PENNINGTON v. INTERNATIONAL HOUSE OF PANCAKES, LLC et al

Filing 71

ORDER that the Motions to Dismiss (ECF Nos. 25 , 38 ) are GRANTED, with leave to amend in part. Signed by Judge Robert C. Jones on 11/13/15. (Copies have been distributed pursuant to the NEF - MMM)

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UNITED STATES DISTRICT COURT

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DISTRICT OF NEVADA

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______________________________________
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BETHANY ANNE PENNINGTON,
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Plaintiff,
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vs.
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INTERNATIONAL HOUSE OF
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PANCAKES, LLC et al.,
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Defendants.
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2:15-cv-0949-RCJ-CWH
ORDER

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This case arises out of an employer’s alleged sex discrimination in violation of Title VII

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of the Civil Rights Act of 1964 and the Nevada Equal Employment Opportunity Act. Pending

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before the Court are two Motions to Dismiss as to one Defendant—International House of

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Pancakes, LLC (ECF Nos. 25, 38). For the reasons given herein, the Court grants the motion,

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with leave to amend in part.

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I.

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FACTS AND PROCEDURAL HISTORY
Plaintiff Bethany Anne Pennington alleges that Julio Solano, general manager of an

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International House of Pancakes restaurant in Las Vegas, sexually harassed her by forcing her to

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provide sexual favors for him and sending her sexually explicit text messages. (See Am. Compl.

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¶¶ 20–26, ECF No. 33). Plaintiff alleges that after she and other female employees reported

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sexual harassment to Hugo Escobedo, director of operations, he refused to investigate the

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allegations or take action against Solano. (Id. at ¶¶ 27–31). Further, Plaintiff maintains that

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Defendants transferred Solano to Wisconsin and promoted him. (Id. at ¶¶ 32–33). Plaintiff also

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alleges that after she complained to Escobedo, Defendants’ employees chastised, harassed, and

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ignored her, reduced her hours, and, ultimately, terminated her. (Id. at ¶¶ 34–36).

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Plaintiff has named as Defendants Rainbow 1606, Inc. (“Rainbow”), a franchisee of

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International House of Pancakes, LLC (“IHOP, LLC”), Farshad Ashoori, owner of Rainbow, and

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IHOP, LLC. (Id. at ¶¶ 2–4, 12). Plaintiff has made five claims against all three Defendants: (1)

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discrimination and harassment based on gender under Title VII of the Civil Rights Act, 42

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U.S.C. § 2000e, et seq., and 42 U.S.C. § 1981; (2) retaliation under Title VII; (3) discrimination,

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hostile work environment, and retaliation based on gender under the Nevada Equal Employment

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Opportunity Act, NRS 633.310 et seq.; (4) intentional infliction of emotional distress; and (5)

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negligent hiring, supervision, and/or training of employees. Plaintiff also claims that IHOP, LLC

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is vicariously liable for the actions of Rainbow and Ashoori as IHOP, LLC’s agents. (Am.

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Compl. at ¶¶ 72–74).

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On May 8, 2012, Plaintiff filed a Charge of Discrimination with the Nevada Equal Rights

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Commission and Equal Employment Opportunity Commission (“EEOC”). (Id. at ¶ 42; Pl.’s

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Resp., Ex. 1, ECF No. 41). On August 29, 2014, the EEOC found Defendants to be an

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“employer” within the meaning of Title VII and found probable cause to believe Defendants

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violated Title VII. (Id. at ¶ 43). On February 19, 2015, Plaintiff received a Notice of Right to

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Sue. (Id. at ¶ 44).

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Plaintiff filed a complaint on May 20, 2015 (ECF No. 1). On July 14, 2015, Defendant

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IHOP, LLC filed a motion to dismiss (ECF No. 25). Plaintiff then filed an amended complaint on

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July 23, 2015 (ECF No. 33). The only change she made was to substitute Farshad Ashoori as a

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defendant for the Dan Ashoori Group. Defendant IHOP, LLC subsequently filed a second

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motion to dismiss based on the Amended Complaint (ECF No. 38). In its two motions to dismiss,

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IHOP, LLC asks the Court to dismiss the case only in respect to IHOP, LLC, pursuant to Federal

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Rules of Civil Procedure 12(b)(6) and 12(b)(1).

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II.

FAILURE TO STATE A CLAIM UNDER RULE 12(b)(6)

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A. Legal Standards

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Federal Rule of Civil Procedure 8(a)(2) requires only “a short and plain statement of the

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claim showing that the pleader is entitled to relief” in order to “give the defendant fair notice of

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what the . . . claim is and the grounds upon which it rests.” Conley v. Gibson, 355 U.S. 41, 47

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(1957). Federal Rule of Civil Procedure 12(b)(6) mandates that a court dismiss a cause of action

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that fails to state a claim upon which relief can be granted. A motion to dismiss under Rule

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12(b)(6) tests the complaint’s sufficiency. See N. Star Int’l v. Ariz. Corp. Comm’n, 720

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F.2d 578, 581 (9th Cir. 1983). When considering a motion to dismiss under Rule 12(b)(6) for

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failure to state a claim, dismissal is appropriate only when the complaint does not give the

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defendant fair notice of a legally cognizable claim and the grounds on which it rests. See Bell

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Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). In considering whether the complaint is

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sufficient to state a claim, the court will take all material allegations as true and construe them in

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the light most favorable to the plaintiff. See NL Indus., Inc. v. Kaplan, 792 F.2d 896, 898 (9th

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Cir. 1986). The court, however, is not required to accept as true allegations that are merely

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conclusory, unwarranted deductions of fact, or unreasonable inferences. See Sprewell v. Golden

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State Warriors, 266 F.3d 979, 988 (9th Cir. 2001).

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A formulaic recitation of a cause of action with conclusory allegations is not sufficient; a
plaintiff must plead facts pertaining to his own case making a violation “plausible,” not just

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“possible.” Ashcroft v. Iqbal, 556 U.S. 662, 677–79 (2009) (citing Twombly, 550 U.S. at 556)

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(“A claim has facial plausibility when the plaintiff pleads factual content that allows the court to

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draw the reasonable inference that the defendant is liable for the misconduct alleged.”). That is,

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under the modern interpretation of Rule 8(a), a plaintiff must not only specify or imply a

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cognizable legal theory (Conley review), but also must allege the facts of the plaintiff’s case so

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that the court can determine whether the plaintiff has any basis for relief under the legal theory

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the plaintiff has specified or implied, assuming the facts are as the plaintiff alleges (Twombly-

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Iqbal review). Put differently, Conley only required a plaintiff to identify a major premise (a

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legal theory) and conclude liability therefrom, but Twombly-Iqbal requires a plaintiff additionally

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to allege minor premises (facts of the plaintiff’s case) such that the syllogism showing liability is

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complete and that liability necessarily follows therefrom, assuming the allegations are true.

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“Generally, a district court may not consider any material beyond the pleadings in ruling

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on a Rule 12(b)(6) motion. However, material which is properly submitted as part of the

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complaint may be considered on a motion to dismiss.” Hal Roach Studios, Inc. v. Richard Feiner

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& Co., 896 F.2d 1542, 1555 n.19 (9th Cir. 1990) (citation omitted). Similarly, “documents

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whose contents are alleged in a complaint and whose authenticity no party questions, but which

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are not physically attached to the pleading, may be considered in ruling on a Rule 12(b)(6)

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motion to dismiss” without converting the motion to dismiss into a motion for summary

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judgment. Branch v. Tunnell, 14 F.3d 449, 454 (9th Cir. 1994). Moreover, under Federal Rule

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of Evidence 201, a court may take judicial notice of “matters of public record.” Mack v. S. Bay

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Beer Distribs., Inc., 798 F.2d 1279, 1282 (9th Cir. 1986). Otherwise, if the district court

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considers materials outside of the pleadings, the motion to dismiss is converted into a motion for

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summary judgment. See Arpin v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 925 (9th Cir.

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2001).

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B. Analysis

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Plaintiff claims that Defendant IHOP, LLC is vicariously liable for the actions of

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franchisee Rainbow based on a theory of agency. Defendant IHOP, LLC argues that Plaintiff’s

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allegations of liability as to IHOP, LLC are insufficient to state a claim for which relief can be

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granted. Title VII “‘primarily govern[s] relations between employees and their employer, not

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between employees and third parties.’” Morgan v. Safeway Stores, Inc., 884 F.2d 1211, 1214

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(9th Cir. 1989) (quoting City of Los Angeles v. Manhart, 435 U.S. 702, 718 n.33 (1978)).

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However, under Title VII, the term “employer” includes “a person engaged in an industry

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affecting commerce who has fifteen or more employees . . . and any agent of such a person.” 42

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U.S.C. § 2000e(b) (emphasis added). Thus, “[a]n employer . . . cannot avoid title VII liability by

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delegating discriminatory programs to third parties.” Morgan, 884 F.2d at 1214. To establish the

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employer’s liability, “the employer must be more than a broker, or other intermediary . . . the

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employer must affirmatively, actively participate in the third-party program.” Id.

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Here, Plaintiff essentially alleges that IHOP, LLC is her “employer” and that it has

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delegated responsibility over its programs to its agents Rainbow and Ashoori. As a result, she

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argues, IHOP, LLC is vicariously liable for Rainbow’s allegedly discriminatory practices. (Am.

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Compl. at ¶¶ 72–74; Pl.’s Resp., 8). To state a valid claim, then, Plaintiff must provide sufficient

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facts to show it is plausible that Rainbow, as a franchisee, acts as IHOP, LLC’s agent, and IHOP,

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LLC actively participates in managing Rainbow’s employees, or at least has established training,

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policies, or procedures that affect the management of Rainbow’s employees. See, e.g., Miller v.

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D.F. Zee’s, Inc., 31 F. Supp. 2d 792, 806 (D. Or. 1998) (holding that Denny’s, Inc. was liable for

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acts of harassment by employees of its agent, a local franchisee).

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Plaintiff alleges that Rainbow is “an employee, agent, joint venture, partner, subsidiary,

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or other related business entity of Defendant IHOP,” and that IHOP, LLC “has the power to exert

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control over . . . Rainbow[]’s day to day operations.” (Am. Compl. at ¶ 72). Specifically, IHOP,

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LLC exerts control over Rainbow

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by dictating the contents of its manuals and training programs, termination
procedures for the franchise/business agreement, hours of operations, inspections,
disciplinary procedures for employees, profit sharing and distribution, and direct
involvement in complaints and claims made against Defendant . . . Rainbow . . .
in addition to other aspects of their business operation.

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(Id. at ¶ 73). As Defendant IHOP, LLC correctly argues, these allegations are mere recitations of

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common elements of an agency relationship; they provide no specific facts to assist the Court in

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determining whether Rainbow is plausibly an agent of IHOP, LLC.

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Earlier in the Amended Complaint, Plaintiff does provide some specific facts to support

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her claim: she alleges that “Defendants have maintained Solano’s employment and promoted

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him since the time period in which the events of this Complaint took place,” (id. at ¶ 32), and

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that “Solano is currently employed by Defendants in Wisconsin,” (id. at ¶ 33). These factual

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allegations could indicate that IHOP, LLC was involved in hiring and disciplinary procedures

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affecting Rainbow’s employees. For example, one might infer that IHOP, LLC transferred

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Solano to another franchise in Wisconsin in response to Plaintiff’s allegations. On the other

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hand, Solano might have simply moved to Wisconsin of his own accord and sought employment

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with a local IHOP restaurant. The Complaint also alleges that all “Defendants” promoted and

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transferred Solano—it does not specifically identify IHOP, LLC as being directly involved, and

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it provides sufficient facts only to make tenuous inferences regarding the cause and motives of

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the alleged transfer.
Plaintiff also refers to “Defendants’ policy and practice of allowing disparate terms and

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conditions of employment,” (id. at ¶ 57), and alleges that “Defendants failed to institute

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sufficiently effective training programs” to identify and prevent discrimination, (id. at ¶ 85). If

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true, these facts could implicate IHOP, LLC as being involved in the alleged discrimination, but,

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again, these facts lack specificity. Thus, the Complaint provides sufficient facts to show it was

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“possible” that Rainbow acted as IHOP, LLC’s agent and that IHOP, LLC should also be liable

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for the alleged discrimination, but the facts provided do not make this conclusion “plausible.” As

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a result, the Court grants Defendant IHOP, LLCs motion dismiss, but it gives Plaintiff leave to

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amend her Complaint to allege facts showing IHOP, LLC’s control over Rainbow.

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III.

FAILURE TO EXHAUST ADMINISTRATIVE REMEDIES

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A. Legal Standards

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A plaintiff must timely exhaust any administrative remedies before bringing a Title VII

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claim to court. Lyons v. England, 307 F.3d 1092, 1103-04 (9th Cir. 2002). However, failure to

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exhaust non-judicial remedies is generally treated as an affirmative defense. Jones v. Bock, 549

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U.S. 199, 212 (2007). A Court should not dismiss a case based on an affirmative defense unless

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the elements of the defense appear on the face of the pleading to be dismissed. Rivera v. Peri &

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Sons Farms, Inc., 735 F.3d 892, 902 (9th Cir. 2013). Where an affirmative defense is not clear

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from the face of the complaint sought to be dismissed, it cannot be determined until (at least) the

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summary judgment stage; it cannot be treated as a quasi-summary-judgment matter under Rule

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12(b). Albino v. Baca, 747 F.3d 1162, 1168–69 (9th Cir. 2014) (en banc) (overruling Wyatt v.

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Terhune, 315 F.3d 1108 (9th Cir. 2003)).

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B. Analysis

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Defendant IHOP, LLC argues that Plaintiff has failed to exhaust her administrative

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remedies because she did not properly name IHOP, LLC in her Charge of Discrimination

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(“Charge”) filed with the EEOC, and IHOP, LLC did not receive notification of the Charge. In

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Title VII actions, failure to timely exhaust administrative remedies is an affirmative defense, see

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Davis v. D.C., 949 F. Supp. 2d 1, 12 (D.D.C. 2013); Williams v. Runyon, 130 F.3d 568, 573 (3d

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Cir. 1997); thus, unless Plaintiff’s failure to exhaust is clear from the face of her Amended

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Complaint, the Court must defer this issue until at least the summary judgment stage.

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Plaintiff’s failure to exhaust as to Defendant IHOP, LLC is not clear from the face of the

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Complaint or from the Charge she filed with the EEOC. (See Am. Compl. at ¶ 42; Pl.’s Resp.,

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Ex. 1). In her Complaint, Plaintiff makes no admission that she did not exhaust her

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administrative remedies as to IHOP, LLC. Indeed, Plaintiff asserts she “complied with all of the

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administrative and/or procedural requisites to file suit against the Defendants under Title VII of

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the Civil Rights Act of 1964.” (Id. at ¶ 8). She also claims to have timely filed charges of

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discrimination against Defendants and received a Notice of Right to Sue based on EEOC’s

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finding of probable cause that Defendants discriminated against her. (Id. at ¶¶ 42–44, 54).

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Plaintiff also maintains that “Defendant received notice that its employees and supervisors are

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engaging in conduct that violates Plaintiff’s rights when she complained to her immediate

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supervisors and later reported her claims to the EEOC.” (Id. at ¶ 86). Nothing in the Complaint

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indicates Plaintiff failed to include IHOP, LLC in her Charge or that IHOP, LLC did not receive

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notice of the Charge.

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Plaintiff’s Charge filed with the EEOC also does not clearly show she failed to exhaust
her administrative remedies as to Defendant IHOP, LLC. In her Charge, Plaintiff listed only one

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employer—“IHOP”—with a Las Vegas address. (Pl.’s Resp., Ex. 1). While Plaintiff did not list

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IHOP, LLC as her employer, she also did not list Rainbow or Ashoori as her employers. Thus,

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the name she submitted is subject to more than one interpretation. Also, Plaintiff listed her

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employer as having “201-500” employees. (Id.). In her Complaint, however, Plaintiff stated that

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“Defendants employ approximately seventy-one (71) individuals in Las Vegas.” (Am. Compl. at

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¶ 15). It is unclear, therefore, whether Plaintiff meant to identify Rainbow as her employer or

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IHOP, LLC, or whether she meant to include both. Finally, Plaintiff listed the address of

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Rainbow’s Las Vegas location as her employer’s address, which might have prevented IHOP,

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LLC from receiving notice of the Charge; however, nothing in the Complaint suggests IHOP,

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LLC did not receive notice. Plaintiff’s failure to exhaust as to Defendant IHOP, LLC is not clear

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either from the face of the Complaint or from the Charge filed with the EEOC. As a result, the

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Court must defer the issue of exhaustion to at least summary judgment.

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Based on Defendant IHOP, LLC’s first argument—failure to state a claim—the Court

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grants the motions to dismiss but gives Plaintiff leave to amend her claim to show whether

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IHOP, LLC should be liable due to an agency relationship with Rainbow and Ashoori. The Court

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defers the issue of exhaustion of remedies to the summary judgment stage.
CONCLUSION

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IT IS HEREBY ORDERED that the Motions to Dismiss (ECF Nos. 25, 38) are
GRANTED, with leave to amend in part.
IT IS SO ORDERED.
DATED: This day of October, 2015.
Dated this 16th 13th day of November, 2015.

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_____________________________________
ROBERT C. JONES
United States District Judge

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