Liebesman v. Competitor Group, Inc.

Filing 35

MEMORANDUM AND ORDER... IT IS HEREBY ORDERED that Defendant's Motion to Dismiss Plaintiffs Amended Collective Class Action Complaint (ECF No. 26 ) is DENIED without prejudice. IT IS FURTHER ORDERED that Plaintiffs Motion for Conditional Class Certification Under the Fair Labor Standards Act or Class Certification Under Fed. R. Civ. P. 23 and Request for Discovery/Briefing Schedule (ECF No. 6 ) is DENIED without prejudice. Plaintiff can refile her motion for conditional class certification in accordance with the case management order that will be entered by the Court. Signed by District Judge Ronnie L. White on 5/11/2015. (NEB)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
)
)
YVETTE JOY LIEBESMAN, individually and )
On behalf of all others similarly situated,
)
)
Plaintiff,
) No. 4:14-CV-1653 RLW
)
v.

)

)
)
)
)

COMPETITOR GROUP, INC.,
Defendant.

MEMORANDUM AND ORDER
This matter is before the court on Defendant' s Motion to Dismiss Plaintiffs Amended
Collective Class Action Complaint (ECF No. 26). This matter is fully briefed and ready for
disposition.

BACKGROUND 1
Defendant Competitor Group, Inc. ("CGI"), a for-profit Delaware corporation with its
principal place of business in the State of California, operates the Rock 'n ' Roll Marathon/HalfMarathon Series of races. (Amended Complaint and Class Action Complaint ("Complaint" or
"Compl."),

~~7-8) .

The Rock ' n' Roll Marathon/Half-Marathon Series has been staged in

approximately twenty-four locations, including the St. Louis Rock ' n ' Roll Marathon/Half
Marathon, for the last two years. (Compl. , ~8) . Plaintiff Yvette Joy Liebesman alleges that she
"volunteered" as a bicycle escort in October 2012 and on October 21 , 2012 for the Rock ' n ' Roll
Marathon in St. Louis, Missouri. (Compl. ,
1

~6).

Liebesman claims that she was led to believe

When ruling on a Federal Rule of Civil Procedure 12(b)( 6) motion to dismiss for failure to state
a claim, the Court must take as true the alleged facts and determine whether they are sufficient to
raise more than a speculative right to relief. Bell At!. Corp. v. Twombly, 550 U.S. 544, 555
(2007).

that her labor would be in support of local charities, the community, and other charitable
purposes.

(Compl., if54). However, she maintains that this was incorrect and she worked

without proper compensation.
Liebesman purports to represent the following class:
All persons who expended their time, labor, and efforts, purported in a volunteer
capacity, on behalf of Defendant Competitor Group, Inc. , in operating events in
the Rock 'n' Roll Marathon from October 21 , 2012 until present.
(Compl., if66).

Liebesman alleges claims for violations of the Fair Labor Standards Act

("FLSA"), violations of state minimum wage laws, unjust enrichment, and fraud. CGI seeks to
dismiss the all of the claims.
STAND ARD FOR MOTION TO DISMISS

In ruling on a motion to dismiss, the Court must view the allegations in the Complaint
liberally in the light most favorable to Plaintiff. Eckert v. Titan Tire Corp., 514 F .3d 801 , 806
(8th Cir. 2008) (citing Luney v. SGS Auto Servs., 432 F.3d 866, 867 (8th Cir. 2005)).
Additionally, the Court "must accept the allegations contained in the complaint as true and draw
all reasonable inferences in favor of the nonmoving party." Coons v. Mineta, 410 F.3d 1036,
1039 (8th Cir. 2005) (citation omitted). To survive a motion to dismiss, a complaint must
contain "enough facts to state a claim to relief that is plausible on its face. " Bell At!. Corp. v.

Twombly, 550 U.S . 544, 570 (2007) (abrogating the "no set of facts" standard for Fed. R. Civ. P.
12(b)(6) found in Conley v. Gibson, 355 U.S. 41 , 45-46 (1957)). While a complaint attacked by
a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiffs
obligation to provide the grounds of his entitlement to relief "requires more than labels and
conclusions, and a formulaic recitation of the elements of a cause of action will not do."

-2-

Twombly, 550 U.S. at 555; Huang v. Gateway Hotel Holdings, 520 F. Supp. 2d 1137, 1140 (E.D.

Mo. 2007).
DISCUSSION
I.

FLSA Exemption

Under the FLSA, "employees" are required to receive a set minimum wage. 29 U.S.C.
§206(a). CGI claims that the Rock 'n' Roll Marathon/Half Marathon Series is entitled to an
exception to this requirement for amusement or recreational establishments under 29 U.S.C.
§213(a)(3):
The provisions of sections 206 (except subsection (d) in the case of paragraph ( 1)
of this subsection) and 207 of this title shall not apply with respect to any
employee employed by an establishment which is an amusement or recreational
establishment, organized camp, or religious or non-profit educational conference
center, if (A) it does not operate for more than seven months in any calendar year,
or (B) during the preceding calendar year, its average receipts for any six months
of such year were not more than 331/3 per centum of its average receipts for the
other six months of such year[.]

CGI contends that Liebesman's FLSA claim should be dismissed based upon application of
this exception.
A. Amusement or Recreational

CGI claims that it is exempt from FLSA coverage pursuant to 29 U.S.C. §213(a)(3)(A)
because it is "an amusement or recreational establishment." CGI argues that the Rock 'n' Roll
Marathon/Half-Marathon Series is designed as "recreation" or as a means to "relax or have fun. "
(ECF No. 34 at 7). It also emphasizes the event's "party-like atmosphere." (ECF No. 34 at 8).
CGI refers the Court to Chen v. Major League Baseball, where the district court in the Southern
District of New York held that the 2013 All Star Week festivities, in conjunction with the 2013
Baseball All Star Game in New York City, were an amusement or recreational establishment that

-3-

operated for fewer than eight months and, therefore, the Section 213(A)(3) exemption applied. 6
F. Supp. 3d 449, 460 (S .D.N.Y. 2014); see also Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590,
595 (11th Cir. 1995) (holding that Defendant Sarasota White Sox, Inc., which owns a minor
league baseball franchise, is an amusement and recreational establishment pursuant to 29 U.S.C.
§ 213); Brennan v. Texas City Dike & Marina, Inc., 492 F.2d 1115, 1118 (5th Cir. 1974) (listing
the following as exempt activities under Section 213(a)(3)("amusement parks, carnivals,
circuses, sports events, parimutuel racing, sport boating or fishing")( citation omitted); Mann v.

Falk, 523 F. App'x 549, 552 (11th Cir. 2013) (noting that "it is clear that a baseball team and a
racetrack derive their income from the recreation that they provide" but holding that a
recreational vehicle park did not qualify as a recreational establishment). CGI likens the mobile,
temporary nature of the Rock 'n' Roll Marathon/Half Marathon Series to the Fanfest in Chen.
Liebesman contends that the Rock ' n' Roll Marathon/Half-Marathon Series events are
not "amusement or recreational" because they are not spectator events. (ECF No. 33 at 8-9).
Rather, Liebesman likens this case to unpaid labor to operate a for-profit gym or yoga class.

(Id.)
The Court does not determine at this time whether the Rock 'n' Roll Marathon/HalfMarathon Series events were "amusement or recreational" events. The record before the Court is
not developed as to whether the ''principal activity" of the series was for amusement and
recreation. Donovan v. Fairfield Bay Cmty. Club, Inc., No. LR-81-669, 1983 WL 2140, at *1
(E.D. Ark. Sept. 27, 1983) (holding, on a motion for summary judgment, that defendant's marina
was properly exempt under §213(a)(3) of the FLSA because it was an "amusement or
recreational establishment"). The Court believes that discovery and development of the factual

-4-

record is necessary for it to determine what the "principal activity" of the Rock 'n' Roll
Marathon/Half-Marathon Series is as a matter of law.
B. Separate Establishment
CGI contends that each Rock ' n' Roll Marathon/Half-Marathon Series event is an
"establishment". (ECF No. 26-1 at 7). CGI argues that an "establishment" is a "distinct physical
place of business." (ECF No. 26-1 at 7 (citing Adams v. Detroit Tigers, Inc., 961 F. Supp. 176,
179 (E.D. Mich. 1997) (holding that the Tigers' batboys at Tigers' home baseball events were an
establishment separate from the Tigers' organization as a whole)).

Under the regulations,

"establishment" is defined as a "'distinct physical place of business' rather than to ' an entire
business or enterprise' which may include several separate places of business." 29 C.F. R.
§779.23 . "For example, a manufacturer may operate a plant for production of its goods, a
separate warehouse for storage and distribution, and several stores from which its products are
sold. Each such physically separate place of business is a separate establishment." 29 C.F.R.
§779.303. CGI maintains that each event is a separate establishment because each operates in a
distinct location in a different city and is separate from CGI's place of business in California.
(ECF No. 26-1 at 7-8). CGI argues that its "establishment" is the "miles of city streets" that
make up each race course." (ECF No. 34 at 11). CGI further maintains that Liebesman cannot
aggregate all of the Rock ' n' Roll Marathon/Half-Marathon Series events together into one
"enterprise-like super-establishment based upon business integration" because the definition of
establishment is based upon the "distant physical space where the establishment is located."
(ECF No. 26-1 at 8 (citing Chen, 6 F. Supp. 3d at 457 ("It is of no consequence that MLB
"coordinated and controlled" the events of All Star Week from its corporate office, ... because
physical distinctness, rather than operation or control, is what distinguishes an ' enterprise' from

-5-

an 'establishment' to which it may belong")). Moreover, CGI maintains that referring to the
Rock 'n' Roll Marathon/Half-Marathon Series events as a "series" and a "tour" does not impact
the analysis because "establishment" refers to a distinct physical place of business rather than an
integrated enterprise. (ECF No. 26-1 at 8 (citing Chessin v. Keystone Resort Mgmt., Inc., 184
F.3d 1188, 1192-93 (10th Cir. 1999) (six-mile separation between two ski resorts meant that they
were two constitute separate establishments for the purposes of § 213(b)(29) even though they
marketed their operations as one enterprise, exchanged some employees, and lacked separate
accounting and management)). Likewise, CGI claims that the mobile nature of these temporary
events does not affect whether each race is a separate establishment. (ECF No. 26-1 at 8-9)
(citing Chen, 6 F. Supp. 3d at 452, 455 (FanFest in a different location every year was its own
establishment); Jeffery v. Sarasota White Sox, Inc., 64 F.3d 590, 595 (I Ith Cir. 1995)
("Defendant's status as an amusement and recreational establishment is not rendered inapplicable
by the fact that Defendant does not own the sports complex in which it operates.").
In response, Liebesman argues that the Rock 'n' Roll Marathon/Half-Marathon Series
events are not separate establishments.

Liebesman contends that CGI ignores 29 C.F.R.

§779.305, entitled Separate establishments on the same premises, which provides that "two or
more physically separated portions of a business though located on the same premises, and even
under the same roof in some circumstances may constitute more than one establishment for
purposes of exemptions." Liebesman also refers the Court to 29 C.F.R. §1620.9, an EEOC
regulation interpreting "establishment" for purposes of the Equal Pay Act ("EPA"). 2 29 C.F.R.
§ 1620.9 requires a "fact-dependent" inquiry to determine whether there is a single

2

CGI argues that this rule applies only in the EPA context where the plaintiff bears the burden of
proving wage discrimination and must compare himself or herself only to those working in the
same "establishment." (ECF No. 34 at 5).

-6-

"establishment." Liebesman argues that the criteria from 29 C.F.R. §1620.9 are taken from
Brennan v. Goose Creek Consol. Indep. Sch. Dist., where the Fifth Circuit held that the Goose

Creek Consolidated Independent School District was a single "establishment" because there was
"a central authority was responsible for the janitors' employment and wages and often
transferred them from one school to another." 519 F.2d 53, 58 (5th Cir. 1975); see also Doe v.
Butler Amusements, Inc., No. 13-CV-03027-JCS,. 2014 WL 5465599, at *11 (N.D. Cal. Oct. 27,

2014) (on summary judgment, the Court declined to decide, however, whether individual
carnivals should be found to be the relevant establishments because fact issues exist).
Liebesman also attempts to distinguish Chen v. Major League Baseball because the FanFest
event was a "small, ancillary portion of MLB's business-a once-a-year expo as a part of a
larger set of once-a-year festivities, itself only a sliver of a much bigger operation of running the
league [whereas] the Rock 'n' Roll Marathon events are CGI's business; the Series is what CGI
does." (ECF No. 33 at 7-8) (emphasis in original).
The term "establishment" is pot defined in the FLSA. At this early stage of litigation, the
Court declines to decide whether the individual races should be found to be the relevant
establishments, as CGI asserts, or rather, some other portion of CGI's business constitutes the
"establishment." On this question, the Court finds that factual questions remain that make
granting CGI's motion to dismiss on this issue inappropriate. In particular, the evidence in the
record relating to the "miles of streets" that make up each race course being the "establishment"
suggests that this case may present the unusual situation in which more than one physical
location should be found to constitute a single establishment. See 29 C.F.R. § 1620.9(a)3 ; see

3

The Court finds 29 C.F.R. § 1620.9, entitled "Meaning of 'establishment,'" instructive:

-7-

Doe, 2014 WL 5465599, at

*11

(denying defendant's motion for summary judgment as to

whether individual carnivals should be found to be relevant "establishments," citing 29 C.F.R. §
1620.9(a)). Because the factual record is not fully developed on this question, the Court declines
to decide it at this early stage of the case.
C. Seven Month Requirement
CGI claims that it is exempt from FLSA coverage pursuant to 29 U.S.C. §213(a)(3)(A)
because it "does not operate for more than seven months in any calendar year." CGI argues that
because an "establishment" is defined as a "distinct physical place of business," the relevant
inquiry is the length of time each physically separate Rock 'n' Roll Marathon/Half-Marathon
Series event operates, not the length of time the whole series operates. (ECF No. 26-1 at 9
(citing Chen, 6 F. Supp. 3d at 459, n.8 ("what matters in this case is the duration of MLB's

(a) Although not expressly defined in the FLSA, the term "establishment" had
acquired a well settled meaning by the time of enactment of the Equal Pay
Act. It refers to a distinct physical place of business rather than to an entire
business or "enterprise" which may include several separate places of
business. Accordingly, each physically separate place of business is ordinarily
considered a separate establishment.
(b) In unusual circumstances, two or more portions of a business enterprise, even
though located in a single physical place of business, may constitute more
than one establishment. For example, the facts might reveal that these portions
of the enterprise are physically segregated, engaged in functionally separate
operations, and have separate employees and maintain separate records.
Conversely, unusual circumstances may call for two or more distinct physical
portions of a business enterprise being treated as a single establishment. For
example, a central administrative unit may hire all employees, set wages, and
assign the location of employment; employees may frequently interchange
work locations; and daily duties may be virtually identical and performed
under similar working conditions. Barring unusual circumstances, however,
the term "establishment" will be applied as described in paragraph (a) of this
section.

Although CGI tries to limit this regulation to only the equal pay context, the Court finds that this
section may be applicable to the "unusual circumstances" here.

-8-

operations at the Javits Center-a physically distinct location where the plaintiff was
employed-not MLB's operations as a whole")). CGI claims that the Rock 'n' Roll events
satisfy this requirement because each even takes place at a different physical location over the
course of only three days. (ECF No. 26-1 at 9).
Again, the Court finds that it cannot determine whether this requirement has been met
based upon the record before the Court. As previously stated, the Court is unclear as to what
CGI's "establishment" is based upon the allegations presented to the Court. Therefore, the Court
must also defer its determination regarding whether this "establishment" "does not operate for
more than seven months in any calendar year" until the factual record is more clearly developed.
II.

Employees

The FLSA defines "employ" as "to suffer or permit to work. " (29 U.S.C. §203(g)). CGI
contends that Liebesman was not an employee because she had no expectation of compensation
and it does not matter that CGI is a for-profit company. (ECF No. 26-1 at 10-12) (citing Okoro
v. Pyramid 4 Aegis, No. 11-C-267, 2012 WL 1410025, at *8 (E.D. Wis. Apr. 23 , 2012)("But, to

say that one cannot under any circumstances volunteer for a for-profit entity might be too
sweeping a statement," but ultimately holding that the plaintiff should have been paid for her
training). CGI argues that Liebesman volunteered only twice in two years, had no expectation of
future employment with CGI or other compensation. (ECF No. 26-1 at 12-13).
Liebesman argues that she was an employee of CGI under the plain text of the FLSA because
CGI suffered or permitted her to work. (ECF No. 33 at 9-10). Liebesman argues that she does
not fit within the two narrowly circumscribed exceptions for "volunteers" in the FLSA, which do
not include for-profit entities.

See 29 U.S.C. §203(e)(2)-(4), (e)(5).

Liebesman refers to a

Department of Labor opinion letter that "[u]nder the FLSA individuals may not volunteer

-9-

services to private sector for profit employers."

Opinion Letter Fair Labor Standards Act

(FLSA), 1999 WL 1788145, at *2. Liebesman encourages this Court to apply the economic
realities test and determine that she was not a volunteer because CGI set the work rules,
assignments and conditions of employment for the "volunteer" employees, provided training and
instruction to the "volunteer" employees, and paid some employees to perform the same work as
the "volunteer" employees. (ECF No. 33 at 12-13).
The test of employment under the FLSA is one of "economic reality." Tony & Susan Alamo
Found. v. Sec 'y of Labor, 471 U.S. 290, 301 (1985) ("associates" who worked for a nonprofit

religious organization which provided them with food, clothing and shelter but no salary, were
employees even though they did not believe they were covered under the FLSA). At this stage
of the litigation, the Court cannot hold as a matter of law that Liebesman was not an employee of
CGI.

Liebesman alleges that she was "suffered to work" for CGI and did not obtain

compensation for her efforts.

As such, she states a claim and the factual record must be

developed to determine whether she was an employee or a volunteer under the economic realities
test. The Court denies, without prejudice, CGI's motion to dismiss Liebesman' s FLSA claim.

III.

State Law Claims

CGI argues that this Court should decline to exercise supplemental jurisdiction over the state
law claims once it dismisses Liebesman' s FLSA claim. (ECF No. 26-1 at 13). CGI argues that
Liebesman has not plausibly alleged how the representation that the Rock 'n' Roll
Marathon/Half-Marathon Series events "revolved around helping charities" was false. (ECF No.
34 at 13). CGI further contends that Liebesman has failed to allege her fraud claim with
particularity because she contends that CGI told her that the Rock 'n' Roll Marathon/HalfMarathon Series events supported local charities. CGI maintains this representation is correct

- 10 -

because the series contributes to charities' ability to fundraise and promote their causes. (ECF
No. 26-1 at 14). CGI claims that the mere fact that CGI, a for-profit entity, benefits "does not
preclude the possibility that charities are benefited as well." (ECF No. 26-1 at 14).

Further,

CGI notes that Liebesman "does not allege that CGI ever told her (or any putative class member)
that it was a non-profit organization" and that such information was readily available to her.
(ECF No. 26-1at14-15).
In response, Liebesman contends that she adequately pleaded her claim for fraud. (ECF
No. 33 at 14-15). She maintains that she alleges the time, manner and circumstances of specific
misrepresentations. Liebesman alleges that CGI's "Industry Alliances Coordinator," Jennifer
Nanista, solicited volunteers from Plaintiffs bicycle club by telling them that the 2011 Rock 'n'
Roll Marathon "revolved around helping charities." Liebesman further alleges that between
September and October 2011, CGI's employee Liz Davis emailed Liebesman the volunteer
registration instructions, including a link to a "volunteer website" that represented that volunteers
"would be supporting local charities with their labor." Further, Liebesman alleges that she
agreed to volunteer in the 2012 Series race in St. Louis based upon similar representations from
Nanista. Liebesman also contends that such representations are consistent with her allegation of
a "broader scheme or plan to enlist a 'volunteer' labor force by means of misrepresentation."
(ECF No. 33 at 15). In sum, she claims that these allegations are not bald or conclusory but are
supported by her allegations in the complaint, cited above.
The Court denies CGI's motion to dismiss the state law claims. First, the Court has
denied CGI's motion to dismiss Liebesman's FLSA claim at this time. Therefore, the Court will
also continue to exercise supplemental jurisdiction over Liebesman's state law claims as well. In
addition, the Court believes that Liebesman has sufficiently alleged her fraud claim. "To succeed

- 11 -

in a fraud claim under Missouri law, a plaintiff must prove: (1) a defendant made a material
representation; (2) with knowledge of its falsity; (3) with intent that plaintiff rely on that
representation; (4) that the plaintiff was ignorant of the falsity; (5) that the plaintiff justifiably
relied upon the representation; and (6) that plaintiff was damaged by that representation." Cole
v. Homier Distrib. Co., 599 F.3d 856, 862 (8th Cir. 2010). "A [fraud] complaint subject to Rule
9(b) 'must identify who, what, where, when, and how."' Streambend Properties II, LLC v. Ivy
Tower Minneapolis, LLC, 781 F.3d 1003, 1013 (8th Cir. 2015) (citing US. ex rel. Roop v.
Hypoguard USA, Inc., 559 F.3d 818, 822 (8th Cir. 2009) (quotation omitted)). " It must 'specify[]
the time, place, and content of the defendant's false representations, as well as the details of the
defendant's fraudulent acts, including when the acts occurred, who engaged in them, and what
was obtained as a result."' Id. The parties seem to disagree about whether CGI fraudulently
claimed that the Rock 'n' Roll Marathon Series had any charitable purpose and whether CGI
failed to disclosed to its "volunteers" that was not a charitable entity. This seems to be an issue
of fact that can be determined through discovery, rather than a pleading deficiency under Fed. R.
Civ. P. 9(b). Liebesman has adequately alleged statements that she claims were false and that
she relied on. Later in this litigation, the Court will determine whether such statements are false
based upon a full record.

Therefore, the Court denies CGI's motion to dismiss, without

prejudice.

Accordingly,
IT IS HEREBY ORDERED that Defendant's Motion to Dismiss Plaintiffs Amended
Collective Class Action Complaint (ECF No. 26) is DENIED without prejudice.
IT IS FURTHER ORDERED that Plaintiffs Motion for Conditional Class Certification
Under the Fair Labor Standards Act or Class Certification Under Fed. R. Civ. P. 23 and Request

- 12 -

for Discovery/Briefing Schedule (ECF No. 6) is DENIED without prejudice. Plaintiff can refile
her motion for conditional class certification in accordance with the case management order that
will be entered by the Court.
Dated this 11th day of May, 2015.

RONNIE L. WHITE
UNITED STATES DISTRICT JUDGE

- 13 -