Martino et al v. Wire to Wire, Inc. et al
Filing
67
OPINION AND ORDER granting in part and denying in part 50 Motion to Dismiss for Failure to State a Claim by Defendant Chapel Electric Co.; granting in part and denying in part 51 Motion to Dismiss for Failure to State a Claim by Defendant TriVe rsity Construction Company LLC. The motions to dismiss Plaintiffs' state common law claim for breach of contract are DENIED WITHOUT PREJUCICE. The alternative motions to hold said claim in abeyance are GRANTED. Plaintiffs are ORDERED to file w ith the Clerk of this Court a brief report describing the status of the proceedings in Martino, et al. v. Philpott, Adversary Proceeding Case No. 1:13-ap-01084 (Bankr. S. D. Ohio 2013) no later than 12/8/2014, and every 90 days thereafter. Finally, the preliminary pretrial conference set for 9/9/2014 at 11:00 AM is VACATED. Signed by Judge S Arthur Spiegel on 9/8/2014. (km1)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION
MICHAEL MARTINO, et al.,
:
:
:
:
:
:
:
:
:
Plaintiffs,
v.
WIRE TO WIRE, INC., et al.,
Defendants.
This
matter
motions.
Claim
before
OPINION AND ORDER
Court1
the
on
the
following
two
We consider below Defendant TriVersity Construction
Company,
Amended
is
No. 1:12-cv-00562
LLC’s
Amended
Complaint
(doc.
against
51)
Chapel
Plaintiffs’
or,
and
Motion
in
the
Electric
memorandum
in
to
the
Dismiss
Plaintiffs’
alternative,
Motion
Co.,
to
LLC
response
Abate
Dismiss
(doc.
to
or
50),
both
Third
Plaintiffs’
Abate
as
(doc.
Claims
well
57)
as
and
Defendants’ respective replies (docs. 62, 61).
I.
Background
This cause of action was commenced in August 2012 (doc. 1).
A first (doc. 10), then a second (doc. 19), amended complaint
followed.
In all, seven claims have been brought by Plaintiffs
Michael Martino, Brian Yelton and Russell Schroer, in various
groupings,
against
Defendants
Wire
1
to
Wire,
Inc.,
their
This matter was transferred to this Court’s docket from the
docket of the Honorable Susan J. Dlott on August 20, 2014 (doc.
65).
1
employer, and Todd Philpott and Martin Crabill, both owners—and
the purported alter egos—of Wire to Wire.2
of:
unpaid
and
underpaid
overtime
There are allegations
compensation
under
the
Federal Labor Standards Act (“FLSA”) and a retaliation charge
related thereto (first and seventh claims); a failure to comply
with the record-production requirements of Article II, Section
34a
of
the
Ohio
Constitution
and
Ohio
Rev.
Code
§
4111.08
(second claim); a failure to pay wages in a timely manner as
required under Ohio Rev. Code § 4113.15(A) (sixth claim);
failure
to
pay
Kentucky’s
prevailing
projects (third and fourth claims).
motions
is
the
fifth
claim,
which
wage
on
two
and a
different
Pertinent to the instant
was
refined
in
the
Third
Amended Complaint that added TriVersity Construction and Chapel
Electric as named Defendants (see doc. 39).
To appreciate its
substance, however, a slight digression is necessary.
In April and May 2013, suggestions of voluntary (Chapter 7)
bankruptcy by Defendants Philpott and Crabill were filed (docs.
33 and 27, respectively).
filed
a
suggestion
of
In this same time-band, Plaintiffs
bankruptcy
advising
the
Court
that
Defendant Wire to Wire had been subjected to an involuntary
Chapter 7 bankruptcy petition (see doc. 30).
2
Chief Judge Susan
Two other Defendants, Volpenhein Brothers Electric, Inc. and
Morel Construction Co., were named in the Second Amended
Complaint (doc. 19), but both were quickly dismissed with
prejudice (see docs. 25, 29).
2
J.
Dlott,
to
whom
this
cause
of
action
was
then
assigned,
administratively terminated it from her docket on May 3, 2013,
granting the parties leave to reinstate when (and, presumably,
if)
appropriate
(see
doc.
33).
Plaintiffs
then
filed
a
“Complaint Asserting Nondischargeability of Certain Debts under
11 U.S.C. §§ 523(a)(2), (4) and (6)”
against Defendant Philpott
in the United States Bankruptcy Court for the Southern District
of Ohio.
See In re Philpott, Chapter 7 Case No. 1:13-bk-12066
(Bankr. S.D. Ohio 2013) (doc. 22).
In it, they allege, inter
alia, that Defendants Wire to Wire and Philpott submitted to
“upper tier contractors” certified payroll reports and notarized
conditional lien releases stating that Plaintiffs had been paid
full prevailing and proper overtime wages.
Martino, et al. v.
Philpott, Adversary Proceeding Case No. 1:13-ap-01084 (Bankr.
S.D. Ohio 2013) (doc. 1 ¶¶ 15, 19).
In actuality, though,
Plaintiffs
the
were
paid
wages
less
than
certified (id. (doc. 1 ¶¶ 20, 27)).
Defendants
received
from
these
amount
Defendants
Plaintiffs maintain that
upstream
contractors
“reimbursement” amounts that exceeded the wages paid to them,
with Defendant Philpott pocketing the difference.
This use “for
his own purposes” amounts to defalcation and embezzlement in
their view, and Plaintiffs urge that his debt to them for the
wages they contend they are owed should not be discharged.
(doc. 1 ¶¶ 24, 28-34).
3
Id.
Plaintiffs amended their dischargeability complaint to add
TriVersity Construction and Chapel Electric as defendants on a
breach of contract theory.
Id. (doc. 12 ¶¶ 76-83).
They then
filed motions to dismiss for lack of jurisdiction under Fed. R.
Civ.
P.
against
12(b)(1),
them
Philpott’s
response,
urging
were
Chapter
not
7
Plaintiffs
that
Plaintiffs’
sufficiently
proceeding.
filed
a
purported
claims
related
(docs.
Id.
motion
to
22,
20).
In
relief
from
the
for
Defendant
automatic stay to proceed against Defendant Philpott, along with
TriVersity and Chapel, in this Court.
In re Philpott, Chapter 7
Case No. 1:13-bk-12066 (Bankr. S.D. Ohio 2013) (doc. 27).
That
motion was denied on March 10, 2014:
The motion to terminate or condition the automatic
stay filed by Michael Martino, Brian Yelton, and Russell
Schroer, former employees of Wire to Wire, Inc., is hereby
DENIED as moot. The bankruptcy court will retain
jurisdiction over the adversary complaint and enter a final
order determining whether the debts underlying the FLSA and
related state law claims asserted against the Debtor Todd
Philpott, individually, are nondischargeable under §
523(a)(2), (4), and (6). The automatic stay does not
extend to the codefendants named in the parallel lawsuit
initiated in district court by Martino, Yelton, and
Schroer. The district court litigation against these
particular codefendants can proceed unaffected by the
automatic stay which expired in the bankruptcy case.
Id. (doc. 42 at 6-7 (footnote omitted) (emphasis added)).
bankruptcy
court
thereafter
dismissed
TriVersity
The
Construction
and Chapel Electric from the adversary proceeding for lack of
jurisdiction
on
March
24,
2014.
4
See
Martino,
et
al.
v.
Philpott, et al., supra (doc. 33 at 2 (“Accordingly, the Motions
are GRANTED.
Chapel
are
The Plaintiffs’ actions against Tri[V]ersity and
DISMISSED.
Plaintiffs’
This
action
dischargeability
shall
action,
proceed
alone,
on
against
the
Mr.
Philpott.”)).
The day after the bankruptcy court denied their motion for
relief
from
the
automatic
stay
as
it
related
to
Defendant
Philpott, Plaintiffs filed in this Court a motion for an order
to lift the stay against Defendant Wire to Wire on the premise
that it did not—indeed, as a corporate entity, could not—receive
a
Chapter
7
discharge
motion (doc. 36).
Wire
(see
Complaint
Chapel
doc.
on
(doc.
35).
Dlott
granted
that
With consent of counsel for Defendant Wire to
38),
March
Plaintiffs
26,
2014,
two
dismissed
were
Judge
from
the
filed
their
days
after
adversary
Third
Amended
TriVersity
and
proceeding
in
bankruptcy, adding them as named Defendants to the litigation
pending in this Court (see doc. 39).
TriVersity Construction was the general contractor of the
United Way Renovation Project, the subject of Plaintiffs’ fifth
claim for relief.
TriVersity entered into a subcontract with
Chapel Electric, which, in turn, entered into a subcontract with
Wire to Wire.
Plaintiffs’ employer, therefore, became a “sub
subcontractor” by virtue of these relationships.
Chapel
are
the
“upper
tier
contractors”
5
to
TriVersity and
whom
certified
payroll reports were submitted by Defendant Philpott, on behalf
of Defendant Wire to Wire, for the purpose of securing lien
releases.
common
Plaintiffs sue for breach of contract under Ohio
law,
claiming
that
they
should
have
been
paid
the
stipulated wage rate of $27.40 per hour for all work done by
them
on
the
project.
Plaintiffs
had
no
direct
contractual
relationship with TriVersity or Chapel, but maintain that they
are
the
“third-party
beneficiaries”
of
the
wage
provision
contained within the agreements into which TriVersity and Chapel
and, in turn, Chapel and Wire to Wire, entered.
The total
amount in controversy is $6,005.55 (doc. 39 ¶¶ 76, 80).3
II.
Discussion
Defendants TriVersity Construction and Chapel Electric urge
that
dismissal
pursuant
to
Fed.
R.
Civ.
P.
12(b)(1)
is
appropriate because this Court lacks subject-matter jurisdiction
of
the
state
against them.
common
law
breach
of
contract
claim
asserted
No federal question jurisdiction exists under 28
U.S.C. § 1331, as Plaintiffs concede that the Davis-Bacon Act is
inapplicable (see doc. 57 at 9-10).
Moreover, Plaintiffs do not
allege diversity of citizenship of the parties or a sufficient
3
Plaintiff Martino claims to be owed $1,776.00, an additional
$7.40 per hour for the 240 hours he worked on the United Way
project (doc. 39 ¶¶ 74-76). Plaintiff Yelton claims to be owed
$4,229.55, an additional $9.40 per hour for 325 hours worked and
$6.95 for 169 hours worked, all hours likewise with respect to
said project (doc. 39 ¶¶ 77-80). These two amounts total
$6,005.55.
6
amount in controversy to trigger jurisdiction under 28 U.S.C. §
1332.
In the absence of original jurisdiction then, the only
means
by
which
this
Court
could
consider
the
claim
against
TriVersity and Chapel would be through a discretionary exercise
of
supplemental
jurisdiction,
vis-à-vis
the
other
six
claims
against Defendant Wire to Wire, under 28 U.S.C. § 1367.
Defendants
also
contend
that
dismissal
is
appropriate
pursuant to Fed. R. Civ. P. 12(b)(6) for failure to state a
viable claim.
They argue first that a “sub subcontractor” is
only an incidental beneficiary of the contractual terms between
the general contractor and its subcontractor, and, therefore,
has no right of action in the event of a breach.
matter
before
us,
if
Wire
to
Wire
lacks
Hence, in the
standing
to
sue
TriVersity or Chapel, then clearly Plaintiffs, as Wire to Wire’s
employees, do as well.
See The Kuempel Co. v. Dayton Malleable,
Inc., No. 76AP-893, 1977 WL 200214 (Ohio App. 10th Dist. June
14, 1977).
Second, Defendants TriVersity and Chapel maintain
that specific language within the agreement they executed in
connection with the project, specifically Section 1.3, precludes
any finding in Plaintiffs’ favor (see doc. 51, Exh. A).
In response, Plaintiffs argue that they are the intended
third-party beneficiaries of the contractually stipulated wage
provisions, not simply “incidental” ones, and thus have standing
to sue under Ohio law as interpreted by the Sixth Circuit.
7
See
Norfolk & Western Co. v. United States, 641 F.2d 1201 (6th Cir.
1980).
Moreover, they contend that documents other than the
agreement between TriVersity Construction and Chapel Electric,
ones not currently before the Court, are pertinent and require
study before any determination on the merits is made.
On the issue of whether this matter ought to be held in
abeyance, Defendants assert that resolution of the fraud claim
against Debtor Philpott must occur before Plaintiffs can develop
their putative third-party beneficiary theory in this forum.
agree.
We
Ostensibly a complement of threshold findings of fact
and conclusions of law will attend the ruling by the bankruptcy
judge presiding over the pending adversary proceeding.
Court
anticipates
findings
as
to
the
wage
rate
This
promised
to
Plaintiffs by their employer for hours worked on the United Way
Renovation Project; the wage rate, if any, to which Plaintiffs
were otherwise entitled; the total amount of hours Plaintiffs
actually worked; and whether the payroll reports submitted by
Defendant Philpott to Chapel Electric—and, ultimately TriVersity
Construction—were indeed false.
We similarly expect conclusions
as to whether Defendant Philpott committed fraud and, if so,
whether
Plaintiffs
between
the
wages
are
entitled
to
they
actually
received
claimed to have paid them.
recover
and
the
the
difference
wages
he
A finding of fraud renders any
related debt nondischargeable, and would enable Plaintiffs to
8
seek
full
recovery
from
Defendant
Philpott
in
the
first
instance.
Should the bankruptcy court find to the contrary,
Plaintiffs
can
then
return
to
this
Court,
at
which
time
we
expect that Defendants TriVersity and Chapel will renew their
Rule 12 motions to dismiss.
Plaintiffs’
contention
that
abatement
is
not
indicated
because their employer, Wire to Wire, remains a defendant in
this action is unavailing.
Wire to Wire has not answered or
otherwise responded to the Third Amended Complaint (filed on
March
26,
2014)
Defendants.
that
added
TriVersity
and
Chapel
as
named
Plaintiffs are obviously aware of this circumstance
inasmuch as they applied to the Clerk for an Entry of Default
against
Wire
to
Wire
on
June
11,
2014
(see
doc.
55).4
Furthermore, in seeking consent under Fed. R. Civ. P. 15(a) to
file that pleading, Plaintiffs were expressly advised by counsel
for Wire to Wire that he was preparing a motion to withdraw (see
doc. 38, Exh. 1).
In support of that motion, filed just two
days later, Defendant Philpott declared under penalty of perjury
that, “Wire to Wire has ceased all business operations, and to
my knowledge has no assets to protect. . . . The corporation has
no intention of renewing operations, and has no means with which
to pay for legal expenses or any legal judgment[]” (doc. 42,
4
This application remains pending.
9
1).5
Exh.
As
aptly
noted
by
Defendant
Chapel
Electric,
“[c]learly, Wire to Wire will not be addressing the merits of
Plaintiffs’ factual claims in this forum, and Plaintiffs know
this better than anyone[]” (see doc. 61 at 3).
Plaintiffs
consistently
have
maintained,
Moreover, as
“Defendant
Philpott
was, at all times relevant, an alter ego of Employer.
Philpott
had, at all times relevant, complete control over Employer along
with [Defendant] Crabill, and Employer has no separate mind,
will or existence of its own[]” (doc. 39 ¶ 14 & Martino, et al.
v. Philpott, supra (doc. 1 ¶ 9) (emphasis added)).
doubt,
the
adversary
proceeding
against
Defendant
Without a
Philpott
should run its course in the bankruptcy court before TriVersity
and
Chapel
are
called
to
defend
the
derivative
contract claim Plaintiffs seek to litigate here.
breach
of
The delay
attendant to abatement will be both purposeful and practical,
conserving judicial resources with little, if any, prejudice to
Plaintiffs.
III. Conclusion
The motions to dismiss or, in the alternative, abate filed
by Defendants TriVersity Construction Company, LLC and Chapel
Electric Co., LLC (docs. 51 and 50, respectively) are GRANTED IN
PART AND DENIED IN PART.
The motions to dismiss Plaintiffs’
5
Chief Judge Dlott granted Attorney Stephen E. Imm’s motion to
withdraw on April 4, 2014 (doc. 43).
10
state common law claim for breach of contract are DENIED WITHOUT
PREJUCICE.
The
alternative
abeyance are GRANTED.
motions
to
hold
said
claim
in
Plaintiffs are ORDERED to file with the
Clerk of this Court a brief report describing the status of the
proceedings in Martino, et al. v. Philpott, Adversary Proceeding
Case No. 1:13-ap-01084 (Bankr. S. D. Ohio 2013) no later than
December
8,
2014,
and
every
ninety
(90)
days
thereafter.6
Finally, the preliminary pretrial conference set for Tuesday,
September 9, 2014 at 11:00 a.m. is VACATED.
SO ORDERED.
Dated:
September 8, 2014
s/S. Arthur Spiegel________________
S. Arthur Spiegel
United States Senior District Judge
6
This Court is aware of the case management deadlines currently
in place in the bankruptcy court, namely that discovery is to be
completed by October 31, 2014 and motions for summary judgment
are to be filed by January 5, 2015, with a two-day trial set for
April 14, 2015. Martino, et al. v. Philpott, Adversary
Proceeding Case No. 1:13-ap-01084 (Bankr. S.D. Ohio 2013) (doc.
42).
11
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