Li v. VJ & H, LTD et al
Filing
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MEMORANDUM OPINION. Signed by Magistrate Judge Timothy J. Sullivan on 2/6/2024. (ols, Deputy Clerk)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MARYLAND
WEIDONG LI,
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Plaintiff,
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v.
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VJ & H, LTD, et al.,
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Defendants.
Civil No. TJS-23-1633
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MEMORANDUM OPINION
This case is assigned to me for all proceedings by the parties’ consent, pursuant to 28 U.S.C.
§ 636(c). ECF No. 32. Pending before the Court is the Motion to Dismiss (“Motion”) (ECF No.
33) filed by Defendants VJ & H, LTD. d/b/a Nails Obsession and Hue Nguyen (“Ms. Nguyen”).
ECF No. 33. Having considered the parties’ submissions (ECF Nos. 33, 35, 38, 39 & 40), I find
that a hearing is unnecessary. See Loc. R. 105.6. For the following reasons, the Motion will be
denied.
I.
Background
Plaintiff Weidong Li brought this lawsuit on behalf of himself and other similarly situated
employees of Defendants. ECF No. 5. Plaintiff alleges that during the time when he was employed
by Defendants, they did not comply with the Fair Labor Standards Act, 29 U.S.C. § 201 et seq.
(“FLSA”), the Maryland Wage and Hour Law, Md. Code, Lab. & Empl. § 3-401 et seq.
(“MWHL”), and the Maryland Wage Payment and Collection Law, Md. Code, Lab. & Empl. § 3501 et seq. (“MWPCL”). Defendants timely moved to dismiss and their Motion is ripe for decision.
II.
Factual Allegations
The following facts are accepted as true for the purpose of evaluating this Motion. Plaintiff
worked for Defendants between 2021 and 2022 as a nail salon worker.1 ECF No. 5 ¶ 24. Plaintiff
generally worked 62 hours per week. Id. ¶¶ 26-27. Plaintiff was paid on commission, according to
the amount his clients spent at the nail salon. Id. ¶¶ 29-31. Defendants never informed Plaintiff of
his hourly wage and never paid him overtime pay for the hours worked over 40 hours in any week.
Id. ¶¶ 80-81. Plaintiff apparently worked with customers but also spent more than 20% of each
workday performing non-tipped work (cleaning). Id. ¶¶ 82-83. And for the tipped work that
Plaintiff did perform, Defendants misappropriated his tips by deducting 20% from the tips due to
Plaintiff. Id. ¶ 84. Defendants did not provide statements reflecting Plaintiff’s weekly pay,
including the rate of pay and deductions made from Plaintiff’s pay, in Chinese, Plaintiff’s native
language. Id. ¶ 85. Plaintiff was required to buy his own tools and equipment and was sometimes
directed to buy materials for the nail salon and personal items for Ms. Nguyen. Id. ¶¶ 87-90.
III.
Discussion
A.
Legal Standard
Rule 12(b)(6) permits a court to dismiss a complaint if it fails to “state a claim upon which
relief can be granted.” “The purpose of a Rule 12(b)(6) motion is to test the sufficiency of a
complaint, [and not to] 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). 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, 663 (2009) (internal quotation marks
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Plaintiff did not work for Defendants between January 31, 2021, and June 1, 2021. ECF
No. 5 ¶ 25.
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omitted). A complaint must consist of “more than labels and conclusions, and a formulaic recitation
of a cause of action’s elements will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 545 (2007).
When considering a motion to dismiss, a court must accept as true the well-pled allegations of the
complaint and “construe the facts and reasonable inferences derived therefrom in the light most
favorable to the plaintiff.” Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). While a court
must take the facts in the light most favorable to the plaintiff, it “need not accept the legal
conclusions drawn from the facts” and “need not accept as true unwarranted inferences,
unreasonable conclusions, or arguments.” E. Shore Markets, Inc. v. J.D. Assocs. Ltd. P’ship, 213
F.3d 175, 180 (4th Cir. 2000).
“Federal Rule of Civil Procedure 8(a)(2) requires only ‘a short and plain statement of the
claim showing that the pleader is entitled to relief,’ in order to ‘give the defendant fair notice of
what the . . . claim is and the grounds upon which it rests.’” Twombly, 550 U.S. at 555 (quoting
Conley v. Gibson, 355 U.S. 41, 47 (1957)). A complaint generally “does not need detailed factual
allegations.” Id. So long as the factual allegations are “enough to raise a right to relief above the
speculative level,” the complaint will be deemed sufficient. Id. A “well-pleaded complaint may
proceed even if it strikes a savvy judge that actual proof of those facts is improbable and that a
recovery is very remote and unlikely.” Id. at 556 (internal quotation marks omitted).
B.
Failure to State a Federal Claim
Defendants move to dismiss Plaintiff’s Complaint because it fails to state a claim under
federal law, thus depriving this Court of subject matter jurisdiction.2 ECF No. 33-1 at 6-8.
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Defendants’ argument is premised on Rule 12(b)(6), not Rule 12(b)(1). Under Rule
12(b)(1), the Court “may consider evidence outside the pleadings” to help determine whether it
has jurisdiction over the case before it. Richmond, Fredericksburg & Potomac R.R. Co. v. United
States, 945 F.2d 765, 768 (4th Cir. 1991); see also Evans v. B.F. Perkins Co., a Div. of Standex Int’l
Corp., 166 F.3d 642, 647 (4th Cir. 1999). But the Court should grant a Motion under Rule 12(b)(1)
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Defendants argue that Plaintiff has failed to state a claim under the FLSA because Defendants are
in possession of evidence extrinsic to the allegations in the Complaint (unauthenticated tax returns)
that shows that Defendants’ gross sales were less than $500,000 in both 2021 and 2022. Defendants
argue that because their gross sales do not meet the statutory threshold, they fall outside the FLSA’s
enterprise coverage. See 29 U.S.C. § 203(s)(1) (defining an enterprise engaged in commerce or the
production of goods for commerce as one that, among other things, “is an enterprise whose annual
gross volume of sales made or business done is not less than $500,000 (exclusive of excise taxes
at the retail level that are separately stated)”). If Plaintiff’s FLSA claims are dismissed, the Court
will no longer have jurisdiction over the remaining state law claims because none of them raise a
federal question and there is not complete diversity between the parties.
The Court rejects Defendants’ argument. Rule 12(d) provides that “[i]f, on a motion under
Rule 12(b)(6) or 12(c), matters outside the pleadings are presented to and not excluded by the
court, the motion must be treated as one for summary judgment under Rule 56.” But a Court has
“complete discretion to determine whether or not to accept the submission of any material beyond
the pleadings that is offered in conjunction with a Rule 12(b)(6) motion and rely on it, thereby
converting the motion, or to reject it, or simply not consider it.” Sager v. Hous. Comm'n of Anne
Arundel Cnty., 855 F. Supp. 2d 524, 542 (D. Md. 2012). In determining whether to exercise its
discretion to convert a motion to dismiss into one for summary judgment, a court should exercise
“great caution” and consider whether conversion “is likely to facilitate the disposition of the action
. . . [and] whether discovery prior to the utilization of the summary judgment procedure is
“only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail
as a matter of law.” Richmond, 945 F.2d at 768; Roman v. Guapos III, Inc., 970 F. Supp. 2d 407,
411 (D. Md. 2013). Even if Defendants had moved to dismiss under Rule 12(b)(1), the Court would
have reached the same result.
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necessary.” Id. “This conversion is not appropriate when the parties have not had an opportunity
to conduct reasonable discovery.” Zak v. Chelsea Therapeutics Int’l, Ltd., 780 F.3d 597, 606 (4th
Cir. 2015).
The Court declines to consider the extrinsic evidence that Defendants have attached to their
Motion, and declines to convert the Motion into a motion for summary judgment. Plaintiff has not
yet conducted discovery. Considering the allegations of Plaintiff’s Complaint, it is unlikely that
Plaintiff has much information about Defendants’ gross sales in 2021 and 2022. Further, “[t]ax
forms . . . are not presumptively reliable or authentic, and may be shown to be incredible or
unreliable by a plaintiff.” Gao v. Kerry Nails Salon Corp., No. 18-10448-PGG, 2021 WL 673460,
at *3 (S.D.N.Y. Feb. 22, 2021). Plaintiff must be allowed an opportunity to take discovery before
the Court considers whether summary judgment is warranted.
Defendants also argue that the Court lacks jurisdiction because Plaintiff was not “engaged
in commerce or in the production of goods for commerce.” ECF No. 33-1 at 7-8 (citing 29 U.S.C.
§ 207(a)). But in other cases, this Court has found nail salon employees to be engaged in commerce
or in the production of goods for commerce. See, e.g., De Paredes v. Zen Nails Studio, LLC, 2023
WL 2207405 (D. Md. Feb. 24, 2023). Other courts have reached the same conclusion. See Gao,
2021 WL 673460, at *3 (“The Court concludes that the nail salon's employees handle and work
with products – such as nail polish and nail polish remover – that have traveled in interstate
commerce.”). The Court is not persuaded it should reach a different result based on an opinion
from the United States Court of Appeals for the Eleventh Circuit, see ECF No. 33-1 at 7, which
arises from a different factual predicate. See Helfand v. W.P.I.P., Inc., 165 F. Supp. 3d 392, 399 at
n.8 (D. Md. 2016) (declining to dismiss a complaint based on the reasoning set forth in Thorne v.
All Restoration Services, Inc., 448 F.3d 1264, 1267 (11th Cir. 2006) because, among other reasons
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“the court reached its decision in light of an evidentiary record; in the instant case, by contrast,
litigation has only just commenced, and discovery is not yet underway.”).
C.
“Contradictory and Ambiguous Statements”
Defendants argue that the Complaint must be dismissed because the Complaint contains
self-contradicting statements that are confusing to Defendants. The Court rejects this argument
because, as a whole, the Complaint gives Defendants “fair notice of what the . . . claim is and the
grounds upon which it rests.” Twombly, 550 U.S. at 555.
D.
Plaintiff’s Citation to the Wrong Statute in Count II
Defendants argue that Plaintiff fails to state a plausible claim for relief in Count II because
the Complaint refers to a statute that plainly does not apply to Plaintiff’s claim. ECF No. 5 ¶¶ 107112 (citing Md. Code, Lab. & Employ. § 3-416, which concerns federally funded projects
undertaken by certain gas and electric companies). Plaintiff states that Count II of the Complaint
refers to the wrong section of the Maryland Code, and that Plaintiff intended to refer to Md. Code,
Lab. & Employ. § 3-413, which concerns Maryland’s state minimum wage. Plaintiff seeks leave
to amend the Complaint to correct the error. As explained below, the Court will grant Plaintiff
leave to file an amended complaint. The Motion is denied inasmuch as it seeks the dismissal of
Count II.
E.
Plaintiff’s Allegations in Count V
Defendants argue that Count V must be dismissed because Plaintiff does not plausibly
allege that Defendants failed to provide the notice required by Md. Code, Lab. & Empl. § 3504(a)(1). ECF No. 33-1 at 9-10. Having reviewed Plaintiff’s Complaint, the Court finds that
Plaintiff has plausibly alleged that Defendants did not provide Plaintiff the notice required by § 3504. The Court notes that Plaintiff’s Complaint contains another uncorrected error in paragraph
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130, where Plaintiff refers to the time of “firing” instead of the time of hiring. ECF Nos. 5 at 19;
38-3 at 19. The Motion is denied as to Count V.
F.
Employee vs. Independent Contractor
Defendants argue that Plaintiff’s claims in Counts II, IV, and V must be dismissed because
Plaintiff was an independent contractor, not an employee of Defendants, and the referenced statutes
only protect employees. ECF No. 33-1 at 10-12. In determining whether an individual qualifies as
an employer for purposes of the FLSA and related Maryland statutes (and thus whether Plaintiff is
an employee or independent contractor), “[t]he overarching concern is whether [the individual]
possessed the power to control the workers in question.”3 Prusin v. Canton’s Pearls, LLC, No.
JKB-16-0605, 2017 WL 5126156, at *11 (D. Md. Nov. 6, 2017). The Court looks to the “economic
reality” test to determine the employer’s level of control, considering factors such as “whether the
alleged employer (1) had the power to hire and fire employees, (2) supervised and controlled
employee work schedules or conditions of employment, (3) determined the rate and method of
payment, and (4) maintained employment records.” Id. “None of the four factors is dispositive;
rather, a court should consider the totality of circumstances,” including additional considerations
such as “the person’s job description, his or her financial interest in the enterprise, and whether or
not the individual exercises control over the employment relationship.” Id. (internal quotations
omitted).
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The FLSA defines “employer” as “any person acting directly or indirectly in the interest
of an employer in relation to an employee.” 29 U.S.C. § 203(d). An “employee” is defined as “any
individual employed by an employer,” id. § 203(e)(1), and “employ” means “to suffer or permit to
work.” Id. § 203(g). “The Supreme Court has instructed courts to construe the terms ‘employer’
and ‘employee’ expansively under the FLSA.” See Quinteros v. Sparkle Cleaning, Inc., 532 F.
Supp. 2d 762, 768 (D. Md. 2008) (citing Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326
(1992); Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947)).
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Plaintiff has plausibly alleged that Defendants were his employers. He alleges that
Defendants had the power to hire and fire him, supervised and controlled his work schedule,
determined the rate and method of his payment, and maintained employee records. ECF No. 5
¶¶ 12-15. Although the details of these allegations are sparse, they are sufficient to put Defendants
on fair notice of Plaintiff’s claims against them. The parties will have the opportunity to obtain
evidence pertinent to the “economic reality” test during discovery. With the benefit of discovery,
the Court will be in a better position to determine whether Plaintiff was an employee or
independent contractor in his work for Defendants. See generally Wilson v. Marlboro Pizza, LLC,
No. PX-22-1465, 2023 WL 3122130, at *3 (D. Md. Apr. 27, 2023) (“[A]lthough at this stage, the
specifics of each employment-related act are wanting, in the aggregate they make plausible that
Wilson was ‘economically dependent’ on Defendants for his employment, rather than being ‘in
business for himself.’”); Brown v. Rapid Response Delivery, Inc., 226 F. Supp. 3d 507, 512 (D.
Md. 2016) (“[W]hether Plaintiffs are employees or independent contractors is a legal question
which the Court must determine based on the facts developed in discovery.”); Rollins v. Rollins
Trucking, LLC, No. JKB-15-3312, 2016 WL 81510, at *3 (D. Md. Jan. 7, 2016) (explaining that
“courts in this District have allowed similarly pleaded FLSA/MWHL claims to proceed to
discovery”); Astorga v. Castlewood Consulting, LLC, No. GJH-14-4006, 2015 WL 2345519, at *4
(D. Md. May 14, 2015) (“Ultimately, after discovery, the Court will evaluate these factors and
apply them to the facts of the case. That time, however, has not yet arrived.”).
G.
Plaintiff’s Request for Leave to File Amended Complaint
Plaintiff seeks leave to file an amended complaint to correct typographical errors. ECF No.
35 at 17. Rule 15 provides that a party seeking to amend its pleading after twenty-one days
following service may do so “only with the opposing party’s written consent or the court’s leave.”
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Fed. R. Civ. P. 15(a)(1)(B). The Rule requires courts to “freely give leave when justice so requires.”
Fed. R. Civ. P. 15(a)(2). The Fourth Circuit has liberally construed this standard, such that leave to
amend should be denied only if prejudice, bad faith, or futility is present. See Johnson v. Oroweat
Foods Co., 785 F.2d 503, 509 (4th Cir. 1986). Defendants did not register any opposition to
Plaintiff’s request to file an amended complaint. And the Court finds good cause to grant Plaintiff
the requested leave. Plaintiff’s motion for leave to file an amended complaint (ECF No. 38) is
GRANTED. Plaintiff’s Amended Complaint (ECF No. 38-3) will be deemed filed as of the date
of this Memorandum Opinion.
IV.
Conclusion
For these reasons, Defendants’ Motion to Dismiss (ECF No. 33) is DENIED. Plaintiff’s
motion for leave to file an amended complaint (ECF No. 38) is GRANTED. Defendants shall file
an answer to the Amended Complaint within 14 days of the date of this Memorandum Opinion
and accompanying Order. Thereafter, the Court will enter a scheduling order so that the parties
may proceed with discovery. The Court will not entertain any motion for summary judgment until
after the close of discovery.
Date: February 6, 2024
/s/
Timothy J. Sullivan
Chief United States Magistrate Judge
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