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Carroll v. Dan Rainville & Associates, Inc.

United States District Court, D. Maryland

October 23, 2017

MATT CARROLL Plaintiff/Counter-Defendant
v.
DAN RAINVILLE & ASSOCIATES INC., Defendants/Counter-Plaintiffs

          MEMORANDUM OPINION

          STEPHANIE A. GALLAGHER, UNITED STATES MAGISTRATE JUDGE.

         Pending before this Court is Plaintiff/Counter-Defendant Matt Carroll's (“Carroll”) Motion to Dismiss the Counterclaims Filed by Defendant/Counter-Plaintiff Dan Rainville & Associates, Inc. (“DRA”), [ECF No. 33]. I have reviewed DRA's Opposition, [ECF No. 34], and Carroll's Reply. [ECF No. 36]. No oral argument is necessary. See Local Rule 105.6 (D. Md. 2016). For the reasons set forth below, Carroll's motion will be GRANTED.

         I. BACKGROUND

         On March 29, 2017, Carroll filed suit against his former employer, DRA, alleging violations of the Federal Fair Labor Standards Act (“FLSA”), the Maryland Wage and Hour Law, and the Maryland Wage Payment and Collection Law. [ECF No. 1, 1]. DRA engages in the “business of selling and installing commercial HVAC and ventilation units.” Id. at 2. From January, 2016 through August, 2016, Carroll “worked as both an estimator and perform[ed] inside sales jobs for which he was paid hourly, ” in addition to earning a 20% commission on sales. Id. at 3. In this lawsuit, Carroll seeks to recover allegedly unpaid overtime wages and commissions from his inside sales job. [ECF No. 33, 3].

         On June 12, 2017, DRA filed an Amended Counterclaim asserting the following claims under Maryland law: (1) Breach of Contract - Return of Unearned Draws; (2) Breach of Contract - Noncompetition and Non-solicitation Agreement; (3) Breach of Contract - Use of Confidential Information; (4) Violation of Maryland Trade Secrets Act; (5) Intentional Interference with Business Relations; (6) Detinue; and (7) Civil Conspiracy. [ECF No. 19]. Carroll has moved to dismiss all seven counterclaims under F.R.C.P. 12(b)(1), citing this Court's lack of subject-matter jurisdiction. [ECF No. 33].

         II. STANDARD OF REVIEW

         “Federal courts are not courts of general jurisdiction; they have only the power that is authorized by Article III of the Constitution and the statutes enacted by Congress pursuant thereto.” Bender v. Williamsport Area Sch. Dist., 475 U.S. 534, 541 (1986). “Subject-matter jurisdiction cannot be conferred by the parties, nor can a defect in subject-matter jurisdiction be waived by the parties.” Brickwood Contractors, Inc. v. Datanet Eng'g, Inc., 369 F.3d 385, 390 (4th Cir. 2004) (citing United States v. Cotton, 535 U.S. 625, 630 (2002)). Thus, “questions of subject-matter jurisdiction may be raised at any point during the proceedings and may (or, more precisely, must) be raised sua sponte by the court.” Id. (citing Bender, 475 U.S. at 541).

         Under Federal Rule of Civil Procedure 12(b)(1), a motion to dismiss for lack of “subject matter jurisdiction can be presented in either of two forms: (1) a facial challenge that plaintiff has failed to allege facts sufficient to establish subject matter jurisdiction, ” or (2) a contention that “the jurisdictional allegations of the complaint are not true.” Nicholson v. United States, 2017 WL 2793800, at *1 (E.D. Va. May 30, 2017); Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982). While the plaintiff bears the burden of proving that a court has jurisdiction over the claim or controversy at issue, a Rule 12(b)(1) motion should be granted “only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law.” Ferdinand-Davenport v. Children's Guild, 742 F.Supp.2d 772, 777 (D. Md. 2010); see also Evans v. B.F. Perkins Co., a Div. of Standex Int'l Corp., 166 F.3d 642, 647 (4th Cir. 1999).

         Pursuant to the Judicial Improvement Act of 1990, federal courts “‘have supplemental jurisdiction over all other claims that are so related to claims in the action within such original jurisdiction that they form part of the same case or controversy under Article III of the United States Constitution.'” Shanaghan v. Cahill, 58 F.3d 106, 109 (4th Cir. 1995) (quoting 28 U.S.C. § 1367(a)). To form part of the same case or controversy as the federal claim(s), the state claim(s) must “‘derive from a common nucleus of operative fact[, ] . . . such that [a plaintiff] would ordinarily be expected to try them all in one judicial proceeding.'” Hinson v. Norwest Fin. S.C., Inc., 239 F.3d 611, 615 (4th Cir. 2001) (quoting Carnegie-Mellon University v. Cohill, 484 U.S. 343, 349 (1988)). Thus, where a federal court has original federal question or diversity jurisdiction over a claim, parties may “append state law claims over which federal courts would otherwise lack jurisdiction, ” provided they derive from a common nucleus of operative fact. Cahill, 58 F.3d at 109.

         “There is no dispute that compulsory counterclaims are, by definition, within the supplemental jurisdiction of the court.” Long v. Welch & Rushe, Inc., 28 F.Supp.3d 446, 452 (D. Md. 2014) (citing Painter v. Harvey, 863 F.2d 329, 331 (4th Cir. 1988)). A compulsory counterclaim “arises out of the transaction or occurrence that is the subject matter of the opposing party's claim, ” while a permissive claim does not. Id. (quoting Fed.R.Civ.P. 13(a)). To determine whether a counterclaim is compulsory, courts look to: (1) whether “the issues of fact and law raised in the claim and counterclaim [are] largely the same[;]” (2) whether “res judicata [would] bar a subsequent suit on the party's counterclaim, absent the compulsory counterclaim rule[;]” (3) whether “substantially the same evidence support[s] or refute[s] the claim as well as the counterclaim[;]” and (4) whether “there [is] any logical relationship between the claim and counterclaim[.]” Painter, 863 F.2d at 331 (citing Sue & Sam Mfg. Co. v. B-L-S Const. Co., 538 F.2d 1048 (4th Cir. 1976)). Contrary to a compulsory counterclaim, a permissive counterclaim must have an independent jurisdictional base such as federal question or diversity jurisdiction. See Sue, 538 F.2d 1048, 1051 (4th Cir. 1976).

         III. ANALYSIS

         A. Carroll Did Not Waive the Defense that the Court Lacks Subject-Matter Jurisdiction Over DRA's Counterclaims.

         DRA asserts Carroll waived his defense that this Court lacks subject-matter jurisdiction over its counterclaims, because Carroll omitted the argument from his previously filed motion to dismiss under F.R.C.P. 12(b)(6), [ECF No. 13], and Answer, [ECF No. 21]. [ECF No. 34, 3]. DRA is incorrect.

         Federal Rule 12(b) provides seven affirmative defenses to a claim for relief, including the defense that the Court lacks subject-matter jurisdiction. Fed.R.Civ.P. 12(b). While subsections (g) and (h) of Rule 12 provide that some defenses will be waived if they are omitted from a party's first Rule 12 motion or responsive pleading, subject-matter jurisdiction is specifically exempted. Fed.R.Civ.P. 12(h). Moreover, Rule 12(h)(3) expressly states that “[i]f the court determines at any time that it lacks subject-matter jurisdiction, [it] must dismiss the action.” Id. It is thus axiomatic that ...


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