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James Heath v. Audatex North America

January 23, 2012


The opinion of the court was delivered by: O'neill, J.


Plaintiff James Heath brought an employment discrimination action against defendants Audatex North America and its parent company Solera Holdings. Audatex answered and asserted several counterclaims against Heath, all relating to separate litigation that was brought against Audatex by entities that are not a party to this litigation. Heath answered Audatex's counterclaims and asserted affirmative defenses based upon Audatex's alleged duty to indemnify Heath. Now before me are Audatex's motion to strike Heath's indemnification affirmative defenses, Heath's motion for leave to file a counterclaim for indemnification, attorney fees and costs and the parties' responses thereto. For the reasons that follow, I will grant Audatex's motion to strike and deny Heath's motion for leave to file a counterclaim.


Heath's Complaint alleges the following facts. Heath started working for Audatex in June of 2007 as Vice President of Corporate Accounts. Compl. ¶ 15. The principal place of business of Audatex (both the parent and the wholly owned subsidiary) is in California, id. ¶¶ 5-6, but Heath worked in Pennsylvania. Id. ¶ 15. Heath was "one of the top producers for" Audatex, id. ¶ 25, and his accomplishments included securing a contract with Avis Budget Group. Id. ¶ 30. Audatex knew that Avis had an existing contract with Mitchell International, one of Heath's prior employers, but instructed Heath to procure a contract with Avis anyway. Id. ¶ 29.

Heath went on medical leave on April 1, 2009 due to rheumatoid arthritis and underwent a total hip replacement on June 16, 2009. Id. ¶¶ 31 & 33. Audatex terminated Heath on July 10, 2009, claiming that Heath's position was being eliminated. Id. ¶¶ 34-35. Heath was fifty-four years old at the time. Id. ¶ 34. He alleges in his Complaint that Audatex unlawfully discriminated against him because of his age, his disability and his decision to go on medical leave. See Compl. ¶¶ 41-66. Heath also claims that his employment was terminated because Audatex expected him to testify in litigation involving Avis and Mitchell concerning the AvisAudatex contract. Id. ¶ 63.

Audatex has filed an Answer and brought counterclaims against Heath. Audatex's counterclaims assert the following facts. When Audatex hired Heath, he signed agreements promising not to use prior employers' confidential information or disclose Audatex's confidential information. Am. Countercl. ¶ 9-10. In 2009, Mitchell notified Audatex that the Avis-Audatex contract that Heath procured overlapped with an existing contract between Avis and Mitchell. Id. ¶ 11. Audatex investigated the matter and ascertained that Heath himself helped procure the Avis-Mitchell contract while he was an employee at Mitchell. Id. ¶ 13. Avis later sued Mitchell, Audatex and Heath, alleging among other things fraudulent inducement. Id.

¶ 14. Mitchell then brought cross-claims against Audatex based on Heath's alleged misconduct while he worked at Audatex. Id.

Audatex conducted further investigation and learned that Heath used confidential information he gained as a Mitchell employee to secure the Avis-Audatex contract. Id. ¶ 16b. Audatex also learned that Heath disclosed to Avis confidential Audatex information in the course of negotiating the Avis-Audatex contract. Id. ¶ 16c. Audatex did not learn of Heath's misconduct until after Audatex terminated Heath's employment. Id. ¶ 18. Audatex, Avis and Mitchell later reached a settlement whose terms are confidential. Id. ¶ 15. Audatex asserts counterclaims against Heath for breach of contract, breach of duty of loyalty and violation of the Computer Fraud and Abuse Act, 18 U.S.C. § 1030. See Am. Countercl. ¶¶ 19-49.

Heath's answer to Audatex's counterclaims asserts affirmative defenses that rely on California Labor Code § 2802. See Dkt. No. 29. The Code provides in pertinent part that [a]n employer shall indemnify his or her employee for all necessary expenditures or losses incurred by the employee in direct consequence of the discharge of his or her duties, or of his or her obedience to the directions of the employer, even though unlawful, unless the employee, at the time of obeying the directions, believed them to be unlawful.

Cal. Lab. Code § 2802(a). "Necessary expenditures or losses" includes "all reasonable costs, including, but not limited to, attorney's fees incurred by the employee enforcing the rights granted by" § 2802. Id. § 2802(c). The affirmative defenses that rely on § 2802 assert that Audatex must pay Heath's counsel fees from the Avis/Mitchell litigation and indemnify him in the present litigation (ninth affirmative defense) and indemnify him for expenditures and losses that resulted from the discharge of his duties at Audatex (thirteenth). Heath also asserts that Audatex cannot recover on its counterclaims because it has a duty to indemnify him (fourteenth).

A week after answering Audatex's counterclaims, Heath moved for leave to file a counterclaim to Audatex's counterclaim. See Dkt. No. 31. Relevant to the motions now before me is the allegation in Heath's proposed counterclaim that Audatex's litigation with Avis and Mitchell took place in California state court. Dkt. No. 31-3 ¶ 18. Heath seeks indemnification, attorney fees and costs. Id. ¶¶ 25-35. Audatex opposes Heath's motion and moves to strike Heath's affirmative defenses that rely on the California Labor Code. See Dkt. Nos. 33 & 32.


I. Heath's Motion for Leave to File a Counterclaim

As a preliminary matter I must decide how to characterize Heath's motion. Although the motion requests leave to "file a counterclaim," Audatex argues that Heath's motion is controlled by Federal Rule of Civil Procedure 15, which governs amendments to pleadings. This Court has previously stated that a plaintiff's counterclaim in reply to a defendant's counterclaim should be deemed an amendment to the complaint. Se. Indus. Tire Co. v. Duraprene Corp., 70 F.R.D. 585, 588 (E.D. Pa. 1976) (Becker, J.) ("Lest the trier of fact be confronted with a veritable [b]arrage of legal documents, ...

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