Reynolds et al v. Solo & AD, Inc. et al
Filing
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MEMORANDUM OPINION. Signed by Magistrate Judge Charles B. Day on 10/2/2015. (aos, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
Southern Division
CHARMAINE REYNOLDS, et al.,
Plaintiffs,
v.
SOLO & AD, INC., et al.,
Defendants.
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Civil Action No.: CBD-15-2021
MEMORANDUM OPINION
Before this Court is Defendants Solomon Abdella and Alganesh Debesai’s Motions to
Dismiss (ECF Nos. 10, 11)1 (“Defendants’ Motions”) and the opposition thereto. The Court has
reviewed Defendants’ Motions, related memoranda, and applicable law. No hearing is deemed
necessary. See Local Rule 105.6 (D. Md.). For the reasons presented below, the Court DENIES
Defendants’ Motions.
I.
Factual Background
Plaintiff Charmaine Reynolds and Michelle Donofrio (“Plaintiffs”) worked as bartenders
at the Ethiopian restaurant Defendants Solomon Abdella and Alganesh Debesai (“Defendants”)
own and operate in Silver Spring, Maryland. Pl.’s Compl. 2, 3. Defendants jointly own Solo &
AD, Inc., and exercise exclusive control and authority over its business operations, including its
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Defendants Solomon Abdella and Alganesh Debesai filed separate, but similar, motions to dismiss (ECF
Nos. 10, 11), and subsequently filed a joint reply (ECF No. 16), to Plaintiff’s opposition (ECF No. 14). In light of
the overlap, the Court addresses both motions simultaneously.
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pay practices and its employees’ work schedules. Pl.’s Compl. 3. Plaintiff Reynolds allegedly
worked with Defendants from approximately April 1, 2013 through approximately April 31,
2015.2 Pl.’s Compl. 3. Plaintiff Donofrio allegedly worked with Defendants from
approximately July 25, 2013 through approximately August 29, 2013. Id.
Plaintiffs allege that prior to April 1, 2015, Defendants did not pay Plaintiffs any wages,
and that after this date, Defendants compensated Plaintiffs by permitting them to keep a portion
of their tips. Pl.’s Compl. 4. Plaintiff Reynolds alleges that she worked approximately 3,467.12
hours without receiving wages, while Plaintiff Donofrio alleges that she worked approximately
198.80 hours without receiving wages. Id. Plaintiffs also allege that they worked overtime hours
and were not compensated. Pl.’s Compl. 5.
Plaintiffs filed a Complaint alleging three counts against Defendants: (1) Count I for
failure to pay minimum and overtime wages under the Fair Labor Standards Act (“FLSA”); (2)
Count II for failure to pay minimum and overtime wages under the Maryland Wage and Hour
Law (“MWHL”); and (3) Count III for failure to pay minimum wages under the Maryland Wage
Payment and Collection Law (“MWPCL”).
II.
Standard of Review
A motion to dismiss under Rule 12(b)(6) challenges the adequacy of the complaint and
“constitutes an assertion by a defendant that, even if the facts alleged by a plaintiff are true, the
complaint fails as a matter of law ‘to state a claim upon which relief can be granted.’” See
Stewart v. Bierman, 859 F. Supp. 2d 754, 758 (D. Md. 2012) (citing Edwards v. City of
Goldsboro, 178 F.3d 231, 243 (4th Cir.1999)); Ford v. Karpathoes, No. ELH–14–00824,
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Although Plaintiff Reynolds alleges she worked with Defendants until approximately April 31, 2015, the
Court notes that the month of April does not have thirty-one (31) days.
2
2014 WL 6621997, at *2 (D. Md. Nov. 20, 2014). Whether a complaint states a claim for
relief is assessed by reference to the pleading requirements of Fed. R. Civ. P. 8(a)(2). Rule 8(a)
requires a “short and plain statement of the claim showing that the pleader is entitled to relief.”
Fed. R. Civ. P. 8(a)(2). “Rule 8(a)(2) still requires a ‘showing,’ rather than a blanket assertion,
of entitlement to relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 n.3 (2007). That
showing must consist of more than “a formulaic recitation of the elements of a cause of action”
or “naked assertion[s] devoid of further factual enhancement.” Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009) (internal citations omitted). However, a plaintiff need not include “detailed factual
allegations” in order to satisfy Rule 8(a)(2). Twombly, 550 U.S. at 555. To satisfy the minimal
requirements of Rule 8(a)(2), the complaint must set forth “enough factual matter (taken as true)
to suggest” a cognizable cause of action, “even if . . . [the] actual proof of those facts is
improbable and . . . recovery is very remote and unlikely.” Twombly, 550 U.S. at 556. In other
words, the complaint must contain facts sufficient to “state a claim to relief that is plausible on
its face.” Id. at 570; see Iqbal, 556 U.S. at 684; Simmons v. United Mortg. & Loan Inv., LLC,
634 F.3d 754, 768 (4th Cir. 2011).
In reviewing a Rule 12(b)(6) a motion, a court “‘must accept as true all of the factual
allegations contained in the complaint,’ and must ‘draw all reasonable inferences [from those
facts] in favor of the plaintiff.’” E.I. du Pont de Nemours & Co. v. Kolon Indus., Inc., 637 F.3d
435, 440 (4th Cir. 2011) (citations omitted). In evaluating the complaint, unsupported legal
allegations need not be accepted. Revene v. Charles Cnty. Comm’rs, 882 F.2d 870, 873 (4th Cir.
1989)(citing District 28, United Mine Workers of America, Inc. v. Wellmore Coal Corp., 609
F.2d 1083, 1085-86 (4th Cir. 1979)). Legal conclusions couched as factual allegations are
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insufficient, Iqbal, 556 U.S. at 678, as are conclusory factual allegations devoid of any reference
to actual events, United Black Firefighters v. Hirst, 604 F.2d 844, 847 (4th Cir. 1979). A Rule
12(b)(6) motion will be granted if the “well-pleaded facts do not permit the court to infer more
than the mere possibility of misconduct.” Iqbal, 556 U.S. at 679 (citation omitted). A motion
asserting failure to state a claim typically “does not resolve contests surrounding the facts, the
merits of a claim, or the applicability of defenses,” Edwards v. City of Goldsboro, 178 F.3d 231,
243 (4th Cir.1999) (quotation marks omitted), unless such a defense can be resolved on the basis
of the facts alleged in the complaint. See Goodman v. Praxair, Inc., 494 F.3d 458, 464 (4th Cir.
2007) (en banc).
III.
Analysis
In their motions, Defendants argue that the Court should grant Defendants’ Motions
under Rule 12(b)(6) because Plaintiffs seek to pierce the corporate veil and hold Defendants
liable for unpaid wages, without alleging that piercing the corporate veil is necessary because of
Defendants’ fraud or to enforce paramount equity. Def.’s Mot 1. In response, Plaintiffs argue
that “a piercing of the corporate veil analysis is completely irrelevant” because individuals may
be liable under the FLSA, MWHL, and MWPCL when they exercise sufficient control over the
employment relationship. Pl.’s Opp’n 3. Specifically, Plaintiffs argue that under the economic
reality test, which identifies when someone is an “employer” under the FLSA and the MWHL,
Defendants are liable. Pl.’s Opp’n 3-4. In their reply, Defendants reiterate that in order for an
individual to be held personally liable, and the corporate veil of limited liability to be
disregarded, Plaintiffs must first allege that piercing the corporate veil is necessary as a result of
Defendants’ fraud or to enforce paramount equity. Def.’s Reply 1. Defendants note that since
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Plaintiffs’ Complaint lacks any allegations of fraud, or that piercing the corporate veil is
necessary to enforce a paramount equity, then the Court must grant their motion. Def.’s Reply 2.
As set forth below, Defendants’ basis for their motions is meritless.
Defendants’ sole basis for their motions is that Plaintiffs seek to pierce the corporate veil
and hold Defendants personally liable without alleging fraud or the enforcement of paramount
equity. The Court holds that to survive this Rule 12(b)(6) motion to dismiss, Plaintiffs only have
to allege sufficient facts from which it could be inferred that Defendants are “employers” under
the FLSA, MWHL, and MWPCL. Plaintiffs do not need to allege facts showing that piercing the
corporate veil is necessary. See, e.g., Iraheta v. Lam Yuen LLC, No. DKC–12–1426, 2012 WL
5995689, at *4 (D. Md. Nov. 29, 2012) (holding that individual defendants could be found liable
as “employers” under the FLSA, MWHL, and MWPCL, and denying the defendants’ motion to
dismiss based on the argument that they were individuals who could not be held personally liable
under general principles of Maryland corporation law); Guzman v. D & S Capital LLC, No. 14–
CV–01799, 2015 WL 772797, at *4 (D. Md. Feb. 20, 2015) (holding that the defendants’ “. . .
argument that Plaintiff needs to pierce the corporate veil to have them qualify as employers
under the FLSA lacks merit.”); Roman v. Guapos III, Inc., 970 F. Supp. 2d 407, 416 (D. Md.
2013) (“It is well settled that an individual may qualify as an employer and face liability under
the FLSA.”); Pearson v. Prof'l 50 States Protection, LLC, No. RDB–09–3232, 2010 WL
4225533, at *4 (D. Md. Oct. 26, 2010) (collecting cases).
The FLSA generally requires employers, among other things, (1) to pay their employees
in accordance with applicable minimum wage rates, and (2) to provide their employees with
overtime compensation for all hours worked in excess of a forty-hour workweek. See 29 U.S.C.
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§§ 206-207. Under the FLSA, an “employer” is “any person acting directly or indirectly in the
interest of an employer in relation to an employee.” Id. § 203(d). The definition of “employer”
should “be interpreted broadly to achieve Congress’s intent to provide a remedy to employees for
their employers’ wage and hour violations.” Gionfriddo v. Jason Zink, LLC, 769 F. Supp. 2d
880, 890 (D. Md. 2011). This does not mean however, that it should be inferred that Congress
intended to disregard the liability shield that individuals benefit from when they do business in a
corporate form. See Caseres v. S & R Mgmt. Co., LLC, No. 12–cv–01358–AW, 2012 WL
5250561, at *3 (D. Md. Oct. 24, 2012) (citing Gray v. Powers, 673 F.3d 352, 356 (5th Cir.
2012)). Instead, “an individual’s status as a high-level corporate shareholder or officer does not
automatically impart ‘employer’ liability to that individual, as individual liability ‘is dictated by
the economic reality of the employment relationship.’” Id. (citing Pearson v. Prof'l 50 States
Prot., LLC, No. RDB–09–3232, 2010 WL 4225533, at *4 (D. Md. Oct. 26, 2010)).
To determine whether an individual is an “employer” under the FLSA, courts analyze the
economic realities of the relationship between the employee and the presumed employer. See
Schultz v. Capital Intern. Sec., Inc., 466 F.3d 298, 304 (4th Cir. 2006). “The focal point is
whether the worker is economically dependent on the business to which he renders service or is,
as a matter of economic [reality], in business for himself.” Id. Under the economic reality test,
an “employer” is someone who (1) has the authority to hire and fire employees; (2) supervises
and controls work schedules or employment conditions; (3) determines the rate and method of
payment; and (4) maintains employment records. Caseres, 2012 WL 5250561, at *3. Courts
also look to “the person's job description, his or her financial interest in the enterprise, and
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whether or not the individual exercises control over the employment relationship.” Id. (citing
Gionfriddo, 769 F. Supp. 2d at 890 (D. Md. 2011)). “No single factor in the economic reality
test is dispositive, and courts should consider the totality of the circumstances.” Id.
The MWHL is the state’s equivalent of the FLSA. See Watkins v. Brown, 173 F. Supp.
2d 406, 416 (D. Md. 2001). The MWHL and the FLSA have a similar purpose, which is to
provide a minimum wage and maximum hours for employees. Id. Under the MWHL, the
definition of “employer” is similar to the definition in the FLSA. See Md. Code, Lab. & Empl.,
§ 3–401(b) (“‘Employer’ includes a person who acts directly or indirectly in the interests of
another employer with an employee.”). Similar to the FLSA, to determine whether a particular
person is an “employer” under the MWHL, courts apply the economic reality test. Khalil v.
Subway at Arundel Mills Office Park, Inc., No. CCB–09–158, 2011 WL 231793, at *2 (D. Md.
Jan. 24, 2011).
The MWPCL requires employers to pay accrued wages to employees upon termination of
employment. See Md. Code, Lab. & Empl., § 3–505. The MWPCL defines “employer” as “any
person who employs an individual in the State or a successor of the person.” Id. § 3–501(b).
This definition of “employer” is more restrictive that the definition in the FLSA and the MWHL.
See Watkins, 173 F. Supp. 2d at 416. Specifically, “[t]he MWPCL does not contain a . . .
provision that explicitly expands employer liability to those acting on behalf of the employer.”
Id. “[A]n ‘employer’ under the MWPCL has the ‘commonly understood meaning of the term . .
., which contemplates some sort of contractual relationship involving the payment of wages in
exchange for services.’” Caseres, 2012 WL 5250561, at *4 (citing Watkins, 173 F. Supp. 2d at
414). “Courts analyzing the MWPCL have rejected any interpretation that would encompass
supervisors, officers, or other agents acting on behalf of the corporate employer.” Id.
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The Complaint in this case contains sufficient facts to state a plausible claim against
Defendants as “employers” under the FLSA, MWHL, and MWPCL. The Complaint alleges that
Defendants jointly own Solo & AD, Inc., and that they exercise exclusive control and authority
over Solo & AD, Inc.’s business operations. Pl.’s Compl. 3. Through Solo & AD, Inc.,
Defendants own and operate an Ethiopian restaurant known as Abyssinia Restaurant. Id. The
Complaint alleges that Defendants hired Plaintiffs as bartenders and had the power to fire
Plaintiffs. Pl.’s Compl. 3, 6. It also alleges that Defendants supervised Plaintiffs in the
performance of their job duties, and had the power to set Plaintiff’s rate of pay and work
schedules. Pl.’s Compl. 3, 6. Plaintiffs alleges that Defendants did not maintain true and
accurate records of each hour, day, and week Plaintiffs worked, or of how much Plaintiffs were
paid. Pl.’s Compl. 6. Plaintiffs also allege that Defendants failed to pay them wages, including
overtime wages, for almost the entirety of their employment. Pl.’s Compl. 2, 5.
In support of their motion, Defendants cite to cases from the Maryland Court of Appeals
which are inapposite. Def.’s Mot 3-4; Def.’s Reply 1-2. While these cases address the analysis
the court follows to determine whether it is appropriate to pierce the corporate veil, these cases
do not hold that piercing the corporate veil is necessary to find Defendants liable under the
FLSA, MWHL, and MWPCL. Viewing the Complaint in the light most favorable to Plaintiffs,
the allegations state a plausible claim for relief. Defendants could be found individually liable as
“employers” for violating minimum wage and overtime provisions under the FLSA and the
MWHL. Defendants could also be found liable for violating the provisions under the MWPCL
requiring prompt payment of wages upon termination. Accordingly, Defendants’ Motions are
denied.
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IV.
Conclusion
For the foregoing reasons, the Court DENIES Defendants’ Motions.
October 2, 2015
/s/
Charles B. Day
United States Magistrate Judge
CBD/yv
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