WRIGHT v. LEHIGH VALLEY HOSPITAL AND HEALTH NETWORK et al
MEMORANDUM OPINION. SIGNED BY MAGISTRATE JUDGE ARNOLD C. RAPOPORT ON 6/23/11. 6/24/11 ENTERED AND COPIES E-MAILED.(mas, )
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF PENNSYLVANIA
JONI WRIGHT, ET AL.
: CIVIL ACTION
: NO. 10-431
LEHIGH VALLEY HOSPITAL
AND HEALTH NETWORK, ET AL.
ARNOLD C. RAPOPORT
UNITED STATES MAGISTRATE JUDGE
June 23, 2011
MEMORANDUM OPINION AND ORDER
Presently pending before me in this action under the Fair
Labor Standards Act (“FLSA”) is Plaintiff Joni Wright’s Motion
for Leave to File a Second Amended Complaint (“proposed SAC”).
For the reasons that follow, the Motion is denied.
After a responsive pleading is filed, Rule 15(a) only
permits an amended pleading upon the written consent of the
opposing party, or with leave of court.
See Fed. R. Civ. P.
The rule directs the court to “freely give leave when
justice so requires.”
Under this liberal standard, courts
will grant a party leave to amend unless the opposing party can
establish prejudice, undue delay, bad faith on the part of the
movant or futility of amendment.
See Arthur v. Maersk, Inc., 434
F.3d 196, 204 (3d Cir. 2006); see also Forman v. Davis, 371 U.S.
178, 182 (1962).
An amendment is futile if “the complaint, as
amended, would fail to state a claim upon which relief could be
In re Burlington Coat Factory Sec. Litig., 114 F.3d
1410, 1434 (3d Cir. 1997) (citing Glassman v. Computervision
Corp., 90 F.3d 617, 623 (1st Cir. 1996)).
In making the futility
assessment, I use the same standard of legal sufficiency employed
under Federal Rule of Civil Procedure 12(b)(6).
To survive a motion to dismiss for failure to state a claim
pursuant to Rule 12(b)(6), the complaint must plead sufficient
factual allegations, that, taken as a whole, state a facially
plausible claim to relief.
544, 570 (2007).
Bell Atl. Corp. v. Twombly, 550 U.S.
A complaint satisfies the threshold of facial
plausibility if “the plaintiff pleads factual content that allows
the court to draw the reasonable inference that the defendant is
liable for the misconduct alleged.”
Ashcroft v. Iqbal, ___ U.S.
___, 129 S.Ct. 1937, 1949 (2009) (citing Twombly, 550 U.S. at
“Threadbare recitals of the elements of a cause of action,
supported by mere conclusory statements,” are insufficient to
establish plausible allegations to survive the motion.
1949 (citing Twombly, 550 U.S. at 555).
The court must “‘accept
all factual allegations as true, construe the complaint in the
light most favorable to the plaintiff, and determine whether,
under any reasonable reading of the complaint, the plaintiff may
be entitled to relief.’”
Fowler v. UPMC Shadyside, 578 F.3d 203,
210 (3d Cir. 2009) (quoting Phillips v. County of Allegheny, 515
F.3d 224, 233 (3d Cir. 2008)).
However, the court may disregard
any legal conclusions in the complaint.
Id. at 210–11 (citing
Iqbal, at 1949).
Like the earlier iterations of her complaint, Wright asserts
in the proposed SAC that she and other similarly situated
registered nurses are employed by Lehigh Valley Hospital and
Health Network, Lehigh Valley Hospital, Lehigh Valley Hospital –
Muhlenberg, Lehigh Valley Hospital – 17th Street, and Lehigh
Valley Hospital – Cedar Crest (collectively “the institutional
defendants”), who failed to accurately track and record hours
actually worked by registered nurses and failed to pay
compensation and overtime compensation in accordance with the
mandates of FLSA for compensable work performed before and after
(SAC ¶¶ 22-26.)
With the proposed SAC, Wright
seeks to join as additional defendants Ronald W. Swinfard, whom
Wright identifies as the current chief executive officer of the
institutional defendants, and Elliot J. Sussman, who is
identified as the immediate past chief executive officer of the
(SAC ¶ 13.)
Additionally, she seeks
to join as additional defendants the individual members of the
institutional defendants’ board of trustees.
(SAC ¶ 15.)
alleges “[u]pon information and belief, Mr. Sussman and Mr.
Swinford are her ‘employers’ for purposes of the FLSA because, as
CEOs, they both had/have operational control over significant
aspects of [the institutional defendants’] day-to-day functions
during the time period giving rise to this action, and were
ultimately responsible for ensuring [the institutional
defendants’] compliance with FLSA.”
(SAC ¶ 14.)
She makes the
identical allegation with respect to the individual board
(SAC ¶ 16.)
She makes no other specific allegation
with regard to Sussman, Swinford or the twenty-two individual
board members she seeks to join as defendants regarding their
personal participation in the actions that led her to file suit.
Defendants argue that Wright’s “information and belief”
assertions, which allege no facts showing how each additional
defendant personally participated in the events giving rise to
the alleged FLSA violation, are legally insufficient to satisfy
the Twombly / Iqbal plausibility standard.
A defendant subject to FLSA as an “employer” is “any person
acting directly or indirectly in the interest of an employer in
relation to an employee . . . .”
29 U.S.C. § 203(d).
Supreme Court has instructed courts to construe the terms
“employer” and “employee” expansively to effect Congress’s
remedial intent in enacting the FLSA.
Nationwide Mut. Ins. Co.
v. Darden, 503 U.S. 318, 326 (1992); Rutherford Food Corp. v.
McComb, 331 U.S. 722, 728–29 (1947).
In determining whether an
individual or entity is an “employer,” courts must focus on the
“economic reality” of the employment relationship, rather than on
“technical concepts” of agency law.
Goldberg v. Whitaker House
Co-op., Inc., 366 U.S. 28, 33 (1961).
The FLSA “contemplates there being several simultaneous
employers who may be responsible for compliance with the FLSA.”
Dole v. Elliott Travel & Tours, Inc., 942 F.2d 962, 965 (6th Cir.
1991) (citing Falk v. Brennan, 414 U.S. 190, 195 (1973)).
the concept of multiple employers is an accepted one for purposes
of the FLSA, the question of whether a particular defendant is an
“employer” under the FLSA, “must focus upon the totality of the
circumstances, underscoring the economic realities of the
Donovan v. Sabine Irrigation Co., 695
F.2d 190, 194 (5th Cir. 1983).
Thus, a person “‘with operational
control of a corporation’s enterprise is an employer along with
the corporation, jointly and severally liable under the FLSA for
unpaid wages.’” Donovan v. Grim Hotel Co., 747 F.2d 966, 971-72
(5th Cir. 1984) (quoting Donovan v. Agnew, 712 F.2d 1509, 1511
(1st Cir. 1983).
Although the United States Court of Appeals for the Third
Circuit has not addressed the issue, other Courts of Appeals have
held that a corporate officer may be deemed to be an “employer”
under the FLSA and held jointly and severally liable for unpaid
See Chao v. Hotel Oasis, Inc., 493 F.3d 26, 34 (1st Cir.
2007); Agnew, 712 F.2d at 1511; Grim Hotel Co., 747 F.2d 966,
971-72 (5th Cir. 1984) (quoting Agnew).
These courts have held
that the “economic reality” test also governs the analysis for
determining whether individuals are employers under the FLSA, but
focuses on “the role played by the corporate officers in causing
the corporation to undercompensate employees and to prefer the
payment of other obligations and/or the retention of profits.”
Baystate Alternative Staffing, Inc. v. Herman, 163 F.3d 668, 678
(1st Cir. 1998).
In addition to analyzing corporation administration in
determining FLSA employer liability, courts also look to whether
an individual undertakes “managerial responsibilities” relating
to the corporation or exerts “substantial control” over its
Falk v. Brennan, 414 U.S. 190, 195 (1973); see Reich
v. Circle C Inv. Inc., 998 F.2d 324, 329 (5th Cir. 1993)(noting
that defendant was the “driving force” behind the corporation and
thus met the definition of an employer).
The factors deemed
relevant to the personal liability analysis include the officer’s
(1) ownership interest in the corporation, (2) degree of
operation control over the corporation’s daily functions,
financial affairs, and compensation practices, and (3) role in
the corporation’s determination to compensate (or not compensate)
employees in accordance with the FLSA.
Chao, 493 F.3d at 34;
Baystate Alternative Staffing, 163 F.3d at 677–78.
Before applying these legal concepts of who may be held
liable as an “employer” under FLSA, I must pause to identify the
allegations in the complaint that are not entitled to the
assumption of truth.
See Iqbal, 129 S.Ct. at 1950.
Supreme Court explained, “the tenet that a court must accept as
true all of the allegations contained in a complaint is
inapplicable to legal conclusions.”
Id., 129 S.Ct. at 1949; see
also Twombly, 550 U.S. at 555.
Although defendants take strong issue with Wright’s use of
“upon information and belief” pleading, the allowance of pleading
upon information and belief has been held to be appropriate under
the Twombly / Iqbal regime where the facts required to be pled
are uniquely in the control of the defendant.
See Brinkmeier v.
Graco Children’s Prods. Inc., Civ. A. 09-262, 2011 WL 772894, at
*6 (D.Del. March 7, 2011) (citing Simonian v. Blistex, Inc., Civ.
A. 10-1201, 2010 WL 4539450, at *3 (N.D.Ill. Nov. 3, 2010)
(recognizing that nothing in Twombly or Iqbal suggests that
pleading on information and belief is “necessarily deficient”).
“Accordingly, the Court will not dismiss Plaintiff’s complaint
based on the allegations being pled upon information and belief,
so long as there is a proper factual basis asserted to support
the beliefs pled.”
However, where “these averments are merely ‘a formulaic
recitation of the elements of a cause of action’ . . . [r]eliance
by [Plaintiff] on information and belief cannot transform legal
conclusions into plausible factual allegations.”
Essex Ins. Co.
v. Miles, Civ. A. 10-3598, 2010 WL 5069871, at *3 (E.D.Pa. Dec.
3, 2010) quoting Iqbal at 1950.
That is exactly the problem with
With respect to status of the individual
defendants as an “employer,” the SAC pleads only that the
proposed new defendants are FLSA employers because they have
“operational control” of the institutional defendants and are
“ultimately responsible” for ensuring their compliance with the
“Operational control” and “ultimate responsibility” are
not facts; they are legal conclusions utterly devoid of any
factual basis asserted to support the beliefs pled.
no allegations supporting her operational control conclusion,
including such rudimentary facts as specifying which proposed
individual defendant controlled which institutional defendant,
whether they had any specific role in each corporations’
personnel, financial and compensation practices, and most
importantly, whether they had any role in the corporations’
alleged determination to compensate (or not compensate) its
employees in accordance with the FLSA.1
This failure is a
I note, of course, that the institutional defendants are
not for profit enterprises. SAC ¶ 11. Thus ownership interest
in the corporations is a relevant factor to the extent that it
shows that these are not the type of single-owner alter ego
corporations where courts have used the economic reality test to
hold that the owner is a jointly liable FLSA employer. See e.g.,
Duncan v. Perdue, 988 F.Supp. 992, 994 (W.D.Va. 1997) (finding
serious problem in an initial complaint; here I am confronted
with Wright’s request to amend her complaint for the third time
to plead her FLSA cause of action, filed after substantial fact
discovery has already been taken on her claims against the
The lack of any supporting factual
allegations renders the proposed FLSA claims against the officers
and directors implausible.
Accordingly, the attempt to amend the
complaint to add them as additional parties is futile.
For the reasons I have expressed, I deny Wright’s Motion for
Leave to file a Second Amended Complaint.
An appropriate order
will be entered.
BY THE COURT:
/s/ Arnold C. Rapoport
ARNOLD C. RAPOPORT
UNITED STATES MAGISTRATE JUDGE
individual defendant was an employer under FLSA where he was sole
owner and chief executive officer of company); Gusdonovich v.
Business Information Co., 705 F.Supp. 262, 268 (W.D.Pa. 1985)
(upholding FLSA verdict against individual defendants because
“the uncontradicted evidence as well as the stipulations of the
parties showed that these three individuals were the sole owners
of the corporation”). While ownership itself is not
determinative, the not for profit status of the institutional
defendants implies that the individual defendants had no
ownership interest, which, combined with the failure to plead any
factual matter to support the legal conclusion of operational
control, is additional support for my finding that the allegation
that the individual defendants are FLSA employers does not jive
with economic reality.
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