Lopez v. Next Generation Construction & Environmental, LLC et al

Filing 47

ORDER. Defendant Camron Lente's Motion to Dismiss (Doc. # 31 ) is GRANTED and the claims against him are DISMISSED WITHOUT PREJUDICE. By Judge Christine M. Arguello on 11/08/2016. (athom, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Christine M. Arguello
Civil Action No. 16-cv-00076-CMA-KLM
RICARDO LOPEZ, on behalf of himself and all similarly situated persons,
Plaintiff,
v.
NEXT GENERATION CONSTRUCTION & ENVIRONMENTAL, LLC, a Colorado limited
liability company, and
CAMRON LENTE,
Defendants.
ORDER GRANTING DEFENDANT CAMRON LENTE’S MOTION TO DISMISS

This matter comes before the Court on Defendant Camron Lente’s Motion to
Dismiss (Doc. # 31) the claims asserted against him in Plaintiff Ricardo Lopez’s
complaint (Doc. # 18) pursuant to Fed. R. Civ. R. 12(b)(6). For the following reasons,
the Court grants the motion and dismisses the claims against Lente without prejudice.
I.

Standards Governing Motions to Dismiss

The purpose of a motion to dismiss under Rule 12(b)(6) is to test “the sufficiency
of the allegations within the four corners of the complaint.” Mobley v. McCormick, 40
F.3d 337, 340 (10th Cir. 1994). A complaint will survive such a motion only if it contains
“enough facts to state a claim to relief that is plausible on its face.” 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.” Christy Sports, LLC v. Deer Valley Resort Co., Ltd., 555 F.3d 1188, 1192
(10th Cir. 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.” Ashcroft
v. Iqbal, 556 U.S. 662, 678 (2009) (quotation marks and citation omitted).
In reviewing a Rule 12(b)(6) motion, a court must accept all the well-pleaded
allegations of the complaint as true and must construe them in the light most favorable
to the plaintiff. Williams v. Meese, 926 F.2d 994, 997 (10th Cir. 1991). Nevertheless,
a complaint does not “suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual
enhancement.’” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 557). “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.” Miller v. Glanz, 948
F.2d 1562, 1565 (10th Cir. 1991).
II.

Relevant Background

Plaintiff, Ricardo Lopez, a past employee for Next Generation Construction &
Environmental, LLC (Next Generation), contends that he and others similarly-situated
were not compensated for overtime hours, provided mandatory rest breaks, or
compensated for meal breaks while working for Next Generation. As pertinent here, he
has therefore filed claims against Lente, 1 Next Generation’s founder and Chief
Executive Officer (CEO), alleging violations of the Colorado Wage Claim Act, Colorado

1

Lopez also brings claims against Next Generation, but this Order does not concern those claims
because Lente’s motion to dismiss only requests dismissal of Lopez’s claims against him personally.

2

Minimum Wage Act, and Fair Labor Standards Act (FLSA). Lente argues that these
claims should be dismissed under Rule 12(b)(6) because Lopez does not allege
sufficient facts to pierce Next Generation’s corporate veil and hold Lente personally
liable. Lopez’s response requests that the Court permit him to amend his complaint. 2
The Court addresses the sufficiency of Lopez’s state and federal claims below.
III.

The Colorado Wage Claim Act and Colorado Minimum Wage Act Claims

Colo. Rev. Stat. § 7-80-107(1) provides that Colorado’s common law principles
for piecing the corporate veil apply to “any case in which a party seeks to hold the
members of a limited liability company personally responsible for the alleged improper
actions of the limited liability company.” See Weinstein v. Colborne Foodbotics, LLC,
302 P.3d 263, 268 (Colo. 2013).
Next Generation is a limited liability company, and Lopez seeks to hold Lente
personally liable for the actions of the company. The Court therefore applies Colorado’s
common law corporate veil principles here.
In general, a corporation is treated as a legal entity separate from its
shareholders, officers, and directors. McCallum Family L.L.C. v. Winger, 221 P.3d 69,
73 (Colo. App. 2009). The fiction of the corporate veil isolates “the actions, profits, and
debts of the corporation from the individuals who invest in and run the entity.” In re
Phillips, 139 P.3d 639, 643 (Colo. 2006). Only extraordinary circumstances justify
2

In his response to Lente’s motion to dismiss, Lopez urges the Court to permit him to amend his
complaint, rather than dismiss his claims against Lente. To the extent Lopez would like to amend his
complaint to include additional factual allegations against Lente, he must file a motion pursuant to Fed. R.
Civ. P. 15. Any such motion must comply with all applicable rules, including D.C.COLO.LCivR 7.1(d).
Simply inserting a request to amend in his response to a motion to dismiss is inadequate.

3

disregarding the corporate entity to impose personal liability. Id. at 644; Leonard v.
McMorris, 63 P.3d 323, 330 (Colo. 2003). The paramount goal of piercing the corporate
veil is to achieve an equitable result. Phillips, 139 P.3d at 644; Water, Waste & Land,
Inc. v. Lanham, 955 P.2d 997, 1004 (Colo. 1998).
To determine whether it is appropriate to pierce the corporate veil, courts
undertake a three-part inquiry. Phillips, 139 P.3d at 644; Micciche v. Billings, 727 P.2d
367, 372–73 (Colo. 1986). First, the court must determine whether the corporate entity
is the “alter ego” of the person at issue. Phillips, 139 P.3d at 644; Fink v. Montgomery
Elevator Co., 161 Colo. 342, 350, 421 P.2d 735, 739 (1966). Courts consider a variety
of factors in determining status as an alter ego, including whether (1) the corporation is
operated as a distinct business entity; (2) funds and assets are commingled; (3)
adequate corporate records are maintained; (4) the nature and form of the entity’s
ownership and control facilitate misuse by an insider; (5) the business is thinly
capitalized; (6) the corporation is used as a “mere shell”; (7) legal formalities are
disregarded; and (8) corporate funds or assets are used for non-corporate purposes.
Phillips, 139 P.3d at 644; Leonard, 63 P.3d at 330. Second, the court must determine
whether justice requires recognizing the substance of the relationship between the
person sought to be held liable and the corporation over the form because the corporate
fiction was “used to perpetrate a fraud or defeat a rightful claim.” See Phillips, 139 P.3d
at 644; McCallum Family L.L.C., 221 P.3d at 74. Third, the court must consider whether
an equitable result will be achieved by disregarding the corporate form and holding an

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individual personally liable for the acts of the business entity. Phillips, 139 P.3d at 644;
Sheffield, 211 P.3d at 721-22. All three prongs of the analysis must be satisfied.
The party seeking to pierce the corporate veil bears the burden of demonstrating,
by a preponderance of the evidence, that the veil should be pierced. McCallum Family
L.L.C., 221 P.3d at 74. If the veil is not pierced, claims against the individual personally
cannot remain.
In his complaint, Lopez presents no facts to support a claim for piercing the
corporate veil and allowing his state claims against Lente, in his individual capacity, to
proceed. Specifically, Lopez presents no information regarding whether Colorado
Native is an “alter ego” of Lente; does not allege that Colorado Native is a fiction used
by Lente to perpetrate a fraud; and does not argue that the result will be more equitable
if the Court disregards the corporate form to assess Lente’s liability for the acts of the
entity. That Lopez may present this information later is insufficient to defeat dismissal
under Rule 12(b)(6). See Miller v. Glanz, 948 F.2d 1562, 1565 (10th Cir. 1991) (“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.”).
Thus, taking Lopez’s well-pleaded allegations as true, the Court concludes that
Lopez’s complaint lacks “enough facts to state a [plausible] claim” for piercing the
corporate veil and allowing his claims against Lente under the Colorado Wage Claim
Act and the Colorado Minimum Wage Act to proceed. See U.S. ex rel. Conner v. Salina
Reg’l Health Cir., Inc., 543 F.3d 1211, 1217 (10th Cir. 2008).
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IV.

The FLSA Claim

State law limitations on piercing the corporate form do not necessarily constrict a
federal statute regulating interstate commerce for the purpose of effectuating certain
social policies. Pension Ben. Guar. Corp. v. Ouimet Corp., 711 F.2d 1085, 1093 (1st
Cir. 1983); see Hodgson v. Okada, 472 F.2d 965, 968–69 (10th Cir. 1973) (discussing
the liability of a Colorado corporation and an individual officer of that corporation under
federal law without referencing state law veil-piercing principles). Indeed, federal courts
are wary of allowing the corporate form to stymie federal legislative policies. See, e.g.,
First Nat’l City Bank v. Banco Para El Comercio Exterior de Cuba, 462 U.S. 611, 630
(1983); Bangor Punta Operations, Inc. v. Bangor & A. R.R., 417 U.S. 703, 713 (1974).
For this reason, a federal court, in deciding what veil-piercing test to apply, should “look
closely at the purpose of the federal statute to determine whether the statute places
importance on the corporate form, an inquiry that usually gives less respect to the
corporate form than does the strict common law alter ego doctrine.” Town of Brookline
v. Gorsuch, 667 F.2d 215, 221 (1st Cir. 1981).
In FLSA cases, personal liability has often been imposed on individual officers in
a corporation without conducting a traditional veil-piercing analysis. See, e.g.,
Saavedra v. Lowe’s Home Centers, Inc., 748 F. Supp. 2d 1273, 1284 (D.N.M. 2010);
Digiore v. State of Ill., 962 F. Supp. 1064, 1080 (N.D. Ill. 1997); Donovan v. Agnew, 712
F.2d 1509, 1511-12 (1st Cir. 1983); Donovan v. Sabine Irrigation Co., Inc., 695 F.2d
190, 194–95 (5th Cir. 1983), cert. denied, 463 U.S. 1207 (1983); Marchak v. Observer
Publications, Inc., 493 F. Supp. 278, 282 (D.R.I. 1980); Brennan v. Whatley, 432 F.
6

Supp. 465, 469 (E.D. Tex. 1977); Hodgson v. Royal Crown Bottling Co., 324 F. Supp.
342, 347 (D. Miss. 1970), aff'd, 465 F.2d 473 (5th Cir. 1972); Schultz v. Chalk-Fitzgerald
Construction Co., 309 F. Supp. 1255 (D. Mass. 1970).
Such liability has instead been imposed on the ground that the particular
individual falls within the FLSA’s definition of “employer” and thus shares statutory
obligations with the corporation itself. See, e.g. Saavedra, 748 F. Supp. 2d at 1284 (“A
person must be an ‘employer’ within the meaning of the . . . FLSA to be held individually
liable under [the] statute.”); Digiore, 962 F. Supp. at 1080 (the FLSA contemplates
individual liability under term “employer”); Donovan, 712 F.2d at 1511 (imposing liability
for FLSA violations upon an individual shareholder as an “employer” within the meaning
of FLSA Section 3(d), 29 U.S.C. § 203(d)).
This occurs because an “employer” under the FLSA is defined to “include[ ] any
person acting directly or indirectly in the interest of an employer in relation to an
employee.” 29 U.S.C. § 203(d). “Person” includes “an individual,” and “employ”
includes to “suffer or permit to work.” Id. Courts construe these provisions expansively,
Robertson v. Bd. of Cty. Comm’rs of Cty. of Morgan, 78 F. Supp. 2d 1142, 1150 (D.
Colo. 1999), and an employee may have several simultaneous employers, id.; Falk v.
Brennan, 414 U.S. 190, 195 (1973).
The Tenth Circuit has considered numerous factors when determining whether
an individual is an “employer” under the FLSA, including whether the alleged employer
has the power to hire and fire employees, supervises and controls employee work
schedules or conditions of employment, determines the rate and method of payment,
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and maintains employment records. Hodgson v. Okada, 472 F.2d 965, 968–69 (10th
Cir. 1973); Mitchell v. Hertzke, 234 F.2d 183, 189–90 (10th Cir. 1956); see also
Robertson, 78 F. Supp. 2d at 1150–51; Herman v. RSR Security Servs., Ltd., 172 F.3d
132, 139 (2d Cir. 1999) (“[T]he overarching concern is whether the alleged employer
possessed the power to control the workers in question, ... with an eye to the ‘economic
reality’ presented by the facts of each case.”); Baker v. Flint Eng’g & Const. Co, 137
F.3d 1436, 1439 (10th Cir. 1998) (applying these factors to assess the employeremployee relationship). Courts have also looked at the level of operational control the
individual has over the company, including whether the individual is “involved in the dayto-day operation or ha[s] some direct responsibility for the supervision of the
employee.’” Koellhoffer v. Plotke-Giordani, 858 F. Supp. 2d 1181, 1189–90 (D. Colo.
2012) (quoting Alvarez Perez v. Sanford–Orlando Kennel Club, Inc., 515 F.3d 1150,
1160 (11th Cir. 2008)).
In his complaint, Lopez does not provide any facts to support a finding that Lente
is an “employer” under the FLSA or that Lente and Lopez (and others similarly-situated)
were in an employer-employee relationship as contemplated by the Act. Lopez merely
states that Lente is the “founder, owner, and operator of Next Generation.” (Doc. # 18 ¶
4.) Lopez does not flesh out any of the above-mentioned factors or explain Lente’s
operational control over the company, including whether Lente hired and fired
employees; oversaw conditions of employment; set the rate and method of payment;
maintained employment records; was involved in the day-to-day operation of the
company; or supervised any employees, much less Lopez. See Iqbal, 556 U.S. at 678
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(naked assertions without further factual enhancement are insufficient under Rule
12(b)(6)). Lopez references pay records and handwritten timesheets but does not
specifically tie them to Lente’s role at Next Generation. (Id. at ¶¶ 10-12.) Lopez
mentions that “Defendants” 3 made no effort to ensure that employees could take breaks
but does not assert that Lente personally controlled, or even took part in, setting
employee work hours. (Id. at ¶ 12.) While it is certainly possible that Lente, as CEO,
had some operational control over Next Generation, the Court’s function at this junction
is not to weigh potential possibilities but to assess the facts alleged in Lopez’s complaint
to determine whether they are legally sufficient to state a claim for relief. The Court
concludes that they are not.
Thus, taking Lopez’s well-pleaded allegations as true, the Court concludes that
Lopez’s complaint lacks “enough facts to state a claim [under the FLSA] that is plausible
on its face.” U.S. ex rel. Conner, 543 F.3d at 1217.
V.

Conclusion

For the foregoing reasons, Defendant Camron Lente’s Motion to Dismiss (Doc. #
31) is GRANTED and the claims against him are DISMISSED WITHOUT PREJUDICE.

DATED: November 8, 2016

BY THE COURT:

CHRISTINE M. ARGUELLO
United States District Judge

3

Lopez used “Defendants” throughout the complaint to reference Lente and Next Generation collectively.

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