Gordon et al v. Kaleida Health et al
Filing
33
DECISION AND ORDER GRANTING Defendants' 6 Motion to Dismiss; DIRECTING the Clerk of the Court to close this case. Signed by William M. Skretny, Chief Judge U.S.D.C. on 1/15/2012. (MEAL)
UNITED STATES DISTRICT COURT
WESTERN DISTRICT OF NEW YORK
CATHERINE GORDON, et al.,
Plaintiffs,
v.
DECISION AND ORDER
08-CV-950S
KALEIDA HEALTH, et al.,
Defendants.
I. INTRODUCTION
Plaintiffs commenced this action on August 6, 2008, by filing a summons and class
action complaint in New York State Supreme Court, County of Erie. They assert claims
of failure to keep accurate records under the Employee Retirement Income Security Act
(“ERISA”), breach of fiduciary duty under ERISA, violations of the Racketeer Influenced
and Corrupt Organizations Act (“RICO”), estoppel, breach of contract, breach of implied
covenant of good faith and fair dealing, unjust enrichment/restitution, and quantum meruit.
All claims are based upon Defendants’ alleged failure to properly compensate Plaintiffs and
other employees for all hours worked and/or for hours in excess of 40 per week at overtime
rates and their failure to keep accurate records of time worked for purposes of determining
benefits.
On December 23, 2008, Defendants removed the action to this Court and then
moved to dismiss it in its entirety. For the reasons stated below, Defendants’ motion to
dismiss is granted.
1
II. BACKGROUND
Prior to filing their state court action, Plaintiffs commenced an action in this Court
(“the Federal Action”) based on the same alleged conduct, which action remains pending.
Gordon v. Kaleida Health, 08-CV-378, filed May 22, 2008. The complaint in the Federal
Action originally asserted claims under the Fair Labor Standards Act (“FLSA”), New York
Labor Law (“NYLL”), ERISA-failure to keep accurate records, ERISA-breach of fiduciary
duty, and RICO, and of breach of contract, breach of implied covenant of good faith and
fair dealing, conversion, unjust enrichment/restitution, quantum meruit, fraud and deceit,
misrepresentation, and estoppel.
On July 1, 2008, Defendants moved to dismiss the Federal Action in its entirety. In
response, Plaintiffs voluntarily dismissed, without prejudice, all claims except those alleging
violations of the FLSA and NYLL, and estoppel. (08-CV-378, Docket No. 112.) Shortly
thereafter, on August 6, 2008, Plaintiffs filed two actions in state court which, together,
“revive” the ten voluntarily dismissed claims. Both state actions also assert estoppel
claims. Defendants timely removed both actions to this Court.1
In the instant Complaint, Plaintiffs identify themselves as “employees” under the
FLSA and NYLL, and allege that putative class members, employed by Defendants, were
not paid their regular or statutorily required rate of pay for all hours worked. (Docket No.
1, Ex. A, ¶¶ 69-70.) They further allege that Defendants’ were deliberately indifferent to
1
Upon filing in state court, the instant action was assigned Suprem e Court Index No. 2008-9073.
As already noted, this action includes claim s of failure to keep accurate records under ERISA, breach of
fiduciary duty under ERISA, RICO violations, estoppel, breach of contract, breach of im plied covenant of
good faith and fair dealing,unjust enrichm ent/restitution, and quantum m eruit. The other action, filed on
the sam e day, was assigned Suprem e Court Index No. 2008-9072. That action, asserting claim s of
conversion, fraud and deceit, m isrepresentation, and estoppel, also was rem oved to this Court where it
was assigned Docket No. 08-CV-951.
2
these statutory wage and overtime requirements, and that the failure to pay overtime was
willful. (Id. ¶¶ 80, 89.) Plaintiffs seek, inter alia, “an award of the value of plaintiffs’ unpaid
wages, including fringe benefits.”
Though the wage and hour statutes provide the
framework for their Complaint, Plaintiffs do not assert claims under either the FLSA or
NYLL. As noted, those claims are pursued in the pending Federal Action.
Defendants now rely on their prior briefing in the Federal Action (in particular, 08CV-380, Docket Nos. 86-87) in support of the instant motion to dismiss. The motion is now
fully briefed and ready for disposition.
II. THE MOTION TO DISMISS
A.
Standard of Review
In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), the
Court must accept the factual allegations in the complaint as true and draw all reasonable
inferences in favor of the plaintiff. See Cleveland v. Caplaw Enters., 448 F.3d 518, 521 (2d
Cir. 2006). “In order to survive a motion to dismiss under Rule 12(b)(6), a complaint must
allege a plausible set of facts sufficient ‘to raise a right to relief above the speculative
level.’” Operating Local 649 Annuity Trust Fund v. Smith Barney Fund Mgmt. LLC, 595
F.3d 86, 91 (2d Cir. 2010) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.
Ct. 1955, 167 L. Ed. 2d 929 (2007)). This standard does not require “heightened fact
pleading of specifics, but only enough facts to state a claim to relief that is plausible on its
face.” Twombly, 550 U.S. at 570.
The Supreme Court recently clarified the appropriate pleading standard in Ashcroft
v. Iqbal, setting forth a two-pronged approach for courts deciding a motion to dismiss. 556
3
U.S. ___, 129 S. Ct. 1937, 173 L. Ed. 2d 868 (2009). The decision instructs district courts
to first “identify[ ] pleadings that, because they are no more than conclusions, are not
entitled to the assumption of truth.” 129 S. Ct. at 1950. Though “legal conclusions can
provide the framework of a complaint, they must be supported by factual allegations.” Id.
Second, if a complaint contains “well-pleaded factual allegations[,] a court should assume
their veracity and then determine whether they plausibly give rise to an entitlement to
relief.” Id. “A claim has 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. The plausibility standard is not akin to a 'probability requirement,' but
it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id. at 1949
(quoting and citing Twombly, 550 U.S. at 556-57 (internal citations omitted)).
B.
The ERISA Claims
The first and second causes of action are brought under ERISA. The first, brought
pursuant to 29 U.S.C. § 1132(a)(3), alleges that Defendants sponsor pension plans for its
employees and “failed to keep accurate records of all time worked by Class Members” in
violation of ERISA section 209, 29 U.S.C. § 1059(a)(1). Plaintiffs allege that, as a result
of this failure, Defendants’ records are not sufficient to determine benefits due under the
plans. (Docket No. 1, Ex. A ¶¶ 110-11, 127-28.) In their second claim, Plaintiffs allege that
Defendants breached their fiduciary duties under 29 U.S.C. § 1104(a)(1) by “failing to credit
them with all of the hours of service for which they were to be paid, including overtime to
the extent overtime may be included as compensation under the Plans, or to investigate
whether such hours should be credited.” (Docket No. 1, Ex. A ¶¶ 112, 130.)
4
Defendants contend these claims must be dismissed because Plaintiffs cannot sue
under ERISA section 502(a)(3) to recover monetary damages, lack Article III standing to
bring a recordkeeping claim, have not yet exhausted their administrative remedies with
regard to either of the ERISA claims, and have not sufficiently stated a breach of fiduciary
duty claim. The Court will address the jurisdictional argument first and all others as
necessary.
Defendants make a standing argument only with regard to the recordkeeping claim,
and contend that standing is lacking because no named Plaintiff has sufficiently alleged
a personal stake in the outcome of the dispute.
ERISA section 209 provides, in pertinent part that:
[E]very employer shall, in accordance with such regulations as the Secretary
may prescribe, maintain records with respect to each of his employees
sufficient to determine the benefits due or which may become due to such
employees.
29 U.S.C. § 1059(a)(1). Section 209 does not provide a private right of action. For that,
Plaintiffs rely on ERISA section 502, pursuant to which:
A civil action may be brought . . .by a participant, beneficiary, or fiduciary (A)
to enjoin any act or practice which violates any provision of this title or the
terms of the plan, or (B) to obtain other appropriate equitable relief (I) to
redress such violations or (ii) to enforce any provisions of this title or the
terms of the plan[.]
29 U.S.C. § 1132(a)(3).
Article III standing requirements must be satisfied even where, as here, Congress
grants certain individuals a right to sue. Raines v. Byrd, 521 U.S. 811, 820 n.3, 117 S. Ct.
2312, 138 L. Ed. 2d 849 (1997). As a constitutional matter, standing involves the question
of whether a plaintiff has made out a "case or controversy" between himself and the
5
defendant within the meaning of Article III. The three basic elements of constitutional
standing are: (1) the plaintiff must suffer an injury in fact; (2) that is "fairly traceable" to the
defendant's conduct; and (3) redressable by the court. Friends of the Earth, Inc. v. Laidlaw
Envtl. Servs., Inc., 528 U.S. 167, 180-181 (2000) (citing Lujan v. Defenders of Wildlife, 504
U.S. 555, 560-61, 112 S. Ct. 2130, 119 L. Ed. 2d 351 (1992)). The party invoking federal
jurisdiction bears the burden of showing that these elements are present. Lujan, 504 U.S.
at 561. Consequently, if none of the named plaintiffs sufficiently allege these elements,
“none may seek relief on behalf of himself or any other member of the [putative] class.”
O’Shea v. Littleton, 414 U.S. 488, 494, 94 S. Ct. 669, 38 L. Ed. 2d 674 (1974).
Here, Plaintiffs allege that Defendants sponsor pension plans for their employees,
and failed to keep records of time worked by class members such that their records are
“legally insufficient” to determine benefits. (Docket No. 1, Ex. A ¶¶ 110-11). They rely on
Fin. Inst. Ret. Fund v. Office of Thrift Supervision (“FIRF”) to suggest that the violation of
a statutory right such as section 209, coupled with a statutory avenue for relief such as
section 502(a)(3), is sufficient to show an injury for Article III purposes. 964 F.2d 142, 147
(2d Cir. 1992). The Court disagrees with Plaintiffs’ interpretation. Moreover, the FIRF
holding is specific to a breach of fiduciary duty claim and involved an identifiable pool of
money to which the plaintiffs had colorable claims. I find it is distinguishable from the
circumstances alleged here for the reasons stated below.
It is well-settled that ERISA, and specifically section 502(a)(3), does require
allegations of some individualized injury or deprivation of a right, even if that right is
statutorily created. Kendall v. Employees Ret. Plan of Avon Prods., 561 F.3d 112, 118-19
(2d Cir. 2009) (plan participant suing under ERISA must identify statutory endorsement of
6
the action and assert constitutionally sufficient injury arising from the breach of a statutorily
imposed duty); see also Malkani v. Clark Consulting, Inc., 727 F. Supp. 2d 444, 451 (D.
Md. 2010) (rejecting proposition that mere existence of section 502(a)(3) is sufficient to
grant standing for Article III purposes and declining to follow FIRF).
The Second Circuit’s recent discussion in Kendall is instructive here. There, as
here, the plaintiff first alleged that the defendant failed to comply with ERISA and thereby
deprived her of her entitlement to such compliance. The Second Circuit concluded that
such allegations “in and of themselves [are insufficient] to constitute an injury-in-fact
sufficient for constitutional standing.” Kendall, 561 F.3d at 121.
The plaintiff in Kendall went on to allege that the employer’s ERISA violations
prevented her from realizing higher benefits. Id. at 119. Although her claim was brought
under ERISA section 502(a)(3) as one for injunctive relief, the Second Circuit concluded
that she was effectively claiming money damages outside that provision’s scope.
Defendants here contend, and I agree, that notwithstanding Plaintiffs’ characterization of
their claim as for injunctive relief, the allegations that Defendants’ records are insufficient
to accurately determine benefits due to Plaintiffs ultimately seeks monetary relief. Plaintiffs
cannot dispute that, if they succeed in demonstrating that Defendants’ compliance with
ERISA will result in the crediting of additional hours toward their pension benefits, they will
realize a monetary gain. Indeed, they anticipate as much in their prayer for relief, where
they seek “an award of the value of plaintiffs’ unpaid wages, including fringe benefits.”2
2
Because this claim is, at its core, one for m onetary relief, ERISA section 502(a)(3) does not
provide a basis for relief. Rather, such a claim should be brought under ERISA section 502(a)(1)(B).
Plaintiffs’ failure to state a cognizable claim under section 502(a)(3) is an alternative ground for dism issal
as a m atter of law.
7
(Docket No. 1, Ex. A at 26.)
The Kendall Court, upon finding that the plaintiff sought monetary relief, reiterated
the Second Circuit’s prior holding that “[r]equests for restitution or disgorgement under
ERISA . . . require[ ] that a plaintiff satisfy the strictures of constitutional standing by
demonstrating individual loss . . . .” 561 F.3d at 119 (quoting Cent. States Se. & Sw.
Areas Health and Welfare Fund v. Merck-Medco Managed Care, 433 F.3d 181, 200 (2d
Cir. 2005)). It then went on to consider whether the plaintiff’s alleged injuries were
sufficient to satisfy Article III.
Typically, “[t]o qualify as a constitutionally sufficient injury-in-fact, the asserted injury
must be concrete and particularized as well as actual or imminent, not conjectural or
hypothetical.” Baur v. Veneman, 352 F.3d 625, 632 (2d Cir. 2003) (internal quotation
marks omitted). In FIRF, the case on which Plaintiffs rely, the Second Circuit held that a
plaintiff may establish standing for an ERISA breach of fiduciary duty claim based on a
theoretical injury arising from the mismanagement of fund assets. 964 F. 2d at 149. The
FIRF plaintiffs were found to have standing where they pointed to “an identifiable and
quantifiable pool of assets to which they had colorable claims.” Kendall, 561 F.3d at 121.
Even assuming a theoretical injury could also establish standing for a
recordkeeping claim, I find the allegations here insufficient.
Accepting Plaintiffs’
allegations as true, and giving their Complaint the most favorable reading, they infer an
injury from the alleged recordkeeping violation that is purely speculative. As a preliminary
matter, they have not identified which defendant(s) they work(ed) for, nor alleged that the
various pension plans Defendants purportedly sponsor are even subject to ERISA, nor
that any one of them is a participant in any particular plan. Beyond that, their ERISA
8
claims are based on an alleged failure to keep accurate records of all time worked by
class members and to credit them “with all of the hours of service for which they were
entitled to be paid, including overtime to the extent overtime may be included as
compensation under the Plans, or to investigate whether such hours should be credited.”
(Docket No. 1, Ex. A ¶¶ 111-12 (emphasis supplied)). In short, these Plaintiffs point to
something they believe should have been done—i.e., crediting hours—but then
immediately concede they do not know whether or not the hours they refer to are to be
credited at all under the terms of the unspecified plans. As was the case in Kendall, 561
F.3d at 122, these Plaintiffs have failed to point to any identifiable or quantifiable asset to
which they are entitled and thus fail to allege a theoretical injury-in-fact sufficient for
purposes of Article III standing.
This ruling applies equally to Plaintiffs’ breach of fiduciary duty claim which is based
on precisely the same allegations as the recordkeeping claim.
Notwithstanding
Defendants’ failure to move for dismissal of the fiduciary duty claim on this basis, federal
courts have an “independent obligation to consider the presence or absence of subject
matter jurisdiction sua sponte.” College Standard Magazine v. Student Ass’n of State
Univ. of N.Y. at Albany, 610 F.3d 33, 35 (2d Cir. 2010). Accordingly, the first and second
causes of action are dismissed for lack of subject matter jurisdiction.
C.
The RICO Claim
Plaintiffs’ third cause of action alleges civil RICO violations, specifically, that
Defendants devised and carried out a scheme to fraudulently deprive them of their lawful
entitlement to wages and overtime. (Docket No. 1, Ex. A ¶¶ 114-15.) In furtherance of
their scheme, Defendants are alleged to have mailed payroll checks to Plaintiff that were
9
“false and deceptive because they mislead [sic] Plaintiffs about the amount of wages to
which they were entitled, as well as their status and rights under the FLSA.” (Id. ¶¶ 11617.) Plaintiffs claim that they relied to their detriment on the misleading payroll checks.
1.
FLSA Preemption
Defendants first argue that this claim is preempted by the FLSA. Based on
Plaintiffs’ allegations, it is beyond dispute that their RICO claim is predicated solely on
alleged violations of wage and hour laws. They plead an unlawful, willful, and systematic
intent by Defendants to retain wages and overtime due to Plaintiffs, resulting in a
deprivation of Plaintiffs’ lawful entitlement to those payments. For the reasons stated
below, I conclude that the RICO claim is preempted to the extent it falls within the FLSA’s
scope.
There exists a well-established principle that “a precisely drawn, detailed statute
preempts more general remedies.” Hinck v. United States, 550 U.S. 501, 506, 127 S. Ct.
2011, 167 L. Ed. 2d 888 (2007).
Where Congress devises a “careful blend of
administrative and judicial enforcement powers,” this principle leads “unerringly to the
conclusion that [the statute] provides the exclusive judicial remedy for claims [falling within
its scope].” Brown v. GSA, 425 U.S. , 833-35, 96 S. Ct. 1961, 48 L. Ed. 2d 402 (1976).
The purpose of the FLSA is “to protect all covered workers from substandard
wages and oppressive working hours.” Barrentine v. Arkansas-Best Freight Sys., Inc.,
450 U.S. 728, 739, 101 S. Ct. 1437, 67 L. Ed. 2d 641 (1981). The Act provides that “no
employer shall employ any of his employees . . . for a workweek longer than forty hours
unless such employee receives compensation for his employment in excess of the hours
above specified at a rate not less than one and one-half times the regular rate at which
10
he is employed.” 29 U.S.C. § 207(a)(1). The regular, minimum rates at which employees
must be paid are established by section 206 of the FLSA. Id. § 206(a). The FLSA sets
forth a broad civil enforcement scheme, pursuant to which “[a]ny employer who violates
the provisions of section 206 or section 207 . . . shall be liable to the employee or
employees affected in the amount of their unpaid minimum wages, or their unpaid
overtime compensation, as the case may be, and in an additional equal amount as
liquidated damages.” Id. § 216(b).
Courts in this Circuit routinely have found federal RICO claims precluded where the
source of the asserted right is covered by a more detailed federal statute. For example,
in Norman v. Niagara Mohawk Power Corp., the plaintiffs brought a claim under RICO
alleging that their employer retaliated against them when they attempted to bring the
employer’s pattern of racketeering to the attention of regulatory authorities. 873 F.2d 634,
635 (2d Cir. 1989). The Second Circuit examined the remedies available to employees
making such “whistleblower” claims and concluded that section 210 of the Energy
Reorganization Act, which provides a remedy for employees who have been retaliated
against for making complaints and creates a procedural framework for vindicating their
right to be free of such conduct, was the exclusive federal remedy for employee
protection. Id. at 637. The Second Circuit agreed with the district court’s finding that the
plaintiffs’ complaint, “distilled to its essence, alleges no more than that appellants were
discriminated against for having made complaints about safety at a nuclear plant—a
section 210 claim,” and affirmed dismissal of the RICO claim. Id. at 638. See also,
DeSilva v. North Shore-Long Island Jewish Health Sys., Inc., 770 F. Supp. 2d 497, 515
(E.D.N.Y. 2011) (finding RICO claim preempted because, inter alia, “allowing plaintiffs to
11
pursue a civil RICO claim grounded in the same facts as plaintiffs’ FLSA claim would,
essentially, create a new private right of action that would allow plaintiffs to seek treble
damages—instead of . . . unpaid wages and liquidated damages—and would render
meaningless [the FLSA’s remedial provisions]”); Eldred v. Comforce Corp., No. 08 Civ.
1171, 2010 U.S. Dist. LEXIS 18260, at *28-29 (N.D.N.Y. March 2, 2010) (finding RICO
claim precluded as duplicative of FLSA claim, and noting that “[t]his approach ensures
that the '[a]rtful invocation of controversial civil RICO, particularly when inadequately
pleaded' does not endanger the uniform administration of core concerns of the primary
enforcement scheme.” (quoting Norman, 873 F.2d at 637)).
Applying the persuasive analysis of the foregoing cases, this Court finds that
allowing plaintiffs to recover under civil RICO for alleged substantive violations of the
FLSA would thwart Congress’s careful, comprehensive scheme to remedy wage and hour
violations falling within the FLSA’s scope.
The question remaining is whether any of Plaintiffs’ civil RICO claims fall outside
the FLSA’s broad reach. Plaintiffs allege that they were not paid overtime wages and that
they were not paid straight-time wages for all hours worked. To the extent the RICO claim
alleges a failure to pay overtime, it clearly rests on “their status and rights under the
FLSA.”3 (Docket No. 1, Ex. A ¶ 117.) A RICO claim that merely recasts alleged FLSA
violations under a different label is precluded by the FLSA’s broad remedial scheme.
DeSilva, 770 F. Supp. 2d at 517.
3
As other courts in this Circuit have done, I reject Plaintiffs’ assertion that their RICO claim is
distinct and separate from their FLSA claim (pending in the Federal Action, 08-CV-380) because it is
based on “defendants’ m isleading pattern of conduct with knowing and reckless disregard for plaintiffs’
rights.” (Docket No. 13 at 14.) The rights they refer to are their statutory FLSA rights which clearly form
the basis for their RICO claim .
12
However, Plaintiffs also claim that they were not paid their regular rate of pay for
all hours worked. The FLSA provides for the recovery of straight-time wages only to the
extent the amount of compensation received by an employee results in a straight-time
hourly rate that is less than the applicable federal minimum wage. Plaintiffs do not allege
that their wages fell below this FLSA threshold. Therefore, to the extent the RICO claim
is based on unpaid straight time wages, it falls outside the FLSA’s scope and is not
preempted.
2.
Failure to State a Claim
Defendants next argue that Plaintiffs’ RICO claim fails because it is not pled with
sufficient particularity and does not adequately allege the existence of a RICO enterprise.
To state a civil claim under RICO, a plaintiff must allege the defendant has violated
the substantive RICO statute, 18 U.S.C. § 1962. There are seven constituent elements:
(1) that the defendant (2) through the commission of two or more [“predicate”] acts (3)
constituting a "pattern" (4) of "racketeering activity" (5) directly or indirectly invests in, or
maintains an interest in, or participates in (6) an "enterprise" (7) the activities of which
affect interstate or foreign commerce. Moss v. Morgan Stanley Inc., 719 F.2d 5, 16-17
(2d Cir. 1983), cert. denied, 465 U.S. 1025 (1984).
Racketeering activity is defined in the statute as any act, including bribery and
extortion, chargeable under State law and punishable by imprisonment for more than one
year; any act indictable under a number of specified federal criminal provisions, including
mail and wire fraud; and any offense involving bankruptcy, securities fraud or drug-related
activities that is punishable under federal law. See 18 U.S.C. § 1961. The enumerated
activities qualify as predicate acts.
13
Plaintiffs allege that Defendants engaged in predicate acts by mailing payroll
checks that were “false and deceptive because they mislead [sic] Plaintiffs about the
amount of wages to which they were entitled, as well as their status and rights under the
FLSA.” (Docket No. 1, Ex. A ¶¶ 116-17.) Defendants are purported to have “repeatedly
mailed payroll checks” on “a regular basis . . . in the last ten years.” Id. at ¶ 116.
The Second Circuit has spoken on the requirements for a mail fraud claim:
To prove a violation of the mail fraud statute, plaintiffs must establish the
existence of a fraudulent scheme and a mailing in furtherance of the
scheme. . . . While there is no requirement that the defendant personally
mail a letter, the plaintiff must show "1) that the defendant 'caused' the
mailing . . .and 2) that the mailing was for the purpose of executing the
scheme or . . .'incidental to an essential part of the scheme.'" United States
v. Bortnovsky, 879 F.2d 30, 36 (2d Cir. 1989) quoting Pereira v. United
States, 347 U.S. 1, 8-9, 98 L. Ed. 435, 74 S. Ct. 358 (1954)).
Allegations of mail fraud must be made with the particularity required by
Federal Rule of Civil Procedure 9(b) . . . . Pursuant to this higher pleading
standard, the “complaint must adequately specify the statements it claims
were false or misleading, give particulars as to the respect in which plaintiffs
contend the statements were fraudulent, state when and where the
statements were made, and identify those responsible for the statements.”
Cosmas v. Hassett, 886 F.2d 8, 11 (2d Cir. 1989). Plaintiffs asserting mail
fraud must also identify the purpose of the mailing within the defendant's
fraudulent scheme. See Sun Sav. & Loan Assoc. v. Dierdorff, 825 F.2d
187, 196 (9th Cir. 1987) (mail fraud adequately pled where complaint
described letters' date, content, origin, destination, and role in fraudulent
scheme); Sears v. Likens, 912 F.2d 889, 893 (7th Cir. 1990) (dismissing
complaint that failed to allege how misrepresentations furthered fraudulent
scheme) . . . .
McLaughlin v. Anderson, 962 F.2d 187, 190-91 (2d Cir. 1992). Defendants urge that this
claim must be dismissed because Plaintiffs have not made particularized allegations of
all circumstances constituting fraud—including time, place, speaker, contents of the
alleged misrepresentations, and why the statements are fraudulent—as required by
Federal Rule of Civil Procedure 9(b). See Anatian v. Coutts Bank (Switz.) Ltd., 193 F.3d
14
85, 88 (2d Cir. 1999). This is particularly so, they claim, where the complaint lumps
together all defendants, misrepresentations, and methods of communication. See Maki
v. Grenda, No. 92 Civ. 819, 1993 U.S. Dist. LEXIS 15046, at *4-5 (W.D.N.Y. Oct. 15,
1993) (Rule 9 requirements not met where complaint vaguely attributed fraudulent acts
to “defendants”); McNamara v. City of New York, No. 05 Civ. 6025, 2007 U.S. Dist. LEXIS
25015 (E.D.N.Y. Mar. 30, 2007) ("Plaintiff merely accuses handfuls of defendants of
engaging in an alleged enterprise without identifying each defendants['] role in and
relationship to the enterprise. Therefore, Plaintiff fails to meet the requirement under Rule
9(b) that allegations of fraud must connect to each individual defendant.").
Although 130 paragraphs are incorporated by reference into the RICO claim, no
specific descriptions of times, places, content, or methods of such misrepresentations are
made therein. Nor do Plaintiffs identify which of the named entities or individuals were
responsible for “causing” or mailing the allegedly fraudulent documents. Plaintiffs argue
that this case may involve hundreds or thousands of employees for whom pleading each
and every paycheck would be impractical or impossible.
They urge that, in such
circumstances, their allegation that mailings occurred at least 100 times within the last 10
years is sufficient to meet Rule 9's requirements. This Court disagrees. The Complaint
is brought by six individuals on behalf of themselves and a putative class. The named
Plaintiffs have offered no reason for their failure to specifically identify predicate acts
particular to them. I find that the mail fraud allegations do not comply with Rule 9, thereby
warranting dismissal of the RICO claim. At least two other district courts have reached
the same conclusion on identical, or nearly identical, allegations. See, DeSilva, 770 F.
Supp. 2d at 526-27; Barrus v. Dick’s Sporting Goods, Inc., 732 F. Supp. 2d 243, 260-62
15
(W.D.N.Y. 2010).
Defendants also argue that Plaintiffs have failed to plead the existence of a RICO
enterprise. In this regard, Plaintiffs allege that Catholic Health System, Inc. (“CHS”) is a
“healthcare consortium” engaged in the care of the sick, with all defendants constituting
an “integrated, comprehensive, consolidated health care delivery system.” (Docket No.
1, Ex. A ¶¶ 13, 15.) The Defendants are alleged to have common ownership and
common management, and are further identified as Plaintiffs’ employer (single, joint or
otherwise) and/or alter egos of each other. (Id. ¶¶ 12, 18-20.) CHS is named as the
RICO enterprise, of which each named Defendant is a member. (Id. ¶¶ 13, 121-23.)
A RICO enterprise under Section 1961(4) includes “any individual, partnership,
corporation, association, or other legal entity, and any union or group of individuals
associated in fact although not a legal entity.” 18 U.S.C. § 1961(4). An association-in-fact
enterprise is “ a group of persons associated together for a common purpose of engaging
in a course of conduct” which is “proved by evidence of ongoing organization, formal or
informal, and by evidence that the various associates function as a continuing unit.”
United States v. Turkette, 452 U.S. 576, 583, 101 S. Ct. 2524, 69 L. Ed. 2d 246 (1981).
“[I]t is well established in this Circuit that, under § 1962(c), the alleged RICO
'person' and RICO 'enterprise' must be distinct.” Falco v. Bernas, 244 F.3d 286, 307 (2d
Cir. 2001) (citations and internal quotation marks omitted). The distinctness requirement
cannot be circumvented by alleging “a RICO enterprise that consists merely of a corporate
defendant associated with its own employees or agents carrying on the regular affairs of
the defendant.” Riverwoods Chappaqua Corp. v. Marine Midland Bank, N.A., 30 F.3d
339, 344 (2d Cir. 1994).
16
Defendants argue, inter alia, that the requisite distinction between person and
enterprise does not exist here. I agree for the reasons stated below.
As already noted, CHS is described as a consortium of which each named
Defendant is a member. The two individual defendants, McDonald and Moley, are alleged
to be part of CHS’s senior executive team responsible for consortium-wide oversight and
management. (Docket No. 1, Ex. A, ¶¶ 18, 21-23, 46-47.) According to Plaintiffs,
McDonald is involved in all business functions of Defendants, has authority to draft and
enforce consortium-wide policies, and was actively involved in the creation of the illegal
wage policies at issue here. (Id. ¶¶ 25, 40, 43.) Moley is allegedly authorized to direct all
aspects of human resources functions across CHS, and actively advised defendants on
the enforcement of the illegal policies. (Id. ¶¶ 47-49.) The entities are described as
commonly owned, managed, and subject to consortium-wide decisionmaking such that
they are alter egos of each other. These alleged relationships compel the conclusion that
the entities and individuals named here were acting as agents of CHS when they
purportedly implemented and enforced consortium-wide illegal wage policies.
Riverwoods, 30 F.3d at 344 (enterprise made up of corporate defendant and its agents
does not meet distinctness requirement); see also, Physicians Mut. Ins. Co. v. Greystone
Servicing Corp, Inc., No. 07 Civ. 10490, 2009 U.S. Dist. LEXIS 32616, at * (S.D.N.Y. Mar.
25, 2009) (facts alleged in complaint—that defendants companies were alter egos and
shared common ownership, directors, managers, and employees—not sufficient to allege
that defendants were sufficiently separate such that one could be considered a distinct
RICO enterprise); DeSilva, 770 F. Supp. 2d at 529-30 (finding a distinct enterprise was
insufficiently pled on allegations virtually identical to those made here).
17
Plaintiffs’ allegations that the enterprise was formed by combining CHS with its
officers and the hospitals and health care entities it manages are clearly insufficient to
show that CHS associated with others to form an enterprise “sufficiently distinct from
itself.” Riverwoods, 30 F.3d at 344. As there appears to be no set of facts Plaintiffs could
plead consistent with the foregoing that would state a cognizable claim, their RICO claim
is dismissed with prejudice.
D.
State Common Law Claims
Plaintiffs assert a number of state common law claims seeking unpaid wages and
overtime based on contract and the state laws of New York. Defendants contend that
these claims are preempted in their entirety by federal law and also that they fail to state
claims for relief.
1.
FLSA Preemption
As noted at Point III.C.1., supra, the FLSA sets forth a broad enforcement scheme
for violations of federal wage and hour law. It was determined, in the context of the RICO
claim, that the claim was preempted insofar as it sought unpaid overtime, but was not
preempted to the extent it sought unpaid straight time wages. Some additional discussion
is warranted here given Plaintiffs’ reliance on the “state laws of New York”—presumably,
the NYLL—in support of their common law claims.
The FLSA contains a savings clause which allows the states to enact their own
stricter wage and hour provisions. Id. § 218(a). New York has enacted such provisions,
pursuant to which employees must be compensated for all hours worked. The NYLL
provides for full recovery of all unpaid straight-time wages owed. In contrast, the FLSA
18
provides for such recovery only to the extent the amount of compensation received by an
employee results in a straight-time hourly rate that is less than the applicable federal
minimum wage. In other words, New York has adopted a stricter wage provision with
regard to straight-time. As for overtime, “the Second Circuit Court of Appeals and . . .
New York District Courts have verified that overtime claims may be brought pursuant to
NYLL § 650 et seq. and that implementing regulation 12 NYCCRR 142-2.2 carries the
force of law.” Gordon v. Kaleida Health, No. 08-CV-378, 2009 U.S. Dist. LEXIS 108119,
at *11 n.6 (W.D.N.Y. Nov. 19, 2009) (citation and quotation marks omitted). The NYLL
overtime regulation expressly incorporates the FLSA’s calculation provisions, and so
recovery for overtime wages is precisely the same under either statute.
Although the Second Circuit has held that statutory wage claims under the NYLL
(which provides equal or greater protections than the FLSA) are not preempted by the
FLSA, it has not yet considered whether preemption applies when unpaid wages are
sought, as here, via common law claims. The circuit courts that have done so have
concluded that such claims are preempted where the relief sought is available under the
FLSA. See Anderson v. Sara Lee Corp., 508 F.3d 181, 192-93 (4th Cir. 2007) (noting the
FLSA’s unusually elaborate enforcement scheme and finding plaintiffs’ negligence,
contract, and fraud claims preempted where recovery on those claims would require the
same proof as a claim asserted under the FLSA); Williamson v. General Dynamics Corp.,
208 F.3d 1144, 1153-54 (9th Cir. 2000) (noting that claims directly covered by the
FLSA—such as overtime and retaliation disputes— must be brought under the FLSA, but
finding that the plaintiffs’ fraud claim was not preempted where the employer’s conduct
was not covered by any FLSA provision).
19
In many district court cases where this issue has arisen, the plaintiffs’ common law
claims were brought in conjunction with FLSA claims, based on the same facts, and
seeking the same relief. In such cases, most courts have had no trouble dismissing the
common law claims as preempted to the extent recovery is available under the FLSA,
even where the plaintiff also brought wage claims under a parallel state statute. See, e.g.,
Guensel v. Mount Olive Bd. of Educ., Civ. No. 10-4452, 2011 U.S. Dist. LEXIS 132102,
at * 19 (D.N.J. Nov. 16, 2011) (common law claims that are “directly covered” by FLSA
must be brought under the FLSA); DeMarco v. Northwestern Mem. Healthcare, No. 10-C397, 2011 U.S. Dist. LEXIS 88541, at *17-18 (N.D. Ill. Aug. 10, 2011) (unjust enrichment
and other state common law claims seeking relief available under the FLSA are
preempted); Bouthner v. Cleveland Constr., Inc., No. RDB-11-244, 2011 U.S. Dist. LEXIS
79316, at *21-22 (D. Md. July 21, 2011) (although common law claim made no reference
to FLSA, it was preempted where claim sought wages mandated by FLSA).
Two courts in this Circuit have expressly concluded that common law claims are
preempted to the extent they seek recovery available under the FLSA, but are not
preempted to the extent that state law provides a remedy not available under federal law.
DeSilva v. N. Shore-Long Island Jewish Health Sys., 770 F. Supp.2d 497, 532-33
(E.D.N.Y. 2011) (finding common law claims preempted by FLSA to extent they sought
overtime wages, but not preempted to extent they sought straight-time pay not available
under the FLSA); Barrus v. Dick’s Sporting Goods, Inc., 732 F. Supp. 2d 243, 263
20
(W.D.N.Y. 2010)4 (dismissing common law claims seeking unpaid overtime as preempted
by FLSA, but allowing claim for unpaid straight time wages to go forward). Other district
courts have held likewise. See, e.g., Monahan v. Smyth Auto., Inc., No. 10-CV-00048,
2011 Dist. LEXIS 9877, at *9-11 (S.D. Oh Feb. 2, 2011) (unjust enrichment claim not
preempted where it was based on alleged failure to pay the state’s minimum wage, which
was higher than FLSA minimum wage rate); Mickle v. Wellman Prods. LLC, No. 08-CV0297, 2008 U.S. Dist. LEXIS 63697, at *10-11 (N.D. Okla. 2008) (while state statute
created a distinct cause of action for overtime compensation, the plaintiffs’ common law
claim seeking such relief was duplicative of remedies provided by the FLSA and was
preempted).
The law on this issue is by no means settled—some courts have declined to find
common law claims preempted where a state’s statute incorporates the FLSA’s minimum
wage and/or overtime provisions, and others have dismissed entirely common law claims
for which only partial relief is found in the FLSA. However, I find the foregoing cases from
within this Circuit persuasive. As the DiSilva court noted, the FLSA’s savings clause
expressly provides that wage and hour actions may be brought under state wage statutes,
“it says nothing about a party’s ability to pursue general common law claims that have no
specific relevance to the labor law context.” 2011 U.S. Dist. LEXIS 27138, at *93
(emphasis in original).
Here, Plaintiffs common law claims are not brought in conjunction with any claim
4
The Barrus decision reverses that portion of Lopez, 2008 U.S. Dist. LEXIS 4744, at *13, 19-20,
the Defendants appear to rely on for the proposition that the FLSA provides an exclusive rem edy for all
com m on law wage claim s, including those seeking straight-tim e pay.
21
for relief under the FLSA or the NYLL. They refer generally to state statutory law only as
the basis for calculating damages. This vague reference to state law is not enough to
draw purely common law claims into the ambit of the FLSA’s savings clause. Accordingly,
to the extent Plaintiffs are seeking unpaid overtime wages that are available under the
FLSA, their claims are preempted, and to the extent they are seeking straight-time wages
for which no federal relief is available, they are not. Accordingly, each common law claim
is dismissed with prejudice only to the extent it seeks unpaid overtime wages.
2.
LMRA Preemption
Plaintiffs allege here that they and all class members entered into contracts for
employment with Defendants, “including implied contracts and/or express contracts such
as collective bargaining agreements,” in which Defendants made implied or express
promises “to fulfill all of their obligations pursuant to applicable state and federal [wage]
law[s].” (Docket No. 1, Ex. A ¶¶ 91-92.) Defendants argue that claims for unpaid straight
time wages, based on the alleged breach of these contract terms, are preempted by the
LMRA.
Section 301 of the LMRA provides that “[s]uits for violation of contracts between
an employer and a labor organization representing employees in an industry affecting
commerce . . . may be brought in any district court of the United States having jurisdiction
of the parties, without respect to the amount in controversy or without regard to the
citizenship of the parties.”
29 U.S.C. § 185(a).
It is well-settled that § 301 also
contemplates suits by individual employees to vindicate “uniquely personal” rights, such
as wages, that find their source in a collective bargaining agreement (a “CBA”). Hines v.
Anchor Motor Freight, Inc., 424 U.S. 554, 562, 96 S. Ct. 1048, 47 L. Ed. 2d 231 (1976).
22
Actions within the scope of § 301 are controlled by federal law and the Supreme
Court has described the pre-emptive force of § 301 as “so powerful as to displace entirely
any state cause of action for violation of contracts between an employer and a labor
organization. Any such suit is purely a creature of federal law, notwithstanding the fact
that state law would provide a cause of action in the absence of § 301." Franchise Tax
Bd.of Ca. v. Construction Laborers Vacation Trust, 463 U.S. 1, 23, 103 S. Ct. 2841, 77
L. Ed. 2d 420 (1983) (internal quotation marks omitted).
Defendants’ preemption argument is rejected at this juncture. Here, the Complaint
merely alleges that Defendants repeatedly represented they would comply with statutory
wage laws, even though they had no intention of doing so. Even assuming such
representations were made in CBAs covering one or more of the Plaintiffs,5 it would not
alter the fact that the alleged right Plaintiffs seek to vindicate— wages due under statutory
law—arises independent of any CBA. The mere existence of a CBA does not mandate
preemption in such circumstances. As the Second Circuit recognized in Foy v. Pratt &
Whitney:
[Section] 301 preemption applies only when necessary to assure that the
purposes animating § 301 will be frustrated neither by state laws purporting
to determine questions relating to what the parties to a labor agreement
agreed, and what legal consequences were intended to flow from breaches
of that agreement . . . .
127 F.3d 229 (2d Cir. 1997) (citation and quotation marks omitted).
Where, as here, a right arises from state law, the court must consider whether the
5
Plaintiffs refer generally to im plied and express contracts, the latter of which m ay include
individual em ploym ent agreem ents and/or collective bargaining agreem ents. As the nam ed Plaintiffs have
not alleged the nature of their contract with any particular Defendant, there is no way of determ ining, at
this point, whether a CBA is even at issue such that the preem ption issue is ripe for consideration.
23
state law claim requires interpretation of a provision of the CBA. If interpretation is
required, the claim is preempted. Levy v. Verizon Information Servs. Inc., 498 F. Supp.
2d 586, 596 (E.D.N.Y. 2007). Defendants’ contention that this common law claim
necessarily involve interpretation of CBAs is unpersuasive. Defendants have not pointed
to a particular CBA that even applies to Plaintiffs, much less requires interpretation.
Because it is not yet evident which Plaintiffs are members of a bargaining unit or which
CBAs are relevant, this Court has no basis upon which to evaluate the need to refer to or
interpret any wage-related provision(s). It may well be that, with more information,
Defendants can demonstrate preemption. At this juncture, however, their argument is
insufficient.6
3.
Failure to State a Claim
Before considering Defendants’ further arguments for dismissal of Plaintiffs’
common law claims for straight-time wages, this Court must again consider its
jurisdiction—specifically, whether, having disposed of all claims based on federal law, it
should decline to exercise supplemental jurisdiction over these purely state law claims.
See 28 U.S.C. § 1367(c)(3).
The United States Supreme Court has instructed that courts ordinarily should
decline to exercise supplemental jurisdiction in the absence of federal claims. See
Carnegie-Mellon Univ. v. Cohill, 484 U.S. 343, 350 n.7, 108 S. Ct. 614, 98 L. Ed. 2d 720
(1988) (noting that in the usual case where all federal claims are eliminated before trial,
6
For substantially the sam e reasons, this Court previously concluded, in 08-CV-378, that it was
not yet able to determ ine whether § 301 preem pts Plaintiffs’ New York Labor Law claim . Gordon, 2009
U.S. Dist. LEXIS 108119, at *8-10, 15 (“It m ay well be that Plaintiffs’ NYLL claim is preem pted . . . .
However, . . . the tim e to m ake that determ ination is after the parties and the Court are clear on which
bargaining units are im plicated in this action and which CBA or CBAs apply.”).
24
the relevant factors informing the decision of whether to exercise supplemental jurisdiction
will “point towards declining to exercise jurisdiction over the remaining state-law claims”);
United Mine Workers of Am. v. Gibbs, 383 U.S. 715, 726, 86 S. Ct. 1130, 16 L. Ed. 2d
218 (1966) (“Certainly, if the federal claims are dismissed before trial, . . . the state claims
should be dismissed as well.”).
The Second Circuit shares this view; where “federal-law claims are eliminated
before trial, the balance of factors to be considered under the pendent jurisdiction
doctrine—judicial economy, convenience, fairness, and comity—will point toward declining
to exercise jurisdiction over the remaining state-law claims.“ Valencia ex rel. Franco v.
Lee, 316 F.3d 299, 305 (2d Cir. 2003); see also, Marcus v. AT&T Corp., 138 F.3d 46, 57
(2d Cir. 1998) (“In general, where the federal claims are dismissed before trial the state
claims should be dismissed as well.”); Powell v. Gardner, 891 F.2d 1039, 1047 (2d Cir.
1989) (“in light of proper dismissal of the § 1983 claim against the County, the district
court should have declined to exercise pendent jurisdiction over Powell's state-law claims
against the County”).
This case is an exception to the general rule. As fully discussed above, Plaintiffs’
common law claims were brought in this Court in the first instance, based on precisely the
same facts and circumstances as the claims still pending in the Federal Action. Plaintiffs
then chose to voluntarily dismiss the instant claims and others, only to resurrect them all
in two state court actions. Principles of judicial economy, convenience to parties and
witnesses, and fairness all weigh in favor of retaining jurisdiction here. Moreover, there
is no harm to the principle of comity. Plaintiffs already have chosen to bring their NYLL
claims in this Court, and what remains of their state common law claims seek the same
25
relief under alternate legal theories. For these reasons, I find it appropriate to exercise
supplemental jurisdiction over this action.
a.
Estoppel
In their fourth cause of action, Plaintiffs claim “[d]efendants are estopped from
asserting statute of limitations defenses against plaintiffs.” (Docket No. 1, Ex. A ¶ 135.)
As pled, this is not a distinct cause of action, but instead is an equitable bar to defendants’
assertion of a statute of limitations defense. DiSilva, 770 F. Supp. 2d at 535 (citation
omitted). Thus, Plaintiffs fail to state a claim for relief and such “claim” is dismissed. This
ruling does not, however, prevent Plaintiffs from asserting equitable estoppel at an
appropriate point in the litigation, should any of their claims go forward and should
Defendants assert a statute of limitations defense. Id. (citation omitted).
b.
Breach of Contract
As an alternative to their LMRA preemption argument, Defendants urge that
Plaintiffs cannot base a breach of contract claim on the purported breach of a statutory
duty. As previously discussed, Plaintiffs allege that each class member’s express or
implied employment contract “included an implied or express term that defendants agreed
to fulfill all of their obligations pursuant to applicable state and federal law, including
payment for all time worked and overtime at time and one-half for time worked over 40
hours in a week.” (Docket No. 1, Ex. A ¶¶ 91-92.) This promise to follow the law is the
only “contractual” promise identified in the Complaint. Courts in New York have held that
“[a] promise to perform an existing legal obligation is not valid consideration to provide a
basis for a contract.” Goncalves v. Regent Int’l Hotels, Ltd., 58 N.Y.2d 206, 220 (1983)
(defendant’s “statutory obligation cannot be transformed into a contractual performance,
26
nor may the [plaintiff’s] statutory right be transformed into a contractual privilege”); see
also, Fafoutis v. Lyons, 149 A.D.2d 565, 566 (2d Dep’t 1989) (“A promise to comply with
a pre-existing legal duty is not adequate consideration upon which a valid contract may
be based.”). New York contract law has carved out one exception to this general
rule—i.e., written acknowledgment of a pre-existing [obligation] is independently
enforceable without additional consideration. R.B. Ventures, Ltd. v. Shane, No. 91 Civ.
5678, 1999 U.S. Dist. LEXIS 12702, at *20 (S.D.N.Y. 1999) (quoting CIBC Bank & Trust
Co. v. Banco Cent. do Brasil, 886 F. Supp. 1105, 1112 (S.D.N.Y. Aug. 18, 1995)).
Here, however, this exception does not work to salvage Plaintiffs’ contract claim.
In response to Defendants’ motion, and perhaps in an effort to avoid preemption, Plaintiffs
state that they are withdrawing “their breach of contract claims under any written
agreements,” and rest the claim solely on the implicit contractual obligations they contend
are part of every employer-employee relationship. Plaintiffs have offered no persuasive
authority in support of their assertion that, absent written agreements, at-will employeremployee relationships are grounded in contract. The four elements of a breach of
contract claim are: (1) the existence of a valid contract, (2) plaintiff's performance of the
contract, (3) defendant's material breach of the contract, and (4) resulting damages.
Noise in The Attic Prods., Inc. v. London Records, 10 A.D.3d 303, 306-07 (1st Dep't
2004). However, as already noted, “[a] promise to perform a pre-existing legal obligation
does not amount to consideration.” Murray v. Northrop Gruman Information Tech, Inc.,
444 F.3d 169, 178 (2d Cir. 2006). As Plaintiffs allege nothing more in this regard, they
have not sufficiently alleged the existence of an at-will employment contract.
As there appears to be no set of facts consistent with the foregoing under which
27
Plaintiffs can successfully plead a breach of contract claim, this claim is dismissed with
prejudice.
c.
The Remaining Claims
Although Plaintiffs withdrew their breach of contract claim to the extent it rested on
written agreements, they appear to rely on those written agreements with regard to their
remaining causes of action for breach of implied covenant of good faith and fair dealing,
unjust enrichment/restitution, and quantum meruit. For example, Plaintiffs allege that
“[b]oth unwritten contracts for at-will employment and written contracts between Class
Members (or their agents) and defendants contained an implied covenant of good faith
and fair dealing which obligated defendants to perform the terms and conditions of the
employment contract fairly and in good faith and to refrain from doing any act that would
violate any state or federal law governing the employment relationship.” (Docket No. 1,
Ex. A ¶ 94.)
Defendants argue that, under New York Law, Plaintiffs may assert quasicontractual claims such as these only where no valid contract exists and, because
Defendants do not dispute the existence of contracts governing their employment
relationships with Plaintiffs,7 the claims must be dismissed. Although the Court agrees
with this general legal principle, it must consider whether an exception applies here.
“Under New York law, when a valid agreement governs the subject matter of a dispute
between parties, claims arising from that dispute are contractual; attempts to repackage
7
Plaintiffs’ argum ent that there is a bona fide dispute as to the existence of em ploym ent
agreem ents is rejected. Although it appears the parties m ay disagree as to the nature of the agreem ents
im plicated here— particularly, collective bargaining agreem ents versus other form s of em ploym ent
contracts— the fact that Plaintiffs are parties to em ploym ent agreem ents is not disputed, at least at this
juncture.
28
them as sounding in fraud, conversion, and other torts, as well as unjust enrichment,
implied and quasi contract, and quantum meruit, are generally precluded, unless based
on a duty independent of the contract.” Poplar Lane Farm LLC v. Fathers of Our Lady of
Mercy, 10-3667-cv, 2011 U.S. App. LEXIS 23863, at *3-4 (2d Cir. Nov. 30, 2011)
(emphasis supplied) (citing Diesel Props S.R.L. v. Greystone Bus. Credit II LLC, 631 F.3d
42, 54 (2d Cir. 2011) (unjust enrichment); Mid-Hudson Catskill Rural Migrant Ministry, Inc.
v. Fine Host Corp., 418 F.3d 168, 175 (2d Cir. 2005) (quantum meruit); Clark-Fitzpatrick,
Inc. v. Long Island R.R., 70 N.Y.2d 382, 388-89 (1987) (quasi-contract and tort);
Sergeants Benev. Ass'n Annuity Fund v. Renck, 19 A.D.3d 107, 116 n.3 (1st Dep't 2005)
(negligent misrepresentation); Baker v. Norman, 643 N.Y.S.2d 30, 33 (1st Dep't 1996)
(fraud)).
It is clear that all claims in this action are predicated on Defendants purported
failure to comply with statutory wage and hour laws. As has already been determined,
Plaintiffs’ right to mandated wages would exist in the absence of employment agreements.
However, in this context, “a plaintiff’s entitlement to recover in [quasi-contract] outside a
valid contract may depend on a showing that the additional recovery sought is so distinct
from the contractual obligations that it would be unreasonable for the defendants to
assume the provided services were rendered without expectation of further pay. MidHudson Catskill Rural Migrant Ministry, Inc. v. Fine Host Corp., 418 F.3d 168, 175 (2d Cir.
2005) (citation omitted). “It is impermissible . . . to seek damages in an action sounding
in quasi contract where the suing party has fully performed on a valid written agreement,
the existence of which is undisputed, and the scope of which clearly covers the dispute
between the parties.” Clark-Fitzpatrick, Inc. v. Long Island Rail Road Co., 70 N.Y.2d 382,
29
389 (1987).
Here, Defendants’ contractual payment obligations are alleged to be
precisely the same as their statutory obligations. As such, the quasi-contract claims are
precluded.
Defendants further argue for dismissal of the quasi-contract claims on the ground
that Plaintiffs have an adequate remedy at law.
To prevail on a claim of unjust
enrichment, a plaintiff must establish that the defendant was enriched at the plaintiff’s
expense in circumstances such that equity and good conscience require restitution. Kaye
v. Grossman, 202 F.3d 611, 616 (2d Cir. 2000). A claim for quantum meruit recovery is
established by showing the performance of services, the defendant’s acceptance of those
services, the expectation of compensation for those services, and the reasonable value
of same. Mid-Hudson, 418 F.3d at 175 (2d Cir. 2005). Here, Plaintiffs claims are based
on Defendants’ alleged failure to comply with their legal obligations to pay Plaintiffs all
earnings to which they were entitled. As a result, Defendants were enriched at their
expense while they were been denied the reasonable value of their services. (Docket No.
1, Ex. A ¶¶ 96-101.)
Plaintiffs have legal remedies available to them in the form of the state statutory
claim they are pursuing in the pending Federal Action, 08-CV-380, against the same
Defendants and based on the same facts. They have not argued any basis for concluding
that the NYLL claim is not sufficient to address Defendants’ alleged failure to pay them
straight-time wages for all hours worked.8 “Generally, if there is an adequate remedy at
8
Plaintiffs’ argum ent that they can m aintain these claim s because they seek injunctive relief is
specious. They offer no authority in support, and these com m on law claim s, by their very nature, are
claim s for restitution and m onetary recovery.
30
law, a court will not permit a claim in equity.” Bongat v. Fairview Nursing Care Ctr., Inc.,
341 F. Supp. 2d 181, 189 (E.D.N.Y. 2004) (dismissing claims of unjust enrichment and
quantum meruit under New York law where claim based on wage and hour statute
provided adequate remedy at law). The quasi-contract claims are subject to dismissal for
this reason, as well. Accordingly, these claims are dismissed with prejudice.
IV. CONCLUSION
For the reasons given above, Defendants’ Motion to Dismiss is granted.
V. ORDERS
IT HEREBY IS ORDERED, that Defendants’ Motion to Dismiss (Docket No. 6) is
GRANTED;
FURTHER, that the Clerk of Court is directed to close this case.
SO ORDERED.
Dated:
January 15, 2012
Buffalo, New York
/s/William M. Skretny
WILLIAM M. SKRETNY
Chief Judge
United States District Court
31
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