Rubio v. BSDB Management Inc.

Background

Manuel Rubio sued BSDB Management Inc., Marvin Neiman, and Dove Lebovic for unpaid overtime wages under the Fair Labor Standards Act and the New York Labor Law. The defendants filed three counterclaims: first, that Rubio approved payment for hours that he and other employees did not work; second, that Rubio misappropriated the defendants’ tools; and third, breach of contract and duties of good faith and honesty.

Rubio moved for judgment on the pleadings, seeking dismissal of the counterclaims. Instead of opposing that motion, the defendants sought leave under Federal Rule of Civil Procedure 15(a) to file amended counterclaims. They proposed revising the first counterclaim to rely on the faithless-servant doctrine, revising the second counterclaim to identify two types of equipment, and withdrawing the third counterclaim. Rubio consented to withdrawal of the third counterclaim but opposed the other amendments.

First Counterclaim

The court held that the proposed first counterclaim was based on alleged fraudulent misrepresentations about hours worked, even though the defendants described it as a breach of loyalty claim. Therefore, Federal Rule of Civil Procedure 9(b) required the defendants to plead the alleged fraud with particularity, including the statements made, who made them, when and where they were made, and why they were fraudulent.

The court found that neither the original counterclaim nor the proposed amendment provided those details. The defendants did not identify when, where, or to whom the reports were made, the number of allegedly overreported hours, or facts suggesting that Rubio misrepresented the hours. Because the proposed amendment would still fail to state a claim, the court found it futile and denied the defendants’ motion for leave to amend the first counterclaim. The court did not reach Rubio’s argument that the faithless-servant doctrine was unconstitutional.

Second Counterclaim

For a conversion claim under New York law, a party must identify a specific thing that it owned or had an immediate right to possess and allege that the opposing party exercised unauthorized control over it. The proposed amendment identified an air compressor and a mechanical floor drain machine, but the court found those descriptions too general.

The defendants provided no further identifying information, records, or facts showing that they owned the particular equipment or that Rubio removed it from their control. The court concluded that the proposed amendment did not plausibly state a conversion claim and denied leave to amend the second counterclaim.

Third Counterclaim and Final Rulings

The defendants sought to withdraw the third counterclaim, and Rubio consented. The court dismissed that counterclaim. As a result, Rubio’s request to dismiss the third counterclaim was denied in part as moot.

The court denied the defendants’ motion for leave to amend. It granted in part Rubio’s motion for judgment on the pleadings to the extent it sought dismissal of the first and second counterclaims, and denied in part as moot the portion seeking dismissal of the third counterclaim. The order did not add a prejudice designation to these rulings. The court also stated that further leave to amend was unlikely absent extraordinary circumstances. The opinion did not decide the merits of Rubio’s underlying overtime claims.