Kim v. The Korean News of Chicago Inc. et al
Filing
24
MEMORANDUM Opinion and Order. Signed by the Honorable Thomas M. Durkin on 7/19/2017. Mailed notice (ew, )
UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
IN KYU KIM,
PLAINTIFF,
v.
THE KOREAN NEWS OF CHICAGO, INC.,
ANDREW HUH, SOOK Y. KIM, AND
ROBERT B. KIM,
DEFENDANTS.
)
)
)
)
)
)
)
)
)
)
)
No. 17 C 1300
Judge Thomas M. Durkin
MEMORANDUM OPINION & ORDER
In-Kyu Kim (“Plaintiff”) alleges to have begun his career in journalism forty
years ago in Korea. R. 1 ¶ 51. He came to the United States in 2000 as the chief
editor of The Korea Times. Id. ¶ 52. He worked for various Korean publications in
the United States over the next several years. Id. ¶¶ 53-54. During a stint in
Chicago with The Korea Times from 2006-2008, Plaintiff met Defendant Robert
Kim, a local travel agent. Id. ¶ 55. Mr. Kim mentioned his interest to Plaintiff in
purchasing the Chicago Branch of The Korea Times, which, at the time, was listed
for sale at $2,000,000. Id. ¶ 56.
In the beginning of April 2014, the CEO of The Korea Times offered to sell
the Chicago Branch to Plaintiff at the deeply discounted price of $500,000. Id. ¶ 57.
This offer was made to Plaintiff exclusively, in light of his longstanding relationship
with the publication. Id. Plaintiff did not have the funds to make the purchase, but
he contacted Mr. Kim, who, along with fellow travel agent and co-defendant Andrew
Huh, put up the funds to make the purchase. Id. ¶¶ 58-61. Negotiating the terms of
the sale was allegedly contentious, and Plaintiff claims to have worked eight to ten
hours weekly over a period of several months as a go-between between the buying
and selling parties. Id. ¶ 60. Plaintiff alleges that Mr. Kim and Mr. Huh verbally
agreed that in recognition of Plaintiff having brought them the business
opportunity and negotiating the terms of sale on their behalf, he would be given a
30% share of the corporation, with the remaining 70% to be split equally between
Mr. Kim’s wife, co-defendant Sook Kim, and Mr. Huh.1 Id. ¶ 62. Plaintiff alleges
that despite his successful consummation of the deal, that promise was never
fulfilled, and he was never otherwise compensated for his efforts. Id. ¶¶ 10, 116.
Plaintiff further alleges that once the deal was done, Mr. Kim asked him to
run the business of the paper, which Mr. Kim and Mr. Huh incorporated as The
Korean News of Chicago, Inc. Id. ¶¶ 63-64. He alleges that Mr. Kim promised to pay
him $2,000 per month for his work, to provide him with his own apartment and
vehicle, and to raise Plaintiff’s wages when the business stabilized. Id. ¶ 64. Relying
on those promises, Plaintiff and his wife moved from New York to Chicago. Id. ¶ 65.
When they arrived, they were not given their own apartment, but rather “a corner
of Kim’s living room to sleep” in. Id. ¶ 66. Plaintiff was given a vehicle, but it was
registered to the company, not to him personally. Id. ¶ 68. Plaintiff alleges he
worked long hours for the paper seven days a week from August 15, 2014 to
February 4, 2015 at the direction and under the supervision of Mr. Kim and Mr.
It is unclear from the allegations whether this promise was made before or after
the deal was finalized.
1
2
Huh. Id. ¶¶ 11, 70. He was paid “a fixed amount per week regardless of the number
of hours he worked in a day or the number of hours he worked in a workweek.” Id.¶
12-14.
In October 2014, just a few months after the close of the sale, Mr. Kim
instructed Plaintiff to look for a purchaser for the paper. Id. ¶ 71. He alleges he did
so, though apparently without success. Id. In January 2015, Plaintiff received a
letter from an attorney indicating that he and his wife were to leave the Kims’
home. Id. In February 2015, Plaintiff received an email from Mr. Kim stating that
his employment had been terminated by the company’s board, on which Plaintiff
alleges all three of the individual defendants held seats as officers. Id. ¶ 72.
Plaintiff has sued the Kims, Mr. Huh, and The Korean News of Chicago, Inc.
under the Fair Labor Standards Act (“FLSA”) and Illinois Minimum Wage Law
(“IMWL”), alleging that the defendants failed to compensate him in accordance with
federal and state overtime pay and minimum wage laws. Id. (Counts I-IV). He has
also sued the defendants for breach of the oral agreement to make him a 30% owner
of the company. Id. (Count V). The defendants move to dismiss arguing that by
alleging that he was promised a 30% stake in the business and that he ran all of the
newspaper’s major operations, Plaintiff has pled himself out of court, because
“business owners” who engage in “management activities” are among the “bona fide
executives” exempt from the FLSA’s minimum and overtime wage requirements. R.
14 at 3-4. The defendants also seek the dismissal of Mrs. Kim from the labor claims
on the basis that Plaintiff has failed to allege that she is an “employer” within the
3
meaning of the FLSA. Id. at 5-6. Finally, the defendants argue that Plaintiff has
failed to allege sufficient detail to support his breach of contract claim against Mrs.
Kim and Mr. Huh. Id. at 7-8. The Court addresses each argument in turn.
1.
Whether Plaintiff is exempt is a question for summary judgment.
“The burden is on the employer to prove that an employee is exempt under
FLSA . . . and such exemptions are to be narrowly construed against the employer
seeking the exemption.” Deschepper v. Midwest Wine & Spirits, Inc., 84 F. Supp. 3d
767, 777 (N.D. Ill. 2015) (citing Schmidt v. Eagle Waste & Recycling, 599 F.3d 626,
631 (7th Cir. 2010)). “The application of an exemption under the FLSA is a matter
of affirmative defense,” and “[a] plaintiff need not plead around potential
affirmative defenses.” Id. (internal brackets omitted) (quoting Corning Glass Works
v. Brennan, 417 U.S. 188, 196–97 (1974)); see also Schaefer–LaRose v. Eli Lilly &
Co., 679 F.3d 560, 571 (7th Cir. 2012) (citing Corning Glass). However, if Plaintiff
pleads facts that “irrefutably” demonstrate that an exemption applies, dismissal on
the pleadings may be appropriate. See id.
The “business owner” exemption applies to “any employee who owns at least
a bona fide 20–percent equity interest in the enterprise in which the employee is
employed . . . and who is actively engaged in its management.” 29 C.F.R. § 541.101.
Plaintiff has not pled himself out of court by alleging that he was promised but not
given 30% ownership of the company. Indeed, Plaintiff expressly alleges that while
he should have been a 30% owner, he was not (on account of the defendants’ breach
of contract). Unless the defendants come forward with affirmative evidence
4
establishing that Plaintiff was actually part-owner, the facts as alleged actually
preclude application of the business owner exemption. Moreover, ownership is not
the whole of the requirement for the exemption to apply. Rather, to be exempt, an
employee must have a bona fide equity interest “and [be] actively engaged in [the
company’s] management.” 29 C.F.R. § 541.101 (emphasis added). “Management” is
defined by the regulations as including, but not being limited to, activities such as:
interviewing, selecting, and training of employees; setting and
adjusting their rates of pay and hours of work; directing the work of
employees; maintaining production or sales records for use in
supervision or control; appraising employees’ productivity and
efficiency for the purpose of recommending promotions or other
changes in status; handling employee complaints and grievances;
disciplining employees; planning the work; determining the techniques
to be used; apportioning the work among the employees; determining
the type of materials, supplies, machinery, equipment or tools to be
used or merchandise to be bought, stocked and sold; controlling the
flow and distribution of materials or merchandise and supplies;
providing for the safety and security of the employees or the property;
planning and controlling the budget; and monitoring or implementing
legal compliance measures.
29 C.F.R. § 541.102. Clearly, deciding whether Plaintiff actively engaged in the
management of the company is a complicated issue of fact to be decided by reference
to an array of factors not yet developed in the record. Contrary to the defendants’
arguments, Plaintiff has not made admissions such that the exemption irrefutably
applies simply by alleging that he worked as a publisher and attempted to find a
buyer for the company. Questions remain as to both prongs of the “business owner”
exemption. It is therefore not appropriate to resolve the issue at this stage in the
proceedings.
5
2.
The complaint plausibly alleges that Mrs. Kim was an employer.
The defendants cite to two cases which consider, based on affidavits and
other evidence at summary judgment, whether certain individuals met the
definition of employer set forth in the FLSA. See R. 14 at 5 (citing Villareal v. El
Chile, Inc., 776 F. Supp. 2d 778 (N.D. Ill. 2011) (denying summary judgment for
Plaintiff where a question of fact remained as to whether either or both of the
defendants were employers within the meaning of the FLSA); Alvarez v. Downtown
Food Enterprises, Inc., 2010 WL 5158122, at *1 (N.D. Ill. Dec. 13, 2010) (granting
summary judgment where the defendant’s affidavit regarding her lack of authority
over the plaintiffs’ employment was apparently uncontested); see also R. 19 at 4
(relying on the “ample precedent” cited in their opening brief). Neither of the cases
is particularly persuasive in the context of a motion to dismiss, where the standard
is not proof, but plausibility.
The FLSA defines “employer” to include “any person acting directly or
indirectly in the interest of an employer in relation to an employee.” 29 U.S.C.
§ 203(d). “The FLSA contemplates several simultaneous employers who may be
responsible for compliance with the FLSA.” Villareal, 776 F. Supp. 2d at 784 (citing
Falk v. Brennan, 414 U.S. 190, 191 (1973)). Courts have held that a determination
of whether an individual is liable under the FLSA “must focus upon the totality of
the circumstances, underscoring the economic reality of the employment
relationship.” Id. at 785 (citation omitted). Whether an individual is liable as an
employer “depends not upon whether the individual controlled every aspect of the
6
employees’ conduct, but upon whether the individual had control over the alleged
FLSA violation.” Id. (citation omitted).
The conduct comprising the alleged violation here is the failure to pay
Plaintiff minimum and overtime wages. Thus, to allege that Mrs. Kim is an
employer, the complaint must set forth factual content supporting the reasonable
inference that she exercised control over Plaintiff’s compensation. See Mann v.
Vogel, 707 F.3d 872, 877 (7th Cir. 2013); see also Deschepper, 84 F. Supp. 3d 767,
778 (N.D. Ill. 2015) (denying a motion to dismiss where the complaint adequately
notified the alleged employer of the basis of the plaintiff’s claims under the FLSA).
Plaintiff alleges that Mrs. Kim, like the other individual defendants, was an owner
and officer of the Korean News of Chicago. R. 1 ¶¶ 21, 23. He alleges that in that
capacity, she “exercised authority over the terms and conditions of plaintiff’s
employment and how much and the manner in which plaintiff was paid.” Id. ¶¶ 2526. These somewhat formulaic allegations are bolstered by the fact that Mrs. Kim is
alleged to have hosted Plaintiff in her home when he moved with his wife from New
York to Chicago. Id. ¶¶ 65-67. A reasonable inference is that in doing so, she was
aware of and participated in arranging particulars of Plaintiff’s relocation for the
job with the newspaper, including the terms of his housing, transportation and
compensation. While the complaint alleges that only Mr. Kim and Mr. Huh
managed Plaintiff’s day-to-day work activities, id. at ¶¶ 22, 24, no such allegation
against Mrs. Kim is required to keep her in the case as an employer at this early
stage. It suffices that she is alleged to have had authority over Plaintiff’s
7
compensation, and to have exercised that authority in violation of her obligations
under the FLSA.
It may be that discovery will show that Mrs. Kim played no role in setting
Plaintiff’s compensation. But because Plaintiff has alleged facts permitting the
Court to draw the reasonable inference that she did, Plaintiff is entitled to pursue
discovery on his claim.
3.
The complaint plausibly alleges a breach of contract against Mrs. Kim and
Mr. Huh
“The required elements of a breach of contract claim in Illinois are the
standard ones of common law: (1) offer and acceptance, (2) consideration, (3)
definite and certain terms, (4) performance by Plaintiff of all required conditions, (5)
breach, and (6) damages.” Fittante v. Olsson, 2013 WL 439125, at *2 (N.D. Ill. Feb.
5, 2013) (citing Wigod v. Wells Fargo Bank, N.A., 673 F.3d 547, 560 (7th Cir. 2012));
see also Radaviciute v. S & K Lim Cleaners, Inc., 2014 WL 1909924, at *4 (N.D. Ill.
May 8, 2014) (citing Lindy Lu LLC v. Ill. Cent. R.R. Co., 984 N.E.2d 1171, 1175 (Ill.
App. Ct. 2013)). On a 12(b)(6) motion, the court must look at whether Plaintiff has
given the defendant fair notice of a plausible claim against it. Id. citing (Tamayo v.
Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008)).
Read in the light most favorable to Plaintiff, Mann, 707 F.3d at 877, the
complaint plausibly alleges that the Kims and Mr. Huh offered to make Plaintiff
part-owner of The Korean News of Chicago as consideration for him bringing them
the unique and economically attractive business opportunity and negotiating the
terms of the deal on their behalf. The complaint plausibly alleges that Plaintiff
8
accepted that offer, and worked diligently without pay to perform his end of the
bargain. The complaint alleges that Plaintiff was not made an owner of the
company as incorporated by the Kims and Mr. Huh and that, as a consequence, he
was damaged. All six common law elements have been pled. See Fittante, 2013 WL
439125, at *2 (finding allegations of an oral contract sufficient, “if just barely,”
where they described the parties’ “mutual obligations,” “clear enough” terms of the
deal, Plaintiff’s performance of his obligations, conduct by the defendant
constituting breach, and damages caused by that conduct).
The defendants point out that in one part of the complaint, Plaintiff alleges
that Mr. Kim and Mr. Huh verbally agreed to give him a 33.3% interest in the
company, but that later in the complaint, Plaintiff alleges that Mr. Kim asked him
to reduce that percentage to 30% for accounting purposes. See R. 14 at 7. According
to the defendants, this second conversation about ownership percentages
constitutes a “second offer,” in which Mr. Huh is alleged to have played no role. Id.
At this stage in the proceedings, this technicality will not derail Plaintiff’s claim
against Mr. Huh. The contract is alleged to have begun with a verbal offer to
Plaintiff from Mr. Kim and Mr. Huh, and at all times is alleged to have
contemplated a three-way split in ownership between the Kims, Mr. Huh and
Plaintiff. Moreover, Mr. Kim and Mr. Huh are alleged to have jointly and equally
financed the purchase of the company, directed Plaintiff’s conduct in negotiating the
terms of sale, and filed for incorporation upon consummation of the deal. Both are
alleged to be officers of the company and to manage its corporate affairs. These facts
9
make Plaintiff’s allegation that they jointly offered to make him a part-owner
plausible, even if that offer was allegedly communicated to Plaintiff by Mr. Kim
alone. The allegations also support the inference that both individuals may have
played a role in the alleged breach. At this stage in the proceedings, that is
sufficient for the claim to proceed to discovery against them jointly.
As for Mrs. Kim, the complaint alleges that her husband made the offer to
Plaintiff and that she was to be a direct party to the agreement as a part-owner of
the newspaper. While evidence confirming these allegations alone may not be
sufficient to prove that Mrs. Kim was bound by the agreement, the allegations are
nevertheless sufficient to state a claim for breach of contract against her. There are
circumstances under which a husband can bind his wife to a contract, if, for
example they are acting in concert in pursuit of a common or joint business
enterprise, see Arwell Div. of Orkin Exterminating Co. v. Kendrick, 267 N.E.2d 352,
354 (Ill. App. Ct. 1971), or if a husband is acting as his wife’s agent, see Elmore v.
Blume, 334 N.E.2d 431, 434 (1975). A husband may also bind his wife to a contract
to which she was not initially party if she later ratifies (or fails to affirmatively
repudiate) the agreement by act or conduct. See Effingham State Bank v. Blades,
487 N.E.2d 431, 434-35 (1985). Whether Mr. Kim was acting as an agent for his wife
when he extended the offer to Plaintiff, or whether Mrs. Kim ratified the agreement
by approving it in her role as an owner, director and officer of the The Korean
Newspaper of Chicago remains to be seen. Since, for the reasons set forth above,
10
both scenarios are plausible based on the allegations in the complaint, Mrs. Kim,
too, remains in the case as to Count V.
Conclusion
For the foregoing reasons, the motion to dismiss is denied.
ENTERED:
Honorable Thomas M. Durkin
United States District Judge
Dated: July 19, 2017
11
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?