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Hose v. Henry Industries, Inc.

United States District Court, E.D. Missouri, Eastern Division

January 27, 2017

JAMES HOSE, Plaintiff,
v.
HENRY INDUSTRIES, INC., Defendant.

          MEMORANDUM AND ORDER

          JOHN A ROSS, UNITED STATES DISTRICT JUDGE

         This matter is before the Court on Plaintiff James Hose's Motion to Dismiss and/or Strike Defendant Henry Industries, Inc.'s Counterclaims (Doc. 14). The motion is fully briefed and ready for disposition. For the following reasons, the Court will deny the motion.

         I. Background

         In September 2013, Plaintiff filed a collective action in the U.S. District Court for the District of Kansas (“FLSA collective action”), alleging that Defendant had misclassified him and other similarly-situated employees as independent contractors, and failed to pay them overtime compensation as required by the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. (“FLSA”) (Doc. 1). In November 27, 2013, Plaintiff filed a class action, on behalf of himself and other similarly-situated employees, in the Circuit Court for the City of St. Louis, seeking compensation for unpaid overtime wages under the Missouri Minimum Wage Maximum Hour Law (“state class action”). Hose v. Henry Industries, Inc., No. 1322-CC10037 (Cir. Ct. City of St. Louis).

         Plaintiff then filed the instant action in this Court, alleging that Defendant terminated his employment on December 27, 2013, because he filed the FLSA collective action and the state class action. According to Plaintiff, Defendant violated the FLSA's anti-retaliation provision and Missouri public policy by terminating him (Doc. 1).

         Defendant filed an answer, raising various affirmative defenses and asserting two counterclaims. In its first counterclaim, Defendant seeks declaratory judgment that Plaintiff was an independent contractor whose scope of work was not covered by the FLSA (declaratory judgment counterclaim). In its second counterclaim, Defendant alleges that Plaintiff breached a contract in which he agreed that his relationship with Defendant would be as an independent contractor, not as an employee, and that he would indemnify Defendant in any suit brought by Plaintiff under, inter alia, minimum wage or overtime laws, based on a theory that Defendant was his employer (indemnification counterclaim). Defendant cites 28 U.S.C. §§ 1332(a) (diversity jurisdiction), 1367(a) (supplemental jurisdiction), and 2201-2202 (declaratory judgment jurisdiction) as the bases for the Court's jurisdiction over its counterclaims (Doc. 9).

         Plaintiff now moves to dismiss and to strike Defendant's counterclaims (Doc. 14). Plaintiff argues that the declaratory judgment counterclaim should be dismissed because it is redundant to one of Defendant's affirmative defenses, i.e., that Plaintiff was not an employee under the FLSA. Plaintiff also argues that the declaratory judgment counterclaim should be dismissed because it is not yet ripe for judicial review, as it will necessitate further factual development relating to the extent Defendant exercised control and influence over Plaintiff's work. In addition, Plaintiff argues that the Court lacks supplemental jurisdiction over the indemnification counterclaim because it is permissive and is insufficiently related to Plaintiff's retaliatory-discharge claim. Plaintiff further argues that the indemnification counterclaim should be dismissed for failure to state a claim because it is preempted by the FLSA and because the contract is invalid, unconscionable, and unenforceable (Docs. 14-15, 28).

         In response, Defendant opposes dismissal of the declaratory judgment counterclaim, arguing that it is not redundant to any of its affirmative defenses, and that the Court has jurisdiction pursuant to 28 U.S.C. §§ 2201 and 2202. Defendant contends that it has invoked the Court's diversity jurisdiction with respect to the indemnification counterclaim, as the parties are completely diverse and the amount in controversy exceeds $75, 000. Defendant additionally argues that the Court has supplemental jurisdiction over the indemnification counterclaim because the claim is part of the same case or controversy as Plaintiff's claim, as it arises from the same common nucleus of operative facts. According to Defendant, the contract is enforceable under both Missouri and federal laws, as the FLSA preempts indemnification actions against employees, but not independent contractors. Defendant also argues that its indemnification counterclaim should not be dismissed without discovery on the issue of whether Plaintiff was an independent contractor or an employee under the FLSA (Doc. 22).

         II. Discussion

          A. Dismissal of Counterclaims for Lack of Subject Matter Jurisdiction

         “[J]urisdiction is a threshold question and must be answered before all other questions.” Ginters v. Frazier, 614 F.3d 822, 826 (8th Cir. 2010) (citing Auto-Owners Ins. Co. v. Tribal Ct. of Spirit Lake Indian Reservation, 495 F.3d 1017, 1020 (8th Cir. 2007)). “In order to properly dismiss for lack of subject matter jurisdiction under Rule 12(b)(1), [a counterclaim] must be successfully challenged on its face or on the factual truthfulness of its averments.” Titus v. Sullivan, 4 F.3d 590, 593 (8th Cir. 1993) (citing Osborn v. United States, 918 F.2d 724, 729 n.6 (8th Cir. 1990)). When considering a facial challenge to its jurisdiction, the Court must restrict itself to the face of the pleadings, and presume the truth of all the factual allegations concerning jurisdiction in the counterclaim. Id. (citing Osborn, 918 F.2d at 729 n.6)). A motion asserting a facial challenge to the Court's jurisdiction over a counterclaim will be successful if the defendant fails to allege an element necessary for subject matter jurisdiction. Id. Here, the parties agree that both of Defendant's counterclaims are permissive and therefore, that they require an independent basis for the Court's subject matter jurisdiction. Shelter Mut. Ins. Co. v. Pub. Water Supply Dist. No. 7 of Jefferson Cty., Mo., 747 F.2d 1195, 1197 (8th Cir. 1984). Because Plaintiff makes a facial challenge to Defendant's counterclaims, for the purpose of this motion, the Court will presume the truthfulness of Defendant's factual allegations concerning jurisdiction.

         Notably, Plaintiff does not dispute-and the Court agrees-that the Court has subject matter jurisdiction over Defendant's declaratory judgment counterclaim under 28 U.S.C. §§ 2201 and 2202. The Court concludes that Defendant has also established that the Court has subject matter jurisdiction over its indemnification counterclaim, as the parties are completely diverse and the amount in controversy exceeds $75, 000. 28 U.S.C. § 1332(a) (diversity jurisdiction). The Court thus has subject matter jurisdiction over both counterclaims, and therefore, it need not resolve the issue of whether the indemnification counterclaim is sufficiently related to Plaintiff's FLSA retaliation claim as to warrant the Court's exercise of supplemental jurisdiction over the indemnification counterclaim. See 28 U.S.C. § 1367(a); Auto-Owners, 495 F.3d at 1024.

         Moreover, the Court is not persuaded by Plaintiff's argument that the indemnification counterclaim is not yet ripe for judicial review. See Sierra Club v. U.S. Army Corps of Eng'rs, 446 F.3d 808, 814 (8th Cir. 2006) (ripeness is a jurisdictional issue). In Missouri, “there two types of indemnification contracts: those that indemnify against liability and those that indemnify against loss.” Scheck Indus. Corp. v. Tarlton Corp., 435 S.W.3d 705, 730 (Mo.Ct.App. 2014) (citing Burns & McDonnell Eng'g Co. v. Torson Constr. Co., 834 S.W.2d 755, 758 (Mo.Ct.App. 1992)). A claim for indemnification against liability is ripe for adjudication when the party seeking indemnification “has suffered a judgment and liability has attached.” Id. (quoting Fast v. Marston, 282 S.W.3d 346, 348 (Mo. 2009)). Where an indemnification claim is against loss, the cause of action accrues “when the indemnitee sustains actual loss.” Id. (quoting Burns, 834 S.W.2d at 758). As relevant, the contract at issue in this case requires Plaintiff to indemnify Defendant from

all liabilities, damages, . . . costs of suit, and any other expense (including attorneys' fees) to which any of the indemnified parties may be subjected, arising out of or in connection with . . . any action, suit, claim, or legal . . . proceeding . . . initiated by or on behalf of any contractor . . . based on a theory that [Defendant] is an employer of . . . such contractor . . ., including any action, suit, claim or legal . . . proceeding . . . under federal or state law for ...

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