Sanchez et al v. Haltz Construction, Inc. et al
Filing
80
MEMORANDUM OPINION Signed by the Honorable John F. Grady on 1/4/2012. Mailed notice.(srb,)
09-7531.112-RSK
January 4, 2012
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
RAMIRO SANCHEZ and RYAN LUKA, on
)
behalf of themselves and all
)
other employees similarly situated,)
known and unknown,
)
)
Plaintiffs,
)
)
v.
)
)
HALTZ CONSTRUCTION, INC., 1919 W. )
CRYSTAL, LLC, RMR GROUP, INC.,
)
ROBERT M. RYAN, II, BILL WILLIAMS, )
KERRY WALSH, KEVIN MACNAB, ROBYN
)
MACNAB, MICHAEL SELVAGGIO, DANIEL )
DILLON, and ERIKA DOMINGUEZ
)
)
Defendants.
)
No. 09 C 7531
MEMORANDUM OPINION
Before
the
court
are
the
motions
of
defendants
Haltz
Construction, Inc. (“Haltz”), Michael Selvaggio, and Daniel Dillon
(collectively, the “Haltz Defendants”) to: (1) dismiss plaintiffs’
amended complaint; and (2) compel plaintiffs to join a necessary
party pursuant to Fed. R. Civ. P. 19.
For the reasons explained
below we grant the Haltz Defendants’ motion to dismiss in part and
deny it in part; and we deny their Rule 19 motion without prejudice
to renewal at a later date.
BACKGROUND
Plaintiffs Ramiro Sanchez and Ryan Luka allege that they were
employed as masonry laborers by “one or more” of the defendants
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from approximately December 3, 2007 to April 30, 2008. (Am. Compl.
¶¶ 47-48.)
Their lawsuit stems from work that they performed on a
construction project at 1919 W. Crystal in Chicago.
(Id. at ¶ 62.)
1919 W. Crystal, LLC (“1919 LLC”) appointed RMR Group, Inc. (“RMR”)
to serve as the project’s general contractor.1
(Id.) RMR engaged
Haltz to provide masonry and demolition work.
(Id. at ¶ 63.)
Haltz is owned and controlled by Dillon and Selvaggio. (Am. Compl.
¶¶ 18-20.)
They are also two of the eight individuals whom
plaintiffs have identified as being involved in the “payroll
processes” by which plaintiffs were paid.
(Id. at ¶ 28.)
Haltz,
in turn, engaged Kevin MacNab to act as a “consultant” to obtain
labor, equipment, and supplies for the project.
(Id. at ¶ 64.)
Haltz also engaged Kevin MacNab, Robyn MacNab, and their company,
Synergy
Construction,
Inc.
(“Synergy”),
obtaining credit with certain vendors.
to
assist
(Id. at ¶ 65.)2
Haltz
in
Plaintiffs
plausibly contend that they are unable at this time to specifically
identify their employer(s) given the number of individuals and
entities involved in the project and the fact that they did not
receive pay stubs or other documentation in connection with their
employment.
(Pls.’ Resp. at 12-16.)
1/
Pursuant to a stipulation, plaintiffs voluntarily dismissed their
claims against 1919 LLC and Bill Williams — an alleged owner and officer of 1919
LLC — without prejudice. (See Stipulation, dated April 9, 2010, DKT # 27.)
2/
Plaintiffs have dismissed Kevin MacNab and Robyn MacNab from this
lawsuit pursuant to a consent decree. (See Consent Decree, dated Aug. 26, 2010,
DKT # 41.)
- 3 -
At some point prior to December 2007 Kevin MacNab met with
Dillon to discuss the project.
(Am. Compl. ¶ 67.)
Dillon
identified himself as an agent of Haltz and Selvaggio, whom Dillon
identified
as
Haltz’s
owner.
(Id.
at
¶¶
68-69.)
At
some
unspecified point after this initial meeting, Dillon gave MacNab a
copy of a written contract between Haltz and RMR (“Contract A”),
which provided that Haltz would supply materials, labor, equipment,
and supplies to complete the project’s masonry work.
70.)
(Id. at ¶
Dillon told MacNab that Contract A was the “official masonry
contract,” which was kept on file with the project’s escrow agent,
Chicago
Title
and
Trust
(“Chicago
Title”).
(Id.
at
¶
71.)
Pursuant to the contract, some portion of the contract price was
held in escrow and disbursed to Haltz for labor, equipment, and
supplies as the project progressed.
(Id. at ¶¶ 66, 74, 98, 100.)
As far as we can tell from the amended complaint, the contract did
not expressly grant any other party a right to claim the funds.
But plaintiffs contend that at least some portion of the money was
effectively earmarked for payments to plaintiffs, the MacNabs, and
Synergy.
(Id. at ¶¶ 74-75.)
Chicago Title disbursed funds from
the escrow account between December 2007 and February 2008, but
plaintiffs allege that the payments were short of the amounts
required by Contract A.
they
and
(Id. at ¶ 75.)
similarly-situated
employees
Plaintiffs estimate that
performed
approximately
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$30,000 worth of labor for which they were not paid. (Id. at ¶ 76.)
In
late
February
or early
March
2008,
Kevin
MacNab
was
“allowed” to view a copy of the project’s official masonry contract
at
Chicago
Title’s
offices
(“Contract
B”).
(Id.
at
¶
77.)
Contract B’s contract price was “significantly less” than Contract
A’s.
(Id. at ¶ 78.)
The change appeared to have been initialed by
Dillon and defendant Robert Ryan, an owner and officer of RMR.
(Id. at ¶¶ 24-25, 79.)
Moreover, it appeared that the parties had
made the change shortly after the project commenced, and prior to
the time that the plaintiffs performed the bulk of their labor.
(Id. at ¶ 80.)
Plaintiffs allege on information and belief that
the parties reduced the contract price to settle a dispute between
Haltz and RMR concerning a “faulty concrete pour.”
(Id. at ¶¶ 82,
84.) After the parties amended the contract, Dillon made “numerous
statements” to plaintiffs and to MacNab “that enough money existed
in the escrow to cover the wages owed to the [plaintiffs], and that
the [plaintiffs] should continue working on the Project because
‘checks were on the way.’”
(Id. at ¶ 85.)
At Dillon’s request,
MacNab reiterated Dillon’s assurances because MacNab believed —
based on Contract A — that the contract price was sufficient to
cover project expenses, including plaintiffs’ wages.
89.)
(Id. at ¶
These statements were false, and Dillon knew or should have
known that they were false, because the amended contract price was
insufficient to cover those expenses.
(Id. at ¶¶ 90-92.)
Relying
- 5 -
on Dillon’s assurances, plaintiffs continued to work on the project
even though wage payments were short or nonexistent.
89.)
(Id. at 88-
Plaintiffs also allege that Selvaggio diverted escrow funds
intended to cover labor costs.
In late February or early March,
Selvaggio directed MacNab to collect a $25,000 disbursement from
Chicago Title.
(Id. at ¶¶ 99, 104.)
When Chicago Title refused to
release the money to MacNab or Synergy, Selvaggio directed MacNab
to tell Chicago Title that MacNab was Haltz’s vice president. (Id.
at ¶ 100.)
This was false, but MacNab went along with it because
Haltz owed him money and MacNab was concerned he would not be paid
if he did not cooperate.
(Id. at ¶¶ 101-02.)
Chicago Title gave
MacNab a check, which he deposited in Synergy’s bank account. (Id.
at ¶ 103.)
Selvaggio then directed MacNab to pay him $11,000 of
the $25,000 disbursement, which he did.
(Id. at ¶¶ 105-108.)
Plaintiffs characterize this as an end-run around the project’s
escrow-distribution plan.
(Id. at ¶ 108.)
Plaintiffs assert claims against the defendants for violating
the Fair Labor Standards Act (“FLSA”) and related state wage laws.
(See id. at Count I (FLSA); Count II (Illinois Minimum Wage Law
(“IMWL”)); and Count III (Illinois Wage Payment and Collection Act
(“IWPCA”) and Attorneys’ Fees in Wage Actions Act (“AFWAA”).) They
also assert claims for: (1) fraud against Dillon and Haltz for
their alleged
(Count
IV);
sleight-of-hand
(2)
fraud
and
with
the
conversion
construction
against
contracts
Selvaggio
for
- 6 -
diverting $11,000 that was earmarked for labor and materials
(Counts V and VI); and (3) unjust enrichment against all the named
defendants for retaining the benefits of plaintiffs’ labor without
adequate compensation (Count VII). The Haltz Defendants have moved
to dismiss each count of plaintiffs’ complaint.
A.
Standard of Review
The purpose of a 12(b)(6) motion to dismiss is to test the
sufficiency of the complaint, not to resolve the case on the
merits.
5B Charles Alan Wright & Arthur R. Miller, Federal
Practice and Procedure § 1356, at 354 (3d ed. 2004).
To survive
such a motion, “a complaint must contain sufficient factual matter,
accepted as true, to ‘state a claim to relief that is plausible on
its face.’
A claim has facial plausibility when the plaintiff
pleads factual content that allows the court to draw the reasonable
inference that the defendant is liable for the misconduct alleged."
Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949 (2009) (citing Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 570, 556 (2007)).
When evaluating
a motion to dismiss a complaint, we must accept as true all factual
allegations in the complaint.
Iqbal, 129 S. Ct. at 1949.
However,
we need not accept as true its legal conclusions; “[t]hreadbare
recitals of the elements of a cause of action, supported by mere
conclusory statements, do not suffice.”
U.S. at 555).
B.
Plaintiffs’ Wage Claims
Id. (citing Twombly, 550
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(1) Plaintiffs’ Individual FLSA Claims
The Haltz Defendants contend that the complaint does not
contain enough detail to satisfy the pleading standards established
in Twombly and Iqbal. Specifically, they point out that plaintiffs
fail to allege the number of hours they worked, the days they
worked, the total amount of money that they claim is owing, and the
type of work they performed.
(Defs.’ Mem. at 3.)
Although the
complaint could be clearer on this point, we infer that the
plaintiffs performed masonry construction work for the defendants.
(See Am. Compl. ¶¶ 36, 43-44.)
As to the other omissions, we think
the defendants are overstating the plaintiffs’ pleading burden.
This case, and wage cases generally, are not so complicated that
they require significant factual allegations “to present a story
that holds together.” Swanson v. Citibank, N.A., 614 F.3d 400, 404
(7th Cir. 2010); see also McCauley v. City of Chicago, --- F.3d
---, 2011 WL 4975644, *4 (7th Cir. Oct. 20, 2011) (“The required
level of factual specificity rises with the complexity of the
claim.”); Secretary of Labor v. Labbe, 319 Fed. Appx. 761, 763
(11th Cir. 2008) (“Unlike the complex antitrust scheme at issue in
Twombly
that
required
allegations
of
an
agreement
suggesting
conspiracy, the requirements to state a claim of a FLSA violation
are
quite
straightforward.”).
Plaintiffs
allege
that
they
“routinely” worked more than 40 hours per week without receiving
overtime pay, and that the amount of compensation they did receive
- 8 -
for
the
work
requirement.
they
performed
fell
(Am. Compl. ¶¶ 49-50.)
below
the
minimum-wage
Plaintiffs do not need to
provide more factual detail in order to state a claim that is
“plausible” in the relevant sense.
763
(concluding
that
allegations
See Labbe, 319 Fed. Appx. at
substantially
similar
to
plaintiffs’ allegations in this case stated a claim for relief);
cf. Swanson, 614 F.3d at 404-05 (After Twombly, “[a] plaintiff who
believes that she has been passed over for a promotion because of
her sex will be able to plead that she was employed by Company X,
that a promotion was offered, that she applied and was qualified
for it, and that the job went to someone else.
That is an entirely
plausible scenario, whether or not it describes what ‘really’ went
on in this plaintiff’s case.”). Defendants rely on Zhong v. August
Ausgust Corp., 498 F.Supp.2d 625, 629 (S.D.N.Y. 2007) for the
proposition that FLSA plaintiffs must allege either the amount of
unpaid wages that they claim, or else allege facts from which the
court can calculate that figure.
We do not believe that this
requirement is consistent with the way that courts in this Circuit
have applied Twombly and Iqbal.
See Swanson, 614 F.3d at 404-05;
see also Allen v. City of Chicago, No. 10 C 3183, 2011 WL 941383,
*6
(N.D.
Ill.
Mar.
15,
2011)
(effectively
rejecting
Zhong);
Nicholson v. UTi Worldwide, Inc., No. 3:09-cv-722-JPG-DGW, 2010 WL
551551, *4 (S.D. Ill. Feb. 12, 2010) (“While Zhong may be right
that a plaintiff should plead his rate of pay and the wages due, no
rule requires that he do so.”) (emphasis in original).
- 9 -
Defendants also argue that plaintiffs have not adequately
alleged that the defendants were their “employers” as the statute
defines that term.
We disagree.
Under the FLSA, an employer is
“any person acting directly or indirectly in the interest of an
employer in relation to an employee . . . .”
203(d).
See 29 U.S.C. §
RMR engaged Haltz to perform masonry work on the 1919 W.
Crystal project.
Selvaggio
and
(Am. Compl. ¶ 63.)
Dillon
were
officers
Plaintiffs allege that
and
owners
of
Haltz
who
controlled the company’s day-to-day operations. (Id. at ¶¶ 18-20.)
It
is
reasonable
to infer
that
the
plaintiffs,
laborers
who
performed masonry work on the project, were employed by Haltz. And
Selvaggio’s and Dillon’s control over Haltz makes them potentially
liable as employers, too.
See, e.g., Dominguez v. Quigley’s Irish
Pub, Inc., 790 F.Supp.2d 803, 823-24 (N.D. Ill. 2011). Ultimately,
plaintiffs must prove their allegations as to each defendant, but
they are not required to do so at this stage of the case.
Finally, we reject the Haltz Defendants’ argument that we
should dismiss the complaint because it leaves open the possibility
that the plaintiffs worked in positions that are exempt from the
FLSA’s requirements.
213(a)(1)
(exempting
(See Defs.’ Mem. at 5); see also 29 U.S.C. §
individuals
“employed
in
a
executive, administrative, or professional capacity”).
bona
fide
It is the
employer’s burden to establish that an employee is exempt, see
Roe-Midgett v. CC Services, Inc., 512 F.3d 865, 869 (7th Cir.
2008), and “[c]omplaints need not anticipate, and attempt to plead
- 10 -
around, potential affirmative defenses.”
Davis v. Indiana State
Police, 541 F.3d 760, 763 (7th Cir. 2008).
Even if plaintiffs were
required to anticipate the defendants’ exemption defense, we infer
from
the
complaint
construction labor.
(2)
that
plaintiffs
performed
non-exempt
(See supra.)
Plaintiffs’ FLSA Collective Action Allegations
The FLSA authorizes the plaintiffs to file suit on their own
behalf and on behalf of “similarly situated employees.”
U.S.C. § 216(b).
See 29
Defendants argue that plaintiffs have failed to
identify “who or what comprises the ‘Collective’ other than by
alleging
that
they
[defendants].”
are
similarly
situated
(Defs.’ Mem. at 5.)
employees
of
the
The complaint alleges that
other individuals, besides plaintiffs, were not paid for masonry
work they performed on the 1919 W. Crystal project. (Am. Compl. ¶¶
32, 50, 52, 55.)
The defendants have not cited any cases holding
that a plaintiff must plead more detail in order to invoke the
FLSA’s collective-action provision. It may turn out that there are
differences among prospective class members that indicate that a
collective action is not appropriate.
stage of the case.
But that is for another
See, e.g., Blakes v. Illinois Bell Telephone
Co., No. 11 CV 336, 2011 WL 2446598, *2 (N.D. Ill. June 15, 2011)
(describing
the
two-step
FLSA
collective-action
certification
procedure); Taillon v. Kohler Rental Power, Inc., No. 02 C 8882,
2003 WL 2006593, *1-2 (N.D. Ill. 2003) (similar).
- 11 -
(3)
Plaintiffs’ State Law Wage Claims
For the reasons we have just discussed, we reject the Haltz
Defendants’ contention that the plaintiffs’ state law wage claims
are insufficiently detailed to state a claim.
6.)
(See Defs.’ Mem. at
Defendants also argue, with respect to plaintiffs’ IWPCA
claim, that plaintiffs have failed to allege an “agreement” to pay
wages.
The IWPCA requires employers, “at least semi-monthly, to
pay every employee all wages earned during the semi-monthly pay
period.”
820 ILCS 115/3.
“Wages” are “any compensation owed an
employee by an employer pursuant to an employment contract or
agreement between the 2 parties, whether the amount is determined
on a time, task, piece, or any other basis of calculation.”
ILCS 115/2.
820
The “contract or agreement” defines the employee’s
wages and benefits, not the IWPCA.
See National Metalcrafters,
Div. of Keystone Consol. Industries v. McNeil, 784 F.2d 817, 824
(7th Cir. 1986) (observing in a different context that the IWPCA
only requires the employer to “honor his contract”).
Under the
IWPCA, an “agreement” is “broader than a contract and requires only
a manifestation of mutual assent on the part of two or more
persons;
parties
may
enter
into
an
‘agreement’
without
the
formalities and accompanying legal protections of a contract.”
Zabinsky v. Gelber Group, Inc., 807 N.E.2d 666, 671 (Ill. App.
2004).
Moreover, “employers and employees can manifest their
assent
to
conditions
of
employment
by
conduct
alone.”
- 12 -
Landers-Scelfo v. Corporate Office Systems, Inc., 827 N.E.2d 1051,
1059 (Ill. App. 2005).
Plaintiffs allege that they performed work
on the project with the understanding that they would be paid as
Chicago Title released money from the escrow account.
(Am. Compl.
¶¶ 73-76, 85, 89); see Landers-Scelfo, 827 N.E.2d at 1059 (“[A]n
employer and an employee, by acting in a manner consistent with an
employment agreement, can set the material terms of the agreement,
including the amount of compensation and the identity of the
employer.”).
The complaint does not specifically request payment
of any agreed-upon wage above the minimum, (cf. Pls.’ Resp. at 18
n.5 (stating that based upon initial “teaser” payments plaintiffs
expected to earn approximately $20 an hour)), but it does allege
that plaintiffs were not paid within the time required by the
statute. (See Am. Compl. ¶¶ 62-63); see also 820 ILCS 115/3-4.
We
conclude that plaintiffs have sufficiently pled an IWPCA violation.
Defendants also argue that plaintiffs have failed to state an
AFWAA claim because they have not alleged that they made a pre-suit
demand for payment. See 705 ILCS 225/1 (authorizing attorneys fees
where, among other requirements, the plaintiff makes a demand at
least three days prior to suit for unpaid wages in an amount at or
below the amount ultimately found due and owing).
Plaintiffs
effectively concede that they did not make the required demand,
arguing instead that the Illinois Legislature recently amended the
IWPCA to permit plaintiffs to recover attorney’s fees.
(See Pls.’
- 13 -
Resp. at 8); see also 820 ILCS 115/14.
Therefore, plaintiffs no
longer need to rely on the AFWAA to recover attorney’s fees in
cases alleging IWPCA violations.
We consider the AFWAA claim
withdrawn, but Count III — including the request for attorney’s
fees — otherwise stands.
See Hatmaker v. Memorial Medical Center,
619 F.3d 741, 743 (7th Cir. 2010) (plaintiffs are not required to
plead legal theories, and a plaintiff who relies on an incorrect
theory may correct the error in response to a dispositive motion).
C.
Plaintiffs’ Fraud Claims
The Haltz Defendants argue that plaintiffs have not alleged
the circumstances of the fraud in sufficient detail to satisfy Rule
9(b)’s heightened pleading requirements.
(“In
alleging
fraud
or
mistake,
a
See Fed. R. Civ. P. 9(b)
party
must
state
with
particularity the circumstances constituting fraud or mistake.”).
A plaintiff satisfies this requirement by pleading “the who, what,
when, where, and how” of the alleged fraud.
Young, 901 F.2d 624, 627 (7th Cir. 1990).
DiLeo v. Ernst &
In Count IV plaintiffs
allege that Dillon, acting as an officer of Haltz, fraudulently
induced the plaintiffs to continue working on the project with
false assurances
that
they would
be paid.
Dillon’s
alleged
conversation with MacNab about “Contract A” is a key allegation
supporting
unclear.
Count
IV,
but
the
timing
of
this
conversation
is
Plaintiffs allege that Dillon and MacNab had an initial
meeting “[p]rior to December 2007,” and that “[s]ubsequent to that
- 14 -
meeting” Dillon gave MacNab a copy of Contract A.
67, 70.)
(Am. Compl. ¶¶
Had Haltz and RMR amended the contract before that time?
The complaint does not say.
If they only amended the contract
afterwards, then it is difficult to see how Dillon’s conversation
with MacNab
was
fraudulent.3
This
leaves
Dillon’s
“numerous
statements” to plaintiffs and to MacNab that there was enough money
in the escrow account to cover plaintiffs’ wages and that “‘checks
were on the way.’” (Id. at ¶ 85.)
We can infer a general time
period when Dillon allegedly made these statements — between
December 2007 and February 2008 — but plaintiffs have not alleged
a
specific
date
or
location
for
any
particular
statement.
Plaintiffs must supply this detail to satisfy Rule 9(b): this is
not information that is exclusively in the defendants’ control.
They
should
plaintiffs.
also
specifically
indicate
what
Dillon
told
the
Under the circumstances, we do not think it is
appropriate to lump MacNab and the plaintiffs together.
Count IV
is dismissed without prejudice.
The problem with Count V is more substantive.
Plaintiffs
allege that Selvaggio told MacNab to falsely represent to Chicago
Title that he (MacNab) was Haltz’s vice president.
100.)
(Am. Compl. ¶
The details of the escrow arrangement are unclear, but we
infer from this allegation that Chicago Title was only authorized
to disburse money to Haltz.
3/
(See id. (alleging that Chicago Title
Plaintiffs allege that Ryan told MacNab that Contract A “was never a
real contract,” (see Am. Compl. ¶ 83), but it is unclear what that means.
- 15 -
refused to disburse the money to MacNab or Synergy).)
Haltz was
then responsible to distribute the funds to vendors and laborers.
Plaintiffs allege that Selvaggio asked MacNab to pose as Haltz’s
vice president “in order to conceal the fact that $11,000 would be
tendered to Selvaggio, rather than to the plaintiffs and others who
had performed labor on the Project.”
Arguably, this allegation
goes to Selvaggio’s fraudulent intent, although it is unclear how
plaintiffs were harmed by this ruse if the money should have been
tendered to Selvaggio (or another Haltz officer) in the first
instance.
justifiably
In any event, plaintiffs do not allege that they
relied
on
Selvaggio’s
misrepresentation to Chicago Title.
(really
MacNab’s)
alleged
See Aasonn, LLC v. Delaney,
--- N.E.2d ---, 2011 WL 6056460, *8
(Ill. App. Ct. Dec. 2,
2011)(“The elements of common-law fraud are: (1) a false statement
of material fact; (2) the defendant knew the statement was false;
(3) the defendant intended that the statement induce the plaintiff
to act; (4) the plaintiff relied upon the truth of the statement;
and (5) the plaintiff suffered damages from his reliance on the
statement.”).
Accordingly,
Count
V
is
dismissed
without
prejudice.4
4/
We do not reach defendants’ alternative argument that Counts IV and V
allege “promissory fraud,” which generally speaking Illinois courts do not
recognize as a tort. HPI Health Care Services, Inc. v. Mt. Vernon Hosp., Inc.,
545 N.E.2d 672, 682 (Ill. 1989) ("[M]isrepresentations of intention to perform
future conduct, even if made without a present intention to perform, do not
generally constitute fraud."). We note, however, that the exception for “schemes
of promissory fraud” is broad. Id.; see also Desnick v. American Broadcasting
Companies, Inc., 44 F.3d 1345, 1354 (7th Cir. 1995) (characterizing the
difference between "promissory fraud" and a "scheme of promissory fraud" as
- 16 -
D.
Plaintiffs’ Claim for Conversion Against Selvaggio
Defendants argue that plaintiffs’ claim for unpaid wages
cannot support a claim for conversion.
“To state a claim for
conversion, a plaintiff must allege (1) he has a right to the
property at issue; (2) he has an absolute and unconditional right
to the immediate possession of the property; (3) he has made a
demand for possession of the property; and (4) defendant has
wrongfully assumed control, dominion, or ownership of the property
without authorization.”
Song v. PIL, L.L.C., 640 F.Supp.2d 1011,
1017 (N.D. Ill. 2010) (citing Loman v. Freeman, 890 N.E.2d 446, 461
(2008)).
“An asserted right to money normally will not support a
claim for conversion . . . [unless] the money at issue can be
described as ‘specific chattel’” (i.e., a specific fund).
Horbach
v. Kaczmarek, 288 F.3d 969, 978 (7th Cir. 2002) (internal citations
omitted).
A plaintiff’s claim to the fund must be “absolute:”
“[i]t must be shown that the money claimed, or its equivalent, at
all
times
belonged
to
the
plaintiff
converted it to his own use.”
and
that
the
defendant
Id. (quoting In re Thebus, 483
N.E.2d 1258, 1261 (Ill. 1985)) (internal quotation marks omitted,
emphasis in original).
Even assuming that the money held in the escrow account
constituted “specific chattel,” we agree with defendants that
plaintiffs have not alleged an “absolute” claim to those funds.
elusive, and speculating that the exception has swallowed the rule).
- 17 -
Plaintiffs argue that their claim is “absolute” because at the time
that Selvaggio obtained the $11,000 from MacNab the plaintiffs had
already performed work for which they were entitled to payment
under the IWPCA.
(Pls.’ Resp. at 20-21.)
They do not support
their argument with any legal authorities, and it is contrary to
the requirement that the money belong to them “at all times.”
See
Horbach, 288 F.3d at 978; see also DeGeer v. Gillis, 707 F.Supp.2d
784, 790-91 (N.D. Ill. 2010) (concluding that the plaintiff’s
alleged right to a non-discretionary bonus did not support a claim
for conversion).
As we understand the complaint, RMR (or Haltz)
funded an escrow account at some point after they executed the
masonry contract. (Am. Compl. ¶¶ 72, 74-75.) Thereafter, periodic
progress payments were made by Chicago Title to Haltz from the
escrow account.
(Id. at ¶ 74.)
Plaintiffs allege that they and
other laborers and creditors were entitled to payment from those
funds, (id. at ¶ 75), but they were only entitled to payment upon
completing the work they were hired to perform.
See Doing Steel,
Inc. v. Castle Const. Corp., No. 02 C 1674, 2002 WL 31664476, *4
(N.D. Ill. Nov. 21, 2002) (concluding that a contractor did not
have an absolute right to funds “at all times” because it “was
entitled to the money only upon the successful performance of its
duties”); see also DeGreer, 707 F.Supp.2d at 790 (“DeGeer was not
entitled to a bonus, let alone the specific sum he seeks, unless
certain conditions were met.”).
We have some doubts about whether
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plaintiffs can amend their complaint to correct the problems we
have identified with their conversion claim, but we will give them
an opportunity to do so.
E.
Count VI is dismissed without prejudice.
Plaintiffs’ Claim for Unjust Enrichment
Defendants argue that the FLSA preempts plaintiffs’ claim for
unjust enrichment.
Preemption is an affirmative defense, and
therefore not really a proper basis for a Rule 12(b)(6) motion.
However, the plaintiffs have not objected to the defendants’ motion
on that ground.
(See Pls.’ Resp. at 17-18.)
Accordingly, we will
address the merits of defendants’ preemption defense.
See, e.g.,
Kyriakoulis v. DuPage Health Center, Ltd., No. 10 C 7902, 2011 WL
2420201, *1 (N.D. Ill. June 9, 2011).
“[I]f all that is sought in
a state law quantum meruit or unjust enrichment claim is unpaid
overtime compensation or minimum wages that are guaranteed by the
FLSA, those state law claims are preempted.
However, if the state
common law claim seeks something other than what the FLSA can
provide, such as, for example, regular wages not paid at the
contracted rate, the claim is not preempted.”
551551, *6.
Nicholson, 2010 WL
Plaintiffs contend that they seek “gap time” — wages
for fewer than 40 hours of work per week at a rate greater than the
minimum wage — in their claim for unjust enrichment.
Id. (“To the
extent Nicholson seeks pay for ‘gap time,’ that claim is not
cognizable under the FLSA and may survive.”).
This is a creative
interpretation of the complaint, which does not mention “gap time”
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or
otherwise
allege
that
the
plaintiffs
were
promised
particular wage for the work that they performed.
any
The complaint
only alleges that the defendants failed to pay plaintiffs the
required minimum wage and overtime compensation.
49-52.)
(Am. Compl. ¶¶
These claims are governed exclusively by the FLSA and
state statutory
wage
laws.
See, e.g.,
Kyriakoulis,
2011
WL
2420201, at *1-2 (concluding that the FLSA preempted common law
claims for unjust enrichment, quantum meruit, and breach of implied
contract based upon unpaid overtime).
In a footnote in their
response brief plaintiffs state that they “understood (from the
initial ‘teaser’ payments they received) that their hourly wage
would be approximately $20 per hour.”
(Pls.’ Resp. at 18 n.5.)
There is no such allegation in the complaint.
A plaintiff may
“suggest facts outside the pleading, including on appeal, showing
that a complaint should not be dismissed.”
See Reynolds v. CB
Sports Bar, Inc., 623 F.3d 1143, 1147 (7th Cir. 2010).
But
plaintiffs are not bolstering otherwise sufficient allegations with
new facts: the complaint, as drafted, does not provide adequate
notice that plaintiffs are seeking “gap time” compensation.
See
Harrell v. United States, 13 F.3d 232, 236 (7th Cir. 1993) (“If a
complaint
fails
to
state
a
claim
even
under
the
liberal
requirements of the federal rules, the plaintiff cannot cure the
deficiency by inserting the missing allegations in a document that
is not either a complaint or an amendment to a complaint.”); see
- 20 -
also Car Carriers, Inc. v. Ford Motor Co., 745 F.2d 1101, 1107 (7th
Cir. 1984) (“[I]t is axiomatic that the complaint may not be
amended by the briefs in opposition to a motion to dismiss.”).
We
conclude that Count VII, as currently pled, is preempted by the
FLSA.
F.
Defendants’ Fed. R. Civ. P. 19 Motion
Defendants argue that Kevin MacNab is a necessary party to
this litigation and ask us to compel plaintiffs to join him as a
defendant to their fraud and conversion claims.
Because we have
dismissed those claims, albeit without prejudice, defendants’ Rule
19 motion is effectively moot.
(See Defs.’ Rule 19 Mem. at 2
(asking us to join MacNab in the event we deny their motion to
dismiss Counts IV, V, and VI).)
Defendants’ Rule 19 motion is
denied without prejudice to renewal at a later date.
CONCLUSION
Defendants’ motion to dismiss (62) is granted in part and
denied in part.
The motion is denied as to Counts I, II, and III.
Counts
VI,
IV,
V,
and
VII
are
dismissed
without
prejudice.
Plaintiffs are given leave to file an amended complaint by January
27, 2012 that cures the deficiencies we have identified, if they
can do so.
If plaintiffs choose not to file an amended complaint
by that date, we will dismiss Counts IV, V, VI, and VII with
prejudice.
Defendants’ Rule 19 motion (64) is denied without
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prejudice to renewal at a later date.
A status hearing is set for
February 1, 2012 at 11:00 a.m.
DATE:
January 4, 2012
ENTER:
___________________________________________
John F. Grady, United States District Judge
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