the Court’s jurisdiction over 22 Defendants’ counterclaim for breach of fiduciary duty. Plaintiff argues that Defendants’ 23 counterclaim should be dismissed because accusations that Plaintiff engaged in illegal or 24 fraudulent conduct while working at Dev Hotels are unrelated to the issues central to her 25 FLSA claim—the hours she worked or the wages or overtime compensation she was paid— 26 and therefore do not share the same common nucleus of operative fact. (Doc. 24 at 3.) 27 2 The Court refrains from considering Defendants’ Exhibit A, attached to its 28 response, because reviewing evidence outside the pleadings is inappropriate at the motion to dismiss stage. U.S. v. Ritchie, 342 F.3d 903, 907-08 (9th Cir. 2003). 1 Defendants respond that their counterclaim is compulsory because any illicit activity 2 engaged in by Plaintiff on their premises arises out of the same transaction or occurrence 3 that is the subject matter of Plaintiff’s FLSA claim—Plaintiff’s employment and activity 4 during said employment. (Doc. 32 at 5.) 5 The Court agrees that it would be inappropriate to exercise supplemental jurisdiction 6 over Defendants’ counterclaim. Notably, considerations of judicial economy and fairness 7 do not dictate that these issues be resolved in one lawsuit. Discovery for Plaintiff’s claim 8 will focus on Plaintiff’s status as an employee, the hours she worked, whether an exemption 9 applies to determine whether she is owed wages and overtime, and whether any violations 10 by Defendants were willful. Conversely, Defendants’ counterclaim would demand entirely 11 different discovery related to the alleged “subvert hotel business operations” and drug- 12 dealing engaged in by Plaintiff on Defendants’ property. 13 In addition, the Court cannot agree that Defendants’ counterclaim “almost mirrors” 14 the issues raised by Plaintiff’s FLSA claim. See Fed. R. Civ. P. 13(a)(1)(A). Rather, the 15 “two sets of claims overlap only insofar as each arises from [P]laintiff’s employment 16 relationship with [Defendants.]” Ader, 324 F. Supp. 3d at 1051 (dismissing the defendant’s 17 counterclaim alleging that plaintiff engaged in self-dealing while employed with the 18 defendant, concluding that the counterclaim was insufficiently related to the plaintiff’s 19 FLSA claim). 20 Even if there were a greater nexus between Plaintiff’s claim and Defendants’ 21 counterclaim, policy considerations nevertheless compel the Court to decline to exercise 22 jurisdiction. This district previously has done so under similar circumstances, noting “[t]he 23 only economic feud contemplated by the FLSA involves the employer’s obedience to 24 minimum wage and overtime standards. To clutter these proceedings with the minutiae of 25 other employer-employee relationships would be antithetical to the purpose of the Act.” 26 Poehler, 2015 WL 7299804, at *7 (citations omitted). Accordingly, 27 // 28 // 1 IT IS ORDERED that Plaintiff's motion to dismiss Defendants’ counterclaim for 2|| breach of fiduciary duty (Doc. 24) is GRANTED. 3 Dated this 6th day of November, 2019. 4 5 Ls Ue 8 States Dictric Judge 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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