Cordero v. Voltaire, LLC

Citation. 2013 WL 6415667 (W.D. Tex. Dec. 6, 2013)

Powered by

Law Students: Don’t know your Bloomberg Law login? Register here

Citation2013 WL 6415667 (W.D. Tex. Dec. 6, 2013)

Brief Fact Summary.

Plaintiffs sued Defendant to recover unpaid overtime wages allegedly due under the Fair Labor Standards Act (FLSA). Four plaintiffs were employed as laborers with Defendants, while one plaintiff was employed as Vice President of Construction. Defendant filed counterclaims based on state law, alleging that the plaintiffs engaged in a fraudulent scheme to falsely report more hours than they actually worked. Defendant also filed counterclaims for conversion and theft, alleging that the plaintiffs stole certain company equipment. Plaintiffs filed motions to dismiss the counterclaims on the ground that they were permissive counterclaims and lacked an independent ground of federal jurisdiction.

Synopsis of Rule of Law.

A federal court have jurisdiction over a permissive state law counterclaim if the claim is so related to a federal claim that it forms part of the same case or controversy.

Points of Law - Legal Principles in this Case for Law Students.

However, where the affirmative defense is raised in the trial court in a manner that does not result in unfair surprise technical failure to comply precisely with Rule 8(c) is not fatal.

View Full Point of Law

Plaintiff Cordero was Vice President of Construction for Defendant. Plaintiff Cordero approved the reported hours worked of the other Plaintiffs. Plaintiffs sued Defendant in federal court under the federal Fair Labor Standards Act (FLSA) for unpaid overtime wages. In response, Defendant filed counterclaims, alleging that Plaintiffs could not recover under the FLSA, or that any recovery should be reduced because: 1) Plaintiffs had falsified and inflated the hours they allegedly worked and 2) Plaintiffs took valuable materials and equipment from it. Based upon the foregoing, Defendant asserted the affirmative defenses of statute of limitations, unclean hands, offset, good-faith and estoppel, as well as counterclaims for fraud, theft, conversion, and breach of fiduciary duty. Defendant also asserted a conspiracy counterclaim against three of the Plaintiffs. Plaintiffs filed motions to dismiss the counterclaims on the ground that they were permissive counterclaims and lacked an independent ground of federal jurisdiction.

Issue.

Does a federal court have jurisdiction over a permissive state law counterclaim if the claim is so related to a federal claim that it forms part of the same case or controversy?

Held.

Yes. The court denied Plaintiffs’ motions to dismiss the fraud counterclaims, but granted Plaintiffs’ motions to dismiss the theft and conversion counterclaims.

Discussion.

A federal court have jurisdiction over a permissive state law counterclaim if the claim is so related to a federal claim that it forms part of the same case or controversy. In other words, a permissive counterclaim must meet the threshold for supplemental jurisdiction under 28 U.S.C. § 1367. A federal court has jurisdiction over a compulsory counterclaim because the claim must already have been deemed to arise out of the same transaction or occurrence as the underlying federal claim.

Here, Plaintiffs’ motions to dismiss the fraud counterclaims must be denied. However, Plaintiffs’ motions to dismiss the theft and conversion counterclaims must be granted. To prove Plaintiffs’  claim of unpaid wages, Plaintiffs must prove the hours they worked and how much they were paid for those hours. Likewise, to prove that Plaintiffs engaged in fraud, Defendant must prove the hours that Plaintiffs worked. Therefore, both the original federal claim and Defendant’s fraud counterclaim

A claim for relief filed against an opposing party after the original claim is filed.

would rely on the same facts and require the same evidence to be produced. The claims thus arose out of the same transaction or occurrence, and, as a result, were compulsory counterclaim over which the federal court has jurisdiction . In contrast, Defendant’s counterclaims for theft and conversion are permissive counterclaims. These counterclaims would require Defendant to prove that Plaintiffs stole equipment. The claims would not rely on the same set of facts as Plaintiffs’ FLSA claims. As a result, the court has jurisdiction over these permissive counterclaims only if the claim is so related to a federal claim as to form part of the same case or controversy. The FLSA claims and the theft and conversion counterclaims did not arise out of the same transaction. Because the only common ground were the parties involved, it did not meet the threshold for supplemental jurisdiction of a permissive counterclaim. The court thus did not have jurisdiction over the theft and conversion counterclaims. Therefore, the court denied Plaintiffs’ motions to dismiss the fraud counterclaims, but granted Plaintiffs’ motions to dismiss the theft and conversion counterclaims.