Opinion
C/A 1:21-1510-TLW-SVH
07-12-2021
Charles C. Woods, Jr., Plaintiff and Counter Defendant, v. Swiss Krono USA, Inc., Defendant and Counter Claimant.
REPORT AND RECOMMENDATION
Shiva V. Hodges United States Magistrate Judge
Plaintiff/Counter Defendant Charles C. Woods, Jr. (“Plaintiff”), filed this action in the Barnwell County Court of Common Pleas against his previous employer Defendant/Counter Claimant Swiss Krono USA, Inc. (“Defendant”), alleging disability discrimination in violation of the Americans with Disabilities Act of 1990, as amended, 42 U.S.C. § 12101 et seq. (“ADA”), retaliation in violation of the ADA, worker's compensation retaliation, and defamation. Defendant removed this case to this court on May 20, 2021, and thereafter filed an answer to the complaint and counterclaims for declaratory judgment and breach of contract.
This matter comes before the court on Plaintiff's motion to dismiss Defendant's counterclaims pursuant to Fed.R.Civ.P. 12(b)(6). [ECF No. 7]. The motion having been briefed [ECF Nos. 8, 13], it is ripe for disposition.
Pursuant to the provisions of 28 U.S.C. § 636(b)(1)(B), and Local Civ. Rule 73.02(B)(2)(e) (D.S.C.), this matter has been assigned to the undersigned for all pretrial proceedings. Having carefully considered the parties' submissions and the record in this case, the undersigned recommends the district judge deny Plaintiff's motion to dismiss.
I. Factual Background
The parties agree to the following facts for purposes of resolving Plaintiff's pending motion. [See ECF No. 7-1 at 1-2, ECF No. 8 at 1-3]. Plaintiff was employed by Defendant from July 1, 2019 through June 26, 2020. On or about December 20, 2019, Plaintiff was involved in a workplace accident for which he reported injuries and subsequently filed a worker's compensation claim, retaining counsel to represent him.
Plaintiff and Defendant, through their respective attorneys, negotiated a settlement of Plaintiff's worker's compensation claim. Separately, Plaintiff's counsel purportedly negotiated a settlement and release (the “Settlement Agreement”) by Plaintiff of all employment-related claims. Plaintiff's counsel purportedly also agreed to a stipulation mandating Plaintiff's resignation from his employment with Defendant, effective immediately.
Plaintiff alleges he was unaware of the Settlement Agreement.
Plaintiff initiated EEOC claims against Defendant that form the basis of this lawsuit. As stated above, Defendant has asserted counterclaims for declaratory judgment and for breach of the Settlement Agreement. Plaintiff moves to dismiss Defendant's counterclaims, arguing that (1) this court lacks subject-matter jurisdiction over Defendant's counterclaims and (2) Defendant fails to state a claim for declaratory judgment or breach of contract in light of SCRCP 43(k).
Defendant alleges that Plaintiff's counsel informed Defendant's counsel in the worker's compensation matter that Plaintiff “will sign a resignation and release of $1000 and no contest of unemployment benefits. He has already filed an EEOC claim.” [ECF No. 5 ¶ 100].
II. Discussion
A. Standard on Motion to Dismiss
A motion to dismiss under Rule 12(b)(6) examines the legal sufficiency of the facts alleged on the face of the plaintiff's complaint. Edwards v. City of Goldsboro, 178 F.3d 231, 243-44 (4th Cir. 1999). To survive a Rule 12(b)(6) motion, “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1949 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The court is “not required to accept as true the legal conclusions set forth in a plaintiff's complaint.” Edwards, 178 F.3d at 244. Indeed, “[t]he presence of a few conclusory legal terms does not insulate a complaint from dismissal under Rule 12(b)(6) when the facts alleged in the complaint cannot support the legal conclusion.” Young v. City of Mount Ranier, 238 F.3d 567, 577 (4th Cir. 2001).
B. Analysis
Plaintiff first argues that “this Court cannot exercise subject-matter jurisdiction over an alleged pre-suit settlement agreement.” [ECF No. 7-1 at 2]. In support, Plaintiff cites Fairfax Countywide Citizens Ass'n v. Fairfax Cty., Va., 571 F.2d 1299 (4th Cir. 1978). In Fairfax, the Fourth Circuit held the district court lacked subject-matter jurisdiction to enforce a settlement agreement, noting as follows:
. . . . upon repudiation of a settlement agreement which had terminated litigation pending before it, a district court has the authority . . . to vacate its prior dismissal order and restore the case to its docket [but not to] enforce the settlement agreement against the breaching party . . . . Association's contract claim did not arise “under the Constitution, laws, or treaties of the United States.” The settlement agreement between Association and County, while serving to terminate litigation of a federal claim, was a private contract entered into after private negotiations between the parties. Both its validity and the interpretation of its terms are governed by Virginia law. If, instead of filing a motion under Rule 60(b)(6), Association had filed a new complaint in the district court, alleging breach of contract and seeking specific performance, there is little doubt that the claim would have been dismissed on jurisdictional grounds. The same is true if the parties had negotiated and entered into a settlement agreement prior to any litigation, and thereafter Association, alleging the breach of the agreement, sought to invoke federal jurisdiction to enforce it.Id. at 1302-03 (4th Cir. 1978) (citations and footnotes omitted). The Fourth Circuit further noted the lack of federal question jurisdiction, diversity jurisdiction, or statutory jurisdiction in the case. Id. at 1303-04 & n. 10.
Although Plaintiff argues otherwise, the holding of Fairfax is not that a district court cannot exercise subject-matter jurisdiction over an alleged pre-suit settlement agreement, but that district courts may not enforce settlement agreements after dismissal absent an independent jurisdictional basis or the appropriate exercise of ancillary jurisdiction. Fairfax is inapplicable to the instant case.
Plaintiff has asserted two causes of action under the ADA, both of which relate to alleged actions that occurred while he was employed by Defendant, as do Plaintiff's claims for worker's compensation retaliation and defamation. The court has subject-matter jurisdiction over the ADA claims because they raise a federal question. Defendant has asserted a federal law counterclaim under the federal Declaratory Judgment Act and a state law claim for breach of contract, both of which relate to the Settlement Agreement between the parties, under the terms of which Plaintiff allegedly agreed to release the ADA claims and all other claims related to employment by Defendant. Accordingly, all of the claims in this matter, both Plaintiff's and Defendant's, are part of the same case or controversy, and this court has supplemental jurisdiction under 28 U.S.C. § 1367 over Defendant's counterclaims.
Here, unlike in Fairfax, Defendant's claim for breach of the settlement agreement is not “factually and legally distinct from the claim giving rise to the original litigation, ” 571 F.2d at 1305, but is, as stated, part of the same case or controversy. See, e.g., Salami v. Jubilee Association of Maryland, C/A No. TDC-20-3532, 2021 WL 2784632, at *1 (D. Md. July 2, 2021) (dismissing the plaintiff's employment discrimination claims where plaintiff had entered into a severance agreement waiving his rights to bring such a claim and declining to continue to exercise supplement jurisdiction over defendant's breach of the agreement counterclaim where all federal claims had been dismissed).
Although argued by Defendant, Plaintiff does not address the above basis for this court's subject-matter jurisdiction and instead argues that Fairfax is not distinguishable from the instant case and that Fields v. Richland Cty., C/A No. 3:17-0443-MGL-TER, 2020 WL 615070 (D.S.C. Feb. 10, 2020) reinforces “Fairfax's holding to decline enforcement of settlement agreements made prior to commencement of litigation.” [ECF No. 13 at 2].
Plaintiff's argument concerning Fields fails for the same reasons his argument failed concerning Fairfax. In both cases, a party sought to enforce a settlement agreement unanchored to any basis for subject matter jurisdiction. In Fields, all defendants had been dismissed from the case when the plaintiff sought for the court “to exercise its inherent authority to grant his motion to enforce settlement.” 2020 WL 615070, at *2. The court declined, finding the situation before the court to have been addressed by Fairfax in that a district court lacks subject matter jurisdiction where “the parties had negotiated and entered into a settlement agreement prior to any litigation, and thereafter [a party], alleging breach of the agreement, sought to invoke federal jurisdiction to enforce it.” Id. at *3.
Such is not the case here. Accordingly, the undersigned recommends the district judge deny Plaintiff's motion to dismiss on this basis.
Given the recommendation above, it is unnecessary to address Defendant's additional argument that this court has subject matter jurisdiction over its counterclaims because they are compulsory. [ECF No. 8 at 5 (citing Fed.R.Civ.P. 13(a)(1)(A))].
Plaintiff next turns to SCRCP 43(k), arguing Defendants fails to state a claim (1) for declaratory judgment because the Settlement Agreement was not signed by him and is thus not binding under this rule and (2) for breach of contract because this rule is the “sole enforcement mechanism of settlement agreement under South Carolina law.” [ECF No. 7-1 at 4-6 (citing S.C. Hum. Affs. Comm'n v. Zeyi Chen, 430 S.C. 509 (2020))].
The rule at issue provides in relevant part as follows:
No agreement between counsel affecting the proceedings in an action shall be binding unless reduced to the form of a consent order or written stipulation signed by counsel and entered in the record, or unless made in open court and noted upon the record, or reduced to writing and signed by the parties and their counsel.SCRCP 43(k). As clarified by the South Carolina Supreme Court, “Rule 43(k) is applicable to settlement agreements [and] is intended to prevent disputes as to the existence and terms of agreements regarding pending litigation.” Chen, 430 S.C. at 519 (citations omitted).
“South Carolina Rules of Civil Procedure govern actions brought in South Carolina courts, not federal courts.” Nationwide Mut. Ins. Co. v. Ruff, C/A No. 0:11-1011-CMC, 2011 WL 2491345, at *3 (D.S.C. June 22, 2011). Plaintiff's reliance on SCRCP 43(k) is misplaced because the Federal Rules of Civil Procedure, which contain no equivalent to SCRCP 43(k), govern the court's actions in this case. See, e.g., Bretzinger v. Crestwood Homes, LLC, C/A No. 0:13-02771-JMC, 2015 WL 12803651, at *4 (D.S.C. May 7, 2015) (granting motion to enforce a settlement agreement based on South Carolina law, arising under diversity jurisdiction, holding “that Truslow, Plaintiffs' attorney of record, bound Plaintiffs when he stated his acknowledgement to the agreed upon terms of the settlement . . . . neither Plaintiffs' affidavits nor Rule 43(k), SCRCP, require the court to find otherwise”) (citing Nationwide, 2011 WL 2491345, at *3)); see also, e.g., Hoyos v. Telecorp Commc'ns, Inc., 488 F.3d 1, 5 (1st Cir. 2007) (“a federal court sitting in diversity or exercising supplemental jurisdiction over state law claims must apply state substantive law, but a federal court applies federal rules of procedure to its proceedings”) (citing Gasperini v. Ctr. for Humanities, Inc., 518 U.S. 415, 427 (1996)).
Plaintiff briefly references Founders Ins. Co. v. Richard Ruth's Bar & Grill LLC, C/A No. 2:13-CV-03035-DCN, 2016 WL 3219538, at *7 (D.S.C. June 8, 2016), as representing a “[f]ederal decision applying Rule 43(k) to an alleged settlement agreement.” [ECF No. 7-1 at 4]. However, the court's inquiry in Founders is different than here, where the court was determining whether the insurance company ever had a reasonable opportunity to settle the claim at issue within the policy limits. The court cited SCRCP 43(k) as one of multiple examples evidencing that the insurance company had no such opportunity. Thus, Founders is distinguishable from the instant case.
Plaintiff does not address the argument that federal procedural law governs in this instance. [See ECF No. 13].
Accordingly, the undersigned recommends the district judge deny Plaintiffs motion to dismiss on this basis.
Given the recommendation above, it is unnecessary to address the parties' arguments as to whether SCRCP 43(k) is applicable to pre-suit settlement agreements or only pending litigation. [See ECF No. 8 at 8-12, ECF No. 13 at 3].
III. Conclusion and Recommendation
For the foregoing reasons, the undersigned recommends the district judge deny Plaintiffs motion to dismiss. [ECF No. 7].
IT IS SO RECOMMENDED.
The parties are directed to note the important information in the attached “ Notice of Right to File Objections to Report and Recommendation.”
Notice of Right to File Objections to Report and Recommendation
The parties are advised that they may file specific written objections to this Report and Recommendation with the District Judge. Objections must specifically identify the portions of the Report and Recommendation to which objections are made and the basis for such objections. “[I]n the absence of a timely filed objection, a district court need not conduct a de novo review, but instead must ‘only satisfy itself that there is no clear error on the face of the record in order to accept the recommendation.'” Diamond v. Colonial Life & Acc. Ins. Co., 416 F.3d 310 (4th Cir. 2005) (quoting Fed.R.Civ.P. 72 advisory committee's note).
Specific written objections must be filed within fourteen (14) days of the date of service of this Report and Recommendation. 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 72(b); see Fed. R. Civ. P. 6(a), (d). Filing by mail pursuant to Federal Rule of Civil Procedure 5 may be accomplished by mailing objections to:
Robin L. Blume, Clerk United States District Court 901 Richland Street Columbia, South Carolina 29201
Failure to timely file specific written objections to this Report and Recommendation will result in waiver of the right to appeal from a judgment of the District Court based upon such Recommendation. 28 U.S.C. § 636(b)(1); Thomas v. Arn, 474 U.S. 140 (1985); Wright v. Collins, 766 F.2d 841 (4th Cir. 1985); United States v. Schronce, 727 F.2d 91 (4th Cir. 1984).