Opinion
CIV-02-2245 PHX JWS [Re: Motions at Docket Nos. 20 and 23]
November 5, 2003
ORDER FROM CHAMBERS
1. MOTIONS PRESENTED
At docket 20, plaintiff and counter-defendant Ammar Halloum moves to dismiss defendant and counter-claimant Intel Corporation's counterclaim pursuant to Federal Rule of Civil Procedure 12(b)(1), (2), and (6). At docket 23, Intel opposes the motion and moves for default judgment on its counterclaim. Halloum opposes Intel's motion for default judgment. Oral argument was not requested, and it would not assist the court.
II. BACKGROUND
This is a discrimination action pursuant to Title VII of the Civil Rights Act of 1964, as amended. On or about September 13, 2002, plaintiff filed a complaint against Intel, Paul Callaghan, and Jane Doe Callaghan in the Superior Court of Maricopa County, Arizona. Halloum alleged discrimination based upon his national origin and religion, retaliation for his internal and EEOC discrimination complaint, and intentional infliction of emotional distress. On November 7, 2002, Intel filed a timely notice of removal pursuant to 28 U.S.C. § 1441 (a) and 1446. Subsequently, Halloum voluntarily dismissed defendants Paul and Jane Doe Callaghan.On March 18, 2003, plaintiff filed his first amended complaint in which he added two retaliation claims. On June 24, 2003, Halloum filed a revised first amended complaint. On June 24, 2003, Intel filed its answer to Halloum's first amended complaint and asserted a counterclaim alleging breach of contract, unjust enrichment, and fraud/deceit. The court has federal question and supplemental jurisdiction.
Doc. 13.
Doc. 16.
Doc. 17.
See 28 U.S.C. § 1331 (federal question) and § 1367 (supplemental).
III. DISCUSSION
A. Motion to DismissHalloum asserts various Federal Rule of Civil Procedure 12(b) grounds in his motion to dismiss Intel's counterclaim — lack of subject matter and personal jurisdiction and failure to state a claim upon which relief can be granted. Halloum contends the state law nature of Intel's claims foreclose this court's subject matter jurisdiction. Furthermore, Halloum claims the Relocation Agreement between him and Intel, which is at issue in the counterclaim, provides for mandatory arbitration and an exclusive California forum. Intel responds that because its counterclaim arises out of the same transaction or occurrence as present in Halloum's complaint, supplemental jurisdiction provides the court with jurisdiction over its counterclaim. Intel also disputes Halloum's interpretation of the Relocation Agreement's provisions.
A facial challenge to the court's subject matter jurisdiction is directed at the legal sufficiency of a claim. The non-moving party receives the same protections as those under a Rule 12(b)(6) motion, and the court applies a standard comparable to that used for Rule 12(b)(6) motions. The court accepts the non-moving party's allegations "as true and constru[es] them in the light most favorable to the [non-moving party]; the court will not look beyond the face of the complaint to determine jurisdiction. The court will not dismiss a claim under 12(b)(1) unless it appears without any merit. The burden of proof is on the party asserting jurisdiction.
See Lee v. City of Los Angeles, 250 F.3d 668, 679 (9th Cir. 2001) (12(b)(6) standard); Dreier v. United States, 106 F.3d 844, 847 (9th Cir. 1996) (12(b)(1) standard). But see Assoc. of Am. Med. Colls, v. United States, 217 F.3d 770, 778 (9th Cir. 2000) (distinguishing between 12(b)(1) and (2)(b)(6) motions with regard to acceptance of affidavits and other evidence) (citations omitted).
5A CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE: CIVIL 2D § 1350 (1990) ("WRIGHT").
See WRIGHT, § 1340.
It is established "that a grant of jurisdiction over particular subject matter includes the power to adjudicate all matters ancillary to the particular subject matter." Federal Rule of Civil Procedure 13(a) states, in relevant part:
Glens Falls Indem. Co. v. United States, 229 F.2d 370, 373 (9th Cir. 1956). See also 28 U.S.C. § 1367(a).
[a] pleading shall state as a counterclaim any claim . . . if it arises out of the transaction or occurrence that is the subject matter of the opposing party's claim and does not require for its adjudication the presence of third parties of whom the court cannot acquire jurisdiction. But the pleader need not state the claim if (1) at the time the action was commenced the claim was the subject of another pending action
However, if a party's counterclaim is unrelated to the complaint's subject matter, the counterclaim is considered permissive, and generally, courts require an independent basis of federal jurisdiction. The majority of courts agree that the words "transaction or occurrence" are construed liberally in order to further the general policies of the federal rules and carry out the philosophy of Rule 13(a)." Federal courts apply "the liberal logical relationship' test to determine whether two claims arise out of the same `transaction or occurrence.'" This flexible test analyzes "whether the essential facts of the various claims are so logically connected that considerations of judicial economy and fairness dictate that all the issues be resolved in one lawsuit."
6 CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE: CIVIL 2D § 1422 at 169-70 (1990) ("6 WRIGHT").
6 WRIGHT, § 1409 at 50 (citing to Pochiro v. Prudential Ins. Co. of Am., 827 F.2d 1246, 1249 (9th Cir. 1987).
"Pochiro, 827 F.2d at 1249. See also So. Union Co. v. Southwest Gas Corp., 165 F. Supp.2d 1010, 1034 (D. Ariz. 2001).
Id.
Here, the court has federal question jurisdiction over Halloum's complaint. The counterclaim is premised on conduct within the employment relationship, as is plaintiff's complaint. In its proposed amended answer and counterclaim, Intel asserts an affirmative defense based upon Halloum's alleged misrepresentations and breach of the Relocation Agreement. It is reasonable to conclude that Intel's counterclaim is intertwined with the facts alleged in Halloum's complaint. Moreover, Halloum neither contends that the counterclaim's adjudication requires the presence of third parties of whom the court cannot acquire jurisdiction, nor that the counterclaim is the subject of another pending action. The counterclaim, therefore, is compulsory, and the court's subject matter jurisdiction flows from jurisdiction over Halloum's complaint.
On October 29, 2003, the court granted Intel leave to amend its answer and counterclaim. Intel's amendment added an affirmative defense based on the after-acquired evidence doctrine.
Halloum's recitation of the Relocation Agreement's terms is incorrect. Contrary to Halloum's assertion, paragraph ten does not mandate arbitration. The provision states, in relevant part, that [i]f Intel requests, I [Halloum] will agree to submit to arbitration to resolve any dispute under this Agreement and agree to be bound by the decision of the arbitrator. . . ." Halloum admits that Intel did not request arbitration; therefore, arbitration is not a mandatory procedure. Halloum also references the same provision for the premise that California is the only appropriate forum. Paragraph 10 further states: "I understand that enforcement and interpretation of this agreement is governed by California state law." This is a typical choice of law provision, which simply means that any tribunal resolving a Relocation Agreement dispute will apply California substantive law. The provision's language does not establish California as an exclusive forum. Because Halloum's lack of personal jurisdiction argument is premised on the court's alleged absence of subject matter jurisdiction, and the court concludes it has subject matter jurisdiction, it is unnecessary to discuss the issue of personal jurisdiction.
Doc. 24, ex. 2 at 1 (emphasis added).
Doc. 24 at 4, ¶ 4.
See, e.g., Hunt Wesson Foods, Inc. v. Supreme Oil Co., 817 F.2d 75, 77-78 (9th Cir. 1987) (the court concluded that a forum selection clause, which stated "[t]he courts of California, County of Orange, shall have jurisdiction . . . over . . . the interpretation of [the] contract" was not a grant of exclusive jurisdiction). Here, the provision at issue does not include a forum selection preference; rather, it speaks only to a choice of law.
Halloum next alleges that Intel's counterclaim fails to state a claim upon which relief can be granted. A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) tests the legal sufficiency of the claims in the complaint. A dismissal for failure to state a claim can be based on either "the lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory."
Balistreri v. Pacifica Police Dep't. 901 F.2d 696, 699 (9th Cir. 1990).
In reviewing a 12(b)(6) motion, "[a] allegations of material fact in the complaint are taken as true and construed in the light most favorable to the nonmoving party." The court is not required to accept every conclusion asserted in the complaint as true; rather, the court examines "whether conclusory allegations follow from the description of facts as alleged by the plaintiff," A claim should only be dismissed if "it appears beyond doubt that a plaintiff can prove no set of facts in support of his claim which would entitle him to relief."
Vignolo v. Miller, 120 F.3d 1075, 1077 (9th Cir. 1997).
Holden v. Hagopian, 978 F.2d 1115, 1121 (9th Cir. 1992) (quoting Brian Clewer, Inc. v. Pan Am. World Airways, Inc., 674 F. Supp. 782, 785 (C.D.Cal. 1986)).
Vinolo, 120 F.3d at 1077 (citation omitted).
Following the above standard, Halloum's arguments fail. He attacks the merits of Intel's counterclaim — not the legal sufficiency. Intel's claims are cognizable legal theories, and the facts asserted, taken as true, are sufficient to avoid a 12(b)(6) dismissal.
See, e.g., J.K. ex rel. R.K. v. Dillenberg, 836 F. Supp. 694, 700 (D. Ariz. 1993) (a 12(b)(6) motion to dismiss is not "a procedure for resolving a contest about the facts or the merits of the case") (quoting 5A CHARLES ALAN WRIGHT ARTHUR R. MILLER, FEDERAL PRACTICE AND PROCEDURE § 1356 (2d ed. 1990)).
B. Motion for Default Judgment
Intel's contention that the court ought to enter a default judgment in its favor because Halloum's answer to Intel's counterclaim was two days late is contrary to modern policy considerations. Generally, "defaults are not favored by the law and any doubts usually will be resolved in favor of the defaulting party." The preferred policy is to encourage a controversy's resolution on the merits of the case. The court will deny Intel's motion, which is based on a minor procedural infraction.
10A CHARLES ALAN WRIGHT, ET AL., FEDERAL PRACTICE AND PROCEDURE: CIVIL 3D § 2681 at 10 (1998).
IV. CONCLUSION
For the reasons set forth above, plaintiff and counter-defendant's motion to dismiss Intel's counterclaim at docket 20 is DENIED. Intel's motion for default judgment on its counterclaim at docket 23 is DENIED.