United States District Court, D. Colorado
ISABEL VALVERDE; MARIA SONIA MICOL SIMON; and those similarly situated, Plaintiffs,
XCLUSIVE STAFFING, INC., XCLUSIVE MANAGEMENT, LLC, dba Xclusive Staffing, XCLUSIVE STAFFING OF COLORADO, LLC, DIANE ASTLEY, OMNI INTERLOCKEN COMPANY, L.L.C., OMNI HOTELS MANAGEMENT CORPORATION, JMIR DTC OPERATOR L.L.C., MARRIOTT INTERNATIONAL, INC., and HCA-HEALTHONE LLC D.B.A. SKY RIDGE MEDICAL CENTER, Defendants.
RAYMOND P. MOORE, UNITED STATES DISTRICT JUDGE
Isabel Valverde and Maria Sonia Nicol Simon
(“Plaintiffs”) have filed this class and
collective action complaint alleging they have not been
properly and fully paid for work they performed. All
Defendants, except Defendant HCA-HealthONE LLC d.b.a. Sky
Ridge Medical Center,  filed a Motion to Dismiss Plaintiffs'
Amended Complaint (ECF No. 65). This matter is now before the
Court on the Report and Recommendation
(“Recommendation”) (ECF No. 163) of Magistrate
Judge Michael J. Watanabe to grant in part and deny in part
the Motion to Dismiss. Plaintiffs filed an Objection (ECF No.
167) to some of the Recommendation. Defendants filed a
Response (ECF No. 171) to Plaintiffs' Objection but no
objection of their own. For the reasons stated below,
Plaintiffs' Objection is overruled in part and sustained
in part. Accordingly, the Recommendation is accepted in part
and declined in part, and the Motion to Dismiss is granted in
part and denied in part.
Allegations in Amended Complaint
party objected to the general background statement in the
Recommendation, it is accepted. Nonetheless, a summary of
such allegations and additional allegations are provided in
order to provide clarity to the matters raised in the
the named plaintiffs, Mr. Valverde and Ms. Simon, are former
employees of Defendant Xclusive Staffing, Inc.
(“Xclusive”), a staffing agency owned by
Defendant Diane Astley. (Amended Complaint (“AC”)
¶¶20, 36, 37, 41, 43.) Xclusive operates in at
least 10 other states using subsidiaries in each state, with
Defendant Xclusive Management, LLC (“Xclusive
Management”) as managers of such subsidiaries. (AC
¶¶22-24.) Defendant Xclusive Staffing of Colorado,
LLC (“Xclusive Staffing”) is Xclusive's
subsidiary (Xclusive, Exclusive Management, and Xclusive
Staffing, collectively, “Exclusive Entities”).
(AC ¶25.) All of these Xclusive Entities are 100% owned
and operated by Defendant Astley. (AC ¶26.)
Xclusive Entities provide low-wage workers for their clients,
mostly hotels like Defendants Omni Interlocken Company, LLC,
Omni Hotels Management Corporation, JMIR DTC Operator LLC,
and Marriott International, LLC (hereafter, collectively,
“Hotel Defendants”). (AC ¶28.) Such clients
also rely on and help control the work of workers provided by
Xclusive. (AC ¶34.) Client supervisors take part in
training, controlling, and inspecting the work of
Xclusive's employees. (AC ¶34.) The Plaintiffs in
this case, Mr. Valverde and Ms. Simon, worked only for
Xclusive's clients in Colorado. (AC ¶¶36-45.)
allege that Xclusive advertises that it complies with
federal, state, and local laws, including overtime laws, but,
in reality, maintains policies that violate state and federal
wage and hour laws. (AC ¶¶46-49.) These policies or
practices consist of (1) weekly deductions of $3.00 from
workers' paychecks as an administrative charge and
deductions of other expenses (including clothing, name tags,
criminal background checks, and tools/equipment) from wages
which are primarily for the benefit of the employer (AC
¶¶50, 52, 58, 59) (collectively, the “$3.00
deduction policy”); (2) automatic deductions of a
30-minute break from workers' work time each day
irrespective of whether they actually took a break (AC
¶¶60-74) resulting in paystubs which do not reflect
all time worked, i.e., workers were not paid for all time
worked (the “30-minute deduction policy”); and
(3) the failure to afford workers compensated 10 minute rest
breaks each four hours as required under the Colorado Wage
Order, resulting in workers not being paid for 10 minutes of
time (AC ¶¶75-82).
to Plaintiffs, Defendant Astley formed an association-in-fact
with Xclusive and all of its associated entities and
subsidies or, in the alternative, Xclusive and all of its
associated entities and subsidiaries formed an
association-in-fact, which Plaintiffs called the
“Astley Enterprise.” (AC ¶¶85-91.) The
Ashley Enterprise allegedly engaged in the following four
interrelated wire fraud schemes: (1) “the USDOL
scheme” which implicated the automatic 30-minute
lunch break deductions and resulting underpayment of workers
(AC ¶¶94-109); (2) “the website scheme”
(AC ¶¶ 110-114); (3) “the electronic
timekeeping scheme” in underreporting employee work
hours, in particular the untaken 30-minute breaks (AC
¶¶115-123); and (4) “the faxed timesheet
scheme” which underreported employee work hours and, in
particular, the untaken 30-minute breaks (AC
Rule 23 class allegations state there are common questions of
law and fact among the preliminarily defined classes,
including: “Defendants' pay practices; the
Defendants' failure to pay employees all they are legally
owed; the nature and extent of Defendant Astley's fraud;
[and] the nature and extent of the antitrust
agreements.” (AC ¶142.) As for Plaintiffs'
collective action allegations under the Fair Labor Standards
Act (“FLSA”), they assert that members suffered
from “the same policies of Defendants, including”
the $3.00 deduction policy and the 30-minute deduction
policy. (AC ¶¶153-159.)
on such allegations, the following claims have been asserted
by Plaintiffs individually and on behalf of various
preliminarily defined subclasses:
Count I: Civil RICO
Count II: FLSA
Count III: Failure to Pay Statutory Required Wages, including
Overtime, Under the Laws of the Several States
Count IV: Failure to Provide 10 Minute Breaks under Colorado
Count V: Illegal Deduction under Colorado Law
Count VI: Equity under the Laws of the Several States
(See Amended Complaint.)
The Stay and the Recommendation
Defendants filed the Motion to Dismiss, they filed a motion to
stay all discovery. The Magistrate Judge granted the stay
pending resolution of, among other things, the Motion to
Dismiss. (ECF No. 124.) That discovery stay remains in place
Magistrate Judge has now recommended the Defendants'
Motion to Dismiss be denied in part and granted in part.
Specifically, the Magistrate Judge recommended the following
dismissals: (1) Count I: preemption - dismissal with
prejudice of the RICO claim as it is preempted by the FLSA;
(2) Count II, III, and IV: failure to state a claim -
dismissal of Plaintiff Simon only, with prejudice; (3) Count
III, IV, and V: standing - dismissal without prejudice of
these claims to the extent they are based on conduct
occurring outside the state of Colorado; (4) Count V: failure
to state a claim - dismissal of Hotel Defendants, with
prejudice; and (5) Count VI: preemption and failure to state
a claim - dismissal with prejudice. The Recommendation
otherwise denied Defendants' Motion to Dismiss. It is, of
course, the recommendation of dismissals to which
Review of a Magistrate Judge's Report and
magistrate judge issues a recommendation on a dispositive
matter, Federal Rule of Civil Procedure 72(b)(3) requires the
district court judge to “determine de novo any part of
the magistrate judge's [recommendation] that has been
properly objected to.” In conducting its review,
“[t]he district judge may accept, reject, or modify the
recommended disposition; receive further evidence; or return
the matter to the magistrate judge with instructions.”
Fed.R.Civ.P. 72(b)(3). An objection is proper if it is filed
within fourteen days of the magistrate judge's
recommendations and specific enough to enable the
“district judge to focus attention on those
issues-factual and legal-that are at the heart of the
parties' dispute.” United States v. 2121 East
30th Street, 73 F.3d 1057, 1059 (10th Cir. 1996)
(quoting Thomas v. Arn, 474 U.S. 140, 147 (1985)).
The district judge need not, however, consider arguments not
raised before the magistrate judge. United States v.
Garfinkle, 261 F.3d 1030, 1031 (10th Cir. 2001)
(“In this circuit, theories raised for the first time
in objections to the magistrate judge's report are deemed
absence of a timely and specific objection, “the
district court may review a magistrate's report under any
standard it deems appropriate.” Summers v.
Utah, 927 F.2d 1165, 1167 (10th Cir. 1991); see
also Fed. R. Civ. P. 72 Advisory Committee's Note
(“When no timely objection is filed, the court need
only satisfy itself that there is no clear error on the face
of the record in order to accept the recommendation.”).
Motions to Dismiss 1. Fed.R.Civ.P.
to dismiss under Rule 12(b)(1) are, generally, either a
facial attack on the complaint's allegations as to the
existence of subject matter jurisdiction or a factual attack
which goes beyond the allegations and challenges the facts on
which subject matter jurisdiction is based. Stuart v.
Colo. Interstate Gas Co., 271 F.3d 1221, 1225 (10th Cir.
2001). A facial attack challenging the sufficiency of the
complaint requires the court to accept the allegations of the
complaint as true. Stuart, 271 F.3d at 1225;
Holt v. United States, 46 F.3d 1000, 1002 (10th
Cir.1995) (internal citation omitted).
evaluating a motion to dismiss under Rule 12(b)(6), a court
must accept as true all well-pleaded factual allegations in
the complaint, view those allegations in the light most
favorable to the plaintiff, and draw all reasonable
inferences in the plaintiff's favor. Brokers'
Choice of America, Inc. v. NBC Universal, Inc., 757 F.3d
1125, 1135-36 (10th Cir. 2014); Mink v. Knox, 613
F.3d 995, 1000 (10th Cir. 2010). Conclusory allegations are
insufficient. Cory v. Allstate Ins., 583 F.3d 1240,
1244 (10th Cir. 2009). Instead, in the complaint, the
plaintiff must allege a “plausible” entitlement
to relief. Bell Atlantic Corp. v. Twombly, 550 U.S.
544, 555-556 (2007). A complaint warrants dismissal if it
fails “in toto to render plaintiffs'
entitlement to relief plausible.” Twombly, 550
U.S. at 569 n.14 (italics in original). “In determining
the plausibility of a claim, we look to the elements of the
particular cause of action, keeping in mind that the Rule
12(b)(6) standard does not require a plaintiff to set forth a
prima facie case for each element.” Safe Street
Alliance v. Hickenlooper, 859 F.3d 865, 878 (10th Cir.
2017) (citation, internal quotation marks, and alteration
omitted). The “‘burden[, however, ] is on the
moving party to prove that no legally cognizable claim for
relief exists.'” Hall v. Oliver, Civil
Action No. 15-cv-01949-RBJ-MJW, 2017 WL 1437290, at *4 n.1
(citing 5B Charles Alan Wright & Arthur R. Miller,
Federal Practice & Procedure § 1357 (3d ed.)).
This Court's Civil Practice Standards
relevant to the parties' arguments, and in keeping with
the standards under Rule 12(b)(6), pursuant to Section
IV.M.2.c of Judge Raymond P. Moore's Civil Practice
Standards (“Standards”), with respect to motions
brought pursuant to Rule 12(b)(6): “For each claim for
relief that the movant seeks to have dismissed, the movant
shall clearly enumerate each element that movant contends
must be alleged, but was not.” In response, the
respondent must identify those elements which he/she disputes
and identify where in the complaint he/she contends contains
proper and sufficient factual allegations are contained.
Standards at Section IV.M.2.c.
Matters to which ...