Crumbling et al v. Miyabi Murrells Inlet LLC et al

Filing 88

ORDER granting in part and denying in part 36 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 39 Motion to Dismiss for Failure to State a Claim; granting in part and denying in part [40 ] Motion to Dismiss for Failure to State a Claim; granting in part and denying in part 51 Motion to Dismiss for Failure to State a Claim; finding as moot 65 Motion to Certify Class; granting in part and denying in part 68 Motion to Dismiss for Failure to State a Claim; finding as moot 69 Motion to Stay; granting in part and denying in part 70 Motion to Dismiss for Failure to State a Claim; finding as moot 71 Motion to Stay; granting in part and denying in part 74 Motion to Dismiss for Failure to State a Claim; finding as moot 76 Motion to Stay. Signed by Honorable Patrick Michael Duffy on June 16, 2016.(jmcg, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF SOUTH CAROLINA
CHARLESTON DIVISION
Krista Crumbling; William Stone;
Christopher Rich; and Anthony Girard,
on behalf of themselves and all others
similarly situated,

)
)
)
)
)
Plaintiffs,
)
)
v.
)
)
Miyabi Murrells Inlet, LLC; Charleston
)
Miyabi, Inc.; Columbia Miyabi, Inc.;
)
Fantasy Far East, Inc.; United Will Kyoto )
USA, Inc.; Miyabi Greenville, Inc.;
)
Fayetteville Miyabi, Inc.; Augusta Miyabi, )
Inc.; Savannah Miyabi, Inc.; Capital Japan, )
Inc. d/b/a Miyabi; Koichiro Hirao,
)
individually; Koichiro Maeda, individually; )
and John Does 1–10, individually,
)
)
Defendants.
)
)

C.A. No.: 2:15-cv-4902-PMD

ORDER

This matter is before the Court on several motions to dismiss filed by various Defendants
(ECF Nos. 36, 39, 40, 51, 68, 70, 74). 1 Also before the Court are three motions to stay filed by
various Defendants (ECF Nos. 69, 71, 76), and Plaintiffs’ Motion to Certify (ECF No. 65). For
the reasons set forth herein, the motions to dismiss are granted in part and denied in part, and the
other motions are denied as moot.

1.
The various Defendants are separately represented and have filed substantially similar motions. The Court
recognizes that the various Miyabi restaurant locations and other corporate entities are separate legal entities, and
nothing in this Order should be construed as a statement to the contrary. However, the Court will refer to the
various entities’ motions as if they had filed one consolidated motion unless the facts or arguments necessitate
differentiation. Additionally, the Court’s references to the Miyabi restaurant locations or entities exclude the
individual defendants and Capital Japan, Inc.

BACKGROUND
On December 10, 2015, Plaintiffs commenced this action on behalf of themselves and all
others similarly situated, seeking unpaid minimum wages and unpaid overtime wages pursuant to
the collective action provision of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216(b).
Plaintiffs also seek relief for unauthorized deductions from their wages pursuant to the South
Carolina Payment of Wages Act (“SCPWA”), S.C. Code Ann. § 41-10-10, et seq. Plaintiffs are
former servers at several Miyabi restaurant locations in South Carolina, North Carolina, and
Georgia.
Plaintiffs primarily allege that Defendants used tip pools that violated the FLSA.
Specifically, Plaintiffs assert that Defendants paid some of their employees an hourly wage lower
than the statutory minimum wage using the FLSA’s Tip Credit provision, 29 U.S.C. § 203(m).
Plaintiffs further assert that while Defendants were paying less than the statutory minimum wage
using the Tip Credit provision, they required servers to contribute a portion of their tips to tip
pools to compensate other employees. Finally, Plaintiffs allege that some of the employees who
received money from the tip pools were non-tipped employees who did not qualify to share in
the tip pools because they did not customarily and ordinarily receive tips. Because these nontipped employees did not customarily and ordinarily receive tips, as required by the Tip Credit
provision, Plaintiffs allege that the tip pools they and the other potential class members shared
with the non-tipped employees violated the FLSA.
LEGAL STANDARD
Defendants’ standing argument implicates this Court’s subject matter jurisdiction and is
governed by Rule 12(b)(1). Usually, “questions of subject matter jurisdiction must be decided
‘first, because they concern the court’s very power to hear the case.’” Roman v. Guapos III, Inc.,

970 F. Supp. 2d 407, 411 (D. Md. 2013) (quoting Owens–Ill., Inc. v. Meade, 186 F.3d 435, 442
n.4 (4th Cir. 1999)). The plaintiff bears the burden of proof on questions of subject matter
jurisdiction. See Evans v. B.F. Perkins Co., 166 F.3d 642, 647 (4th Cir. 1999). “When a
defendant challenges subject matter jurisdiction pursuant to Rule 12(b)(1), ‘the district court is to
regard the pleadings as mere evidence on the issue, and may consider evidence outside the
pleadings without converting the proceeding to one for summary judgment.’” Id. (quoting
Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.
1991)). “The district court should grant the Rule 12(b)(1) motion to dismiss ‘only if the material
jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of
law.’” Id. (quoting Richmond, Fredericksburg & Potomac R.R. Co., 945 F.2d at 768).
DISCUSSION 2
Plaintiffs filed their initial complaint on December 10, 2015. Then, on February 1, 2016,
Plaintiffs filed their first amended complaint. Without Defendants’ consent or the Court’s leave,
Plaintiffs then filed second and third amended complaints on March 8 and March 10,
respectively.

Defendants filed three different motions to dismiss Plaintiffs’ first amended

complaint pursuant to Rule 12(b)(6) on February 22, 2016.
Although the Court has concerns about whether Plaintiffs’ second and third amended
complaints were filed in compliance with Rule 15, the Court may look beyond the pleadings in
its evaluation of standing. Accordingly, without deciding whether those amended complaints are
valid, the Court will consider the allegations contained therein. In their various motions to
dismiss, Defendants first contend that the Greenville, Fayetteville, and Augusta Miyabi locations
should be dismissed because no plaintiff alleges that he or she worked at those locations.
2.
The Court omits a full procedural history section due to the overlapping motions filed in the case and the
minimal assistance such a section would provide. While some procedural history is contained herein, the full
procedural history may be found on PACER.

Second, Defendants question whether or not Plaintiffs have standing to bring this entire action in
its current form. Because standing is a threshold question, the Court will address it first. See
Roman, 970 F. Supp. 2d at 411.
Standing
“As the party invoking federal jurisdiction, Plaintiffs bear the burden of establishing
standing under Article III of the Constitution.” Roman, 970 F. Supp. 2d at 412 (quoting
McBurney v. Cucinelli, 616 F.3d 393, 410 (4th Cir. 2010)). As explained by the Fourth Circuit:
The irreducible constitutional minimum of standing requires (1) an injury in
fact—a harm suffered by the plaintiff that is concrete and actual or imminent, not
conjectural or hypothetical; (2) causation—a fairly traceable connection between
the plaintiff’s injury and the complained-of conduct of the defendant; and (3)
redressability—a likelihood that the requested relief will redress the alleged
injury.
McBurney, 616 F.3d at 402 (quoting Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 102–03
(1998)) (internal quotation marks omitted). Here, Plaintiffs have clearly alleged a sufficient
injury-in-fact: the failure to properly be compensated for hours worked. However, whether those
injuries may be traced to, or redressed by, the various Defendants remains in question.
Defendants make two separate standing arguments.

First, Defendants assert that

Plaintiffs lack standing to maintain any claims against the Miyabi restaurant entities with which
Plaintiffs had no employer–employee relationship. As discussed above, standing requires both
traceability and redressability. See McBurney, 616 F.3d at 402. Thus, Plaintiffs must trace their
injury to the allegedly wrongful conduct of the Defendants and must be able to recover from
those Defendants in the event of a favorable decision. In order for Defendants to be liable under
the FLSA, they must have an employer–employee relationship with Plaintiffs. Roman, 970 F.
Supp. 2d at 412. Accordingly, “Plaintiffs’ injuries are only traceable to, and redressable by,

those who employed them.” Id. Therefore, the Court must conduct an employer analysis to
determine whether Plaintiffs may trace their injuries to each Defendant.
An employer under the FLSA is “any person acting directly or indirectly in the interest of
an employer in relation to an employee.” 29 U.S.C. § 203(d). Under that provision, “‘[s]eparate
persons or entities that share control over an individual worker may be deemed joint employers .
. . .’” Roman, 970 F. Supp. 2d at 413 (quoting Schultz v. Capital Int’l. Sec., Inc., 466 F.3d 298,
305 (4th Cir. 2006)). The applicable federal regulations provide several examples of joint
employment:
Where the employee performs work which simultaneously benefits two or more
employers, or works for two or more employers at different times during the
workweek, a joint employment relationship generally will be considered to exist
in situations such as:
(1)
Where there is an arrangement between the employers to share the
employee’s services, as, for example, to interchange employees;
(2)
Where one employer is acting directly or indirectly in the interest of the
other employer (or employers) in relation to the employee; or
(3)
Where the employers are not completely disassociated with respect to the
employment of a particular employee and may be deemed to share control of the
employee, directly or indirectly, by reason of the fact that one employer controls,
is controlled by, or is under common control with the other employer.
29 C.F.R. § 791.2(b). If the employer–employee relationship does not match one of these
examples, “courts are to consider the ‘economic realities’ of the relationship between the
employee and the putative employer.” Roman, 970 F. Supp. 2d at 413 (citing Schultz, 466 F.3d
at 304). To examine the economic realities of the relationship, the Fourth Circuit has used the
factors discussed in Bonnette v. California Health & Welfare Agency, 704 F.2d 1465 (9th Cir.
1983), and Zheng v. Liberty Apparel Co., 355 F.3d 61 (2d Cir. 2003). Those factors include the
“(1) authority to hire and fire employees; (2) authority to supervise and control work schedules

or employment conditions; (3) authority to determine the rate and method of payment; and (4)
maintenance of employment records.”

Roman, 970 F. Supp. 2d at 413.

However, “‘the

determination of joint-employment must be based upon the circumstances of the whole
activity.’” Id. (quoting Quinteros v. Sparkle Cleaning, Inc., 532 F. Supp. 2d 762, 775 (D. Md.
2008)).
Defendants do not dispute that the Miyabi restaurant entities in this case are employers of
each of the employees who worked for their specific restaurant. For example, Defendants do not
contest that Miyabi Murrell’s Inlet is the employer of Krista Crumbling and the other employees
that worked there. However, no plaintiffs have alleged that they were employees of the Miyabi
restaurants in Fayetteville and Greenville.

Although there may be potential plaintiffs who

worked for the Fayetteville and Greenville restaurants, Plaintiffs are not permitted to bring suit
against those Miyabi entities “based on the composition of a future collective.” Roman, 970 F.
Supp. 2d at 416. In Roman, the plaintiffs brought suit against five locations of a restaurant chain,
each of which was a separate legal entity. However, the plaintiffs had only worked in one of the
five restaurants. Id. at 414. Accordingly, the court in Roman dismissed the other four locations
from the suit. Id. at 412. In dismissing those entities, the court rejected the plaintiffs’ arguments
that employees of the other locations would likely become plaintiffs once the case was certified
as a collective action. A future collective, the court concluded, is insufficient to “satisfy the
requirement that Plaintiffs currently demonstrate standing against all defendants.” Id.; see also
Pashby v. Delia, 709 F.3d 307, 316 (4th Cir. 2013) (“When the case is a class action lawsuit, the
named class representatives ‘must allege and show that they personally have been injured, not
that injury has been suffered by other, unidentified members of the class to which they belong.’”
(quoting Blum v. Yaretsky, 457 U.S. 991, 1001 n.13 (1982))); Lucas v. BMS Enters., Inc., No.

3:09-CV-2159-D, 2010 WL 2671305, at *3 (N.D. Tex. July 1, 2010) (holding that the same
principal applies in the collective action context). Accordingly, Plaintiffs cannot maintain an
action against the Miyabi entities at which no plaintiff ever worked. Thus, the Fayetteville and
Greenville Miyabi restaurants must be dismissed because Plaintiffs lack standing to bring a claim
against them.
Second, Defendants assert that Plaintiffs lack standing because each named plaintiff does
not satisfy the requirements of standing as to each Defendant. Here, because each named
plaintiff did not work for each defendant, Defendants contend that the named plaintiffs cannot
trace their injuries to those defendants for whom they did not work.

Because the named

plaintiffs and opt-ins only worked for one Miyabi restaurant location, Defendants assert that
Plaintiffs cannot trace their injuries to any of the other Miyabi restaurant entities. 3 The Court
agrees.
The bulk of Plaintiffs’ counter-argument on standing can be summarized succinctly as,
“it’s not in the treatise.” While standing may not be addressed in the treatise on which Plaintiffs’
counsel relies, 4 it is nonetheless a constitutional requirement. Plaintiffs make two additional
arguments that do not address the merits of the standing issue.

First, they contend that

Defendants are an integrated enterprise and are all liable under the FLSA regardless of
employment status. It is clear, however, that “[t]he enterprise and liability analyses are distinct.
‘The finding of an enterprise is relevant only to the issue of coverage. Liability is based on the
existence of an employer–employee relationship.’” Cornell v. CF Center, LLC, 410 F. App’x

3. This does not suggest that Plaintiffs’ standing problem would be solved if one of the named or opt-in plaintiffs
had worked for more than one Miyabi restaurant. Rather, only that plaintiff would have standing to sue each of his
employers.
4.
Although the Court’s analysis of this issue is focused on Article III’s requirements, the Court notes that
Defendants have provided the Court with the relevant pages from a treatise published by Littler Mendelson that does
address standing in FLSA collective actions.

265, 267 (11th Cir. 2011) (per curiam) (quoting Patel v. Wargo, 803 F.2d 632, 637 (11th Cir.
1986)).

Thus, while the Court might employ an integrated enterprise analysis if it were

attempting to determine whether a defendant was covered by the FLSA, no defendant has argued
that it was not subject to the FLSA’s requirements. As discussed above, the Court finds that the
Miyabi restaurant entities cannot be liable to plaintiffs who did not work for them.
Second, Plaintiffs contend that this Court and the Fourth Circuit had opportunities to raise
lack of standing sua sponte in the FLSA collective action context and failed to do so in several
cases. See Calderon v. GEICO Gen. Ins. Co., 809 F.3d 111 (4th Cir. 2015); McCoy v. RP, Inc.,
No. 2:14-cv-3171-PMD, 2015 WL 6157306 (D.S.C. Oct. 19, 2015); Herspold v. King Kong
Sushi Bar & Grill, No. 4:14-cv-3418-RBH (D.S.C.).

The Court believes that the above-

referenced cases are of limited value on the question of standing because it was never raised
before the Court. In this case, however, standing has been squarely presented to the Court and
Plaintiffs have not shown that the separate Miyabi restaurant entities they have sued are joint
employers.
For standing purposes, the Court must determine whether each defendant could be held
liable to each plaintiff. Despite the FLSA’s stated goal of efficiency in adjudicating similarly
situated employees’ claims at the same time, collective actions pursuant to § 216(b) may only be
maintained where the named plaintiffs were employed by each of the Defendants. See Brunner
v. Jimmy John’s, LLC, No. 14 C 5509, 2015 WL 5086388, at *3 (N.D. Ill. Aug. 19, 2015)
(finding plaintiffs lacked standing where “some named Plaintiffs admittedly did not work for
some named Defendants . . . .”). Here, Plaintiffs have not alleged any kind of joint employment
theory that would confer standing against all of the defendants. First, Plaintiffs have not alleged
that Defendants fall into any of the categories included in the FLSA’s regulations. In the Court’s

view, the various Miyabi restaurant entities would not fit in any of those categories, necessitating
an inquiry into the economic realities of the situation. However, Plaintiffs’ allegations of joint
employment by the various Miyabi restaurant entities are limited to (1) bare allegations that
Defendants share a common business purpose and (2) the fact that Capital Japan, Inc. operates a
website listing all of the various Miyabi locations. That is insufficient to show joint employment
under the economic realities test. Plaintiffs do not allege that one Miyabi restaurant location had
the authority to hire and fire employees of a different Miyabi restaurant location. The same is
true for work schedules and conditions, rate and method of payment, and maintenance of
employment records. Although those allegations might be properly directed at Capital Japan,
Inc. and the individual defendants, there is nothing before the Court that would establish joint
employment of any plaintiff by each of the Miyabi restaurant locations. The Court remains
skeptical of Plaintiffs’ assertions that the individual defendants and Capital Japan, Inc. are joint
employers.

However, at this stage the jurisdictional facts remain in dispute as to those

defendants. Plaintiffs have the burden of proving subject matter jurisdiction, and Plaintiffs have
not met that burden as to the Miyabi restaurant locations. Accordingly, each plaintiff lacks
standing against certain defendants and, if this case is to survive, the Court must pare it down in
conformity with Article III. 5

5. Unlike in Roman, different plaintiffs in this case have potentially legitimate claims against different defendants.
Because the Court agrees with Defendants that Plaintiffs lack standing to bring this case in its current form, the
Court must determine how, if at all, the case may proceed. Plaintiffs’ counsel requests that the Court permit the
current case to proceed solely against Miyabi Murrell’s Inlet, Capital Japan, Inc., and the individual defendants,
Koichiro Hirao and Koichiro Maeda. Plaintiffs’ counsel further requests that he be permitted to file four additional
actions against the other Miyabi restaurant entities and that the Court equitably toll the statute of limitations for
those actions. Plaintiffs’ counsel’s request is granted in part. The Court will permit the present case to continue
against Miyabi Murrell’s Inlet, Capital Japan, Inc., Koichiro Hirao, and Koichiro Maeda. Plaintiffs are also
permitted to file their four additional actions, but any consideration of equitable tolling will necessarily take place
after those actions have been filed. Finally, Plaintiffs’ counsel is hereby put on notice that if he does not move to
amend his complaint in accordance with the rules, the Court will be forced to strike the now-irrelevant material
contained in his current Complaint pursuant to Rule 12(f)(1).

The Court recognizes the inherent inefficiency in adjudicating Plaintiffs’ claims in
various separate lawsuits. However, the Court may not overlook Article III in the interest of
efficiency. As a result, all other pending motions (ECF Nos. 65, 69, 71, & 76) are denied as
moot.
CONCLUSION
For the foregoing reasons, it is ORDERED that Defendants’ Motions to Dismiss are
GRANTED IN PART and DENIED IN PART and all other motions are DENIED as moot.
AND IT IS SO ORDERED.

June 16, 2016
Charleston, South Carolina