Opinion
3:22-cv-00391-AR
05-08-2024
OKSANA KHAMNAYEV, an individual, Plaintiff, v. SCHNITZER STEEL INDUSTRIES, INC., an Oregon domestic business corporation, Defendant.
FINDINGS AND RECOMMENDATION
Jeff Armistead, United States Magistrate Judge
Plaintiff Oksana Khamnayev filed this action against her former employer, Schnitzer Steel Industries, Inc., asserting claims for disability discrimination under the Americans with Disabilities Act (ADA), 42 U.S.C. § 12101 et seq., and Oregon's statutory parallel, ORS § 659A.100 et seq. (Compl. ¶¶ 23-58, ECF No. 1.) Khamnayev also asserts claims for interference under the Family Medical Leave Act (FMLA), 29 U.S.C. § 2601 et seq., and Oregon's statutory parallel, the Oregon Family Leave Act (OFLA), ORS § 659A.150 et seq. (Id. ¶¶ 59-72.) Khamnayev requests compensatory damages, equitable relief, liquidated damages, attorney fees, and costs.
Schnitzer moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss all of Khamnayev's disability discrimination claims with prejudice, arguing that she did not plausibly allege that she is “disabled” under federal and state law. (Def.'s Mot. at 5-9, ECF No. 7.) The court denied that motion on August 2, 2023. (Order Adopting F&R, ECF No. 27.)
After its Motion to Dismiss was denied, Schnitzer answered the Complaint and alleged counterclaims for attorney fees and breach of contract. (Def.'s Answer ¶¶ 79-89, ECF No. 29.) Khamnayev now moves to dismiss those counterclaims under Rule 12(b)(6). (Pl.'s Mot, ECF No. 31.) As to the attorney fees counterclaim, Khamnayev asserts that Schnitzer's earlier failure to dismiss her claims precludes this court from finding that her claims are objectively unreasonable. (Id. at 4-5.) As to Schnitzer's claim for breach of contract, she argues that it should be dismissed for failure to allege facts demonstrating that Schnitzer is plausibly entitled to relief. (Id. at 5-6.) Although Schnitzer's claim lacks the specific contract provision that is the basis for its claim that Khamnayev breached the separation agreement, Khamnayev guesses that Schnitzer claims that she breached that agreement's nondisparagement clause by bringing this lawsuit. And that claim, she contends, fails because (1) the separation agreement did not release all her claims against Schnitzer and (2) the agreement's nondisparagement clause is unenforceable. She also asks the court for leave to request attorney fees for Schnitzer's counterclaims. (Pl.'s Mot. at 9.)
Schnitzer responds that it sufficiently pleads its counterclaims. (Def.'s Resp. at 4, 6, ECF No. 34.) Schnitzer also confirms in its Response that its breach of contract claim is based on Khamnayev's filing of this action, contending that doing so violates the separation agreement's nondisparagement clause. (Id. at 6-8.)
The court concludes that Schnitzer's claim for breach of contract is insufficiently pled, and that even treating the claims in Schnitzer's Response as if they were alleged in the Complaint, the nondisparagement clause cannot plausibly be read as broadly as is necessary to support Schnitzer's claim. The court also concludes that Schnitzer is merely preserving its attorney fees claim and that it is too early for the court to assess its viability. Accordingly, Khamnayev's motion to dismiss Schnitzer's counterclaims should be GRANTED IN PART and DENIED IN PART.
BACKGROUND
The court construes as true Schnitzer's factual allegations in support of its counterclaims, supplemented by undisputed facts from Khamnayev's Complaint. See Weston Fam. P'ship LLLP v. Twitter, Inc., 29 F.4th 611, 617 (9th Cir. 2022) (courts must construe as true plaintiff's factual allegations in support of plaintiff's claims); Unigestion Holding, S.A. v. UPM Tech., INC., Case No. 3:15-cv-185-SI, 2016 WL 4033976, at *2 (D. Or. July 26, 2016) (same standards apply to motion to dismiss defendant's counterclaims as apply to motion to dismiss plaintiff's claims). Schnitzer employed Khamnayev between March 2013 and November 2019 as a Senior Tax Manager. (Def.'s Answer ¶ 10; Def.'s Resp. at 2; Compl. ¶ 10.) Khamnayev submitted a medical release in May 2019 specifying that Khamnayev could not work more than 40 hours per week. (Def.'s Resp. at 2; Compl. ¶ 14.) Schnitzer offered Khamnayev alternatives to her position, which she did not accept. (Def.'s Answer ¶ 22; Def.'s Resp. at 2; Compl. ¶ 21.)
On October 31, 2019, Schnitzer and Khamnayev entered into a separation agreement. (Def.'s Answer ¶ 82; Agreement, ECF No. 29-1.) The agreement provided that November 1, 2019, would be Khamnayev's last day of employment. (Agreement § 1.) Schnitzer agreed to pay Khamnayev $44,228 in consideration for her execution of and compliance with the agreement. (Id. § 3.) Khamnayev acknowledged that she had received all wages and paid time off that was due to her, as well as all leave and other benefits that she was entitled to under the FMLA. (Id. § 1.) She agreed to not disclose confidential information learned during her employment. (Id. § 4.) The agreement also contains a nondisparagement clause, which prohibits Khamnayev from
mak[ing], publish[ing] or communicat[ing] to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning [Schnitzer] or its businesses, or any of its employees or officers, and existing and prospective customers, suppliers, investors and other associated third parties, now or in the future.(Id. § 10.)
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(6) tests the sufficiency of the claims. Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001). Dismissal, therefore, can be based on either the “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Conservation Force v. Salazar, 646 F.3d 1240, 1242 (9th Cir. 2011) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (1988)). To survive a motion to dismiss under a cognizable legal theory, a complaint “must contain sufficient factual matter to state a facially plausible claim to relief.” Shroyer v. New Cingular Wireless Servs., Inc., 622 F.3d 1035, 1041 (9th Cir. 2010) (citing Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007) (“Factual allegations must be enough to raise a right to relief above the speculative level on the assumption that all of the complaint's allegations are true.”). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678 (citing Twombly, 550 U.S. at 556). “The plausibility standard is not akin to a probability requirement, but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Mashiri v. Epsten Grinnell & Howell, 845 F.3d 984, 988 (9th Cir. 2017) (quotation marks omitted).
The complaint “may not simply recite the elements of a cause of action”; instead, it must contain “sufficient allegations of underlying facts to give fair notice and to enable the opposing party to defend itself effectively.” Starr v. Baca, 652 F.3d 1202, 1216 (9th Cir. 2011) (emphasis added); Iqbal, 556 U.S. at 678 (Rule 8 “demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation.”). In evaluating the sufficiency of a complaint, the court accepts as true all well-pleaded factual allegations and construes them in the light most favorable to the non-moving party. Wilson v. Hewlett-Packard Co., 668 F.3d 1136, 1140 (9th Cir. 2012). The court need not, however, credit a plaintiff's legal conclusions that are couched as factual allegations. Iqbal, 556 U.S. at 678-79.
DISCUSSION
A. Attorney Fees
Schnitzer asserts claims for attorney fees under ORS §§ 20.105(1), 20.107(1), and 659A.885, as well as “any fee-shifting statute cited by [Khamnayev].” (Answer ¶ 79.) Each of the Oregon statues either permits or requires a court to award attorney fees to a prevailing defendant. ORS §§ 20.105(1), 20.107(1), 659A.885(1). Under ORS §§ 20.105 and 20.107, a prevailing defendant is entitled to attorney fees only if the plaintiff had “no objectively reasonable basis” for asserting her claim. ORS §§ 20.105(1), 20.107(1). Further, the court may grant attorney fees to a defendant prevailing against an ADA claim if the plaintiff's underlying claims are “frivolous, unreasonable, or without foundation.” 42 U.S.C. § 12205; Summers v. Teichert & Son, Inc., 127 F.3d 1150, 1154 (9th Cir. 1997) (quoting Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 421 (1978)).
In Khamnayev's view, because the court denied Schnitzer's earlier Motion to Dismiss, the court has “arguably already determined that [Khamnayev] has a sufficient basis in law or fact for her claims and that she therefore had an ‘objectively reasonable basis' for bringing her claims.” (Pl.'s Mot. at 4.) Surviving a motion to dismiss, however, does not automatically insulate Khamnayev from a determination that her claims were objectively unreasonable or without foundation.
In resolving Schnitzer's Motion to Dismiss, the court assessed the sufficiency of Khamnayev's claims, accepting her factual allegations as true. Schnitzer could still be entitled to attorney fees if it establishes that those factual allegations are false and that Khamnayev knew they were false at the time she filed her Complaint. See, e.g., Watson v. County of Yavapai, 240 F.Supp.3d 996, 1002-04 (D. Nev. 2017) (holding that defendant was entitled to fees where plaintiff's ADA and FMLA claims were based on factual allegations that plaintiff could not have reasonably believed to be true); Lenn v. Bottem, 221 Or.App. 241, 249 (2008) (holding that defendants were entitled to attorney fees because plaintiffs had no objectively reasonable basis for their claim where they knew at the time they brought their claim that they could not satisfy all the elements).
It is, however, too early to determine whether Schnitzer will be entitled to attorney fees. Indeed, “neither party is entitled to attorney fees without first prevailing and then filing a separate motion” under Federal Rule of Civil Procedure 54(d). Silliman v. Hawes Fin. Grp., Case No. 6:15-cv-00285-AA, 2015 WL 5056353, at *4 (D. Or. Aug. 26, 2015). Schnitzer's claim provides notice that, if Schnitzer prevails and establishes that plaintiff's claims were objectively unreasonable at the time of filing, it will seek to recover its fees. (See Def.'s Resp. at 4 (“For now, [Schnitzer] is merely reserving the counterclaim.”).) Accordingly, the court recommends declining to dismiss Schnitzer's counterclaim for attorney fees at this stage. See id; Amort v. NWFF, Inc., Case No. 6:11-CV-6396-AA, 2012 WL 3756330, at *4 (D. Or. Aug. 27, 2012) (declining to dismiss defendants' counterclaim for attorney fees, made before discovery was complete, because defendants were simply “providing plaintiff notice that they [would] seek recovery of fees if they prevail[ed] and establish[ed] that plaintiff's claims [were] frivolous”); Estate of Osborn-Vincent v. Ameriprise Fin., Inc., Case No. 3:16-cv-02305-YY, 2019 WL 764029, at *2 (D. Or. Jan. 3, 2019) (“At most, the counterclaim serves as notice of defendants' intention to seek attorney[] fees.”), findings and recommendation adopted, 2019 WL 943379 (D. Or. Feb. 25, 2019).
B. Breach of Contract
1. Insufficient Factual Allegations
Khamnayev argues that Schnitzer's breach of contract claim should be dismissed because Schnitzer does not allege sufficient facts to show that it is plausibly entitled to relief. Schnitzer responds that it “does not need to walk, point-by-point, through [Khamnayev]'s actions which caused damages.” (Def.'s Resp. at 7.) Instead, Schnitzer asserts, it need only allege the elements of a breach of contract claim under Slover v. Or. State Bd. of Clinical Soc. Workers, 144 Or.App. 565, 570 (1996). (Id.)
Schnitzer, however, is in federal court, not state court. Litigants bringing claims in federal court are subject to federal pleading standards. That is true even when a litigant brings a claim under state law. Kearns v. Ford Motor Co., 567 F.3d 1120, 1125 (9th Cir. 2009) (“It is well-settled that the Federal Rules of Civil Procedure apply in federal court, irrespective of the source of the subject matter jurisdiction, and irrespective of whether the substantive law at issue is state or federal.” (quotation marks omitted)). “Regardless of state pleading standards, Twombly and Iqbal apply in federal courts.” John Hyland Constr., Inc. v. Timberland, Inc., Case No. 6:22-cv-01575-AA, 2023 WL 7386053 (D. Or. Nov. 8, 2023).
Under Twombly and Iqbal, Schnitzer must allege facts to permit the court reasonably to infer that Khamnayev is liable for the misconduct alleged. Twombly, 550 U.S. at 555-56; Iqbal, 556 U.S. at 678. As Khamnayev notes, Schnitzer fails to do that. Schnitzer's counterclaim does not identify the relevant contract provision or how Khamnayev is supposed to have breached it. Accordingly, Schnitzer's counterclaim for breach of contract should be dismissed for failure to state a claim. See, e.g., Com. And Indus. Ins. v. HR Staffing, Inc., Case No. 3:14-cv-00559-HZ, 2014 WL 4983671, at *2 (D. Or. Oct. 1, 2014) (dismissing breach of contract counterclaim for failure to state a claim where defendant “failed to identify the relevant contractual provisions” that it claimed plaintiff had breached).
2. Leave to Amend
Schnitzer requests leave to amend if its counterclaims are deemed deficient, explaining that the basis of its breach of contract claim is Khamnayev's filing of this action, which Schnitzer contends is a breach of the agreement's nondisparagement provision. (Def.'s Resp. at 7-10.) Leave to amend may be denied if the proposed amendment is futile or would be subject to immediate dismissal. Carrico v. City & Cnty. of San Francisco, 656 F.3d 1002, 1008 (9th Cir. 2011). An amendment is futile “only if no set of facts can be proved under the amendment to the pleadings that would constitute a valid and sufficient claim or defense.” Barahona v. Union Pac. R.R. Co., 881 F.3d 1122, 1134 (9th Cir. 2018) (quoting Sweaney v. Ada County, 119 F.3d 1385, 1393 (9th Cir. 1997)). The court therefore considers whether Schnitzer's claim, as described in its Response, would be valid.
According to Schnitzer, Khamnayev's filing of this lawsuit is a breach of the nondisparagement provision of the parties' separation agreement. As previously noted, that provision prohibits Khamnayev from making or publishing “any defamatory or disparaging remarks” about Schnitzer, its employees, or its officers. (Agreement § 10.) In Khamnayev's view, the nondisparagement clause cannot be read so broadly as to prevent her from bringing any claims against Schnitzer because the agreement does not contain a release or waiver of Khamnayev's claims. (Pl.'s Mot. at 7-8.)
Khamnayev also argues that the nondisparagement clause is unenforceable under ORS § 659A.370 and McLaren Macomb, 372 NLRB No. 58 (Feb. 21, 2023). (Pl.'s Mot. at 7.) The court need not address Khamnayev's argument that that the provision is unenforceable because it concludes that the nondisparagement clause cannot plausibly be read to prohibit Khamnayev from bringing legal action against Schnitzer.
When construing a contractual provision under Oregon law, the court must first “examine[] the text of the disputed provision, in the context of the document as a whole.” Yogman v. Parrott, 325 Or. 358, 361 (1997). “[T]he court looks at the four corners of the written contract, and considers the contract as a whole with emphasis on the provision or provisions in question.” Eagle Indus., Inc. v. Thompson, 321 Or. 398, 405 (1995). If the provision's meaning is clear, the analysis ends. Yogman, 325 Or. at 361.
Schnitzer does not argue that the court should consider communications made in the formation of the separation agreement render the agreement ambiguous. See Batzer Constr., Inc. v. Boyer, 204 Or.App. 309, 317, review denied, 341 Or. 366 (2006) (“[T]o determine whether a contractual provision is ambiguous, the trial court can properly consider the text of the provision in the context of the agreement as a whole and in light of the circumstances underlying the formation of the contract.”).
In Schnitzer's view, the nondisparagement provision's restriction on making or publishing defamatory or disparaging remarks prohibits Khamnayev from bringing legal action against Schnitzer. Schnitzer neither argues why it thinks the nondisparagement provision is properly interpreted to have that scope nor points the court to any authority supporting its proposed interpretation. (See Def.'s Resp. at 7-8.) For the nondisparagement clause plausibly to have the reach that Schnitzer contends, the agreement in its entirety must be susceptible to interpretation as a release of all Khamnayev's potential legal claims against Schnitzer. Because it does not, the agreement cannot plausibly be read to mean that Khamnayev retains the right to bring claims against Schnitzer yet is prohibited from taking any action toward asserting that right.
Schnitzer characterizes Khamnayev's claims for employment discrimination as “disparaging” because those claims “alleg[e] that Schnitzer engaged in illegal business practices.” (Def.'s Resp. at 8.) The court's analysis assumes that a lawsuit bringing claims for employment discrimination could plausibly be considered “defamatory or disparaging remarks, comments or statements.” The court notes, however, that the nondisparagement provision does not unambiguously encompass claims asserted in litigation.
“A release is a contract in which one or more parties agrees to abandon a claim or right.” Lindgren v. Berg, 307 Or. 659, 665 (1989). A release is “subject to the ordinary rules of contract construction and interpretation.” Patterson v. Am. Med. Sys., Inc., 141 Or.App. 50, 53 (1996) (citing Ristau v. Wescold, Inc., 318 Or. 383, 387 (1994)). “The general rule in Oregon is that, although waivers of constitutional and statutory rights may be expressed through contract terms, those terms must clearly indicate an intention to renounce a known privilege or power.” Ass'n of Or. Corrs. Empls. v. State, 353 Or. 170, 183 (2013) (quotation marks omitted) (citing Taylor v. U.S. Nat'l Bank, 248 Or. 538, 544 (1968) (stating that contract language construed to relinquish a widow's statutory right to certain property must evince a “clear and explicit” waiver of those rights)).
To be effective, a release need not detail every potential claim to be released. For example, a general release of “any and all claims, demands, rights, damages, expenses, loss of compensation, suits and causes of action, whether known or unknown, now existing,” is effective to release claims not specified. Ristau, 318 Or. at 388; see also Patterson, 141 Or.App. at 52-53 (holding that release was effective where plaintiff agreed to “release[], acquit[] and forever discharge[]” defendant from “any and all claims, charges, actions and lawsuits” related to use of defendant's device that plaintiff might have “now or in the future”). But “[i]t is axiomatic that a release cannot be construed to include claims not within the contemplation of the parties.” Patterson, 141 Or.App. at 55. “Before a release is valid, there must be both the knowledge of the existence of the claim and an intention to relinquish it, in the absence of a specific promise to release liability for unanticipated claims.” Id.
Here, the contract, when considered in its entirety, cannot plausibly mean that Khamnayev forfeited potential discrimination claims against Schnitzer. See, e.g., Milne v. Milne Const. Co., 207 Or.App. 382, 389 (2006) (The court must “interpret the agreement as a whole, not word by word or sentence by sentence.”). The agreement is a “Separation Agreement,” not a settlement agreement. It sets out the date of Khamnayev's termination, Schnitzer's obligation to pay her “separation benefits,” and her obligations to return company property, maintain confidential information, and refrain from making disparaging or defamatory remarks about Schnitzer. More importantly, the agreement makes no reference to Khamnayev's potential legal claims against Schnitzer or to Schnitzer's potential liability for such claims. (See Agreement.) The agreement does not acknowledge Khamnayev's right to bring legal action, much less contain a promise not to exercise that right.
Without any term that “clearly indicate[s] an intention to renounce” Khamnayev's right to bring legal action against her former employer, the agreement cannot be read as a release of that right. Ass'n of Or. Corrs. Empls., 353 Or. at 183 (quotation marks omitted); see also Patterson, 141 Or.App. at 53 (“Inherent in the purpose of a release agreement is a promise to abandon a claim or right that is within the contemplation of the parties.” (emphasis added)).
Absent any release of liability, the agreement's nondisparagement clause cannot plausibly be read to prohibit Khamnayev from exercising her right to bring legal action against Schnitzer. Schnitzer should therefore be denied leave to amend its breach of contract claim. See Carrico, 656 F.3d at 1008 (denying leave to amend where party seeking leave did not “propose any specific allegations that might rectify” the deficiency in their claim).
C. Requests to Seek Attorney Fees Related to this Motion
Both parties also request leave to seek attorney fees related to Khamnayev's Motion to Dismiss under ORS § 20.105. (Pl.'s Mot. at 9; Def.'s Resp. at 10.) On the record before it, however, the court cannot conclude that either Schnitzer's claims or Khamnayev's motion were “entirely devoid of legal or factual support at the time” they were made. Lenn, 221 Or.App. at 248. Accordingly, the parties' requests to seek attorney fees as to this motion should be denied.
CONCLUSION
For the above reasons, the Khamnayev's motion to dismiss Schnitzer's co (ECF No. 31) should be GRANTED IN PART and DENIED IN PART.
SCHEDULING ORDER
The Findings and Recommendation will be referred to a district judge. Objections, if any, are due within 14 days. If no objections are filed, the Findings and Recommendation will go under advisement on that date. If objections are filed, a response is due within 14 days. When the response is due or filed, whichever date is earlier, the Findings and Recommendation will go under advisement.