Powers et al v. FMNow LLC et al

Filing 140

ORDER denying in its entirety 86 Motion for Summary Judgment by Magistrate Judge Kathleen M. Tafoya on 9/14/2017. (jgonz, )

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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Magistrate Judge Kathleen M. Tafoya
Civil Action No. 14–cv–03006–KMT
WILLIAM POWERS,
MAP MANAGEMENT LLC, and
BLACK WIDOW LLC,
Plaintiffs,
v.
EMCON ASSOCIATES, INC.,
MICHAEL COCUZZA, and
MICHAEL MICHOWSKI,
Defendants.

ORDER

This matter is before the court on Defendants’ “Motion for Summary Judgment.” (Doc.
No. 86 [“Mot.”].) Plaintiffs filed a Response (Doc. No. 93 [“Resp.”]), to which Defendants
replied. (Doc. No. 100.)
Facts
Defendant Emcon Associates, Inc. (“Emcon”) is a New Jersey corporation. (Doc. No. 24
at 2; Doc. No. 58 at 2.) Defendant Michael Cocuzza is a co-founder and CEO of Emcon. (Doc.
No. 24 at 3; Doc. No. 58 at 3.) Defendant Michael Michowski is a co-founder and Chief
Administrative Officer of Emcon. (Doc. No. 24 at 3; Doc. No. 58 at 3.)
Former Defendant FMNow LLC (“FMNow”) was a Colorado limited liability company
formed on June 13, 2012. (Doc. No. 93-1.) FMNow’s initial Operating Agreement indicates

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that Defendants Cocuzza and Michowski each contributed $12,500.00 of capital and each held
16.667% (one-sixth) ownership interest. (Doc. No. 86-3; Doc. No. 93-1 at 40.)1 Emcon paid for
the capital contributions of both individuals. (Doc. No. 93-3 at 95-97.)2 Three years later,
Defendants Michowski and Cocuzza each issued separate Notes Receivable to Emcon that they
contend include their capital contributions. (Doc. No. 91-3.) Both Notes Receivable are dated
January 1, 2015, after this litigation began. (Id.)
FMNow and Plaintiff Powers executed an Employment Agreement (“EA”) on October
15, 2012. (Doc. No. 86-2.) Plaintiff Powers also completed a 1099 Form for 2013. (Doc. No.
86-6.) Throughout the EA, Plaintiff Powers is referred to as an “employee” and is designated as
“Director and Business Analyst, Industrial Sector, a management position.” (Id. at 1.) The EA
contains the following provisions:
[Employees’] responsibilities may change from time to time, and Employer may
assign such other duties as it deems appropriate in its sole discretion.
Employee agrees to abide by all Company policies as the same may be prescribed
from time to time by Company and furnished in writing to the Employee.
Employee shall be entitled to participate in the then applicable 401k program
immediately upon establishment of such program by the employer.
Employee is eligible to participate in Employee Stock Option Program [] to be
established in calendar 2013.
In the event the Employee shall resign from the Company or no longer be
employed by the Company for any reason other than termination by the Company
without cause, prior to the end of a two year period commencing with the signing

1

Former Defendants Patricia Moscarelli and Jon Mattei, as well as Kathleen Mattei, held the
remaining 4/6 interest in FMNow. (Doc. No. 86-3; Doc. No. 93-1 at 40.)
2
When citing deposition testimony, the court uses the page references in the original deposition
transcript.
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of the agreement, then all Options which may have vested in Employee on or
before that time shall lapse and be of no further force or effect.
In the event the Company is purchased, merges or sells substantially all of its
assets in exchange of consideration valued at twenty-five million dollars
($25,000,000.00) or more[,] then the vesting schedule for Employees’ initial
(percent) Options Interest is waived and the entire remaining (percentage) shall
vest immediately.
Both parties acknowledge that Employee is an at-will employee and has no vested
rights to employment.
Following the termination of this Agreement without cause, Company will
continue to pay Employee for the duration of 12 months full earned compensation
on all accounts sold at the date of termination.
THIS AGREEMENT DESCRIBES THE BASIC LEGAL AND ETHICAL
RESPONSIBILITIES THAT EMPLOYEE IS EXPECTED TO OBSERVE AS
AN EXECUTIVE OR MANAGERIAL EMPLOYEE.
(Id. at 1, 2, 5, 6, 9.) (emphasis in original.) Additionally, the EA also includes a non-compete
agreement prohibiting Plaintiff Powers from working for a competing business located within the
United States for a period of two years following the termination of his employment. (Id. at 4-5.)
FMNow filed a Statement of Dissolution with the Colorado Secretary of State on
September 2, 2015. (Doc. No. 86-1) Initially, Plaintiffs also named as Defendants in this action
FMNow, Jon Mattei, President of FMNow, and Patricia Moscarelli, former President of
FMNow. (Doc. No. 24.) Prior to the dissolution of FMNow, Plaintiffs reached a settlement with
Defendants FMNow and Mattei. (Doc. Nos. 40, 42; Doc. No. 86-12 at 3.)3 The settlement
agreement included the following reservation of rights: “Nothing in this Agreement and Release
shall apply to any of the other defendants in this Lawsuit. Powers contends that FMNow is an
alter ego of Emcon in the Lawsuit (and FMNow/Mattei disagree). Nothing in this Agreement

3

Plaintiffs voluntarily dismissed Defendant Moscarelli. (Doc. Nos. 43, 44.)
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and release shall be construed as an admission that takes a position against Powers’s Interest or
contentions in the Lawsuit.” (Doc. No. 95 at 3.)
Standard of Review
Summary judgment is appropriate if “the movant shows that there is no genuine dispute
as to any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). The moving party bears the initial burden of showing an absence of evidence to support
the nonmoving party’s case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). “Once the
moving party meets this burden, the burden shifts to the nonmoving party to demonstrate a
genuine issue for trial on a material matter.” Concrete Works, Inc. v. City & County of Denver,
36 F.3d 1513, 1518 (10th Cir. 1994) (citing Celotex, 477 U.S. at 325). The nonmoving party
may not rest solely on the allegations in the pleadings, but must instead designate “specific facts
showing that there is a genuine issue for trial.” Celotex, 477 U.S. at 324; see also Fed. R. Civ. P.
56(c). A disputed fact is “material” if “under the substantive law it is essential to the proper
disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir.1998)
(citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A dispute is “genuine” if the
evidence is such that it might lead a reasonable jury to return a verdict for the nonmoving party.
Thomas v. Metropolitan Life Ins. Co., 631 F.3d 1153, 1160 (10th Cir. 2011) (citing Anderson,
477 U.S. at 248).
When ruling on a motion for summary judgment, a court may consider only admissible
evidence. See Johnson v. Weld County, Colo., 594 F.3d 1202, 1209–10 (10th Cir. 2010). The
factual record and reasonable inferences therefrom are viewed in the light most favorable to the
party opposing summary judgment. Concrete Works, 36 F.3d at 1517. Moreover, because

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Plaintiff is proceeding pro se, the court, “review[s] his pleadings and other papers liberally and
hold[s] them to a less stringent standard than those drafted by attorneys.” Trackwell v. United
States, 472 F.3d 1242, 1243 (10th Cir. 2007) (citations omitted); see also Haines v. Kerner, 404
U.S. 519, 520–21 (1972) (holding allegations of a pro se complaint “to less stringent standards
than formal pleadings drafted by lawyers”). At the summary judgment stage of litigation, a
plaintiff’s version of the facts must find support in the record. Thomson v. Salt Lake Cnty., 584
F.3d 1304, 1312 (10th Cir. 2009). “When opposing parties tell two different stories, one of
which is blatantly contradicted by the record, so that no reasonable jury could believe it, a court
should not adopt that version of the facts for purposes of ruling on a motion for summary
judgment.” Scott v. Harris, 550 U.S. 372, 380 (2007); Thomson, 584 F.3d at 1312.
Analysis
1. Emcon’s alter ego status
Though not a model of clarity, Emcon’s first basis for summary judgment appears to be
an argument that Plaintiffs’ Amended Complaint based their alter ego theory of liability solely
on the allegation that Emcon was FMNow’s parent corporation. (Mot. at 9.) Emcon states that
“a lack of ownership of a controlling interest generally precludes application of the veil piercing
doctrine.” (Id. at 9.) Thus, according to Emcon, if it can show FMNow does not hold a
controlling interest in FMNow, Plaintiffs’ alter ego theory fails. (Id. at 9-10.) Emcon makes a
similar argument related to sister corporations who share common ownership. According to
Emcon, it does not share common ownership with FMNow but presuming it did, status as sister
corporations is not sufficient to pierce the corporate veil. (Id. at 10.)

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In asserting these arguments, Emcon ignores the well-established law related to
determining whether one corporation is an alter ego of another. Determining whether a
corporation is an alter ego is not limited to the status of parent-subsidiary or sister corporations.
Instead, the trier of fact must consider the following factors:
(1) whether a corporation is operated as a separate entity; (2) commingling of
funds and other assets; (3) failure to maintain adequate corporate records or
minutes; (4) the nature of the corporation’s ownership and control; (5) absence of
corporate assets and undercapitalization; (6) use of a corporation as a mere shell,
instrumentality or conduit of an individual or another corporation; (7) disregard of
legal formalities and the failure to maintain an arms-length relationship among
related entities; and (8) diversion of the corporation’s funds or assets to
noncorporate uses.
U.S. v. Van Diviner, 822 F.2d 960, 965 (10th Cir. 1987). Further, no one factor is determinative
in this analysis. Newport Steel Corp. v. Thompson, 757 F. Supp. 1152, 1157 (D. Colo. 1990)
(“[A] variety of considerations are used to determine whether the corporate form should be
disregarded.”).
Emcon does not discuss the plethora of evidence in the record relevant to a consideration
of these factors and thus, it is unnecessary for the court to do so here. Instead, Emcon limits its
argument to its contention that Plaintiffs based their “theory of recovery [on] allegations that
Emcon was FMNow’s parent company.” (Mot. at 10.) The court disagrees.
Plaintiffs have never limited their theory of recovery on establishing such a parentsubsidiary relationship. In Plaintiffs’ Amended Complaint, they repeatedly allege FMNow is the
alter ego of Emcon and/or assert an alter ego theory of liability and do not premise those
allegations solely on establishing Emcon is the parent corporation of FMNow. (Doc. No. 24 at
14, 21, 22, 23.) Additionally, in correspondence dated August 5, 2016, Plaintiffs’ counsel

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responded to assertions by Emcon’s counsel that there is no documentation showing that Emcon
holds a controlling interest in FMNow, stating:
[The lack of such documentation to date does not] alter the fundamental argument
pursuant to which we believe Emcon is liable under Mr. Powers’ Employment
Agreement, which is that the two companies were alter egos and Emcon is
properly held liable for FMNow’s breach of the agreement on that basis. . . . As a
result, any agreement to withdraw the allegation of a parent company relationship
would do nothing to change our fundamental theory of liability against Emcon.
(Doc. No. 86-11 at 1.) Moreover, in light of the previous briefing related to and Order ruling on
Defendants’ Motion to Dismiss, in which Plaintiffs’ alter ego theory and the factors relevant to
the same were addressed at length, see Doc. No. 54 at 15-18, it is unclear why Emcon now
argues Plaintiffs’ claims rely on establishing a parent-subsidiary relationship. In any event,
Emcon’s argument is without merit.
2. Expert Testimony
As noted, Emcon fails to dispute or even address the majority of the evidence Plaintiffs
have presented relevant to the alter ego determination. Instead, as its next basis for summary
judgment, it simply argues Plaintiffs cannot establish their alter ego theory because they did not
depose former-Defendant Mattei and Plaintiffs are not offering expert testimony. Notably,
Emcon does not cite to any case law supporting their assertion that expert testimony is required
to establish an alter ego theory, nor is the court aware of any such requirement. Further, while
Mr. Mattei and an expert witness may have offered testimony relevant to Plaintiffs’ alter ego
theory, Plaintiffs have produced a significant amount of evidence relevant to the determining
factors.

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3. Plaintiffs’ Release of FMNow/Mattei
Defendants argue Plaintiffs’ claims against them are precluded based upon Plaintiffs’
release of FMNow/Mattei. (Mot. at 12-14.) “A release is the relinquishment of a vested right or
claim to the person against whom the claim is enforceable.” Truong v. Smith, 28 F. Supp.2d 626,
630 (D. Colo. 1998) (citing Neves v. Potter, 769 P.2d 1047, 1049 (Colo. 1989); Restatement
(Second) of Contracts § 284 (1981)). Agreements exculpating one contracting party from
liability have been held enforceable. Id. (citing Heil Valley Ranch, Inc. v. Simkin, 784 P.2d 781,
784 (Colo. 1989) (considering contract provision exculpating party from liability for
negligence)). Further, a release is an agreement to which general contractual rules of
interpretation and construction apply. Id. (citing Rocky Mountain Ass’n of Credit Mgmt. v.
Hessler Mfg. Co., 553 P.2d 840, 842 (Colo. 1976)).
Plaintiffs’ settlement agreement included a full and final release of claims against former
Defendants FMNow and Mattei. (Doc. No. 95.) However, the agreement also included a
reservation of rights preserving Plaintiffs’ claims against the remaining Defendants. (Id. at 3.)
Defendants reason that presuming FMNow is the alter ego of Emcon, as Plaintiffs contend, then
just as the alter ego doctrine treats corporations as one for purposes of imposing liability, a
release of FMNow from liability also releases Emcon from the same. (Id.) In support of this
contention, Defendants rely on various cases that cite to this basic principal of corporate law,
however, none of those cases indicate that in releasing one corporation the plaintiff therein
reserved its rights against the other. See M/V Am. Queen v. San Diego Marine Constr. Corp.,
708 F.2d 1483, 1489-90 (9th Cir. 1983); Morris v. Penn Mut. Life Ins. Co., No. CIV. A. No. 87–
7063, 1989 WL 14063, at *2 n.2 (E.D. Penn. Feb. 21, 1989); Hydro Air of Conn., Inc. v. Versa

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Tech., Inc., 99 F.R.D. 111, 113 (D. Conn. 1983); Fuls v. Shastina Props., Inc., 448 F. Supp. 983,
989 (N.D. Cal. 1978).
Defendants are critical of Plaintiffs’ reliance on Meyer v. Stern, 599 F. Supp. 295 (D.
Colo. 1984), in which this court applied state law to find “a release with express provisions
reserving the right to sue other tort-feasors will be given the effect intended by the parties.” Id.
at 297. The court explained, “‘[W]hen from the very nature of the transaction the intent to
preserve the right to sue other tort-feasors is apparent, the intent of such agreement will be given
the same effect as if it were a pure covenant not to sue.’” Id. at 297-98 (quoting Farmers
Elevator Co. of Sterling v. Morgan, 474 P.2d 617, 618 (Colo. 1970)).
Defendants distinguish Meyer because it was based upon state law, see id. at 297 (“Both
parties agree that Colorado law should be applied in determining liability”), and involved actions
in tort, rather than contract and statute. (Reply at 8-9.) Although the underlying reasoning is
sound, the court recognizes the distinguishing characteristics of Meyer.
In the present case, the settlement with FMNow and Mattei did not provide Plaintiffs
with the full damages they seek for their claims. (Resp. at 11 n.8.) As Emcon concedes, under
Plaintiffs’ alter ego theory, Emcon would be equally liable for those damages. In the Settlement
Agreement, Plaintiffs specifically and unambiguously reserved their right to continue with their
claims against the remaining Defendants. Emcon has not presented any case law indicating that
a reservation of rights contained within a release of claims does not apply to an alter ego just as it
does to other parties. See, cf., Kennedy v. Ford Motor Co., 80 F. App’x 100, 103-04 (10th Cir.
2003) (noting the plaintiff could have preserved her fraud claims by including a reservation of
rights provision in her settlement agreement); Advantage Props., Inc. v. Commerce Bank, N.A.,

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No. 00-3014, 2000 WL 1694071, at *3 (10th Cir. Nov. 13, 2000) (finding that the plaintiffcorporation’s president and sole stockholder who, though not a party to the lawsuit, participated
in the negotiation of a settlement agreement was barred from asserting individual claims because
he could have preserved such claims in the agreement); Schroeder v. Allstate Ins. Co., No. 09–
cv–00671–JLK–MJW, 2009 WL 1387090, at *1 (D. Colo. May 18, 2009) (noting the plaintiff
could have included a reservation of rights in release to preserve claims); Truong, 28 F. Supp. 2d
at 631 (denying individual defendant’s motion to dismiss Title VII claims; the defendant relied
on a release contained within the plaintiff’s settlement agreement with Defendant HealthFirst
P.C. but the court found the agreement included a reservation of rights to pursue claims against
the defendant in his individual capacity). Accordingly, Defendants’ request for summary
judgment based on Plaintiffs’ previous settlement and release of claims against FMNow and
Mattei is denied.
4. Plaintiff Powers’ Employment Status
Emcon contends Plaintiff Powers was an independent contractor for FMNow and
therefore, he cannot recover under the Colorado Wage Act (“CWA”) or the Fair Labor Standards
Act (“FLSA”). (Mot. at 14-15.) The CWA defines an employee as “any person . . . performing
labor or services for the benefit of an employer in which the employer may command when,
where, and how much labor or services shall be performed.” Colo. Rev. Stat. § 8-4-101(5).
Under the FLSA, an employee is “any individual employed by an employer.” 29 U.S.C. §
203(e)(1). “Employ” means to “suffer or permit to work.” 29 U.S.C. § 203(g). To determine
whether an individual is an employee for purposes of the FLSA, the court must apply the
economic realities test, which focuses on “whether the individual is economically dependent on

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the business to which he renders service.” Doty v. Elias, 733 F.2d 720, 722–23 (10th Cir. 1984).
The Tenth Circuit has set out six factors for courts to consider in performing this test:
(1) the degree of control exerted by the alleged employer over the worker; (2) the
worker’s opportunity for profit or loss; (3) the worker’s investment in the
business; (4) the permanence of the working relationship; (5) the degree of skill
required to perform the work; and (6) the extent to which the work is an integral
part of the alleged employer’s business.
Baker v. Flint Engineering & Const. Co., 137 F.3d 1436, 1440 (10th Cir. 1998).4 Other courts of
appeals have suggested further factors that might be relevant to the inquiry, including “whether
the ‘premises and equipment’ of the employer are used for the work.” Torres–Lopez v. May, 111
F.3d 633, 638 (9th Cir. 1997).
Once findings of fact are made regarding the factors above, the court must decide, as a
matter of law, whether the individual is an “employee” under the FLSA. Baker, 137 F.3d at
1440. No single factor is dispositive; instead the Court must use a totality-of-the-circumstances
approach. Id. at 1441.
In asserting Plaintiff Powers was an independent contractor, Emcon relies on the fact
Plaintiff Powers executed a 1099 rather than a W-2 Form, he described his status on a mortgage
financing document as a “1099 employee,” and FMNow issued payments to Plaintiff Powers’
limited liability companies, rather than to him directly. (Mot. at 14-15.) However, this evidence
is of little relevance in determining Plaintiffs’ employment status.
The Court’s inquiry into the employment relationship “is not limited by any
contractual terminology or by traditional common law concepts of ‘employee’ or
‘independent contractor.’” Henderson v. Inter–Chem Coal Co., 41 F.3d 567, 570
(10th Cir. 1994), citing Dole v. Snell, 875 F.2d 802, 804 (10th Cir. 1989).
Instead, the economic realities of the relationship govern, and “the focal point is
4

Because the economic realities test sufficiently encompasses the CWA’s definition of
employee, the court will limit its direct analysis to the FLSA definition.
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whether the individual is economically dependent on the business to which he
renders service . . . or is, as a matter of economic fact, in business for himself.”
Id. Thus, “an agreement between [an] employer and a worker designating or
labeling the worker as an independent contractor is not indicative of the economic
realities of the working relationship and is not relevant to the analysis of the
worker’s status.” Administrator’s Interpretation No. 2015-1, The Application of
the Fair Labor Standards Act's “Suffer or Permit” Standard in the Identification of
Employees Who Are Misclassified as Independent Contractors (July 15, 2015),
available at https://www.dol.gov/whd/workers/Misclassification/AI-2015_1.pdf
(“AI 2015-1”). See, e.g., . . . Robicheaux v. Radcliff Material, Inc., 697 F.2d 662,
667 (5th Cir. 1983) (explaining that “[a]n employee is not permitted to waive
employee status,” and affirming that welders were employees despite having
signed independent contractor agreements); Olson v. Star Lift Inc., 709 F. Supp.
2d 1351, 1356 (S.D. Fla. 2010) (worker’s receipt of Form 1099-MISC from
employer does not weigh in favor of independent contractor status).
Hugler v. Foreclosure Connection, Inc., No. 2:15-cv-00653-DAK, 2017 WL 2168202, at *11 (D.
Utah May 8, 2017).
The law is clear that in determining an individual’s employment status, the inquiry is
focused on the parties’ relationship. Id. However, the court notes that the EA repeatedly refers
to Plaintiff Powers as an “employee” and never refers to him as an “independent contractor.”
(Doc. No. 86-2.) “Though an employer’s self-serving label of workers as independent
contractors is not controlling, an employer’s admission that his workers are employees covered
by the FLSA is highly probative.” Brock v. Superior Care, Inc., 840 F.2d 1054, 1059 (2d Cir.
1988); see also Hugler, 2017 WL 2168202, at *11.
Further, applying the factors relevant to the economic realities test does not support a
finding that Plaintiff Powers was an independent contractor. FMNow exhibited a significant
amount of control over Plaintiff Powers’ employment. The EA set forth seven general areas of
responsibility and FMNow possessed sole discretion to assign additional responsibilities. (Doc.
No. 86-2 at 1.) Additionally, the EA contained a non-compete agreement applicable for two

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years following the termination of his employment and prohibited Plaintiff Powers from
pursuing a competitive business while still employed by FMNow. (Id. at 5-6.) During his
employment and one year thereafter, Plaintiff Powers was prohibited from soliciting, inducing,
recruiting or causing another FMNow employee to terminate their employment for the purpose
of becoming associated with a competitor. (Id. at 6.) Finally, Plaintiff Powers was required to
abide by all FMNow policies. (Id. at 1.)
With regard to Plaintiff Powers’ opportunity for profit or loss, he was eligible to
participate in the “Employee Stock Option Program” and the 401k program when established.
(Id. at 2.) Plaintiff Powers also retained said options upon leaving FMNow’s employment if it
occurred two years after the contract was executed. (Id.) Further, if FMNow terminated Plaintiff
Powers without cause, it was required to provide him 12 months’ compensation. (Id. at 6.) As to
the permanence of the working relationship, Plaintiff Powers was an at-will employee and the
Employment Agreement did not place a time limit on his employment. (Id. at 2.)
In considering the degree of skill required, the court notes the EA specifically states that
FMNow was hiring Plaintiff Powers for “a management position” and that the EA sets forth the
“basic legal and ethical responsibilities that Employee is expected to observe as an Executive or
Managerial Employee.” (Id. at 1, 9.) The EA also notes that his position “requires considerable
responsibility and trust.” (Id. at 2.)
The record also indicates Plaintiff Powers did not perform work for any other
companies while working for FMNow and/or Emcon. (Doc. No. 93-9 at 2-3.) Additionally, it
appears Plaintiff Powers was dependent upon his employment with FMNow for his livelihood as

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his termination was the result of requesting a loan from Mr. Cocuzza due to his unpaid
compensation and expense reimbursement from FMNow. (Doc. No. 93-9 at 3.)
A trier of fact could make findings as to several of the factors of the economic realities
test that would support the legal conclusion Plaintiff Powers acted as an employee of FMNow.
Thus, Defendants are not entitled to summary judgment against Plaintiffs’ claims under the
FLSA and the CWA. See Rojas v. Westco Farmers, LLC, No. 15–cv–0168–WJM–KLM, 2016
WL 8540843, at *3 (D. Colo. June 14, 2016); see also Herr v. Heiman, 75 F.3d 1509, 1513 (10th
Cir. 1996) (“Under the [FLSA], even though the question of whether a worker is an independent
contractor or an employee is a question of law, the existence and degree of each factor is a
question of fact.” (internal quotations omitted)).
Therefore, it is
ORDERED that Defendants’ “Motion for Summary Judgment” (Doc. No. 86) is
DENIED in its entirety.
Dated this 14th day of September, 2017.

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