Spellman v. American Eagle Express, Inc. ( 2010 )


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  •                              UNITED STATES DISTRICT COURT
                                 FOR THE DISTRICT OF COLUMBIA
    
    
                                                 )
    CLINTON SPELLMAN, et al.,                    )
                                                 )
                   Plaintiffs,                   )
                                                 )
           v.                                    )       Civil Action No. 09-1666 (RMC)
                                                 )
    AMERICAN EAGLE EXPRESS, INC.,                )
                                                 )
                   Defendant.                    )
                                                 )
    
    
                                     MEMORANDUM OPINION
    
                   Plaintiffs sued Defendant for alleged violations of the Fair Labor Standards Act
    
    (“FLSA”), 29 U.S.C. § 201 et seq., and Maryland and District of Columbia wage payment laws.
    
    Defendant answered and counterclaimed against seven of the eleven named Plaintiffs seeking
    
    indemnification pursuant to the indemnification clause in the Transportation Brokerage Agreements
    
    executed by those Plaintiffs. Plaintiffs cry foul and move to dismiss the counterclaim [Dkt. # 16].
    
    They argue that the counterclaim is preempted by the FLSA, is contrary to public policy, and is
    
    outside the scope of the indemnity clause. Defendant responds that the counterclaim survives
    
    because it is not now baseless as a matter of fact or law. The Court agrees with Defendant.
    
    Accordingly, the motion to dismiss will be denied without prejudice.
    
                                               I. FACTS
    
                   Plaintiffs are current and former delivery drivers who sued Defendant on September
    
    1, 2009, alleging that Defendant misclassified them as “independent contractors” under the FLSA
    
    and Maryland and District of Columbia wage payment laws, and as a result, failed to pay them
    overtime rates for each hour worked in excess of forty per week. On October 22, 2009, Defendant
    
    answered and counterclaimed against seven of the eleven named Plaintiffs seeking to enforce the
    
    indemnification clause in the Transportation Brokerage Agreements executed by those Plaintiffs.
    
    That clause provides in relevant part:
    
                   INDEPENDENT CONTRACTOR agrees to defend, indemnify and
                   hold harmless BROKER from any direct, indirect and consequential
                   loss, damage, fine, expense, including reasonable attorney’s fees,
                   action, claim for injury to persons, including death, and damage to
                   property which BROKER may incur arising out of or in connection
                   with the operation of Equipment, CONTRACTOR’s obligations
                   under this Agreement, or any breach by CONTRACTOR or its
                   drivers or workers of the terms of this Agreement.
    
    Countercl. [Dkt. # 9], Ex. A (Transportation Brokerage Agreement) ¶ 10.
    
                   Defendant alleges that the claims asserted by Plaintiffs in the Complaint and the
    
    expenses it has incurred to defend against them fall within the scope of the indemnification clause.
    
    Countercl. ¶ 8. It seeks an award of all costs and expenses, including reasonable attorneys’ fees,
    
    incurred in defending against Plaintiffs’ claims. Id. ¶ 9.
    
                   Plaintiffs move to dismiss the counterclaim for failure to state a claim upon which
    
    relief can be granted. Defendant opposes.
    
                                        II. LEGAL STANDARD
    
                   A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) challenges
    
    the adequacy of a complaint on its face, testing whether a plaintiff has properly stated a claim.
    
    Federal Rule of Civil Procedure 8(a) requires that a complaint contain “a short and plain statement
    
    of the claim showing that the pleader is entitled to relief.” Fed. R. Civ. P. 8(a). A complaint must
    
    be sufficient “to give a defendant fair notice of what the . . . claim is and the grounds upon which
    
    
    
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    it rests.” Bell Atl. Corp. v. Twombly, 
    550 U.S. 544
    , 555 (2007) (internal citations omitted).
    
    Although a complaint does not need detailed factual allegations, a plaintiff’s obligation to provide
    
    the grounds of his entitlement to relief “requires more than labels and conclusions, and a formulaic
    
    recitation of the elements of a cause of action will not do.” Id. The facts alleged “must be enough
    
    to raise a right to relief above the speculative level.” Id. Rule 8(a) requires an actual showing and
    
    not just a blanket assertion of a right to relief. Id. at 555 n.3. “[A] complaint needs some
    
    information about the circumstances giving rise to the claims.” Aktieselskabet Af 21. Nov. 2001 v.
    
    Fame Jeans, Inc., 
    525 F.3d 8
    , 16 n.4 (D.C. Cir. 2008) (emphasis in original).
    
                   A court must treat the complaint’s factual allegations as true, “even if doubtful in
    
    fact.” Twombly, 550 U.S. at 555. But a court need not accept as true legal conclusions set forth in
    
    a complaint. Ashcroft v. Iqbal, 
    129 S. Ct. 1937
    , 1949 (2009). “Threadbare recitals of the elements
    
    of a cause of action, supported by mere conclusory statements, do not suffice.” Id. “While legal
    
    conclusions can provide the framework of a complaint, they must be supported by factual
    
    allegations. When there are well-pleaded factual allegations, a court should assume their veracity
    
    and then determine whether they plausibly give rise to an entitlement to relief.” Id. at 1950.
    
                                             III. ANALYSIS
    
                   In Bill Johnson’s Restaurants, Inc. v. NLRB, 
    461 U.S. 731
     (1983),1 the Supreme
    
    Court recognized that “[a] lawsuit no doubt may be used by an employer as a powerful instrument
    
    of coercion or retaliation” and that by filing a retaliatory lawsuit “an employer can place its
    
    employees on notice that anyone who engages in such conduct is subjecting himself to the possibility
    
    
           1
              While Bill Johnson’s Restaurants concerned a retaliatory lawsuit in the context of the
    National Labor Relations Act, 29 U.S.C. § 151 et seq., courts have applied its reasoning in the FLSA
    context. See, e.g., Martin v. Gingerbread House, Inc., 
    977 F.2d 1405
    , 1407 (10th Cir. 1992).
    
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    of a burdensome lawsuit.” Id. at 740. However, the Court also recognized that “the right of access
    
    to the courts is an aspect of the First Amendment right to petition the Government for redress of
    
    grievances.” Id. at 741. “Considering the First Amendment right of access to the courts[,]” the
    
    Court concluded that “[t]he filing and prosecution of a well-founded lawsuit may not be enjoined
    
    . . . even if it would not have been commenced but for the plaintiff’s desire to retaliate against the
    
    defendant for exercising rights protected by” federal law. Id. at 742-43. “Although it is not unlawful
    
    under” federal anti-retaliation laws “to prosecute a meritorious action, the same is not true of suits
    
    based on insubstantial claims — suits that lack . . . a ‘reasonable basis’.” Id. at 743. “Such suits are
    
    not within the scope of First Amendment protection.” Id. Thus, a retaliatory lawsuit is not unlawful
    
    “unless the suit lacks a reasonable basis in fact or law.” Id. at 748; see also BE & K Constr. Co. v.
    
    NLRB, 
    536 U.S. 516
    , 531 (2002) (recounting that “our holdings limited regulation to suits that were
    
    both objectively baseless and subjectively motivated by an unlawful purpose”) (emphasis in
    
    original).
    
                    In light of this authority, the Court can quickly dispose of Plaintiffs’ argument that
    
    the counterclaim fails because it would not have been filed but for Plaintiffs’ initiation of this
    
    lawsuit. See Reply [Dkt. # 26] at 10-12. Under Bill Johnson’s Restaurants, “a meritorious suit may
    
    not be enjoined, regardless of the intent behind the filing.” Gingerbread House, 977 F.2d at 1407.
    
    Accordingly, Plaintiffs are simply wrong in arguing that the counterclaim cannot lie against them
    
    based solely on their filing of this lawsuit.
    
                    The real issue is whether the counterclaim is objectively baseless, that is, whether it
    
    “lacks a reasonable basis in fact or law.” Bill Johnson’s Restaurants, 461 U.S. at 748. Putting aside
    
    for a moment whether the indemnification lawsuit is preempted by the FLSA or contrary to the
    
    
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    policy of that statute, the lawsuit plainly is reasonably based. Those Plaintiffs that executed
    
    Transportation Brokerage Agreements agreed to indemnify Defendant for any “action” against
    
    Defendant “arising out of or in connection with” Plaintiffs’ “obligations under this Agreement.”
    
    Countercl. ¶ 6. One such “obligation” was the agreement to work for a liquidated fee amount. See
    
    id., Ex. A (Transportation Brokerage Agreement) ¶ 3 (“It is expressly understood and agreed that
    
    CONTRACTOR’S fees for transportation services rendered shall be as set forth in Appendix B and
    
    such fees shall constitute the total fees for everything furnished, provided, or done by
    
    CONTRACTOR in connection with this Agreement, including driver’s services.”). The crux of this
    
    lawsuit is Plaintiffs’ allegation that “Defendant failed to pay” Plaintiffs “for all hours worked and
    
    failed to pay these employees at the overtime rate for any hours worked in excess of forty hours per
    
    week.” Am. Compl. [Dkt. # 23] ¶ 58. In other words, Plaintiffs allege that they are owed more than
    
    the liquidated fee amount in the Transportation Brokerage Agreement. Therefore, Defendant has
    
    a reasonable basis for alleging that this lawsuit is an “action” against it “arising out of or in
    
    connection with” Plaintiffs’ “obligations under this Agreement.” Countercl. ¶ 6.
    
                   Still remaining is whether the counterclaim is baseless because it is preempted by the
    
    FLSA or contrary to the policy of that statute. The Court agrees with the Fourth, Fifth, and Tenth
    
    Circuits that “[i]ndemnity actions against employees work against the purposes of the FLSA[,]”
    
    Gingerbread House, 977 F.2d at 1407-08; see also Lyle v. Food Lion, Inc., 
    954 F.2d 984
    , 987 (4th
    
    Cir. 1992); LeCompte v. Chrysler Credit Corp., 
    780 F.2d 1260
    , 1264 (5th Cir. 1986), and that “a
    
    third party complaint by an employer seeking indemnity from an employee is preempted.”
    
    Gingerbread House, 977 F.2d at 1408. But, whereas here, Defendant asserts that the FLSA is wholly
    
    inapplicable because Plaintiffs are “independent contractors” exempt from the statute’s scope, see
    
    
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    Affirmative Defense ¶ 1, and resolution of that issue will turn on the Court’s application of a fact-
    
    intensive “economic reality” test after discovery has been completed, see Morrison v. Int’l Programs
    
    Consortium, Inc., 
    253 F.3d 5
    , 11 (D.C. Cir. 2001), the Court cannot say at this juncture that the
    
    counterclaim is preempted by, or contrary to the policy of, the FLSA.2 Because application of the
    
    FLSA appears at this early stage to “involve[] genuine issues of material fact or law[,]” Bill
    
    Johnson’s Restaurants, 461 U.S. at 745 n.11, Defendant’s counterclaim is not now baseless.
    
                                           IV. CONCLUSION
    
                   For the foregoing reasons, the Court will deny without prejudice Plaintiffs’ motion
    
    to dismiss Defendant’s counterclaim [Dkt. # 16]. A memorializing Order accompanies this
    
    Memorandum Opinion.
    
    
    Date: January 27, 2010                                     /s/
                                                      ROSEMARY M. COLLYER
                                                      United States District Judge
    
    
    
    
           2
               The Court rejects Plaintiffs’ argument that the counterclaim fails because Defendant did
    not specifically plead facts about the “economic reality” of the parties’ relationship. Defendant need
    not plead, either generally or specifically, that Plaintiffs are “independent contractors” within the
    meaning of the FLSA in order to state a claim for indemnification under the Transportation
    Brokerage Agreements.
    
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