United States District Court, E.D. Louisiana
ZACHARY HENDERSON, ET AL.
DAT DOG ENTERPRISES, LLC
ORDER AND REASONS
J. BARBIER UNITED STATES DISTRICT JUDGE
the Court is a Motion to Dismiss Counterclaims
(Rec. Doc. 28) filed by
Plaintiffs/Counter-defendants, Zachary Henderson, Erin Spath,
Kaleigh Thomas, and Heidi Taylor (collectively,
“Plaintiffs”), an opposition filed by
Defendant/Counterclaimant Dat Dogs Enterprises, LLC
(“Dat Dogs”) (Rec. Doc. 35),
Plaintiffs' reply (Rec. Doc. 38), and
Dat Dogs' sur-reply (Rec. Doc. 41).
Having considered the motion and legal memoranda, the record,
and the applicable law, the Court finds that the motion
should be GRANTED.
AND PROCEDURAL HISTORY
litigation arises out of Plaintiffs' allegations that Dat
Dogs requires its serving bartenders to participate in a
“tip pool” that does not comply with the Fair
Labor Standards Act (“FLSA”) and its regulations.
In December 2017, Plaintiffs filed a collective
action pursuant to 29 U.S.C. § 216(b) on
behalf of all other current and former similarly situated
employees who worked for Dat Dogs within three years prior to
the date the lawsuit was filed. Plaintiffs' complaint
alleges that for the entirety of Plaintiffs' employment,
Dat Dogs has operated some version of this “forced wage
deduction scheme, ” which entails deducting a sum equal
to five percent of each shift's gross sales (minus
alcohol) from the wages of Plaintiffs and other service
bartenders who are paid a subminimum wage of $2.13 per hour
for non-overtime hours and then re-distributing that money to
other employees who are paid a regular rate of over $7.25 per
hour, including cooks, dishwashers, and other back of house
employees, as well as managers. Plaintiffs allege that Dat
Dogs' wage deduction scheme violates the FLSA and does
not qualify for the tip credit set forth in 29 U.S.C. §
203(m) because it is an unlawfully constituted tip pool.
2018, Dat Dogs filed an amended answer to Plaintiffs'
complaint and asserted counterclaims. Specifically, Dat Dogs
alleges that Plaintiffs willfully and intentionally failed to
report cash tips earned during the course of employment with
Dat Dogs, resulting in Plaintiffs' receipt of minimum
adjustment payments to which they were not entitled. Dat Dogs
concludes that Plaintiffs unjustly enriched themselves
without cause at Dat Dogs' expense in violation of
Louisiana law. Dat Dogs seeks restoration of tip-minimum
payments made to Plaintiffs as a result of their alleged
misrepresentations pursuant to Louisiana Civil Code articles
2298, 2299, and 2300.
argue that Dat Dogs' counterclaims should be dismissed
with prejudice pursuant to Federal Rules of Civil Procedure 9
and 12. First, Plaintiffs argue that their motion to dismiss
should be granted because the Fifth Circuit prohibits
employer counterclaims like the ones at issue in FLSA cases.
(Rec. Doc. 28-2, at 4). Plaintiffs assert that the narrow
exception to the rule enumerated in Brennan v.
Heard, 491 F.2d 1 (5th Cir. 1974) is not applicable in
this case because Dat Dogs did not prepay an overtime
obligation it expected to occur in a later pay period. (Rec.
Doc. 28-2, at 6).
Plaintiffs argue that this Court should dismiss Dat Dogs'
counterclaims because the allegations against Plaintiffs
sound in fraud, and Dat Dogs failed to satisfy the heightened
pleading standard of Rule 9. (Rec. Doc. 28-2, at 7-8).
Specifically, Plaintiffs aver that Dat Dogs fails to identify
when Plaintiffs allegedly under-reported cash tips, the
amount of cash tips that were allegedly under-reported, or
the value of the unjust enrichment Dat Dogs allegedly
suffered. (Rec. Doc. 28-2, at 8-9).
Dogs argues in opposition that Plaintiffs' motion to
dismiss should be denied because the Fifth Circuit permits
counterclaims in FLSA actions under the circumstances
presented in this case, and the state law claims asserted by
Dat Dogs are not required to adhere to the heightened
pleading standard of Rule 9 because fraud is not alleged.
(Rec. Doc. 35). First, Dat Dogs asserts that the Fifth
Circuit's ban on counterclaims in FLSA cases does not
apply where, as here, the employer is seeking to retrieve
monies paid in wages that the employee did not earn and the
set-off does not reduce the overall damages award below the
sub-minimum wage. (Rec. Doc. 35, at 4-8).
Dogs next argues that this Court has supplemental
jurisdiction over Dat Dogs' compulsory counterclaims that
arose out of the same transaction or occurrence as the main
demand asserted by Plaintiffs. (Rec. Doc. 35, at 9). Dat Dogs
asserts that the allegations in the complaint and the
counterclaims at issue both revolve around Dat Dogs' tip
policies and how its employees were paid under those
policies. (Rec. Doc. 35, at 10-11). Dat Dogs alleges that
courts within the Fifth Circuit “routinely allow
compulsory counterclaims to proceed in FLSA cases.”
(Rec. Doc. 35, at 10).
Dat Dogs argues that its allegations need not comply with the
heightened pleading standard of Rule 9 because the
counterclaims state a claim for unjust enrichment and
recoupment of monies due, not fraud. (Rec. Doc. 35, at 11).
Specifically, Dat Dogs emphasizes that unjust enrichment and
reimbursement claims under Louisiana law are governed only by
Rule 8(a), which only requires a short and plain statement
showing that the pleader is entitled to relief. (Rec. Doc.
35, at 12). However, Dat Dogs argues that even if this Court
finds that Rule 9 is applicable, Dat Dogs' allegations
satisfy the requisite specificity of Rule 9. (Rec. Doc. 35,
at 13). Dat Dogs notes that the counterclaims identify the
parties it believes were unjustly enriched, state that the
unjust enrichment took place at Dat Dogs' Frenchmen and
Magazine Street locations during Plaintiffs' employment
with Dat Dogs, and state that it occurred through
Plaintiffs' failure to report cash tips they received.
(Rec. Doc. 35, at 14). Dat Dogs goes on to argue that even if
this Court strikes the language sounding in fraud from Dat
Dogs' counterclaims, it still states a valid claim for
relief because the “willfully, knowingly, and
intelligently” language is not an element of the state
law claims alleged. (Rec. Doc. 35, at 14).
raise four arguments in reply. (Rec. Doc. 38). First,
Plaintiffs contest Dat Dogs' assertion that the
counterclaims at issue fall within the exception enumerated
in Singer v. City of Waco, 324 F.3d 813 (5th Cir.
2003) because Dat Dogs' counterclaims do not represent
overtime obligations already fulfilled. (Rec. Doc. 38, at 2).
Thus, Plaintiffs argue that the counterclaims cannot be
asserted in this FLSA action because they do not involve
pre-payment of wages. (Rec. Doc. 38, at 3). Second,
Plaintiffs clarify that Dat Dogs is asserting affirmative
counterclaims for monetary relief, not merely raising a
defense seeking setoff for damages. (Rec. Doc. 38, at 3).
Next, Plaintiffs argue that Dat Dogs' counterclaims are
legally invalid in this FLSA action regardless of whether
they qualify as compulsory or permissive. (Rec. Doc. 38, at
4). Finally, Plaintiffs challenge Dat Dogs' assertion
regarding the applicability of Rule 9. (Rec. Doc. 38, at 6).
Specifically, Plaintiffs argue that the heightened pleading
standard applies to Dat Dogs' counterclaims sounding in
fraud and the allegations “fall woefully short”
in that Dat Dogs fails to allege the amount of tips it
believes went unreported, the dates and pay periods on which
the alleged misrepresentations occurred, and the amount of
tip-minimum payments which it believes are at issue. (Rec.
Doc. 38, at 7-8). Based on the foregoing, Plaintiffs re-urge
this Court to dismiss Dat Dogs' counterclaims.
sur-reply, Dat Dogs emphasizes the importance of this
Court's determination regarding whether Dat Dogs'
counterclaims are compulsory or permissive. (Rec. Doc. 41).
Dat Dogs first argues that this distinction is the
determining factor as to whether the counterclaims should be
dismissed. (Rec. Doc. 38, at 1). Additionally, Dat Dogs
asserts that if this Court grants Plaintiffs' motion to
dismiss the counterclaims, Dat Dogs will be precluded from