ORDER GRANTING DEFENDANT'S MOTION TO DISMISS
WILLIAM ALSUP, District Judge.
In this employment action, defendant moves to dismiss plaintiff's counterclaims in reply for retaliation and indemnification. For the reasons stated below, defendant's motion to dismiss is GRANTED.
Plaintiff Rex Warner commenced this action against defendant Sims Group Limited in the San Mateo County Superior Court, asserting that defendant wrongfully terminated plaintiff after he complained to his supervisors about allegedly unsafe and unhealthy working conditions. The termination also grounds claims for breach of contract, common counts, and retaliation. In addition, the complaint alleges discrimination on the basis of plaintiff's age and conversion of plaintiff's personal property for its own use (Compl. at 7 ¶¶ 7-14). Defendant removed here. Defendant then filed counterclaims in its amended answer for an accounting and conversion of property allegedly owned by defendant and held by plaintiff and for fraudulent submissions of requests for reimbursements. Plaintiff replied with "cross-counterclaims" for retaliation and indemnification, saying that defendant employer's counterclaims were merely retaliation for the suit itself. Defendant now moves to dismiss plaintiff's cross-counterclaims for failure to state a claim. For the reasons stated below, defendant's motion to dismiss is GRANTED.
To survive a motion to dismiss, a pleading must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). Dismissal under Rule 12(b)(6) may be based on either a lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory. Johnson v. Riverside Healthcare Sys., LP, 516 F.3d 759, 763 (9th Cir. 2008). While a court "must take all of the factual allegations in the complaint as true, " it is "not bound to accept as true a legal conclusion couched as a factual allegation." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
Under Rule 7 of the Federal Rules of Civil Procedure, there is no such thing as a "cross-counterclaim, " but our court of appeals has read into the rule and recognized "counterclaims in reply." Davis & Cox v. Summa Corp., 751 F.2d 1507, 1525 (9th Cir. 1985), superseded on other grounds by 28 U.S.C. 1961. Plaintiff's "cross-counterclaims" will be treated as such.
While this order is sympathetic to defendant's argument that allowing plaintiff to assert counterclaims in reply to defendant's counterclaims "leads the parties and this court down an endless hole of pleadings, " the law in our circuit allows, even requires, a plaintiff to raise compulsory counterclaims in reply to a defendant's counterclaims under FRCP 13. Mattel, Inc. v. MGA Entm't, Inc., 705 F.3d 1108, 1110 (9th Cir. 2013).
Under Rule 13(a), compulsory counterclaims are those that arise out of the same transaction or occurrence that is the subject matter of the opposing party's claim. Courts in our circuit apply the logical relationship test for compulsory counterclaims. A logical relationship exists when a "counterclaim arises from the same aggregate set of operative facts as the initial claim." Mattel, 705 F.3d at 1110. Plaintiff's counterclaims in reply of retaliation and indemnification, by their nature, arise from the same transaction as defendant's counterclaims and are therefore compulsory counterclaims. Plaintiff's retaliation claim argues that defendant employer, by counterclaim, is retaliating yet further for plaintiff's initial complaint. Plaintiff's indemnification claim asserts that defendant employer must indemnify its employees, such as plaintiff, for costs incurred during employment. Defendant's counterclaims assert that plaintiff is liable for fraud and conversion committed during employment. Therefore, plaintiff's counterclaims in reply are based on the same set of aggregate facts as defendant's counterclaims.
It is unnecessary to reach the interesting question, as yet unaddressed by our court of appeals, whether an employer's compulsory counterclaims, even baseless ones, should be immunized from retaliation claims under the Age Discrimination in Employment Act. Plaintiff's counterclaim in reply fails for the simpler reason that it falls short of the pleading standard established by Iqbal and Twombly. "A pleading must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face." Iqbal, 556 U.S. at 663. Plaintiff's counterclaim in reply includes wholly conclusory statements, such as "[n]one of [defendant's] accusations have merit, none were ever brought to plaintiff's attention... and none formed the basis for plaintiff's discharge" (Dkt. No. 8 at 7). "[C]onclusory allegations of law and unwarranted inferences are insufficient to defeat a motion to dismiss for failure to state a claim." Epstein v. Wash. Energy Co., 83 F.3d 1136, 1140 (9th Cir. 1996) (internal citations omitted). Plaintiff must explain the reason that defendant's counterclaims are baseless with specific factual allegations. Plaintiff also states in his counterclaims in reply that he inspected his personnel file, and that "[s]aid file did not disclose any wrongdoing committed by plaintiff as previously set forth (Dkt. No. 8 at 7)." This allegation is also too conclusory. Vague uses of weasel phrases such as "completely without merit" or "did not disclose any wrongdoing" will not defeat a motion to dismiss for failure to state a claim. On the other side of the equation, defendant's counterclaims specifically alleged that plaintiff:
intentionally submitted... false expense reports... [such as submitting] duplicate receipts for the purchase of a single item within the same reporting period... duplicate receipts for the purchase of a single item in different expense reports... reimbursement requests for expenses Plaintiff knew to be a violation of company policy... [and] requests for items Plaintiff had ...