United States District Court, D. Colorado
JAIME FUENTES, in his individual capacities and on behalf of others similarly situated, Plaintiff,
COMPADRES, INC., d/b/a Tequila's Golden TEQUILAS THORNTON NUMBER 6, LLC, d/b/a Tequila's Thornton TEQUILAS OF THORNTON, LLC, f/d/b/a Tequila's Thornton EL AGAVE AZUL, INC., d/b/a El Tequileño Arvada, EL NOPAL, INC., d/b/a El Tequileño Lakewood, EL TEQUILENO #1, d/b/a El Tequileño Aurora OSE RAIGOZA DEJESUS GARCIA, and RODRIGO SANCHEZ, Defendants.
ORDER ADOPTING IN PART AND REJECTING IN PART THE
RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE MICHAEL E.
CHRISTINE M. ARGUELLO, UNITED STATES DISTRICT JUDGE.
matter is before the Court on the Recommendation of United
States Magistrate Michael E. Hegarty (Doc. # 114), wherein he
recommends that this Court grant in part and deny in part
Defendants' Motions to Dismiss (Doc. ## 80, 81)
Plaintiff Jaime Fuentes's Second Amended Complaint (Doc.
# 63). All parties timely filed objections to the
Recommendation, essentially challenging it in its
entirety. (Doc. ## 119, 120, 121.) The Court must
therefore review the issues de novo and, in so doing,
“may accept, reject, or modify the recommended
disposition[.]” Fed.R.Civ.P. 72(b)(3). Having conducted
the required de novo review, the Court adopts in part and
rejects in part the Recommendation for the following reasons.
Judge Hegarty's Recommendation provides an extensive
recitation of the factual and procedural background in this
case. The Recommendation is incorporated herein by reference.
See 28 U.S.C. § 636(b)(1)(B); Fed.R.Civ.P. 72(b). Thus,
the factual background of this dispute will be repeated only
to the extent necessary to address the parties'
Defendants are comprised of restaurants in Colorado as well
as the alleged owners or managers of the restaurants and one
real estate holding company associated with the restaurants.
Plaintiff worked as a waiter and bartender at two of the
restaurants-Compadres, Inc. (Golden) and Tequilas Thornton
Number 6, LLC (Thornton)-from October 24, 2016 to February
22, 2017. Plaintiff alleges that, during his employment,
Defendants improperly failed to pay him overtime, retained
tips for management, failed to provide adequate notice
related to the tip credit, and over-reported his tips on his
accordingly commenced this lawsuit on behalf of himself and
others similarly situated, bringing claims against Defendants
under the Fair Labor Standards Act (FLSA) and the Colorado
Wage Claim Act (CWCA). On September 29, 2017, each set of
Defendants filed a Motion to Dismiss Mr. Fuentes's claims
under Federal Rules of Civil Procedure 12(b)(1) and (6).
(Doc. ## 80, 81.) Combined, Defendants request that
Plaintiff's Complaint be dismissed entirely. Plaintiff
disputes that his Complaint warrants dismissal under Rule
12(b)(1) or (6), but requests leave to amend should the Court
find it insufficient. (Doc. # 89.)
FEDERAL RULE OF CIVIL PROCEDURE 12(b)(1)
pursuant to Federal Rule of Civil Procedure 12(b)(1) is
appropriate if the Court lacks subject matter jurisdiction
over claims for relief asserted in the complaint. “The
burden of establishing subject matter jurisdiction is on the
party asserting jurisdiction.” Port City Props. v.
Union Pac. R.R. Co.24, 518 F.3d 1186, 1189 (10th Cir.
2008). Rule 12(b)(1) challenges are generally presented in
one of two forms: “[t]he moving party may (1) facially
attack the complaint's allegations as to the existence of
subject matter jurisdiction, or (2) go beyond allegations
contained in the complaint by presenting evidence to
challenge the factual basis upon which subject matter
jurisdiction rests.” Merrill Lynch Bus. Fin.
Servs., Inc. v. Nudell, 363 F.3d 1072, 1074 (10th Cir.
2004) (quoting Maestas v. Lujan, 351 F.3d 1001, 1013
(10th Cir. 2003)); see Ruiz v. McDonnell, 299 F.3d
1173, 1180 (10th Cir. 2002). The instant motions launch a
factual attack on this Court's subject matter
FEDERAL RULE OF CIVIL PROCEDURE 12(b)(6)
12(b)(6) provides that a court may dismiss a complaint for
“ failure to state a claim upon which relief can be
granted.” Fed.R.Civ.P. 12(b)(6). To survive a motion to
dismiss, the complaint must contain sufficient factual
matter, taken as true and viewed in the light most favorable
to the plaintiff, to “state a claim to relief that is
plausible on its face.” Ashcroft v. Iqbal, 556
U.S. 662, 663 (2009) (citing Bell Atlantic Corp. v.
Twombly, 550 U.S. 544, 570 (2007)). Plausibility in this
context means that the plaintiff pled sufficient facts to
elevate the claims above the level of mere speculation and
allow “the court to draw the reasonable inference that
the defendant is liable for the misconduct alleged.”
Id; Robbins v. Oklahoma, 519 F.3d 1242,
1247 (10th Cir. 2008).
pertinent here, Defendants argue that the Plaintiff's
FLSA Claims should be dismissed because (1) with respect to
Tequilas of Thornton, LLC and the Tequileño
Defendants, Plaintiff does not adequately demonstrate that he
had an employment relationship with them; and (2) with
respect to all Defendants, Plaintiff fails to plausibly
allege that they are an “enterprise engaged in
commerce.” Defendants also request dismissal of
Plaintiff's FLSA claims to the extent they are based on
non-actionable recordkeeping failures. The Court considers
each argument in turn.
Jurisdictional or Merits Element
turning to the allegations in Plaintiff's Complaint, the
Court first considers whether the existence of an
employer-employee relationship is a jurisdictional element of
an FLSA claim, properly assessed under 12(b)(1), as
Defendants contend, or a merits element of the claim,
better-suited for review under Rule 12(b)(6), as Plaintiff
contends and Magistrate Judge Hegarty agreed.
Arbaugh v. Y&H Corp., 546 U.S. 500, 516 (2006),
the United States Supreme Court prescribed a “readily
administrable bright line” to distinguish between
merits and jurisdictional challenges. . That is, if Congress
“clearly states that a threshold limitation on a
statute's scope shall count as jurisdictional, ”
that is the end of the matter. Id. at 515-16, 126.
But, if Congress “does not rank a statutory limitation
on coverage as jurisdictional, ” a court must not treat
it as such. Id. at 516. In making this
determination, courts examine a provision's “text,
context, and relevant historical treatment, ” Reed
Elsevier, Inc. v. Muchnick, 559 U.S. 154, 166 (2010),
and ask whether “traditional tools of statutory
construction ... plainly show that Congress imbued a
procedural bar with jurisdictional consequences[, ]”
United States v. Kwai Fun Wong, 575 U.S. --- (2015).
these principles, the Court concludes that the existence of
an employee-employer relationship is non-jurisdictional and,
thus, properly assessed under Rule 12(b)(6), not Rule
12(b)(1). In so concluding, the Court recognizes that some
courts, including one in this district, have treated the
existence of an employee-employer relationship as a
jurisdictional element. See Murphy v. Allstaff Med. Res.,
Inc., No. 16-cv-02370-WJM, 2017 WL 2224530, at *3 (D.
Colo. May 22, 2017); Doe I v. Four Bros. Pizza, No.
13 CV 1505 VB, 2013 WL 6083414, at *4-5 (S.D.N.Y. Nov. 19,
2013); Li v. Renewable Energy Solutions, Inc., 2012
WL 589567, at *5 (D.N.J. Feb. 22, 2012). This Court, however,
respectfully disagrees with these authorities for several
and foremost, unlike the provision at issue in
Arbaugh, Congress has not “clearly
stated” that the employee-employer relationship is a
“threshold limitation” on the FLSA's scope
that “shall count as jurisdictional.” 546 U.S. at
516. Several provisions of the FLSA speak to the
employee-employer relationship, including § 216(b),
which is often referred to as the jurisdiction-conferring
provision and provides as follows:
An action to recover the liability prescribed . . . may be
maintained against any employer (including a public agency)
in any Federal or State court of competent jurisdiction by
any one or more employees for and in behalf of himself or
themselves and other employees similarly situated.
provision of course mentions the Court's jurisdiction
but, unlike the examples cited in Arbaugh, it does
not contain an express and straightforward
jurisdiction-limiting clause, such as “the district
courts shall have original jurisdiction over . . . ” or
“the district courts are hereby vested with
jurisdiction over . . . .” See Id. at 516, n.
11 (highlighting examples of statutes conferring
§ 216's single reference to jurisdiction states that
certain actions may be maintained “in any Federal or
State court of competent jurisdiction.” To say that an
action may be maintained in a “court of competent
jurisdiction”-that is, in a court that has
jurisdiction-presupposes that the court to which it refers
derives “competent jurisdiction” from some other
source. In this case, that other source is 28 U.S.C. §
1331, which assigns the federal district court original
jurisdiction over all civil actions “arising under the
. . . laws . . . of the United States.” See Breuer v.
Jim's Concrete of Brevard, Inc., 538 U.S. 691, 694
(2003) (although the FLSA provides that an action “may
be maintained . . . in any Federal or State court of
competent jurisdiction, ” 29 U.S.C. § 216(b),
“the district courts would in any event have original
jurisdiction over FLSA claims under 28 U.S.C. § 1331 . .
. and § 1337(a).”). Plaintiff's action arises
under the FLSA, plainly a law of the United States. And
nothing in § 1331 conditions its jurisdictional grant on
compliance with the FLSA's employee/employer relationship
requirement. In essence, § 216 is not primarily
concerned with granting or defining jurisdiction; it appears
intended to create a collective right of action for injured
employees. Whether plaintiffs have stated a cause of action
under § 216(b) is therefore a question that goes to the
merits of the case rather than to the Court's
subject-matter jurisdiction. Cf. Steel Co. v. Citizens
for a Better Env't, 523 U.S. 83, 91-92 (1998) (the
failure of a cause of action does not produce a failure of
employee/employer coverage under the FLSA (as
opposed to the existence of an employee/employer
relationship) has historically been treated,
including in this Circuit, as non-jurisdictional. In other
words, questions of who is an “employer” and who
is an “employee” under the FLSA are substantive
ingredients of a meritorious FLSA claim rather than elements
of subject-matter jurisdiction. See, e.g.,
Murphy, 2017 WL 2224530, at *4 (FLSA coverage is not
a jurisdictional inquiry); Fuqua v. Celebrity Enters.,
Inc., No. 12-cv-00208-WJM, 2012 WL 4088857, at *2 (D.
Colo. Sept. 17, 2012) (same). This Court sees no reason why
the existence of an employee/employer relationship
under the FLSA would implicate the court's subject-matter
jurisdiction when questions of employee/employer
coverage under the FLSA do not. Indeed, when
analyzing coverage, courts generally turn to the FLSA's
definition section, coupled with the “economic
reality” test; likewise, a determination of whether
there is an employee/employer relationship under the FLSA
invokes the same statutory provisions and test. See e.g.,
Johnson v. Unified Gov't of Wyandotte Cnty., 371
F.3d 723, 729 (10th Cir. 2004) (using the economic reality
test to examine whether plaintiff is an employee under the
FLSA); see also Doe I, 2013 WL 6083414, at *5
(determining whether an employee-employer relationship
existed by examining the “economic realities' of
such relationships); Li, 2012 WL 589567, at *4B5
these reasons, as well as those articulated by Magistrate
Judge Hegarty, the Court concludes that the existence of an
employee/employer relationship under the FLSA is an element
of the plaintiff's meritorious FLSA claim and does not
implicate this Court's threshold subject matter
jurisdiction. The Court therefore declines the
Defendants' request to analyze the issue under Rule
12(b)(1) but instead turns to evaluate the plausibility of
Plaintiff's Complaint pursuant to Rule
Plausibility under Rule 12(b)(6)
following reasons, the Court concludes that Plaintiff has
sufficiently pleaded an employment relationship with the
Tequila Defendants and Defendant Sanchez, but he has not
sufficiently pleaded an employment relationship with the
Tequileño Corporate Defendants.
the FLSA, an “employer” is defined as “any
person acting directly or indirectly in the interest of an
employer in relation to an employee. . . .' 29 U.S.C.
§ 203(d). An “employee' is defined as
“any individual employed by an employer.” 29
U.S.C. § 203(e)(1). The FLSA “defines the verb
'employ' expansively to mean, 'suffer or permit
to work.'” Nationwide Mut. Ins. Co. v.
Darden, 503 U.S. 318, 326 (1992) (quoting 29 U.S.C.
§ 203(g)). Consistent with these broad definitions,
“[t]he Supreme Court has instructed courts to construe
the terms ‘employer' and ‘employee'
expansively under the FLSA.” See Nationwide Mut.
Ins. Co. v. Darden, 503 U.S. 318, 326 (1992);
Rutherford Food Corp. v. McComb, 331 U.S. 722, 730
persons or entities that share control over an individual
worker may be deemed joint employers under the
FLSA. According to the Department of Labor
if the facts establish that the employee is employed jointly
by two or more employers, i.e., that employment by one
employer is not completely disassociated from employment by
the other employer(s), all of the employee's work for all
of the joint employers during the workweek is considered as
one employment for purposes of the [FLSA].
29 C.F.R. § 791.2(a) (emphasis added); see also Falk
v. Brennan, 414 U.S. 190, 195 (1973) (observing in a
FLSA case that apartment building maintenance workers were
employed by both building management company and building
owners). “[A]ll joint employers are responsible, both
individually and jointly, for compliance with all of the
applicable provisions of the [FLSA], including the overtime
provisions.” 29 C.F.R. § 791.2(a). The regulation
states that a joint employment relationship generally will be
considered to exist in situations such as:
(1) Where there is an arrangement between the employers to
share the employee's services, as, for example, to