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Nesbitt v. FCNH, Inc

United States District Court, D. Colorado

November 14, 2016

RHONDA NESBITT, individually, and on behalf of all others similarly situated, Plaintiff,
v.
FCNH, INC., VIRGINIA MASSAGE THERAPY, INC., MID-ATLANTIC MASSAGE THERAPY, INC., STEINER EDUCATION GROUP, INC., STEINER LEISURE LTD., SEG CORT LLC, d/b/a as the “Steiner Education Group”, Defendants.

          ORDER

          R. Brooke Jackson United States District Judge.

         This matter is before the Court on two motions filed by defendants: (1) defendants' Motion for Summary Judgment, ECF No. 62; and (2) defendants' Motion to Dismiss the Claims of Opt-In Plaintiffs Soliz, Alfisi, Sprague and Williams and to Exclude Evidence from Certain Other Opt-In Plaintiffs, ECF No. 64, which remains pending after being granted in part on November 1, 2016. This Order solely addresses defendants' motion for summary judgment. For the reasons below, the Court GRANTS IN PART and DENIES IN PART that motion. In addition, because the Court dismisses plaintiffs' FLSA claim, the Court orders the parties to show cause within 14 day as to why the Court should not dismiss without prejudice the remainder of the action for lack of subject matter jurisdiction.[1]

         I. FACTS

         Plaintiffs are massage therapy students who attended defendants' massage therapy vocational schools.[2] ECF No. 46-1 at ¶¶5-21 (Amended Complaint); ECF No. 62 at 1 n.1. These schools are collectively run by defendant Steiner Education Group (“SEG”) in the following states: Arizona, Colorado, Connecticut, Florida, Maryland, Massachusetts, Illinois, Nevada, New Jersey, Pennsylvania, Texas, Utah, Virginia, and Washington. Id. at ¶¶13-15. Although they enrolled as students at SEG's institutions, plaintiffs argue here that during SEG's clinical massage curriculum they functioned as defendants' “employees” under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., as well as their respective state's laws. See Id. at ¶¶57-81. Accordingly, they assert claims for unpaid wages under those laws for the time they performed clinical massages for paying customers at defendants' institutions. Id.

         Enrollment at the SEG's Institutions.

         Upon enrolling at an SEG massage therapy vocational school, students are required to sign an “Enrollment Agreement” wherein they acknowledge that they will pay tuition in exchange for classroom and clinical training in massage therapy. ECF No. 62-2 at ¶¶12-15 (Decl. of Melissa Wage). This Agreement likewise discloses to students that it is illegal under the respective state's laws to perform massage therapy for compensation without a license, and that students are not guaranteed employment with their school or otherwise upon graduation from the program. Id. Students also receive a Student Catalog and Handbook upon enrolling at one of defendants' schools. Id. at ¶¶12-17. Though these documents differ to some degree at defendants' different institutions, they all generally describe SEG's clinical requirement to graduate. See Id. They also inform students that as unlicensed student massage therapists, they could not and would not receive compensation during this clinical component of their education. Id.

         For the first few weeks after they enroll at one of SEG's schools, which are all accredited and licensed by the states in which they operate, see id. at ¶¶3-10, students engage exclusively in classroom education and practice, see ECF No. 62-8 at ¶4 (Decl. of Matthew Rodgers).[3] During that time, students learn about the practice of massage therapy. See Id. They also have the opportunity to occasionally practice the massage therapy skills they learn in the classroom on other students and instructors. Id. Once they complete their school's requisite initial amount of classroom education, students can then begin SEG's clinical curriculum. Id. at ¶5. While they complete this clinical curriculum, students continue to receive classroom education. See id.

         SEG's Clinical Training Program.

         Prior to giving their first clinical massages, students must undergo orientation for SEG's clinical program. Id. at ¶7. Though plaintiffs dispute the extent of this orientation, see ECF No. 71-2 at 56:9-14 (Dep. of Sara Alexandra Tan, August 3, 2016), defendants describe it as consisting of a discussion with students about the clinical course's objectives and the expectations of student massage therapists, ECF No. 62-8 at ¶7. As defendants explain, these “expectations include that students will greet a client” receiving a massage, “perform a 50-minute massage, and return the client to the waiting room, all within approximately one hour” in order “to mimic the general timing of a massage at a spa or other professional massage therapy business.” Id. at ¶8. During orientation instructors also explain to students that they are expected to maintain their booths and tables as if they were professional massage therapists. Id. at ¶17. Students therefore must apparently “move desks, tables, etc., and set up privacy curtains” during their scheduled massage clinic. ECF No. 71 at 5.

         In general, students perform roughly 100 massages (lasting approximately 50 minutes each) during SEG's clinical program. ECF No. 62-8 at ¶12. They perform these massages at their respective schools in cordoned off, empty classrooms. See ECF No. 71-16 at 34:3-11 (Dep. of Matthew Rodgers, July 26, 2016). Their clients are paying customers from the public to whom defendants' institutions publicly advertise discounted massages at their respective schools.[4] ECF No. 62-8 at ¶2; ECF No. 71-18 (Advertisements). Because customers pay some amount of money to receive their clinical massages, defendants generate revenue from SEG's clinical curriculum. See ECF No. 62-14 at ¶¶3-6 (Decl. of James Wharton). It is disputed, however, whether these schools actually profit from running these clinics. Compare Id. at ¶8 with ECF No. 71 at 6-7. Regardless of whether students' massages generate profit, the Enrollment Agreement, Student Catalog and Handbook inform students that they will not receive compensation for providing massage services during their clinical training. ECF No. 62-2 at ¶¶12-17. Defendants contend that it would be illegal under the laws in every state in which they operate to pay students as unlicensed massage therapists for performing these massages. ECF No. 62 at 3 (citing C.R.S. § 12-35.5-107; 3 C.C.R. § 722-1:2).

         In any event, because this training is a “clinical” massage program, after each massage the student's client has the opportunity to provide the student with feedback. See ECF No. 62-8 at ¶15. How often feedback is given is disputed. See ECF No. 71-4 at 21:23-35, 22:1-5 (Dep. of Amanda Camacho, July 14, 2016). Nevertheless, if a customer provides a student massage therapist with feedback, the student and his or her instructors discuss those comments and criticisms during classroom instruction later in the week. ECF No. 62-8 at ¶18. Furthermore, although it is once again disputed how much this occurs, students also are apparently required to perform a certain number of massages on their instructors or licensed massage therapists during these clinics in order to receive additional feedback from a source “more knowledgeable than the general public” about massage therapy. ECF No. 62-8 at ¶16.

         Finally, one last disputed issue about defendants' clinics that is relevant in this case is how much SEG supervises its programs. Defendants contend that they comply with all state regulations pertaining to this issue, as they are required to do in order to become accredited, and that students performing massages at all defendants' institutions are “supervised by a clinic manager and teaching assistants, who are there to facilitate the clinic process, provide feedback to the students, and are available to answer any student questions that may arise.” ECF No. 62-8 at 10. This “clinic manager is a licensed and experienced massage therapists, as generally are the teaching assistants.” Id. For their part, plaintiffs counter that these supervisors did not provide direct or individualized supervision during the clinics. See, e.g., ECF No. 71-2 at 40:3-13.

         Procedural History

         Plaintiff Rhonda Nesbitt initiated this suit against SEG and various additional defendants on April 7, 2014. ECF No. 1 (Complaint). She sues individually but also purportedly on behalf of all those similarly situated. Id. She seeks certification of a class or collective action on behalf of all those whom attended SEG's schools in fourteen states within the past three years. See generally Id. Plaintiffs' Complaint included five claims for relief, including a claim under the FLSA, a claim to declare unlawful certain terms of the parties' Arbitration Agreement, and claims for wages under several state statutes. Id. at ¶¶57-81. After failing to compel arbitration, defendants moved for judgment on the pleadings on March 7, 2016. ECF No. 44. The Court, however, denied that motion as moot at a March 10, 2016 status conference during which it granted plaintiffs' oral motion to amend the Complaint. ECF No. 45. Plaintiffs then filed their Amended Complaint on April 28, 2016. ECF No. 46-1.

         On August 19, 2016 defendants filed two more motions: (1) a motion for summary judgment, ECF No. 62; and (2) a motion to dismiss several plaintiffs who had opted-in and to exclude evidence from other opt-in plaintiffs, ECF No. 64. The Court held oral arguments on defendants' motion for summary judgment on November 1, 2016, during which time it granted in part defendants' motion to dismiss several opt-in plaintiffs. ECF No. 89. Defendants' pending motion for summary judgment is the subject of this Order.

         II. STANDARD OF REVIEW

         The Court may grant summary judgment if “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). The moving party has the burden to show that there is an absence of evidence to support the nonmoving party's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). The nonmoving party must “designate specific facts showing that there is a genuine issue for trial.” Id. at 324. A fact is material “if under the substantive law it is essential to the proper disposition of the claim.” Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670 (10th Cir. 1998) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986)). A material fact is genuine if “the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Anderson, 477 U.S. at 248. The Court will examine the factual record and make reasonable inferences therefrom in the light most favorable to the party opposing summary judgment. Concrete Works of Colo., Inc. v. City & Cnty. of Denver, 36 F.3d 1513, 1517 (10th Cir. 1994).

         III. ANALYSIS

         The one dispositive issue before the Court on summary judgment is whether the plaintiffs qualified as “employees” under the FLSA during defendants' clinical programs. This is a question of law to be decided by a “totality of the circumstances” approach that looks at six factors to assess the economic realities of the parties' relationship. See Reich v. Parker Fire Protection Dist., 992 F.2d 1023, 1025-26 (10th Cir. 1993). Using that test here, I find that, although there are various disputes of fact as noted above, the disputed facts are not material to the decision. I conclude as a matter of law that these plaintiffs do not qualify as “employees” under the FLSA. The Court therefore grants defendants' motion for summary judgment as it pertains to the FLSA claim and enters judgment dismissing it. However, because I find that the parties do not adequately brief plaintiffs' state law claims, I decline to grant defendants' motion as to those claims. I address both issues, as well as my sua sponte decision to question subject matter jurisdiction in light of these decisions, in turn.

         A. FLSA: The Tenth Circuit's Six-Factor ‚ÄúTotality of ...


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