Hall et al v. Plastipak Holdings, Inc et al
Filing
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OPINION AND ORDER denying 30 Second Motion for Sanctions; denying 24 Motion to Dismiss Amended Complaint. Signed by District Judge Robert H. Cleland. (LWag)
UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION
ROBERT HALL, et al.,
Plaintiffs,
v.
Case No. 15-11428
PLASTIPAK HOLDINGS,
INC, PLASTIPAK PACKAGING, INC.,
PLASTIPAK TECHNOLOGIES, LLC, and
WILLIAM C. YOUNG,
Defendants.
/
OPINION AND ORDER DENYING DEFENDANTS’ MOTION TO DISMISS
AMENDED COMPLAINT AND DENYING DEFENDANTS’
SECOND MOTION FOR SANCTIONS
Pending before the court is Defendants’ Motion to Dismiss Plaintiffs’ Amended
Complaint (Dkt. # 24) and Defendants’ Second Motion for Sanctions (Dkt. # 30).
Plaintiffs have filed responses to both motions (Dkt. ## 26, 31) to which Defendants
have replied (Dkt. ## 27, 32.) The issues are fully briefed and the court determines that
no hearing is necessary. See E.D. Mich. LR 7.1(f)(2). For the reasons stated below, the
court will deny Defendants’ Motions.
I. BACKGROUND
Plaintiffs brought suit against Defendants seeking unpaid overtime compensation
under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq. (Dkt. # 1.)
Defendants filed a motion to dismiss arguing that (1) certain Defendants were
improperly named in this action and (2) that Plaintiffs failed to state a claim under the
FLSA because they were properly paid for working a “fluctuating work week.” (Dkt. # 9.)
Defendants also filed a Motion for Sanctions arguing, in general, that Plaintiffs’ claims
were frivolous. (Dkt. #18.) The court granted Defendants’ Motion to Dismiss, but did so
on the grounds that Plaintiffs failed to plead sufficient factual matter to state a claim that
was plausible on its face. (Dkt. # 22, Pg. ID 361 (citing Ashcroft v. Iqbal, 556 U.S. 662,
678 (2009)). The court held that a plaintiff may “push the strength of his complaint from
‘possibility’ to ‘plausibility’” by pleading facts “such as an imprecise numeric estimate of
uncompensated hours or unpaid wages.” (Id. at Pg. ID 360.) The court, in a later
separate opinion, denied the Motion for Sanctions, as well. (Dkt. # 33.)
After the court granted the Motion to Dismiss, but before the Motion for Sanctions
was denied, Plaintiffs filed an Amended Complaint (Dkt. 23), which initiated the instant
round of briefing that includes a second Motion to Dismiss and a second Motion for
Sanctions.
II. STANDARD
A. Motion to Dismiss
A complaint must contain “a short and plain statement of the claim showing that
the pleader is entitled to relief.” Fed. R. Civ. P. 8(a)(2). To survive a motion to dismiss,
the complaint’s “[f]actual 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.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The court views the
complaint in the light most favorable to the Plaintiff and accepts all well-pleaded factual
allegations as true. Tackett v. M&G Polymers, USA, LLC, 561 F.3d 478, 488 (6th Cir.
2009). The court, however, “need not accept as true legal conclusions or unwarranted
factual inferences.” Directv, Inc. v. Treesh, 487 F.3d 471, 476 (6th Cir. 2007) (quoting
Gregory v. Shelby County, 220 F.3d 433, 446 (6th Cir. 2000)).
“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 (2009) (quoting Twombly, 550 U.S. at 570). “[W]here the
well-pleaded facts do not permit the court to infer more than the mere possibility of
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misconduct, the complaint has alleged—but it has not show[n]—that the pleader is
entitled to relief.” Id. at 679 (internal quotation marks omitted).
“In determining whether to grant a Rule 12(b)(6) motion, the court primarily
considers the allegations in the complaint, although matters of public record, orders,
items appearing in the record of the case, and exhibits attached to the complaint, also
may be taken into account.” Amini v. Oberlin Coll., 259 F.3d 493, 502 (6th Cir. 2001)
(quoting Nieman v. NLO, Inc., 108 F.3d 1546, 1554 (6th Cir.1997)).
B. Motion for Sanctions
Federal Rule of Civil Procedure 11 permits sanctions if “a reasonable inquiry
discloses the pleading, motion, or paper is (1) not well grounded in fact, (2) not
warranted by existing or a good faith argument for the extension, modification or
reversal of existing law, or (3) interposed for any improper purpose such as harassment
or delay.” Merritt v. Int’l Ass’n of Machinists and Aerospace Workers, 613 F.3d 609, 626
(6th Cir. 2010) (quoting Herron v. Jupiter Transp. Co., 858 F.2d 332, 335 (6th Cir.
1988)). Rule 11 of course does not require a party or its counsel to be correct, instead,
the relevant standard by which actions are governed is “reasonableness under the
circumstances.” Adams v. Penn Line Servs., Inc., 620 F. Supp. 2d 835, 838 (N.D. Ohio
2009).
III. DISCUSSION
Defendants advance six arguments in their Motion to Dismiss. First, they argue
Plaintiffs have asserted a formula for damages that “ignores the fact that Plaintiffs have
already received compensation for hours that they have worked.” (Dkt. # 24, Pg. ID
429.) Second, Defendants argue that the Amended Complaint suffers from the same
Twombly concerns as the original Complaint because Plaintiffs have failed to provide
estimates of the uncompensated hours worked or wages owed. Defendants’ third,
fourth, and fifth arguments, in sum, assert that they are in compliance with Department
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of Labor (“DOL”) regulations concerning the fluctuating work week and are thus entitled
to pay less than time and a half for overtime. Lastly, Defendants argue that Plastipak
Packaging, Inc. is the only proper Defendant and that the others (Plastipak Holdings,
Inc.; Plastipak Technologies, LLC; and William C. Young) should be dismissed. The
court will address these arguments in turn.
A. Damages Calculations
Defendant first argues that Plaintiffs’ damages formula is incorrect because it
does not account for the amount Plaintiffs have already been compensated for overtime
hours (however deficient it may be). This argument can be quickly dispensed with. First,
Plaintiffs concede that the formula should have accounted for the straight-time wages
already paid and have corrected their statement of the formula to focus only on the
additional overtime premium to which they claim entailment. (Dkt. # 26, Pg. ID 464.)
And second, a faulty damages formula in a complaint may be a problem down the road,
but it does not, at the motion to dismiss phase, mean that a plaintiff has fallen below the
minimum pleading requirement of Rule 8, that is, that a plaintiff state a valid claim for
relief. See Fed. R. Civ. P. 8(a)(2).
B. Twombly
Defendants argue that Plaintiffs have failed to correct the factual deficiencies
noted in the court’s earlier opinion dismissing the complaint, and that the Amended
Complaint therefore still fails under Twombly. To survive a motion to dismiss, the
complaint’s “[f]actual allegations must be enough to raise a right to relief above the
speculative level.” Twombly, 550 U.S. at 555. In its earlier opinion, the court stated that
deficiencies in the complaint could be overcome by pleading facts “such as an
imprecise numeric estimate of uncompensated hours or unpaid wages.” (Dkt. #22, Pg.
ID 360.) Plaintiffs have obviously done so. There are new factual assertions in the
Amended Complaint that make estimates as to the number of uncompensated (or more
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accurately deficiently compensated) overtime hours worked and also estimate the
amount of unpaid wages owed. (See, e.g., Dkt. # 23, Pg. ID 365-66, ¶¶ 9-11 (“Hall
worked 28.3 hours in excess of 80 . . . Hall is owed at least $4,010.00 for overtime
hours worked for which he was not paid one and a half times his regular rate of pay.”))
Plaintiffs have thus cured the major deficiency noted in the court’s earlier opinion.
The court is at a loss to understand how Defendants can assert that “Plaintiffs
made no such estimates within the body of the Amended Complaint.”1 (Id. at Pg. ID
429.) Defendants of course dispute that these facts actually establish any violation
because they maintain that Plastipak Packaging, Inc. meets the requirements to pay
Plaintiffs under the fluctuating-work-week scheme (which requires only half-time pay for
overtime hours) and that Plaintiffs have not been undercompensated according to that
scheme. But this is beside the point. Plaintiffs allege that Defendants’ conduct precludes
the use of the fluctuating work week and that Plaintiffs therefore have been underpaid
because they should have received time-and-a-half pay (not half time) for overtime
hours worked.
C. The Fluctuating Work Week
Defendants third, fourth, and fifth arguments (Parts I.C., I.D., and I.E of the
Motion to Dismiss) all amount to a claim that Defendants are in compliance with DOL
regulations concerning the fluctuating work week and that they are entitled to calculate
Plaintiffs’ pay accordingly. In support of this argument, Defendants attach to their Motion
to Dismiss an agreement signed by Robert Hall (the “Acknowledgment Form,” as
Defendants refer to it) (Dkt # 24-4, Pg. ID 455), which Defendants assert explains the
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Perhaps Defendants have placed too much stock in (or advance too precious a
reading of) the court’s request for estimates of uncompensated hours. While
Defendants are correct that Plaintiffs have not identified any wholly uncompensated
hours, and only identified hours for which they were paid half or regular time, this
quibble misses the mark. Plaintiffs have alleged that they should have been paid time
and a half and that they were paid less. That is enough at this stage.
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fluctuating-work-week system to employees and has been signed by all Plaintiffs.
Further, Defendants state that the DOL has “approved Defendant Plastipak Packaging,
Inc.’s pay practices as to fluctuating work weeks,” but Defendants do not attach any
such approval.2 This argument fails for two reasons.
First, as Plaintiffs point out, matters outside the pleadings cannot be considered
by a court in ruling on a Rule 12(b)(6) motion to dismiss. Weiner v. Klais and Co., Inc.,
108 F.3d 86, 88 (6th Cir. 1997). A court may consider documents attached to a
defendant’s Rule 12(b)(6) motion only if the documents are properly considered “part of
the pleadings” because “they are referred to in the plaintiff’s complaint and are central to
her claim.” Id. at 89 (citing Venture Assocs. Corp. v. Zenith Data Sys. Corp., 987 F.2d
429, 431 (7th Cir. 1993)). Plaintiffs correctly note that they did not rely on or mention the
Acknowledgment Form in their Amended Complaint and that a motion to dismiss is an
improper vehicle to advance an argument wholly based on documents not in the
pleadings.3
Second, even if the court could consider the Acknowledgment Form, an
employer must do more than produce such a form to show compliance with DOL
regulations. The fluctuating-work-week regulation requires that four conditions be
satisfied before paying an employee on such a plan:
(1) the employee’s hour must fluctuate from week to week;
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The court therefore cannot credit the supposed DOL approval, as without an
agency document anointing Defendants’ payment scheme, the court cannot determine
the scope or nature of such approval and cannot determine what level of deference, if
any, is owed this agency determination.
3
With no citation or support, Defendants state that “Defendant Plastipak
Packaging, Inc.’s Salary Non-Exempt Policy and the Acknowledgment that each Plaintiff
signed, are, therefore, referred to in the Complaint . . . .” (Dkt. # 27, Pg. ID 488
(emphasis omitted).) A review of the Amended Complaint reveals that Defendants are
simply wrong.
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(2) the employee must receive a fixed salary that does not vary with the
numbers of hours worked during the week (excluding overtime premiums);
(3) the fixed amount must be sufficient to provide compensation every
week at a regular rate that is at least equal to the minimum wage; and
(4) the employer and employee must share a “clear mutual understanding”
that they employer will pay that fixed salary regardless of the number of
hours worked.
O’Brien v. Town of Agawam, 350 F.3d 279, 288 (1st Cir. 2003) (citing 29 C.F.R. §
778.114(a), (c)). Additionally, it is the employer’s burden to show compliance with the
requirements of the regulation. Aiken v. County of Hampton, S.C., 977 F. Supp. 390,
395 (D.S.C. 1997) (citing Bailey v. County of Georgetown, 94 F.3d 152, 155-56 (4th Cir.
1996)). Here, even if there was a clear understanding about the pay system (the fourth
requirement), Plaintiffs allege in their Amended Complaint that employees were docked
vacation pay when they didn’t work a full forty hours and, thus, Defendants fail to meet
the second requirement that the fixed salary not vary when fewer hours are worked.
Defendants’ response, arguing that an employer is free to deduct vacation days
for willful absences or tardiness under the fluctuating-work-week plan, is unavailing.
(See Dkt. # 24, Pg. ID 437 (citing Samson v. Apollo Res., Inc., 242 F.3d 629, 639 (5th
Cir. 2001)). Plaintiffs’ Amended Complaint alleges that when they “worked less than 40
hours per week, Plaintiffs were only paid for the actual hours worked, at their regular
hourly rate. Defendants took away benefits in the form of banked vacation pay to make
up the difference and bring their compensation up to the stated ‘salary’ amount.” (Dkt. #
23, Pg. ID 373.) The analysis in the Samson case makes relatively clear that only
deductions of a disciplinary nature are allowed under the fluctuating work week. See
242 F.3d at 638-39. Deductions to “make up the difference” for an employee who was
scheduled, for example, to work only thirty-two hours are of an entirely different sort and
Defendants offer no authority holding that they are allowed under the FLSA or DOL
regulations.
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Defendants try to overcome this hurdle by mischaracterizing Plaintiffs’ Amended
Complaint, arguing that “Plaintiffs have merely alleged that Plastipak Packing, Inc.
requires salary non-exempt associate employees like the Plaintiffs to use banked
vacation time when they are called upon to work in a workweek, but are willfully
unavailable to work.” (Dkt. # 24, Pg. ID 439.) But nowhere in the Amended Complaint
do Plaintiffs limit their allegations to scenarios in which they were “willfully unavailable”
to work. They allege that Defendants used such deductions to “make up the difference”
where hours dipped below forty. This, fairly read, could include scenarios where
Plaintiffs were scheduled for less than forty hours of work, were sent home early when
there was no work to be done, or were sick. Relatedly, Defendants assert that “the only
time a vacation day is used is when a vacation day is requested or when it is allowable
under intermittent FMLA (and only when a full day is missed).” (Id.) But this point is
obviously in dispute as one of Plaintiffs’ primary allegations is that Defendants’ do in fact
deduct vaction days even when employees don’t request it. Plaintiffs and Defendants
must be left to their proofs on this point of contention. The matter is not appropriate for
resolution on a motion to dismiss.
D. Proper Defendants
Finally, Defendants argue that Plastipak Holdings, Inc.; Plastipak Technologies,
LLC; and William C. Young are not proper Defendants because they are not
“employers” of Plaintiffs. Defendants however fail to cite to a single case or statue in
their attempt to define an “employer” for purposes of an action under the FLSA. The
FLSA defines “employer” to include “any person acting directly or indirectly in the
interest of an employer in relation to an employee . . .” 29 U.S.C. § 203(d). It may be
that there are several simultaneous employers who may be responsible for compliance
with the FLSA. Falk v. Brennan, 414 U.S. 190, 195 (1973); Dole v. Elliott Travel &
Tours, Inc., 942 F.2d 962, 965 (6th Cir. 1991). “The remedial purposes of the FLSA
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require the courts to define ‘employer’ more broadly than the term would be interpreted
in traditional common law applications.” Dole, 942 F.2d at 965 (quoting McLaughlin v.
Seafood, Inc., 867 F.2d 875, 877 (6th Cir. 1991)). “In deciding whether a party is an
employer, ‘economic reality’ controls rather than common law concepts of agency.” Id.
Further, “[t]he overwhelming weight of authority is that a corporate officer with
operational control of a corporation’s covered enterprise is an employer along with the
corporation, jointly and severally liable under the FLSA for unpaid wages.” Dole, 942
F.2d at 965.
According to the Complaint, “Mr. Young is the President of Holdings and
Packaging . . . [and] the person with authority to make decisions concerning pay
practices of Defendants.” (Dkt. # 1, Pg. ID 4.) These allegations are enough at this
stage to establish that Mr. Young is a corporate officer with operational control, and thus
an employer under the FLSA. Mr. Young is a proper defendant.
As to Plastipak Holdings, Inc. and Plastipak Technologies, LLC, Plaintiffs have
alleged sufficient facts for the court to find it “plausible” that they are employers under
the FLSA. See Twombly, 550 U.S. at 570. Courts employ the “economic realities” test in
determining who is and is not an employer for FLSA purposes. Goldberg v. Whitaker
House Co-op., Inc., 366 U.S. 28, 33 (1961). The question of who is an employer
depends on many factors and factual considerations: “No one factor is dispositive;
rather, it is incumbent upon courts to transcend traditional concepts of the employeremployee relationship and assess the economic realities presented by the facts in each
case.” Dole, 942 F.2d at 965 (quoting Donovan v. Sabine Irrigation Co., Inc., 695 F.2d
190, 195 (5th Cir. 1983). For now, Plaintiffs’ allegations that all of the Plastipak entities
have overlapping addresses, resident agents, and management is enough to warrant
factual development of this issue.
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IV. CONCLUSION
For the reasons stated above, IT IS ORDERED that Defendant’s Motion to
Dismiss (Dkt. # 24) is DENIED.
IT IS FURTHER ORDERED that, as Defendants have advanced substantially the
same arguments in the Second Motion for Sanctions (Dkt. # 30), that motion is also
DENIED on the same grounds.
s/Robert H. Cleland
ROBERT H. CLELAND
UNITED STATES DISTRICT JUDGE
Dated: August 12, 2016
I hereby certify that a copy of the foregoing document was mailed to counsel of record
on this date, August 12, 2016, by electronic and/or ordinary mail.
s/Lisa G. Wagner
Case Manager and Deputy Clerk
(313) 234-5522
S:\Cleland\JUDGE'S DESK\C2 ORDERS\15-11428.HALL.denySecondMTD.smq.2.wpd
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