Darrow v. WKRP Management, LLC et al

Filing 144

ORDER denying 106 Defendants Motion to Dismiss by Judge Christine M. Arguello on 6/3/2011.(erv, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 09-cv-01613-CMA-BNB
ROBERT DARROW, individually and on
behalf of other similarly situated persons,
Plaintiff,
v.
WKRP MANAGEMENT, LLC,
WKRP COLORADO PP, LLC,
WKRP COLORADO, LLC,
WKRP HOLDINGS, LLC,
Defendants.

ORDER DENYING DEFENDANT’S MOTION TO DISMISS

This matter is before the Court on Defendants’ Motion to Dismiss Plaintiff’s
Second Amended Complaint (Doc. # 106) (hereinafter, “Amended Complaint”). In this
case, Plaintiff Robert Darrow, individually and on behalf of other similarly situated
persons, alleges that WKRP Management, LLC, WKRP Colorado PP, LLC, WKRP
Colorado, LLC, and WKRP Holdings, LLC (collectively “Defendants”) violated the Fair
Labor Standards Act (“FLSA”) and the Colorado Minimum Wage of Workers Act
(“CMWWA”) by failing to reasonably approximate his automotive expenses for

reimbursement purposes, and thereby, failing to pay him minimum wage. Jurisdiction
over Plaintiff’s FLSA claim is proper pursuant to 29 U.S.C. § 216(b) and 28 U.S.C.
§ 1331. Jurisdiction over Plaintiff’s CMWWA claim is proper pursuant to 28 U.S.C.
§ 1367(a).
I. BACKGROUND
A.

FACTS
Defendants jointly operate approximately forty-eight Pizza Hut franchise stores in

Colorado, Kansas, Missouri, and New Mexico. Plaintiff is employed by Defendants as a
pizza delivery driver in Colorado. Opt-in Plaintiffs James Adair, James Connors,
Joseph Conners, Isaac Hayes, Amy McVey, and Richard McVey (collectively “opt-in
Plaintiffs”) are also employed by Defendants as delivery drivers at stores in Colorado,
Kansas, and Missouri. Defendants paid Plaintiff at or near the Colorado minimum wage
from 2007 to 2009. Defendants paid opt-in Plaintiffs at or near the applicable state
minimum wage, but never paid opt-in Plaintiffs more than $2.00 over the federal
minimum wage. In 2009, the Colorado minimum wage was $7.28 per hour. The federal
minimum wage was $6.55 per hour from January to July 2009 until it was raised to
$7.25 per hour after July. On average, Plaintiff and opt-in Plaintiffs delivered two to
three orders per hour and drove five miles per delivery.
Plaintiff alleges that Defendants required their delivery drivers to “maintain and
pay for safe, legally-operable, and insured automobiles when delivering WKRP’s pizza

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and other food items.” (Doc. # 102.) Defendants reimbursed Plaintiff between $0.75
and $1.00 per delivery for the vehicle expenses incurred by Plaintiff to make deliveries.
Plaintiff alleges that it was Defendants’ policy and practice to unreasonably estimate
employees’ automotive expenses for reimbursement purposes, which caused Plaintiff
and other similarly situated individuals to be paid less than the federal minimum wage
and the Colorado minimum wage from 2007 to 2009 in violation of the FLSA and the
CMWWA.
B.

PROCEDURAL HISTORY
Plaintiff filed his original complaint on July 8, 2009. (Doc. # 1.) Subsequently,

Defendants filed a Motion to Dismiss pursuant to Fed. R. Civ. P. 12(b)(6), arguing that
Plaintiff failed to allege sufficient facts in support of his claims. (Doc. # 19.) The Court,
finding that Plaintiff’s complaint lacked clarity and suffered from conclusory allegations,
dismissed Plaintiff’s original complaint without prejudice. (Doc. # 69.)
On August 8, 2010, Plaintiff filed the Amended Complaint. (Doc. # 102.) The
Amended Complaint abandoned all but one claim against Defendants. Plaintiff’s
remaining claim alleges that Defendants’ reimbursement formula did not reasonably
approximate Plaintiff’s vehicle-related expenses, which caused Plaintiff to be paid below
the federal and Colorado minimum wages. (Doc. # 102.)
On September 13, 2010, Defendants’ filed a second Motion to Dismiss pursuant
to Fed. R. Civ. P. 12(b)(6), arguing that Plaintiff failed to allege his actual automotive
expenses, and as a result, failed to state a plausible claim that (1) Defendants’

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reimbursement formula did not reasonably approximate Plaintiff’s actual vehicle-related
expenses, and (2) that Defendants had paid Plaintiff below the minimum wage.
Additionally, Defendants’ argued that Plaintiff’s collective action claim must fail because
Plaintiff failed to show that others, including opt-in Plaintiffs, were similarly situated.
Plaintiff responded on October 4, 2010 and Defendants replied on October 18, 2010.
II. STANDARD OF REVIEW
Fed. R. Civ. P. 12(b)(6) provides that a defendant may move to dismiss a claim
for “failure to state a claim upon which relief can be granted.” The complaint will only
survive a motion to dismiss if it “contains ‘enough facts to state a claim to relief that is
plausible on its face.’” Ridge v. Red Hawk, L.L.C. v. Schneider, 493 F.3d 1174, 1177
(10th Cir. 2007) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “The
question is whether, if the allegations are true, it is plausible and not merely possible
that the plaintiff is entitled to relief under the relevant law.” Robbins v. Oklahoma, 519
F.3d 1242, 1247 (10th Cir. 2008). “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.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1950 (2009) (internal quotation marks
omitted).
In reviewing a Rule 12(b)(6) motion to dismiss, a court “accept[s] all the wellpleaded allegations of the complaint as true” and “construe[s] them in the light most
favorable to the plaintiff.” David v. City & Cnty. of Denver, 101 F.3d 1344, 1352 (10th
Cir. 2007) (quoting Twombly, 550 U.S. at 563). Nevertheless, the courts “are not bound

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to accept as true a legal conclusion couched as a factual allegation.” Twombly, 550
U.S. at 555 (quoting Papasan v. Allain, 478 U.S. 265, 286 (1986)). “The court’s function
on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might
present at trial, but to assess whether the plaintiff’s complaint alone is legally sufficient
to state a claim for which relief may be granted.” Sutton v. Utah State Sch. for the Deaf
& Blind, 173 F.3d 1226, 1236 (10th Cir. 1999). However, “a complaint does not suffice
if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.” Iqbal, 129 S.
Ct. at 1949.
III. ANALYSIS
The FLSA provides a definition for “wages,” but does not address an employer’s
reimbursement of expenses. However, “[Department of Labor] regulations are entitled
to judicial deference, and are the primary source of guidance for determining the scope
and extent of exemptions to the FLSA,” including expense reimbursement. Spadling v.
City of Tulsa, 95 F.3d 1492, 1495 (10th Cir. 1996). Therefore, the Court will look to the
Department of Labor regulations to determine whether, under the FLSA, an employee
may claim that his wages are reduced below the minimum wage when he is underreimbursed for vehicle-related expenses. Under 29 C.F.R. § 531.35, “the wage
requirements of the [FLSA] will not be met where the employee ‘kicks-back’ directly or
indirectly to the employer or to another person for the employer's benefit the whole or
part of the wage delivered to the employee.” A kickback occurs when the cost of tools
that are specifically required for the performance of the employee’s particular work “cuts

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into the minimum or overtime wages required to be paid him under the Act.” Id. Section
531.35 specifically incorporates § 531.32(c), which in turn incorporates § 778.217,
which states:
Where an employee incurs expenses on his employer's behalf or where
he is required to expend sums solely by reason of action taken for the
convenience of his employer, section 7(e)(2) [which provides that
employee's regular rate does not include travel or other expenses incurred
in furtherance of the employer's interest] is applicable to reimbursement
for such expenses. Payments made by the employer to cover such
expenses are not included in the employee's regular rate (if the amount
of the reimbursement reasonably approximates the expenses incurred).
Such payment is not compensation for services rendered by the
employees during any hours worked in the workweek.
29. C.F.R. § 778.217(a). In Wass v. NPC International, Inc. (Wass I), 688 F. Supp. 2d
1282, 1285-86 (D. Kan. 2010), the court concluded that these regulations “permit an
employer to approximate reasonably the amount of an employee's vehicle expenses
without affecting the amount of the employee's wages for purposes of the federal
minimum wage law.” However, if the employer makes an unreasonable approximation,
the employee can claim that his wage rate was reduced because of expenses that were
not sufficiently reimbursed. Id. at 1287.
Plaintiff alleges that his under-reimbursed vehicle expenses constituted a
kickback to Defendants because Defendants failed to reasonably approximate Plaintiff’s
vehicle-related expenses and Plaintiff was specifically required to use and maintain a
vehicle to benefit Defendants’ business. Plaintiff further alleges that Defendants’
unreasonable approximation of Plaintiff’s vehicle-related expenses led to Plaintiff’s wage
being reduced below the minimum wage.
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Defendants argue that Plaintiff cannot use an estimated mileage rate as a
substitute for actual vehicle-related expenses. Without pleading his actual expenses,
Defendants contend that Plaintiff is unable to prove (1) that Defendants’ reimbursement
rate was an unreasonable approximation, and (2) that Defendants paid him below the
minimum wage as a result of the under-reimbursement. Plaintiff responds that he does
not have to produce his actual automotive expenses in order to state a claim under
the Iqbal and Twombly standard because he can raise the plausible inference that
Defendants’ approximation of his vehicle-related expenses was unreasonable without
knowing his actual expenses. For the following reasons, the Court finds that Plaintiff’s
Amended Complaint meets the pleading standard under Iqbal and Twombly.
A.

FACTUAL SUFFICIENCY OF ESTIMATED VEHICLE-RELATED EXPENSES
This Court must first determine whether an estimate of Plaintiff’s vehicle-related

expenses is factually sufficient to serve as the basis for a claim. FLSA plaintiffs can rely
on estimates provided that there is evidence that the estimate is not an unreasonable
approximation of the actual figure. See Anderson v. Mt. Clemens Pottery Co., 328 U.S.
680, 694 (1946) (holding that “employees cannot be barred from their statutory rights”
because they rely on estimates of overtime hours worked) (superseded by statute on
other grounds); Bledsoe v. Wirtz, 384 F.2d 767, 771 (1967) (holding that the employer
had “the burden of specifically and expressly rebutting the reasonable inferences drawn
from employee’s evidence as to the amount of time spent working” when no record of
actual time spent was kept); Robinson v. Food Serv. of Belton, Inc., 415 F. Supp. 2d

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1232, 1235 (D. Kan. 2005) (holding that plaintiffs may estimate the number of overtime
hours worked to prove an FLSA claim). In almost factually identical cases, other courts
have found that “[i]t is not implausible to suggest that drivers may be able to estimate
their expenses without knowing their actual expenses incurred.” Wass v. NPC Int’l, Inc.
(Wass II), No. 09-2254, 2010 U.S. Dist. LEXIS 141978, at *12 (D. Kan. Sept. 1, 2010);
See also, Perrin v. Papa John’s Int’l, Inc., No. 4:09CV01335, 2011 WL 846148, at *3
(E.D. Mo. Mar. 8, 2011).
In his Amended Complaint, Plaintiff alleges that the 2009 IRS standard business
mileage rate of $0.44 per mile was a reasonable approximation of his vehicle-related
expenses in 2009.1 Defendants contend that Plaintiff cannot use the IRS mileage rate
as a substitute for actual expenses, but do not cite any authority for this proposition.
Alternatively, Defendants argue that “even if substituting a mileage rate was an
acceptable substitute for alleging actual expenses, Plaintiffs would still be required to
allege facts supporting the purported rate.” (Doc. # 109 at 8.) The Court agrees that
Plaintiff must allege some facts supporting the purported rate because “a complaint
does not suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.”
Iqbal, 129 S. Ct. at 1949. However, Plaintiff has satisfied this requirement by supporting
the reasonableness of his estimate through reference to the IRS business mileage
reimbursement rate for 2009, which ranged from $0.445 to $0.585 and the AAA

1

Plaintiff alleges only his vehicle-related expenses for 2009 and not for the other relevant time
periods. Although this is a deficiency, this is not a basis to dismiss the Amended Complaint because
Plaintiff has provided sufficient information for 2009 and such a deficiency can be easily remedied.

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estimate of the cost of running and operating a car, which ranged from $0.45 to $0.55
per mile in 2009. Furthermore, Plaintiff asserts that the cost of running and operating
his vehicle per mile would be higher than that of an average driver due to “frequent
stopping and starting of the engine, frequent braking, short routes as opposed to
highway driving, and driving under time pressure.” (Doc. # 102 at 6.) Although FLSA
claims regarding under-reimbursement of vehicle-related expenses are sometimes
dismissed for lack of specificity, this typically occurs when plaintiffs fail to provide any
information at all regarding their vehicle-related expenses. Cf. Bailey v. Border Foods,
No. 09-01230, 2009 WL 3248305, at *2 (D. Minn. Oct. 6, 2009) (dismissing the plaintiffs’
claims for failure to identify “any facts that would permit the court to infer that Plaintiffs
actually received less than minimum wage,” including vehicle-related expenses). The
fact that Plaintiff’s estimate is consistent with IRS and AAA figures, combined with
Plaintiff’s assertion that delivery drivers likely incur greater than average vehicle-related
expenses, is sufficient for the Court to infer that the estimate is a reasonable
approximation of the actual figure. See Perrin, 2011 WL 846148, at *2 (“As evidence of
the reasonableness of this estimate, Plaintiff recites the higher IRS business mileage
reimbursement rate during this time period.”).
The Court’s conclusion is consistent with other district courts that have
considered the use of IRS figures. Although Defendants argue that Wass is
distinguishable from this case because the Wass plaintiff documented his vehicle
expenses in addition to citing the IRS figures, the Court finds that documentation is not

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a necessary component to sustain this FLSA claim. See Perrin, 2011 WL 846148, at *3
(holding that it was plausible for the plaintiff to reasonably estimate his vehicle-related
expenses even though the plaintiff did not claim that he documented his actual
expenses).
B.

REASONABLE APPROXIMATION OF VEHICLE-RELATED EXPENSES
Given that Plaintiff may use an estimate of his vehicle-related expenses as a fact

to support his claims, this Court now must determine whether Plaintiff, based on the
facts alleged in the Amended Complaint, has stated a plausible claim that Defendants
failed to reasonably approximate his actual expenses. Plaintiff alleges that he was
reimbursed at a rate of between $0.75 and $1.00 per delivery for all relevant time
periods and has been reimbursed at a rate of $0.75 since 2009. Plaintiff further alleges
that he drove an average of five miles per delivery and incurred vehicle-related
expenses of $0.44 per mile in 2009. Accepting all of the abovementioned factual
allegations as true, as required by Fed. R. Civ. P. 12(b)(6), Defendants’ reimbursement
formula under-reimbursed Plaintiff in the amount of $1.45 per delivery in 2009.
Defendants correctly argue that they did not have to reimburse Plaintiff for his
actual expenses, but could approximate Plaintiff’s vehicle-related expenses in setting
the reimbursement rate. See Wass I, 688 F. Supp. 2d at 1285-86 (holding that the
plaintiff could not base his claim on the defendants’ failure to reimburse actual expenses
because the defendant could reasonably approximate the Plaintiff’s expenses for
reimbursement purposes). Although Defendants’ reimbursement rate did not need to

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exactly equal Plaintiff’s actual expenses, the reimbursement rate must have been a
reasonable approximation. The facts alleged are sufficient to show that there is a
reimbursement gap that is “significant enough to support a plausible claim that
defendant failed to approximate reasonably its drivers’ expenses.” Wass I, 2010 U.S.
Dist. LEXIS 141978, at *7.
C.

MINIMUM WAGE VIOLATION CLAIM
To state a claim for a violation of the FLSA and the CMWWA, Plaintiff not

only must allege facts sufficient to lead to the plausible inference that Defendants’
reimbursement formula did not reasonably approximate Plaintiff’s expenses, but also,
that the under-reimbursement led to Plaintiff being paid less than federal and Colorado
minimum wages. Plaintiff alleges that he was paid $7.28 per hour in 2009. In 2009, the
Colorado minimum wage was $7.28 per hour. The federal minimum wage was $6.55
from January to July of 2009, when it was raised to $7.25. As noted, Plaintiff’s
allegations can be interpreted as demonstrating that Defendants under-reimbursed him
for his vehicle-related expenses in the amount of $1.45 per delivery in 2009. If Plaintiff
was paid $7.28 per hour, was reimbursed at the rate of $0.75 per delivery, and
completed two deliveries per hour, then Plaintiff was paid a total of $8.78 per hour.
Based on the facts alleged in the Amended Complaint, Plaintiff, on average, had to
drive a total of ten miles in order to make those two deliveries per hour. Therefore,
Plaintiff incurred vehicle-related expenses in the amount of $4.20 per hour to complete
two deliveries (2 deliveries x ($.44/mile x 5 miles/trip)). After deducting Plaintiff’s

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vehicle-related expenses from his wage, including the delivery reimbursement, Plaintiff
earned $4.58 per hour, which was $1.97 below the federal minimum wage before July
2009 and $2.67 below the federal minimum wage after July 2009. Plaintiff’s wage was
$2.70 below the Colorado minimum wage in 2009. Therefore, the facts stated in the
Amended Complaint raise the plausible inference that (1) Defendants failed to
reasonably approximate Plaintiff’s vehicle-related expenses, and (2) Plaintiff’s wage
was reduced to below the federal and Colorado minimum wages for the 2009 time
period. Thus, Plaintiff’s allegations are legally sufficient to state a claim under the FLSA
and CMWWA.
D.

COLLECTIVE ACTION CLAIM
The FLSA permits a plaintiff to bring an action “against any employer . . . on

behalf of himself . . . and other employees similarly situated.” § 216(b). Although the
FLSA does not provide a definition of similarly situated individuals, the Tenth Circuit, at
this stage of the litigation, requires “nothing more than substantial allegations that the
putative class members were together the victims of a single decision, policy, or plan.”
Theissen v. Gen. Elec. Capital Corp., 267 F.3d 1095, 1105 (10th Cir. 2001). Given that
this Court finds that Plaintiff may estimate his vehicle-related expenses, this Court also
finds that the estimates provided for opt-in Plaintiffs suffice. Additionally, wages,
reimbursement rates, average number of deliveries, and average delivery distances
have been provided for opt-in Plaintiffs, which allows the Court to determine that it
was plausible that opt-in Plaintiffs were paid below the minimum wage due to under12

reimbursement of expenses. Furthermore, the complaint alleges sufficient facts to
demonstrate that opt-in Plaintiffs were subjected to the same policy regarding
reimbursement as Plaintiff because each of them received a flat rate reimbursement
of between $0.75 and $1.00 per delivery.2
III. CONCLUSION
Based on the facts provided, it is plausible that Defendant failed to reasonably
estimate Plaintiff’s vehicle-related expenses for reimbursement purposes, which caused
Plaintiff’s wage to be reduced below the minimum wage. Additionally, the Amended
Complaint alleges facts sufficient to state a plausible claim that there are other similarly
situated individuals that have been subjected to the same reimbursement policy.
Based on the foregoing, the Court ORDERS that Defendant’s Motion to Dismiss
(Doc. # 106) is DENIED.
DATED: June

03

, 2011
BY THE COURT:

_______________________________
CHRISTINE M. ARGUELLO
United States District Judge

2

The Court is aware of Defendants’ argument that Plaintiff has failed to allege facts sufficient to
demonstrate that Defendants willfully violated the FLSA, which would warrant extending the limitations
period from two to three years. This issue will be addressed at a later proceeding regarding class
certification.

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