Boutros et al v. JTC Painting and Decorating Corp. et al
Filing
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OPINION & ORDER re: 41 MOTION to Dismiss Pursuant to Rule 12(b)(6). filed by John Caruso, JTC Painting and Decorating Corp. For the reasons stated above, the Court denies defendants' motion to dismiss. The Court will hold a conference to discuss the management of this case on Monday, October 28, 2013, at 5 p.m., in Courtroom 1305 of the Thurgood Marshall U.S. Courthouse, 40 Centre Street, New York, New York 10007. In advance of that conference, the Court directs the parties to mee t and confer and to prepare a revised Civil Case Management Plan and Scheduling Order in accordance with the Court's Individual Rules. Counsel are directed to submit the Civil Case Management Plan and Scheduling Order to the Court by October 23, 2013. (Signed by Judge Paul A. Engelmayer on 10/15/2013) (djc)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF NEW YORK
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KAMAL BOUTROS, SAMUEL ZUNIGA,
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Plaintiffs,
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-v:
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JTC PAINTING AND DECORATING CORP.,
:
JOHN CARUSO,
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Defendants.
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PAUL A. ENGELMAYER, District Judge:
12 Civ. 7576 (PAE)
OPINION & ORDER
In this lawsuit under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (“FLSA”),
and New York Labor Law (“NYLL”), two painters, Kamal Boutros and Samuel Zuniga, allege
that their longtime employer, JTC Painting and Decorating Corporation, and its owner John
Caruso (collectively, “JTC”), failed to pay them overtime pay to which they were allegedly
statutorily and contractually entitled. Zuniga also alleges that JTC retaliated against him after he
filed this lawsuit, in violation of the FLSA. JTC now moves to dismiss. It argues that (1)
plaintiffs fail to plead facts sufficient to establish subject matter jurisdiction under the FLSA; (2)
Boutros’s FLSA claim was mooted by JTC’s offer of judgment under Federal Rule of Civil
Procedure 68; and (3) if Boutros’s FLSA overtime claim is moot, the Court should decline to
exercise supplemental jurisdiction over plaintiffs’ state-law claims. For the reasons that follow,
the Court denies the motion to dismiss.
1
I.
Background
A. Factual Allegations1
Boutros and Zuniga are painters who worked for JTC, a painting contractor. TAC ¶¶ 10–
12. Caruso is an owner and/or officer of JTC who controls its employment practices, including
payment of salary to Boutros and Zuniga. Id. ¶¶ 13, 16. JTC is subject to a collective bargaining
agreement (“CBA”) under which, for every hour a painter works in excess of 35 hours a week
(“CBA overtime”), JTC will pay him one and a half times his regular hourly rate. Id. ¶¶ 22, 24.
Boutros and Zuniga allege that JTC failed to pay them and their colleagues overtime pay,
both as required by the CBA, and by the FLSA, under which overtime is required to be paid by
covered employers for an employee’s work in excess of 40 hours per week (“FLSA overtime”).
Id. ¶ 25. Instead, for overtime hours, they were paid at their normal hourly rate, id., either in
cash or by means of a non-payroll check, id. ¶ 30. Boutros and Zuniga’s wage rates during their
employment were between $33.50 and $39.50 per hour. Id. ¶ 23.
Boutros alleges that JTC failed to pay him at least 308 hours of FLSA overtime and 963
hours of CBA overtime, dating back to 2009. Id. ¶¶ 26–27. Zuniga alleges that JTC failed to
pay him at least 423 hours of FLSA overtime and 856 hours of CBA overtime, also dating back
to 2009. Id. ¶¶ 28–29. Both men also allege that JTC owes them for CBA overtime they
performed before 2009, but they do not have records for that work, and have not quantified the
1
For the purpose of resolving the motion to dismiss, the Court assumes all facts pled in the Third
Amended Complaint (“TAC”) (Dkt. 52) to be true, drawing all reasonable inferences in favor of
the plaintiff. See Koch v. Christie’s Int’l PLC, 699 F.3d 141, 145 (2d Cir. 2012).
The following abbreviations are used herein for the parties’ memoranda of law: (1) Defendants’
Motion to Dismiss Pursuant to Rule 12(b)(6) or, in the Alternative or in Conjunction, Motion to
Dismiss Pursuant to Rule 12(b)(1) (“Def. Br.”) (Dkt. 43); (2) Plaintiffs’ Opposition to
Defendants’ Motion to Dismiss (“Pl. Br.”) (Dkt. 46); and (3) Defendants’ Reply in Support of
Defendants’ Motion to Dismiss Pursuant to Rule 12(b)(6) or, in the Alternative or in
Conjunction, Motion to Dismiss Pursuant to Rule 12(b)(1) (“Def. Reply Br.”) (Dkt. 49).
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overtime hours prior to 2009 for which they have not been paid. Id. ¶¶ 27, 29. JTC allegedly
similarly denied overtime to its more than 100 other painters. TAC ¶¶ 31–34.
B. The Initial Complaint, JTC’s Alleged Retaliation, and the Amended Complaints
On October 10, 2012, plaintiffs filed their initial Complaint, bringing claims under the
FLSA and a putative class action under NYLL. Dkt. 1. On November 5, 2012, defendants
answered. Dkt. 4.
After plaintiffs filed the Complaint, JTC “told Zuniga that he was being terminated from
his job, and sent him home.” TAC ¶ 74. Zuniga’s attorneys intervened, and JTC brought Zuniga
back to work, but it assigned him to a new supervisor, who offered that JTC would pay him a
significant sum of money and find employment for a relative if he withdrew from the lawsuit.
Id. ¶¶ 75–76. Zuniga told the supervisor that any offers should be made to his attorneys. Id. ¶
77. In response, JTC ceased offering Zuniga work on long-term projects; JTC now allegedly
offers him only brief, undesirable assignments, even though more junior painters continue to
receive long-term work. Id. ¶¶ 77–79.
On February 25, 2013, the parties stipulated that plaintiffs could amend the Complaint to
add retaliation claims by Zuniga. Dkt. 12. On March 1, 2013, plaintiffs did so, filing their First
Amended Complaint (FAC). Dkt. 15.
On March 15, 2013, plaintiffs filed a motion for conditional collective action certification
and court-approved notice. Dkt. 18–22. On April 11, 2013, defendants filed an opposition. Dkt.
24–27. On April 17, 2013, plaintiffs filed a reply. Dkt. 28.
On June 19, 2013, the Court, sua sponte, dismissed plaintiffs’ FLSA overtime claims and
denied their motions for conditional collective action certification and court-approved notice.
Dkt. 31. The Court acted on the basis of the decision in Lundy v. Catholic Health Systems of
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Long Island Inc., 711 F.3d 106, 114 (2d Cir. 2013), handed down the same day that the FAC was
filed, which held that plaintiffs bringing a FLSA overtime claim must allege not merely that they
typically worked unpaid overtime, but must specify at least one week in which they worked
overtime hours but were not paid overtime. The Court’s dismissal was without prejudice to
plaintiffs’ right to amend.
On July 12, 2013, plaintiffs filed a Second Amended Complaint (“SAC”). Dkt. 33. For
both Boutros and Zuniga, the SAC identified numerous weeks, beginning in October 2009, in
which Boutros and Zuniga had worked specific overtime hours, but had not been paid overtime
rates. SAC ¶¶ 21–24.
C. JTC’s Rule 68 Offers of Judgment
On July 16, 2013, JTC served Offers of Judgment, pursuant to Rule 68, on Boutros and
Zuniga. These offers were keyed to the specific overtime hours alleged in the TAC and, covered
“any unpaid wage liability claimed in this action under the Fair Labor Standards Act.” Clark
Decl. Ex. E. On August 1, 2013, Zuniga accepted, but Boutros rejected, the Rule 68 Offers. Id.
The offer to Zuniga did not, however, extend to his FLSA retaliation claim or his claims under
the NYLL.
D. JTC’s Motion to Dismiss
On August 5, 2013, JTC moved to dismiss the SAC. Dkt. 41–43. It argued, first, that the
SAC failed to allege that JTC is an enterprise covered by the FLSA, in that it did not allege either
that JTC engages in interstate activity or has gross annual sales above $500,000. Second, it
argued, Boutros’s FLSA overtime claim is moot because JTC’s Rule 68 Offer of Judgment
would have fully compensated him for that claim. Third, JTC argued, assuming Boutros’s FLSA
claim was dismissed, the Court lacked subject matter jurisdiction over the NYLL claims, because
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there is no common nucleus of fact between those claims and Zuniga’s FLSA retaliation claim,
the only remaining federal claim.
On August 19, 2013, plaintiffs filed their opposition. Dkt. 46–47. On August 26, 2013,
defendants replied. Dkt. 48–49.
On October 2, 2013, the Court held argument. At argument, the Court granted plaintiffs
leave to amend the SAC, for the limited purpose of curing their pleadings as to whether JTC was
an FLSA enterprise, which plaintiffs represented they could do. Dkt. 51. With regard to the
other aspects of the pending motion to dismiss, the parties agreed to rest on their existing briefs.
Id. On October 4, 2013, plaintiffs filed their Third Amended Complaint, including three
paragraphs (¶¶ 18–20) as to FLSA coverage. Dkt. 52.
II.
Applicable Legal Standards
To survive a motion to dismiss under Rule 12(b)(6), a complaint must plead “enough
facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S.
544, 570 (2007). A claim will only have “facial plausibility when the plaintiff pleads factual
content that allows the court to draw the reasonable inference that the defendant is liable for the
misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 663 (2009). A complaint is properly
dismissed, where, as a matter of law, “the allegations in a complaint, however true, could not
raise a claim of entitlement to relief.” Twombly, 550 U.S. at 558. Accordingly, a district court
must accept as true all well-pleaded factual allegations in the complaint, and draw all inferences
in the plaintiff’s favor. ATSI Commc’ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007)
(“ATSI”). However, that tenet “is inapplicable to legal conclusions.” Iqbal, 556 U.S. at 678. A
pleading that offers only “labels and conclusions” or “a formulaic recitation of the elements of a
cause of action will not do.” Twombly, 550 U.S. at 555.
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III.
Discussion
A. Enterprise Coverage
The FLSA requires that covered employers pay their workers at an overtime rate of one
and a half times their normal hourly rate for a workweek longer than 40 hours. 29 U.S.C.
§ 207(a)(1). An employer is covered by the FLSA if it is engaged in interstate commerce and
has gross annual sales above $500,000. 29 U.S.C. § 203(s)(1). In its motion to dismiss, JTC
argued that the SAC failed to plead either that JTC handled goods that moved through interstate
commerce or had gross annual sales in excess of $500,000. Def. Br. 7. That argument was
well-founded. However, at argument, on plaintiffs’ representation that they could cure this
deficiency with proper factual allegations, the Court granted plaintiffs leave to amend solely for
that purpose. Dkt. 51.
The TAC, which plaintiffs filed on October 4, 2013, cures this problem. It alleges that
JTC’s painters (more than 100) are employees who use tools, paint, and other materials that
travel in interstate commerce. TAC ¶ 18. It also alleges that JTC offers services in the “New
York Tri-State area,” id., and that its annual revenues exceed $500,000, id. ¶ 19. These
pleadings satisfactorily allege that JTC is an enterprise covered by the FLSA.
B. Mootness
“Article III, § 2, of the Constitution limits the jurisdiction of federal courts to ‘Cases’ and
‘Controversies.’” Genesis Healthcare Corp. v. Symczyk, 133 S. Ct. 1523, 1528 (2013) (citation
omitted). “[A]n actual controversy must be extant at all stages of review.” Id. (citation omitted).
“If an intervening circumstance deprives the plaintiff of a personal stake in the outcome of the
lawsuit, at any point during litigation, the action can no longer proceed and must be dismissed as
moot.” Id. (citation omitted).
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JTC argues that Boutros’s FLSA claim is moot because it offered him full compensation
in its Rule 68 Offer of Judgment. Def. Br. 10–16. Plaintiffs dispute, factually, that JTC offered
Boutros full compensation. Def. Br. 11–14. Alternatively, they argue, as a matter of law, that
even if defendants had offered Boutros full compensation for his own FLSA claims, that that
offer would not moot his lawsuit, both because he and Zuniga have moved to certify this case as
a collective action, and because Boutros’s refusal to accept the Offer of Judgment requires it to
be treated as withdrawn, so as not to moot his claim.
Plaintiffs’ latter two arguments fail. Plaintiffs may not rely on their supposedly pending
motion to certify a collective action, because the Court dismissed that motion more than three
months ago, Dkt. 31, and plaintiffs have not renewed it. Nor may plaintiffs rely on the fact that
they did not accept JTC’s Offer of Judgment. Although “there are good reasons to question the
proposition that an unaccepted, or rejected, offer of judgment under Rule 68 can moot a
plaintiff’s claim . . . the ship has sailed on that question, at least in this Circuit, as the Court of
Appeals has made clear.” Pla v. Renaissance Equity Holdings LLC, No. 12 Civ. 5268 (JMF),
2013 WL 3185560 at *4 (S.D.N.Y. June 24, 2013) (citation omitted). See, e.g., McCauley v.
Trans Union, L.L.C., 402 F.3d 340, 342 (2d Cir. 2005) (an offer of maximum recovery under
Rule 68 moots a case once a district court enters default judgment in favor of the plaintiff for that
amount); Abrams v. Interco Inc., 719 F.2d 23, 32 (2d Cir. 1983) (Friendly, J.) (“[T]here is no
justification for taking the time of the court and the defendant in the pursuit of minuscule
individual claims which defendant has more than satisfied.”); see also Doyle v. Midland Credit
Mgmt., Inc., 722 F.3d 78, 81 (2d Cir. 2013) (“[A]n offer need not comply with Federal Rule of
Civil Procedure 68 in order to render a case moot under Article III.”).
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The decisive question, then, is factual: Did defendants offer Boutros the “maximum
recovery available” under the FLSA? Ward v. Bank of N.Y., 455 F. Supp. 2d 262, 267 (S.D.N.Y.
2006) (Chin, J.). Only an offer of the maximum recovery possible would deprive Boutros of a
personal stake in the outcome; if Boutros can plausibly argue that he might be able to obtain a
greater recovery at trial, then there remains a live controversy between him and JTC. See
McCauley, 402 F.3d at 341 (offer included “the only possible damages [plaintiff] may still
recover.”); Abrams, 719 F.2d at 32 ( “all that remains is their individual claims, for which Interco
admittedly has offered to pay much more than plaintiffs could obtain by suit.”); Ward, 455 F.
Supp. 2d at 269–70 (“BONY’s offer far exceeds all Ward could recover at trial.”); cf. id.
(“Courts have, however, denied a defendant’s motion to dismiss on mootness grounds where the
plaintiff potentially could recover more than the relief offered by defendant, such as where the
offer is not comprehensive, or where the amount due to plaintiff is disputed.”).
Boutros and JTC disagree as to whether JTC has in fact offered Boutros the maximum
amount Boutros could recover under his FLSA claim. JTC notes that it offered to compensate
Boutros for exactly 308 hours of overtime, matching the total of the overtime hours enumerated
in the TAC. Boutros, by contrast, notes that the TAC alleges that JTC owes him for “at least 308
hours” of FLSA overtime, TAC ¶ 26, and that, until he has received full discovery, he cannot
know whether there were additional overtime hours for which he went uncompensated.
Both parties make plausible arguments. Boutros explains that the TAC’s estimate of “at
least 308 hours” of unpaid overtime was based on his diary and on the payroll records which JTC
turned over in initial discovery. However, he argues, JTC’s payroll records are flawed, id. ¶ 31,
and may be incomplete; they therefore cannot be taken as a reliable representation of his full
work hours. He argues that, to draw an accurate conclusion as to his hours, he will need to
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review other documents, such as sign-in sheets, sign-out sheets, job site documents, and cash
disbursement journals, and possibly take depositions.
In response, defendants point to an email exchange between counsel, made in the context
of informal efforts to resolve this case, in which the defense pressed for “a hard number as to
what your clients are claiming in unpaid overtime, based on hours over forty (40) in a work
week, so that we can proceed towards resolution.” Clark Decl. Ex. A. Plaintiffs responded by
referencing a chart of Boutros’s hours that he had previously provided. Id. Defendants used the
308 hours in that chart (which dovetailed with the 308 hours listed in the TAC) to calculate their
Rule 68 Offer. JTC effectively argues that Boutros is estopped from claiming higher damages.
But that is unpersuasive. Plaintiffs’ counsel may fairly be faulted for imprecision for failing to
state that the chart was subject to the possibility that discovery would reveal a basis for claiming
additional overtime hours. But that lapse does not undo the TAC’s explicit pleading that there
were “at least 308 hours” that went uncompensated. TAC ¶ 26; see also SAC ¶ 21. Nor would it
preclude Boutros from arguing for greater FLSA overtime damages at trial, assuming that
evidence adduced in discovery supports that claim.
At the motion to dismiss stage, the Court cannot resolve this factual dispute against
Boutros—it must accept as true all well-pleaded factual allegations in the TAC. ATSI, 493 F.3d
at 98. That includes Boutros’s factual allegation that JTC failed to pay him for at least 308
hours worked in excess of 40 hours in a week. Given that, defendants’ Offer based on only 308
hours does not assuredly give Boutros his maximum possible recovery. Boutros and JTC still
have a live controversy. Boutros’s FLSA claim is not moot.2
2
To be sure, Boutros runs a risk in not accepting the Rule 68 Offer. If he cannot establish
greater FLSA damages than those offered by JTC, under Rule 68, he will be obligated to
compensate JTC for “the costs [it] incurred after the offer was made.” Fed. R. Civ. P. 68; Marek
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•
C. Supplemental Jurisdiction
Defendants finally argue that, if Boutros's FLSA claim is dismissed as moot, the Court
should decline to exercise supplemental jurisdiction over the state law claims. However, because
Boutros's FLSA overtime claim remains live, the Court will continue, for the time being, to
exercise supplemental jurisdiction.
CONCLUSION
For the reasons stated above, the Court denies defendants' motion to dismiss. The Court
will hold a conference to discuss the management of this case on Monday, October 28,2013, at 5
p.m., in Courtroom 1305 of the Thurgood Marshall U.S. Courthouse, 40 Centre Street, New
York, New York 10007. In advance of that conference, the Court directs the parties to meet and
confer and to prepare a revised Civil Case Management Plan and Scheduling Order in
accordance with the Court's Individual Rules. Counsel are directed to submit the Civil Case
Management Plan and Scheduling Order to the Court by October 23,2013.
SO ORDERED.
Paul A. Engelmayer
United States District Judge
Dated: October 15,2013
New York, New York
v. Chesny, 473 U.S. 1 (1985); Baker v. Urban Outfitters, Inc., 431 F. Supp. 2d 351, 361-62
(S.D.N.Y. 2006) aff'd, 249 F. App'x 845 (2d Cir. 2007).
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