Matrai et al v. AM Entertainment, LLC et al
Filing
44
MEMORANDUM AND ORDER: 28 Motion for Judgment is granted as to the state law claims and is denied as to the FLSA claim. Within fourteen days Plaintiffs shall file an amended complaint to include in their FSLA claim the factual allegations stated in their response brief and discussed in this order. Signed by U.S. District Senior Judge Sam A. Crow on 4/14/15. (msb)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
KARI MATRAI and
KENNY MATRAI,
Plaintiffs,
v.
Case No. 14-2022-SAC
AM ENTERTAINMENT, LLC,
PAUL B. SEATON,
QUEST INTEGRATED SYSTEMS, INC.,
and DIRECTV, LLC,
Defendants.
MEMORANDUM AND ORDER
This federal question case comes before the court on Defendant
DIRECTV’s motion for judgment on the pleadings,1 pursuant to Fed. R. Civ.
Pro. 12(c).
The two individual Plaintiffs allege that they worked as satellite
installation and repair technicians for the Defendants. They bring the
following claims against DIRECTV in their first amended complaint: failure to
pay overtime under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § §
201–219; breach of contract to compensate Plaintiffs; unjust enrichment by
failing to compensate Plaintiffs; and interference with business expectancy.
1
The parties note that after Defendant Quest Integrated Systems, Inc. moved for judgment
on the pleadings, they reached an agreement to dismiss that defendant from this case.
Accordingly, the Court excludes any analysis of Quest in this order, as the parties have done
in their post-agreement briefs.
Background
Plaintiffs allege the following facts, which the Court construes in the
light most favorable to them. DIRECTV markets and installs satellite
television systems nationwide. Plaintiffs worked as satellite television
installers, installing systems for DIRECTV, from December 1, 2010 to April
13, 2013. Plaintiffs provided their own tools and materials for their work,
paid for their own equipment, storage, and insurance, and were liable for
payroll taxes as if they were self-employed. The installer agreements
between the parties identified Plaintiffs as independent contractors. While
working for Defendant, Plaintiffs each worked, on average, approximately
27.6 hours of overtime per week, but received no overtime compensation.
Although both plaintiffs worked, Kari Matrai was never paid for any of her
work.
After Plaintiffs left Defendant’s employment, they sought to carry on a
contracting business as satellite television installers, including installing
systems for DIRECTV. While responding to an advertisement for certified
installers, Plaintiffs spoke on January 25, 2014 with a contractor and
arranged to begin contracting work. Based on those discussions and the
contractor’s initiation of background checks and drug tests on Plaintiffs,
Plaintiffs fully expected to begin work soon thereafter. On February 6, 2014,
however, the contractor informed Plaintiffs that he could not bring them on.
When Plaintiffs asked why, he responded, “David,” which Plaintiffs
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understood to refer to R. David Miller, DIRECTV’s General Manager for the
Topeka region. As a result of that event, Plaintiffs lost future income.
Judgment on the Pleadings Standard
The court reviews a Rule 12(c) dismissal “under the standard of review
applicable to a Rule 12(b)(6) motion to dismiss.” Nelson v. State Farm Mut.
Auto. Ins. Co., 419 F.3d 1117, 1119 (10th Cir. 2005) (internal quotation
marks omitted). In analyzing the motion, the court accepts as true all wellpleaded factual allegations in the complaint and views them in the light most
favorable to the plaintiff. In re Gold Res. Corp. Sec. Litig., 776 F.3d
1103, 1108 (10th Cir. 2015). To survive a motion to dismiss, a complaint
must contain sufficient factual matter, accepted as true, to “state a claim to
relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129
S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly, 550
U.S. 544, 570, 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.” Free Speech v. Federal Election Comm'n.,
720 F.3d 788, 792 (10th Cir. 2013) (quoting Iqbal, 556 U.S. at 678). “Such
facts must ‘raise a right to relief above the speculative level.’” Twombly, 550
U.S. at 555, 127 S.Ct. 1955. The plausibility standard is not akin to a
“probability requirement,” but it asks for more than a sheer possibility that a
defendant has acted unlawfully. Iqbal, 556 U.S. at 556. Where a complaint
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pleads facts that are “merely consistent with” a defendant's liability, it “stops
short of the line between possibility and plausibility of ‘entitlement to relief.’”
Id. at 557. Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements, do not suffice. Id.
Where, as here, multiple defendants are sued, notice and plausibililty
are best served where the complaint specifically states “who is alleged to
have done what to whom.” See Twombly, 127 S.Ct. at 1970–71 n. 10;
Robbins v. Oklahoma, 519 F.3d 1242, 1250 (10th Cir. 2008). Unless the
complaint alleges which defendant engaged in what acts, it is impossible for
the defendants to ascertain what particular illegal acts they are alleged to
have committed.
To carry their burden, plaintiffs under the Twombly standard must do
more than generally use the collective term “defendants.” Id. This
Court, in Robbins, placed great importance on the need for a plaintiff
to differentiate between the actions of each individual defendant and
the actions of the group as a whole. Id. This is because the purposes
of plausibility, notice and gatekeeping, are best served by requiring
plaintiffs to directly link an actual individual with the alleged improper
conduct.
VanZandt v. Oklahoma Dept. of Human Services, 276 Fed.Appx. 843, 849,
2008 WL 1945344, 5 (10th Cir. 2008). Although this requirement has been
developed and is most frequently applied in the context of § 1983 cases
which require proof of individual participation, and usually involve state
agencies and individual defendants, see e.g., Robbins, 519 F.3d at 1250, its
rationale applies in other contexts as well. See Robbins, 519 F.3d at 1250,
citing Medina v. Bauer, 2004 WL 136636, *6 (S.D.N.Y., Jan.27, 2004) (non4
§ 1983 case), and citing Lane v. Capital Acquisitions and Mgmt. Co., 2006
WL 4590705, *5 (S.D.Fla., April 14, 2006) (non-§ 1983 case). This rationale
applies here, where the defendants consist of two LLCs, one corporation, and
one individual, and the liability is based on individual participation.
Accordingly, the allegations in the complaint that Defendants collectively
took certain acts or that “all Defendants” engaged in certain acts shall not be
considered.
Request to Amend
Plaintiffs, in their response to the motion to dismiss, request leave to
amend their complaint. Generally, a party must file a motion to amend
before the court will grant leave to amend. See D. Kan. R. 7.1 (requiring a
separate motion and memorandum); Calderon v. Kan. Dep't of Social &
Rehab. Servs., 181 F.3d 1180, 1185–87 (10th Cir. 1999) (a response to a
motion to dismiss does not constitute a request to amend a complaint);
Robinson v. Farmers Services L.L.C., 10–CV–02244–JTM, 2010 WL 4067180,
at *5 (D.Kan. Oct. 15, 2010). No motion to amend has been filed.
If a party does not file a formal motion to amend its pleading, the
Tenth Circuit provides that a request for leave to amend must give adequate
notice to the district court and to the opposing party of the basis for the
proposed amendment before the court must recognize that a motion for
leave to amend is before it. Calderon, 181 F.3d at 1186–87. Here, that
requirement has been met, as Plaintiffs have set forth in their brief the
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additional acts allegedly taken by DIRECTV which Plaintiffs desire to include
in an amended complaint. See Dk. 34, p. 3. Defendant acknowledges its
notice of these facts by contending in its reply brief that an amendment
based on them would be futile. Accordingly, the Court will, in its discretion,
treat Plaintiff’s request as a motion to amend.
Motion to Amend Standard
The relevant rule provides that leave to amend shall be given freely
“when justice so requires.” Fed.R.Civ.P. 15(a)(2). The decision whether to
grant a motion to amend is left to the sound discretion of the district court.
Drake v. City of Fort Collins, 927 F.2d 1156, 1163 (10th Cir. 1991).
Nonetheless, the court may deny leave to amend where amendment would
be futile. Bradley v. Val–Mejias, 379 F.3d 892, 901 (10th Cir. 2004). “A
proposed amendment is futile if the complaint, as amended, would be
subject to dismissal.” Id. See also Full Life Hospice, LLC v. Sebelius, 709
F.3d 1012, 1018 (10th Cir. 2013).
DIRECTV argues futility in contending that the complaint, even if
amended to include the additional facts, fails to sufficiently plead the
existence of an employment relationship between it and the Plaintiffs.
Defendant asserts that Plaintiffs were not employees but independent
contractors. Plaintiffs counter that they were employees because DIRECTV
controlled their day-to-day activities. Plaintiffs allege in their first amended
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complaint the following acts taken by the Topeka region’s General Manager
and Assistant Manager:
Assigning jobs to Plaintiffs;
Requiring Plaintiffs to provide estimated times of completion for
specific projects;
Telling Plaintiffs when they could and could not go home at the
end of a work day;
Requiring Plaintiffs to wear the same wardrobe as regular
DIRECTV employees;
Evaluating and compensating Plaintiffs on the same basis as
regular DIRECTV employees; and
Dictating what types of material, such as pipe fittings, that
Plaintiffs were permitted to use;
Dk. 4, p. 5. Plaintiffs additionally allege via their de facto motion to amend
that Direct TV engaged in the following acts:
Tested and evaluated Plaintiffs at its facility;
Held mandatory meetings at its facility;
Told Plaintiffs it could terminate them or other techs for any
reason;
Played the primary role in terminating Plaintiffs;
Provided certain equipment for installations;
Directed routes for Plaintiffs to drive;
Told plaintiffs the number of jobs they were required to do in a
day;
Gave Plaintiffs a DIRECTV tech number; and
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Required Plaintiffs to obtain permission from DIRECTV before
rescheduling jobs.
Dk. 34, p. 3.
FLSA Analysis
Section 216(b) of the FLSA creates a cause of action against
employers who violate the overtime compensation and/or minimum wage
requirements mandated in sections 206–207. An “employer” subject to the
FLSA is “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
defines the verb “employ” expansively to mean “suffer or permit to work.”
29 U.S.C. § 203(g).
The Supreme Court has instructed courts to construe the terms
“employer” and “employee” expansively under the FLSA. Nationwide Mutual
Ins. Co. v. Darden, 503 U.S. 318, 326, 112 S.Ct. 1344, 117 L.Ed.2d 581
(1992); Rutherford Food Corp. v. McComb, 331 U.S. 722, 730, 67 S.Ct.
1473, 91 L.Ed. 1772 (1947) (“[T]here is in the [FLSA] no definition that
solves problems as to the limits of the employer-employee relationship
under the Act.... The definition of ‘employ’ is broad.”); Falk v. Brennan, 414
U.S. 190, 195, 94 S.Ct. 427, 38 L.Ed.2d 406 (1973).
The Tenth Circuit has noted that determinations about employment
relationships under the FLSA are “not limited by any contractual terminology
or by traditional common law concepts of ‘employee’ or ‘independent
contractor.’ ” Baker v. Flint Eng'g & Const. Co., 137 F.3d 1436, 1440 (10th
8
Cir. 1998) (quoting Henderson v. Inter–Chem Coal Co., Inc., 41 F.3d 567,
570 (10th Cir. 1994). “Because the definition of ‘employee’ under the FLSA
is broad, but not precise, courts apply the Supreme Court's ‘economic
reality’ test to determine the scope of employee coverage under the FLSA.”
Johns v. Stewart, 57 F.3d 1544, 1557 (10th Cir. 1995), citing Goldberg v.
Whitaker House Coop., Inc., 366 U.S. 28 at 33, 81 S.Ct. 933.
The Tenth Circuit does the same. In determining whether an individual
is an employee or an independent contractor for purposes of the FLSA, it
uses the “economic realities” test. Barlow v. C.R. England, Inc., 703 F.3d
497, 506 (10th Cir. 2012). That test focuses on whether the employee is
economically dependent on the business to which he renders service by
examining the following factors: (1) the degree of control exerted by the
alleged employer over the worker; (2) the worker's opportunity for profit or
loss; (3) the worker's investment in the business; (4) the permanence of the
working relationship; (5) the degree of skill required to perform the work;
and (6) the extent to which the work is an integral part of the alleged
employer's business. Id. (citation and quotation omitted). “Th[e] [economicreality] test is based upon the totality of the circumstances, and no one
factor in isolation is dispositive.” Henderson, 41 F.3d at 570 (applying
economic-reality test to determine if individual was an employee under the
FLSA) (citing Dole v. Snell, 875 F.2d 802, 805 (10th Cir. 1989)).
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Both parties urge the court to rely on FLSA cases involving other cable
installers, some of which apply variants of the economic realities test. Some
of those cases find installers to be employees, while others find installers to
be independent contractors. But because of the fact-specific nature of the
inquiry and the different procedural posture of some of those cases
(summary judgment), those cases are not instructive.
Given the broad definition of “employer” under the FLSA, the
constraints of a Rule 12(c) review, and the specific allegations included in
the complaint and in the Plaintiff’s response brief, the Court finds that
Plaintiffs have set forth sufficient facts to show that their motion to amend is
not futile, and sufficient plausibility to withstand the motion to dismiss.
Although those facts may ultimately prove insufficient to meet the economic
realities test, they are sufficient at the pleading stage. The court notes that
in other FLSA cases, DIRECTV has generally been unsuccessful in moving to
dismiss on the basis that installers are independent contractors. See e.g.,
Renteria-Camacho v. DIRECTV, Inc., 2015 WL 1399707 (D.Kan. 2015)
(denying motion to dismiss where DIRECTV alleged it was not Plaintiff’s
employer for purposes of FLSA claim); Lang, et al. v. DIRECTV, Inc., 735
F.Supp.2d 421, 432–434 (E.D.La. 2010) (same); Arnold v. DIRECTV, Inc.,
2011 WL 839636 (E.D.Mo. 2011) (same); Cf, Arnold v. DIRECTV, Inc., 2013
WL 6159456 (E.D.Mo. 2013) (arbitration case finding facts sufficient for
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Plaintiffs to sustain their burden for conditional certification on the joint
employer issue).
Breach of Contract and Unjust Enrichment
Defendant contends that Plaintiffs’ claims for breach of contract and
unjust enrichment must fail because Plaintiffs show no contract between
them and DIRECTV, and no reasonable expectation of compensation from
DIRECTV.
The complaint alleges breach of contract by stating:
Plaintiffs and Defendants entered into Agreements, within the context
of Plaintiff’s employment with Defendants, in which Plaintiffs would
provide labor, materials, equipment, and supplies to Defendants for
purposes of carrying on Defendants’ business, and Defendants were to
compensate Plaintiffs accordingly. … Defendants accepted the benefit
of Plaintiffs’ labor, materials, supplies, and equipment but failed to
make payment for the labor, materials, supplies, and equipment as
required by the Agreements.
Dk. 4, p. 9.
The only agreement referenced in the complaint is the installer
agreement, but that agreement expressly identified Plaintiffs as independent
contractors and is not alleged to have been breached. Nor does Plaintiffs’
response brief identify any express agreement allegedly breached. Instead,
the brief appears to assert an implied agreement in contending that “[u]nder
Kansas law, an employment relationship creates an implied contract.”
Plaintiffs cite Wilkinson v. Shoney’s, Inc., 269 Kan. 194, 213-14
(2000), in support of this assertion. Id. But Wilkinson merely applied the
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established rule that the totality of circumstances must be examined to
clarify the intention of the parties at the time the relationship began:
Where it is alleged that an employment contract is one to be based
upon the theory of ‘implied in fact,’ the understanding and intent of
the parties is to be ascertained from several factors which include
written or oral negotiations, the conduct of the parties from the
commencement of the employment relationship, the usages of the
business, the situation and objective of the parties giving rise to the
relationship, the nature of the employment, and any other
circumstances surrounding the employment relationship which would
tend to explain or make clear the intention of the parties at the time
said employment commenced.
Wilkinson v. Shoney's, Inc., 269 Kan. 194, 214, 4 P.3d 1149, 1162-1163
(2000), quoting Morriss v. Coleman Co., 241 Kan. 501, Syl. ¶ 1, 738 P.2d
841 (1987).
Plaintiffs are hard pressed to contend that despite a written agreement
between the parties which identifies and treats Plaintiffs as independent
contractors, they had an implied employment agreement that Defendant
somehow breached by treating them as independent contractors. Having
reviewed the complaint, the court finds that it fails to plausibly allege that
DIRECTV expressly or impliedly contracted with Plaintiffs to be employees of
and not independent contractors for DIRECTV, or that DIRECTV would pay
them overtime, or that DIRECTV would pay Plaintiffs for their equipment and
supplies, or any other breach of contract claim. See Albright v. City of
Leavenworth, Kan., 69 F.3d 547 (Table) (10th Cir. 1995) (summary
judgment finding no promise, express or implied, that the Plaintiffs would
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receive the additional pay they claimed, so finding no contract that DirecTV
could have breached by not doing so).
The complaint’s allegation of unjust enrichment is similarly conclusory
in alleging the following: Defendants requested that Plaintiffs provide labor,
materials, supplies, and equipment for work done on various projects;
Plaintiffs did so pursuant to Defendants’ request; Defendants received the
direct benefit of Plaintiffs’ labor, materials, supplies, and equipment; and
Defendants’ retention of the benefits of that labor, materials, supplies, and
equipment would be unjust. Dk. 4, p. 10. Plaintiffs seek compensation for
the fair and reasonable value of the labor, materials, supplies, and
equipment they provided to Defendant, for which they were not
compensated. Id.
Under Kansas law, “[u]njust enrichment arises when (I) a benefit has
been conferred upon the defendant, (2) the defendant retains the benefit,
and (3) under the circumstances, the defendant's retention of the benefit is
unjust.” Draper, 288 Kan. 510, Syl. ¶ 6. See also Haz–Mat Response, Inc. v.
Certified Waste Services Ltd., 259 Kan. 166, 176, 910 P.2d 839 (1996)
(‘“The substance of an action for unjust enrichment lies in a promise implied
in law that one will restore to the person entitled thereto that which in equity
and good conscience belongs to [another].’ ”) (quoting Peterson v. Midland
Nat'l Bank, 242 Kan. 266, 275, 747 P.2d 159 [1987]).
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Here, as with Plaintiffs’ breach of contract claim, the amended
complaint fails to contain sufficient factual matter, accepted as true, to state
a claim for unjust enrichment that is plausible on its face. The Court cannot
reasonably infer that this Defendant legally owed Plaintiffs anything it did
not pay, or unjustly retained a benefit it had received from Plaintiffs. The
breach of contract and unjust enrichment claims shall therefore be
dismissed.
Interference with Prospective Business Advantage
Defendant contends that Plaintiffs’ claim for interference with
prospective business advantage fails to state a claim for relief because it
fails to plead the essential element of malice. Plaintiffs counter that their
complaint meets this element by alleging that DIRECTV’s General Manager
for the Topeka region (Miller) acted “intentionally” in speaking to the
contracting party, objecting to Plaintiffs’ involvement, and dissuading him
from contracting with Plaintiffs. Plaintiffs assert that Miller’s act itself
demonstrates specific intent to injure Plaintiffs, and that malice includes
acting “with … specific intent to injure,” citing Brown v. University of Kansas,
16 F.Supp. 3d 1275, 1291 (D.Kan. 2014).
Under Kansas law, the plaintiff must show that the alleged wrongdoer
sought intentionally or maliciously to harm his prospective business
advantage. See Turner v. Halliburton Co., 240 Kan. 1, 722 P.2d 1106, 1115
(1986) (finding no malice where the plaintiff’s past employer told his
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prospective employer that it had terminated the plaintiff for having stolen
company property, a true statement). The requirements for this tort are:
(1) the existence of a business relationship or expectancy with the
probability of future economic benefit to the plaintiff; (2) knowledge of
the relationship or expectancy by the defendant; (3) that, except for
the conduct of the defendant, plaintiff was reasonably certain to have
continued the relationship or realized the expectancy; (4) intentional
misconduct by defendant; and (5) damages suffered by plaintiff as a
direct or proximate cause of defendant's misconduct.
Turner, 240 Kan. at 12. The tort is “predicated on malicious conduct by the
defendant.” Id. Malice is defined as “a state of mind characterized by an
intent to do a harmful act without a reasonable justification or excuse.” PIK
3d § 103.05, 124.92 cmt; L & M Enters., Inc. v. BEI Sensors & Sys. Co., 231
F.3d 1284, 1288 (10th Cir. 2000); Turner, 722 P.2d at 1116–17.
The following factors help determine whether an actor's conduct in
intentionally interfering with a prospective contractual relation of another is
improper:
(a) the nature of the actor's conduct,
(b) the actor's motive,
(c) the interests of the other with which the actor's conduct interferes,
(d) the interests sought to be advanced by the actor,
(e) the social interests in protecting the freedom of action of the actor
and the contractual interests of the other,
(f) the proximity or remoteness of the actor's conduct to the
interference, and
(g) the relations between the parties.
Turner, 240 Kan. at 14, quoting from The Restatement (Second) of Torts,
Section 767. “While the 12(b)(6) standard does not require that Plaintiff
establish a prima facie case in [his] complaint, the elements of each alleged
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cause of action help to determine whether Plaintiff has set forth a plausible
claim.” Khalik v. United Air Lines, 671 F.3d 1188, 1192 (10th Cir. 2012).
Here, the complaint’s allegation that Miller acted “intentionally” is a
conclusion. It neither alleges that Miller acted with specific intent to injure
Plaintiffs nor alleges facts otherwise sufficient to show malice. A party whose
acts are motivated by his own self-interest does not necessarily act
maliciously. See e.g., M West, Inc. v. Oak Park Mall, LLC., 293 P.3d 168, at
10 (Table) (2013); Moeller v. Kain, 2008 WL 4416042, 7 (Kan.App. 2008).
Therefore, merely alleging that Miller intentionally dissuaded the contracting
party from going forward with the Plaintiffs’ business relationship is
insufficient to allege malice. The complaint leaves open the possibility that
Miller acted in his own self-interest without intent to harm, and thus fails to
plead sufficient factual content that would allow the court to draw the
reasonable inference that the defendant acted with evil intent, i.e.,
maliciously. This claim shall therefore be dismissed.
IT IS THEREFORE ORDERED that DIRECTV’s motion for judgment on
the pleadings (Dk. 28) is granted as to the state law claims and is denied as
to the FLSA claim.
IT IS FURTHER ORDERED that within fourteen days Plaintiffs shall file
an amended complaint to include in their FSLA claim the factual allegations
stated in their response brief and discussed in this order.
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Dated this 14th day of April, 2015, at Topeka, Kansas.
s/Sam A. Crow
Sam A. Crow, U.S. District Senior Judge
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