REYNOLDS v. TURNING POINT HOLDING COMPANY, LLC et al

Filing 31

MEMORANDUM AND/OR OPINION. SIGNED BY HONORABLE JOSHUA D. WOLSON ON 2/26/20. 2/27/20 ENTERED AND COPIES E-MAILED.(kw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA

CHRISTINA M. REYNOLDS, on behalf of
herself and all others similarly situated,

Case No. 2:19-cv-01935-JDW

Plaintiff,
v.
TURNING POINT HOLDING COMPANY,
LLC, et al.,
Defendants.
MEMORANDUM
Christina Reynolds seeks to assert claims against entities based both in Pennsylvania and
New Jersey. Although the entities all exist within the same corporate family, they remain separate,
and the New Jersey entities lack the contacts with Pennsylvania that could subject them to personal
jurisdiction here. The Court will therefore grant the pending Motion.
I.

FACTS
A.

The Turning Point Restaurants

The Turning Point is a chain of restaurants that serve breakfast and lunch meals. There are
nineteen Turning Point restaurants: five in Pennsylvania; thirteen in New Jersey; and one in
Delaware. Each individual restaurant is a separate limited liability company. Turning Point
Holding Company (“TPHC”) is incorporated in New Jersey and is the parent company and 100%
stockholder of Turning Point of Pennsylvania (“TPPA”), Turning Point of New Jersey (“TPNJ”),
and each Turning Point restaurant LLC. Defendant Kirk Ruoff is the CEO of all of the Turning
Point entities, and, along with his wife, he is the majority shareholder of TPHC.
TPHC employs District Managers, each of whom oversees multiple Turning Point
restaurants in New Jersey and Pennsylvania, and General Managers, each of whom oversees an

individual restaurant. It also handles the payroll for all employees of all Turning Point entities.
Each Turning Point restaurant maintains its own bank account to handle deposits, but no payments
are made from those accounts. Instead, TPHC controls and monitors the restaurants’ bank
accounts and determines when to transfer the cash from those accounts into payroll accounts that
TPNJ and TPPA control. TPHC also handles all accounts payable and determines the vendors for
each restaurant. Finally, TPHC handles the human resources and inventory for each restaurant
and employs a culinary director who prepares the menu for all Turning Point restaurants.
TPNJ, which is incorporated in New Jersey, is responsible for hiring staff for each Turning
Point restaurant. It also pays the employees of the individual New Jersey restaurants and is listed
as the employer on each employee’s W-2 form.

Similarly, TPPA pays employees of the

Pennsylvania restaurants, and employees of the Pennsylvania restaurants have TPPA listed as their
employer on their W-2 forms. TPNJ and TPPA have no corporate employees. TPHC files a
consolidated income tax return for all of the entities. TPNJ and TPPA file sales tax returns, which
employees of TPHC prepare.
TPHC maintains a single website for the Turning Point entities, which also have a shared
social media presence. The Turning Point website posts job positions at Turning Point entities and
sells gift cards that can be used at any Turning Point restaurant. The Turning Point restaurants
generally share the same hours of operation and use the same point of sale system. Additionally,
the restaurants have interrelated operations and share the same employment policies. Individual
restaurants will sometimes share employees or managers to make up for staff shortages. Certain
employees of these restaurants, including servers, bussers, and baristas were paid in accordance
with the “tip credit” provisions of federal and Pennsylvania wage-and-hour laws.

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B.

Plaintiff’s Work At The Turning Point Of North Wales

From March through July 2018, Ms. Reynolds worked as a server at the Turning Point
restaurant in North Wales, Pennsylvania. During that time, the restaurant employed her and other
servers, bussers, and baristas in a tipped capacity. Nevertheless, she performed some non-tipgenerating work, particularly before the restaurant opened and after it closed. Ms. Reynolds
recorded her work time by logging into the restaurant’s timekeeping system through a point-ofsale system; however, no one instructed her to use a different job code when performing non-tip
generating work or when working before or after hours. Ms. Reynolds believes Defendants’
employment practices were common labor policies at each of their restaurants. She now seeks to
bring a collective action claim for violations of the Fair Labor Standards Act (“FLSA”) and
Pennsylvania Minimum Wage Act (“PMWA”) on behalf of herself and other employees who work
or have worked at any Turning Point restaurant.
C.

Procedural History

On August 16, 2019, Ms. Reynolds filed an Amended Complaint in which she alleges four
claims for violations of the FLSA and the PMWA on behalf of herself and all other tipped
employees who work, or have worked, at the Turning Point restaurants. On August 26, 2019,
Defendants filed a motion to dismiss in which they allege that this Court lacks personal jurisdiction
over all Turning Point entities located outside of Pennsylvania. On September 9, 2019, Ms.
Reynolds filed a response in opposition. In her response, she contends that the Court has both
specific and general personal jurisdiction over the out-of-state Turning Point entities.

On

September 17, 2019, the Court entered an Order granting the Parties’ stipulation to conduct
jurisdictional discovery. Following that discovery, the parties filed supplemental memoranda
addressing personal jurisdiction.

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II.

LEGAL STANDARD
A federal court may assert jurisdiction over a nonresident of the forum state to the extent

authorized by the law of the forum. See Fed. R. Civ. P. 4(k)(2). The Pennsylvania Long–Arm
Statute grants jurisdiction coextensive with that permitted by the Due Process Clause of the
Fourteenth Amendment, see 42 Pa. Cons.Stat.Ann § 5322(b), which in turn requires that
nonresident defendants “have certain minimum contacts with [Pennsylvania] such that
maintenance of the suit does not offend traditional notions of fair play and substantial justice.”
International Shoe Co. v. Washington, 326 U.S. 310, 316 (1945).
When a defendant moves to dismiss for lack of personal jurisdiction under Rule 12(b)(2),
the burden falls upon the plaintiff to establish jurisdiction. See O’Connor v. Sandy Lane Hotel
Co., 496 F.3d 312, 316 (3d Cir. 2007). If a defendant puts forth evidence demonstrating its lack
of connection to a jurisdiction, a plaintiff cannot rely on the bare pleadings alone to satisfy her
burden. See Miller Yacht Sales, Inc. v. Smith, 384 F.3d 93, 101 n.6 (3d Cir. 2004). Instead, she
must establish jurisdictional facts through sworn affidavits or other competent evidence. See id.
III.

ANALYSIS
In order to exercise personal jurisdiction, a court must possess either specific or general

personal jurisdiction over each defendant. See D'Jamoos ex rel. Estate of Weingeroff v. Pilatus
Aircraft Ltd., 566 F.3d 94, 102 (3d Cir. 2009). A court may assert general jurisdiction if a
company’s contacts are so continuous and systematic as to render the company essentially at home
in the forum state. See Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 914, 919
(2011). In contrast, specific jurisdiction depends on an affiliation between the forum and the
underlying controversy. See id. Specific jurisdiction exists if the defendant has “‘purposefully
directed’ his activities at residents of the forum and the litigation results from alleged injuries that

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arise out of or relate to those activities.” Metcalfe v. Renaissance Marine, Inc., 566 F.3d 324, 334
(3d Cir. 2009) (quote omitted). While general jurisdiction subjects a company to jurisdiction for
all purposes, specific jurisdiction is “confined to adjudication of issues deriving from, or connected
with, the very controversy that establishes jurisdiction.” Id. Here, Ms. Reynolds posits a number
of bases for the Court to assert personal jurisdiction over the New Jersey entities, some of which
argue for specific jurisdiction, some of which argue for general jurisdiction, and some of which
argue for both. The Court addresses each argument in turn.
A.

Alter Ego

Plaintiff argued in her initial opposition, and devotes all of her supplemental opposition, to
her argument that the Turning Point entities are not really separate entities but that they are really
all just alter egos of TPHC. Under the alter-ego theory, “if a subsidiary is ‘merely the agent’ of its
parent corporation or the parent corporation ‘controls’ the subsidiary, ‘then personal jurisdiction
exists over the parent whenever personal jurisdiction (whether general or specific) exists over the
subsidiary.’” Lutz v. Rakuten, Inc., 376 F. Supp.3d 455, 470–71 (E.D. Pa. 2019) (quoting Shuker
v. Smith & Nephew, PLC, 885 F.3d 760, 781 (3d Cir. 2018)). Here, because there is no dispute
that Turning Point of North Wales is subject to general jurisdiction in Pennsylvania, then TPHC
and other Turning Point entities would be as well if they are all alter-egos of each other.
The alter ego doctrine applies only if “the degree of control exercised by the parent is
greater than normally associated with common ownership and directorship” and “the parent
controls the day-to-day operations of the subsidiary such that the subsidiary can be said to
be a mere department of the parent.” Action Mfg. Co. v. Simon Wrecking Co., 375 F. Supp.2d
411, 422 (E.D. Pa. 2005) (citing Directory Dividends, Inc. v. SBC Communications, Inc., 2003
WL 21961448, *3 (E.D. Pa. July 2, 2003)) (internal quotation marks omitted). Courts have noted

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a “strong presumption” against piercing a corporate veil or deeming companies alter-egos of each
other. See, e.g.., In re Blatstein, 192 F.3d 88, 100 (3d Cir. 1999); In re Suboxone (Buprenorphine
Hydrochloride & Naloxone) Antitrust Litig., No. 13-md-2445, 2017 WL 4810801, at *11 (E.D.
Pa. Oct. 25, 2017).
Courts in this district consider ten factors in determining whether a subsidiary is the alter
ego of its parent: “(1) ownership of all or most of the stock of the related corporation; (2) common
officers and directors; (3) common marketing image; (4) common use of a trademark or logo; (5)
common use of employees; (6) integrated sales system; (7) interchange of managerial and
supervisory personnel; (8) performance by the related corporation of business functions which the
principal corporation would normally conduct through its own agent or departments; (9) acting of
the related corporation as marketing arm of the principal corporation, or as an exclusive distributor;
and (10) receipt by the officers of the related corporation of instruction from the principal
corporation.” Lutz, 376 F. Supp.3d at 471 (quote and citations omitted). These factors are best
viewed as a non-exclusive guide to help resolve the broader issue of whether the companies have
a ‘single functional and organic identity.’” Simeone ex rel. Estate Of Albert Francis Simeone, Jr.
v. Bombardier-Rotax GmbH, 360 F. Supp. 2d 665, 676 (E.D. Pa. 2005). Accordingly, “no one
aspect of the relationship between two corporations unilaterally disposes of the analysis, and the
court may consider any evidence bearing on the corporations' functional interrelationship.” In re
Chocolate Confectionary Antitrust Litig., 674 F. Supp. 2d 580, 598 (M.D. Pa. 2009).
Here, some of these factors point towards a finding of alter-ego. TPHC and other Turning
Point entities have common ownership, common directors and officers, and a common use of a
trademark or logo. However, the fact that a company “is portrayed as a single brand to the public
. . . does not demonstrate the necessary control by defendant parent over the subsidiaries.” In re

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Enter. Rent-A-Car Wage & Hour Employment Practices Litig., 735 F. Supp. 2d 277, 323 (W.D.
Pa. 2010), aff'd, 683 F.3d 462 (3d Cir. 2012). Similarly, the fact that District Managers supervise
the individual restaurants or that TPHC maintains payroll is immaterial because the “level of
control necessary to substantiate an alter ego relationship must exceed the usual supervision that a
parent exercises over a subsidiary.” Simeone, 360 F.Supp.2d at 675; see also In re Latex Gloves
Prods. Liab. Litig., No. MDL 1148, 2001 WL 964105, at *3 (E.D. Pa. Aug. 22, 2001) (concluding
that the mere “monitoring of the subsidiary's performance, supervision of the subsidiary's finance
and capital budget decisions, and articulation of general policies and procedures” do not establish
an alter ego relationship ) (quoting United States v. Bestfoods, 524 U.S. 51, 72 (1998)).
Moreover, other factors tilt the other way. The Turning Point entities do not have an
integrated sales system, common employees, or managerial and supervisory personnel. Indeed,
Ms. Reynolds admits that the restaurants have their own managerial personnel and staff who
“control the day-to-day ground level operations for the individual restaurants.” (ECF No. 29 at.
2.) Moreover, there is no evidence that any of the Turning Point entities performs functions for
another that the other should ordinarily perform for itself or acts as a marketing arm for a principal
corporation. Each restaurant has a General Manager who is responsible for, among other things,
allocating the budget, ordering food and other supplies from vendors, and enforcing employment
policies. The General Manager retains discretion to deviate from company-wide policies if
necessary. For instance, one restaurant has adopted its own opening hours and implemented
changes to the menu based on its distinct clientele.
Ultimately, the Court concludes that Ms. Reynolds has demonstrated that the Turning Point
entities operate as a single brand with common corporate control. That, however, is not enough to
overcome the presumption that wholly-owned subsidiaries are separate and distinct from their

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parent companies. See Clark v. Matsushita Elec. Indus. Co., 811 F. Supp. 1061, 1067 (M.D. Pa.
1993) (citing Cannon Mfg. Co. v. Cudahy Parking Co., 267 U.S. 333 (1925)).
B.

The Turning Point Website

The Turning Point website does not subject any out-of-state entity to specific or general
personal jurisdiction in Pennsylvania. The activity on the website is not related closely enough to
the activity at issue in this case. The sale of gift cards has nothing to do with Ms. Reynolds’ claims
about her underpaid wages. Postings for job openings and Ms. Reynolds claims both relate to the
Turning Point human relations function, but they are not the same conduct, and they are not so
related as to give rise to specific personal jurisdiction because Ms. Reynolds’ alleged harm does
not flow from Turning Point’s hiring procedures. Nothing in the record suggests that Turning
Point’s website has any connection to its pay practices.
The website also does not subject any out-of-state Turning Point entity to general
jurisdiction in Pennsylvania. Operating a website through which customers can order products
does not, on its own, suffice to establish general jurisdiction. See TruePosition, Inc. v. LM Ericsson
Tel. Co., 844 F. Supp.2d 571, 592 (E.D. Pa. 2012) (“To hold that the possibility of ordering
products from a website establishes general jurisdiction would effectively hold that any
corporation with such a website is subject to general jurisdiction in every state.”); Wilson v. RIU
Hotels & Resorts, No. 10–7144, 2011 WL 3241386, at *8 (E.D. Pa. July 29, 2011) (“Maintenance
of a website which allows users to reserve accommodations at Defendant's resorts does not
demonstrate that [defendant] has systematic and continuous contact with Pennsylvania”).
However, even if operating a website were sufficient to establish general jurisdiction, Plaintiffs
have not provided evidence of a single interaction between the website and a Pennsylvania
resident. Accordingly, Plaintiffs have failed to meet their burden of showing that the contacts

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between the website and forum “are so ‘continuous and systematic’ as to render” any out-of-state
Turning Point entity essentially at home in Pennsylvania. Goodyear, 564 U.S at 919.
C.

TPNJ

Ms. Reynolds makes two arguments regarding TPNJ, one for the exercise of general
jurisdiction and one for the exercise of specific jurisdiction. Both fail.
1.

Business registration in Pennsylvania

Ms. Reynolds contends that TPNJ is subject to general personal jurisdiction in the
Commonwealth because it is registered to do business in Pennsylvania as a foreign business.
Pennsylvania law provides that when a foreign business registers to do business in Pennsylvania,
it consents to general jurisdiction in the state. 42 Pa.C.S.A. § 5301. There is substantial debate
about whether this statute is constitutional. The Third Circuit held in 1991 that the statute comports
with due process. See Bane v. Netlink, Inc., 925 F.2d 637, 639 (3d Cir. 1991). More recently,
however, the Supreme Court has held that general personal jurisdiction exists only when
“affiliations with the State are so continuous and systematic as to render [it] essentially at home in
the forum State.”

Daimler AG v. Bauman, 571 U.S. 117, 139 (2014) (quotes omitted). Since

then, some courts have held that the statute still comports with due process. See, e.g., Sciortino v.
Jarden, Inc., 395 F. Supp.3d 429, 431 (E.D. Pa. 2019); Bors v. Johnson & Johnson, 208 F. Supp.3d
648 (E.D. Pa. 2016); Gorton v. Air & Liquid Sys. Corp., 303 F. Supp.3d 278 (M.D. Pa. 2018).
Other courts disagree. See In re Asbestos Prod. Liab. Litig. (No. VI), 384 F. Supp.3d 532, 537
(E.D. Pa. 2019); AstraZeneca AB v. Mylan Pharm., Inc., 72 F.Supp.3d 549, 556 (D. Del. 2014);
Spear v. Marriott Hotel Servs., Inc., No. 15-CV-6447, 2016 WL 194071, at *2 (E.D. Pa. Jan. 15,
2016).

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The parties do not tackle this complicated issue. Instead, Ms. Reynolds argues in a couple
sentences that TPNJ is subject to general jurisdiction because it registered to do business. Turning
Point does not address it at all. However, having reviewed the decisions cited above, this Court
agrees with and adopts as its own Judge Robreno’s analysis in In re Asbestos. In re Asbestos Prod.
Liab. Litig. (No. VI), 384 F. Supp. 3d 532, 537 (E.D. Pa. 2019). The Pennsylvania statutory scheme
requiring foreign corporations to consent to general personal jurisdiction in Pennsylvania by virtue
of registering to do business here violates the Due Process Clause. Therefore, the Court does not
have general personal jurisdiction over TPNJ.
2.

Hiring and training

Pennsylvania’s long-arm statute provides that personal jurisdiction extends to any person
who causes “harm or tortious injury in this Commonwealth by an act or omission outside this
Commonwealth.” 42 Pa. C.S. § 5322(a)(4). Based on this statute, Ms. Reynolds argues that this
Court has specific jurisdiction over TPNJ based on its role in hiring and training General Managers
and overseeing staff hiring for Turning Point entities. None of that conduct gives rise to specific
jurisdiction, however.
The harm at issue—the failure to pay wages properly—does not stem from TPNJ’s acts or
omissions. TPNJ did not pay Ms. Reynolds’ wages; TPPA did, at least according to her W-2.
Thus, while TPPA might face liability, TPNJ does not. In contrast, Ms. Reynolds’ claims are not
about the training or the way that staff was hired. While those facts might be atmospheric, they
do not give rise to Ms. Reynolds’ claims. They therefore cannot form a basis for specific
jurisdiction.

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IV.

CONCLUSION
Ms. Reynolds has not shown that the out-of-state Turning Point entities are subject to

specific or general personal jurisdiction in Pennsylvania. Therefore, the Court will grant the
motion and dismiss the out-of-state Turning Point entities. An appropriate Order follows.

BY THE COURT:
/s/ Joshua D. Wolson
JOSHUA D. WOLSON
February 26, 2020

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