United States District Court, D. Arizona
Douglas L. Rayes United States District Judge
issue is Plaintiff/Counterdefendant Ryan Ripley's motion
to dismiss Defendants/Counterclaimants PMD Development, LLC
and Troy Pearce's state law counterclaims for lack of
subject matter jurisdiction. (Doc. 13.) The motion is fully
briefed. For the following reasons, Ripley's
motion is granted.
January 15, 2018, Ripley commenced employment with
Defendants. In April 2018, Ripley filed a complaint against
Defendants alleging that they (1) failed to pay him minimum
wage in violation of the Fair Labor Standards Act
(“FLSA”), 29 U.S.C. §§ 201-219, and the
Arizona Minimum Wage Statute, A.R.S. §§ 23-362 to
23-364 and (2) failed to pay him wages due under the Arizona
Wage Statute, A.R.S. §§ 23-351, 23-353, and 23-355.
(Doc. 1 at 4-6.) Defendants denied all claims and filed
counterclaims alleging breach of contract and
misrepresentation. (Doc. 9 at 4, 7-8.)
Defendants allege that Ripley failed to report sales
activity, refused to meet with Defendants to discuss sales,
and performed work for another company while receiving
compensation from Defendants. (Id.) In response,
Ripley filed a motion to dismiss the counterclaims for lack
of subject matter jurisdiction. (Doc. 13.)
Federal Rule of Civil Procedure 12(b)(1) a party may move to
dismiss a claim for lack of subject matter jurisdiction. A
court has subject matter jurisdiction over claims that
“arise under the Constitution, laws, or treaties of the
United States” or over “civil actions where the
matter in controversy exceeds the sum or value of $75, 000,
exclusive of interest and costs, and is between”
diverse parties. 28 U.S.C. §§ 1331, 1332. The party
asserting jurisdiction bears the burden of proof. Indus.
Tectonics, Inc. v. Aero Alloy, 912 F.2d 1090, 1092 (9th
Cir. 1990). When evaluating a jurisdictional challenge, the
court assumes the veracity of a plaintiff's allegations
and “draws all reasonable inferences in the
plaintiff's favor.” Doe v. Holy See, 557
F.3d 1066, 1073 (9th Cir. 2009).
where subject matter jurisdiction might be lacking, federal
courts may exercise supplemental jurisdiction over claims
“that are so related to claims in the action within
original jurisdiction that they form part of the same case or
controversy.” 28 U.S.C. § 1367. State law
counterclaims satisfy this standard when they and the federal
claim arise from a “common nucleus of operative
fact.” In re Pegasus Gold Corp., 394 F.3d
1189, 1195 (9th Cir. 2005) (citing United Mine Workers v.
Gibbs, 383 U.S. 715, 725 (1966)).
bringing their state law counterclaims, Defendants do not
allege either federal question or diversity jurisdiction, but
rather invoke this Court's supplemental jurisdiction
under 28 U.S.C. § 1367. (Docs. 9, 18.) Ripley argues
that supplemental jurisdiction is lacking because the
counterclaims do not form “part of the same case or
controversy” for the purpose of § 1367 and,
alternatively, that the Court should decline to exercise
supplemental jurisdiction pursuant to §
1376(c)(4). (Doc. 13 at 3-7.) The Court agrees.
Court has held that an employment relationship alone does not
generate supplemental jurisdiction over state law
counterclaims. See, e.g., Ader v. SimonMed
Imaging Inc., No. CV-17-02085-PHX-JJT, 2018 WL 3238697,
at *4 (D. Ariz. Jun. 4, 2018); Poehler v. Fenwick,
No. 2:15-CV-01161 JWS, 2015 WL 7299804, at *2 (D. Ariz. Nov.
19, 2015). For example, in Poehler, an employee sued
her employer, alleging violations of the FLSA.
Poehler, 2015 WL 7299804, at *1. The employer
counterclaimed for breach of contract and breach of fiduciary
duty. Id. In response, the employee moved to dismiss
her employer's state law counterclaims for lack of
subject matter jurisdiction. Id. The court granted
the motion, finding that the employment relationship did not
amount to a “common nucleus of operative fact”
sufficient to grant supplemental jurisdiction over the
employer's state law counterclaims. Id. at *2.
as in Poehler, Defendants' state law
counterclaims relate to Ripley's FLSA claim only through
the employment relationship. Ripley's FLSA claim requires
evidence that he was employed by Defendants and paid less
than the minimum wage rate for hours he worked. See
29 U.S.C. § 206(a). In contrast, Defendants'
misrepresentation counterclaim focuses on representations
made by Ripley prior to entering into his contract. (Doc. 9
at ¶¶ 22-26.) This claim requires evidence of the
representations made during the parties' contract
negotiations, whereas Ripley's FLSA claim requires
evidence of his performance and compensation after the
formation of the contract.
Defendants' breach of contract counterclaim focuses on
whether Ripley breached his employment contract by failing to
follow Defendants' procedures, using unapproved
suppliers, and engaging in self-dealing. This counterclaim
does not turn on evidence about the hours Ripley worked and
the compensation he received for that work. The counterclaims
overlap with Ripley's FLSA claim only insofar as each
arises from the contract and employment relationship between
Defendants and Ripley, which is insufficient to serve as the
“common nucleus of operative facts.” See
Ader, 2018 WL 3238697, at *4; Poehler, 2015 WL
7299804, *2. Accordingly, the Court lacks supplemental
jurisdiction over Defendants' counterclaims.
even if the counterclaims are sufficiently related to confer
supplemental jurisdiction, there are compelling reasons to
decline supplemental jurisdiction under § 1367(c)(4).
“Federal FLSA policy presents a compelling reason for
the court to refuse to exercise supplemental jurisdiction
over Defendants' counterclaims.” Poehler,
2015 WL 7299804, at *3. “[T]he only economic feud
contemplated by the FLSA involves the employer's
obedience to minimum wage and overtime standards. To clutter
FLSA proceedings with the minutiae of other employer-employee
relationships would be antithetical to the purpose of the
Act.” Martin v. PepsiAmericas, Inc., 628 F.3d
738, 741 (5th Cir. 2010); Donovan v. Pointon, 717
F.2d 1320, 1323 (10th Cir. 1983) (finding that permitting an
employer in an FLSA “proceeding to try his private
claims, real or imagined, against his employees would delay
and even subvert the whole process”); Pioch ...