Opinion
07 Civ. 7350 (BSJ)(KNF).
October 31, 2008
MEMORANDUM AND ORDER
INTRODUCTION
In this action, brought pursuant to the Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201- 219, as amended, the New York Labor Law and the New York State Labor Department's Codes, Rules and Regulations, the defendants have made an application, pursuant to Fed.R.Civ.P. 15(a), for an order permitting them to amend their answer to the plaintiff's amended complaint, in order to assert counterclaims and additional affirmative defenses. According to the defendants, during the pretrial discovery phase of the litigation, an analysis of the plaintiff's time sheets and the defendants' payroll records indicated that the plaintiff may have been compensated for hours she did not work. As a consequence, the defendants contend claims for recoupment, set-off and unjust enrichment may be made by them against the plaintiff. The amended pleading the defendants seek to file will enable them to assert these claims.
Recoupments and set-offs are typically pleaded as counterclaims rather than affirmative defenses. See Middletown Plaza Assocs. v. Dora Dale of Middletown, Inc., 621 F. Supp. 1163, 1165 (D. Conn. 1985). The defendants have raised the issues of recoupment and set-off in their proposed amended pleading, through affirmative defenses and counterclaims.
For her part, the plaintiff maintains the defendants' application should be denied, because they delayed unduly in seeking to assert the above-referenced counterclaims and have failed to demonstrate a good faith basis exists for their delay. In addition, according to the plaintiff, the defendants cannot prevail on a cause of action for unjust enrichment, under New York Law, and, therefore, amending their answer, to assert such a cause of action, would be futile. Moreover, the plaintiff contends the defendants seek leave to assert the instant counterclaims to retaliate against her, for commencing this action, and to chill the participation of others, as plaintiffs in this action, inasmuch as the plaintiff is seeking class-action and collective-action certification from the court.
BACKGROUND
In August 2007, the plaintiff commenced this action by filing a complaint with the Clerk of Court. Thereafter, in October 2007, the plaintiff filed an amended complaint. On October 31, 2007, the defendants answered the plaintiff's amended complaint. In doing so, the defendants advised the plaintiff that they reserved the right to raise affirmative defenses in addition to those asserted in the answer to plaintiff's amended complaint, should such defenses be discovered during the course of the litigation.
In December 2007, the parties requested that the proceedings in this action be stayed, while their respective counsel participated in mediation efforts involving several wage and hour cases pending in California. The parties' request was granted, and the proceedings in the instant action were stayed, until February 1, 2008. In late February 2008, the Court, after consulting with the parties, issued an order governing their pretrial discovery activities. On April 1, 2008, the instant motion, to amend the defendants' answer to the plaintiff's amended complaint, was filed.
DISCUSSION
Fed.R.Civ.P. 15(a) provides that "[a] party may amend its pleading once as a matter of course: (A) before being served with a responsive pleading. . . . In all other cases, a party may amend its pleading only with the opposing party's written consent or the court's leave." Fed.R.Civ.P. 15(a)(1)(B)(2) explains that "[t]he court should freely give leave when justice so requires." Although the defendants made no citation to Fed.R.Civ.P. 13 in their notice of motion, that rule is pertinent here, in that it governs counterclaims. In its most pertinent part, Fed.R.Civ.P. 13 informs that "[t]he court may permit a party to amend a pleading to add a counterclaim if it was omitted through oversight, inadvertence, or excusable neglect or if justice so requires." Fed.R.Civ.P. 13(f). Reading the two Rules together, as they must be, see Bank of New York v. Sasson, 786 F. Supp. 349, 352 (S.D.N.Y. 1992), the relevant considerations for a court when an application, such as the instant one is made, include the good faith of the movant, the danger of prejudice to the adversary party, the timeliness or the extent of the delay in asserting the counterclaim(s) and whether the proposed amendment would be futile. See Foman v. Davis, 371 U.S. 178, 182, 83 S. Ct. 227, 230 (1962).
In addition, it is also prudent for a court to determine whether the proposed counterclaim(s) is compulsory or permissive. If the proposed counterclaim(s) is a compulsory counterclaim, see Fed.R.Civ.P. 13(a), a denial of a motion to assert that claim, through an amended pleading, may bar the movant from asserting the claim in a later action. See Valley Disposal Inc. v. Central Vermont Solid Waste Mgmt. Dist., 113 F.3d 357, 364 (2d Cir. 1997); Feitshans v. Kahn, No. 06 Civ. 2125, 2007 WL 998400, at *2 (S.D.N.Y. April 2, 2007). "Whether a counterclaim is compulsory or permissive turns on whether the counterclaim 'arises out of the transaction or occurrence that is the subject matter of the opposing part[ies'] claim' and [the Second Circuit Court of Appeals] has long considered this standard met when there is a 'logical relationship' between the counterclaim and the main claim." Jones v. Ford Motor Credit Co., 358 F.3d 205, 209 (2d Cir. 2004).
In the case at bar, the Court finds that the counterclaims the defendants wish to assert against the plaintiff have a logical relationship to the main claims, since the subject matter of the main claims and the proposed counterclaims is whether the plaintiff was compensated appropriately by the defendants for the hours she worked. Accordingly, the proposed counterclaims are compulsory counterclaims, which, if not asserted by the defendants, in this action, will be lost by them. See Baker v. Gold Seal Liquors, Inc., 417 U.S. 467, 469 n. 1, 94 S. Ct. 2504, 2506 n. 1 (1974).
Delay and Bath Faith
The plaintiff contends the defendants' delay, from August 2007 — when this action was initiated — to April 2008, before seeking to assert the above-referenced counterclaims, was unreasonable and militates against granting the instant motion. However, the plaintiff's contention ignores the fact that active litigation in this action was, at the parties' request, suspended for a period, while mediation efforts were pursued by counsel to the respective parties in litigation pending in California. Approximately four weeks after active litigation in the instant action resumed, the defendants sought leave to assert their counterclaims.
The plaintiff acknowledges the October 2007 amendment to her complaint. However, she alleges no new allegations were made in the amended pleading. Rather, Sprint/United Management Co. was simply added as a defendant, after the parties conferred about whom a proper party defendant should be.
In the circumstance of the instant case, the Court finds that the defendants' delay in attempting to assert their counterclaims was not an inordinate delay. In any event, delay alone is typically not a sufficient basis upon which to deny a request to amend pleadings. See State Teachers Retirement Bd. v. Fluor Corp., 654 F.2d 843, 856 (2d Cir. 1981); Rachman Bag Co. v. Liberty Mut. Ins. Co., 46 F.3d 230, 234-35 (2d Cir. 1995). Furthermore, the reason proffered by the defendants for their delay, the discovery, after serving their answer in October 2007, "of additional facts that support specific affirmative defenses and counterclaims against Plaintiff," is not evidence of bad faith on the part of the defendants. It is not uncommon, during the pretrial discovery phase of an action, while the parties are examining closely the claims and defenses that have been asserted, for information to emerge that causes a litigant to assess the action in a different light, one informed by a factual analysis prompted by the contentions of the adversary party. Thus, where the plaintiff finds bad faith on the part of the defendants, which she contends warrants the Court in denying the defendants' motion, the Court finds none.
Futility
As noted above, the plaintiff maintains that, under New York law, the defendants cannot prevail on a cause of action for unjust enrichment. Therefore, according to the plaintiff, permitting them to amend their pleading to assert such a claim would be futile. "Cases dealing with unjust enrichment in New York are uniform in their recognition of three elements of the claim: 'To prevail on a claim for unjust enrichment in New York, a plaintiff must establish (1) that the defendant benefitted; (2) at the plaintiff's expense; and (3) that equity and good conscience require restitution." Beth Israel Medical Center v. Horizon Blue Cross and Blue Shield of New Jersey, Inc., 448 F.3d 573, 586 (2d Cir. 2006) (quoting Kaye v. Grossman, 202 F.3d 611, 616 [2d Cir. 2000]). The essence of a cause of action for unjust enrichment is that "one party possesses money . . . that in equity and good conscious [it] should not have obtained or possessed because it rightfully belongs to another." Strong v. Strong, 277 A.D.2d 533, 534, 715 N.Y.S.2d 499, 501 (App.Div. 3rd Dep't 2000); City of Syracuse v. R.A.C. Holding, Inc., 258 A.D. 2d 905, 906, 685 N.Y.S.2d 381, 382 (App.Div. 4th Dep't 1999).
When futility is asserted as a ground upon which an application to amend a pleading should be denied, it is appropriate for a court to determine whether the proposed claim could withstand a motion to dismiss made pursuant to Fed.R.Civ.P. 12(b)(6). See Lucente v. International Bus. Machines Corp., 310 F.3d 243, 258 (2d Cir. 2002). Where a litigant sets forth a claim that is plausible, the claim will withstand a motion to dismiss made pursuant to Fed.R.Civ.P. 12(b)(6). See Bell Atlantic Corp. v. Twombly, ___ U.S. ___, 127 S. Ct. 1955, 1965 (2007); see also Iqbal v. Hasty, 490 F.3d 143, 157-58 (2d Cir. 2007). A pleading "attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations." Bell Atlantic, 127 S. Ct. at 1964. This is so because, at the pleading stage, all that is required by the applicable Federal Rule of Civil Procedure is that a pleader set forth "a short and plain statement of the claim showing that the pleader is entitled to relief" so that the adversary party will have fair notice of what the pleader's claim is and the grounds upon which it rests. Fed.R.Civ.P. 8(a); see also Conley v. Gibson, 355 U.S. 41, 47, 78 S. Ct. 99, 103 (1957) (overruled on other grounds).
The gravamen of the plaintiff's futility argument is that the defendants have not established the bona fides of their unjust enrichment cause of action with facts supported by competent evidence, as the plaintiff alleges she has done, through her sworn deposition testimony, respecting the claims in her amended complaint. The plaintiff misapprehends the obligation imposed on a litigant, as established by Rule and Supreme Court jurisprudence, when pleading counterclaims. Here, all the defendants need to do is set forth a short and plain statement of a plausible cause of action, by alleging that the plaintiff benefitted, at their expense, by receiving compensation from them to which she was not entitled and that equity and good conscience dictate that the excess compensation be recouped. The Court finds that the defendants have met their pleading burden. They have given the plaintiff adequate notice of their unjust enrichment claim. Furthermore, it is useful to remember that, when a motion is made pursuant to Fed.R.Civ.P. 12(b)(6), a court need not determine "whether a [pleader] is likely to prevail ultimately." The court is required to determine only "whether the claimant is entitled to offer evidence to support [his] claims." Phelps v. Kapnolas, 308 F.3d 180, 184-85 (2d Cir. 2002) (quoting Chance v. Armstrong, 143 F.3d 698, 701 [2d Cir. 1998]). Notwithstanding the fact that "'it may appear on the face of the pleading that a recovery is very remote and unlikely . . . that is not the test. . . .'" Id. at 185 (quoting Chance, 143 F.3d at 701 [quoting Branham v. Meachum, 77 F.3d 626, 628 [2d Cir. 1996]). Inasmuch as the Court finds that the defendants' unjust enrichment cause of action would survive a motion to dismiss, because, as pleaded, it appears to be a plausible cause of action, it would be inappropriate to bar them from amending their answer to the plaintiff's amended complaint, on the basis of futility.
Retaliation
The plaintiff ascribes a retaliatory motive to the defendants' attempt to amend their answer to the plaintiff's amended complaint and urges that the instant motion be denied, as a consequence. "[A]n employer's lawsuit filed with a retaliatory motive rather than in good faith may constitute an adverse action and provide a basis for a retaliation claim." Beltran v. Brentwood North Healthcare Ctr., LLC, 426 F. Supp. 2d 827, 833 (N.D. Ill. 2006). However, where an employer seeks to amend a pleading to assert a compulsory counterclaim to avoid the risk of being foreclosed from raising the claim in a subsequent action, that conduct cannot constitute retaliation, unless the counterclaim is "totally baseless." Ergo v. International Merchant Servs., Inc., 519 F. Supp. 2d 765, 781 (N.D. Ill. 2007). The record before the Court does not establish that the counterclaims the defendants seek to assert, by amending their answer to the plaintiff's amended complaint, which are premised on the defendants' analysis of attendance and payroll data, are "totally baseless." Therefore, no basis exists for denying the defendants the relief they seek through the instant motion, based on the plaintiff's retaliation allegation.
CONCLUSION
For the reasons set forth above, the defendants' motion to amend their answer to the plaintiff's amended complaint, Docket Entry No. 27, is granted.
SO ORDERED: