United States District Court, E.D. Virginia, Norfolk Division
OPINION AND ORDER
S. DAVIS, CHIEF UNITED STATES DISTRICT JUDGE.
matter is before the Court on a motion to dismiss, for lack
of subject matter jurisdiction and for failure to state a
claim, filed by defendant Josh Enterprises, Inc.
(“Defendant") pursuant to Rules 12(b)(1) and
12(b)(6) of the Federal Rules of Civil Procedure. Def. Mot.,
ECF No. 9. Plaintiff Suzanne Kuntze ("Plaintiff")
claims that Defendant violated the Fair Labor Standards Act
("FLSA") by purposefully misclassifying her as
exempt from overtime, failing to pay her overtime, and
failing to pay her at her regular rate for mandatory training
hours. Defendant contends that (1) it already paid Plaintiff
the money to which she is entitled under the
"fluctuating workweek" calculation for overtime
pay, thus mooting Plaintiff's overtime claim and
depriving the Court of jurisdiction; (2) Plaintiff failed to
state a claim for unpaid regular time; and (3) even if
Plaintiff amends her claim for unpaid regular time, the claim
would be moot because Defendant already paid more than full
relief. Plaintiff responds that (1) the fluctuating workweek
method does not apply to the overtime claim advanced in this
case and, therefore, her claim for overtime is not moot; and
(2) she adequately alleged a violation of the FLSA for unpaid
regular hours. Alternatively, Plaintiff requests that she be
granted leave to amend the record, or that the Court permit
the parties to conduct discovery, and that Plaintiff be
granted leave to amend her complaint after discovery.
FACTUAL AND PROCEDURAL BACKGROUND
began working for Defendant, a tax service company, in 2015
after Defendant acquired ownership of Plaintiff's
previous employer. Plaintiff worked for her previous employer
year-round since 2005. Compl. ¶ 9, ECF No. 1. In 2015,
after taking over the company, Defendant gave Plaintiff the
title of "Manager" and had her sign a new
employment agreement. Compl. ¶ 10-11. Under the new
agreement, Plaintiff worked as a seasonal employee making a
bi-weekly salary of $1, 280.00 during "tax season."
Compl. ¶ 13; PL's Ex. B, ECF No. 1-2. During the off
season, she worked reduced hours at an hourly wage. Compl.
¶ 14-15. Plaintiff alleges that, notwithstanding her
title as "Manager," Defendant took away her
managerial job duties such as the ability to hire, fire,
schedule, and supervise employees, reducing her
responsibilities to that of a "regular customer service
tax preparer." Compl. ¶ 12.
end of 2015, Plaintiff was required to sign a new employment
agreement to keep her position. Compl. ¶ 16. The
agreement kept Plaintiff on a bi-weekly salary of $1, 280.00
during the tax season and changed her title to "Shift
Supervisor." Compl. ¶ 16; PL's Ex. C, ECF No.
1-3. At the end of 2016, Defendant required Plaintiff to sign
a new employment agreement which set her bi-weekly salary at
$1, 330.00 for the tax season. Compl. ¶ 20; PL's Ex.
D, ECF No. 1-4. None of the agreements capped Plaintiff's
tax season hours, but all three required Plaintiff to
clock-in and out. PL's Exs. B, C, D. The agreements also
noted that Defendant would schedule Plaintiff's hours
"to meet [Defendant's] customer demands because
customer demand fluctuates throughout Tax Season."
PL's Exs. B, C, D.
letter dated August 11, 2017, Plaintiff requested a $60, 000
payment from Defendant to compensate her for unpaid overtime
and regular time. Def.'s Ex. A, ECF No. 10-1. Defendant
responded via counsel on November 18, 2017, with a letter
stating that, while Defendant maintained that Plaintiff was
exempt from overtime, it would nonetheless compensate
Plaintiff for overtime based on the fluctuating workweek
methodology. Def.'s Ex. C, ECF No. 10-3. With the letter,
Defendant issued two checks purportedly "in full
satisfaction of [Plaintiff's] claims against [her]
employer." Def.'s Ex. C. The letter explained that
one check, in the amount of $5, 977.72, was for uncompensated
overtime calculated based on half of her regular hourly rate
under the fluctuating workweek method, plus an additional,
equal amount, for liquidated damages. Def.'s Ex. C. The
second check, which was in the amount of $267.78, was
intended to compensate Plaintiff at her regular hourly rate
for the sixteen and a half regular hours that she spent
completing mandatory training. Def.'s Ex. C. Plaintiff
did not cash the two checks and instead filed her complaint
in this case on January 19, 2018. Mem. in Support of
Def.'s Mot. to Dismiss, ECF No. 10; Compl., ECF No. 1.
before Plaintiff filed her complaint, counsel for Defendant
sent a letter to Plaintiff's counsel highlighting issues
raised during an earlier phone conversation. Def.'s Ex.
D, ECF No. 10-4. The letter again emphasized that Defendant
believed Plaintiff was exempt from overtime pay, but claimed
that even if she was not, Defendant had already given
Plaintiff every dollar to which she was entitled under the
proper calculation method in this jurisdiction. Def.'s
Ex. D. Counsel for Plaintiff replied to Defense counsel's
letter on January 19, 2018. Def.'s Ex. E, ECF No. 10-5.
The letter from Plaintiff's counsel alleged that
Defendant willfully misclassified Plaintiff as
"exempt" from overtime payment, argued that the
fluctuating workweek method was not applicable in this case,
and demanded that Plaintiff be paid based on a
time-and-a-half calculation of overtime. Def.'s Ex. E.
The letter claimed Plaintiff sought a total of $29, 298.90 as
a settlement payment, which covered overtime calculated at
the time-and-a-half rate, unpaid training time at her regular
rate, liquidated damages, and attorney's fees. Def.'s
April 12, 2018, counsel for Defendant sent Plaintiff's
counsel two cashier's checks, one for $267.78 as payment
for training hours at Plaintiff's regular hourly rate,
and one for $5, 980.10 as payment for Plaintiff's
overtime hours plus liquidated damages. Def.'s Ex. F,
ECF No. 10-6. The facts in the record do not state whether
Plaintiff cashed or deposited the cashier's checks.
filed the instant motion to dismiss on April 16, 2018.
Def.'s Mot., ECF No. 9. On July 11, 2018, the Court
issued an order directing the parties to schedule oral
argument on the motion to dismiss and to address controlling
case law of the United States Court of Appeals for the Fourth
Circuit that applied the half-time calculation of the
fluctuating workweek method to misclassification cases.
Order, ECF No. 17. The Court also directed Plaintiff to be
prepared to address how discovery could alter the amount of
damages recoverable, and whether willful misrepresentations
of entitlement to overtime have any relevance to civil
damages, in light of the FLSA's provision regarding
criminal prosecution for willful violations. Order, ECF No.
17. The Court then held a hearing on the motion to dismiss on
September 25, 2018.
12(b)(1) Motion to Dismiss
Facial v. Factual Challenge
motion to dismiss pursuant to Rule 12(b)(1) of the Federal
Rules of Civil Procedure for lack of subject matter
jurisdiction may attack a complaint on its face, insofar as
the complaint fails to allege facts upon which the court can
base jurisdiction, or, as is the case here, it may attack the
truth of any underlying jurisdictional allegations contained
in the complaint. Beck v. McDonald, 848 F.3d 262,
270 (4th Cir. 2017); Adams v. Bain, 697 F.2d 1213,
1219 (4th Cir. 1982). In the former situation, known as a
facial challenge, the court is required to accept all of the
complaint's factual allegations as true, "and the
plaintiff, in effect, is afforded the same procedural
protection as he would receive under a 12(b)(6)
consideration." Adams, 697 F.2d at 1219.
latter situation, known as a factual challenge, "the
district court may regard the pleadings as mere
evidence on the issue and may consider evidence
outside the pleadings." Velasco v. Gov't of
Indonesia, 370 F.3d 392, 398 (4th Cir. 2004) (citing
Adams, 697 F.2d at 1219). In explaining how district
courts should evaluate evidence presented in a factual
challenge, the United States Court of Appeals for the Fourth
Circuit has indicated that it depends on whether the
jurisdictional facts are intertwined with the merits facts.
Kerns v. United States, 585 F.3d 187, 196 (4th Cir.
2009). Both scenarios are discussed below.
Facts Not Intertwined
jurisdictional facts are not intertwined with the merits, the
trial court may weigh evidence and resolve factual disputes
to determine its jurisdiction. See Arbaugh v. Y&H
Corp., 546 U.S. 500, 514 (2006); Adams, 697
F.2d at 1219; 2 Milton I. Shador & Mary P. Squiers,
Moore's Federal Practice - Civil § 12.30
(2018); 5B Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1350 (3d ed.
2004) . But see Richmond, Fredericksburg & Potomac
R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.
1991) (applying a summary judgment standard in a case where
jurisdictional facts were not intertwined with merits facts,
rather than weighing the evidence and resolving factual
disputes). When such jurisdictional and merits facts
are not intertwined, the plaintiff bears the burden of
proving jurisdiction by a preponderance of the evidence and
may present "affidavit[s], depositions or live
testimony" to meet its burden. Adams, 697 F.2d
at 1219; accord United States ex rel. Vuyyuru v.
Jadhav, 555 F.3d 337, 437-48 (4th Cir. 2009).
footnote 3 notes, there are published Fourth Circuit cases
that apply a summary judgment standard in non-intertwined
scenarios, and in doing so, make no reference to a district
court's authority to weigh evidence, as previously
established in Adams. However, in those cases, it
does not appear that the issue of a district judge's
authority to weigh evidence was squarely presented to the
Fourth Circuit. Moreover, in at least two of the cases,
there were not material disputes of fact, and thus, there was
no need to "weigh" the evidence. Balfour Beatty
Infrastructure, Inc., 855 F.3d at 251; Richmond,
Fredericksburg & Potomac R.R. Co., 945 F.2d at 769.
Accordingly, it appears that the Richmond line of
cases should not be interpreted as directly
"conflicting" with Adams and its progeny,
and this Court, therefore, may follow the well-established
standard set forth in Adams.
to the extent that there is a direct conflict between the
cases permitting district courts to weigh evidence and
resolve disputed jurisdictional facts (Adams and
progeny), and those applying a summary judgment standard
(Richmond and progeny), this Court must follow
Adams as it is the earlier-in-time decision. See
McMellon v. United States, 387 F.3d 329, 333 (4th Cir.
2004). Moreover, the decision in Adams is consistent
with more recent Supreme Court precedent and respected Civil
Procedure treatises. See, e.g., Bolivarian
Republic of Venez. v. Helmerich & Payne Int'l
Drilling Co., 137 S.Ct. 1312, 1316 (2017) ("[W]here
jurisdictional questions turn upon further factual
development, the trial judge may take evidence and resolve
relevant factual disputes."); Arbaugh, 546 U.S.
at 514 (noting that “in some instances, if
subject-matter jurisdiction turns on contested facts, the
trial judge may be authorized to review the evidence and
resolve the dispute on her own") (citing 2
Moore's Federal Practice § 12.30 (3d ed.
2005); 5B Charles Alan Wright & Arthur R. Miller,
Federal Practice and Procedure § 1350 (3d ed.
2004)). Though those recent Supreme Court cases have not
clearly defined the limitations on a trial court's
authority to weigh evidence in the 12(b)(1) context, a review
of case law from multiple circuits, including the Fourth
Circuit, indicates that district courts may typically resolve
factual disputes in 12(b)(1) motions unless the
jurisdictional and merits facts are intertwined. See,
e.g., Kerns, 585 F.3d at 192-93;
Trentacosta, 813 F.2d at 1558; Williamson v.
Tucker, 645 F.2d 404, 415 (5th Cir. 1981).
propriety of such procedural rule is further bolstered by the
fact that "courts . . . have an independent obligation
to determine whether subject-matter jurisdiction exists, even
in the absence of a challenge from any party."
Arbaugh, 546 U.S. at 514. It is necessary for
federal courts to have the ability to determine their own
jurisdiction as soon as possible because “' federal
courts are courts of limited jurisdiction'" and they
must be cautious not to overstep the power authorized by the
Constitution and federal statute. Gunn v. Mint on,
568 U.S. 251, 256 (2013) (quoting Kokkonen v. Guardian
Life Ins. Co. of America, 511 U.S. 375, 377 (1994)) .
Accordingly, regardless of whether a "conflict''
exists in the law, the Court concludes that, consistent with
Adams, district courts are typically permitted to
weigh evidence and resolve factual disputes to determine
jurisdiction when such facts are not intertwined
with the merits. Adams, 697 F.2d at 1219.
analysis in an intertwined case is more nuanced than the
approach explained above for non-intertwined cases. When
facts are said to be * intertwined," it means that facts
necessary to prove jurisdiction overlap with facts necessary
to prove the merits of the case such that a 12(b) (1) motion
is, essentially, an indirect attack on the plaintiff's
alleged factual merits. Kerns, 585 F.3d at 193. In
such a scenario, the plaintiff is not only facing a
jurisdictional challenge, but “'a challenge to the
validity of h[er] claim.'" Id. (quoting
Williamson, 645 F.2d at 415) . Thus, when
jurisdictional and merits facts are intertwined, *[i]t is the
better view that . . . the entire factual dispute is
appropriately resolved only by a proceeding on the
merits," which entails either denying the 12(b)(1)
motion and proceeding with the case, or converting the
12(b)(1) motion into a motion for summary judgment on the
merits, as explained in detail below. Adams, 697 F.2d at
1219 (emphasis added); accord Kerns, 585 F.3d at
course, a trial court must first assume jurisdiction before
it can deny the 12(b) (1) motion or convert it to a motion
for summary judgment on the merits. See Kerns, 585
F.3d at 193. Therefore, to assume jurisdiction, the trial
court should engage in a threshold analysis to ensure that
the plaintiff's allegations are sufficient to
confer jurisdiction. Rich v. United States, 811 F.3d
140, 145 (4th Cir. 2015) . This step is, essentially, a
facial analysis where “'a presumption of
truthfulness should attach to the plaintiff's
allegations'" to determine if they state facts that
plausibly confer jurisdiction. Id. (quoting
Kerns, 585 F.3d at 193) .
the allegations pass the threshold analysis required in such
intertwined jurisdictional/merits facts cases, then the trial
court may either (1) deny the 12(b)(1) motion and proceed
with discovery, with the understanding that a party will file
a motion for summary judgment after discovery (if doing so
would not be frivolous); or (2) treat the 12(b)(1) motion as
one for summary judgment and take it under advisement until
the parties have conducted adequate discovery - this is what
courts have referred to as simply "proceeding on the
merits," which is not to be confused with weighing the
evidence and resolving factual disputes. Compare Carter
v. United States, 694 Fed.Appx. 918, 924 (4th Cir. 2017)
(unpublished) (stating that a court should deny the 12(b)(1)
motion before proceeding to the merits) with Lutfi v.
United States, 527 Fed.Appx. 236, 241-42 (4th Cir. 2013)
(unpublished) (holding that the district court should have
assumed jurisdiction and proceeded as if the defendant filed
a motion for summary judgment). Either way, the plaintiff must be
afforded the same procedural safeguards "that would
apply were the plaintiff facing a direct attack on the
merits," specifically the ability to conduct discovery.
Kerns, 585 F.3d at 193. At a minimum, discovery
should be adequate to "resolve the relevant factual
disputes." Kerns, 585 F.3d at 193,
motion to dismiss for lack of subject matter jurisdiction
asserts that the case is moot because Defendant paid
Plaintiff all that she is legally entitled to receive, and
she has, therefore, received "complete relief." A
court loses jurisdiction over a case when it becomes moot.
Williams v. Ozmit, 716 F.3d 801, 809 (4th Cir.
2013). The mootness doctrine arises from the "case and
controversy" requirement of the United States
Constitution. U.S. Const, art. Ill. § 2. "[A] case
is moot when the issues presented are no longer
“live' or the parties lack a legally cognizable
interest in the outcome." Simmons v. United Mortg.
And Loan Inv., LLC, 634 F.3d 754, 763 (4th Cir. 2011)
(quoting United States v. Hardy, 545 F.3d 280, 283
(4th Cir. 2008)) (internal quotation marks omitted)
(alterations in original). In other words, a case is moot
when it is impossible for the court to grant relief to the
prevailing party, such as when "complete relief"
has been secured by a plaintiff. United States v.
Springer, 715 F.3d 535, 540 (6th Cir. 2013);
Simmons, 634 F.3d at 763.
Supreme Court Standard from Campbell-Ewald
United States Supreme Court recently addressed mootness in
the context of a defendant's offer of judgment under
Federal Rule of Civil Procedure 68. Campbell-Ewald Co. v.
Gomez, 136 S.Ct. 663, 672 (2016) . The Supreme Court
held that a rejected offer, even when it provides the
plaintiff the relief he or she seeks, does not moot a claim
as it is considered an unaccepted settlement offer that does
not divest the plaintiff of his or her interest in the case.
Id. However, the Court expressly reserved decision
on the hypothetical question of "whether the result
would be different if a defendant deposits the full amount of
the plaintiff's individual claim in an account payable to
the plaintiff, and the court then enters judgment for the
plaintiff in that amount." Id. Comparing the
offer of judgment in the case before it to railroad
tax cases in which the parties actually received
payment that fully satisfied their tax claims, the Supreme
Court suggested that an offer of judgment or settlement is
legally different than actual payment because, in the former
situation, the plaintiff has not received the money.
Id. at 671 (citing California v. San Pablo &
Tulare R.R. Co., 149 U.S. 308 (1893); Little v.
Bowers, 134 U.S. 547 (1890); San Mateo County v.
Southern Pacific R.R. Co., 116 U.S. 138 (1885)).
Additionally, both the concurring and the dissenting opinions
in Campbe11-Ewa1d suggested that actual payment
would moot a case because the plaintiff received full relief.
See id. at 676 (Thomas, J., concurring)
("Because Campbell-Ewald only offered to pay
Gomez's claim but took no further steps, the court was
not deprived of jurisdiction."); id. at 679
(Roberts, C. J., dissenting); id. at 683 (Alito, J.,
the decision in Campbe11-Ewald, courts have split on
whether actual payment of full relief moots an
individual's claim, with multiple decisions turning on
whether the case was a class action. Compare Leyse v.
Lifetime Entm't Servs., LLC, 679 Fed.Appx. 44, 48
(2d Cir. 2017) (affirming the lower court's ruling that
class certification was not warranted and that a deposit by
the defendant of a full settlement and consent to judgment
permits the court to enter judgment and moot the individual
claim), S. Orange Chiropractic Ctr., LLC v. Cayan
LLC, Civil No. 15-13069-PBS, 2016 U.S. Dist. LEXIS
49067, at *12-13 (D. Mass. Apr. 12, 2016) (holding that, even
though the individual plaintiff's claims were moot, the
class action may proceed), and Price v. Berman's
Auto, Inc., No.14-763-JMC, 2016 U.S. Dist. LEXIS 35807,
at *7-10/ *8-9 n.3 (D. Md. Mar. 21, 2016) (holding
that an unconditional tender of full relief by cashier's
check was sufficient to moot a claim in a case where there
were no class action concerns), with Fulton Dental, LLC
v. Bisco, Inc., 860 F.3d 541, 545-46 (7th Cir. 2017)
(holding a deposit into an account with the court in the
plaintiff's name before the plaintiff moved to certify
the class was insufficient to moot the individual and
potential class claims), Chen v. Allstate Ins. Co.,
819 F.3d 1136, 1146-48 (9th Cir. 2016) (deciding, in the
class action context, that the individual plaintiff's
claims were not moot), and Ung v. Universal Acceptance
Corp., 190 F.Supp.3d 855, 860-63 (D. Minn. 2016)
(declaring, in the class action context, that "there is
no principled difference between a plaintiff rejecting a
tender of payment and an offer of
payment") . The Supreme Court has not yet resolved
the split, and commentators disagree on how the Court will
ultimately decide the unresolved hypothetical question.
Compare Justiciability-Class Action Moo
tness-Campibell-Ewald Co. y. Gomez, 130 Harvard
L. Rev. 427, 432 (2016)(wIf at some point, a
defendant actually delivers a payment constituting complete
relief to a named plaintiff, it would be difficult to avoid
the conclusion that the named plaintiff's claim has been
mooted"), and Thomas D. Rowe, Jr., 13
Moore's Federal Practice § 68.04 (2018)
("In a case comprising only the plaintiff's
individual claim, the ...