Strike Tax Advisory LLC v. West

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STRIKE TAX ADVISORY LLC, and JONATHAN CARDELLA, Plaintiffs, v. DANIELLE WEST, Defendant.

No. 1:23-cv-00177-BLW

United States District Court, D. Idaho

September 1, 2023

MEMORANDUM DECISION AND ORDER

B Lynn Winmill, U.S. District Court Judge

INTRODUCTION

Before the Court is Defendant Danielle West's Motion to Dismiss (Dkt. 6). For the reasons explained below, the Court will grant the motion and dismiss this case with prejudice.

BACKGROUND

This is an employment dispute between an employer, Strike Tax Advisory LLC (“Strike”), and its former employee Danielle West.^[1] Strike offers advisory services to businesses by helping determine their eligibility for certain tax credits. Compl. ¶ 2, Dkt. 1-3. In November of 2017, Strike hired Danielle West as an Account Manager on its sales team. Id. ¶ 17. Her job was to sign clients who might be eligible for tax credits. Id. ¶ 13. Strike's tax credit team would then complete indepth studies to determine whether those clients were, indeed, eligible. Id. ¶ 11.

Strike fired West on April 4, 2022, due to “performance issues, including one that nearly lost Strike a significant business relationship.” Id. ¶ 21. After West's termination, a dispute arose over how much compensation she was entitled to receive. Id. ¶¶ 35-42. That dispute is the heart of this case.

Before digging into the details of the parties' disagreement, it is helpful to better understand Strike's business model and compensation structure. As noted, Strike's salespeople identify and sign clients who they believe are potentially eligible for certain tax credits. Then, to determine whether a client is, indeed, eligible, Strike's tax credit team completes an in-depth “tax-credit study” involving data collection and communications with the client. Id. ¶ 11. If the study reveals that the client is indeed eligible, Strike provides the client with the appropriate application forms and advises them how to apply for the tax credit. Id. In exchange, the client pays Strike a percentage of any tax credit or refund successfully obtained as a result of Strike's assistance. Id. The client may choose to make that payment (1) when the tax-credit study is complete, or later (2) when the client receives their tax refund or credit. Id. ¶ 12. If the former, the amount is calculated as a percentage of the anticipated credit or refund, and if the latter, it is a percentage of the actual refund or credit received. Id.

Strike's salespeople receive a base wage and two kinds of additional payments: Fee Commissions (“Commissions”) and Engagement Letter Bonuses (“EL Bonuses”). Commissions are calculated as a percentage of the payments made by the clients each salesperson signs. Id. ¶ 13. According to Strike, a salesperson earns a Commission at the time that Strike actually collects payments from a client-not at the time a client is retained. Id. ¶ 13-14. The other kind of payment that salespeople receive, EL Bonuses, are simply advances on Commissions. Id. ¶ 15. These are earned when a salesperson initially signs a client and obtains the documentation necessary for Strike to begin the tax-credit study. Id. ¶ 15.

Now, back to what happened in this case. At the time West was fired in April of 2022, she had received a total of seventeen EL Bonuses, because she had signed seventeen clients. Id. ¶ 22. But only one of those seventeen clients had, at that point, paid Strike. Id. ¶ 23. Accordingly, Strike determined that West was only entitled to one Commission. Id. ¶ 23.

When she did not receive commissions for the other clients she had signed, West sent Strike a demand letter seeking “immediate payment . . . of all of the commissions she earned through the deals she closed during her employment with Strike.” Demand Letter at 2, Dkt. 6-2. The letter also requested an “itemized earning statement” detailing all “(a) deals closed by West during the course of her employment, (b) income received by Strike pursuant to the deals, (c) wages and compensation paid to West, and (d) deductions Strike made to West's wages and compensation.” Compl. ¶ 27, Dkt. 1-3.

Strike responded two weeks later by (1) providing the “comprehensive accounting” West had requested and (2) offering a $1,000 check “as full and complete payment of all debt owed to West.” Id. ¶ 28-29. In its letter, Strike maintained the position that West was only entitled to one Commission of $111.20. Id. ¶ 29. It offered the settlement “solely to avoid having to waste its resources defending West's claims any further.” Id. ¶ 29. Strike also advised West that, if she filed a lawsuit to collect the unpaid Commissions, Strike would counterclaim for repayment of a separate $2,600 advance that West had previously received. Id. ¶ 30.

West rejected Strike's settlement offer and, on March 10, 2023, informed Strike that she intended to file a complaint in the U.S. District Court for the District of Colorado the following week. Id. ¶ 31. West included a copy of her draft complaint, which alleged wage theft and retaliation in violation of the Colorado Wage Act (CWA), C.R.S. § 8-4-101 et seq..

On March 12, 2023, two days after receiving West's notice of intent to file suit, Strike filed its own complaint seeking declaratory relief in Idaho state court. Compl., Dkt. 1-3. West promptly removed the case to federal court. Notice of Removal, Dkt. 1. In this lawsuit, Strike seeks declaratory judgments establishing that: (a) the amount of compensation Strike owes West “is dictated by the Employment Agreement negotiated by” the parties; (b) “Strike does not owe West more than $1,000 for compensation earned during the course of her employment with Strike;” and (c) “Strike did not retaliate against West under the CWA.” Id. at 9.

Instead of answering Strike's Complaint, West filed a Motion to Dismiss Pursuant to Colorado Anti-SLAPP Law and Federal Rule of Civil Procedure 12(b)(6). Motion, Dkt. 6. That motion has been fully briefed and is ready for a decision.

LEGAL STANDARD

To survive dismissal under Federal Rule of Civil Procedure 12(b)(6), a complaint “must contain sufficient factual matter, accepted as true, to ‘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)). In making that determination, a court must accept as true all factual allegations in the complaint and construe them in the light most favorable to the plaintiff. Watison v. Carter, 668 F.3d 1108, 1112 (9th Cir. 2012).

Moreover, West believes an additional standard for dismissal applies in this case. Colorado's Anti-SLAPP law, C.R.S. § 13-20-1101, et seq., requires the dismissal of certain complaints even if they clear the threshold demands of Rule 12(b)(6).^[2] The Anti-SLAPP law provides:

A cause of action against a person arising from any act of that person in furtherance of the person's right of petition or free speech under the United States constitution or the state constitution in connection with a public issue is subject to a special motion to dismiss unless the court determines that the plaintiff has established that there is a reasonable likelihood that the plaintiff will prevail on the claim.

C.R.S. § 13-20-1101(3)(a). That statute goes on to provide a non-exhaustive list of acts that are considered to be “in furtherance of a person's right of petition or free speech,” including a catchall for “[a]ny other conduct or communication in furtherance of the exercise of a constitutional right of petition or the constitutional right of free speech in connection with a public issue or an issue of public interest.” C.R.S. § 13-20-1101(2)(a)(IV).

ANALYSIS

West first argues that Strike's Complaint should be dismissed under Colorado's Anti-SLAPP law because it was filed “to prevent [her] from exercising her right to file a lawsuit under the Colorado Wage Act.” Def.'s Memo. in Supp. at 2, Dkt. 6-1. Moreover, she explains Strike has not identified any “cognizable legal theory” as the basis for its lawsuit. Strike responds, first, that the Anti-SLAPP law does not apply in this case for various reasons. Moreover, Strike explains, Idaho's Declaratory Judgment Act (IDJA) provides a sufficient legal basis for this lawsuit.

Strike is correct on both points. The Anti-SLAPP law does not apply because Strike's cause of action does not arise from West's exercise of a constitutional right of petition or speech. Further, the IDJA does provide a valid legal basis for Strike's lawsuit because Strike's rights and obligations are disputed under the terms of the employment contract and the CWA. Nevertheless, the Court will dismiss Strike's lawsuit under its inherent authority to administer its docket and avoid duplicative litigation.

1. Colorado's Anti-SLAPP law does not apply.

Courts analyze Anti-SLAPP motions to dismiss in two steps. See generally L.S.S. v. S.A.P., 523 P.3d 1280, 1285-89 (Colo.App. 2022). First, the court determines whether the movant has shown that the Anti-SLAPP law applies. Id. And second, if the law does apply, the Court determines whether the non-movant has demonstrated a reasonable likelihood of success on its claim. Id.

West argues that the Anti-SLAPP law applies because Strike filed this lawsuit “in response” to her own threatened litigation in Colorado. Def.'s Memo. in Supp. at 2, Dkt. 6-1. Accordingly, she explains, this action “ar[ose] from” an act “in furtherance of” her right to petition the government-that is, the act of threatening to file a lawsuit in federal court. C.R.S § 13-20-1101(3)(a). But Strike's subjective intention for filing its Complaint is not dispositive when it comes to the Anti-SLAPP law.^[3] That law's applicability does not hinge on a plaintiff's subjective motivations. ...