Tag Archives: Complaint

Entrepreneur’s Guide to Litigation – Blog Series: Complaints and Answers

A.  The Complaint

Litigation begins with a Complaint. “Complaint” is capitalized because it is a specific legal document, rather than a garden-variety complaint about something. The Complaint lays out the plaintiff’s specific legal claims against the defendant. It needs to contain enough facts that, if everything stated is true and there are no extenuating circumstances, a judge and jury could find in favor of the plaintiff.

As an example, Paul Plaintiff is suing Diana Defendant for violating a contract. Paul files a Complaint with a court claiming several facts: 1) Diana signed a contract to buy widgets; 2) Paul delivered the widgets; and 3) Diana did not pay the agreed-upon amount. If the court finds that these facts are true, then, unless there were extenuating circumstances, Diana probably breached a contract with Paul and should pay damages.

Paul’s Complaint also needs to allege facts showing that he has a right to be in that court. For example, if Paul wants to sue Diana inTexas, he has to show that the case and the parties have some connection toTexas. If he wants to sue her in a federal court, he has to meet a number of other criteria. (Federal court is generally only available if the parties are based in different states and the damages are relatively substantial or if the legal question is one of federal law.)

B.  Response to a Complaint

Once the defendant officially learns of the Complaint, she has a certain limited time to file some sort of response with the court. The time to respond, however, does not run from when the plaintiff filed the lawsuit, but generally when he officially delivered notice of the Complaint to the defendant. (There is a timeline that starts ticking when the defendant becomes aware of a state court lawsuit she wants to “remove” to federal court.) The amount of time for the defendant to respond varies by what court the case is in, but is generally a short period of time.

After receiving the complaint, the defendant has three options: 1) Ignore the Complaint and have the court grant judgment in favor of the plaintiff; 2) Tell the court that the Complaint is defective and ask for dismissal; or 3) Answer the Complaint. Option one is usually not a good plan; courts do not look favorably on defendants who ignore the legal process, and this option prevents a defendant from fighting the plaintiff’s claims.

Option two does not deal with the merits of the plaintiff’s issue. It is simply telling the court that the Complaint is defective for a variety of reasons including, for instance, how it was served, who the parties are (or are not), which court the case is in, or simply that, even if everything is true, the plaintiff cannot win. For example, if Paul sues Diana, but never tells Diana about the suit, Diana can then ask the court to dismiss the case. Also, if Diana works for DefendCo and Paul’s contract was actually with DefendCo and not with Diana, personally, she may be able to have the case dismissed because Paul sued the wrong party. If Paul sued Diana in a federal court inTexaswhen both parties are residents ofCaliforniaand neither has ever been to or done business in Texas, then Diana may be able to get the case dismissed, at least from theTexascourt.

Finally, there is the “So, what?” defense. If the Complaint doesn’t actually allege a cause of action, the defendant can ask the court to dismiss it. This usually happens because the plaintiff simply assumes a fact, but does not include it in the Complaint. If, for example, Paul alleges only that Diana failed to pay him a certain amount of money, but does not allege that a contract existed between them, then Diana can essentially say “So, what?” and ask the court to dismiss the case. She would ask the court to dismiss the case because, even if true (she really did not pay him any money), he did not plead any facts showing that she was supposed to pay him money. The defendant is not admitting the truth of the allegation; she is just saying that even if true, the plaintiff cannot win.

Finally, a defendant can file an Answer. Again, “Answer” is capitalized because it is a specific legal document. In an Answer, the defendant responds, paragraph by paragraph, to each of the plaintiff’s allegations. The defendant must admit, deny, or say that she does not know the answer to each specific allegation. Saying “I don’t know” functions as a denial.

For example, Paul’s Complaint probably alleges that Diana lives at a certain address. Assuming Diana actually lives there, she has to admit that fact. Paul may allege that he delivered the correct number of working widgets to Diana. If the widgets were not what she actually ordered or did not work, Diana would deny that allegation. Finally, Paul may claim that those widgets cost him a certain amount of money. Diana likely has no way to know how much Paul paid for the widgets, so she would say she does not know – thus leaving Paul to prove that allegation.

Also in the Answer, the defendant can claim affirmative defenses. Those tell the court that there were extenuating circumstances so that, even if everything the plaintiff says is true, the court should not find in favor of the plaintiff.

For example, if Paul told Diana not to worry about paying him for the widgets for six months but then turned around and immediately sued her, she would claim that as an affirmative defense.

Finally, the Answer may contain counterclaims. These claims are the defendant counter-suing the plaintiff for something. The counterclaims may be related to the original suit or not. Usually they are related, but they do not have to be. This section follows the same rules as if the defendant were filing a complaint.

For example, Diana may counterclaim against Paul because he sent her the wrong widgets and, perhaps, add a claim that when Paul delivered the widgets to her warehouse, he backed his truck into her building and caused damage. She would then counterclaim for breach of contract and property damage. The court would then sort out the whole mess to decide who owed whom how much.

In Secret Rebate Case, If It Walks Like A Duck, Allegations That It Will Also Quack Are Plausible

On May 24, 2011, United States District Court, Central District of California, denied a motion to dismiss allegations of a “price squeeze” implemented through the granting of secret rebates to the plaintiff’s customers, finding that the complaint stated a plausible claim under California Business and Professions Code section 17045. Drawing on “judicial experience and common sense”, District Judge Dean D. Pregerson held that the allegations of the first amended complaint are sufficiently “plausible” on their face to withstand challenges under Bell Atl. Corp. v. Twombly, 550 U.S. 544, (2007). Western Pacific Kraft, Inc. v. Duro Bag Manufacturing Company, Case No. CV 10-06017 DDP (SSx), 5/24/11.

Plaintiff Western Pacific Kraft, Inc. (“WPK”) is a wholesaler of paper bag products to smaller wholesale distributors. Defendant Duro Bag Manufacturing Company (“Duro”) is the largest manufacturer of paper bags in the country, and the largest seller of paper bags in California. Duro was WPK’s supplier, and also its principal competitor. For twenty years or more, Duro would reduce its prices to WPK, where WPK informed Duro that it had to meet competition from competing sources.

On October 9, 2010, however, Duro informed WPK that it would no longer do so. Instead, it raised the prices it charged WPK, while at the same time lowering the prices it charged WPK’s customers. WPK only became aware of the discriminatory pricing when asked by its existing customers to meet the competition from Duro’s lower prices.

WPK filed a complaint in federal court, alleging violations of California Business and Professions Code section 17045. Section 17045 has been a feature of California law since 1913, and was added to the California Unfair Practices Act in 1941. It prohibits the “secret payment” of rebates and unearned discounts, or secretly extending to certain purchasers special services or privileges not extended to all purchasers buying on like terms and conditions. However, additional elements of a violation are that there also be (a) injury to a competitor, and (c) a showing that such payment tends to destroy competition. It has been held to be applicable to competition at either the seller or the purchaser level, or both. ABC International Traders, Inc. v. Matsushita Elec. Corp., 14 Cal. 4th 1247 (1997). In Diesel Elec. Sales & Serv., Inc. v. Marco Marine San Diego, Inc., 16 Cal. App. 4th 202 (1993), the Court of Appeal, Fourth District, held that Section 17045 must be “liberally construed”.

The first amended complaint alleged that as a result of the price discriminations, which were unknown to WPK, Duro’s course of conduct “effectively put it out of business”. It alleged that Duro had injured WPK and destroyed competition by providing secret rebates, refunds, or discounts to its customers.

As is much in vogue, Duro moved to dismiss, citing Twombly, and Ashcroft v. Iqbal, 129 S.Ct. 1937 (2009). In discussing the applicable legal standards, the District Court recited the litany of quotes from Twombly that, while a complaint need not include “detailed factual allegations”, it must offer “more than an unadorned, the–defendant–unlawfully–harmed–me accusation.” Iqbal at 1949. While “conclusory allegations”, “labels and conclusions”, including “formulaic recitation of the elements,” or “naked assertions” are insufficient, the court will assume the veracity of “well-pleaded factual allegations”. Because this is somewhat of a subjective exercise, courts are to draw on their “judicial experience and common sense” in evaluating the two schools of thought. When is an allegation “well-pleaded” and “factual”, as opposed to being a “legal conclusion”? This may be difficult to parse prior to at least initial discovery.

Nevertheless, the court is to use its “common sense”. To paraphrase Lewis Carroll’s famous logical fallacy of officers marching, where at least one of the officers “waddles”, and has been heard to even utter the phrase, “quack”, a degree of common sense may tell us whether the allegation is, in context, “plausible on its face”. Is one of the officers really a duck?

The central attack by Duro was that the allegations of the first amended complaint do not plead sufficient factual allegations to show that Duro’s price discriminations were “secret”. Duro argues that this is so because it advised WPK that it would no longer grant “meeting competition” price reductions. However, as the court reasoned, WPK alleged a “price squeeze” in which Duro simultaneously raised its net prices to WPK, while at the same time lowering net prices charged to its former customers. The court held that on a motion to dismiss on Twombly grounds, the allegations were sufficient that the prices attributable to secret rebates were “secret”. This was on the basis of the allegations that the rebates were never disclosed to WPK. Here we have a “hint” of a possible concerted refusal to deal.

Duro also contended that the first amended complaint failed to establish that WPK could have been harmed by the secret rebates, assuming they were “secret” at all. The court disagreed, as a fair reading of the first amended complaint was that as a result of the price discriminations and rebates, “virtually all of the plaintiff WPK’s major customers began buying paper products directly from defendant Duro”. Thus, it alleged that as a result of the secret discriminatory pricing, it had been effectively run out of business. Perhaps not surprisingly, and as it would have been endorsed by Lewis Carroll, these allegations were sufficient to satisfy the three prongs of 17045. First, the price discriminations were “secret”. Second, by effectively putting WPK out of business, WPK was harmed as a competitor. Third, the elimination of WPK as a competitor would have reduced consumer search opportunities, and thus would have contracted the available consumer choices, and thereby allocatively inefficiently injuring the competitive process.

The motion to dismiss, interestingly, did not attack the first amended complaint on DuPont Cellophane grounds. It did not argue that paper bags, like cellophane, may have been substitutable with an array of packaging materials, and that “paper bags” or “paper bags in California”, were an insufficient allegation of a properly defined relevant market for an evaluation whether the allegations of antitrust injury were sufficiently “plausible”. See United States v. E.I. DuPont de Nemours & Co., 353 U.S. 586 (1957). Thus, the court has held that through an application of “common sense” as determined by the district court, there can be life after Twombly. While further developments could determine that we have but an impersonation of a duck, the allegations are sufficient to allow the connection between the waddles, the quacks, and a judicial determination that in fact, we are dealing with something like a duck.

NLRB’s Acting General Counsel Lafe Solomon Releases Statement on Boeing Complaint

NLRB Acting General Counsel Lafe Solomon today responded to inquiries regarding a complaint issued April 20 against the Boeing Company with the following statement:

“Contrary to certain public statements made in recent weeks, there is nothing remarkable or unprecedented about the complaint issued against the Boeing Company on April 20. The complaint involves matters of fact and law that are not unique to this case, and it was issued only after a thorough investigation in the field, a  further careful review by our attorneys in Washington, and an invitation by me to the parties to present their case and discuss the possibility of a settlement. Only then did I authorize the complaint alleging that certain statements and decisions by Boeing officials were discriminatory under our statute.

It is important to note that the issuance of a complaint is just the beginning of a legal process, which now moves to a hearing before an administrative law judge. That hearing, scheduled for June 14 in Seattle, is the appropriate time and place to argue the merits of the complaint. The judge’s decision can further be appealed to the Board, and ultimately to the federal courts. At any point in this process, the parties could reach a settlement agreement and we remain willing to participate in any such discussions at the request of either or both parties.  We hope all interested parties respect the legal process, rather than trying to litigate this case in the media and public arena.”

Mr. Solomon made the same point today in a brief written response to a letter received earlier this month from Boeing General Counsel J. Michael Luttig.

EEOC Sues Owner Of 42 McDonald’s Restaurants For Sexual Harassment And Retaliation

Multiple Women, Including Teens, Were Abused at Reedsburg Restaurant; Some Were Fired for Complaining, Federal Agency Charges

MILWAUKEE — The McDonald’s restaurant in Reedsburg, Wis. , owned and operated by Missoula Mac, Inc., violated federal civil rights laws by permitting male employees to create a hostile work environment of sexual harassment against female employees, the U.S. Equal Employment Opportunity Commission (EEOC) charged in a lawsuit it filed this morning in federal district court in Madison, Wis.

The EEOC filed suit on behalf of a class of women it said were subjected to sexual comments, sexual propositions, or physical touching by co-workers. The suit also alleges that some of the women were fired in retaliation for complaining about the sexually hostile work environment and that the harassment was so intolerable that at least one woman was forced to quit her job to avoid it.

John Rowe, director of EEOC’s Chicago District, which includes Wisconsin, noted that the agency’s administrative investigation, which preceded the lawsuit, revealed that male employees at the Reedsburg McDonald’s made sexual comments about the bodies of female co-workers, propositioned them, and touched them inappropriately. Further, Rowe said, several of the victims were teenaged high school students.

“One of the distressing things is how young some of the victims appear to have been,” said Rowe. “Another is that some of the employees who complained about what was going on were allegedly either fired or ignored. It’s cause for considerable concern, especially at a business which employs so many young and vulnerable women.”

The EEOC’s lawsuit stems from discrimination charges filed by three former employees of the McDonald’s restaurant located at 1500 Main Street in Reedsburg. In total, Missoula Mac owns and operates 42 McDonald’s restaurants in Wisconsin.

The EEOC sued after first trying to reach a voluntary settlement out of court through its conciliation process. The agency seeks lost wages and compensatory and punitive damages for the women who were harassed, retaliated against, or both, and injunctive relief to end the discriminatory practices. The suit, captioned EEOC v. Missoula Mac, Inc., d/b/a McDonald’s Restaurant (Civil Action No. 3:11-cv-00267), was filed in U.S. District Court for the Western District of Wisconsin in Madison. The case will be litigated primarily by attorneys in the EEOC’s Milwaukee Area Office.

John Hendrickson, EEOC regional attorney for the Chicago District said, “McDonald’s is one of the most well-known brands in America and the world, and its image is one of complete reliability, good taste and wholesomeness. What we found was allegedly going on at the McDonald’s in Reedsburg was something completely different and illegal. This litigation is going to put the Reedsburg McDonald’s under a well-deserved microscope, and, if the allegations are borne out, assure that appropriate relief is provided to the victims and that the harassment is brought to a halt.”

The EEOC’s Chicago District Office is responsible for processing charges of discrimination, administrative enforcement, and the conduct of agency litigation in Illinois, Iowa, Minnesota, North Dakota, South Dakota, and Wisconsin with Area Offices in Milwaukee and Minneapolis.

Kasten v. Saint Gobain Performance Plastic Corp. — Supreme Court Rules Fair Labor Standard Act’s Anti-Retaliation Provision Covers Oral Complaints

In Kasten v. Saint Gobain Performance Plastic Corp., the U.S. Supreme Court held that the provision in the Fair Labor Standards Act (FLSA) that prohibits retaliation against employees who “file” an FLSA complaint covers oral complaints made by employees.

Kasten’s Complaint

Kevin Kasten worked for Saint Gobain Plastics Performance Corp. He complained to his supervisors, as well as to the company’s HR department, that the time clocks in the plant where he worked were located between where employees put on their work-related protective gear and where they were assigned to perform their work tasks, and therefore the employees did not get full credit for the time they spent putting on and taking off their work gear, contrary to the FLSA’s donning and doffing provisions. Kasten alleged that after raising this issue, the company terminated him. Kasten then sued the company, claiming that his termination violated the FLSA’s anti-retaliation provision.

The Supreme Court’s Decision

Saint Gobain argued that the anti-retaliation provision in the FLSA requires that, in order to “file” a complaint and thereby invoke the Act’s protections, an employee must submit something in writing. The Supreme Court disagreed, holding that in this context, to file a complaint also can include an oral complaint. The Court did, however, take into consideration Saint Gobain’s argument that a complaint must provide the employer with fair notice that the employee is making a complaint that could subject it to a later claim of retaliation, clarifying that an oral complaint will be sufficient to invoke the FLSA’s protections only so long as the complaint is “sufficiently clear and detailed for a reasonable employer to understand it, in light of both content and context, as an assertion of rights protected by the statute and a call for their protection.”

Saint Gobain also asked the Court to decide whether an employee complaint — oral or written — must be made to a administrative agency or judicial body, or whether it can be also made to a private employer. The Court, however, declined to decide that issue because Saint Gobain did not raise it in its opening brief to the Court, and instead said that the issue would have to be addressed by lower courts. In his dissent, Justice Scalia (joined by Justice Thomas) disagreed with the majority’s decision not to consider that issue, and explained that he agreed with Saint Gobain’s argument that any complaint must be made to a governmental body, and therefore a complaint made to a private employer does not trigger the FLSA’s anti-retaliation provision.

Implications for Employers

The Court’s decision is yet another decision in what has been a stream of recent rulings extending employee protections, including the Court’s January 2011 decision in Thompson v. North American Stainless, LP, which extended Title VII’s anti-retaliation provision to associational discrimination claims, and the Court’s decision earlier this month in Staub v. Proctor Hospital, which confirmed that the “cat’s paw” theory of employer liability is valid with respect to many workplace discrimination claims given this trend, the Court’s conclusion that Congress intended the FLSA to cover both oral and written complaints is not surprising. Unfortunately, the Court’s decision not to address whether oral complaints made directly to an employer, as opposed to those made to a governmental body, trigger the anti-retaliation provision leaves a substantial question unresolved. The majority’s opinion, however, implied that internal complaints are covered under the FLSA, as the Court’s opinion noted that limiting the FLSA’s anti-retaliation protections to only written complaints would discourage employee participation in informal, internal grievance procedures.

In light of the Court’s ruling, employers should be cautious when any complaint, oral or written, is made by an employee concerning practices covered by the FLSA, even if that complaint is made internally, and particularly before taking any adverse action against that employee. Employers also may want to consider implementing a process to review and respond to internal employee complaints (oral or written) concerning FLSA-related matters. That process may include specifying what sort of information must be provided to the employer in order for an employee to “file” a complaint. If an employee fails to provide that information, the employer may have a defense to any later-filed retaliation claim by arguing that that the employee’s complaint did not provide the required information, and thus it was not “sufficiently clear and detailed” to invoke the FLSA’s anti-retaliation protections.

Because the Court did not answer the question of whether oral or written complaints made to private employers, as opposed to government bodies, trigger the FLSA’s anti-retaliation protections, decisions from lower courts will undoubtedly address this issue going forward. We will report on future developments.