Brown v. J&W Grading, Inc.

• Decision Date: 20 June 2019
• Docket Number: CIVIL ACTION NO. 3:18-01263-WGY
• Parties: Michael BROWN, Jr.; Nathan Cole; Aaron Floyd ; Brandon Horton; Eric Moore; Gregory Seal ; Manny Rivera ; Dan Vischansky; Neal Nida; Kevin Shofner; Shaun Stockton; Kyran Adams; Cody Piper ; John Gable ; Donna Turbville; John Wilterding; and Richard Padilla ; Individually, on Behalf of Themselves and All others Similarly Situated; Plaintiffs, v. J&W GRADING, INC. ; Migo IQ, Inc.; Radar_Apps, Inc. ; ECO IQ LLC; Cloud IQ, LLC; Synergy, LLC; Mojo Transport, LLC ; Ronnie Guthrie ; Jonathon Kotthoff; Carol Leese; Jason Neilitz; Ivelisse Estrada Rivero; and Does 1-100; Defendants.
• Court: U.S. District Court — District of Puerto Rico

390 F.Supp.3d 337

Michael BROWN, Jr.; Nathan Cole; Aaron Floyd ; Brandon Horton; Eric Moore; Gregory Seal ; Manny Rivera ; Dan Vischansky; Neal Nida; Kevin Shofner; Shaun Stockton; Kyran Adams; Cody Piper ; John Gable ; Donna Turbville; John Wilterding; and Richard Padilla ; Individually, on Behalf of Themselves and All others Similarly Situated; Plaintiffs,
v.
J&W GRADING, INC. ; Migo IQ, Inc.; Radar_Apps, Inc. ; ECO IQ LLC; Cloud IQ, LLC; Synergy, LLC; Mojo Transport, LLC ; Ronnie Guthrie ; Jonathon Kotthoff; Carol Leese; Jason Neilitz; Ivelisse Estrada Rivero; and Does 1-100; Defendants.

CIVIL ACTION NO. 3:18-01263-WGY

United States District Court, D. Puerto Rico.

June 20, 2019

390 F.Supp.3d 342

L. Michelle Gessner, The Law Offices of Michelle Gessner, PLLC, Charlotte, NC, Enrique J. Mendoza-Mendez, Mendoza Law Office, San Juan, PR, for Plaintiffs.

Sylvia M. Arizmendi-Lopez-de-V, Reichard & Escalera, Carlos R. Sosa-Padro, Carlos R. Sosa Padro Law Office, Alberto Jose Bayouth-Montes, Dimitri Gonzalez-Izquierdo, O'Neill & Borges LLC, Veronica Irizarry-Baez, Vicente & Cuebas, Guillermo De-Guzman-Vendrell, De Guzman Law Offices, Alberto J. Castaner-Padro, III, Castaner Law Offices P.S.C., Carlos R. Rivera-Ortiz, San Juan, PR, Kelsey M. Martin, Kirk M. Sosebee, Pro Hac Vice, W. David Paxton, Gentry Locke Rakes & Moore, LLP, Andrew O. Gay, Pro Hac Vice, Roanoke, VA, Edgardo J. Hernandez-Oharriz, Hernandez-Oharriz & Santiago Law Firm, PSC, Guaynabo, PR, for Defendants.

Cloud IQ, LLC, pro se.

Mojo Transport, LLC, pro se.

Jason Neilitz, pro se.

MEMORANDUM OF DECISION

YOUNG, D.J.¹

390 F.Supp.3d 343

I. INTRODUCTION

In this case, the Plaintiffs² (a putative class of workers from across the United States) depict a scheme among multiple eager but haplessly unprepared start-up businesses and their owners to exploit the disaster of Hurricane Maria in order to promote their smartphone application, in turn exploiting the laborers they hired in the process.

The Plaintiffs allege that the Defendants recruited them to participate in a disaster relief project (the "Project") in the aftermath of Hurricane Maria. Pls.' Second Am. Collective Class Action Compl. ("Compl.") ¶¶ 55, 61, ECF No. 96. Most of the Plaintiffs travelled to Puerto Rico from the continental United States for the Project. Id. ¶¶ 10-26, 222. Many of them leased their personal equipment to the Defendants for use in the Project. Id. ¶¶ 67-74. The Plaintiffs allege that they worked on the Project for about three months in Puerto Rico but received payment for only two weeks of work. Id. ¶¶ 84-90. They further allege that many obtained neither the return of their equipment nor the lease payments they were owed under the Equipment Rental Agreement. Id. ¶ 97. They allege that many of them remain "stranded in Puerto Rico," unable to afford to travel home. Id. ¶ 96.

The Plaintiffs bring the present action seeking to recover unpaid wages, overtime compensation, damages, and attorneys' fees if they prevail on a series of claims including violations of the wage, hour, and anti-retaliation provisions of the Fair Labor Standards Act ("FLSA") and Puerto Rico employment laws, breach of contract, unjust enrichment, fraudulent inducement, conversion, and negligent bailment. Compl. ¶¶ 151-245. This memorandum explains the Court's January 8, 2019 order allowing in part and denying in part the Defendants' myriad motions to dismiss, ECF No. 160.

II. FACTS ALLEGED³

In the aftermath of Hurricane Maria, Synergy, LLC ("Synergy"), a technology company, obtained a contract from the Federal Emergency Management Agency ("FEMA") for a project to assist with the enormous task of clean-up (the "Project"). Compl. ¶ 55. In what began looking more like a Silicon Valley collaboration than a team of emergency relief experts, Synergy partnered with start-up technology firms ECO IQ, LLC ("ECO IQ"), Cloud IQ, LLC ("Cloud IQ"), Migo IQ, Inc. ("Migo IQ"), Radar_Apps, Inc. ("Radar_Apps"), and Mojo Transport, LLC ("Mojo") (collectively, including Synergy, the "Technology Defendants") to develop and deploy a smart phone application (the "App") that they planned to use to perform the multi-million-dollar contract. Id. ¶¶ 55-57.

Cloud IQ soon sub-contracted with J&W Grading, Inc. ("J&W"), a Virginia-based contractor owned by Ronnie Guthrie ("Guthrie"), to carry out the clean-up work on the ground. Id. ¶¶ 59-60. J&W was not

390 F.Supp.3d 344

able independently to supply the staff or equipment that the Technology Defendants lacked, so J&W recruited the Plaintiffs ("men and women from around the United States") to work on the Project. Id. ¶¶ 60-61. J&W also arranged to rent the Plaintiffs' equipment. Id. ¶ 67. To this end, J&W entered into Equipment Rental Agreements with many of the individual Plaintiffs, which specified that J&W would ship the equipment to Puerto Rico and make monthly rental payments to the Plaintiffs. Id. ¶¶ 67, 70-72.⁴

Each Equipment Rental Agreement specifies that "[t]he rent will be paid in installments of $ 3,000.00 each month, in advance, beginning on December 1, 2017 and will be paid on the 1st day of each succeeding month throughout the Term ...." Compl., Ex. B, Equipment Rental Agreement ("Equipment Rental Agreement") ¶ 4, ECF No. 96-2. Among other things, the Equipment Rental Agreements specify that the Equipment "will remain the property of the Lessor," "[t]he Lessee will not encumber the Equipment or allow [it] to be encumbered," and "the Lessor will not disturb the Lessee's quiet and peaceful possession of the Equipment or the Lessee's unrestricted use of the Equipment for the purpose for which [it] was designed" as long as there has been no default. Id. ¶¶ 13-16.

J&W entered into subcontractor agreements with the Plaintiffs when J&W recruited them to join the clean-up effort in Puerto Rico. Compl. ¶¶ 61-66, Ex. A, Master Subcontractor Agreement ("Subcontractor Agreement"), ECF No. 96-1. The Subcontractor Agreement lists J&W as the "Contractor," and refers to an unnamed "prime contractor" and "project owner." Compl. ¶ 62; Subcontractor Agreement 2-3, 11. The Plaintiffs allege that J&W entered into this Subcontractor Agreement with them "on behalf of the Technology Firm Defendants." Compl. ¶ 62.

The Subcontractor Agreement describes the scope of work for which the Plaintiffs were to be employed and the rates they were to be paid. Subcontractor Agreement 12-13. The Subcontractor Agreement promises "[g]uaranteed payment to Subcontractor for first invoices in 21 days. Payments within 14 days thereafter. Payment via check or wired funds, whichever requested." Id. at 2.

In January 2018, J&W officially hired the Plaintiffs in Puerto Rico. Compl. ¶ 76. The Plaintiffs signed multiple documents in a "New Hire Package," including an I-9 Employment Eligibility Verification form, a W-4 tax form, and an "Employee Use of Company Vehicles Agreement." Compl. ¶¶ 77-78 & Ex. D, J&W Grading New Hire Package ("New Hire Package") 2, ECF No. 96-4.⁵

Reality quickly set in. The Plaintiffs (including the majority who had flown to Puerto Rico for no reason other than to work on the Project) went three weeks with no work. Compl. ¶ 83. During this time, they did not receive per diem payments in cash, but they did receive room and board on the island. Id. The Project was delayed for multiple reasons, including that the Technology Defendants needed time to put their branding on the equipment that they had rented from the Plaintiffs

390 F.Supp.3d 345

and to set up GPS and load tracking devices on the Plaintiffs' vehicles. Id. ¶¶ 81-82. The Plaintiffs speculate that these delays were because the Technology Defendants sought to employ the Project to market and test the App they were in the process of developing. Id. ¶¶ 81-83.

At a meeting with all of the Plaintiffs on January 28, 2018, Jonathon Kotthoff ("Kotthoff"),⁶ who the Plaintiffs allege has an ownership stake in all of the Technology Defendants, described Migo IQ as the "prime" on the Project. Id. ¶ 137. At this meeting, Migo IQ issued each Plaintiff an iPhone pre-loaded with the App. Id. The Plaintiffs were instructed to "clock in and out on the App," and were informed that the Technology Defendants would "monitor[ ] and control[ ]" all of their work remotely through the App from a room in the "main office" called the "bird house." Id.

The Plaintiffs further allege that at that meeting, "Migo IQ and ECO IQ principals announced that they were all working under ‘one flag’ and ‘one leadership structure’ and were ‘one team.’ " Id. ¶ 138.

Between February and April 2018, the Plaintiffs performed the work for which they were hired: manual clean-up such as cutting down trees and hauling debris across the island. Id. ¶ 84. The Plaintiffs "often" worked over eight hours per day and over forty hours per week most weeks. Id. ¶ 85. They allege that they did not receive a meal period after the third and before the fifth consecutive hour of work. Id. ¶ 86.

The Plaintiffs received their first paychecks after "approximately six weeks" in Puerto Rico, which included wages for one pay period (two weeks of work). Id. ¶ 87. The Plaintiffs...