Smith v. Auto Club Services, Inc.
ORDER granting 15 Motion to Dismiss (Written Opinion) Signed by Senior Judge David S. Doty on 10/25/2017. (DLO)
United States District Court
District of Minnesota
Civil No. 17-1949(PAM/FLN)
Leslie L. Smith,
Auto Club Services, Inc.,
L. Kathleen Harrell-Latham, Esq. and Loop Legal PLLC, 2828
University Avenue SE, Suite 150, Minneapolis, MN 55414,
counsel for plaintiff.
William Roth Sampson, Esq. and Shook, Hardy, & Bacon LLP,
2555 Grand Blvd., Kansas City, MO 64108; Douglas R.
Boettge, Esq. and Stinson Leonard Street, LLP, 50 South 6th
Street, Suite 2600, Minneapolis, MN 55402; counsel for
This matter is before the court on the motion to dismiss by
defendant Auto Club Services, Inc.
Based on a review of the
reasons, the motion is granted.
This contract dispute arises out of the parties’ June 2014,
plaintiff Leslie Smith to act as Auto Club’s agent in connection
with the sale of its insurance policies in Minnesota.
¶ 7; Agreement § I(A).
In exchange for sales commissions, Smith
“sufficient time” to selling its products, and maintain certain
Agreement specified that Smith was “an independent contractor
and not an employee of [Auto Club] for any purpose.”
According to Smith, Auto Club told her that the projections were
“very conservative” and a “bare minimum.”
Id. ¶ 19.
not allege the specific sales revenue projected.
those projections and statements, Smith executed the Agreement.
Id. ¶ 20.
Smith alleges that after she signed the Agreement, Auto
Club failed to authorize necessary approvals that prohibited her
from immediately opening an office and making sales, even though
she was already incurring operating expenses.
Id. ¶¶ 21-23.
When Smith finally began selling Auto Club policies in November
2014, she learned that Auto Club only underwrites policies at a
“competitive price” for persons with high credit scores.
Smith alleges that Auto Club knew that the credit-score
averages in her territory made it impossible for her to meet the
information from her so that she would sign the Agreement.
She also alleges that Auto Club prevented her from
credit scores outside of her territory, even though other agents
were permitted to do so.
Id. ¶¶ 37-41.
In April 2017, after suffering “substantial losses” due to
“disappointing revenue,” Smith advised Auto Club that she was
closing her office and seeking other employment.
Id. ¶¶ 42-46.
violation of the Minnesota Franchise Act, Minn. Stat. § 80C.01
et seq. (Count I); violation of the Minnesota Deceptive Trade
Practices Act, Minn. Stat. § 325D.44 (Count II); violations of
the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq.
(Counts III and IV); fraud (Count V); unjust enrichment (Count
VI); and declaratory judgment that she was fraudulently induced
to enter into the Agreement (Count VII).
Auto Club now moves to
Standard of Review
accepted as true, to state a claim to relief that is plausible
on its face.’”
Braden v. Wal-Mart Stores, Inc., 588 F.3d 585,
594 (8th Cir. 2009) (quoting Ashcroft v. Iqbal, 556 U.S. 662,
plaintiff [has pleaded] 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 (citing Bell
Atl. Corp. v. Twombly, 550 U.S. 544, 556 (2007)).
complaint need not contain detailed factual allegations, it must
raise a right to relief above the speculative level.
sufficient to state a claim.
Iqbal, 556 U.S. at 678 (citation
and internal quotation marks omitted).
The court does not consider matters outside the pleadings
under Rule 12(b)(6).
Fed. R. Civ. P. 12(d).
The court may,
however, consider matters of public record and materials that
are “necessarily embraced by the pleadings.”
Porous Media Corp.
v. Pall Corp., 186 F.3d 1077, 1079 (8th Cir. 1999) (citation and
internal quotation marks omitted).
Here, the court properly
The Fraud-Based Claims
fraudulent conduct by Auto Club.
Count I alleges breach of the
intentionally ... engag[ing] in unfair and inequitable conduct
... [it] had reason to know . . . was deceiving” Smith.
“deceptive” practices, id. ¶ 58, Counts V and VI allege fraud
and unjust enrichment, respectively, based on allegedly false
inducement, id. ¶ 94.
Because these claims either allege fraud or sound in fraud,
Smith is required to plead them with particularity.
Civ. P. 9(b); Drobnak v. Andersen Corp., 561 F.3d 778, 784 (8th
In other words, she was required to plead “the who,
what, where, when, and how of the alleged fraud.”
U.S. ex rel.
Thayer v. Planned Parenthood of Heartland, 765 F.3d 914, 917
Auto Club argues that Smith has failed to support her
allegations with any of the required details.
meaningfully responded to that argument.
Smith has not
Failure to respond to
an argument in response to a motion to dismiss “amounts to a
waiver, and on that basis alone defendant’s motion to dismiss
... should be granted.”
Espey v. Nationstar Mortg., LLC, Civ.
No. 13-2979, 2014 WL 2818657, at *11 (D. Minn. June 19, 2014);
Zimmerschied v. JP Morgan Chase Bank, N.A., 49 F. Supp. 3d 583,
590-91 (D. Minn. 2014).
Even if the court were to undertake a Rule 9(b) analysis,
Ogletree, Abbott, Clay & Reed Law Firm, L.L.P. v. FindLaw, Civ.
No. 14-340, 2014 WL 2611862, at *3 (D. Minn. June 11, 2014).
The closest Smith comes to laying an adequate foundation for her
fraud-based claims is her allegation that Auto Club provided her
projections, which proved to be unattainable.
Compl. ¶ 19.
projections promised by Auto Club, nor does she allege that the
unspecified projections were false or misleading when they were
Such vague allegations do not satisfy Rule 9(b).
revenue projections and defendant’s statement that “significant
allegation[s] do not satisfy the requirements of Rule 9(b)”).
Because Smith has failed to satisfy Rule 9(b), all of her
fraud-based claims fail.
12(b)(6), as well.
Each of those claims fails under Rule
The Minnesota Franchise Act claim (Count I)
fails because Smith has not adequately pleaded that she was a
See Clear Wave Hearing Instruments, Inc. v. Starkey
Holding Corp., Civ. No. 11-1562, 2012 WL 949953, at *6 (D. Minn.
Mar. 20, 2012) (“As a threshold matter, Plaintiffs must allege
that they have a franchise relationship with Defendants.”); see
also Minn. Stat. § 80C.01, subdiv. 4(a) (“‘Franchise’ means (1)
a contract or agreement, either express or implied, whether oral
or written, for a definite or indefinite period, between two or
more persons ....”).
The complaint does not allege a franchise
relationship, and neither does the Agreement.
court rejects Smith’s argument that costs she incurred operating
Coyne’s & Co. v. Enesco, LLC, 553 F.3d 1128, 1131 (8th Cir.
2009) (noting that a franchise fee “ordinarily [is] an up-front,
The Deceptive Trade Practices Act claim fails because Smith
has not alleged any public benefit from her cause of action.
See Select Comfort Corp. v. Sleep Better Store, LLC, 796 F.
Supp. 2d 981, 985-87 (D. Minn. 2011) (discussing cases).
Smith has alleged only projections of future performance, not
any specific misrepresentations “of a past or present material
Trooien, 608 F.3d at 1029; ADT Sec. Servs., Inc. v.
Swensen, 276 F.R.D. 278, 294-95 (D. Minn. 2011).
governed the parties’ relationship, and Smith has pleaded no
facts to undermine its validity.
See Integrity Bank Plus v.
Talking Sales, Inc., Civ. No. 04-4523, 2005 WL 419694, at *4 (D.
Minn. Feb. 22, 2005) (“[T]he existence of an express contract
As a result, all of Smith’s fraud-based claims fail as a
matter of law.
III. The FLSA claims
The remaining two counts allege that Auto Club violated the
FLSA by (1) misclassifying her as an independent contractor and
(2) failing to pay her overtime.
These claims also fail as a
matter of law.
Initially, it is difficult to understand the assertion that
Agreement, which states that she is an independent contractor.
Agreement § IV(D).
Even if the complaint plausibly alleged that
Smith was an employee of Auto Club rather than an independent
minimum wage for the hours she worked for Auto Club.
A minimum-wage claim is not viable if Smith received the
minimum necessary compensation – that is, “hours actually worked
... multiplied by the minimum hourly statutory [pay rate]” – no
Hensley v. MacMillan Bloedel Containers, Inc.,
786 F.2d 353, 357 (8th Cir. 1986).
It is not enough for Smith
simply to allege that she “received only commissions and did not
Agreement,” Compl. ¶ 69, without also alleging that she did not
receive minimum wage.
See Jones v. Casey’s Gen. Stores, 538 F.
Supp. 2d 1094, 1102-03 (S.D. Iowa 2008) (rejecting minimum-wage
claim, like the one asserted here, that was predicated on a
“mere allegation that certain hours actually worked by Plaintiff
went entirely unpaid”); see also Bailey v. Border Foods, Inc.,
Civ. No. 09-1230, 2009 WL 3248305, at *2 (D. Minn. Oct. 6, 2009)
(“To [plead] a viable FLSA claim for unpaid minimum wages, the
complaint should indicate the applicable rate of pay and the
amount of unpaid minimum ... wages due.”) (internal quotation
hours she worked or the commissions she received from Auto Club,
her misclassification claim does not raise a right to relief
“above the speculative level.”
Twombly, 550 U.S. at 555.
A similar analysis applies to her unpaid overtime claim.
Smith must do more than allege that “at times, [she] worked more
(dismissing claim alleging that the plaintiffs “regularly worked
... overtime each week but were not paid ... overtime wages in
violation of the FLSA”).
Furthermore, Auto Club correctly notes
requirements are implicated by the complaint, such as those for
outside sales and bona-fide executives.
Smith did not address
applicability and waiving any argument to the contrary.
2014 WL 2818657, at *11.
As a result, the FLSA claim must be
Accordingly, based on the above, IT IS HEREBY ORDERED that:
The motion to dismiss [ECF No. 15] is granted; and
The complaint [ECF No. 1] is dismissed with prejudice.
LET JUDGMENT BE ENTERED ACCORDINGLY.
Dated: October 25, 2017
s/David S. Doty
David S. Doty, Judge
United States District Court
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