Judd v. Keypoint Government Solutions Incorporated
Filing
83
REVISED RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE by Magistrate Judge Scott T. Varholak on 6/20/18 respectfully RECOMMENDING that 41 MOTION to Dismiss filed by Keypoint Government Solutions Incorporated be DENIED. (nmarb, ) Modified on 6/20/2018 to add "Revised". (nmarb, ).
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Civil Action No. 18-cv-00327-RM-STV
ORSON JUDD,
Plaintiff,
v.
KEYPOINT GOVERNMENT SOLUTIONS, INC.,
Defendant.
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE
Magistrate Judge Scott T. Varholak
This matter comes before the Court on a Motion to Dismiss [#41] filed by
Defendant KeyPoint Government Solutions, Inc. (“KeyPoint”). The Court has considered
the Motion and related briefing, the entire case file, and the applicable case law, and
has determined that further oral argument would not materially assist in the disposition
of the Motion. For the following reasons, this Court respectfully RECOMMENDS that
KeyPoint’s Motion to Dismiss be DENIED.
I.
BACKGROUND 1
KeyPoint provides background checks for the federal government. [#1 at ¶ 4] As
investigators for KeyPoint, Plaintiff Orson Judd and others performed investigations,
including acquiring and interviewing witnesses and reviewing public records, and
prepared reports on those investigations for KeyPoint to submit to the government. [Id.]
1
The facts are drawn, in part, from the allegations in Judd’s Complaint, which must be
taken as true when considering the Motion to Dismiss. See Wilson v. Montano, 715
F.3d 847, 850 n.1 (10th Cir. 2013) (citing Brown v. Montoya, 662 F.3d 1152, 1162 (10th
Cir. 2011)).
1
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Investigators, including Judd, routinely worked in excess of 40 hours per week. [Id.]
Judd alleges that KeyPoint violated the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §
216(b), by improperly classifying him and other investigators as independent
contractors, enabling KeyPoint to withhold overtime wages due to them for working over
40 hours a week. [See generally #1]
Judd claims that KeyPoint has willfully violated the FLSA because it “has known
that its classification of Investigators as independent contractors violates” the statute
since at least September 2011. [Id. at ¶ 8] At that time, the Internal Revenue Service
(“IRS”) provided a determination letter to KeyPoint’s chief executive officer, stating that
KeyPoint “had misclassified one of its Investigators as an independent contractor rather
than an employee.” [Id. at ¶ 2] Judd alleges that KeyPoint “employs thousands of
Investigators across the United States who perform the same kind of work” as the
misclassified investigator, “under the same corporate-wide constraints, policies and
procedures . . . that le[]d to the IRS determination.”
[Id.]
Judd also alleges that
KeyPoint reclassified all of its investigators in California as employees in approximately
2014, but nevertheless continues to classify investigators in other states as independent
contractors, even though they perform the same work “under the same or substantially
similar policies, procedures and constraints as the Investigators properly classified as
employees.”
[Id. at ¶ 3]
Judd worked for KeyPoint as an investigator from
approximately June 2008 through September 2014. [Id. at ¶ 15]
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a. 2015 Smith Action 2
In 2015, Richard Smith, a former KeyPoint investigator, filed a FLSA action
against KeyPoint on behalf of a nationwide proposed class of similarly situated
investigators in the United States. Smith v. KeyPoint Government Solutions, Inc., Civil
Action No. 15-cv-00865-REB-KLM (D. Colo. 2015) (“Smith Action”), Docket No. 1-1. 3
On April 24, 2015, that suit was transferred to the U.S. District Court for the District of
Colorado. Id., Docket No. 1. Judd filed a consent to join the Smith Action on August 20,
2015. Id., Docket No. 43. Smith filed a motion for conditional certification on April 18,
2016, id., Docket No. 78, which the Court denied without prejudice on April 25, 2016,
id., Docket No. 83. Senior United States District Court Judge Robert E. Blackburn
determined that, prior to deciding the issues impacting the certification of a collective
action, it would be more efficient to resolve the substantive issues raised by the motion
for summary judgment filed by KeyPoint, which was also pending before the Court. Id.
at 2.
The Court later granted KeyPoint’s Motion for Summary Judgment. Id., Docket
No. 95. Judge Blackburn explained that Smith’s claims were barred by the standard
2
Because the briefing includes arguments with respect to whether a prior action in this
Court tolled the FLSA statute of limitations, it is necessary to recount the procedural
history in the 2015 Smith Action. [See #41 at 7; #57 at 10-13; #60 at 5-7] The
Complaint also includes factual allegations with respect to that case. [See #1 at ¶¶ 15,
51]; Tellabs, Inc. v. Makor Issues & Rights, Ltd., 551 U.S. 308, 322 (2007) (holding a
court “must consider the complaint in its entirety . . . [and] documents incorporated into
the complaint by reference”).
3
The Court takes judicial notice of the proceedings in the Smith Action. “[F]acts subject
to judicial notice may be considered in a Rule 12(b)(6) motion without converting the
motion to dismiss into a motion for summary judgment.” Tal v. Hogan, 453 F.3d 1244,
1264 n.24 (10th Cir. 2006). “This includes another court’s publicly filed records
‘concerning matters that bear directly upon the disposition of the case at hand.’”
Hodgson v. Farmington City, 675 F. App’x 838, 841 (10th Cir. 2017) (quoting United
States v. Ahidley, 486 F.3d 1184, 1192 n.5 (10th Cir. 2007)).
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two-year statute of limitations under the FLSA, and that Smith had failed to present
sufficient evidence to show that KeyPoint had acted “willfully,” such that a three-year
limitations period applied. Id. at 3- 5; see also 29 U.S.C. § 255(a). The Court also found
that Smith’s motion for certification of a collective action, which had been filed nearly a
year after the case was transferred to the Colorado federal district court, and 16 months
after the case was originally filed, was untimely. Smith Action, Docket No. 95 at 6-8. The
Court entered final judgment in favor of KeyPoint. Id., Docket No. 97. In January 2017,
the Court amended the judgment to clarify that “while [Smith’s] individual claims are
dismissed with prejudice as barred by limitations, the collective action claims are
dismissed without prejudice.” Id., Docket No. 99 at 1.
b. Instant Suit
Judd filed the instant suit in the United States District Court for the District of
Arizona on March 10, 2017. [#1] Judd requests that this matter be certified as a
collective action. [#1 at 18; #43] Judd seeks compensatory and statutory damages,
including lost wages, earnings, and all other money owed to him and members of the
collective, and an order directing KeyPoint to identify and restore restitution and
compensation for lost wages to all current and former investigators classified as
independent contractors, among other relief. [#1 at 18-19]
In April 2017, KeyPoint moved to transfer the action to this Court. [#9] While the
case remained pending in the Arizona federal district court, Judd filed a motion for
conditional certification. [#11] KeyPoint then filed a motion to stay all case deadlines,
pending resolution of its motion to transfer. [#12] Concurrent with the motion to stay, the
parties stipulated to a tolling agreement, which provided in part that if the transfer was
4
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granted, Judd would “have 7 days to adjust his moving papers for conditional
certification.” [#12-1 at ¶ 4]
In February 2018, the Arizona federal district court granted KeyPoint’s motion to
transfer and transferred the instant suit to this Court. [#24] Pursuant to the parties’
stipulation, Judd re-filed his Motion for Conditional Certification in this Court on February
16, 2018. [#43] On the same day, KeyPoint moved to dismiss pursuant to Federal Rule
of Civil Procedure 12(b)(6). [#41] The Motion to Dismiss is fully briefed. [##57, 60]
Additionally, the parties addressed the Motion to Dismiss, along with the Motion for
Conditional Certification, at a status conference on April 10, 2018. [#64]
II.
STANDARD OF REVIEW
Under Federal Rule of Civil Procedure 12(b)(6), a court may dismiss a complaint
for “failure to state a claim upon which relief can be granted.” Fed. R. Civ. P. 12(b)(6).
In deciding a motion under Rule 12(b)(6), a court must “accept as true all well-pleaded
factual allegations . . . and view these allegations in the light most favorable to the
plaintiff.” Casanova v. Ulibarri, 595 F.3d 1120, 1124 (10th Cir. 2010) (quoting Smith v.
United States, 561 F.3d 1090, 1098 (10th Cir. 2009)). Nonetheless, a plaintiff may not
rely on mere labels or conclusions, “and a formulaic recitation of the elements of a
cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007).
“To survive a motion to dismiss, 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, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 570). Plausibility
refers “to the scope of the allegations in a complaint: if they are so general that they
encompass a wide swath of conduct, much of it innocent, then the plaintiffs ‘have not
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nudged their claims across the line from conceivable to plausible.’”
Robbins v.
Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008) (quoting Twombly, 550 U.S. at 570).
“The burden is on the plaintiff to frame a ‘complaint with enough factual matter (taken as
true) to suggest’ that he or she is entitled to relief.” Id. (quoting Twombly, 550 U.S. at
556). The ultimate duty of the court is to “determine whether the complaint sufficiently
alleges facts supporting all the elements necessary to establish an entitlement to relief
under the legal theory proposed.” Forest Guardians v. Forsgren, 478 F.3d 1149, 1160
(10th Cir. 2007).
III.
ANALYSIS
In support of its Motion to Dismiss, KeyPoint argues that 1) Judd has failed to file
a valid consent, and 2) Judd’s claims are barred by the FLSA statute of limitations. [#41
at 3-7] The Court addresses each argument in turn.
a. Consent
KeyPoint first argues that Judd has failed to file a valid consent to join this action
because Judd did not reference the name of the lawsuit in his consent form, and
because it is unclear whether Judd has consented to act as the named plaintiff in this
suit. [#41 at 5-6] A FLSA collective action commences when a party plaintiff files his
“written consent.” 29 U.S.C. § 256; see also 29 U.S.C. § 216(b) (“No employee shall be
a party plaintiff to any [FLSA collective action] unless he gives his consent in writing to
become such a party and such consent is filed in the court in which such action is
brought.”). Accordingly, an individual’s claim in a FLSA collective action dates back to
when his written consent is filed, rather than to the filing of the complaint. See id.
Plaintiffs in a FLSA suit therefore must file a valid consent form in order to toll the
statute of limitations. The consent requirement applies equally to both named and
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unnamed plaintiffs. See, e.g., Faust v. Comcast Cable Commc'ns Mgmt., LLC, No.
WMN-10-2336, 2013 WL 5587291, at *3 (D. Md. Oct. 9, 2013) (collecting cases).
“[C]ourts have generally not taken a strict approach with regard to the form of the
written consent, at least with respect to named plaintiffs . . . . [A]ll that is required is a
signed statement indicating the plaintiff’s intent, and consent, to participate as a plaintiff
in the collective action.” Mendez v. The Radec Corp., 260 F.R.D. 38, 52 (W.D.N.Y.
2009); see also D'Antuono v. C & G of Groton, Inc., No. 3:11cv33 (MRK), 2012 WL
1188197, at *2 (D. Conn. Apr. 9, 2012) (“While it is clear that some document in
addition to the complaint must be filed, it is not clear what form the written consent must
take, especially when the alleged party plaintiff is a named plaintiff.”); Manning v. Gold
Belt Falcon, LLC, 817 F. Supp. 2d 451, 454 (D.N.J. Oct. 5, 2011) (“With respect to
form, courts have shown considerable flexibility as long as the signed document
indicates consent to join the lawsuit.”); Perkins v. S. New Eng. Tel. Co., No. 3:07–cv–
967 (JCH), 2009 WL 3754097, at *3 n.2 (D. Conn. Nov. 4, 2009) (“[W]hile a consent
form need not take any specific form, courts have generally accepted irregular consent
forms where the signed document verifies the complaint, indicates a desire to have
legal action taken to protect the party's rights, or states a desire to become a party
plaintiff.”).
Consistent with that approach, “plaintiffs have been deemed to have
manifested consent,” even if they did not file a document constituting a written consent
form, or the specific form approved by the court. Manning, 817 F. Supp. 2d at 454
(citing Mendez, 260 F.R.D. at 52 (finding affirmation submitted by a named plaintiff
sufficient to satisfy consent requirement)); see also D'Antuono, 2012 WL 1188197 at *4
(finding a signed affidavit sufficient, though plaintiff did not submit a written consent
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form, where the court could read that document “broadly as implicitly verifying the
complaint, expressing an interest that legal action be taken . . . and expressing an
interest in being a party plaintiff”).
Here, Judd filed a form entitled “Consent to Join Collective Action Under the Fair
Labor Standards Act of 1938 (FLSA), 29 U.S.C § 216(b).”
omitted)]
[#1-2 at 2 (emphasis
In the caption of the form, the plaintiff is identified as “ORSON JUDD,
individually and on behalf of all others similarly situated.”
[Id.] The footer of the
document states, “Consent to Join Collective Action[,] Judd v. KeyPoint.” [Id.] In the
body of the consent form, Judd describes his background working for KeyPoint, and his
involvement in the Smith Action. [Id. at 3] Judd states, “I want to join this lawsuit
alleging that KeyPoint has violated [FLSA] by misclassifying me and other Investigators
as independent contractors rather than employees.”
[Id.]
Judd describes his
understanding that the suit seeks unpaid wages and overtime pay. [Id.] Finally, Judd
notes that he “designate[s] the Plaintiff named in the Complaint as [his] representative
to the fullest extent possible under applicable laws.” [Id.] The form is signed by Judd
and dated January 28, 2017. [Id.] The Court finds that the consent form is sufficient to
constitute Judd’s written consent—Judd has expressed his intent and consent to
participate in the collective action against KeyPoint. See Mendez, 260 F.R.D. at 52.
KeyPoint argues that Judd does not explicitly note that he is in fact the named
plaintiff, and that Judd’s statement that he “designate[s] the Plaintiff named in the
Complaint as [his] representative,” demonstrates that “Judd never consented to act as
the Named Plaintiff.” [#41 at 5] But KeyPoint cites to no authority suggesting that Judd
was required to state that he is the named plaintiff. And other courts have rejected this
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very argument. As one court explained, it is irrelevant if the plaintiff “does not explicitly
claim to be a named plaintiff in the action,” especially when “the caption on h[is] signed
declaration states as much.” D'Antuono, 2012 WL 1188197, at *3; see also Faust, 2013
WL 5587291, at *5 (“The Court declines to read the consent requirements of Sections
216 and 256 so strictly as to require that a plaintiff explicitly state ‘I consent’ or ‘I am the
named Plaintiff’ in order to join a collective action under the FLSA. Rather, a signed
declaration that manifests a clear intent to be a party plaintiff is sufficient . . . .”
(quotation omitted)). That reasoning applies with equal force here—Judd’s consent
form clearly is captioned with the name of the lawsuit, which bears his name: “ORSON
JUDD, individually and on behalf of all others similarly situated, Plaintiffs.” [#1-2 at 2]
Though Judd refers to designating the named plaintiff as “[his] representative,” when he
himself is that named plaintiff, in light of the caption with Judd’s name, and the footer of
the consent document also indicating that Judd is the named plaintiff, the Court finds
that Judd’s third-person reference to himself was quite simply a mistake or
typographical error.
KeyPoint also argues that Judd mistakenly states in his consent that the Smith
Action was still pending at the time he signed the consent form. [#41 at 5] Though the
Smith Court entered the amended final judgment on January 20, 2017, Smith Action,
Docket No. 100, and Judd’s consent form in this matter was signed on January 28,
2017 [#1-2 at 3], KeyPoint offers no explanation as to how this discrepancy impacts
Judd’s consent in this case, and the Court finds that it does not.
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Accordingly, the Court concludes that Judd filed a valid consent form on March
10, 2017. 4 [See #1-2]
b. Statute of Limitations
KeyPoint next argues that Judd’s claims are barred by FLSA’s two-year statute of
limitations.
[#41 at 6-7]
KeyPoint further contends that the alternative three-year
statute of limitations does not apply because KeyPoint did not willfully violate FLSA.
[Id.]
Pursuant to 29 U.S.C. § 255(a), FLSA actions are subject to a two-year statute of
limitations, “except that a cause of action arising out of a willful violation may be
commenced within three years after the cause of action accrued.” Because Judd has
adequately pleaded a willful violation of the FLSA by KeyPoint, his claims are timely
under the FLSA three-year statute of limitations and the Court need not decide whether
Judd’s claims were tolled by the Smith Action. 5
4
Though Judd’s consent form is dated January 28, 2017 [#1-2 at 3], a FLSA collective
action commences “on the date when the complaint is filed,” when the individual “is
specifically named as a party plaintiff in the complaint” and the “written consent to
become a party plaintiff” is filed on that date. 29 U.S.C. § 256(a). Because Judd was
specifically named as a party plaintiff in the complaint filed on March 10, 2017, and the
consent accompanied that complaint, the instant FLSA action commenced on March 10,
2017.
5
In his opposition to the Motion to Dismiss, Judd argues that his claims also fall within
the two-year statute of limitations because the limitations period was tolled when he
filed his notice of consent in the Smith Action. [#57 at 10-13] In a FLSA collective
action, courts toll the statute of limitations from the time each plaintiff files their consent
to opt in, to the time each plaintiff “must pursue their claim individually because of
dismissal from the collective action or a court’s decision to decertify the class.” Ford v.
Navika Capital Grp., LLC, No. 14-00311-KD-C, 2016 WL 1069676, at *12 (S.D. Ala.
Mar. 17, 2016) (collecting cases); see also Arnold v. Navika Capital Grp., LLC, No. 14CV-378-GKF- FHM, 2015 WL 12990468, at *3 (N.D. Okla. July 1, 2015) (“[T]he filing of
a putative class action tolls the statute of limitations for all asserted members of the
class up to the time the court decides not to certify, or to decertify, the class.”) (citing
Am. Pipe & Const. Co. v. Utah, 414 U.S. 538, 554 (1974)). The tolling rule is adopted
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An employer acts willfully for purposes of the FLSA if it “either [knows] or show[s]
reckless disregard for the matter of whether its conduct was prohibited by the statute.”
McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988); see also Mumby v. Pure
Energy Servs. (USA), Inc., 636 F.3d 1266, 1270 (10th Cir. 2011). “Reckless disregard
can be shown through ‘action entailing an unjustifiably high risk of harm that is either
known or so obvious that it should be known.’” Mumby, 636 F.3d at 1270 (quoting
Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47, 68 (2007)). Courts have found willful
violations where the evidence showed:
(1) admissions that an employer knew its method of payment
violated the FLSA prior to the accrual of the action; (2) continuation
of a pay practice without further investigation after being put on
notice that the practice violated the FLSA; (3) earlier violations of
the FLSA that would put the employer on actual notice of the
from the United State Supreme Court’s decision in American Pipe and Construction
Company v. Utah, which held that “commencement of the original class suit” tolls the
running of the statute of limitations “for all purported members of the class” until after
the denial of the class certification motion. 414 U.S. at 554. Although American Pipe
involved a Fed. R. Civ. P. 23 class action suit, which commences at the time the
complaint is filed, rather than when each individual plaintiff files an opt-in form, courts
have repeatedly applied American Pipe to the FLSA collective action context. See, e.g.,
Ford, 2016 WL 1069676, at *12 (“In the context of a FLSA collective action . . . courts
have applied the American Pipe rule by tolling the statute of limitations between the time
each individual opt-in plaintiff consents to the suit and the time each opt-in plaintiff must
pursue their claim individually because of dismissal from the collective action or a
court’s decision to decertify the class.” (collecting cases)).
The Supreme Court recently clarified that the American Pipe rule only tolls a
putative class member’s future individual claims—it does not allow a putative class
member to file a new class action after the statute of limitations has expired. China
Agritech, Inc. v. Resh, No. 17-432, 2018 WL 2767565 (U.S. June 11, 2018). If that
holding were found to apply in the FLSA context, particularly in light of the FLSA tolling
decisions that have relied on American Pipe, Judd would not be entitled to assert
another FLSA collective action beyond the statute of limitations despite tolling by
Smith—only his claims as an individual could proceed. In other words, if the Court finds
that Judd has not adequately pleaded a willful FLSA violation by KeyPoint, such that the
two-year statute of limitations applies, and if the Court were to find that China Agritech
applies here, any tolling from the Smith Action could only save Judd’s individual claims,
not his claims on behalf of the collective.
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Requirements of the FLSA; (4) failure to keep accurate or complete
records of employment; and (5) prior internal investigations which
revealed similar violations.
Nieddu v. Lifetime Fitness, Inc., 977 F. Supp. 2d 686, 688 n.1 (S.D. Tex. 2013)
(quotation omitted).
Courts have repeatedly held that at the motion to dismiss stage, the plaintiff’s
burden to allege a willful FLSA violation is minimal.
Even a “general averment of
willfulness satisfies the requirements of pleading a willful violation of the FLSA, so as to
invoke the three-year statute of limitations” at the pleading stage. Litras v. PVM Int'l
Corp., No. 11-cv-5695 (JFB)(AKT), 2013 WL 4118482, at *6 (E.D.N.Y. Aug. 15, 2013);
see also Woodards v. Chipotle Mexican Grill, Inc., No. 14-cv-4181 (SRN/SER), 2015
WL 3447438, at *9 (D. Minn. May 28, 2015) (same); Davis v. W. Wayne Sch. Dist., No.
3:07cv1906, 2008 WL 11366358, at *2 (M.D. Pa. May 9, 2008) (finding conclusory
allegation that defendant acted willfully, without allegations of the particular facts upon
which the purportedly willful behavior was based, sufficient to survive a motion to
dismiss); Svoboda v. Tri-Con Indus., Ltd., No. 4:08CV3124, 2008 WL 4754647, at *2 (D.
Neb., Oct. 27, 2008) (same) (collecting cases). This is because the question of whether
an alleged FLSA violation is willful is not an element of the plaintiff’s claim, but rather an
anticipation of a limitations defense that defendant may raise.
See, e.g., Aviles-
Cervantes v. Outside Unlimited, Inc., 276 F. Supp. 3d 480, 491 (D. Md. 2017) (collecting
cases); see also Woodards, 2015 WL 3447438, at *9 (“[A]n affirmative defense of a
statute of limitations violation often involves a factual inquiry, meaning it is not generally
amenable to resolution on a Rule 12(b)(6) motion.” (quotation omitted)).
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At this early stage of the proceedings, Judd has plausibly pleaded that KeyPoint
willfully violated the FLSA. Judd alleges that KeyPoint has known that its classification
of investigators as independent contractors violates the FLSA since at least September
2011, when the IRS determined that KeyPoint had improperly classified an investigator
in California as an independent contractor “when in fact he was an employee.” [#1 at ¶
8; see also ¶¶ 2, 62] Judd further alleges that in 2014, KeyPoint reclassified all of its
investigators in California as employees. [Id. at ¶ 3] Judd claims that, in other states,
KeyPoint nevertheless continues to classify investigators as independent contractors,
“even though they do the same kind of work under the same or substantially similar
policies, procedures and constraints” as the California investigators now properly
classified as employees. 6 [Id.] In short, Judd has pleaded specific facts in support of
6
Judd further alleges that KeyPoint reclassified its California investigators as
employees “[a]s a result of” a class action suit filed by Michael Sgherzi, the investigator
that the IRS determined KeyPoint had misclassified, in California state court. [#1 at ¶¶
8, 62]; see Sgherzi v. KeyPoint Gov’t Solutions, Inc., Case No. BC487486 (Cal.
Superior Ct.) (“Sgherzi Action”). The Court takes judicial notice of the Sgherzi Action.
See Hodgson, 675 F. App’x at 841. The Sgherzi Action was resolved in a Class Action
Settlement Agreement and Joint Stipulation, which specifically stated that its terms
would not “be construed or deemed an admission of liability, culpability, negligence or
wrongdoing on the part of Defendants.” [#60-2 at ¶ 36] Moreover, in approving the
agreement, the California state court ordered that the agreement, the order approving it,
“or any other Order entered in this action . . . shall not be offered in evidence in any
action or proceeding against Defendant . . . in any court . . . for any purpose
whatsoever.” [#60-1 at ¶ 10] Accordingly, the Court agrees with KeyPoint that Judd
cannot rely on the Sgherzi proceedings as evidence of KeyPoint’s willfulness [#60 at 34]. See, e.g., Veliz v. Cintas Corp., No. C 03-1180 RS, 2008 WL 4911238, at *10 (N.D.
Cal. Nov. 13, 2008) (holding that a settlement agreement by defendant in an earlier
case was not admissible for purposes of showing willfulness under the FLSA because
the parties to the earlier settlement agreed that it could not be admitted in any
proceeding as an admission by defendant). Nevertheless, Judd’s other allegations of
KeyPoint’s willfulness are sufficient to withstand the instant Motion to Dismiss, for the
reasons discussed above.
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his allegations that KeyPoint acted willfully—more than what is required at this stage of
the proceedings. See Aviles-Cervantes, 276 F. Supp. 3d at 491.
KeyPoint counters that the IRS Determination letter is insufficient to support an
allegation of willfulness by KeyPoint because that determination is not binding and did
not apply FLSA standards. [#60 at 2-3] But courts have held that analogous IRS
determinations may in fact bear on the issue of willfulness under the FLSA, at least
where the individuals subject to the IRS determination were litigants in the later FLSA
action. See, e.g., Werner v. Bell Family Med. Ctr., Inc., No. 3:09 C 0701, 2012 WL
1514872, at *2 (M.D. Tenn. May 1, 2012) (finding, in denying a motion in limine, IRS’
determination that plaintiff was an employee and not an independent contractor for
federal tax purposes “theoretically could be probative of Defendants’ willfulness, good
faith, and knowledge or notice of the alleged FLSA violations, as well as Plaintiff’s
damages”). By the same token, other courts have found that alleged FLSA violations
for misclassifying workers as independent contractors were not willful, where the IRS
had previously determined that the defendant had properly classified workers as
independent contractors. See, e.g., Blair v. TransAm Trucking, Inc., No. 09-2443-EFMKGG, 2018 WL 1523101, at *36 (D. Kan. Mar. 28, 2018) (plaintiff had failed to
demonstrate willfulness under the FLSA where defendant presented evidence that the
IRS had previously determined, and the Department of Labor had confirmed, that
defendant had properly classified workers as independent contractors); Contreras v.
Aventura Limousine & Transportation Serv., Inc., No. 13-22425-CIV-DIMITROULEAS,
2014 WL 11880993, at *7 (S.D. Fla. June 30, 2014) (finding plaintiff was not entitled to
summary judgment on the issue of willfulness because the jury could find that
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defendants made an adequate inquiry as to FLSA compliance by relying on an IRS
audit); Kelly v. A1 Tech., No. 09 Civ. 962 (LAK)(MHD), 2010 WL 1541585, at *18
(S.D.N.Y. Apr. 12, 2010) (holding plaintiff had failed to demonstrate that defendant’s
alleged FLSA violation was willful, and noting that “defendant only considered plaintiff to
have been an employee, as opposed to an independent contractor, pursuant to an
I.R.S. determination of plaintiff’s employment status”). Accordingly, Judd is entitled to
rely on the IRS determination in support of the willfulness allegations here.
Citing to the Smith Action, KeyPoint also argues that this District has already
determined that KeyPoint did not act willfully in treating investigators as independent
contractors. [#41 at 6-7] In Smith, Judge Blackburn granted KeyPoint’s Motion for
Summary Judgment and dismissed plaintiff Richard Smith’s individual claims. Smith
Action, Docket No. 95. The Court held that Smith had failed to present any evidence
“comparable to that which has been found sufficient to show willfulness under the
FLSA.” Id. at 5. Instead, Smith had simply argued that “defendant showed reckless
disregard by classifying some of its workers as independent contractors and other as
employees, despite the fact that all investigators do the same type of work subject to the
same type of controls.” Id. KeyPoint presented evidence to explain the rationale behind
treating some investigators as employees and others as independent contractors, which
Smith did not rebut. Id.
The finding that Smith did not present sufficient evidence to show KeyPoint’s
willfulness is inapposite here for several reasons. First, that finding was made under
Fed. R. Civ. P. 56—not pursuant to the significantly lighter burden posed to a plaintiff by
a Rule 12(b)(6) motion to dismiss. See, e.g., Lagasse v. Flextronics Am., LLC, C.A. No.
15
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11-445ML, 2012 WL 2357442, at *3 (D.R.I. June 1, 2012) (“While Plaintiff may
ultimately be unable to prove a willful violation (or withstand a Rule 56 challenge), the
applicable standard at [the motion to dismiss] stage is ‘plausibility’ and not ‘likely
success on the merits’”), report and recommendation adopted, 2012 WL 2357641
(D.R.I. June 20, 2012).
Second, that finding was specific to the arguments and
evidence presented by Smith. See, e.g., Smith Action, Docket No. 95 at 5 (“Plaintiff
presents no evidence here comparable to that which has been found sufficient to show
willfulness under the FLSA.” (emphasis added)); id. (holding no reasonable jury could
find that KeyPoint had acted willfully where Smith had “cite[d] no authority, and the court
ha[d] found none,” to rebut evidence presented by KeyPoint that its disparate treatment
of contractors was based on business strategy). Finally, Judd has made additional
allegations here regarding KeyPoint’s willfulness that were not made by Smith in the
prior action, including contending that KeyPoint was put on notice of its improper
practices by the IRS determination letter, and noting that all investigators in California,
who perform essentially the same work as Judd and other investigators, have since
been re-classified as employees. [See, e.g., #1 at ¶¶ 2-3, 8, 62] Cf. Smith Action,
Docket No. 3.
For these reasons, and for the purposes of the instant Motion to Dismiss, the
three-year FLSA statute of limitations applies. The parties agree that Judd’s cause of
action accrued in September 2014, when he stopped working as an investigator for
KeyPoint. [See #41 at 7; #57 at 12] Judd filed his consent form in the instant action on
March 10, 2017.
[## 1, 1-2]
Because Judd has plausibly alleged willfulness, and
16
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because he filed his consent to join in the instant action within three years of the accrual
of his claims against KeyPoint in September 2014, his FLSA action is timely.
IV.
Conclusion
For the foregoing reasons, this Court respectfully RECOMMENDS that
KeyPoint’s Motion to Dismiss [#41] be DENIED. 7
DATED: June 20, 2018
BY THE COURT:
s/Scott T. Varholak
United States Magistrate Judge
7
Within fourteen days after service of a copy of the Recommendation, any party
may serve and file written objections to the magistrate judge’s proposed findings
and recommendations with the Clerk of the United States District Court for the
District of Colorado. 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b); In re Griego, 64
F.3d 580, 583 (10th Cir. 1995). A general objection that does not put the district
court on notice of the basis for the objection will not preserve the objection for de
novo review. “[A] party’s objections to the magistrate judge’s report and
recommendation must be both timely and specific to preserve an issue for de novo
review by the district court or for appellate review.” United States v. 2121 East 30th
Street, 73 F.3d 1057, 1060 (10th Cir. 1996). Failure to make timely objections may
bar de novo review by the district judge of the magistrate judge’s proposed findings
and recommendations and will result in a waiver of the right to appeal from a
judgment of the district court based on the proposed findings and recommendations
of the magistrate judge. See Vega v. Suthers, 195 F.3d 573, 579-80 (10th Cir.
1999) (District court’s decision to review a magistrate judge’s recommendation de
novo despite the lack of an objection does not preclude application of the “firm
waiver rule”); Int’l Surplus Lines Ins. Co. v. Wyo. Coal Ref. Sys., Inc., 52 F.3d
901, 904 (10th Cir. 1995) (by failing to object to certain portions of the magistrate
judge’s order, cross-claimant had waived its right to appeal those portions of the
ruling); Ayala v. United States, 980 F.2d 1342, 1352 (10th Cir. 1992) (by their
failure to file objections, plaintiffs waived their right to appeal the magistrate judge’s
ruling). But see, Morales-Fernandez v. INS, 418 F.3d 1116, 1122 (10th Cir. 2005)
(firm waiver rule does not apply when the interests of justice require review).
17
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