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Pili v. Patel

United States District Court, E.D. Virginia, Richmond Division

January 11, 2019

SHANTELL PILI, et al., Plaintiffs,
v.
ANILKUMAR PATEL, et al., Defendants.

          MEMORANDUM OPINION

          M. Hannah Lauck United States District Judge

         This matter comes before the Court on two motions: Defendants'[1]Motion to Dismiss First Amended Complaint (the "Second Motion to Dismiss") and Defendants' Motion for Sanctions (collectively with the Second Motion to Dismiss, the "Motions"). (ECF Nos. 28, 36.) Plaintiffs Shantell Pili, Joshua Vaughn, Laio Morris, Valeria Berry, and Akilah Ar-Raheem (collectively, "Plaintiffs") responded in opposition to the Motions. (ECF Nos. 31, 43.) Defendants replied to Plaintiffs' opposition to the Second Motion to Dismiss. (ECF No. 34). Defendants did not file a reply to the Motion for Sanctions, and the time to do so has expired.

         On December 11, 2018, the Court held a hearing on the Motions. The matters are ripe for disposition. The Court exercises jurisdiction pursuant to 28 U.S.C. § 1331[2] and 28 U.S.C. § 1367.[3] For the reasons that follow, the Court will deny the Second Motion to Dismiss and the Motion for Sanctions.

         I. Factual and Procedural Background

         A. Procedural Background

         Plaintiffs bring this four-count Amended Complaint for allegedly unlawful behavior stemming from Defendants' employment of Plaintiffs. A recitation of all pleadings will contextualize the motions currently before the Court.

         The original May 14, 2018 Complaint (the "Original Complaint") named three plaintiffs: Laio Morris, Shantell Pili, and Joshua Vaughn (the "Original Plaintiffs"). (ECF No. 1.) The Original Complaint brought three claims. In Count I, the Original Plaintiffs sought unpaid wages and unpaid overtime pay pursuant to the FLSA. In Count II, the Original Plaintiffs claimed, in the alternative, unpaid wages pursuant to the Virginia Minimum Wage Act. In Count III, Plaintiff Vaughn asserted a claim under the doctrine of quantum meruit.[4]

         On June 10, 2018, Defendants filed a Motion to Dismiss (the "First Motion to Dismiss"), (ECF No. 14), which Plaintiffs opposed, (ECF No. 17). On June 29, 2018, Plaintiffs filed a Notice of Filing the First Amended Complaint, (ECF No. 25), and the Amended Complaint, (ECF No.26).[5]

         The Amended Complaint names five plaintiffs, adding Valeria Berry and Akilah Ar-Raheen to Original Plaintiffs Morris, Pili, and Vaughn. The Amended Complaint includes four causes of action. In Count I, all five Plaintiffs bring an FLSA claim for unpaid wages and unpaid overtime. In Count II, all Plaintiffs, in the alternative, allege violations of the Virginia Minimum Wage Act. In Count III, Plaintiff Vaughn raises a claim pursuant to the doctrine of quantum meruit. Finally, in Count IV, Plaintiffs Pili and Vaughn each assert, for the first time, a claim for retaliation pursuant to the FLSA.

         On July 19, 2018, Defendants filed the Second Motion to Dismiss. On August 2, 2018, Plaintiffs responded, and on August 8, 2018, Defendants replied. Six days later, on August 14, 2018, Defendants filed the Motion for Sanctions.[6] On August 28, 2018, Plaintiffs opposed the Motion for Sanctions. Defendants opted not to reply. On December 11, 2018, the Court held a hearing (the "December 11, 2018 Hearing") on the Motions.

         B. Summary of Compensation-Related Allegations[7] in the Amended Complaint[[8]]

         According to Plaintiffs, Defendants operate the Akaza Hotel[9] in Richmond, Virginia. Although a change in formal ownership occurred during some of the relevant times, [10] Plaintiffs aver that "upon information and belief, the natural persons (including Anilkumar and Toral Patel) associated with ownership (via SN Holdings, LLC) and management of the hotel have remained the same throughout all relevant periods." (Am. Compl. ¶ 16.)

         Defendants Anilkumar Patel and Toral Patel (collectively, the "Patels") were "involved in the ownership and management of the Akaza Hotel, the formation of all corporate Defendants in this lawsuit, and exercised the power to hire and fire, controlled [Plaintiffs'] work schedules, and directed Plaintiffs in their work." (Id. ¶¶ 20-21.) The Patels also "w[ere] involved in establishing the 'Volunteer for Humanitarian Trade Agreement' program[11] through which the Akaza Hotel recruited desperate people to work without any cash wages at the hotel." (Id.) According to Plaintiffs, Defendants recruit and hire "desperate" workers via online advertisements. (Id. ¶¶ 21, 24.) These workers provided services, including "landscaping, repairing appliances, cleaning hotel rooms, replacing water-damaged sheetrock, repairing plumbing issues, examining water damage, replacing framework, replacing tile, painting, making bookings, checking guests in and out, receiving and processing payments, inspecting rooms for damage, and other assorted services." (Id. ¶ 25.)

         As compensation, Defendants provided workers with accommodations at the hotel rather than monetary payment. These hotel rooms "were in substandard condition, and many ... lacked basic utilities and/or had health hazards." (Id. ¶ 28.) Plaintiffs also contend that, "[t]o the degree anyone at the hotel kept records, [the Patels], upon information and belief, w[ere] involved in such recordkeeping." (Id. ¶¶ 20-21.)

         For each Plaintiff, the Amended Complaint details the dates of alleged employment, the alleged hours worked at the Hotel, the tasks undertaken, and the conditions of the accommodations received in exchange for their services. Although the factual allegations differ based on each Plaintiffs experience, the theme is clear: according to Plaintiffs, Defendants required them to perform various hotel tasks, [12] often working over forty hours a week without overtime compensation, [13] in exchange for residing in substandard rooms.[14]

         C. Summary of Retaliation-Related Allegations and Procedural History[15]

         On April 20, 2018, prior to filing suit, Counsel for Plaintiffs sent Defendants a Demand Letter marked "For Settlement Purposes Only."[16] (Demand Letter 1, ECF Nos. 37-1, 43-1 (capitalization and holding altered).) The Demand Letter summarized Pili and Vaughn's claims and invited Defendants to provide "a copy of contemporaneous accounting of [Pili and Vaughn's] hours worked and wages paid." (Demand Letter 2, ECF Nos. 37-1, 43-1.) The Demand Letter also stated: "If we can resolve this case out of court, we will not file the lawsuit." (Id. at 2.) Plaintiffs gave Defendants until May 4, 2018 to respond.

         When asked for additional time to respond to the Demand Letter, Counsel for Plaintiffs agreed to seven more days, or until May 11, 2018. (Correspondence 8-10, ECF No. 43-1.) After Counsel for Defendants failed to contact Counsel for Plaintiffs by the May 11, 2018 deadline, the Original Plaintiffs filed their Original Complaint on May 14, 2018.

         On May 16, 2018, Counsel for Defendants renewed contact with Counsel for Plaintiffs "apologizing for [his] failure to respond... by May 11, 2018 and inquiring if they were still amendable to resolving the claim." (Jackson Aff. at 2, ECF No. 37-1.) After further email exchanges, Counsel for Defendants sent Counsel for Plaintiffs several documents, including two "Reconciliation Sheets." (Pls.' Ex. B ("Pili's Reconciliation Sheet"), ECF No. 26-2; Pls.' Ex. C ("Vaughn's Reconciliation Sheet"), ECF No. 26-3.) Other than Plaintiffs' April 20, 2018 Demand Letter, no email or document from either side-including Defendants-bore a "for settlement only" or similar notation.

         The Reconciliation Sheets include notations that Pili and Vaugh owed money to, and committed crimes against, the Hotel. Pili's Reconciliation Sheet indicates that Pili owes Defendants $1, 026.25 "'for the fair value of room' less the alleged value of the work that [Pili] performed." (Am. Compl. ¶ 38 (quoting Pili's Reconciliation Sheet 1).) Pili's Reconciliation Sheet also states that Pili stole items from the Hotel (including cash from the front desk), and that she "is Guilty of both Grand Theft And Defrauding the Innkeeper for the sum of $7, 526.25." (Pili's Reconciliation Sheet 1 (capitalization in original).) Plaintiffs contend that Pili "never stole items from Defendants and had never before been told that she owed [Defendants] money for the 'fair value of room' at the hotel." (Am. Compl. ¶ 39.) Plaintiffs charge that Defendants made these accusations in retaliation for Pili filing the Original Complaint.[17]

         Vaughn's Reconciliation Sheet-sent days after Plaintiffs filed the Original Complaint- evinces similar notations. Vaughn's Reconciliation Sheet notes that Vaughn owed the Hotel $310.00 for the fair value of his room. Vaughn's Reconciliation Sheet indicates that "Vaughn's incompetent work" resulted in $5, 700.00 in damages and $250 in repairs. (Vaughn's Reconciliation Sheet 1, ECF No. 26-3.) It further represents that Vaughn "Stole items from the Hotel including Tools, Fridge, [and] Microwave." (Id. (capitalization in original).) Finally, as with Pili, an annotation charges that Vaughn "is Guilty of both Grand Theft And Defrauding the Innkeeper for [a different] sum of $6, 760.00." (Id.) Plaintiffs again contend that Vaughn "never stole any items from Defendants and had never before been told that he owed money for the 'fair value of room' at the [H]otel" beyond the deposit. (Am. Compl. ¶ 56.) Plaintiffs claim that Defendants made these accusations in retaliation for Vaughn filing the Original Complaint.

         In response to Defendants' sending the Reconciliation Sheets and other documents, Counsel for Plaintiffs asked Counsel for Defendants to further explain the information in the Reconciliation Sheets, including records showing how Defendants calculated the values cited in both Pili and Vaughn's Reconciliation Sheets. Counsel for Defense did not respond to this request, apparently prioritizing deadlines in this Court instead. Plaintiffs then filed their Amended Complaint, asserting, in Count IV, Pili and Vaughn's FLSA retaliation claims.

         II. Analysis: Second Motion to Dismiss

         Plaintiffs bring this four-count action against Defendants, alleging violations of the FLSA, Virginia state law claims, and the common law doctrine of quantum meruit. Defendants move to dismiss all four counts in their Second Motion to Dismiss. The Court finds that Plaintiffs plausibly allege facts in support of their FLSA claims, Counts I and IV. The Court will exercise supplemental jurisdiction over Count II (the Virginia state law claim) and Count III (the quantum meruit claim) pursuant to 13 U.S.C. § 1367.[18] Accordingly, and for the reasons that follow, the Court will deny the Second Motion to Dismiss.

         A. Standard of Review: Federal Rule of Civil Procedure 12(b)(6)[19]

         Black letter law provides that a plaintiffs well-pleaded allegations are taken as true and the complaint is viewed in the light most favorable to the plaintiff when a court evaluates a motion under Fed.R.Civ.P. 12(b)(6). Matkari, 7 F.3d at 1134; see also Republican Party of N.C v. Martin, 980 F.2d 943, 952 (4th Cir. 1992). This principle applies only to factual allegations, however, and "a court considering a motion to dismiss can choose to begin by identifying pleadings that, because they are no more than conclusions, are not entitled to the assumption of truth." Ashcroft v. Iqbal, 556 U.S. 662, 679 (2009). "A motion to dismiss under Rule 12(b)(6) tests the sufficiency of a complaint; importantly, it does not resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." Martin, 980 F.2d at 952 (citing 5A Charles A. Wright & Arthur R. Miller, Federal Practice and Procedure § 1356 (1990)).

         A complaint containing only "labels and conclusions" or a "formulaic recitation of the r elements of a cause of action" cannot survive a Rule 12(b)(6) challenge. Bell Atl Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citations omitted). Instead, a plaintiff must assert facts that rise above speculation and conceivability to those that "show" a claim that is "plausible on its face." Iqbal, 556 U.S. at 678-79 (citing Twombly, 550 U.S. at 570; Fed.R.Civ.P. 8(a)(2)). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. at 678 (citing Twombly, 550 U.S. at 556).

         "A plaintiff is generally permitted to plead facts based on 'information and belief if such plaintiff is in a position of uncertainty because the necessary evidence is controlled by the defendant." Ridenour v. Multi-Color Corp., 147 F.Supp.3d 452, 456 (E.D. Va. 2015). This allowance is not limitless. See, e.g., Pirelli Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 442 (7th Cir. 2011) (holding, in the context of a pleading for fraud under Rule 9(b), that "[w]hen a plaintiff sets out allegations on information and belief, he [or she] is representing that he [or she] has a good-faith reason for believing what he [or she] is saying, but acknowledging that his [or her] allegations are 'based on secondhand information that he [or she] believes to be true'") (citing Black's Law Dictionary 783 (7th ed. 1999)).

         B. Plaintiffs Sufficiently Plead that the FLSA Applies

          Plaintiffs bring two counts pursuant to the FLSA. In Count I, Plaintiffs claim that Defendants owe Plaintiffs compensation for the work that Plaintiffs performed for Defendants. In Count IV, Plaintiffs allege that Defendants unlawfully retaliated against Plaintiffs Pili and Vaughn for filing the Original Complaint.

         Defendants challenge the applicability of the FLSA on two grounds. First, Defendants posit that the enterprise at issue falls outside of the scope of the FLSA because its gross annual revenue does not meet the $500, 000 threshold required for enterprise coverage. Next, Defendants argue that Plaintiffs have failed to plausibly establish an employer-employee relationship between Defendants and each of the Plaintiffs.

         Both arguments fail. Plaintiffs plausibly allege facts to support a finding, at this stage, that Defendants' enterprise falls within the scope of the FLSA and that each of the Plaintiffs had an employer-employee relationship with Defendants. Accordingly, the Court will deny the Second Motion to Dismiss.

         1. Plaintiffs Sufficiently Plead That Defendants Fall Within the Definition of "Enterprise" Within the FLSA

         To recover under the FLSA, a plaintiff may rely on two theories of recovery. First, a plaintiff may demonstrate that the employer constitutes an "enterprise engaged in commerce or in the production of goods for commerce" ("enterprise coverage") whose "annual gross volume of sales made or business done is not less than $500, 000 (exclusive of excise taxes at the retail level that are separately stated)." 29 U.S.C. §§ 206(a), 2O7(s)(1)(A)(ii). "Under the FLSA, an 'enterprise' need not be a single business." Griffin v. Daniel, 768 F.Supp. 532, 535 (4th Cir. 1991). Alternatively, a plaintiff may allege that the plaintiff has, in her or his capacity as an employee, personally "engaged in commerce or in the production of goods for commerce" ("individual coverage"). Id. at § 207(a)(1). The Court concludes that Plaintiffs plausibly allege that Defendants' gross volume of sales made or business done meets the $500, 000 threshold, [20]thus establishing enterprise coverage and surviving this Rule 12(b)(6) challenge.

         Plaintiffs allege that "[u]pon information and belief, and notwithstanding Defendants' claims to the contrary, Defendants received at least $500, 000 in gross revenue in each of 2016 and 2017." (Am. Compl. ¶ 31.) Defendants challenge this assertion as "a conclusory and wholly unsupported claim."[21] (Mem. Supp. 2d Mot. Dismiss 10.) In response, Plaintiffs state: "Based on firsthand knowledge, the Plaintiffs anticipate that discovery... will firmly establish that the Defendants enjoyed revenue in excess of $500, 000 'annual gross volume of sales or business done' during the relevant time." (Resp. 2d Mot. Dismiss 9.)

         Viewing the allegations in the light most favorable to the non-moving party, Plaintiffs' minimal allegation passes muster. Plaintiffs plainly contend that, "[u]pon information and belief," Defendants meet the $500, 000 threshold for enterprise coverage to apply. (Am. Compl. ¶ 31.) Because a common enterprise within the FLS A may include multiple entities, [22] the Court finds Plaintiffs' allegation that Defendants meet the $500, 000 threshold requirement plausible. See Griffin, 768 F.Supp. at 535.

         Further, Plaintiffs may plead on information and belief and survive a Rule 12(b)(6) motion to dismiss when the information to support the factual allegations exists within the Defendants' control.[23] See Ridenour, 147 F.Supp.3d at 456. The Court has no difficulty concluding that Defendants possess the relevant information regarding Akaza Hotel's gross volume of sales or business done.

         Accordingly, Plaintiffs sufficiently plead that the FLS A applies to Defendants through the enterprise coverage provisions, and the Court will deny the Second Motion to Dismiss brought on this basis.

         2. Plaintiffs Sufficiently Plead that an Employee-Employer Relationship Exists Between Each Plaintiff and Defendants

         A plaintiff must also establish an employer-employee relationship within the meaning of 83 (4th Cir. 2016). Plaintiffs abundantly do so here under what is called the Economic Reality Test.[24]

         Although the FLS A defines the terms employer, [25] employee, [26] and employ, [27] "there is ... no definition that solves problems as to the limits of the employer-employee relationship under the Act." Rutherford Food Corp. v. McComb, 331 U.S. 722, 728 (1947). The Supreme Court of the United States has stated: "The definition of' employ' is broad." Id., Similarly, "[a] broader or more comprehensive coverage of employees ... would be difficult to frame." Griffin, 768 F.Supp. at 539 (quoting United States v. Rosenwasser, 323 U.S. 360, 362 (1944) (alterations in original)). Courts interpret the term employer broadly to include "those with managerial responsibilities and 'substantial control of the terms and conditions of the work of... employees.'" Kerr, 824 F.3d at 83 (quoting Falk v. Brennan, 414 U.S. 190, 195 (1973)). The FLS A even applies to informal and loose employment relationships. See, e.g., Griffin, 768 F.Supp. at 538-40.

         The existence of an employer-employee relationship "does not depend on... isolated factors but rather upon the circumstances of the whole activity." Rutherford, 331 U.S. at 730. A court must consider the "underlying economic realities" in a fact-specific manner. Id. at 727 (quoting Walling v. Rutherford Food Corp., 156 F.2d 513, 517 (10th Cir. 1946). For instance, a court may consider the worker's economic dependency on the alleged employer. Griffin, 768 F.Supp. at 539.

         Under the Economic Reality Test, a court should consider four factors: "whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records." Id. (quoting Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132, 139 (2d Cir. 1999). These factors are not necessarily exhaustive, and a court must consider the circumstances of the activity as a whole because "no one factor is dispositive." Id.

         a. Plaintiffs Sufficiently Satisfy All Aspects of the Economic Reality Test

         Plaintiffs plead sufficient facts to show that an employee-employer relationship exists between each Plaintiff and Defendants within the scope of the FLSA. The Amended Complaint asserts that each plaintiff worked for the Hotel without receiving monetary compensation.[28] For each Plaintiff, the Amended Complaint describes the kinds of tasks that Plaintiffs completed for the benefit of the hotel. These tasks included front desk duties, maintenance duties, housekeeping duties, and landscaping duties. As compensation, each Plaintiff lived in one of the Hotel rooms without paying the room rate.

         Defendants founder when asserting that Plaintiffs' Amended Complaint does not survive a motion to dismiss because it fails to properly allege an employer-employee relationship. The Court will explain why Defendants cannot prevail by ...


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