Johnson v. CRC Holdings, Inc. et al

Filing 13

MEMORANDUM. Signed by Judge James K. Bredar on 3/7/2017. (krs, Deputy Clerk)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
*
LISA JOHNSON,

*

Plaintiff

*

v.

*

CRC HOLDINGS, INC.
d/b/a CRC SALOMON, et al.,
Defendants
*

*

*

*

CIVIL NO. JKB-16-2937

*
*
*

*
*
*
MEMORANDUM

*

*

*

*

Plaintiff Lisa Johnson brought the instant action against her former employer, CRC
Holdings, Inc. (“CRC”), and its owner, Cregg R. Seymour (“Seymour”), alleging that she was
not paid the full wages she was due under the Fair Labor Standards Act, the Maryland Wage and
Hour Law, and the Maryland Wage Payment Collection Law. (Compl., ECF No. 1.) Defendants
have filed a MOTION TO DISMISS AND/OR TO STAY PROCEEDINGS AND COMPEL
ARBITRATION (ECF No. 7), and Plaintiff has responded (ECF No. 9).

No hearing is

necessary. Local Rule 105.6 (D. Md. 2016). For the reasons stated below, Defendants’ motion
will be granted as a motion to stay proceedings and compel arbitration.
I.

Standard for Dismissal for Failure to State a Claim
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 (2009) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Facial plausibility exists “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. An inference of a mere

possibility of misconduct is not sufficient to support a plausible claim. Id. at 679. As the
Twombly opinion stated, “Factual allegations must be enough to raise a right to relief above the
speculative level.” 550 U.S. at 555. “A pleading that offers ‘labels and conclusions’ or ‘a
formulaic recitation of the elements of a cause of action will not do.’ . . . Nor does a complaint
suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’” Iqbal, 556
U.S. at 678 (quoting Twombly, 550 U.S. at 555, 557). Although when considering a motion to
dismiss a court must accept as true all factual allegations in the complaint, this principle does not
apply to legal conclusions couched as factual allegations. Twombly, 550 U.S. at 555.
II.

Allegations of the Complaint1
CRC is a company that provides court reporting services. (Compl. ¶ 2.) Plaintiff alleges

that she was employed by CRC as a Production Coordinator from August 18, 2014, through
June 30, 2015, before she was promoted to Office Manager, a position she occupied until April
of 2016. (Id. at ¶ 21.) Plaintiff’s complaint relates exclusively to the period of her employment
as a Production Coordinator, during which time she had little discretion in performing her tasks,
had no supervisory role, performed no data analysis or interpretation, and did not set policy for
CRC’s business. (Id. at ¶¶ 33–40.) As a Production Coordinator, Plaintiff alleges that she was
routinely required to work in excess of forty hours per week: often working through lunch,
staying at the office late, responding to phone calls during what was otherwise her personal time,
and engaging in weekend travel. (Id. at ¶¶ 47–61.) Nonetheless, Plaintiff alleges that she never
received any overtime compensation during the period in question, but was instead paid a flat
rate based on an annual salary.2 (Id. at ¶ 62.) Therefore, Plaintiff alleges, in failing to pay

1

The facts are recited here as alleged by Plaintiff, as this memorandum is evaluating a motion to dismiss.
See Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997).
2
Plaintiff’s annual salary was $35,000 for the first four-and-a-half months that she worked as a Production
Coordinator, after which time she received a raise to $37,500 per year. (Compl. ¶¶ 43–44.)

2

overtime, Defendants acted in violation of the Fair Labor Standards Act of 1938, 29 U.S.C.
§§ 201–219 (2017) (“FLSA”), the Maryland Wage and Hour Law, Md. Code Ann., Lab. &
Empl. §§ 3-401–3-431 (LexisNexis 2016) (“MWHL”), and the Maryland Wage Payment
Collection Law, Md. Code Ann., Lab. & Empl. §§ 3-501–3-509 (LexisNexis 2016)
(“MWPCL”). (Compl. ¶¶ 70–85.)
III. Analysis
Defendants base their motion to dismiss on the premise that Plaintiff waived her rights
under the applicable wage laws when she entered into a Separation Agreement and Release (“the
Agreement”) on May 7, 2016. (Defs.’ Mot. to Dismiss ¶ 2.) Because a ruling on this affirmative
defense is improper at this stage in the proceedings, and because the Agreement is extrinsic to
the Complaint and not relied on by it, Defendants’ motion to dismiss will be denied. However,
even if the Court were to consider this defense, it would not find that Plaintiff waived her claims
under the pertinent statutes. Furthermore, Defendant Seymour is a proper party under the
pertinent statutes, so Defendants’ motion that he be dismissed will likewise be denied. However,
because the Agreement also contained a valid arbitration clause, Defendants’ motion to compel
arbitration will be granted, and the case will be stayed pending arbitration of Plaintiff’s claims.
A.

Motion to Dismiss
1. Proper Considerations on a Motion to Dismiss

Defendants fail to present any justification why, on a motion to dismiss, the Court should
consider their argument that Plaintiff waived her right to sue.
Generally, a defense to a claim for relief in a pleading must be raised in a responsive
pleading.

Fed. R. Civ. P. 12(b).

The Federal Rules of Civil Procedure carve out seven

exceptions for defenses that may be raised on a motion to dismiss, including failure to state a

3

claim upon which relief can be granted. See id. Under such a motion, courts generally constrain
their considerations to the allegations of the complaint and any attached documents, but may also
consider extrinsic evidence that is “integral to and explicitly relied on in the complaint” and the
authenticity of which is unchallenged by the plaintiffs.

Am. Chiropractic Ass’n v. Trigon

Healthcare, Inc., 367 F.3d 212, 234 (4th Cir. 2004).
Defendants’ motion to dismiss is based on the notion that Plaintiff waived her right to sue
Defendants when she signed the Agreement. (Defs.’ Mot. to Dismiss ¶ 2.) This affirmative
defense does not obviously fit under any of the enumerated exceptions under Rule 12 of the
Federal Rules of Civil Procedure,3 so consideration of the argument is not timely.

Even

assuming that Defendants’ argument could properly be considered under Rule 12(b)(6), the
evidence upon which Defendants rely (i.e., the Agreement) was neither attached to the
Complaint nor integral to or relied upon by the Complaint. Therefore, the Court will not
consider the release clause contained within the Agreement on a motion to dismiss. For these
reasons, the motion will be denied.
2. Validity of Waiver
Even if, on this motion to dismiss, the Court were to consider the Agreement’s release
clause and to rule on the substance of Defendants’ affirmative defense, Defendants would still
not prevail. As the Court has already indicated in this case, the right to wage protections under
the FLSA is not normally negotiable without approval by a court or by the Department of Labor.
(See Mem. to Counsel, ECF No. 8.) For that reason, and because the pertinent Maryland statutes
are similarly non-waivable, see infra, Plaintiff’s claims would survive Defendants’ motion.
Congress enacted the FLSA to “protect certain groups of the population from substandard
wages and excessive hours which endangered the national health and well-being and the free
3

Defendants’ motion fails to cite the authority under which they seek dismissal of the Complaint.

4

flow of goods in interstate commerce.” Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 706 (1945).
One cannot abridge or otherwise waive one’s rights under the FLSA “because this would nullify
the purposes of the statute and thwart the legislative policies it was designed to effectuate.”
Barrentine v. Ark.-Best Freight Sys., Inc., 450 U.S. 728, 740 (1981); see also Duprey v. Scotts
Co. LLC, 30 F. Supp. 3d 404, 407 (D. Md. 2014) (“[The FLSA’s] provisions are mandatory and
generally are not subject to bargaining, waiver, or modification by contract or settlement.”).
The MWHL sets a minimum wage standard with a similar purpose to the FLSA: to allow
workers to maintain themselves at a level consistent with their needs (including their health), to
safeguard against unfair competition, and to increase the stability of industry, among other
things.

Md. Code Ann., Lab. & Empl. § 3-402 (LexisNexis 2016). As such, the statute

expressly invalidates any agreement to work for less than the statutorily required minimum
wage.4 Id. at § 3-405. While the MWHL sets the minimum amount of compensation due to an
employee, the MWPCL dictates the permissible terms of such payment. See Md. Code Ann.,
Lab. & Empl. §§ 3-502–3-505 (LexisNexis 2016). Like the MWHL, it also declares void any
agreement to work for less than the statutorily required wage. Id. at § 3-502(f).
On May 7, 2016, Plaintiff signed the Agreement in which she agreed, among other
things, to
release and forever discharge [Defendants] from any and all rights, demands,
causes of action, complaints, contracts and other claims whatsoever, in law or in
equity, which Employee . . . [has] or may have against the CRC Releasees,
including all known, unknown, undisclosed and unanticipated claims occurring
before and including the effective date of this Agreement.

4

The MWHL also incorporates the rights enjoyed by an employee under the FLSA. Md. Code Ann., Lab.
& Empl. §§ 3-401(c), 3-404 (LexisNexis 2016) (“This subtitle does not diminish . . . a right of an employee that is
granted under the [federal Fair Labor Standards Act of 1938.]”). For that reason, courts generally apply the FLSA
and the MWHL under a common analysis. See, e.g., Turner v. Human Genome Science, Inc., 292 F. Supp. 2d 738,
744 (D. Md. 2003) (“The requirements under the MWHL mirror those of the federal law; as such, Plaintiffs’ claim
under the MWHL stands or falls on the success of their claim under the FLSA.”)

5

(Agreement ¶ 9, ECF No. 7-1.) Notably, the Agreement carves out an exception to the abovequoted release for “claims that may not be waived as a matter of law.” (Id. at ¶ 10.) Because a
worker cannot contractually waive her rights to full payment under the FLSA, MWHL, or
MWPCL, the Agreement does not cover Plaintiff’s claims under those statutes. Therefore, even
if it were to consider Defendants’ proffered affirmative defense of waiver on this motion to
dismiss, the Court would deny that argument as a matter of law.
3. Defendant Seymour’s Status as Employer
Defendant Seymour further argues that Plaintiff’s claims should be dismissed against him
because he is not personally liable for employer CRC’s alleged wrongdoing. (Defs.’ Mot. to
Dismiss ¶ 11.) By contrast, all of Plaintiff’s allegations are directed against both Defendants,
collectively (Compl. ¶¶ 4–85), implying that Seymour was acting as an agent of CRC as well as
its owner. The FLSA and the MWHL both define “employer” to include any person acting in the
interest of an employer with respect to an employee. 29 U.S.C. § 203(d) (2017); Md. Code Ann.,
Lab. & Empl. § 3-401(b) (LexisNexis 2016). In evaluating the adequacy of an FLSA/MWHL
complaint at the pleading stage, a court will presume that all allegations made against the
defendants collectively apply with equal force as against each individual defendant. Rollins v.
Rollins Trucking, LLC, Civ. No. JKB-15-3312, 2016 WL 81510, at *2 (D. Md. Jan. 7, 2016)
(unreported). Furthermore, “employees need undertake no veil-piercing venture to recover under
the wage statutes.” Id. at *3. Seymour, the Court concludes, is properly named as a Defendant.
Therefore, the Court will deny Defendants’ motion to dismiss Seymour from the case, and the
Complaint will survive against both Defendants.

6

B.

Motion to Compel Arbitration

As an alternative to their motion to dismiss, Defendants move the Court to compel
arbitration. (Defs.’ Mot. to Dismiss, ¶ 8.) By signing the Agreement, Plaintiff gave CRC the
right to resolve through arbitration any dispute concerning Plaintiff’s prior employment.
(Agreement ¶ 15.)
1. Enforceability of the Arbitration Agreement
The Federal Arbitration Act (“FAA”) reflects “a liberal federal policy favoring arbitration
agreements,” and claims under the FLSA may properly be resolved through mandatory
arbitration. Adkins v. Labor Ready, Inc., 303 F.3d 496, 500, 06 (4th Cir. 2002). A party may
compel arbitration if it demonstrates the following:
(1) the existence of a dispute between the parties, (2) a written agreement that
includes an arbitration provision which purports to cover the dispute, (3) the
relationship of the transaction, which is evidenced by the agreement, to interstate
or foreign commerce, and (4) the failure, neglect or refusal of the defendant to
arbitrate the dispute.
Id. at 500–01. Whether parties have a valid arbitration agreement governing a dispute is a
question of applicable state contract law.

Id. at 501.

Under Maryland law, a contract is

unenforceable if it is so vague that the reviewing court cannot discern the parties’ intention (i.e.,
when a material term is left undefined). Quillen v. Kelley, 140 A.2d 517, 523 (Md. 1958).
However, Maryland courts are reluctant to reject agreements as unintelligible, but will sustain
them so long as the reviewing court can establish the contracting parties’ reasonable intent. Id.
(“The law does not favor, but leans against the destruction of contracts because of uncertainty;
therefore, the courts will, if possible, so construe the contract as to carry into effect the
reasonable intention of the parties if that can be ascertained.”). Maryland law also holds that
where a contract refers to another document, that other document may be interpreted as part of
the contract. Ray v. William G. Eurice & Bros., 93 A.2d 272, 279 (Md. 1952).
7

In the instant case, the only element at issue is whether Plaintiff has bound herself to
arbitrate her dispute with Defendants. The Agreement contains the following arbitration clause:
In the event that Employee brings a legal action . . . relating to this Agreement,
Employee’s employment or the mutual separation thereof, against any CRC
Releases [sic], Employee agrees that, at the option of CRC, he/she will submit to
arbitration pursuant to the employment arbitration rules of the American
Arbitration Association.
(Agreement ¶ 15.) The Agreement is broad and does not itself identify who will select the
arbitrator, how the costs of arbitration should be allocated, where it should take place, or whether
it is to be binding. (See id.) However, the agreement incorporates by reference the American
Arbitration Association’s (AAA’s) employment arbitration rules, which provide mechanisms for
resolving these ambiguities. See American Arbitration Association, Employment: Arbitration
Rules and Mediation Procedures, R. 1, 10–12; Fee Schedule (2009). The Court may therefore
interpret these rules as part of the Agreement. The only missing term that is not expressly
addressed by the rules is the question of whether the arbitration is to be binding, but courts have
not shied away from discerning the reasonable intent of parties who omitted that term from their
agreements to arbitrate. See, e.g., Rainwater v. Nat’l Home Ins. Co., 944 F.2d 190, 193–94 (4th
Cir. 1991) (per curiam) (holding that reference to an earlier version of the AAA’s rules implied
an agreement for arbitration to be binding); Dow Corning Corp. v. Safety Nat’l Cas. Corp., 335
F.3d 742, 746 (8th Cir. 2003) (finding that reasonable interpretation of an arbitration agreement
provided for non-binding arbitration when it failed to expressly state as much). The Court is not
presently asked to determine whether the Agreement contemplates binding or non-binding
arbitration. Rather, for the present purposes, it is sufficient to conclude that the Agreement’s
silence on this issue does not render it unenforceable.
The Agreement clearly expresses the parties’ intention that CRC be given the right to
submit disputes to arbitration (including disputes relating to employment, as well as those
8

relating to the Agreement itself). (Agreement ¶ 15.) In light of that clear intention, and in light
of the FAA’s “liberal policy favoring arbitration agreements,” Adkins, 303 F.3d at 500, the Court
will grant Defendants’ motion to compel arbitration.
2. Granting a Stay in the Case
If a court refers a matter to arbitration pursuant to a valid agreement under the FAA, then
the court shall, on application of one of the parties, stay the proceedings until the arbitration is
complete. 9 U.S.C. § 3 (2016.) In the event of the Court’s granting Defendant’s motion to
compel arbitration, Plaintiff has requested the Court to stay the case. (Mem. in Supp. of Pl.’s
Opp’n 7, ECF No. 9-1.) The Court will grant that request in accordance with the FAA. If, in the
meantime, the parties negotiate a settlement, the Court will review the fairness of that
arrangement under the FLSA.
IV. Conclusion
For the foregoing reasons, Defendants’ motion will be granted in part and denied in part.
Construing the motion as one to dismiss the Complaint or to dismiss Defendant Seymour, the
Court will deny the motion; construing it as a motion to compel arbitration and to stay the case,
the Court will grant it. A separate order shall issue.

DATED this 7th day of March, 2017.
BY THE COURT:

/s/
James K. Bredar
United States District Judge

9