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Virginia Transformer Corp. v. Ebbert

United States District Court, W.D. Virginia, Roanoke Division

March 28, 2019

VIRGINIA TRANSFORMER CORP., Plaintiff/Counter-defendant


          Elizabeth K. Dillon Elizabeth K. Dillon United States District Judge.

         Plaintiff Virginia Transformer Corp. (VTC) asserts claims against one of its former salespeople, defendant Alexander Ebbert. VTC filed suit in state court, asserting a breach of contract claim. Ebbert filed a counterclaim that included federal claims (a race discrimination and retaliation claim under 42 U.S.C. § 1981) and a breach of contract claim; he then removed the case to this court. He later amended, [1] and it is his first amended counterclaim (Dkt. No. 13) that is the operative counterclaim.

         Pending before the court are two motions, which were fully briefed and were argued before the court. The first is VTC's motion to dismiss the first amended counterclaim in its entirety, which asserts several different grounds for dismissal. (Dkt. No. 16.) The second is Ebbert's motion for leave to file a second amended counterclaim. (Dkt. No. 23.) In it, Ebbert seeks leave to amend his counterclaim to add what the parties refer to collectively as the “Title VII Counterclaims.” The eight proposed Title VII Counterclaims consist of a discrimination claim and a separate retaliation claim on four separate grounds: race (Caucasian), religion (Jewish), national origin (American), and sex (gay).[2] VTC opposes allowing amendment (Dkt. No. 24) and argues that amendment would be futile.

         In response to the futility arguments and at the hearing, Ebbert requested that, if the court were to deny the motion for leave to amend, he be permitted to file a new amended counterclaim (which has not yet been provided to the court).

         The court has considered the arguments of the parties and their briefing, and sets forth its rulings below.


         With regard to Ebbert's motion to amend, Federal Rule of Civil Procedure 15(a) directs that leave to amend a complaint “shall be freely given when justice so requires.” The court should only deny leave to amend a pleading “when the amendment would be prejudicial to the opposing party, there has been bad faith on the part of the moving party, or the amendment would be futile.” Edwards v. City of Goldsboro, 178 F.3d 231, 242 (4th Cir. 1999) (quoting Johnson v. Oroweat Foods Co., 785 F.2d 503, 509 (4th Cir. 1986)).

         Here, VTC contends that amendment would be futile, arguing that none of the claims in the proposed second amended counterclaim could survive a Rule 12(b)(6) motion to dismiss.[3]To survive such a motion, a plaintiff's allegations must “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). This standard “requires the plaintiff to articulate facts, when accepted as true, that ‘show' that the plaintiff has stated a claim entitling him to relief, i.e., the ‘plausibility of entitlement to relief.'” Francis v. Giacomelli, 588 F.3d 186, 193 (4th Cir. 2009) (quoting Iqbal, 556 U.S. at 678). The plausibility standard requires more than “a sheer possibility that a defendant has acted unlawfully.” Iqbal, 556 U.S. at 678.

         In determining whether Ebbert has met this plausibility standard, the court must accept as true all well-pleaded facts in the complaint and any documents incorporated into or attached to it. Sec'y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007). Further, it must “draw[] all reasonable factual inferences from those facts in [Ebbert's] favor, ” Edwards v. City of Goldsboro, 178 F.3d 231, 244 (4th Cir. 1999), but it “need not accept legal conclusions couched as facts or ‘unwarranted inferences, unreasonable conclusions, or arguments, '” Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012) (quoting Giarratano v. Johnson, 521 F.3d 298, 302 (4th Cir. 2008)).


         A. Exhaustion of Title VII Counterclaims

         With regard to the Title VII Counterclaims, VTC opposes the motion to amend to add those claims on the grounds that amendment is futile. In addition to arguing that each claim is subject to dismissal under Rule 12(b)(6) for failure to state a claim, VTC also contends that those claims cannot be considered by this court because-despite the EEOC's issuance of a right-to-sue letter-the right-to-sue letter was issued less than 180 days after Ebbert filed his charge of discrimination. Specifically, he filed his charge “in January 2018, ” (Dkt. No. 13 at 1 n.1), and the EEOC issued its notice of right-to-sue on July 17, 2018. The parties have not identified the exact date that he filed his charge, but because the notice itself indicates that less than 180 days have passed, he presumably filed his charge after January 17, 2018. VTC argues that, because the EEOC did not retain authority over his underlying charges for the statutory period of 180 days, as set forth in 42 U.S.C. § 2000e-5(f)(1), those claims have not been administratively exhausted and must be dismissed.

         As the court noted in its recent opinion in Hardy v Lewis Gale Medical Center, 7:18-cv-218, ECF No. 49, at 11- 19 (Mar. 19, 2019 Amended Mem. Op. & Order), as amended (Mar. 27, 2019), which addressed this same issue, there is a split of authority as to whether courts can consider claims in a case where the EEOC issued its right-to-sue notice prior to the expiration of the 180-day statutory period EEOC has to resolve the claims. Id. at 12. In large part, the issue turns on whether or not the EEOC's regulation on this issue, 29 C.F.R. § 1601.28(a)(2), which purports to give authority to the EEOC to issue early right-to-sue notices, is a valid exercise of EEOC's rule-making authority.

         In Hardy, this court concluded that EEOC's regulation was not entitled to deference and could not alter the statutory scheme, and thus that EEOC was not permitted to issue right-to-sue notices earlier than 180 days. The court incorporates its reasoning in Hardy and reaches the same result here. Accordingly, because Ebbert received his right-to-sue notice less than 180 days after filing his charge, that notice is ineffective to constitute a complete exhaustion of ...

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