CIRCLE CLICK MEDIA LLC, METRO TALENT, LLC, CTNY INSURANCE GROUP LLC, on behalf of themselves and all others similarly situated, Plaintiffs,
REGUS MANAGEMENT GROUP LLC, REGUS BUSINESS CENTRE LLC, REGUS PLC, HQ GLOBAL WORKPLACES LLC, and DOES 1 through 50, Defendants.
ORDER RE: RULE 12(b)(1), 12(b)(6), AND 12(f) MOTIONS TO DISMISS COUNTERCLAIMS
SAMUEL CONTI, District Judge.
Plaintiffs Circle Click Media LLC ("Circle Click"), Metro Talent, LLC ("Metro Talent"), and CTNY Insurance Group LLC ("CTNY") (collectively, "Plaintiffs") bring this putative class action against Regus Management Group LLC ("RMG"), Regus Business Centre LLC, Regus plc, and HQ Global Workplaces LLC (collectively "Defendants"). Defendants filed an answer, and, as part of that answer, RMG asserts counterclaims against each of the named Plaintiffs, as well as against members of the absent class. ECF No. 78 ("Answer") at 17-26 ("Countercl."). Plaintiffs have filed two motions to dismiss the counterclaims. The first motion, which is brought under Federal Rule of Civil Procedure 12(b)(1), asserts that the Court lacks subject matter jurisdiction. ECF No. 81 ("12(b)(1) MTD"). The second motion, which is brought under Rules 12(b)(6) and 12(f), asserts that the counterclaims should be dismissed for failure to state a claim and struck because they are redundant. ECF No. 82 ("12(b)(6)/12(f) Mot."). All motions are fully briefed. ECF Nos. 84 ("12(b)(1) Opp'n"), 85 ("12(b)(6)/12(f) Opp'n"), 87 ("12(b)(1) Reply"), 88 ("12(b)(6)/12(f) Reply"). Per Civil Local Rule 7-1(b), the matters are appropriate for determination without oral argument. For the reasons set forth below, the motion to dismiss for lack of subject matter jurisdiction is GRANTED in part and DENIED in part, the motion to dismiss for failure to state a claim is GRANTED, and the motion to strike is DENIED.
RMG is in the business of leasing commercial office space throughout California and New York. Countercl. ¶ 1. Through its advertisements, RMG represents that it provides customers with fully equipped offices for one low monthly price. ECF No. 77 ("Apr. 22 Order") at 3-4. RMG has also represented that its services are "simple, easy, and flexible, " and that its one-page contract - the Office Service Agreement - "takes just 10 minutes to complete." Id . at 4.
Each of the named Plaintiffs in this action executed an Office Service Agreement with RMG. Countercl. ¶ 1. The Office Service Agreement is in fact one page, and it merely identifies the location of the office space, the monthly office fee, the term of the agreement, and the parties to it. Apr. 22 Order at 2. The Office Service Agreement incorporates by reference another document called the "Terms and Conditions." Apr. 22 Order at 3. The Terms and Conditions is also only one page, but it is printed in five-point font, which is almost illegible. Id . The Terms and Conditions reference another document, the "House Rules, " which discloses a number of fees, including a mandatory, "Kitchen Amenities/Beverage Fee"; a "[s]tandard services" fee, including a fee "billed upon service activation for applicable telecom and internet services"; an "Office Set Up Fee"; and a "Business Continuity Fee." Id . The House Rules reference yet another document, the Service Price Guide, which lists the prices for a variety of services. Id.
In July 2012, Plaintiffs filed this action against Defendants in California state court. ECF No. 1. The action was subsequently removed, and several rounds of pleading followed. The gravamen of Plaintiffs' Second Amended Complaint ("2AC"), Plaintiffs' operative pleading, is that RMG and the other Defendants routinely assessed Plaintiffs for charges that were not disclosed in the Office Service Agreement. ECF No. 65 ("2AC"). For example, the monthly fee listed in Circle Click's Office Service Agreement is $2, 461, but Circle Click allegedly received monthly invoices ranging from $2, 559.67 to $6, 653.79. Id . ¶ 49. Plaintiffs allege that Circle Click was assessed charges for kitchen amenities (regardless of whether these amenities were used), telephone lines, telecom handsets, office restoration, and business continuity services, among other things. Id . ¶ 52.
In their 2AC, Plaintiffs seek to represent a class of all persons who paid for Defendants' office space in California and New York and were assessed charges by Defendants over the monthly payments indicated in the Office Service Agreement or any similar agreement. Plaintiffs assert the following causes of action: violation of California's Unfair Competition Law ("UCL"), Cal. Bus. & Prof. Code § 17200, et seq.; violation of California's False Advertising Law ("FAL"), id. § 17509; intentional misrepresentation; unjust enrichment; and violations of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1961, et seq.
Defendants previously moved to dismiss the 2AC, and that motion was granted in part and denied in part on April 22, 2013. The Court dismissed Plaintiffs' claim for intentional misrepresentation with prejudice, reasoning that Plaintiffs could not plausibly claim that Defendants had exclusive knowledge of various fees when those fees were disclosed in the documents referenced in the parties' agreements. Apr. 22 Order at 11. Plaintiffs' RICO claim was dismissed because Plaintiffs could not state a claim for intentional misrepresentation. Id . at 16-17. Plaintiffs' other causes of action remained largely undisturbed. Id . at 23-24.
Defendants subsequently filed an Answer, in which RMG asserted several counterclaims. The "Counterclaim-Defendants" identified in the Answer are Circle Click, Metro Talent, CTNY, and "Unnamed Counterclaim-Defendants." Countercl. ¶¶ 11-14. The Unnamed Counterclaim-Defendants are essentially the absent members of the classes proposed by Plaintiffs. See id. ¶ 14.
RMG asserts counterclaims for breach of contract against Circle Click and CTNY. RMG also asserts three "alternative" counterclaims against "all Counterclaim-Defendants": (1) breach of contract, (2) quantum meruit, and (3) unjust enrichment. Countercl. ¶¶ 21-49. The facts alleged in Counterclaim are bare bones. RMG alleges that Circle Click and CTNY failed to make required payments under the Office Service Agreement. Id . ¶¶ 21-32. Specifically, RMG alleges that Circle Click failed to pay $1, 047 in business continuity fees and that CTNY failed to pay $13, 640.38 in monthly payments and "applicable taxes and fees." Id . ¶¶ 26, 32. The counterclaim contains no factual allegations regarding wrongdoing on the part of Metro Talent or the absent class members.
A. Plaintiffs' Rule 12(b)(1) Motion to Dismiss
The thrust of Plaintiffs' Rule 12(b)(1) motion is that RMG cannot state a claim against the absent class members since they are not opposing parties for the purposes of Rule 13. Plaintiffs further argue that the court lacks subject matter jurisdiction over the counterclaims without the absent class members, since with respect to the individual Plaintiffs, Defendant has alleged an amount in controversy of only $14, 687.38, well below the $75, 000 jurisdictional minimum.
1. RMG's Counterclaims against the Absent Class Members
Rule 13 allows a defendant to assert a compulsory or permissive counterclaim against an "opposing party." Fed.R.Civ.P. 13(a)-(b). Plaintiffs argue that the absent class members are not opposing parties within the meaning of Rule 13 since they are not named parties. Mot. at 3. RMG disagrees, arguing that class members who join this action should be prepared to accept the legal consequences and risks of litigation, and that RMG should be able to strike back against any party that sues it. Opp'n at 2.
RMG primarily relies on a 1977 decision out of the Southern District of New York, National Super Spuds, Inc. v. New York Mercantile Exchange , 75 F.R.D. 40 (S.D.N.Y. 1977). Id . at 2-4. The plaintiffs in that case sought to represent a class of persons who held net long positions on potato futures contracts. Nat'l Super Spuds , 75 F.R.D. at 41. They alleged that short sellers, in concert with a number of brokers, manipulated the trading price of the futures contracts. Id . at 42. One of the broker defendants asserted a counterclaim, alleging that various members of the class engaged in a counter-conspiracy to squeeze the futures market. Id . Some of the counter-defendants were identified by name, while others were not. Id.
The court held that certain absent class members were opposing parties within the meaning of Rule 13 "within the context of th[e] case." Id . The court reasoned that Rule 42 authorized the consolidation of any or all common issues related to the case, as well as orders to avoid unnecessary cost or delay. Id . at 44. The court found that "this is a particularly apt case for exercising... discretion under Rule 42 to consolidate... the various issues, " since, if the counterclaims were dismissed and asserted again in a related action, the related claims would be reassigned to the court under the local rules. Id . The court also noted that some of the issues raised by the counterclaims could be raised as affirmative defenses. Id.
The decision in National Super Spuds is not binding on this court. In any event, the case is distinguishable. The counterclaim in National Super Spuds targeted particular individuals who were allegedly engaged in a common conspiracy to manipulate prices. The breach of contract, quantum meruit, and unjust enrichment counterclaims in the instant action target the entire class, and there is no indication that these counterclaims raise common issues of fact or law. Further, unlike in National Super Spuds, taking up RMG's counterclaims against the class makes little sense from a case management perspective. Defendants would essentially have the Court assume jurisdiction over any number of distinct breach of contract claims that would otherwise be resolved in state court.
The other cases cited by RMG - which were also decided decades ago by out-of-circuit courts - are equally unpersuasive. In Wolfson v. Artisans Savings Bank, plaintiffs asserted antitrust claims against banks that required escrow accounts for the payment of taxes and insurance in connection with mortgages, but then failed to pay interest on the escrowed funds. 83 F.R.D. 552, 554 (D. Del. 1979). The court allowed the defendants to assert a counterclaim against the absent class members for expenses incurred in maintaining the escrow accounts, reasoning that the counterclaim bore a "logical relationship" to the plaintiffs' claim. Id . But the Court dismissed the defendants' counterclaim for unjust enrichment, reasoning that "it concern[ed] individual and distinct loan transactions as to which no agreement or parallel conduct is claimed and would require examination of payments collected and disbursed in the individual escrow accounts of individual class members ...