JEFFREY B. MOULD Plaintiff,
NJG FOOD SERVICE INC., et al. Defendants.
JAMES K. BREDAR, District Judge.
This memorandum and the accompanying order address motions in the two actions consolidated under this caption. Jeffrey B. Mould brought his suit against NJG Food Service, Inc. ("NJG"), OC Crabbag, LLC ("Crabbag"), Nolen J. Graves, and Albert Levy (collectively "Defendants") for violations of the Fair Labor Standards Act of 1928 ("FLSA"), 19 U.S.C. §§ 201 et seq., the Maryland Wage and Hour Law ("MWHL"), Md. Code Ann., Labor & Employment §§ 3-401 et seq., the Maryland Wage Payment and Collection Law ("MWPCL"), Md. Code Ann. Labor & Employment §§ 3-503 et seq., the Internal Revenue Code ("IRC"), 29 U.S.C. § 7434, as well as for the common law torts of conversion and unjust enrichment. Kathleen Yanek and Julianne Lodowski (collectively with Mould, "Plaintiffs") brought their suit on behalf of themselves and others similarly situated as a collective and class action against Defendants for violations of the FLSA, the MWHL, the MWPCL, and for the common law torts of conversion and unjust enrichment. Now before the Court are (1) Defendants' motions to dismiss (ECF Nos. 35; JKB-13-2183, No. 9.), (2) Plaintiff Mould's motion for leave to file a second amended complaint (ECF No. 36), (3) Defendants' motion to stay discovery, consolidate, and extend time (ECF No. 37), (4) Plaintiff Mould's motion for leave to file a limited surreply to Defendants' reply to Plaintiff's opposition to Defendants' partial motion to dismiss (ECF No. 65), (5) Plaintiffs Yanek and Lodowski's motion for leave to file a second amended complaint and supplemental motion for leave to file a second amended complaint (JKB-13-2183, ECF Nos. 18, 20), and (6) Plaintiffs Yanek and Lodowski's motion for leave to file a limited surreply (JKB-13-2183, ECF No. 19). The issues have been briefed and no hearing is required. Local Rule 105.6.
For the reasons set forth below, (1) Defendants' motions to dismiss (ECF Nos. 35; JKB-13-2183, No. 9) will be GRANTED IN PART and DENIED IN PART, (2) Plaintiff Mould's motion for leave to file a second amended complaint (ECF No. 36) will be DENIED, (3) Defendants' motion to stay discovery, consolidate, and extend time (ECF No. 37) will be GRANTED, (4) Plaintiff Mould's motion for leave to file a limited surreply to Defendants' reply to Plaintiff's opposition to Defendants' partial motion to dismiss (ECF No. 65) will be DENIED, (5) Plainitffs Yanek and Lodowski's motion for leave to file a second amended complaint and supplemental motion for leave to file a second amended complaint (JKB-13-2183, ECF Nos. 18, 20) will be GRANTED, and (6) Plainitffs Yanek and Lodowski's motion for leave to file a limited surreply (JKB-13-2183, ECF No. 19) will be DENIED.
The complaints present several identical questions of law and fact.,  Mould, Yanek, and Lodowski were all employed as servers at the Crab Bag restaurant. Mould worked there from February 13, 2011 until his employment was terminated on June 23, 2013. (ECF No. 33, Mould Am. Compl. ¶¶ 3, 12.) Yanek worked there from October 2009 until her employment was terminated in September 2012. (JKB-13-2183, ECF No. 3, Yanek Sec. Am. Compl., ¶ 3.) Lodowski worked there from August 2009 until her employment was terminated in September 2012. ( Id. at ¶ 4.) Plaintiffs allege that they, and other similarly situated servers, were paid an hourly wage of $3.63 and an overtime hourly rate of $7.26 during the relevant period. (Mould Am. Compl., ¶¶ 12, 15; Yanek Sec. Am. Compl., ¶¶ 15, 18.)
During this period, Defendants utilized a tip credit to satisfy minimum wage requirements under the FLSA and the MWHL. (Mould Am. Compl., ¶¶ 13-14; Yanek Sec. Am. Compl., ¶¶ 16-17.) In addition, Defendants instituted a tip pooling arrangement. ( Id. ) Plaintiffs allege that both the tip pooling arrangement and the use of a tip credit violated the FLSA and the MWHL. (Mould Am. Compl., ¶ 14; Yanek Sec. Am. Compl., ¶ 17.)
In support of this claim, Plaintiffs allege that Defendants failed to give Plaintiffs notice about any tip credit they were utilizing to meet minimum wage requirements. ( Id. ) Plaintiffs further allege that they, and others similarly situated, were coerced by Defendants into participating in a tip pooling arrangement, whose terms violated the FLSA and the MWHL. ( Id. ) Specifically, from approximately December 2011 until June 2013, Defendants required servers to contribute either 2.5% of net sales for the shift ("A.M. percentage") or 5% of net sales for the shift ("P.M. percentage") to the tip pool. ( Id. ) Included in this calculation were non-food sales (e.g., sales of The Crab Bag t-shirts), unpaid tabs and compensated meals (e.g., meals eaten by Defendants or other employees of the Crab Bag and meals that customers refused to pay for), and mandatory service charges. ( Id. ) Servers were required to place an envelope containing their required contribution to the tip pool in the tip-out safe at the end of each shift. (Mould Am. Compl., ¶ 14; Yanek Am. Compl., ¶¶ 17, 66.) This policy applied to any shift in which a busboy or foodrunner was present, irrespective of the number of such employees present or the amount of time such employees spent on the shift. ( Id. ) The money that servers contributed to the tip pool was then "distributed to various employees beyond just the busboys and foodrunners... including... line cooks, steamers, employees at the raw bar, carryout cashiers, carryout cooks, an prep cooks, and, upon information and belief, members of management." ( Id. ) Plaintiffs further allege that both the amounts to be contributed to the tip pool by Plaintiffs and the amounts distributed to other employees "changed at the direction and whim of Defendants." (Mould Am. Compl., ¶ 14; Yanek Am. Compl., ¶ 17.) In particular, "[d]efendants continually attempted to exert their influence and coercion to keep the exact nature and application of the tip pool secret and have repeatedly disciplined employees, up to termination of employees, for questioning the validity of the tip pool and tip credit." ( Id. )
Plaintiff Mould also alleged Defendants terminated his employment in retaliation against him for complaining about Defendants' pay practices. ( Id. at ¶ 71.) Specifically, after he filed his initial complaint in the present case (ECF No. 1), on June 14, 2013, he informed other servers about this lawsuit and their rights under the FLSA, the MWHL, and other statutes. (Mould Am. Compl., ¶ 18.) On June 23, Defendant Levy informed Mould that there had been complaints against him and that, as a result, he was suspended indefinitely. ( Id. ) Mould was then escorted off the premises and informed that he was no longer permitted on The Crab Bag property. ( Id. ) On June 27, Mould was advised that his employment was terminated. ( Id. ) Mould has alleged that during his tenure at the Crab Bag, he was never disciplined and never received any write-up regarding disciplinary action. ( Id. )
In support of his claim under the Internal Revenue Code, Mould has alleged that, as of December 2011, Defendants instructed him and other servers not to report any tips (i.e., to enter the amount of $0) into the DIGITAL DINING system used by Defendants to keep track of the hours worked by servers. ( Id. at ¶¶ 52-53.) Mould further alleges that as a result of this policy, Defendants willfully over-reported the tips he earned on his 2012 W-2 by $10, 000. ( Id. )
Plaintiff Mould filed his original complaint with this Court on May 1, 2013. (ECF No. 1.) On June 5, Defendants filed their answer to the original complaint. (ECF No. 8.) On September 4, with leave from the Court, Mould filed the amended complaint that is the subject of this motion to dismiss. (Mould Am. Compl.) Defendants filed the present motion to dismiss on September 5. (ECF No. 35.)
On June 28, Defendants made a first offer of judgment to Plaintiff Mould. (ECF No. 35-2.) In this first offer of judgment, which Defendant had until July 15, 2013 to accept, Defendants offered to have judgment entered against them in the amount of $40, 000 "representing full judgment to settle, release and satisfy any and all causes of action brought, or which could have been brought, in the above-captioned civil action by Plaintiff Mould." ( Id. ) On August 30, Defendants again offered to have judgment entered against them. (ECF No. 35-3.) In this second offer of judgment, Defendants offered to have judgment entered against them in the amount of $35, 151.20 with regard to the "minimum wage and overtime claims that Mr. Mould has advanced under the Fair Labor Standards Act (FLSA) and Maryland Wage Hour Law (MWHL)." ( Id. ) The offer did not cover Mould's other claims. ( Id. ) In both offers of judgment, Defendants agreed to pay reasonable attorney's fees and costs as determined by the Court. (ECF Nos. 35-2, 35-3.) Plaintiff Mould did not accept either of Plaintiffs' offers.
On September 9, Mould filed a motion for leave to file a second amended complaint (ECF No. 36), and Defendants filed a motion to stay discovery, consolidate cases, and extend time to answer Count X (ECF No. 37.) On October 28, Mould filed a motion for leave to file a limited surreply to Defendants' reply to Plaintiff's opposition to Defendants' partial motion to dismiss.
Plaintiffs Yanek and Lodowski filed their original complaint on July 26, 2013. (JKB-13-2183, ECF No. 1.) On August 16, Defendants filed the present motion to dismiss. (JKB-13-2183, ECF No. 9.) On September 4, Plaintiffs Yanek and Lodowski filed a first amended complaint. (JKB-13-2183, ECF No. 16.) On October 3, Plainitffs Yanek and Lodowski filed a motion for leave to file a second amended complaint (JKB-13-2183, ECF No. 18.) and a supplemental motion for leave to file a second amended complaint. (JKB-13-2183, ECF No. 20.) As a technical matter, Defendants' motion to dismiss is mooted by the filing of Plaintiffs Yanek and Lodowski's amended complaint (JKB-13-2183, ECF No. 16), which supersedes the original complaint. In cases like the present one, where the amended complaint is similar to the original complaint, this Court ordinarily gives defendants an opportunity to advise it of whether the motion to dismiss should be considered in relation to the amended complaint or whether defendants would like an opportunity to file a revised motion to dismiss that specifically addresses the amended complaint. Here, however, given that Defendants' reply to Plaintiffs' opposition to Defendants' motion to dismiss (JKB-13-2183, ECF No. 17) specifically addresses the first amended complaint, the Court deems that Defendants intended for the Court to consider their motion to dismiss in relation to the first amended complaint. Further, given that (1) the Court is granting Plaintiffs' motion for leave to file a second amended complaint (JKB-13-2183, ECF Nos. 18, 20), and (2) that the modifications in the Plaintiffs' second amended complaint (the addition of two named plaintiffs and miscellaneous minor corrections) are minor and irrelevant to the Court's ruling on Defendants' motion to dismiss, and (3) that there has been extensive briefing on Plaintiff's motion for leave to file a second amended complaint, the Court will, in the interest of clarity and judicial economy, consider Defendants' motion to dismiss in relation to Plaintiffs' second amended complaint. (JKB-13-2183, ECF No. 20-1.)
On August 1, 2013, Defendants made offers of judgment to Plaintiffs Yanek and Lodowski. (JKB-13-2183, ECF No. 9-2.) Defendants offered Plaintiff Yanek to have judgment entered against them in the amount of $13, 200, "representing full judgment to settle, release and satisfy any and all causes of action brought or which could have been brought, in the above-captioned civil action by Plaintiff Yanek." ( Id. ) The offer, which Plaintiff Yanek had until August 15, 2013 to accept, also provided that Plaintiff Yanek was authorized to "file  a Motion for Attorneys' Fees and/or a Bill of Costs." ( Id. ) Defendants' offer to Plaintiff Lodowski was on the same terms as their offer to Plaintiff Yanek, with the exception that Defendants offered Plaintiff Lodowski $10, 750. ( Id. ) Neither Yanek nor Lodowski accepted Defendants' offer.
On October 7, Plaintiffs Yanek and Lodowski filed a motion for leave to file a limited surreply to Defendants' motion to dismiss. (JKB-13-2183, ECF No. 19.) On November 12, 2013, this Court ordered that the case filed by Plaintiff Mould and the case filed by Plaintiffs Yanek and Lodowski be consolidated for all purposes, including trial, and that all subsequent pleading and papers be captioned as Civil Action No. 1:13-cv-1305-JKB. (ECF No. 74; JKB-13-2183, ECF No. 30.)
II. LEGAL STANDARDS
A. Motion to Dismiss under Rule 12(b)(6)
A motion to dismiss under FED. R. CIV. P. 12(b)(6) is a test of the legal sufficiency of a complaint. Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999). To pass this test, a complaint need only present enough factual content to render its claims "plausible on [their] face" and enable the court to "draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). The plaintiff may not, however, rely on naked assertions, speculation, or legal conclusions. Bell Atl. v. Twombly, 550 U.S. 544, 556-57 (2007). In assessing the merits of a motion to dismiss, the court must take all well-pled factual allegations in the complaint as true and construe them in the light most favorable to the Plaintiff. Ibarra v. United States, 120 F.3d 472, 474 (4th Cir. 1997). If after viewing the complaint in this light the court cannot infer more than "the mere possibility of misconduct, " then the motion should be granted and the complaint dismissed. Iqbal, 556 U.S. at 679.
B. Motion to Dismiss under 12(b)(1)
Motions to dismiss for lack of subject matter jurisdiction are governed by Federal Rule of Civil Procedure 12(b)(1). Where the court's subject matter jurisdiction is in dispute, the plaintiff bears the burden of proving that jurisdiction exists. Williams v. United States, 50 F.3d 299, 304 (4th Cir. 1995). In determining its own jurisdiction, the 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." Richmond, Fredericksburg & Potomac R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991). The court should grant a Rule 12(b)(1) motion to dismiss "if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law." Id.
C. Motion to File an Amended Complaint
Generally, leave to file an amended or supplemental pleading should be "freely give[n] where justice so requires." FED. R. CIV. P. 15(a)(2). A district court may deny leave, however, if: (1) the new pleading would prejudice the opposing party; (2) the moving party has acted in bad faith; or, (3) the new pleading would be futile ( i.e., if it could not withstand a motion to dismiss). Laber v. Harvey, 438 F.3d 404, 426 (4th Cir. 2006); Perkins v. U.S., 55 F.3d 910, 917 (4th Cir. 1995). If a district court chooses to deny leave, it must give justifying reasons. See id. (citing Foman v. Davis, 371 U.S. 178, 182 (1962)).
However, where a motion for leave to amend pleadings is filed beyond the deadline set forth in the scheduling order, it will only be granted if it satisfies both the "good cause" standard of Rule 16(b)(4) and the standard of Rule 15(a)(2) for allowing amendment of pleadings. Fed.R.Civ.P. 16(b)(4); 15(a)(2). See Moses v. Cowan Distrib. Servs., Inc., Civ. No. JKB-10-1809, 2012 WL 527657, at *2 (D. Md. Feb. 16, 2012). See also Nourison Rug Corp. v. Parvizian, 535 F.3d 295, 298-99 (4th Cir. 2008) (noting tension between Rule 15 and Rule 16; not reaching district court's Rule 15(a) finding of futility because it affirmed district court's Rule 16(b) application of "good cause" standard); Odyssey Travel Center, Inc. v. RO Cruises, Inc., 262 F.Supp.2d 618, 631 (D. Md. 2003) ("once the scheduling order's deadline for amendment of the pleadings has passed, a moving party first must satisfy the good cause standard of Rule 16(b); if the moving party satisfies Rule 16(b), the movant then must pass the tests for amendment under [Rule] 15(a)").
The analysis under Rule 16(b) is less focused on the substance of the proposed amendment and more concerned with the timeliness of the motion to amend "and the reasons for its tardy submission." Rassoull v. Maximus, Inc., 209 F.R.D. 372, 373-74 (D. Md. 2002). A court's scheduling order "is not a frivolous piece of paper, idly entered, which can be cavalierly disregarded by counsel without peril, '" Potomac Electric Power Co. v. Electric Motor Supply, Inc., 190 F.R.D. 372, 376 (D. Md. 1999), quoting Gestetner v. Case Equipment Co., 108 F.R.D. 138, 141 (D. Me. 1985). "Properly construed, "good cause" means that scheduling deadlines cannot be met despite a party's diligent efforts.'... Carelessness is not compatible with a finding of diligence and offers no reason for a grant of relief." Potomac Elec., 190 F.R.D. at 375 (citations omitted).
A. Motions to Dismiss (ECF Nos. 35; JKB-13-2183, No. 9)
Defendants have moved to dismiss Counts I through IX of Plaintiff Mould's first amended complaint, pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. (ECF No. 35.) This partial motion to dismiss does not seek the dismissal of Count X (Violation of the Fair Labor Standards Act-Retaliation). ( Id. ) Defendants have also moved to dismiss Plaintiffs Yanek and Lodowski's entire case, pursuant to Rules 12(b)(1) and 12(b)(6) of the Federal Rules of Civil Procedure. (JKB-13-2183, ECF No. 9.) Given that these motions to dismiss address many identical issues of law and fact, the Court will consider them together, claim by claim.
1. Conversion and Unjust Enrichment Claims (Mould Am. Compl., Counts VIII and IX; Yanek Sec. Am. Compl., Counts VI and VII)
Defendants seek to dismiss Plaintiff Mould's Counts VIII (Conversion) and IX (Unjust Enrichment) (ECF No. 35) and Plaintiffs Yanek and Lodowski's Counts VI (Conversion) and VII) (Unjust Enrichment) (JKB-13-2183, ECF No. 9) on the basis that these fail to state a cause of action. The Court finds that these common law claims are preempted by the FLSA.
A claim for unjust enrichment, also referred to as quantum meruit, has three elements. Hill v. Cross Country Settlements, LLC, 936 A.2d 343, 352 (Md. 2007). A plaintiff must show: (1) a benefit conferred upon the defendant by the plaintiff; (2) the defendant appreciated or knew about the benefit; and (3) the defendant accepted the benefit under such circumstances as to make it inequitable for the defendant to retain the benefit without payment of its value. Id .; Quickley v. Univ of Maryland Med. Sys. Corp., CCB-12-321, 2012 WL 4069757 (D. Md. Sept. 14, 2012). As for conversion, it consists of the "wrongful deprivation of a person of property to the possession of which he is entitled." Darcars Motors of Silver Spring, Inc. v. Borzym, 841 A.2d 828, 836 (Md. 2004) (quoting Wallace v. Lechman & Johnson, Inc., 732 A.2d 868, 874 (Md. 1998).
At issue here is whether Plaintiffs' conversion and unjust enrichment claims arise out of their FLSA claim, as Defendants argue, or whether they have an independent basis, as Plaintiffs claim. Indeed, as the Fourth Circuit held in Anderson v. Sara Lee Corp, 508 F.3d 181 (4th Cir. 2007), the remedies provided by the FLSA are the exclusive remedies for violations of its mandates. Id. at 194 (citing Kendall v. City of Chesapeake, Va., 174 F.3d 437 (4th Cir. 1999)). See also Quickley v. Univ of Maryland Med. Sys. Corp., CCB-12-321, 2012 WL 4069757 (D. MD. Sept. 14, 2012 ("[T]he federal statute [, i.e. the FLSA, ] nonetheless preempts common law claims for rights protected by the FLSA.") Therefore, in order to successfully plead a cause of action, Plaintiffs must establish the elements of these common law torts without relying on any rights that arise solely from the FLSA.
Here, in support of their claim of conversion, Plaintiffs have alleged that "Defendants knowingly and purposely took and interfered with Plaintiffs'... personal property, viz., the gratuities held in the tip pool'" by "improperly and intentionally divert[ing] a portion of the tip pool' to compensate employees who do not customarily and regularly receive tips, including members of management." (Mould Am. Compl. ¶ 57; Yanek Sec. Am. Compl. ¶ 65). Plainttiffs further allege that they "possessed or had an immediate right to possess [the funds they contributed to the tip pool because of]... Defendants' requirement that Plaintiffs... contribute out-of-pocket funds to the "tip pool" related to sales upon which no tip was provided." (Mould Am. Compl. ¶ 59; Yanek Sec. Am. Compl. ¶ 67.)
However, to the extent these practices-using the tip pool to compensate employees who do not regularly receive tips and requiring servers to pay into the tip pool on the basis of sales upon which no tip was provided-infringe upon Plaintiffs' rights, they infringe upon rights that arise out of the FLSA. Indeed, these practices conform to the tip pooling policy set out by Defendants, which requires Plaintiffs to contribute to the tip pool on the basis of "net sales." (Mould Am. Compl., ¶ 14; Yanek Am. Compl., ¶ 17.) And, as the Supreme Court established in Williams v. Jacksonville Terminal Co., 315 U.S. 386, 397-98 (1942), absent a statutory provision to the contrary, an employer may have an arrangement with its employees "in which the employee agrees to turn over the tips to the employer." See also Cumbie v. Woody Woo, Inc., 596 F.3d 577, 582 (9th Cir. 2010) (citing Williams, 315 U.S. 386) ("[S]ection 203(m) [of the FLSA]... does not alter the default rule in Williams that tips belong to servers to whom they are given only in the absence of an explicit contrary understanding' that is not otherwise prohibited. ...