Kim v. Joong-Ang Daily News California, Inc.

Background

Moonsung Kim sued the defendants under the Fair Labor Standards Act (FLSA) and New York Labor Law, alleging retaliation for filing and pursuing an earlier wage-and-hour lawsuit. In that earlier case, Kim alleged that he worked overtime without being paid. He had retained workplace documents and produced them in discovery to support his wage claims.

During Kim’s deposition in the earlier case, Diane H. Lee, who represented the KCD Defendants, questioned Kim about copying and retaining documents from his employer’s computer. Kim alleged that the questions were threatening and intended to discourage him from continuing his wage lawsuit. The KCD Defendants later asserted counterclaims alleging, among other things, theft or misappropriation of confidential information and breach of a confidentiality agreement. Kim alleged that those counterclaims were filed solely to retaliate against him.

Motions and Venue

The Lee Defendants moved under Federal Rule of Civil Procedure 12(b)(6) to dismiss for failure to state a claim. The KCD Defendants moved under Rules 12(b)(3) and 12(b)(6), arguing that venue was improper and that Kim failed to state a claim.

Judge Liman denied the KCD Defendants’ motion to dismiss for improper venue. The court applied the rule allowing a case to be brought where a substantial part of the events occurred. Because the allegedly retaliatory deposition took place in Manhattan and was closely connected to the claims, the Southern District of New York was a proper venue even though the counterclaims were filed in the Eastern District of New York.

Claims Against the Lee Defendants

The court held that the Lee Defendants could not be sued for damages in a private FLSA retaliation action because they were not Kim’s employers. The FLSA permits private relief against an “employer,” and the court applied the economic-reality test, which considers such matters as the power to hire and fire, control over work conditions and schedules, control over pay, and maintenance of employment records. Kim admitted that the Lee Defendants were not his employers and did not argue that they satisfied this test.

The court applied the same employer definition to Kim’s New York Labor Law retaliation claim. It therefore dismissed the claims against the Lee Defendants with prejudice, concluding that amendment would be futile.

Retaliation Claims Against the KCD Defendants

The court explained that filing a wage lawsuit is protected activity. It also recognized that a baseless lawsuit or counterclaim filed with a retaliatory motive can, in some circumstances, be an adverse action supporting a retaliation claim. To rely on litigation conduct as retaliation, however, a plaintiff must allege both a retaliatory motive and that the challenged lawsuit or counterclaim lacked a reasonable basis in fact or law.

The court found that Kim plausibly alleged a retaliatory motive for the counterclaims because they were filed while he was actively pursuing the wage case. But the court held that Kim did not adequately allege that the counterclaims were objectively baseless. He did not dispute that the documents belonged to the KCD Defendants, that he took them without permission or the defendants’ knowledge, or that he had signed a confidentiality and nondisclosure agreement. The court also concluded that the conversion-based counterclaim was at least supported by existing law or a nonfrivolous argument for changing the law, and that the contract counterclaim was not shown to be baseless.

The court likewise held that the deposition questions were not objectively baseless or shown to have a retaliatory motive. The questions followed Kim’s admission that he copied and retained employer documents and were permissible subjects of examination in the wage case. The court characterized them as part of a vigorous litigation defense rather than retaliation prohibited by the FLSA.

Disposition

Judge Liman granted the motion to dismiss the complaint against the KCD Defendants and dismissed that complaint without prejudice. The court granted the motion to dismiss against the Lee Defendants and dismissed the complaint against them with prejudice. The court separately denied the KCD Defendants’ motion to dismiss for improper venue. The clerk was directed to close the two motions.