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Ramos v. Rals Subway Nova LLC

United States District Court, D. Maryland

October 10, 2018

JOSE F. RAMOS Plaintiff,
v.
RALS SUBWAY NOVA LLC, et al., Defendants.

          MEMORANDUM OPINION

          Richard D. Bennett United States District Judge.

         Plaintiff Jose Ramos (“Plaintiff” or “Ramos”) brings this action against Defendants Rals Subway Nova LLC (“Rals Nova”), Rals Subway Partners LP (“Rals Partners”), and Pankaj J. Seth (“Seth”) (collectively, “Defendants”) alleging that Defendants unlawfully kept wages withheld from his paycheck under false representations that these withholdings would be used to pay his health insurance premiums. (Compl., ECF No. 1.) Ramos asserts violations of the Maryland Wage Payment and Collection Law, Labor and Employment § 3-503 (“MWPCL”) (Count I); fraudulent filing of information returns in violation of 26 U.S.C. § 7434 (Count II); negligent withholding (Count III); and unlawful conversion (Count IV). Currently pending before this Court is Defendants Rals and Seth's Motion to Dismiss the Complaint as to Rals Partners, LP and Pankaj J. Seth, and to Defer or Deny Certification of a Class Action and Request for Hearing (ECF No. 7) and Plaintiff's Motion for Leave to file a Surreply. (ECF No. 15.) The parties' submissions have been reviewed, and no hearing is necessary. See Local Rule 105.6 (D. Md. 2016). The gravamen of the Motion to Dismiss is the contention that Rals Partners and Seth are not employers of Ramos. For the reasons set forth below, Defendants' Motion (ECF No. 7) is DENIED. As Plaintiff has not yet moved to certify a class, Defendant's request to defer or deny class certification is DENIED. Finally, as this Court finds that Plaintiff has adequately pled all of his claims, Plaintiff's Motion for Leave to file a Surreply (ECF No. 15) is DENIED AS MOOT.

         BACKGROUND

         At the motion to dismiss stage, the court must “accept as true all of the well-pleaded allegations and view the complaint in the light most favorable to the non-moving party.” LeSueur-Richmond Slate Corp. v. Fehrer, 666 F.3d 261, 264 (4th Cir. 2012). This case concerns Defendant-employers' alleged misuse of wages which were withheld from Plaintiff-employee's paycheck under representations that they would be used to pay his healthcare premiums. The alleged employers, Defendants Rals Partners and Rals Nova, own and operate several Subway restaurant franchises in Maryland, Virginia, and the District of Columbia. (Compl. ¶ 3-8, ECF No. 1). Rals Partners owns Rals Nova. (Id. at ¶ 5) Plaintiff-employee Jose Ramos is an Area Manager of Defendants' Maryland Subway franchises. (Id. at ¶¶ 12-13.) In this position, he operates and oversees several Subway restaurants in Maryland. (Id. at ¶ 14). In about 2013, Seth purchased Rals Nova and Rals Partners and became the sole owner of the two entities. (Id. at ¶¶ 11, 16). Subsequently, Seth has become Ramos' ultimate supervisor: he sets Ramos' rate of pay, determines his benefits, and oversees his work schedule. (Id. at ¶¶ 17-20).

         In 2013, Defendants offered health insurance benefits to Ramos and his family. (Id. at ¶ 23.) In 2015, 2016, and 2017 Defendants withheld wages from Ramos's gross, pre-tax wages, on a bi-weekly basis, purportedly to pay for Ramos's health insurance premiums. (Id. at ¶¶ 27, 29-30.) Rather than disburse these wages for their authorized purposes, Defendants made few, if any, premium contributions to Ramos's health insurance companies from January 1, 2015 to December 31, 2017. (Id. at ¶ 32.) Instead, it is alleged that Defendants kept these wage withholdings for themselves. (Id. at ¶ 36.) Defendants also did not supply Plaintiff with IRS Form 1095-C. (Id. at ¶ 33.) To conceal their mishandling of Plaintiff's wages, Defendants issued Ramos a W-2 in 2015, 2016, and 2017 which overreported his total earned wages for those years. (Id. at ¶ 46.) Because Defendants failed to pay Plaintiff's healthcare premiums, Ramos and his family's health insurance coverage frequently lapsed between 2015 and 2017. (Id. at ¶ 49.) As a result, Ramos and his family incurred substantial medical bills that would have otherwise been covered by their health insurance. (Id. At ¶ 50.)

         On April 26, 2018 Plaintiff filed a four count complaint seeking class certification and alleging violations under the MWPCL and 26 U.S.C. § 7434, as well as negligent withholding and unlawful conversion. Defendant has responded by filing the pending Motion to Dismiss as to Rals Partners, LP and Pankaj J. Seth, and to Defer or Deny Certification of a Class Action and Request for Hearing. (ECF No. 7).

         STANDARD OF REVIEW

         Rule 8(a)(2) of the Federal Rules of Civil Procedure provides that a complaint must contain a “short and plain statement of the claim showing that the pleader is entitled to relief.” Rule 12(b)(6) of the Federal Rules of Civil Procedure authorizes the dismissal of a complaint if it fails to state a claim upon which relief can be granted. The purpose of Rule 12(b)(6) is “to test the sufficiency of a complaint and not to resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses.” Presley v. City of Charlottesville, 464 F.3d 480, 483 (4th Cir. 2006). The United States Supreme Court's opinions in Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007), and Ashcroft v. Iqbal, 556 U.S. 662, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009), “require that complaints in civil actions be alleged with greater specificity than previously was required.” Walters v. McMahen, 684 F.3d 435, 439 (4th Cir. 2012) (citation omitted). In Twombly, the Supreme Court articulated "[t]wo working principles" that courts must employ when ruling on Rule 12(b)(6) motions to dismiss. Iqbal, 556 U.S. at 678. First, while a court must accept as true all factual allegations contained in the complaint, legal conclusions drawn from those facts are not afforded such deference. Id. (stating that "[t]hreadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice."); see also Wag More Dogs, LLC v. Cozart, 680 F.3d 359, 365 (4th Cir. 2012) (“Although we are constrained to take the facts in the light most favorable to the plaintiff, we need not accept legal conclusions couched as facts or unwarranted inferences, unreasonable conclusions, or arguments.” (internal quotation marks omitted)). Second, a complaint must be dismissed if it does not allege “a plausible claim for relief.” Iqbal, 556 U.S. at 679.

         Rule 9(b) of the Federal Rules of Civil Procedure requires that “the circumstances constituting fraud be stated with particularity.” Fed.R.Civ.P. 9(b). The rule “does not require the elucidation of every detail of the alleged fraud, but does require more than a bare assertion that such a cause of action exists.” Mylan Labs., Inc. v. Akzo, N.V., 770 F.Supp. 1053, 1074 (D. Md. 1991). To satisfy the rule, a plaintiff must “identify with some precision the date, place and time of active misrepresentations or the circumstances of active concealments.” Johnson v. Wheeler, 492 F.Supp.2d 492, 509 (D. Md. 2007). As the United States Court of Appeals for the Fourth Circuit stated in United States ex rel. Nathan v. Takeda Pharmaceuticals North America, Inc., 707 F.3d 451 (4th Cir. 2013), the aims of Rule 9(b) are to provide notice to defendants of their alleged misconduct, prevent frivolous suits, eliminate fraud actions where all the facts are learned after discovery, and protect defendants from harm to their goodwill and reputation. 707 F.3d at 456 (citation omitted).

         DISCUSSION

         In seeking to dismiss this case as to Defendants Rals Partners, LP and Pankaj J. Seth, Defendants argue that (1) the complaint contains a series of inaccurate factual allegations, which should warrant a dismissal of all claims against Rals Partners and Seth; (2) Rals Partners and Seth are not the “employers” of Ramos as the term is defined under the Maryland Wage Payment and Collection Law (“MWPCL”); (3) Plaintiff has failed to allege willful violations of 26 U.S.C. § 7434 with sufficient particularity under Federal Rule of Civil Procedure 9(b); and (4) Plaintiff has abandoned his claims of negligent withholding (Count III) and unlawful conversion (Count IV) by failing to reassert them in his Response in Opposition or, alternatively, Plaintiff has failed to allege sufficient facts to state a claim for relief under these theories. This Court will address these arguments seriatim.

         I. Defendants' Factual Assertions

         Defendants dedicate a significant portion of their papers to disputing the facts of the Complaint. Specifically, they argue that Rals Partners only operates in Virginia (Def.'s Mem. Mot. Dismiss 1, ECF No. 7-1); only Rals Subway Nova, LLC has an employment relationship with Ramos (Id. at 4); Rals Nova continuously provided Ramos with healthcare coverage (Id. at 4); Rals Partners does not have an ownership interest in Rals Nova (Id. at 5); and Seth is a limited partner of Rals Partners, not the sole owner of Rals Nova or Rals Partners (Id. at 5). Moreover, Defendants contend that the exhibits attached to the Complaint-pay stubs displaying “Rals Subway Nova LLC” and emails to Ruta Parikh of Rals Nova-support their contentions. (Id. at 4.) Defendants muster these factual assertions to support their argument that Rals Partners and Seth should be dismissed as to all of Plaintiff's claims. (Def.'s Mem. Mot. 4, 5-6; Def.'s Mem. Reply 3-4, ECF No. 12.)

         The legal arguments of the Defendants with respect to the pending Motion to Dismiss are predicated solely on factual disputes as to the allegations contained in the Complaint. Specifically, these factual contentions of the Defendants are: (1) Mr. Ramos is not employed by Rals Partners because it operates only in Virginia (Def.'s Mem. Mot. 4); (2) Seth is a limited partner of Rals Partners and Rals Nova, so he is shielded from liability under Md. Code Ann., Corps. & Ass'ns, §4A-301 (Id. at 5.); and (3) Rals Partners is not subject to the MWPCL because it only operates in Virginia. (Id. at 6.) All of these assertions are premature at this stage because the Court must accept the allegations of the Complaint as true for purposes of reviewing a motion to dismiss. E.I. du Pont de Nemours & Co., 637 F.3d at 440 (4th Cir. 2011) (citations omitted); Hall, 846 F.3d at 765 (4th Cir. 2017). Based on the allegations in the complaint, Rals Partners operates in Maryland, Virginia, and the District of Columbia (Compl. ¶ 8); all Defendants have an employment relationship with Ramos (Id. at ΒΆ 12); Ramos's healthcare coverage lapsed as a result of Defendant's failure to pay ...


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