Opinion
No. C 04-01038 SI.
September 24, 2004
ORDER DISMISSING SUPPLEMENTAL STATE LAW CLAIMS
The motion by various defendants to dismiss for failure to state a claim, to dismiss supplemental state law claims, and for a more definite statement came on for hearing on September 24, 2004. Having considered the arguments of the parties and the papers on file, including the supplemental memoranda filed by the parties in response to this Court's August 4, 2004 Order requesting the views of the parties on the issue of supplemental jurisdiction, the Court will DISMISS all supplemental state law claims in this action.
BACKGROUND
Plaintiffs Won Woong Im, Song Taek Jo, Yeoung Cheoul Jou, Chong Duk Kim, Ki Hong Kim, San Woon Kim, Sa Hyun Moon and Paul Na (collectively hereafter "plaintiffs") are former employees of defendant Jin Construction Electric Company ("JCEC"). According to their complaint, JCEC hired plaintiffs to work as electricians on prevailing wage projects contracted to JCEC. Plaintiffs allege that JCEC failed to pay them overtime and prevailing wages on various public works between 1999 and 2003. Plaintiffs also allege multiple statutory causes of action against their former employer.
LEM Construction, Transworld Construction, Inc., Kin Wo Construction, Inc., C.M. Chiang Construction Co., and Fedcon General Contractors (collectively hereafter "Prime Contract Defendants") are general contractors that entered into subcontracts with JCEC for the electrical work on the various projects. Plaintiffs allege that these contractors are also liable for the unpaid wages and penalties for which JCEC is allegedly liable.
Payment bonds were legally required on the projects and plaintiffs allege that the surety companies, Washington International Insurance Co., Colonial American Surety Co., CGU Insurance Co. and Safeco Insurance Co. of America (collectively hereafter "Surety Defendants"), issued such bonds to ensure payment by the surety of all wage claims due if JCEC failed to pay. Plaintiffs include the Surety Defendants in this action on the basis that the bonds issued are liable for claims against JCEC arising under the various projects.
Based on these allegations, plaintiffs assert ten causes of action, including: (i) violation of the Fair Labor Standards Act ( 29 U.S.C. §§ 207 and 216, "FLSA"), against JCEC; (ii) violation of California Labor Code §§ 1771, 1774, 1775, 1776 and 1815, and/or San Francisco Administrative Code § 6.22, against JCEC and the Prime Contract Defendants; (iii) breach of contract as third party beneficiary, against JCEC and the Prime Contract Defendants; (iv) violation of California Labor Code §§ 510, 1194 and 1815, against JCEC; (v) violation of California Labor Code §§ 203, 203.5 and 227.3, against JCEC; (vi) violation of California Labor Code §§ 223 and 1778, against JCEC; (vii) violation of California Business and Professions Code § 17200, against JCEC and the Prime Contract Defendants; (viii) violation of California Business and Professions Code § 17043, against JCEC and the Prime Contract Defendants; (ix) breach of contract, against the Surety Defendants; and (x) enforcement of stop notices, against contracting public entities.
On March 16, 2004, plaintiffs' complaint was filed against all defendants. Defendants Washington International Insurance Company, Lem Construction, and Transworld Construction, Inc. filed a motion to dismiss for failure to state a claim, to dismiss supplemental state law claims, and for a more definite statement on May 5, 2004. The remaining defendants, aside from JCEC, filed briefs in support. Defendant JCEC never responded to the plaintiffs' complaint and a default judgment was entered against JCEC on August 2, 2004. In response to entering a default judgment against JCEC, this Court issued an order requesting the views of the parties on whether this Court continues to have jurisdiction over the remaining parties and claims.
LEGAL STANDARD
A motion to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction may either "attack the allegations of the complaint or may be made as a `speaking motion' attacking the existence of subject matter jurisdiction in fact." Thornhill Publ'g Co. v. General Tel. And Elec., 594 F.2d 730, 733 (9th Cir. 1979) (citing Land v. Dollars, 330 U.S. 731, 735 n. 4. (1947)). Where the jurisdictional issue is separable from the merits of the case, the court need only consider evidence related to the jurisdiction issue, and rule on that issue, resolving factual disputes as necessary. Id. (citing Berardinelli v. Castle Cooke, Inc., 587 F.2d 37 (9th Cir. 1978))
DISCUSSION
In their separately filed responses to this Court's order on August 4, 2004, the Prime Contract Defendants and the Surety Defendants argue that in light of defendant JCEC's default, this Court should dismiss plaintiffs' remaining claims pursuant to 28 U.S.C. § 1367(c). Fedcon Response at 3; Washington Response at 2. Specifically, both the Prime Contract Defendants and the Surety Defendants assert that (1) state claims predominate over the federal claim and (2) this Court will be required to adjudicate noveland complex issues of state law. Fedcon Response at 3; Washington Response at 2; Kin Wo Response at 3.
Plaintiffs argue that this Court should retain jurisdiction over the remaining parties and claims in spite of JCEC's default. Plaintiffs' Response at 1. Specifically, plaintiffs argue that the default of JCEC does not render their FLSA claim invalid or dismissed. Id. Plaintiffs assert that even though this Court will no longer review the substantive claim under FLSA against JCEC, the Court will still need to determine the amount of damages. Id. at 2 Additionally, plaintiffs argue that the remaining state claims arose out of a "common nucleus of operative fact," so this Court should retain its jurisdiction in the interest of judicial economy, convenience, and fairness.Id. at 1.
This Court finds the argument set forth by the defendant parties persuasive. Section 1367(c) of Title 28 of the United States Code provides, in pertinent part:
The district courts may decline to exercise supplemental jurisdiction over a claim under subsection (a) if —
(1) the claim raises a novel or complex issue of State law,
(2) the claim substantially predominates over the claim or claims over which the district court has original jurisdiction,
(3) the district court has dismissed all claims over which it has original jurisdiction, or
(4) in exceptional circumstances, there are other compelling reasons for declining jurisdiction.28 U.S.C. § 1367(c). A default judgment does not qualify as a dismissal for the purpose of Section 1367(c)(3), and it cannot serve as the basis for declining supplemental jurisdiction.Trustees of Constr. Indus. Laborers Health and Welfare Trust v. Desert Valley Landscape Maintenance, Inc., 333 F.3d 923, 926 (9th Cir. 2003). However, supplemental jurisdiction is a "doctrine of discretion, not a plaintiff's right," Medrano v. City of Los Angeles, 973 F.2d 1499, 1506 (9th Cir. 1992), and the entry of default judgment does not preclude the court from declining to exercise supplemental jurisdiction under 28 U.S.C. § 1367(c)(1)-(2).
Here, adjudication of the remaining state claims would require this Court to determine novel and complex state issues, potentially including: (1) whether employees have a private right of action against the non-employer prime contractors and their sureties for California Labor Code violations; (2) whether employees of a subcontractor can state claims directly against the non-employer prime contractors on a third party beneficiary basis; (3) whether California's Unfair Competition Law applies to non-employers for wage law violations; and (4) whether penalties can be imposed against a surety under California Labor Code § 203.5. Washington Response at 2-3. Plaintiffs additionally assert California Labor Code § 2699, enacted on January 1, 2004, in support of their second cause of action. Pls.' Opp'n to C.M. Chiang at 2; Pls.' Opp'n to Kin Wo at 5; Pls.' Opp'n to Fedcon at 4. Subsection § 2699(c) of the California Labor Code allows "an aggrieved employee" to recover through a civil action filed on behalf of himself or others. However, the statue defines "an aggrieved employee" as "any person who was employed by the alleged violator . . ." California Labor Code § 2699(c)(4) (2004) (emphasis added). Plaintiffs have included the Prime Contract Defendants, who are not employers of the plaintiffs, as defendants in the second cause of action, again raising a new question of state law. This Court believes that such noveland complex state law issues are better resolved, in the first instance, in the state court.
This action also falls under 28 U.S.C. § 1367(c)(2), which empowers district courts to decline to exercise supplemental jurisdiction where "the claim substantially predominates over the claim or claims over which the district court has original jurisdiction." Here, the number of state claims substantially predominate the only federal claim, for which the sole defendant JCEC has defaulted. The sheer number of state claims (9), defendants (17), construction projects, and plaintiffs, all point to the dismissal of the state claims, particularly in light of the fact that the only federal-claim defendant, JCEC, defaulted after the filing of the Complaint and before any substantial litigation, pretrial proceedings or trial. Indeed, where "all federal-law claims are eliminated before trial, the balance off actors to be considered under the pendant jurisdiction doctrine — judicial economy, convenience, fairness, and comity — will point toward declining to exercise jurisdiction over the remaining state-law claims." Carnegie-Mellon University v. Cohill, 484 U.S. 343, 350 n. 7 (1988). Therefore, this Court holds that the remaining state claims are dismissed without prejudice.
Given that the Court grants defendants' motion to dismiss for lack of subject matter jurisdiction, the Court will not address the defendants' remaining claims
CONCLUSION
For the foregoing reasons and for good cause shown, the Court hereby declines to exercise supplemental jurisdiction and GRANTS defendants' motions to dismiss all state law claims, without prejudice, for lack of subject matter jurisdiction.
IT IS SO ORDERED.