Simms et al v. Northport Health Services Of Arkansas, L.L.C. et al
MEMORANDUM OPINION AND ORDER. Defendants' 28 Motion to Dismiss for Failure to State a Claim filed by Claude Lee and J. Norman Estes is DENIED. Signed by Honorable P. K. Holmes, III on May 14, 2013. (jas)
IN THE UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF ARKANSAS
FORT SMITH DIVISION
NIKKI SIMMS and KIM HUFFSTETLER
Case No. 2:12-CV-02252
NORTHPORT HEALTH SERVICES OF ARKANSAS, L.L.C.
d/b/a LEGACY HEALTH AND REHABILITATION
CENTER; NHS MANAGEMENT, L.L.C.; J. NORMAN ESTES
and CLAUDE LEE, individually and in their capacities as
owners, managers, and/or officers of the above named entities
MEMORANDUM OPINION AND ORDER
Currently before the Court are Defendants J. Norman Estes and Claude Lee’s Motion to
Dismiss (Doc.28 ) and brief in support (Doc. 29) and Plaintiffs Nikki Simms and Kim Huffstetler’s
Response in Opposition (Doc. 32). Plaintiffs are Licensed Practical Nurses who were employed at
Defendant Legacy Health and Rehabilitation Center (“Legacy”) in Fort Smith, Arkansas. Plaintiffs
allege that during their period of employment, Defendants collectively violated the wage and hour
provisions of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., and the Arkansas
Minimum Wage Act (“AMWA”), Ark. Code Ann. 11-4-201 et seq., by failing to properly
compensate Plaintiffs for work performed. Plaintiffs also assert state law claims against all
Defendants for unjust enrichment and promissory estoppel.
Defendants Estes and Lee’s Motion to Dismiss asserts that Plaintiffs’ FLSA and AMWA
claims against them must fail because Plaintiffs failed to allege facts that establish Estes and Lee
were Plaintiffs’ “employers,” as that term is defined by both statutes. Estes and Lee also maintain
that Plaintiffs’ allegations of unjust enrichment and promissory estoppel “consist of a mere recitation
of the elements of those claims” and “are not facts” but “conclusions.” (Doc. 29, p. 9).
In ruling on a motion to dismiss, the Court accepts as true all of the factual allegations
contained in a complaint and reviews the complaint to determine whether its allegations show that
the pleader is entitled to relief. Schaaf v. Residential Funding Corp., 517 F.3d 544, 549 (8th Cir.
2008). All reasonable inferences from the complaint must be drawn in favor of the non-moving
Crumpley-Patterson v. Trinity Lutheran Hosp., 388 F.3d 588, 590 (8th Cir. 2004).
Complaints should be liberally construed in the plaintiff’s favor and “should not be dismissed for
failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in
support of his claim which would entitle him to relief.” Rucci v. City of Pacific, 327 F.3d 651, 652
(8th Cir. 2003) (quoting Conley v. Gibson, 355 U.S. 41, 45-46 (1957)). Nevertheless, “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, 129 S.Ct. 1937, 1949 (2009). Pleadings that contain mere “labels and
conclusions” or “a formulaic recitation of the elements of the cause of action will not do.” Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (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.” Iqbal, 129 S.Ct. at 1949.
Estes admits in his Answer to the Amended Complaint that he owns 92% of the outstanding
membership interests in Defendant Northport Health Services of Arkansas, LLC d/b/a Legacy Health
and Rehabilitation Center (“Legacy”). Both he and Lee are officers of Legacy and Defendant NHS
Management, LLC. However, Estes and Lee argue that they are not “employers” subject to liability
under the FLSA and AMWA because they “spend very little time in Arkansas and simply have
nothing to do with the day to day operations of Legacy,” Plaintiffs’ employer. (Doc. 29, p. 2).
Further, they maintain that “it is doubtful that either Plaintiff have [sic] ever seen or spoken to either
Estes or Lee—much less that either man was their ‘employer’ within the meaning of any applicable
laws.” Id. at p. 5.
As explained above, when deciding a motion to dismiss, a court must accept the factual
allegations contained in a plaintiff’s complaint as true. Therefore, when examining whether
Plaintiffs’ claims against Estes or Lee should be dismissed in the case at bar pursuant to Rule
12(b)(6), the Court may only examine the pleadings to determine whether sufficient facts have been
set forth by Plaintiffs to establish plausible claims that, if proven true, would entitle Plaintiffs to
relief. Whether Estes or Lee actually hired or fired Plaintiffs, spent time in Arkansas directly
supervising Plaintiffs, or engaged in the day-to-day operations of Legacy are factual disputes that are
potentially relevant at the summary judgment or trial stage of these proceedings; however, on a
motion to dismiss, the Court cannot engage in an analysis of the disputed facts, but must assume that
the facts as stated by Plaintiffs are true.
To state facts necessary to a potential finding of liability under the FLSA and AMWA,
Plaintiffs must assert that Defendants were “employers” as defined by these statutes. Under the
FLSA, an “employer” broadly includes “any person acting directly or indirectly in the interest of an
employer in relation to any employee.” 29 U.S.C. § 203(d). Similarly, the AMWA defines an
“employer” as “any individual, partnership, association, corporation, business trust . . . or any person
or group of persons acting directly or indirectly in the interest of an employer in relation to an
employee.” Ark. Code Ann. 11-4-203(4)(A-B).
The Eighth Circuit has held that a corporate officer with operational control of the
corporation’s day-to-day functions is an employer within the meaning of the FLSA. Wirtz v. Pure
Ice Co., Inc., 322 F.2d 259, 262-63 (8th Cir. 1963). A stockholder of a company who is “engaged
in the active management of the affairs of the corporation, although he is ‘shown not to have
assumed any special obligation individually to pay the wages or salaries of [employees]’” is still an
employer under the FLSA. Chambers Constr. Co. v. Mitchell, 233 F.2d 717, 724 (8th Cir. 1956).
The so-called “active management test” provides that a corporate officer may be included in the
definition of “employer” if he hires the supervisors and home office workforce and if the wages of
the corporation’s employees are subject to his control, if only in varying degrees. Id. A corporate
officer can be held jointly and severally liable along with a corporation for the upaid wages of the
corporation’s employees. Brown v. L & P Indus., LLC, 2005 WL 3503637, at *12 (E.D. Ark. Dec.
21, 2005) (citing Donovan v. Agnew, 712 F.2d 1509, 1511-14 (1st Cir. 1983)).
Estes and Lee argue that the Amended Complaint fails to allege facts sufficient to show that
they had the ability to hire or fire either of the Plaintiffs or had any control over Plaintiffs’
employment at Legacy. After reviewing the Amended Complaint, the Court finds that it states the
following: Estes and Lee, as officers of Legacy, “create and enforce policies of Legacy Health and
Rehabilitation Center, and make decisions affecting the wages and hours of their employees,
including Plaintiffs and those similarly situated;” “manage and control Legacy Health and
Rehabilitation Center and make all critical decisions regarding staffing, budgets and census;” and
“could hire and fire employees of Legacy Health and NHS, supervise and control their schedules
and conditions of employment, and [have] control over employees’ wages and employment records.”
(Doc. 27, paras. 12, 17, 28, 29).
Plaintiffs have therefore asserted in their Amended Complaint that Estes and Lee have a
significant ownership interest in Legacy and operational control of the major aspects of Legacy’s
day-to-day functions, including decisions affecting the hiring, firing, and payment of wages to
Legacy’s employees. Accordingly, Plaintiffs have stated a plausible claim that Estes and Lee are
“employers” pursuant to the FLSA and AMWA.
Plaintiffs’ claims for unjust enrichment and promissory estoppel are similarly sufficient to
survive Defendants’ Motion to Dismiss. Plaintiffs allege that all Defendants, collectively, “made
a promise to Plaintiffs that they would be paid for all hours of work” and “expected Plaintiffs to
complete their job duties every day and work through their lunch.” Id. at para. 82. “Plaintiffs
provided services to Defendants by working through their lunch breaks,” and “reasonably expected
to be paid the value of such services.” Id. at para. 76. Further, Plaintiffs contend that even though
“Defendants accepted benefits of Plaintiffs’ work” and “were aware that Plaintiffs were providing
such services with the expectation of being paid,” Defendants failed to pay Plaintiffs for the services
they rendered, and Defendants “were unjustly enriched at the expense of the named Plaintiffs.” Id.
at paras. 77-79. These facts state claims for unjust enrichment and promissory estoppel.
Accordingly, Defendants J. Norman Estes and Claude Lee’s Motion to Dismiss (Doc.28 )
IT IS SO ORDERED this 14th day of May, 2013.
/s/P. K. Holmes, III
P.K. HOLMES, III
CHIEF U.S. DISTRICT JUDGE
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