United States District Court, S.D. Indiana, Terre Haute Division
ORDER ON MOTION TO DISMISS COUNTERCLAIM
J. McKINNEY, United States District Court
matter comes before the Court on Plaintiff/Counter Defendant,
Jackie Kelso's (“Kelso's”), Motion to
Dismiss Defendants/Counterclaimants, Complete Home
Renovations, Inc.'s, and John R. Wilson's
(collectively, “Complete's”), Counterclaim,
based on a lack of subject matter jurisdiction, pursuant to
Federal Rule of Civil Procedure 12(b)(1) (“Rule
12(b)(1)”). Kelso asserts that supplemental
jurisdiction over Complete's Counterclaim pursuant to 28
U.S.C. § 1367 is improper because it does not arise from
the same case or controversy as Kelso's claims under the
Fair Labor Standards Act (“FLSA”) and the Indiana
Wage Payment Act. Dkt. No. 13. Complete, however, argues that
its Counterclaim and Kelso's Complaint both relate to
Kelso's actions and the actions of her company, If These
Walls Could Talk, Inc. (“If These Walls Could
Talk”), while working with Complete, making
supplemental jurisdiction over the Counterclaim proper. Dkt.
No. 15 at 2.
Complaint, Kelso alleges that she worked for Complete until
she was terminated in August 2016 and that Complete refused
to pay Kelso for all of her accrued wages and for overtime
for hours she worked exceeding forty hours per week. Dkt. No.
1, ¶¶ 4-7. Kelso asserts that Complete's
refusal violated of the FLSA and the Indiana Wage Payment
Act. Id., at ¶¶ 8-15.
response to Kelso's Complaint, Complete denied that Kelso
was employed by Complete and asserted its Counterclaim for
conversion against Kelso. See generally, Dkt. No.
10. In its Counterclaim, Complete alleges that it formed an
independent contractor agreement with If These Walls Could
Talk, an Indiana corporation for which Kelso is the sole
shareholder, officer, and director. Id. at 6.
Complete claims that, under this independent contractor
agreement, If These Walls Could Talk agreed to seek out and
secure job contracts for Complete in exchange for a 10%
commission for each job it secured. Id. Complete
contends that Kelso, as the sole proprietor of If These Walls
Could Talk, converted $3, 175.00 from Complete's accounts
receivable and deposited the funds into her personal bank
accounts, in violation of Indiana Code § 35-43-4-2.
Id. at 6-7.
ruling on a motion to dismiss for lack of subject matter
jurisdiction under [Rule] 12(b)(1), the district court must
accept as true all well-pleaded factual allegations, and draw
reasonable inferences in favor of the plaintiff.”
Ezekiel v. Michel, 66 F.3d 894, 897 (7th Cir. 1995).
When challenged, the party invoking the Court's
jurisdiction bears the burden of establishing that the Court
has proper jurisdiction of the case. Lujan v. Defs. of
Wildlife, 504 U.S. 555, 561 (1992). The Court may view
any evidence submitted beyond the jurisdictional allegations
within a complaint to determine whether the Court has subject
matter jurisdiction over a claim. Id. (quoting
Capitol Leasing Co. v. Fed. Deposit Ins. Corp., 999
F.2d 188, 191 (7th Cir. 1993)).
to 28 U.S.C. § 1367(a), “the district courts shall
have supplemental jurisdiction over all other claims that are
so related to claims in the action within [the courts']
original jurisdiction that they form part of the same case or
controversy under Article III of the United States
Constitution.” In accordance with this statute, a
federal court's jurisdiction over federal questions can
be carried over to state law claims that “‘derive
from a common nucleus of operative fact, ' such that
‘the relationship between [the federal] claim and the
state claim permits the conclusion that the entire action
before the court comprise but one constitutional
case.'” Groce v. Eli Lilly & Co., 193
F.3d 496, 500 (7th Cir. 1999) (quoting City of Chi. v.
Int'l Coll. of Surgeons, 522 U.S. 156, 164-65
(1997)). See also, Ammerman v. Sween, 54 F.3d 423,
424 (7th Cir. 1995) (citing United Mine Workers of Am. v.
Gibbs, 383 U.S. 715, 725 (1966)). This requirement is
satisfied by demonstrating that “ʻ[a] loose
factual connection'” exists between the federal and
state law claims. McCoy v. Iberdrola Renewables,
Inc., 760 F.3d 674, 683 (7th Cir. 2014) (quoting
Baer v. First Options of Chi., Inc., 72 F.3d 1294,
1299 (7th Cir. 1995)).
Complete argues that its conversion claim arises from the
same set of facts giving rise to Kelso's FLSA and Indiana
Wage Payment Act claims, Dkt. No. 15 at 2, Complete has not
provided sufficient facts to establish “a loose factual
connection” between its Counterclaim and Kelso's
claims to support finding supplemental jurisdiction. Complete
has not provided any factual basis beyond alleging it had a
working relationship with Kelso to demonstrate how its
Counterclaim for conversion of Complete's accounts
receivable relates to Kelso's claims alleging that
Complete failed to pay her proper wages, and the existence of
an employment relationship alone cannot establish a common
nucleus of operative fact to support supplemental
jurisdiction in an FLSA case. Villareal v. El Chile,
Inc., 601 F.Supp.2d 1011, 1018-19 (N.D. Ill. 2009).
Furthermore, Kelso's wage payment claims and
Complete's conversion claim do not share any common
elements, and Complete's conversion claim could be
litigated without discussing any of the key facts associated
with Kelso's claims. See Hadad v. World Fuel Serv.,
Inc., No. 13 C 3802, 2013 WL 6498894, at *3 (N.D.
Ill.Dec. 11, 2013) (concluding that supplemental jurisdiction
over a state battery claim was improper because the facts
necessary to prove a claim of battery were completely
unrelated to those necessary to prove a claim under FLSA and
because the elements for each claim were completely
distinct); Lewis v. Carrier One, Inc., No. 15 CV
7402, 2016 WL 910522, at *4 (N.D. Ill. Mar. 10, 2016)
(distinguishing from Rothman v. Emory Univ., 123
F.3d 446 (7th Cir. 1997), because the plaintiff's
conversion claim “could be litigated without discussion
of the operative facts” of his wage payment claim).
Counterclaim also alleges that Kelso acted through her
company, If These Walls Could Talk, in order to convert funds
from Complete's accounts receivable. Dkt. No. 10, at 6-7.
However, If These Walls Could Talk has not been named as a
party to this action, and Kelso's Complaint contains no
reference to If These Walls Could Talk or the alleged
independent contractor agreement it had with Complete.
Complete had plead that the FLSA was not applicable in light
of its independent contractor agreement with If These Walls
Could Talk and asserted its Counterclaim for conversion
against Kelso “doing business as” If These Walls
Could Talk, it is possible that the Court could find a common
nexus between Kelso's claims and Complete's
Counterclaim to support supplemental jurisdiction. However,
Complete's Counterclaim as written does not clearly
support such a position and does not otherwise allege enough
facts to find a factual connection to Kelso's claims.
Because Complete has not alleged sufficient facts to find a
common nexus between Kelso's claims and its Counterclaim,
and because Complete's Counterclaim includes allegations
relating to actions taken by If These Walls Could Talk, this
Court cannot properly assert supplemental jurisdiction over
foregoing reasons, the Court GRANTS Kelso's Motion to
Dismiss Counterclaim, without prejudice. The Court further
GRANTS Complete leave to amend its ...