United States District Court, E.D. Virginia, Richmond Division
Hannah Lauck United States District Judge
matter comes before the Court on two motions:
Defendants'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.
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 and 28 U.S.C.
§ 1367. For the reasons that follow, the Court
will deny the Second Motion to Dismiss and the Motion for
Factual and Procedural Background
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.
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.
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
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.
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. 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
Summary of Compensation-Related
Allegations in the Amended
to Plaintiffs, Defendants operate the Akaza
Hotel in Richmond, Virginia. Although a change
in formal ownership occurred during some of the relevant
times,  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.
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 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.)
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.)
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,  often working over forty hours a week
without overtime compensation,  in exchange for residing
in substandard rooms.
Summary of Retaliation-Related Allegations and Procedural
April 20, 2018, prior to filing suit, Counsel for Plaintiffs
sent Defendants a Demand Letter marked "For Settlement
Purposes Only." (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.
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.
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.
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
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.
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.
Analysis: Second Motion to Dismiss
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. Accordingly, and for the reasons that
follow, the Court will deny the Second Motion to Dismiss.
Standard of Review: Federal Rule of Civil Procedure
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 §
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).
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)).
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
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.
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.
Plaintiffs Sufficiently Plead That Defendants Fall Within the
Definition of "Enterprise" Within the FLSA
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,
thus establishing enterprise coverage and
surviving this Rule 12(b)(6) challenge.
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." (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.)
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,  the Court finds Plaintiffs'
allegation that Defendants meet the $500, 000 threshold
requirement plausible. See Griffin, 768 F.Supp. at
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. 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.
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
Plaintiffs Sufficiently Plead that an Employee-Employer
Relationship Exists Between Each Plaintiff and
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.
the FLS A defines the terms employer,  employee,
and employ,  "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.
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.
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."
Plaintiffs Sufficiently Satisfy All Aspects of the
Economic Reality Test
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. 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.
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 ...