Barker v. Atlantic Pacific Lines et al
Filing
27
AMENDED OPINION AND ORDER Signed by the Honorable Joan H. Lefkow on 8/14/2013: Sachdevs motion to dismiss for lack of personal jurisdiction [dkt. 12] is denied and defendants motion to dismiss for failure to state a claim [dkt. 14] is granted as to count IV and denied as to counts I, II, III, and V. Scheduling conference reset for September 17, 2013 at 8:30 a.m.Mailed notice(wp, )
Barker v. Atlantic Pacific Lines et al
Doc. 27
UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
PETER BARKER,
Plaintiff,
v.
ATLANTIC PACIFIC LINES and
MUNISH SACHDEV,
Defendants.
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No. 13 C 1272
Judge Joan H. Lefkow
AMENDED OPINION AND ORDER
Plaintiff, Peter Barker, filed a five-count complaint against defendants, Atlantic Pacific
Lines (“APL”) and Munish Sachdev (collectively referred to as “defendants”), alleging claims
for retaliatory discharge, violation of the Illinois Whistleblower Act (“IWA”), 740 Ill. Comp.
Stat. 174/1 et seq., violation of the Illinois Wage Payment and Collection Act (“IWPCA”),
820 Ill. Comp. Stat. 115/1 et. seq., and breach of contract.1 Sachdev has moved to dismiss for
lack of personal jurisdiction [dkt. 12] under Federal Rule of Civil Procedure 12(b)(2), and APL
and Sachdev moved to dismiss [dkt. 14] under Rule 12(b)(6) for failure to state a claim upon
which relief may be granted. For the following reasons, Sachdev’s motion to dismiss for lack of
personal jurisdiction [dkt. 12] is denied and defendants’ motion to dismiss for failure to state a
claim [dkt. 14] is granted in part and denied in part.
BACKGROUND2
Atlantic Pacific Lines (“APL”) is a privately owned nonvessel ocean common carrier
offering full export and import services, including warehousing and distribution. APL is
1
The court has subject matter jurisdiction under 28 U.S.C. § 1332 and venue is appropriate under
28 U.S.C. § 1391(b).
2
The following facts are taken from the complaint and are presumed true for the purpose of resolving the
pending motion. Dixon v. Page, 291 F.3d 485, 486 (7th Cir. 2002).
Dockets.Justia.com
incorporated in New Jersey and serves commercial customers out of its principal place of
business in West Long Branch, New Jersey, and from offices in Michigan, Illinois, New York,
India, Italy, and China. APL’s Illinois office, opened in 2008, has one employee and leased
office space. Sachdev is a citizen of New Jersey and the owner and president of APL.
In September 2010, Barker began working as the vice president of sales for APL in its
Illinois office. When APL hired Barker, it entered into an agreement to pay him an annual salary
of $90,000. Barker continued working for APL in connection with that agreement. APL also
provided Barker with employee benefits including health insurance and a car allowance. APL
issued Barker traditional paychecks and withheld the requisite federal and state payroll taxes and
reported Barker’s yearly earnings on an IRS W-2 Form.3 As vice president of sales, Barker
reported directly to Sachdev. Barker’s responsibilities included calling prospective and existing
clients to sell APL’s products and services. APL provided Barker with a laptop computer, office
telephone, printer, facsimile machine and a company credit card. APL also paid for Barker’s
business-related expenses and his cellular telephone. Barker consistently received positive
feedback on his sales and job performance and received salary increases. In early October 2012,
Barker’s yearly salary was $225,000.
In September 2012, Sachdev offered Barker two options: (1) he could remain an
employee but APL would cut his salary by $75,000 or (2) he could choose to become an
independent contractor and APL would pay him a commission based salary. Barker questioned
the legality of his reclassification to an independent contractor. Without informing Barker, APL
unilaterally reclassified Barker as an independent contractor. Although labeled independent
contractor, Barker’s day-to-day job responsibilities remained the same; he continued performing
3
The Internal Revenue Code (“IRC”) and the Illinois Income Tax Act (“IITA”) require that employers
withhold payroll taxes. See 26 U.S.C. §§ 3102(a), 3402;35 Ill. Comp. Stat. 5/701. Violations of the IRS
and ITA carry criminal penalties. See 26 U.S.C. § 2702; 35 Ill. Comp. Stat. 5/1301.
2
the same duties, reported to Sachdev, and received the same employee benefits and car
allowance. Barker learned about this change in employment status after receiving a paycheck,
which reflected a lower salary and failed to make federal and state payroll tax withholdings.
Sachdev told Barker that he changed Barker’s employment status to avoid paying payroll
taxes. Barker questioned how he could receive employee health insurance yet be denied
employee status. Barker additionally told Sachdev that his paychecks after the reclassification
did not reflect the full amount of commissions to which Barker claimed he was entitled.
Throughout the remainder of October and into November 2012, Barker continued asking
defendants how they calculated his salary. Defendants ultimately acquiesced to Barker’s
requests and provided him with a summary of his sales. This summary, however, was inaccurate
and omitted sales that Barker alleges that he made. Barker asked for an explanation but
defendants failed to provide one.
On November 27, 2012, Barker requested information from Sachdev on his sales and
commissions so he could prepare invoices to APL. Barker explained to Sachdev that he needed
this documentation in the event that the IRS ever audited Barker. As an independent contractor,
Barker was responsible for accounting for his earnings for tax purposes. On November 29,
2012, Barker called Sachdev again for an explanation regarding how defendants calculated his
commissions. During this conversation, Sachdev became upset and told Barker that he should
have accepted the fixed salary option. In the same conversation, Sachdev terminated Barker’s
employment despite having told Barker a few days earlier that he was having an outstanding
sales month. After his termination, Barker requested his final paycheck, which defendants
refused to provide. In February 2013, defendants remitted Barker’s final paycheck without an
explanation regarding why it took several months to issue. Barker claims that he is still owed
3
part of his annual salary and sales commissions after being reclassified as an independent
contractor.
LEGAL STANDARD
Rule 12(b)(2) permits dismissal of a claim based on lack of personal jurisdiction. See
Fed. R. Civ. P. 12(b)(2). The burden of proof on jurisdictional challenges is on the party
asserting jurisdiction. United Phosphorous, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th
Cir. 2003); RAR, Inc. v. Turner, 107 F.3d 1272, 1276 (7th Cir. 1997). In considering a motion to
dismiss for lack of personal jurisdiction, the court may review affidavits submitted by the
parties. Purdue Research Found. v. Sanofi-Synthelabo, S.A., 338 F.3d 773, 782 (7th Cir. 2003).
When the court rules on th motion without a hearing, however, the plaintiff need only establish a
“prima facie case of personal jurisdiction.” Id. at 782 (quoting Hyatt Int’l Corp. v. Coco,
302 F.3d 707, 713 (7th Cir. 2002)). The court will “read the complaint liberally, in its entirety,
and with every inference drawn in favor of” of the plaintiff. Central States, Se. & Sw. Areas
Pension Fund v. Phencorp Reinsurance Co., 440 F.3d 870, 878 (7th Cir. 2006) (quoting
Textor v. Bd. of Regents of N. Ill. Univ., 711 F.3d 1387, 1393 (7th Cir. 1993)). Disputes
concerning relevant facts are resolved in favor of the plaintiff. Purdue, 338 F.3d at 782 (citing
Nelson v. Park Indus., 717 F.2d 1120, 1123 (7th Cir. 1983)).
A motion to dismiss under Rule 12(b)(6) challenges a complaint for failure to state a
claim upon which relief may be granted. Fed. R. Civ. P. 12(b)(6); Gen. Elec. Capital Corp. v.
Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997). In ruling on a Rule 12(b)(6)
motion to dismiss, the court accepts as true all well-pleaded facts in the plaintiff’s complaint and
draws all reasonable inferences from those facts in the plaintiff’s favor. Dixon v. Page, 291 F.3d
485, 486 (7th Cir. 2002). To survive a Rule 12(b)(6) motion, the complaint must not only
provide the defendant with fair notice of a claim’s basis, but must also establish that the
4
requested relief is plausible on its face. Ashcroft v. Iqbal, 556 U.S. 662, 129 S. Ct. 1937, 173 L.
Ed. 2d 868 (2009); see also Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955,
167 L. Ed. 2d 929 (2007). “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.” Iqbal, 556 U.S. at 678. At the same time, the plaintiff need not plead legal
theories. Hatmaker v. Mem’l Med. Ctr., 619 F.3d 741, 743 (7th Cir. 2010). Rather, it is the facts
that count.
ANALYSIS
I.
Personal Jurisdiction
Sachdev argues that the court lacks personal jurisdiction because he is a New Jersey
citizen with attenuated contacts with Illinois. Sachdev included a sworn declaration providing
that he had only been to Illinois twice since APL opened its Illinois office and that the
negotiations leading to APL’s hiring Barker occurred in Wisconsin, not Illinois. Assuming,
arguendo, that personal jurisdiction exists, Sachdev additionally argues that he was acting on
behalf of APL and the fiduciary shield doctrine thus precludes the court from exercising personal
jurisdiction over him.
Barker alleges that Sachdev breached his employment contract and committed tortious
conduct by reclassifying Barker to an independent contractor, for refusing to pay the entirety of
his salary, and firing him for complaining about the conduct. As Sachdev directed this conduct
towards Illinois, argues Barker, the court can properly exercise personal jurisdiction over
Sachdev. Barker further argues that Sachdev had a personal financial stake in the decision to
reclassify and terminate Barker’s employment and that the amount of discretion he exercised in
doing so belies the applicability of the fiduciary shield doctrine.
5
A.
Sachdev’s Contacts with Illinois
The court, sitting in diversity, has personal jurisdiction over Sachdev to the extent that an
Illinois court could exercise personal jurisdiction. See Klump v. Duffus, 71 F.3d 1368, 1371 (7th
Cir. 1995). Illinois allows for personal jurisdiction to the extent authorized by the Fourteenth
Amendment’s due process clause, which merges the federal constitutional and state statutory
inquiries together. Tamburo v. Dworkin, 601 F.3d 693, 700 (7th Cir. 2010); 735 Ill. Comp. Stat.
5/2-209(c). Under the Illinois long-arm statute, personal jurisdiction can be general or specific.
uBid, Inc. v. GoDaddy Grp., Inc., 623 F.3d 421, 425 (7th Cir. 2010). General jurisdiction is a
demanding standard in which a defendant can be haled into an Illinois court if they have
“‘continuous and systematic general business contacts’ with the forum state.” uBid, 623 F.3d at
425–26 (quoting Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 415–16,
104 S. Ct. 1868, 80 L. Ed. 2d 404 (1984)).4
Specific jurisdiction, on the other hand, grows out of a defendant’s particular contacts
with the state and is present when “(1) the defendant has purposefully directed his activities at
the forum state or purposefully availed himself of the privilege of conducting business in that
state, and (2) the alleged injury arises out of the defendant’s forum-related activities.” Tamburo,
601 F.3d at 702; see Mobile Anesthesiologists Chicago, LLC v. Anesthesia Assocs. of Houston
Metroplex, P.A., 623 F.3d 440, 444 (7th Cir. 2010). The exercise of specific jurisdiction must
also comport with the traditional notions of fair play and substantial justice, see Felland v.
Clifton, 682 F.3d 665, 673 (7th Cir. 2012), taking into account “the burden on the defendant, the
interests of the forum State, and the plaintiff's interest in obtaining relief.” Burger King Corp. v.
Rudzewicz, 471 U.S. 462, 477, 105 S. Ct. 2174, 85 L. Ed. 2d 528 (1985) (internal quotation
marks omitted).
4
Barker does not argue that general jurisdiction is proper over Sachdev.
6
In determining whether a defendant purposefully directed his activities at the forum state,
courts look to whether the defendant engaged in (1) intentional conduct (or intentional and
allegedly tortious conduct), (2) expressly aimed at the forum state, (3) with the knowledge that
such conduct would injure the plaintiff in the forum state. Tamburo, 601 F.3d at 703 (citing
Calder v. Jones, 465 U.S. 783, 789, 104 S. Ct. 1482, 79 L. Ed. 2d 804 (1984)). Barker alleges
two claims against for Sachdev for violation of the IWPCA premised on Sachdev’s alleged
failure to pay Barker’s total compensation for work performed in violation of an agreement
between the parties. See Tamburo, 601 F.3d at 702 (“Personal jurisdiction in breach-of-contract
actions often turns on whether the defendant purposefully availed himself of the privilege of
conducting business or engaging in a transaction in the forum state.”) (internal quotation marks
omitted).
Sachdev argues that any injury Barker suffered is too attenuated from Sachdev’s fleeting
contacts with Illinois. Barker, however, alleges that his IWPCA claim for lost wages directly
resulted from his reclassification to an independent contractor. The reclassification, delivered to
Barker by Sachdev as an ultimatum, also ran afoul of the parties’ prior agreement detailing
Barker’s pay schedule and resulted in defendants paying Barker less than he was owed. Barker
further alleges that defendants failed to pay him the total amount of commissions owed after the
reclassification, and when he attempted to obtain information from Sachdev regarding his sales
figures, Sachdev told Barker that he should have accepted the fixed salary option and then
terminated him. These allegations reveal that Sachdev played a role in quantifying the wages
Barker claims that he is still owed and Sachdev’s alleged failure to pay those wages substantiates
Barker’s IWPCA claims. Exercising specific personal jurisdiction over Sachdev is thus
appropriate because Barker allege that Sachdev was complicit in the reclassification decision and
7
had a role in determining Barker’s commission-based salary.5 Because Sachdev communicated
the reasons for APL’s compensation decisions to Barker who was working for APL in Illinois at
the time, Sachdev reasonably could have anticipated being haled into an Illinois court in
connection with a dispute regarding the total wages Barker alleges defendants failed to pay. See
Leong v. SAP Am., Inc., 901 F. Supp. 2d 1058, 1064 (N.D. Ill. 2012) (plaintiff’s allegations that
non-resident defendant was involved in the decision not to correct her salary and communicated
that decision to plaintiff in Illinois were sufficient to confer personal jurisdiction); Farmer v.
DirectSat USA, LLC, No. 08 C 3962, 2010 WL 380697, at *9 (N.D. Ill. Jan. 28, 2010) (specific
personal jurisdiction appropriate over defendants who instituted wage and hour policies and had
a direct role in establishing the defendant company’s Illinois office).
Allowing this lawsuit against Sachdev to proceed in Illinois does not run afoul of
traditional notions of fair play and substantial justice. That Sachdev may face a burden litigating
the case in Illinois, by itself, does not preclude personal jurisdiction as “out-of-state defendants
always face such a burden.” Felland, 682 F.3d at 677. Illinois has a strong interest in resolving
the dispute because the underlying facts giving rise to this lawsuit occurred here. As a citizen of
Illinois, Barker also has an interest in having the case litigated in his home state. Judicial
efficiency also militates in favor of exercising personal jurisdiction over Sachdev as his conduct
5
Sachdev relies on decisions by judges in this court granting motions to dismiss for lack of personal
jurisdiction over non-resident individuals in cases including IWPCA claims; however, the facts of the
case at bar are distinguishable from all of these cases. See, e.g., Chen v. Quark Biotech, Inc., No. 03 C
5729, 2003 WL 22995163, at *5 (N.D. Ill. Dec. 15, 2003) (none of the plaintiff’s claims for unpaid wages
were for work performed in Illinois); Allman v. McGann, 02 C 7442, 2003 WL 1811531, at *5 (N.D. Ill.
April 4, 2003) (“[The defendant] has never had any contact with [the plaintiff], whether by way of
telephone, mail, or electronic communication.”); McMurray v. Improvenet, Inc., No. 00 C 7137, 2001
WL 561376, at *3 (N.D. Ill. May 22, 2001) (Illinois plaintiff’s allegations regarding unsubstantiated
telephone conversations with California defendant and a brief conversation in Illinois regarding the
plaintiff’s outstanding commissions were not sufficient contacts to make the defendant amenable to
personal jurisdiction in Illinois); Krok v. Burns & Wilcox, Ltd., No. 98 C 5902, 1999 WL 262125, at *4
(N.D. Ill. April 16, 1999) (defendants’ termination of plaintiff did not give rise to his wage dispute claim
under the IWPCA).
8
is intertwined with Barker’s claims against APL (as to which personal jurisdiction is
undisputed).
B.
The Fiduciary Shield Doctrine
Moreover, Sachdev contends that the fiduciary shield doctrine precludes the court from
exercising personal jurisdiction because he was acting on behalf of APL when communicating
with Barker. “[T]he fiduciary shield doctrine prevents courts from asserting jurisdiction over a
person on the basis of acts taken by that person not on his own behalf, but on behalf of his
employer.” Rollins v. Ellwood, 565 N.E. 2d 1302, 1306, 141 Ill. 2d 244, 152 Ill. Dec. 384
(1990). The doctrine is not an absolute right but, rather, an equitable and discretionary doctrine.
C.S.B. Commodities, Inc. v. Urban Trend (HK) Ltd., 626 F. Supp. 2d 837, 847 (N.D. Ill. 2009)
(internal citation omitted). In determining whether to apply the fiduciary shield doctrine, courts
looks to whether personal gain motivated the non-resident defendant’s actions and whether the
defendant’s actions were discretionary. See Rice v. Nova Biomedical Corp., 38 F.3d 909, 912
(7th Cir. 1994); Sommese v. Am. Bank & Trust Co. N.A., No. 11 C 2827, 2012 WL 3006824, at
*3 (N.D. Ill. July 23, 2012).
Barker alleges that Sachdev stood personally to gain by reclassifying Barker’s
employment status to avoid payroll taxes because Sachdev had an ownership interest in APL. In
addition, although he worked for APL, Sachdev’s dual role as president and owner provided him
with discretionary authority over personnel matters, evidenced by Sachdev’s terminating
Barker’s employment. See Sommese, 2012 WL 30006824, at *5 (“[C]ourts do not consider it
unfair to exercise jurisdiction over an individual when the actions giving rise to personal
jurisdiction are discretionary.”); Brujis v. Shaw, 876 F. Supp. 975, 978 (N.D. Ill. 1995) (“[T]he
shield should not apply where the employee has the power to decide what is to be done and
chooses to commit the acts that subject him to long-arm jurisdiction.”) (internal quotation marks
9
omitted). Sachdev’s roles as owner and president combined with the oversight those titles
provided him in operating APL undercut Sachdev’s argument that he merely operated on behalf
of APL. Accordingly, Sachdev cannot rely on the fiduciary shield doctrine, and therefore, his
motion to dismiss for lack of personal jurisdiction is denied.
II.
Retaliatory Discharge Claim (Count I)
Barker alleges that APL is liable for retaliatory discharge because it terminated his
employment for protesting alleged illegal conduct. Defendants argue that the IWA abrogates the
common law tort of retaliatory discharge under Illinois law, and alternatively, that Barker
inadequately pleaded the claim.
The tort of retaliatory discharge prohibits an employer for discharging an employee in
retaliation for engaging in conduct protected by public policy. See Pratt v. Caterpillar Tractor
Co., 500 N.E.2d 1001, 1002, 149 Ill. App.3d 588, 102 Ill. Dec. 900 (1986). To establish a prima
facie case of retaliatory discharge, a plaintiff must allege that he was terminated in retaliation for
his actions and that the discharge violates a clear mandate of public policy. Gomez v. The
Finishing Co., 861 N.E.2d 189, 196, 369 Ill. App. 3d 711, 308 Ill. Dec. 124 (2006). Illinois
public policy favors the reporting of crimes to employers and protects employees who do so in
the workplace from termination as a result. See Belline v. K-Mart Corp., 940 F.2d 184, 187 (7th
Cir. 1991). In a similar vein, the IWA prohibits an employer from retaliating against an
employee for “disclosing information to a government or law enforcement agency, where the
employee has reasonable cause to believe that the information discloses a violation of a State or
federal law, rule, or regulation.” 740 Ill. Comp. Stat. 174/15(b).
Defendants argue that the IWA abrogates the common law tort of retaliatory discharge.
Although the Illinois Supreme Court has not spoken on this issue, the Illinois appellate courts
have held that the IWA did not abrogate retaliatory discharge claims in instances where an
10
employee is terminated for reporting illegal conduct to their employer (as opposed to law
enforcement). See Michael v. Precision Alliance Grp., LLC, 952 N.E. 2d 682, 688, 2011 IL App
(5th) 100089, 351 Ill. Dec. 890 (2011) (“[I]n no instance has Illinois required an employee to
make a direct report to a government agency . . . Instead, when courts evaluate the intent of
employees, the test has been whether the plaintiffs acted on a good-faith belief that an employer
was violating the law.”) (internal citation omitted); Sardiga v. N. Trust Co., 948 N.E. 2d 652,
657–58, 409 Ill. App. 3d 56, 350 Ill. Dec. 372 (2011) (“When an employee complains to a
supervisor, as opposed to a government agency, and is terminated as a result, a common law
claim of retaliatory discharge arises, with which [the IWA] does not interfere.”); Callahan v.
Edgewater Care & Rehabilitation Ctr., Inc., 872 N.E.2d 551, 554, 374 Ill. App. 3d 630, Ill. Dec.
568 (2007) (“[N]othing in the language of the [IWA] or its legislative history even suggests that
the legislature intended to repeal or preempt the common-law rights of an individual discharged
for reported illegal activities to her superiors . . . The fact that individuals discharged in
retaliation for reporting illegal activities to their superiors have no right of action under the
[IWA] does not compel the conclusion that they no right of action at all.”).6 Barker’s retaliatory
discharge claim is based on his disavowal of APL’s allegedly illegal maneuvering to avoid
federal and state tax laws to Sachdev and his resulting termination. The IWA did not abrogate
the common law’s protection of this type of conduct. See Stiles v. Int’l Bioresources, 726 F.
Supp. 2d 944, 950–51 (N.D. Ill. 2010) (“The statute and common-law action cover distinct
6
Defendants rely on the undersigned judge’s opinion in Bustamante v. Tin, Inc., No. 07 C 970, 2008 WL
360786, at *5 (N.D. Ill. 2008) , which stated that the common law tort of retaliatory discharge did not
protect employees who make internal complaint to their employers (as opposed to law enforcement) and
dismissed the plaintiff’s retaliatory discharge claim. In Babych v. Pyschiatric Solutions, Inc., No. 09 C
8000, 2010 WL 3547981, at *1 (N.D. Ill. Sept. 7, 2000), the undersigned recognized the split of authority
on this issue noting that Illinois courts have allowed retaliatory discharge claims to proceed where an
employee reports illegal conduct on to the employer. In light of the Illinois appellate courts reasoning on
this issue, the court finds that the IWA does not abrogate the common law tort of retaliatory discharge in
cases where an employee alleges that an employer retaliated against him for internally reporting illegal
activity.
11
subjects (although they may overlap).”).
Barker alleges that Sachdev admitted that Barker’s reclassification was a means by which
defendants could avoid paying payroll taxes, and that Barker told Sachdev he would not
participate in anything illegal and thereafter requested to see his sales invoices to comply with
his own tax reporting requirements. Barker sufficiently allege that he voiced opposition to
defendants’ alleged scheme to avoid paying taxes, which is illegal, and this opposition ultimately
led to his termination. See 26 U.S.C. § 2702; 35 Ill. Comp. Stat. 5/1301; see also Russ v.
Pension Consultants Co., 538 N.E.2d 693, 697–98 182 Ill. App. 3d 769, 131 Ill. Dec. 318,
(1989) (“Illinois has an interest in the enforcement of the federal tax law because federal tax
records could also mean the falsification of state tax records, since the legislature has adopted
the federal taxable income as the starting point for calculating the state corporate income tax.”).
By alleging retaliation in violation of his reporting a matter running afoul of Illinois public
policy to his employer, Barker adequately pleaded a claim for retaliatory discharge and APL’s
motion to dismiss count I is thus denied.7
III.
IWA Claim (Count II)
Barker alleges that he is entitled to recovery under the IWA for refusing to participate in
defendants’ activity that allegedly attempted to circumvent federal and state tax laws.
Defendants argue that Barker never refused to participate in alleged illegal activity and thus
cannot recover under the IWA.
7
Defendants raise for the first time in their reply brief that Barker failed to plead his retaliatory discharge
claim with particularity under Rule 9(b) as his allegations were premised on fraud. See Fed. R. Civ. P.
9(b); Borsellino v. Goldman Sachs Grp., Inc., 477 F.3d 502, 507 (7th Cir. 2007). While arguments raised
for the first time in a reply brief are generally waived, see Dexia Credit Local v. Rogan, 629 F.3d 612,
625 (7th Cir. 2010), defendants’ argument also fails on the merits. Even if Barker’s allegations regarding
defendants’ violation of criminal law based on tax evasion evoked Rule 9(b), Barker sufficiently pleaded
the who, what, where, when, and how to satisfy the rule. Namely, Barker alleges that, in October 2012,
Sachdev stated that he reclassified Barker’s position to avoid payroll tax obligations, and after Barker
raised concerns about reporting his personal income for tax purposes, Sachdev terminated his
employment in November 2012.
12
The IWA protects employees “refusing to participate in an activity that would result in a
violation of a State or federal law, rule, or regulation.” 740 Ill. Comp. Stat. 174/20 (emphasis
added). To state a claim under the IWA, a plaintiff must allege that “(1) he refused to participate
in an activity that would result in a violation of a state or federal law, rule or, regulation and (2)
his employer retaliated against him because of that refusal.” Sardiga, 948 N.E. 2d at 656–57.
The Seventh Circuit construed the phrase “refusing to participate” to condition recovery under
the IWA on a cognizable refusal by the employee to participate in illegal activity and resulting
termination of employment. See Robinson v. Alter Barge Line, Inc., 513 F.3d 668, 670 (7th Cir.
2008). In Sardiga, the Illinois appellate court held that the phrase “refusing to participate”
unambiguously limited recovery to plaintiffs who actually refuse to participate in illegal
activities; a plaintiff who participates in such activity cannot recover under the IWA.
948 N.E.2d 652, 657, 409 Ill. App. 3d 56, 350 Ill. Dec. 372 (2011) (holding that “’refusing
means refusing; it does not mean ‘complaining’ or ‘questioning’”).
Barker alleges that he objected to and questioned Sachdev’s decision to reclassify his
employment status. Because Barker’s status as an independent contractor required that he report
and pay taxes on all his earnings, Barker demanded information from defendants documenting
his sales so that he could prepare invoices to APL. Two days later, defendants terminated
Barker. While Barker may have initially accepted commissions, he told defendants that the new
payment structure did not fully reflect his taxable income and that he would not participate in
any payment arrangement that was illegal. Defendants then terminated Barker’s employment
within a matter of days. These allegations suffice to state a claim under section 20 of the IWA
and APL’s motion to dismiss count II is thus denied. See Beers v. E.R. Wagner Mfg. Co.¸
No. 12 C 8888, 2013 WL 1679403, at *4 (N.D. Ill. April 17, 2013) (plaintiff successfully
13
pleaded a claim under section 20 of the IWA by alleging that he refused participation in an
activity that would violate the law and he was fired as a result).
IV.
IWPCA Wage Claim (Count III)
Barker alleges that defendants failed to pay him the total compensation due under the
parties’ agreement in violation of the IWPCA. Defendants argue that Barker’s claim is moot
and inadequately pleaded as no agreement existed between the parties.
Defendants first argue that Barker’s claim is moot because he received wages and a final
paycheck in February 2013. Barker, however, contends that he is still owed part of his annual
salary of $225,000 from October 2012 through the date of his termination in November 2012 and
commissions that defendants agreed, but failed, to pay after his employment reclassification.
Accordingly, because Barker alleges that he has not received the entire amount he claims
defendants agreed to pay him, his claim is not moot. See Williams-Green v. J. Alexander’s
Restaurants, Inc., 277 F.R.D. 374, 380 (N.D. Ill. 2011) (“Once a party has received the relief it
sought, its claim becomes moot and a federal court lacks subject matter jurisdiction over it.”);
Krieger v. Adler, Kaplan & Begy, No. 94 C 7809, 1997 WL 323827, at *10 (N.D. Ill. June 11,
1997) (dismissing allegations under IWPCA as moot for expenses that were paid).
Second, defendants argue that the IWPCA does not establish an independent right to
wages and Barker’s failure to allege an agreement dooms his IWPCA claim. The IWPCA
provides a cause of action to employees “for the timely and complete payment of earned wages
or final compensation without retaliation from employers.” Miller v. Kiefer Flooring, Inc.,
739 N.E. 2d 982, 987, 317 Ill. App. 3d 370, 251 Ill. Dec. 49 (2000). The IWPCA requires that
employers pay employees at least twice a month all wages earned during that pay period.
820 Ill. Comp. Stat. 115/3. The IWPCA defines “wages” as “any compensation owed an
employee by an employer pursuant to an employment contract or agreement” and includes
14
commissions. 820 Ill. Comp. Stat. 115/2. The IWPCA further provides that employers “shall
pay the final compensation of separated employees in full, at the time of separation, if possible,
but in no case later than the next regularly scheduled payday for such employee.” 820 Ill. Comp.
Stat. 115/5.
The IWPCA’s definition of agreement requires only the manifestation of mutual assent.
See Hess v. Kanoski & Assoc., 668 F.3d 446, 452 (7th Cir. 2012); see also Wharton v. Comcast
Corp., 912 F. Supp. 2d 655, 659 (N.D. Ill. 2012) (“Illinois courts have held that an employment
agreement need not be a formally negotiated contract, and that parties may enter into an
agreement without the formalities and accompanying legal protections of a contract.”) (internal
quotation marks and alterations omitted); Landers-Scelfo v. Corporate Office Sys., Inc., 827 N.E.
2d 1051, 1067, 356 Ill. App. 3d 1060, 293 Ill. Dec. 170 (2005) (“An employment agreement
need not be a formally negotiated contract.”). To state a claim under the IWCPA, the plaintiff
must allege the existence of an agreement substantiating entitlement to the wages and
compensation sought. See Dominquez v. Micro Ctr. Sales Corp., No. 11 C 8202, 2012 WL
1719793, at *1 (N.D. Ill. May 15, 2012).
Barker alleges that defendants agreed upon his initial hiring to pay Baker an annual
salary of $90,000. In connection with agreement, Barker received salary increases, and in
October 2012, Barker’s annual salary was $225,000 at which time defendants unilaterally
changed Barker’s compensation to one based on commissions. As a result, Barker alleges that
he received lower wages than he was due under the parties’ agreement. Barker further alleges
that defendants also failed to pay him the full amount of commissions after his reclassification.
Although defendants argue that Barker’s alleged agreement upon his initial hire did not set forth
the contours of his right to compensation, Barker alleges that his continued employment and
compensation were premised on that agreement. At this stage, and taking the IWPCA’s broad
15
definition of agreement into account, Barker alleges the mutual assent between the parties giving
rise to an agreement supporting his claim for unpaid wages and compensation due under the
IWPCA. See Horowitz v. Animal Emergency & Treatment Ctrs. of Chicago, LLC, No. 12 C
2561, 2012 WL 3598807, at *8 (N.D. Ill. Aug. 20, 2012) (“Under the federal notice pleading
standards, [the plaintiff] has sufficiently alleged an agreement under the IWPCA by stating that
after her written agreement expired, the parties agreed to extend her current employment
arrangement providing for a salary of $155,000 a year.”); Zabinsky v. Gelber Grp., Inc.,
807 N.E. 2d 666, 671, 347 Ill. App. 3d 243, 283 Ill. Dec. 61 (2004) (“To require an employee to
have a valid, enforceable contract before invoking the [IWPCA] would render the [IWPCA]
surplusage.”).8 Accordingly, defendants’ motion to dismiss Barker’s count III is denied.
V.
IWPCA Retaliation Claim (Count IV)
Barker also alleges a claim under IWPCA for retaliation in that his objection
to defendants’ failure to comply with the IWPCA led to his dismissal. Defendants argue that
Barker never referenced the IWPCA in his alleged complaints to Sachdev and thus could not
have been terminated in retaliation for invoking the IWPCA. The IWPCA provides a cause of
action for employees who suffer retaliation from employers for complaining about their failure
to make payments pursuant to the IWPCA. See 820 Ill. Comp. Stat. 115/14(c).9 Barker alleges
that defendants terminated his employment not because he asked and failed to receive back pay
due under the IWPCA, but rather because he opposed their alleged scheme to bypass paying
8
Although Barker’s allegations that he is entitled to both the unpaid portion of his yearly salary in
addition to commissions after his employment reclassification may ultimately prove to be duplicative,
Barker is entitled to plead in the alternative. See Fed. R. Civ. P. 8(d)(2).
9
An earlier version of section 14(c) of the IWPCA provided only a criminal penalty under Illinois law
for retaliation against an employee for protesting violations of the statute. Courts were unwilling to read
a private cause of action into the statute. See Skelton v. Am. Intercontinental Univ. Online, 382 F. Supp.
2d 1068, 1078 (N.D. Ill. 2005); McGrath v. CCC Information Servs., Inc., 731 N.E. 2d 384, 393, 314 Ill.
App. 3d 431, 246 Ill. Dec. 856 (2000). Effective January 1, 2011, the Illinois General Assembly amended
the statute providing a private cause of action to employees for retaliation under the IWPCA. See P.A.
96-1407, § 10.
16
payroll taxes and asked for documentation substantiating his sales. Accordingly because Barker
did not allege retaliation in violation of his request for compensation under the IWPCA, he
cannot maintain a claim for IWPCA retaliation. Accordingly, defendants’ motion to dismiss
count IV is granted.
VI.
Breach of Contract Claim (Count V)
Barker last alleges that APL breached the agreement entered by the parties
upon Barker’s hire. Defendants argue that Barker was an at-will employee who had no contract,
and assuming one existed, no breach occurred.
Under Illinois law, employment agreements are presumed to be at will such that they are
terminable at any time by the employer or employee. Kalush v. Deluxe Corp., 171 F.3d 489,
492 (7th Cir. 1999). To overcome this presumption, a plaintiff has the burden of demonstrating
that the parties contracted otherwise. Taylor v. Canteen Corp., 69 F.3d 773, 782 (7th Cir. 2011).
A plaintiff can establish a breach of contract by alleging “(1) the existence of a valid and
enforceable contract; (2) performance by the plaintiff; (3) breach of contract by the defendant;
and (4) resultant injury to the plaintiff.” Henderson–Smith & Assoc., Inc. v. Nahamani Family
Serv. Ctr., Inc., 752 N.E.2d 33, 43, 323 Ill. App. 3d 15, 256 Ill. Dec. 488 (2001).
Defendants argue that Barker’s employment was at-will such that he could be terminated
at any time. Barker, however, alleges that defendants agreed upon hiring him in 2010 to pay him
an annual salary of $90,000. In connection with that agreement, Barker’s yearly salary rose to
$225,000 by September 2012. In October 2012, defendants unilaterally changed that agreement
by reclassifying Barker’s employment status, and in doing so, failed to pay Barker the full
amount of his yearly salary. Barker sufficiently alleged the existence of an agreement and a
resulting breach, which is all that is necessary to state a claim for breach of contract. See Axiom
Ins. Managers Agency, LLC v. Indemnity Ins. Corp., No. 11 C 2051, 2011 WL 3876947, at *12
17
(N.D. Ill. Sept. 1, 2011) (“A plaintiff need not plead all the specific details underlying an alleged
breach of contract to state a claim.”); AT&T Corp. v. Van Ru Credit Corp., No. 10 C 7059, 2011
WL 211574, at *1 (N.D. Ill. Jan. 21, 2011) (“[The plaintiff] alleges the existence of a specific
contractual relationship between itself and [the defendant]; that is sufficient to survive a motion
to dismiss.”).
Defendants’ further argue that the lack of a term specifying the duration of Barker’s
employment with APL highlights that any employment agreement between the parties was at
will and terminable at any time. See, e.g., A.T.N., Inc. v. McAirlaid’s Vliesstoffe GmbH & Co.
KG, 557 F.3d 483, 486 (7th Cir. 2009) (“[C]ontracts of indefinite duration are generally deemed
terminable at will be either party.”). The alleged breach here, however, is not premised on
defendants terminating Barker’s employment; rather, the breach stems from defendants’ alleged
failure to compensate Barker as a salaried employee and for commissions after his
reclassification as an independent contractor. Accordingly, that Barker did not allege that the
agreement specified a duration of employment does not defeat his breach of contract claim
seeking compensation for work performed prior to his termination. See, e.g., Colosi v.
Electri–Flex Co., 965 F.2d 500, 504 (7th Cir.1992) (“Employment at will is a contractual
relationship, one which entitles the employee to all wages and other benefits that he has earned,
i.e., that accrued before he was terminated.”); Kamboj v. Eli Lilly & Co., No. 05 C 4023, 2007
WL 178434, at *6 (N.D. Ill. Jan. 18, 2007) (“[T]he Court agrees with Plaintiff that she may
assert a claim for breach of the other terms or conditions of her at-will employment contract,
even though she would not be able to assert a claim for termination of that contract, or for a
unilateral modification of that contract past any time of her acceptance of it.”).
Defendants last argue that Barker’s acceptance of payment under the commission pay
structure in October 2012 modified any agreement (assuming one existed) between the parties.
18
See, e.g., Doyle v. Holy Cross Hosp., 682 N.E. 2d 68, 71–72, 289 Ill. App. 3d 75, 224 Ill. Dec.
507 (1997) (“When an employment agreement is terminable at will, it may be modified by the
employer as a condition of employment.”). Under that modified agreement, argue defendants,
Barker received everything to which he was entitled thus defeating his breach of contract claim.
Barker, however, alleges that defendants still failed to pay him the entire amount of the
commissions that he earned after the reclassification. Whether Barker’s conduct modified the
parties’ agreement does not preclude his breach of contract claim. That is a factual question,
which will be resolved through discovery.10 Cf. Czpala v. Commerz Futures, LLC, 114 F. Supp.
2d 715, 719 (N.D. Ill. 2000) (“Pleadings must only serve to give notice of the claim; the
development of legal theories and the correlation of facts to theory come later in the process.
Moreover, a court not dismiss a claim if any facts that might be established within those
allegations would permit a judgment for the plaintiff.”) (internal citation and quotations marks
omitted). Accordingly, APL’s motion to dismiss count V is denied.
CONCLUSION
For the foregoing reasons, Sachdev’s motion to dismiss for lack of personal jurisdiction
[dkt. 12] is denied and defendants’ motion to dismiss for failure to state a claim [dkt. 14] is
granted as to count IV and denied as to counts I, II, III, and V. This case will be called for a
scheduling conference on September 17, 2013 at 8:30 a.m.
Dated: August 14, 2013
ENTER:
____________________________
JOAN HUMPHREY LEFKOW
United States District Judge
10
Both cases that defendants rely upon – Schoppert v. CCTC Int’l, Inc., 972 F. Supp. 444 (N.D. Ill. 1997)
and Bommelman v. Transfer Print Foils, Inc., No. 97 C 2082, 2000 WL 816792 (N.D. Ill. June 22, 2000)
– for their argument that Barker’s conduct after his employment reclassification modified any agreement
were decided at summary judgment and are thus unavailing in resolving the present motion to dismiss.
19
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