Alvarez v. Seahorse Inc.
| Decision Date | 08 September 2017 |
| Docket Number | Case No.: 16-cv-00014 |
| Parties | MANUEL ALVAREZ, Plaintiff/Counterclaim-Defendant, v. SEAHORSE INC. AND SHAO WALKER, Defendants/Counterclaim-Plaintiffs. |
| Court | U.S. District Court — Northern Mariana Islands |
Before the Court is counterclaim-defendant Manuel Alvarez's motion to dismiss the counterclaims. (ECF No. 8.) For the reasons set forth below, the motion is granted in part and denied in part.
Plaintiff/counterclaim-defendant Manuel Alvarez ("Alvarez") filed this FLSA suit against defendants/counterclaim-plaintiffs Seahorse, Inc. ("Seahorse") and Shao Walker ("Walker") pursuant to 28 U.S.C. § 1331 (federal question jurisdiction), also bringing several claims under the laws of the Commonwealth of the Northern Mariana Islands pursuant to 28 U.S.C. § 1367 (supplemental jurisdiction).
Alvarez is a resident of Saipan, and alleges he was an employee of Seahorse from 2005 to 2016. (Compl. ¶ 9, ECF No. 1.) Defendants admit that Alvarez was a shareholder at the time that Seahorse was incorporated, and that he was also a corporate officer (Vice-President) of Seahorse from February 2005 to January 2016, but deny that he was an employee. (Answer ¶¶ 9, 14, ECF No. 5.)
Seahorse is a business engaged in tourism and marine sports in Saipan. (Compl. ¶¶ 6-7.) Walker cofounded Seahorse with plaintiff, and is the current owner of the corporation. (See Compl. ¶¶ 5, 7; Answer ¶¶ 7, 14.)
Plaintiff filed a complaint on June 1, 2016, alleging that defendants violated the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., the CNMI Wage and Hour Act, and are liable for breach of contract, and conversion. (Compl., ECF No. 1.)
Defendants were served with summons on June 2, 2016. (Summons, ECF Nos. 2, 3.)
On June 24, 2016, plaintiff filed a motion for entry of default for failure to file an answer or respond to the complaint. (Pl's. Mot. for Default J., ECF No. 4.) That same day, defendants filed an answer with affirmative defenses and seven counterclaims. (Answer and Countercls., ECF No. 5.) On September 8, 2016, defendants filed a brief in opposition to the motion for entry of default, and a cross-motion to dismiss the complaint. (Defs'. Cross-Mot. to Dismiss, ECF No. 14.)
On August 11, 2016, plaintiff filed a motion to dismiss the counterclaims. (Pl's. Mot. to Dismiss Countercls., ECF No. 8.) On August 25, 2016, defendants filed a motion for an extension of time to file their brief in opposition to the motion to dismiss the counterclaims, requesting one additional hour of time on that same day to file. (Defs'. Mot. for Extension of Time, ECF No. 11.) The brief in opposition was filed approximately two hours later on August 26, 2016. (Defs'. Br. in Opp'n, ECF No. 12.) Plaintiff filed a reply brief on September 1, 2016. (Pl's. Reply Br., ECF No. 13.)
On September 8, 2016, the Court heard oral argument on the motion for entry of default, motion for an extension of time, and motion to dismiss the counterclaims. (Mins., ECF No. 15.) At the hearing, plaintiff's counsel moved to withdraw the motion for entry of default, and the Court granted the motion. (See id. at 1.) The Court also granted the motion for an extension of time to file the brief in opposition, and accepted the brief for consideration on the merits. (Id.) Counsel for defendants agreed not to pursue the cross-motion to dismiss the complaint.1 The Court thereafter took the motion to dismiss the counterclaims under advisement. (Id. at 1-2.)
The following background is drawn from the complaint, taking the well-pleaded allegations as true, as required at the motion to dismiss stage.
In 2005, plaintiff and defendant Walker cofounded Seahorse. At this time, they agreed that plaintiff would receive fifty percent of the shares of the corporation after ten years, and in the interim, plaintiff would be an employee of Seahorse, working at least twelve hours per day, six days per week, and six hours on Sundays. (Compl. ¶¶ 5, 8, 9, 14.)
Between 2005 and 2014, as an employee, the parties agreed that plaintiff would receive thirty-five dollars per day, with twenty-five dollars paid out and ten dollars withheld for "exigencies such as medical travel or other unexpected expenses." (Compl. ¶ 15.) Despite this agreement, plaintiff did not receive the twenty-five dollars each week. (Id. ¶ 16.) In the final year of his employment, 2015, plaintiff received four hundred dollars per week, and occasionally received an additional two hundred dollars for work performed for Saipan Aqua World and Kuraling Dive, two entities affiliated with defendant Walker. (Id. ¶¶ 17, 18.)
During this period, plaintiff also performed work for Regel Corporation, the Iron Horse Machine Shop, and the Low Tide Beach Bar & Grill, all of which are alter-egos of Walker. (Compl. ¶ 33.) In exchange for his work, plaintiff was to become an equal partner in these businesses. However, he was not compensated or made partner, and these businesses, which are not named parties in this action, "converted numerous items of property belonging to [plaintiff]." (Id. ¶¶ 33-38.)
In February 2015, plaintiff demanded that Walker transfer the agreed-on fifty percent of shares in Seahorse to him, and she refused. Additionally, in late 2015, plaintiff fell ill and requested some of the withheld funds for his medical use, but defendants refused. Plaintiff traveled to the Philippines to obtain medical treatment, and upon his return, discovered that defendant Walker had "changed the locks on [his] living quarters and personal office." (Compl. ¶¶ 23-31.)
After these events transpired, plaintiff filed a complaint against defendants, alleging six causes of action: (1) Payment below minimum wage in violation of the FLSA; (2) Unpaid overtime in violation of the FLSA; (3) Retaliation in violation of the FLSA; (4) Violation of CNMI Wage and Hour Act; (5) Breaches of contract; and (6) Conversion. (Compl. ¶¶ 41-58.)
The following background is drawn from the answer, taking the well-pleaded allegations as true for purposes of the motion to dismiss the counterclaims.
In February 2005, defendant Walker invested $30,000 in Seahorse in exchange for thirty percent of the shares in the corporation, and plaintiff retained the remaining seventy percent of shares. Walker was named President and plaintiff was named Vice-President, a title he retained until 2016. (Countercls. ¶ 19.) At no time was plaintiff an employee of Seahorse, as evidencedby his 2009 bankruptcy filings, which stated he was a "self-employed handyman," and had no shares or interests in any businesses, including Seahorse. (Countercls. ¶¶ 25-41.)
Following the initial investment in Seahorse in 2005, Walker began paying one of plaintiff's personal debts and, between 2006 and 2007, gave plaintiff a personal loan of $5,000. (Countercls. ¶¶ 22-23.) On February 12, 2007, Alvarez transferred fifty percent of the total shares in Seahorse to Walker, and he retained a twenty percent stake in the corporation. (Id. ¶ 24.) Around March 2007, Walker contributed an additional $37,000 to Seahorse for the purchase of equipment, including five jet skis, and for operating capital. In exchange, plaintiff transferred his remaining shares to Walker. (Countercls. ¶¶ 19-21.)
While plaintiff served as Vice-President of Seahorse, Seahorse provided him with a number of financial benefits at his request or demand. (See Countercls. ¶ 48.) Despite these benefits, beginning in August 2014, plaintiff "became increasingly belligerent in his demands for money from the defendant Seahorse," and, after being refused additional stipend funds, threatened to report illegal activity related to the hiring of foreign workers, attempted to prevent employees from working, and harassed customers by photographing them and calling them illegal workers. (Id. ¶¶ 49-55.)
Following these incidents, plaintiff sent a demand letter to Walker and Seahorse for $5,000 and fifty percent of the shares in Seahorse. (Countercls. ¶¶ 56-57.) Seahorse refused, stating he was not entitled to any shares because he transferred his ownership interest in 2007, that Seahorse had already paid for his ticket to the Philippines for medical care and paid for his medical insurance, and also offered to give him a cash loan, which Alvarez refused. (Id. ¶¶ 58-60.)
In 2015, plaintiff registered equipment owned by Seahorse, including eight jet skis and five boats, under his name. (Countercls. ¶ 65; Ex. I, ECF No. 5-9.) Further, plaintiff registered aToyota vehicle in his name despite the fact that it was owned by Walker. (Countercls. ¶ 65; Ex. J, ECF No. 5-10.) After this, in January 2016, plaintiff was removed as Vice-President by corporate board resolution. (Countercls. ¶ 64.)
Based on plaintiff's actions, defendants have brought seven counterclaims against him: (1) Unjust enrichment; (2) Abuse of Process; (3) Breach of Fiduciary Duty; (4) Tortious Interference with Contract; (5) Intentional Interference with Prospective Economic Advantage; (6) Conversion; and (7) Declaratory Judgment. (Countercls. ¶¶ 66-127.)
To survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a pleading "must contain sufficient factual matter, accepted as true, to state a claim for relief that is plausible on its face." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009); Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). In other words, the pleading must contain "more than labels and conclusions"; the "[f]actual allegations must be enough to raise a right to relief above a speculative level." Eclectic Props. East, LLC v. Marcus & Millichap Co., 751 F.3d 990, 995 (9th Cir. 2014) (quoting Twombly, 550 U.S. at 555). Thus, a court must "identify pleadings that, because they are no more...
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