United States District Court, D. Maryland
L. Russell, III United States District Judge
MATTER is before the Court on Defendants Regency Management
Services, LLC (“Regency”) and Abdul
Ayyad's Motion to Dismiss (ECF No. 15). The Motion is
ripe for disposition, and no hearing is necessary.
See Local Rule 105.6 (D.Md. 2018). For the reasons
outlined below, the Court will grant in part and deny in part
is the owner and Chief Executive Officer of Regency, which
operates several Ashley Furniture stores in Maryland and
Virginia. (Am. Compl. ¶¶ 10, 18-20, 32, ECF No. 7).
Defendants employed Plaintiffs Roberta Greenwald, Elizabeth
Elliott, Damon Vass, Grant Geist, and Rhonda Kenney as
commissioned sales people at their furniture stores for
various periods between 2015 and 2017. (Id.
¶¶ 32-37). Plaintiffs were W-2 employees, and not
independent contractors. (Id. ¶¶ 11-12).
As part of their employment at Defendants' stores,
Plaintiffs signed a “Regency Management Services
Commission Sales Agreement” (the “Commission
Agreement”). (Id. ¶ 51; Defs.' Mot.
Dismiss [“Defs.' Mot.”] Ex. 2
[“Comm'n Agmt.”], ECF No.
15-2). The Commission Agreement provided that
Defendants would pay Plaintiffs an hourly wage plus
commissions and that commissions would be paid “less
standard deductions and withholdings, in accordance with
[Regency's] standard payroll practices and
procedures.” (Am. Compl. ¶ 53; Comm'n Agmt. at
3). While Plaintiffs worked for Regency and Ayyad, they
received bi-weekly paychecks with the required state and
federal deductions and withholdings. (Am. Compl. ¶ 64).
Defendants also issued Plaintiffs W-2s for wages earned.
(Id. ¶ 65). When Plaintiffs' employment
with Ayyad and Regency ended, Defendants paid Plaintiffs
commissions owed via IRS 1099 forms, without taking any
deductions or withholdings. (Id. ¶¶
67-89). As a result, Plaintiffs “were required to pay
additional taxes on the commissions, ” thereby reducing
their wages earned. (Id. ¶¶ 113, 116).
then “willfully misrepresented” the amount of
wages Plaintiffs earned on their W-2s in 2016 and 2017 by
“underreporting wages and excluding any commission
amounts that were paid to them” after they left
Defendants' employment. (Id. ¶
92).Defendants did so “to avoid paying
the employer portion of the FICA, FUTA, and other federal and
state income taxes on paychecks issued after Plaintiffs left
employment.” (Id. at 2). Defendants also
“have not paid Plaintiffs all commissions earned during
their employment with Defendants.” (Id. ¶
sued Regency and Ayyad on January 24, 2018. (ECF No. 1). On
April 11, 2018, Plaintiffs filed an Amended Complaint. (ECF
No. 7). In their five-Count Amended Complaint, Plaintiffs
allege: willful violations of the Internal Revenue Code, 26
U.S.C. § 7434 (2018) (Count I); improper deductions under
the Maryland Wage Payment and Collection Law (the
“MWPCL”), Md. Code Ann., Lab. & Empl.
[“L & E”] § 3-503 (West 2018) (Count
II); owed commissions under the MWPCL, L & E § 3-505
(Count III); negligent issuance of owed wages (Count IV); and
breach of contract (Count V). (Am. Compl. ¶¶
134-97). Plaintiffs seek compensatory damages, treble
damages, injunctive relief, and attorney's fees and
costs. (Id. ¶¶ 141, 164, 171, 183, 197).
and Ayyad now move to dismiss all counts against them for
failure to state a claim upon which relief may be granted.
(ECF No. 15). Plaintiffs filed an Opposition on June 19,
2018. (ECF No. 18). On June 29, 2019, Regency and Ayyad filed
a Reply. (ECF No. 19).
Standard of Review
purpose of a motion made under Federal Rule of Civil
Procedure 12(b)(6) is to “test[ ] the sufficiency of a
complaint, ” not to “resolve contests surrounding
the facts, the merits of a claim, or the applicability of
defenses.” King v. Rubenstein, 825 F.3d 206,
214 (4th Cir. 2016) (quoting Edwards v. City of
Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999)). A
complaint fails to state a claim if it does not contain
“a short and plain statement of the claim showing that
the pleader is entitled to relief, ” Fed.R.Civ.P.
8(a)(2), or does not “state a claim to relief that is
plausible on its face, ” Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). A claim is facially
plausible “when the plaintiff pleads factual content
that allows the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Id. (citing Twombly, 550 U.S. at 556).
“Threadbare recitals of the elements of a cause of
action, supported by mere conclusory statements, do not
suffice.” Id. (citing Twombly, 550
U.S. at 555). Though the plaintiff is not required to
forecast evidence to prove the elements of the claim, the
complaint must allege sufficient facts to establish each
element. Goss v. Bank of America, N.A., 917
F.Supp.2d 445, 449 (D.Md. 2013) (quoting Walters v.
McMahen, 684 F.3d 435, 439 (4th Cir. 2012)),
aff'd sub nom., Goss v. Bank of America,
NA, 546 Fed.Appx. 165 (4th Cir. 2013).
considering a Rule 12(b)(6) motion, a court must examine the
complaint as a whole, consider the factual allegations in the
complaint as true, and construe the factual allegations in
the light most favorable to the plaintiff. Albright v.
Oliver, 510 U.S. 266, 268 (1994); Lambeth v. Bd. of
Comm'rs, 407 F.3d 266, 268 (4th Cir. 2005) (citing
Scheuer v. Rhodes, 416 U.S. 232, 236 (1974)). But,
the court need not accept unsupported or conclusory factual
allegations devoid of any reference to actual events,
United Black Firefighters v. Hirst, 604 F.2d 844,
847 (4th Cir. 1979), or legal conclusions couched as factual
allegations, Iqbal, 556 U.S. at 678.
contend that the Court should dismiss all Counts against them
for failure to state a claim. The Court addresses each Count
Internal Revenue Code - 26 U.S.C. § 7434(a) - Count
Defendants maintain that 26 U.S.C. § 7434(a) only
applies to willful and fraudulent misrepresentations of the
amount of wages; it does not apply to the misclassification
of W-2 wages as 1099 independent contractor income.
Plaintiffs counter that they do not allege that they were
misclassified. Rather, they allege that Defendants
fraudulently underreported their wages on their W-2s, and
therefore they state a claim under § 7434(a). The Court
agrees with Plaintiffs.
7434(a) provides that “[i]f any person willfully files
a fraudulent information return with respect to payments
purported to be made to any other person, such other person
may bring a civil action for damages ...