Edwards et al v. KB Home
Filing
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MEMORANDUM AND ORDER GRANTING 10 Defendant KB Home's MOTION to Dismiss.(Signed by Judge Kenneth M. Hoyt) Parties notified.(dwilkerson, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
GALVESTON DIVISION
KIP EDWARDS, et al,
Plaintiffs,
VS.
KB HOME,
Defendant.
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CIVIL ACTION NO. G-11-240
MEMORANDUM AND ORDER
I.
INTRODUCTION
Before the Court is the defendant, KB Home’s motion to dismiss the plaintiffs’ Kip
Edwards and named and unnamed claimants suit1, pursuant to Federal Rules of Civil Procedure,
Rule 12(b)(6) (Document No. 10). Also before the Court is the collective response of the
plaintiffs to the defendant’s motion (Document No. 18). The Court has examined the pleadings,
motion and response and determines that the defendant’s motion to dismiss should be granted.
II.
FACTUAL BACKGROUND AND CONTENTIONS
The plaintiffs present themselves as salespersons employed by the defendant, “one of the
nation’s largest homebuilders.” The plaintiffs contend that they were “misclassified” as exempt,
and paid on a commission basis and, therefore, denied overtime compensation. In this regard,
the plaintiffs assert that the defendant violated the Fair Labor Standards Act when the defendant
failed to pay overtime wages. See 29 U.S.C. § 206 et seq.
The defendant asserts that the plaintiffs were employed as new home salespersons and
therefore were not entitled to overtime compensation. The defendant contends that “outside
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This suit was filed as a “collective action” pursuant to the Fair Labor Standards Act of 1938, 29 U.S.C. §
201 et. seq. See also 29 U.S.C. § 216(b).
salespersons” are not entitled to overtime pay because the FLSA classifies them as exempt. The
defendant points to 29 U.S.C. § 213(a)(1) and 29 C.F.R. § 541.500 as the statutory and
regulatory basis for its claim of exemption. The defendant also points to “two opinion letters”
[2007-1 and 2007-2] as indicative of the Department of Labor’s (“DOL”) interpretation of §
213(a)(1).
The defendant also argues that the plaintiffs’ pleadings fail to demonstrate that an
“employer-employee” relationship exists between the plaintiffs and the defendant. In this regard,
the defendant attacks the plaintiffs’ “generalized allegations” that the defendant acted as their
employer while pointing out that the plaintiffs’ pleadings fail to support the necessary elements
of FLSA covered employer. In several related arguments, the defendant contends that the
plaintiffs have failed to allege a factual basis for minimum wage status thereby establishing a
basis for an overtime claim. As well, the defendant asserts that the plaintiffs have failed to
sufficiently plead a collective action.
The plaintiffs’ response points out that an amended pleading has been filed by them
which pleading renders moot the defendant’s motion to dismiss. As well, the plaintiffs respond
that dismissals are disfavored and that a collective action should not be the subject of a Rule
12(b)(6) motion because the propriety of certifying a suit as a collective action is addressed when
a plaintiff moves for conditional certification and seeks to notify the putative class. Therefore,
the plaintiffs assert that the defendant’s Rule 12(b)(6) motion is premature and should be denied.
III.
LEGAL STANDARD FED. R. CIV. P. 12(b)(6)
Federal Rule of Civil Procedure 12(b)(6) authorizes a defendant to move to dismiss for
“failure to state a claim upon which relief may be granted,” FED. R. CIV. P. 12(b)(6). Under the
demanding strictures of a Rule 12(b)(6) motion, “[t]he plaintiff's complaint is to be construed in
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a light most favorable to the plaintiff, and the allegations contained therein are to be taken as
true.” Oppenheimer v. Prudential Sec., Inc., 94 F.3d 189, 194 (5th Cir. 1996) (citing Mitchell v.
McBryde, 944 F.2d 229, 230 (5th Cir. 1991)). Dismissal is appropriate only if, the “[f]actual
allegations [are not] enough to raise a right to relief above the speculative level, on the
assumption that all the allegations in the complaint are true (even if doubtful in fact).” Bell Atl.
Corp. v. Twombly, 550 U.S. 544, 555, 127 S. Ct. 1955, 1965, 167 L.Ed.2d 929 (2007).
Moreover, in light of Federal Rule of Civil Procedure 8(a)(2), “[s]pecific facts are not necessary;
the [factual allegations] need only ‘give the defendant fair notice of what the . . . claim is and the
grounds upon which it rests.” Erickson v. Pardus, 551 U.S. 89, 93, 127 S. Ct. 2197, 2200, 167
L.Ed.2d 1081 (2007) (per curiam) (quoting Twombly, 550 U.S. at 555, 127 S.Ct. at 1964. Even
so, “a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more
than labels and conclusions, and a formulaic recitation of the elements of a cause of action will
not do.” Twombly, 550 U.S. at 555, 127 S. Ct. at 1964 - 65 (citing Papasan v. Allain, 478 U.S.
265, 286, 106 S. Ct. 2932, 92 L.Ed.2d 209 (1986).
More recently, in Ashcroft v. Iqbal, the Supreme Court expounded upon the Twombly
standard, reasoning that “[t]o survive a motion to dismiss, a complaint must contain sufficient
factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face,’” Ashcroft
v. Iqbal, ---U.S. ----, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Twombly, 550 U.S.
at 570, 127 S. Ct. at 1974). “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.” Ashcroft, ---U.S. ----, 129 S. Ct. at 1949 (citing Twombly, 550 U.S. at 556,
127 S.Ct. at 1955). “But where the well-pleaded facts do not permit the court to infer more than
the mere possibility of misconduct, the complaint has alleged--but it has not ‘show [n]’--‘that the
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pleader is entitled to relief.’” Ashcroft, ---U.S. ----, 129 S. Ct. at 1950 (quoting FED. R. CIV. P.
8(a)(2)). Nevertheless, when considering a 12(b)(6) motion to dismiss, the Court’s task is
limited to deciding whether the plaintiff is entitled to offer evidence in support of his or her
claims, not whether the plaintiff will eventually prevail. Twombly, 550 U.S. at 563, 1969 n.8
(citing Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S. Ct. 1683, 40 L. Ed.2d 90 (1974)); see also
Jones v. Greninger, 188 F.3d 322, 324 (5th Cir. 1999).
IV.
RESTATEMENT OF CONTENTIONS
The defendant contends that the plaintiffs’ suit should be dismissed because the evidence
is undisputed that the plaintiffs were outside salespersons and, therefore, exempt status applies to
their employment agreement. In support of this argument, the defendant relies on and proffers
two DOL opinion letters issued by the administrator of the Wage and Hour Division that,
according to the defendant, apply to the plaintiffs’ FSLA claims. The Court will review the
plaintiffs’ amended pleadings for evidence of “facial plausibility.”
In their amended pleadings, the plaintiffs proffer that: (a) their paychecks were issued by
the defendant; (b) W-2 earnings statements were issued by the defendant wherein the defendant
identified itself as the plaintiffs’ employer; (c) the plaintiffs worked in the offices provided by
the defendant that included a desk, chairs for customers, fax machine and other equipment
necessary for inside or outside sales work; (d) they worked over 40 hours per week, obtaining
various documents from buyers necessary to complete and close a mortgage loan; and (e) they
served as customer service representatives concerning the home warranty after the house was
sold including homes they did not sell.
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V.
DISCUSSION AND ANALYSIS
Title 29 U.S.C. § 213(a)(1) provides an exemption from the minimum wage and overtime
provision of the FLSA for “any employee employed…in the capacity of outside salesman.”
Under 29 C.F.R. § 541.500(a), “the term employee employed in the capacity of outside salesman
means any employee”:
(1) whose primary duty is: (i) making sales within the meaning of
Section 3(k) of the Act, or (ii) obtaining orders or contracts for
services or for the use of facilities for which a consideration will be
paid by the client or customer; and
(2) who is customarily and regularly engaged away from the employer’s
place or places of business in performing such primary duty, [i.e. exempt
work].
The DOL issued two letters in 2007 addressing the issue of when a salesperson may be
treated as an exempt employee. The opinion letters generally describe an exempt salesperson as
one who maintains a space in a temporary sales office within the subdivision where the homes
are sold. They have “a desk, a telephone, and a fax machine but few of the other accoutrements
of a typical business office.” Generally, these offices are not the permanent office of the
employer but designed to conduct the day-to-day operations at a home construction site.
The salesperson’s activities generally include “meeting with prospects; real estate sales
employees; showing properties and communities to prospects; touring and demonstrating model
homes and home sites; engaging in a wide variety of marketing efforts; and meeting with
customers, construction personnel; completing paperwork; prospecting customers; following up
with customers; scheduling appointments; learning about the homes; completing mortgage
qualification forms if such assistance is required; filing reports with sales managers; completing
the sales contract; and other duties incidental to an related to the selling of new homes.” See
[DOL Letters – FLSA 2007-1 and 2007-2].
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VI.
CONCLUSION
The Court is of the opinion that the plaintiffs’ amended pleadings do overcome the
defendant’s declaration that the pleadings fail to adequately assert that the defendant was their
employer on the occasion(s). Pleadings that indicate that the defendant issued paychecks to the
plaintiffs and supplied W-2 earnings statements (not Form 1099s), support the view that the
defendant considered itself the employer of the plaintiffs. Whether the defendant fit the classic
definition of employer, however, need not be established or demonstrated at this time. It is
enough that the defendant referred to itself as the plaintiffs’ employer in formal documents. See
Oppenheimer v. Prudential Sec. Inc., 94 F.3d 189, 194 (5th Cir. 1996). This conclusion merely
accepts the tax forms as establishing an employer-employee relationship. An inquiry concerning
the nature of that relation must be pursued.
In analyzing the employer-employee relationship, it appears that the defendant intended,
at all times, that the plaintiffs be treated as exempt employees. Moreover, the various duties set
forth in the plaintiffs’ pleading fit those duties that are specifically identified by the DOL as
classic and peculiar to an exempt employee. It was or currently is the plaintiffs’ primary duty to
make sales of new homes, obtain contracts for sales, and service the customer and/or contract
sufficiently so that the sale is consummated. As a follow-up, the plaintiffs are to address new
home concerns when an appliance or the home construction fails in some manner.
The plaintiffs admit that their work is performed in a model home sales office. Hence,
they do not work in the home office or the executive offices of the defendant. The equipment
provided to the plaintiffs is classic salesperson tools necessary for contacting customers,
preparing sales contracts, mortgage applications and the other duties incidental and related to the
sale of new homes. The plaintiffs make much of the fact that they work more than 40 hours in a
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typical week comprised of a seven work day schedule, and that the defendant requires the
plaintiffs to arrive at work 15-30 minutes before start time. These requirements, too, are typical
of a sales force. Moreover, the fact that some sales are consummated within the defendant’s
sales office, does not alter their employment status. Sales training meetings and preparation of
sale reports or, answering and resolving complaints of customers concerning home/appliance
warranties, and the like, do not change a salesperson’s status from outside to inside.
The Court is of the opinion that the plaintiffs’ amended pleadings fail to take the
plaintiffs outside the classic definition of outside salesperson. See 29 U.S.C. § 213(a)(1) and (2).
Therefore, the Court concludes that the defendant’s motion to dismiss should be GRANTED.
It is so ORDERED.
SIGNED at Houston, Texas this 28th day of July, 2011.
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Kenneth M. Hoyt
United States District Judge
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