Mlungwana v. Covenant Care Marion LLC

Filing 19

MEMORANDUM OF DECISION AND ORDER GRANTING 12 MOTION TO DISMISS FOR FAILURE TO STATE A CLAIM For Conversion by Defendant Covenant Care Marion LLC. Count II of Pla's complaint is DISMISSED. Counts I, III, IV, and V of the complaint are not affected by this Opinion and Order and remain pending. Signed by Judge William C Lee on 4/13/2015. (lhc) (lhc)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF INDIANA
FORT WAYNE DIVISION
DUMISANI MLUNGWANA,
Plaintiff,
v.
COVENANT CARE MARION LLC,
Defendant.

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Case No.: 1:14-CV-339

MEMORANDUM OF DECISION AND ORDER
This matter is before the court on the motion to dismiss filed by Defendant Covenant
Care Marion LLC (“Affirma”).1 [DE 12.] Affirma filed a brief in support of its motion on that
same date. [DE 13.] Defendant seeks dismissal of Count II of Plaintiff’s complaint. Plaintiff
Dumisani Mlungwana filed a response in opposition to the motion [DE 17] and Affirma filed a
reply brief. [DE 18.] For the reasons discussed below, Defendant’s motion to dismiss Count II of
Plaintiff’s complaint is GRANTED. Counts I, III, IV, and V of the complaint are not affected by
this Order and remain pending.

FACTUAL BACKGROUND
Mlungwana was employed by Affirma “as a PRN (as needed) registered occupational
therapist (OTR) from July 2011 until March 11, 2012.” (Complaint, p. 2, ¶ 6.). “Thereafter, he
was employed by [Affirma] as a regular full time registered occupational therapist (OTR) until
March 12, 2014, when his employment was terminated.” (Complaint, p. 2, ¶ 7.). Mlungwana
states that “[t]hroughout the last year of his employment, from March 2013, [Affirma] paid
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In its corporate disclosure statement filed pursuant to Fed.R.Civ.P. 7.1 [DE 11], Defendant
states that its corporate name is “Affirma Rehabilitation, Inc., d/b/a Marion Rehabilitation &
Assisted Living.” Defendant refers to itself as Affirma in its pleadings and the court will do the
same.
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[him] at the rate of $40.00 per hour for each hour he worked, up to 40 hours per week.”
(Complaint, p. 2, ¶ 8.). Mlungwana contends, however, that he worked an average of 55 hours
per week during that last year. (Complaint, p. 2, ¶ 9.). He claims that he was paid $40.00 per
hour for the first 40 hours that he worked each week, but received nothing for the hours that he
worked in excess of 40 per week. (Complaint, p. 2, ¶ 10.). Mlungwana asserts that [Affirma]
failed to pay him for the overtime that he worked. (Complaint, p. 2, ¶ 11.). Based on those
allegations, Mlungwana filed this lawsuit and asserts claims against Affirma “for unpaid
overtime pursuant to the Fair Labor Standards Act (“FLSA), 29 U.S.C. 207 and 213, unpaid
wages pursuant to Indiana Code 22-2-5-2, 34-24-3, 22-2-9-2, and conversion, breach of implied
contract, and unjust enrichment under Indiana common law.” (Complaint, p. 1, ¶ 1). Count II of
the complaint, the state law claim for conversion, is the only count at issue in Affirma’s motion
to dismiss.

STANDARD OF REVIEW
When considering a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6), a court presumes all well-pleaded allegations to be true, views them in the light most
favorable to the plaintiff, and accepts as true all reasonable inferences to be drawn from the
allegations. Whirlpool Fin. Corp. v. GN Holdings, Inc., 67 F.3d 605, 608 (7th Cir. 1995). The
Supreme Court has articulated the following standard regarding factual allegations that are
required to survive dismissal:
While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need
detailed factual allegations, . . . a plaintiff's obligation to provide the “grounds” of
his “entitlement to relief” requires more than labels and conclusions, and a
formulaic recitation of the elements of a cause of action will not do. . . . Factual
allegations must be enough to raise a right to relief above the speculative level, . .
. on the assumption that all the allegations in the complaint are true (even if
doubtful in fact).
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Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (internal citations omitted). A complaint
must contain sufficient factual matter to “state a claim that is plausible on its face.” Id. at 547.
“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, 556 U.S. 662, 678 (2009) (citing Twombly, 550 U.S. at 556).
Although the court must accept as true all well-pleaded facts and draw all permissible
inferences in the Plaintiff's favor, it need not accept as true “threadbare recitals of a cause of
action’s elements, supported by mere conclusory statements. . .” Id. Legal conclusions can
provide a complaint’s framework, but unless well-pleaded factual allegations move the claims
“from conceivable to plausible,” they are insufficient to state a claim. Id. at 683 (quoting
Twombly, 550 U.S. at 570).
DISCUSSION
The parties do not dispute the applicable Indiana law regarding conversion (although they
certainly debate its application to the facts of this case). Affirma summarized that law in its
memorandum as follows:
Conversion requires the knowing or intentional exertion of unauthorized control
over the personal property of another. Ind. Code § 35-43-4-3(a) (emphasis
added); see also Huff v. Biomet, Inc., 654 N.E.2d 830, 835 (Ind.Ct.App. 1995)
overruled on other grounds; Stevens v. Butler, 639 N.E.2d 662, 666 (Ind.Ct.App.
1994), trans. denied. Money is subject to conversion only if it is a “special
chattel.” A “special chattel” is “a determinative sum with which the defendant
was entrusted to apply to a certain purpose.” Huff, 654 N.E.2d at 835-36 (citing
Stevens, 639 N.E.2d at 666). Failure to pay a debt does not constitute criminal
conversion. Id. at 836 (citing National Fleet Supply, Inc. v. Fairchild, 450 N.E.2d
1015, 1019 (Ind.Ct.App. 1983)).
Def’s. Mem., p. 3.
Affirma asks this court to dismiss Mlungwana’s conversion claim because, it argues, it
did not exercise control over property belonging to the Plaintiff, a necessary element in
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establishing a prima facie case of conversion under Indiana law. Affirma argues that its “alleged
failure to distribute the correct amount of its money to Mlungwana for services he performed
does not constitute conversion.” Id., p. 1 (italics in original). According to Affirma,
“Mlungwana’s conversion claim is about Affirma’s money, not Mlungwana’s. . . . Mlungwana
cannot maintain his conversion claim without evidence that Affirma retained his personal
property.” Id., p. 4 (italics in original).
Affirma contends that the cases it cites in support of its argument are on point and
establish as a matter of law that money allegedly owed as wages does not constitute a “special
chattel” and, therefore, cannot be the subject of a conversion claim.
For example, in Huff v. Biomet Inc., supra, the court held that a “special chattel” is “a
determinate sum with which the defendant was entrusted to apply to a certain purpose.” Huff,
654 N.E.2d at 835-36 (citing Stevens, 639 N.E.2d at 666). Failure to pay a debt does not
constitute criminal conversion. Id. at 836 (citing National Fleet Supply, 450 N.E.2d at 1019).
Furthermore, “a plaintiff must allege sufficient facts to ‘allow the Court to draw the reasonable
inference that the Plaintiff [] entrusted determinable sums of money to the Defendants to apply
for a certain purpose.’” Foster v. W-Transfer, Inc., 2012 WL 2376188 at *1 (S.D.Ind. June 22,
2012) (quoting Puma v. Hall, 2009 WL 5068629 at *4 (S.D. Ind. Dec. 17, 2009)).2
Indeed, the cases cited by Affirma support the company’s position. See National Fleet
Supply, 450 N.E.2d at 1019 (failure to pay a debt is not conversion under Indiana law); Huff, 654
N.E.2d at 836 (employer did not commit criminal conversion when it wrongfully withheld
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In Puma, the plaintiffs were mortgage loan officers who brought suit for unpaid wages and
asserted claims under the Fair Labor Standards Act and various state statutes. They also alleged
that defendants were liable for conversion for failure to pay those wages. The court rejected the
conversion claim, holding that “. . . under Indiana law the failure to pay an indebted sum of
money does not constitute conversion.” Puma, 2012 WL 5068629, at *4 (citing Tobin v. Ruman,
819 N.E.2d 78, 89 (Ind.Ct.App. 2004)).
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commission payments from employee); Puma, 2012 WL 5068629, supra, n. 2; Tobin, 819
N.E.2d at 89 (employer did not commit conversion by wrongfully withholding retained earnings
because withholding was, at most, a failure to pay a debt).
In its reply brief, Affirma cites yet another case from the Southern District of Indiana that
addressed a conversion claim based on unpaid compensation. In Dunlap v. Switchboard
Apparatus, Inc., 2012 WL 1712554 (S.D.Ind. May 15, 2012) the plaintiffs alleged that they were
not paid for engineering services they performed for defendants. They brought several claims
against defendants, including a claim for conversion. The court rejected the conversion claim
and held that “. . . Indiana law is settled that failure to pay a debt ‘does not constitute conversion
as a matter of law’ Puma v. Hall, 2009 WL 5068629, at *4 (S.D.Ind. Dec.17, 2009); see also
Tobin v. Ruman, 819 N.E.2d 78, 89 (Ind.Ct.App. 2004) (wrongful withholding of retained
earnings is, at most, a failure to pay a debt, which does not constitute conversion as a matter of
law).”
Id. at *9. The Dunlap holding, then, is also in line with Huff, Tobin, Foster, and Puma.
Affirma contends that Mlungwana’s conversion claim “boils down to the same allegation
the courts rejected in Dunlap, Puma, and Tobin--the defendant committed conversion because it
failed to pay for services performed.” Def.’s Reply, p. 2. “Mlungwana’s conversion claim fails
as a matter of law because Indiana law does not recognize a claim for conversion when the
employer’s conduct amounts to nothing more than a failure to pay a debt or withholding of
plaintiff’s earnings.” Id. (citing National Fleet, Huff, Puma, and Tobin).

In his response, Mlungwana argues that the cases on which Affirma relies are not on
point and “can be materially distinguished from the instant case.” Pltf.’s Resp., p. 3. Mlungwana

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argues, for example, that Affirma’s reliance on the Tobin case is misplaced. The plaintiff in
Tobin, a lawyer who separated from the defendant law firm, brought a conversion claim (among
others, including a claim under the Wage Payment Act) against the firm alleging that the firm
failed to pay him a bonus that was due. Instead of directly paying Tobin the bonus, it became
part of his minority interest in the firm. Mlungwana contends that the Tobin case stands only for
the proposition that “‘[b]ecause there was no violation of the Wage Payment Act, Tobin is
ineligible for treble damages and attorney fees.’” Pltf.’s Resp., p. 3 (quoting Tobin, 819 N.E.2d
at 88). Mlungwana argues that “[u]nlike Tobin, who was compensated with a bonus that was set
over to his equity interest in the firm, Mlungwana has never been compensated in any form for
the overtime wages that he earned and entrusted to Defendant until payday.” Id., p. 4
(underlining in original).
In its reply brief, Affirma asserts that “Mlungwana incorrectly argues Tobin is
inapplicable because he focuses on the Tobin court’s analysis of Count II of Tobin’s amended
complaint.” Def.’s Reply, p. 3. In Count II, Tobin asserted claims for breach of contract and
violation of the Wage Payment Act, alleging that the defendant was liable for treble damages
and attorneys’ fees for failing to pay Tobin a bonus he claimed he was entitled to. Affirma states
that “[t]he Tobin court’s analysis of the Wage Payment Act and breach of contract claims is
irrelevant to this court’s determination of the viability of Mlungwana’s conversion claim. What
matters here is the Tobin court’s analysis of Tobin’s conversion claim (Count III of Tobin’s
amended complaint). That analysis is directly applicable to evaluation of Mlungwana’s
conversion claim. Tobin, like Mlungwana, alleged his employer committed conversion because
it wrongfully withheld money it owed him.” Id.
In fact, in Tobin, the court addressed the plaintiff’s conversion claim and held as follows:

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As to whether or not [defendant] committed criminal conversion, [defendant]
argue[s] that any failure to pay Tobin his share of the retained earnings is, at
most, the failure to pay a debt, which does not constitute criminal conversion as a
matter of law. We agree. Tobin has not shown that he entrusted money to
[defendant] for any particular purpose; to the contrary, the funds at issue are and
always have been in the possession of and generated by [defendant].
[Defendant’s] wrongful withholding of these funds from Tobin is, at most, the
failure to pay a debt, which does not constitute criminal conversion as a matter of
law.
Tobin, 819 N.E.2d at 89 (citing Huff, 654 N.E.2d at 836). This court agrees that Mlungwana’s
application of Tobin is misplaced. The holding in Tobin regarding the plaintiff’s conversion
claim is in line with Huff, National Fleet, Foster, Puma, and Dunlap. In all of those cases, as
discussed above, the courts held that a claim for unpaid wages cannot be the basis for a
conversion claim.
Affirma contends that “[t]he similarity between Mlungwana’s claim and Tobin’s claim
requires application of the Tobin decision.” Def.’s Reply, pp. 3-4. “Indiana courts simply do not
recognize a claim for conversion based on failure to pay for services rendered. Like the
unsuccessful plaintiffs in Dunlap, Tobin, Puma, and Huff, Mlungwana alleges conversion
because at most, Affirma withheld money and failed to compensate him for services he
performed. Affirma’s conduct does not constitute conversion under Indiana law even if the
amount at issue is determinable and the plaintiff’s entitlement to the money is not in question.”
Id. (citing Tobin, 819 N.E.2d at 89).
Mlungwana also attempts to distinguish Foster v. W-Transfer, supra, and states that “[i]n
Foster, plaintiff failed to satisfy the ‘entrustment’ element of conversion . . . [because] the wages
due the plaintiff were not transferred directly from defendant employer to plaintiff employee;
instead, the wages were first directed to a third-party, in this case, the State, thereby obviously
precluding a finding that [plaintiff] entrusted the wages to [defendant].” Id. But, Mlungwana

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says, in the present case no such third party was involved and “Mlungwana did entrust his earned
overtime wages directly to Defendant . . . .” Id.
In Foster, the plaintiff was a teamster and defendant, W-Transfer, was a private trucking
company that occasionally leased its employees to the state or state agencies to provide services
on public works projects. Foster, 2012 WL 2376188 at *1 (S.D.Ind. June 22, 2012). Plaintiff
contended that he was owed wages for work he did on such projects and that W-Transfer’s
failure to pay him those wages constituted conversion under Indiana law. The court rejected
Foster’s conversion claim, based primarily on the fact that Foster could not establish that the
wages he claimed he was owed constitute a “special chattel.” The court explained as follows:
The case law is clear that a plaintiff must allege sufficient facts to “allow the
Court to draw the reasonable inference that the Plaintiff [ ] entrusted determinable
sums of money to the Defendants to apply for a certain purpose.” . . . In order to
satisfy the “entrustment” element, the money at issue must be the plaintiff’s own,
whereas here, the funds of a third party, namely, the State’s, are those being
entrusted to reimburse contractors for wages to be paid to their employees.
Compare Roake [v. Christensen], 528 N.E.2d [789,] 791 [Ind. Ct. App. 1988]
(finding conversion where an employer allowed a health care insurance policy to
lapse while continuing to accept checks to pay for it from an employee), with
Tobin, 819 N.E.2d at 89 (holding that failure of an employer to pay employee
retained earnings is at most failure to pay a debt). As to the “determinant sum”
element, State funds for public works projects are not earmarked for payment of
each employee, but are part of a larger heterogeneous pool that can be held until
the contractor pays his debts. . . . Because these funds are co-mingled they cannot
be considered a determinant sum, thereby precluding the classification of money
as a special chattel under these facts.
Id. at *4 (additional internal citations and footnote omitted).
So while it is true that the decision in Foster turned largely on the fact that the funds
earmarked to pay plaintiff were entrusted to a third party, it is also true that the court in Foster
recognized that the reasoning and holding in Tobin precluded plaintiff’s claim for conversion.
Having reviewed the parties’ briefs and the applicable law, this court concludes that
Affirma’s argument for dismissal is well taken. While Mlungwana makes a gallant effort to
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demonstrate that the cases on which Affirma relies are factually distinguishable from this case,
he ultimately succeeds only in making distinctions without a difference. Mlungwana has failed
to state a claim for conversion against Affirma, even when all of his factual assertions are taken
as true, since his assertions fail to establish the elements of that cause of action. Accordingly, his
claim must be dismissed pursuant to Fed.R.Civ.P. 12(b)(6).
CONCLUSION
For the reasons discussed above, Defendant’s Motion to Dismiss Plaintiff’s Conversion
Claim [DE 12] is hereby GRANTED and Count II of Plaintiff’s complaint is DISMISSED.
Counts I, III, IV, and V of the complaint are not affected by this Opinion and Order and remain
pending.
Entered: April 13, 2015.

s/ William C. Lee
William C. Lee, Judge
United States District Court

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