Peery v. Nixon Engineering,llc

Western District of Texas, txwd-6:2018-cv-00358

REPORT AND RECOMMENDATIONS re {{10}} Motion to Dismiss filed by Nixon Engineering, LLC. Signed by Judge Jeffrey C. Manske.

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0 IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF TEXAS WACO DIVISION JAYME PEERY, § § Plaintiff, § § v. § CASE NO. 6:18-CV-00358-ADA-JCM § NIXON ENGINEERING, LLC, § § Defendant. § REPORT AND RECOMMENDATION OF THE UNITED STATES MAGISTRATE JUDGE TO: THE HONORABLE ALAN D ALBRIGHT UNITED STATES DISTRICT JUDGE This Report and Recommendation is submitted to the Court pursuant to 28 U.S.C. § 636(b)(1)(C), FED. R. CIV. P. 72(b), and Rules 1(f) and 4(b) of Appendix C of the Local Rules of the United States District Court for the Western District of Texas, Local Rules for the Assignment of Duties to United States Magistrate Judges. Before the Court are Defendant's Motion to Dismiss [ECF #10], Plaintiff's Response [ECF #11], and Defendant's Reply [ECF #12]. For the reasons stated below, the undersigned RECOMMENDS Defendant's Motion to Dismiss be GRANTED IN PART and DENIED IN PART. I. INTRODUCTION Plaintiff initiated this lawsuit on December 10, 2018, alleging Defendant violated the Fair Labor Standards Act (FLSA) and Texas common law by directing / causing Plaintiff and similar employees to work "off-the-clock" during compensable hours. Pl.'s Orig. Compl., ¶¶ 49-89 [ECF #1]. After Defendant moved to dismiss the Original Complaint under Federal Rule of Civil Page 1 of 10 0 Procedure 12(b)(6), Plaintiff amended his complaint to add additional factual detail. Pl.'s First Am. Compl. at p. 1 [ECF # 7]. Defendant then filed a second motion to dismiss, alleging the First Amended Complaint stated two, fundamentally incompatible claims, did not merit supplemental jurisdiction, and alleged preempted state law claims. Def.'s Mot. Dismiss at p. 1. The First Amended Complaint alleges Defendant "enforced a company-wide policy" of requiring employees to work off the clock and without pay. Pl.'s First Am. Compl., ¶ 3. Specifically, it alleges Plaintiff and other employees ordinarily worked forty (40) hours a week on the clock. Id., ¶ 25. In addition, it alleges Defendant directed Plaintiff and others to work "up to thirteen (13) hours 'off-the-clock' per week" without compensation. Id., ¶ 27 (parenthetical in original). This includes twenty (20) minutes a day to retrieve a work vehicle and perform a required inspection, two (2) hours to drive said vehicle to and from the work site, and fifteen (15) minutes of cleaning the site at the end of the work shift. Id., ¶¶ 39-43. Plaintiff alleges this policy violated FLSA overtime pay provisions and Texas equitable principles. Id., ¶¶ 62-104. In addition to his claims, Plaintiff's Complaint also alleges identical claims on behalf of similarly-situated employees of Defendant. Pl.'s First Am. Compl., ¶¶ 1-10. The Complaint identifies two class actions: one of FLSA § 216 plaintiffs and one of Rule 23 state law plaintiffs. Id., ¶¶ 63, 92. Both classes begin on December 10, 2014 and are only distinguished by the cause of action asserted. Id. The proposed FLSA class—per 29 U.S.C. § 216—consists of plaintiffs who affirmatively "opt-in" to the litigation. Id. However, the proposed state law class—per Rule 23 of the Federal Rules of Civil Procedure—consists of plaintiffs who would not affirmatively "opt-out" of the litigation. Id. The Complaint then requests the Court "certify[] the FLSA Collective", "approv[e] . . . a notice to be sent to all [] FLSA Collective Members", and "certify[] the Texas Common-Law Class[.]" Pl.'s First Am. Compl., ¶ 105. Page 2 of 10 0 II. RELEVANT LAW To survive Rule12(b)(6), the nonmovant must plead "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). "The court's task is to determine whether the plaintiff has stated a legally cognizable claim that is plausible, not to evaluate the plaintiff's likelihood of success." Lone Star Fund V (U.S.), L.P. v. Barclays Bank PLC, 594 F.3d 383, 387 (5th Cir. 2010). "Factual allegations must be enough to raise a right to relief above the speculative level, on the assumption that all the allegations in the complaint are true (even if doubtful in fact)." Twombly, 550 U.S. at 555. "The court accepts all well-pleaded facts as true, viewing them in the light most favorable to the [nonmovant]." In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir. 2007) (internal quotation marks omitted). "A claim has facial plausibility when the [nonmovant] pleads factual content that allows the court to draw the reasonable inference that the [movant] is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Id. At the Rule 12(b)(6) dismissal stage, the court considers only whether the complaint states a plausible claim to relief on its face. Pfeffer v. HSA Retail, Inc., No. SA:11-cv-00959-XR, 2012 WL 280740 at *2-3 (W.D. Tex. Jan. 31, 2012) (Rodriguez, J.). Thus, in a class action, the propriety of certification is not properly raised in a motion to dismiss. See Hoffman v. Cemex, Inc., No. H- 09-3144, 2009 WL 4825224 at *4 (S.D. Tex. Dec. 8, 2009).1 Indeed, the plaintiff is not required 1 ("With respect to the collective action issue, the plaintiffs need not plead facts to support the propriety of a collective action to survive a Rule 12(b)(6) motion. Whether proceeding collectively is appropriate will be addressed when the plaintiffs move for conditional certification and issuance of notice to the class. If the class is conditionally certified and notice is issued, [the defendant] may later move for decertification, at which point the appropriateness of class certification will be subjected to a more searching inquiry."). Page 3 of 10 0 to plead facts supporting the appropriateness of class action status in his or her complaint and only need plead sufficient facts to state a plausible claim to relief. Pfeffer, 2012 WL 280740 at *2-3. III. ANALYSIS Defendant challenges Plaintiff's Amended Complaint for five reasons. First, it argues Plaintiff's impending request for Rule 23 certification of his state law claims is "fundamentally incompatible" with his impending request for certification of his FLSA claims. Def.'s Mot. Dismiss at 5-8. Second, it argues Plaintiff's impending request for Rule 23 certification of his state law claims is improper as the state law claims are too "individualized" to merit Rule 23 certification. Id. at 8-10. Third, it argues Plaintiff's state common law claims should be dismissed as they will "substantially predominate" over the federal law claims. Id. at 10-13. Fourth, it argues the FLSA preempts Plaintiff's state law causes of action. Id. at 14-15. Fifth, Defendant argues, in its reply, that Plaintiff fails to state a claim for relief as to unpaid hours under forty (40) hours a week. Def.'s Dismiss Reply at 4. A. Certification Challenges At the outset, some of Defendant's challenges address the propriety of Plaintiff's proposed class rather than the facial prospect of relief. Id. at 5-10. Plaintiff's Complaint features multiple requests for certification and could plausibly be construed as a move for certification. E.g. Pl.'s Second Am. Compl., ¶¶ 9, 10, 105.2 In this reading, Defendant's pleading is not a motion to dismiss but rather a response to Plaintiff's request for certification. Pfeffer, 2012 WL 280740 at *2-3. However, Rule 12(b)(6) does not permit early challenges to the propriety of class action complaints and, instead, only allows a challenge to the facial plausibility of relief. See Huchingson 2 Plaintiff, in his response, argues he did not move for certification in his Complaint. Pl.'s Dismiss Resp. at n.4. Page 4 of 10 0 v. Rao, 2015 WL 1655113 at *3 (W.D. Tex. April 14, 2015) (considering a Rule 12(b)(6) motion against a class action complaint only for whether said complaint gives the defendant "fair notice of the putative class."). Accordingly, the undersigned will not treat the Complaint as a motion for certification and will instead analyze it only for facial plausibility. Defendant's first challenge to Plaintiff's Complaint is that Rule 23 certification of the state law claims would be "fundamentally incompatible" with 29 U.S.C. § 216(b) certification of the FLSA claims. Def.'s Mot. Dismiss at 5-8. At the outset, this argument appears to lack merit. See Tyson Foods, Inc. v. Bouaphakeo, 136 S. Ct. 1037, 1043 (2016) (allowing a Rule 23 state common law class and a § 216(b) FLSA class to proceed concurrently).3 However, regardless, this challenge addresses the propriety of certifying Plaintiff's claims. See e.g. Jackson, 220 F.R.D. at 57-58 (considering this argument in class certification posture). A dispute regarding certification of a class or classes is not properly before the Court at the 12(b)(6) stage. Pfeffer, 2012 WL 280740 at *2-3; Hoffman, 2009 WL 4825224 at *4. Defendant's second challenge to Plaintiff's Complaint is that the "inherently individualized inquiries" affecting each employee "predominate" over the "questions of law and fact common to class members." Def.'s Mot. Dismiss at 8-9 (quoting FED. R. CIV. P. 23(b)(3)) 3 Defendant raises LaChapelle v. Owens-Illinois, Inc., 513 F.2d 286, 288 (5th Cir. 1975) ("LaChappelle II"), in which the Fifth Circuit held "§ 16(b) [of the FLSA] precludes pure Rule 23 class actions in FLSA suits." However, that case presented a distinct question: whether FLSA claims can be brought as class actions under Rule 23 rather than § 216(b). Id. There, the plaintiff argued he did not need to file written consents for his ADEA class action because Rule 23 controlled rather than § 216(b). LaChappelle v. Owens-Illinois, Inc., 64 F.R.D. 96, 97 (N.D. Ga. 1974) ("LaChappelle I"). The district court rejected that argument, finding § 216(b) of the FLSA overrode Rule 23 for FLSA and ADEA claims and added additional requirements for certification. Id. The Fifth Circuit affirmed, concluding "Rule 23 cannot be invoked to circumvent the consent requirement of the third sentence of (sic) FSLA § 16(b)[.]" LaChappelle II, 513 F.2d at 288. LaChappelle II did not address whether Rule 23 could be used for state law claims in conjunction with distinct, but related, FLSA claims certified under § 216(b). Id.; see also Jackson v. City of San Antonio, 220 F.R.D. 55, 58 (W.D. Tex. 2003) ("Plaintiffs must proceed, if they are to proceed with both claims in class action form, under section 216(b) for the FLSA claim and under Rule 23(b)(3) for the state claim."). Page 5 of 10 0 (quotation marks omitted). This argument arises verbatim from Rule 23's requirements for class certification. FED. R. CIV. P. 23(b)(3). This inquiry is well-suited for a motion to decertify or a response to a motion to certify. See Bouaphakeo, 136 S. Ct. at 1045-46; Comcast Corp. v. Behrend, 569 U.S. 27, 33 (2013) (considering argument in certification / decertification posture). It is not well suited for a Rule 12(b)(6) motion to dismiss. Pfeffer, 2012 WL 280740 at *2-3. B. Supplemental Jurisdiction Defendant's third argument is that Plaintiff's state claims "substantially predominate over the federal claims[]" and the Court should therefore decline to exercise supplemental jurisdiction. Def.'s Mot. Dismiss at 10 (quotation marks omitted). Defendant cites 28 U.S.C. § 1367(c)(2), which allows a court to decline its supplemental jurisdiction over a state claim. Id. However, this analysis is factorial and requires the Court to also consider: (1) whether the state claims are novel or complex; (2) whether any federal claims remain; (3) other compelling reasons for declining jurisdiction; and, (4) equitable considerations such as judicial economy, convenience, fairness, and comity. Enochs v. Lampasas County, 641 F.3d 155, 159 (5th Cir. 2011) (citing Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 (1988)). If the number and weight of the totality of factors favors declination of jurisdiction, the Court may then do so. Id. The statutory factors support retaining jurisdiction here. First, Plaintiff's quantum meruit claims are analogous to FLSA claims and do not present novel or complex state law issues. Stephens v. LJ Partners, 852 F. Supp. 597, 600 (W.D. Tex. 1994) (Prado, J.). Second, Plaintiff only brought one FLSA claim (off-the-clock hours above forty a week) and one state claim (off-the-clock hours below forty a week) so neither eclipses the other in size or scope. Page 6 of 10 0 Third, federal claims remain in this litigation. Enochs, 641 F.3d at 159. Fourth, judicial economy prefers Plaintiff's state claim remain in this litigation given it arises from the same operative facts and principles as his federal claim. Id. at 160. Fifth, there is no convenience in dismissing similar state law claims to be tried in a nearby court. Id. These factors weigh in favor of exercising jurisdiction, although, naturally, reevaluation may be proper once certification is at issue. C. Preemption Defendant fourth argues Plaintiff's state law claim for unpaid time exceeding forty (40) hours is preempted by FLSA § 207 (unpaid overtime). Def.'s Dismiss Reply at 3. Plaintiff agrees but argues the FLSA also preempts his claim for unpaid time not exceeding forty (40) hours when the total unpaid time pushes the weekly total beyond forty (40) hours. Pl.'s Dismiss Resp. at 3. This problem is known as "gap time[;]" nonpaid hours that escape FLSA § 207 because they are under the forty (40) hour minimum but escape FLSA § 206 because the average hourly pay exceeds the $7.25 minimum. Green v. Dallas County Schools, No. 3:04-cv-891-P, 2005 WL 1630032 at *3 (N.D. Tex. July 6, 2005). "The Fifth Circuit has not addressed the viability of gap time claims[.]" Carman v. Meritage Homes Corp., 37 F. Supp. 3d 860, 865 (S.D. Tex. 2014). The Northern District of Texas defines "gap time" as: time that is not covered by overtime provisions because it does not exceed the overtime limit[] and time that is not covered by the minimum wage provisions because. . . the employees are still being paid a minimum wage when their salaries are averaged across their actual time worked. Green, 2005 WL 1630032 at *3 (quoting Ladegaard v. Hard Rock Concrete Cutters, Inc., No. 00- C-5755, 2004 WL 1882449 at *5 (N.D. Ill. Aug. 18, 2004)) (quotation marks omitted). The FLSA does not, on its face, address the problem of gap time. 29 U.S.C. §§ 206-07. However, the Fourth Circuit, and some district courts of this circuit, hold gap time is actionable under FLSA § 207 for weeks exceeding forty (40) hours. Valcho v. Dallas Cnty. Hosp. Dist., 658 F. Supp. 2d 802, 811 Page 7 of 10 0 (N.D. Tex. Aug. 14, 2009) (citing Monaham v. County of Chesterfield, Va., 95 F.3d 1263, 1290 (4th Cir. 1996)). These courts reason that "proper overtime compensation under the FLSA 'cannot be said to have been paid to an employee unless all the straight time compensation due him for the nonovertime hours under his contract (express or implied) or under any applicable statute has been paid[]'" and cite Department of Labor regulations in support. Id. (quoting 29 C.F.R. § 778.315) (parenthetical in original). Alternatively, the Second Circuit and other district courts of this circuit hold only unpaid time beyond the forty (40) hour-a-week threshold is recoverable. Carman, 37 F. Supp. 3d at 865-66 (citing Lundy v. Catholic Health Sys. of Long Island, Inc., 711 F.3d 106, 116 (2d Cir. 2013)). Those courts reason the FLSA overtime requirements are limited to overtime and reject as unpersuasive the Department of Labor interpretations to the contrary. Id. The undersigned finds the Second Circuit's reasoning persuasive. The FLSA was not meant to "creat[e] a federal remedy for all wage disputes—of which the garden variety would be for payment of hours worked in a 40-hour work week." Lundy, 711 F.3d at 116. The plain language of FLSA § 207(a) contemplates overtime compensation "for [] employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which [the employee] is employed." 29 U.S.C. § 207(a)(1). Nothing in the language of § 207 appears fairly read to address compensation for hours under the forty (40) hour threshold. Id. Further, while courts appear in disagreement, none of the courts to adopt the Fourth Circuit's reasoning have done so since the Second Circuit's ruling in 2013. Indeed, the only case provided by Plaintiff issued after 2013 is Carmichael v. Monarch Dental Corp., No. 3:12-cv-706-P, 2014 WL 1622709 at *2 n.3 (N.D. Tex. March 31, 2014), which noted the decision but did not reach the issue. Given these facts, the undersigned adopts the reasoning of the Second Circuit and concludes the Page 8 of 10 0 FLSA only provides a cause of action for Plaintiffs seeking recovery of unpaid time exceeding forty (40) hours a week. Lundy, 711 F.3d at 116. Thus, Plaintiff's claims are preempted to the extent he seeks compensation for unpaid time exceeding forty (40) hours a week. Id. However, to the extent he seeks compensation for unpaid time below the forty (40) hour a week threshold, regardless of whether the weekly total exceeded forty (40) hours, his state claims are not preempted. Id. D. Rule 12(b)(6) Challenge Finally, Defendant argues in its Reply that Plaintiff fails to state a claim to relief for unpaid time to the extent said claim arises from time under the forty (40) hour threshold. Def.'s Dismiss Reply at 4. Defendant did not raise this argument in its Motion and Plaintiff did not seek to respond by surreply. While the undersigned finds the argument persuasive, dismissal should not be contemplated without an opportunity to Plaintiff to respond and / or correct the alleged defects. Accordingly, Plaintiff should be given fourteen (14) days leave to amend his complaint or file a surreply to address the Rule 12(b)(6) challenge raised by Defendant's Reply. IV. CONCLUSION In sum, Defendant's Motion to Dismiss should be granted in part and denied in part. To Defendant's first two points, arguments regarding compatibility of class actions and individualized claims are premature at the Rule 12 motion stage. Second, supplemental jurisdiction is appropriate given the interrelated nature of Plaintiff's state and federal claims. Third, Plaintiff's state law gap time claims are preempted only to the extent that time exceeds forty (40) hours. Fourth, Plaintiff could not address Defendant's challenge to the factual sufficiency of his under-forty (40) hour claim and should be given leave to respond or amend. Page 9 of 10 0 V. RECOMMENDATION Accordingly, the undersigned RECOMMENDS Defendant's Motion to Dismiss be GRANTED IN PART and DENIED IN PART. The Motion should be granted as to Plaintiff's state law claims for unpaid hours exceeding the forty (40) hour workweek, which are preempted by federal law. Otherwise, it should be denied. Further, the Court should grant leave to Plaintiff to amend his complaint or otherwise respond to Defendant's allegation that Plaintiff failed to state a claim to unpaid wages not exceeding forty (40) hours a week. The undersigned recommends fourteen (14) days of leave. The parties may wish to file objections to this Report and Recommendation. A party filing objections must specifically identify those findings or recommendations to which objections are made. The District Court need not consider frivolous, conclusory, or general objections. Battle v. U.S. Parole Comm'n, 834 F.2d 419, 421 (5th Cir. 1987). A party's failure to file written objections to the proposed findings and recommendations contained in this Report within fourteen (14) days after the party is served with a copy of the Report shall bar that party from de novo review by the District Court of the proposed findings and recommendations in the Report and, except upon grounds of plain error, shall bar the party from appellate review of unobjected-to proposed factual findings and legal conclusions accepted by the District Court. 28 U.S.C. § 636(b)(1)(C); Thomas v. Arn, 474 U.S. 140, 150-53 (1985); Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415 (5th Cir. 1996) (en banc). SIGNED this 13th day of March, 2019. THE HONORABLE JEFFREY C. MANSKE UNITED STATES MAGISTRATE JUDGE Page 10 of 10