Cuervo v. Airport Servs., Inc.

Decision Date22 November 2013
Docket NumberCASE NO. 12-20608-CIV-GOODMAN
PartiesHERMAN CUERVO, et al., Plaintiffs, v. AIRPORT SERVICES, INC., et al., Defendants.
CourtU.S. District Court — Southern District of Florida

[CONSENT CASE]

AMENDED ORDER DENYING MOTION TO DISMISS
AND STAYING PORTION OF CASE1

In their amended complaint, Plaintiffs2 allege that defendant Proficient Services, LLC ("Proficient") is liable for defendant Airport Services, Inc.'s ("ASI") Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq., violations because it is ASI's successor in interest. Proficient moved to dismiss the amended complaint by arguing, in part, that no cause of action for successor liability exists under the FLSA in this Circuit. After closely examining the applicable case law and the relevant facts in this case, the Courtconcludes that a cause of action for successor liability under the FLSA does exist in this Circuit. Accordingly, the Court denies Proficient's motion. The Court also stays this case as to defendants ASI and Hazem A. Sabry ("Sabry"), due to their respective bankruptcies.

I. BACKGROUND

Plaintiffs filed suit against Ann Mitchell ("Mitchell"), Sabry, and ASI, alleging myriad violations of the FLSA and Florida's Minimum Wage Act, § 448.110, Fla. Stat. (2012), arising from their employment as car cleaners for ASI's cleaning service to rental car companies at Miami International Airport. [ECF No. 1]. Sabry and Mitchell filed their respective answers to Plaintiffs' complaint. [ECF Nos. 6; 11]. ASI did not respond, and a default judgment and an award of attorney's fees and costs was entered against ASI. [ECF Nos. 10; 12; 26; 29; 31; 32; 33]. ASI then filed for bankruptcy. [ECF No. 49]; In re Airport Servs, Inc., No. 6:12-bk-10198-KSJ (M.D. Fla. 2012).

In light of ASI's bankruptcy, Plaintiffs moved to amend their complaint to add Proficient as a defendant. [ECF No. 37]. Plaintiffs argued that by taking over ASI's operations and doing so by using ASI's employees and managers, Proficient was a joint employer under the FLSA. [Id. at pp. 2-5]. The Court denied that motion (without prejudice) because, among other things, Plaintiffs conceded that Proficient did notemploy them because it only began to operate as ASI after the default judgment against ASI. [ECF No. 63].3

Plaintiffs filed a renewed motion to amend their complaint to add Proficient as a defendant under a successor liability theory (i.e., Proficient is liable for ASI's labor violations because it is ASI's successor in interest). [ECF No. 73]. The Court granted the renewed motion [ECF No. 74], and Plaintiffs filed their first amended complaint against ASI, Sabry, and Proficient. [ECF No. 75].

ASI and Sabry answered the amended complaint. [ECF No. 77]. After filing his answer, Sabry filed for bankruptcy. [ECF No. 79]. Proficient consented to the Undersigned's jurisdiction to hear this case and filed a motion to dismiss the amended complaint. [ECF No. 82]. Plaintiffs filed their response in opposition. [ECF No. 85]. Proficient did not file a reply and the time to do so has passed.

II. APPLICABLE LEGAL STANDARD

In reviewing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(6), a court must take all well-pleaded facts in the plaintiff's complaint and all reasonable inferences drawn from those facts as true. Jackson v. Okaloosa Cnty, Fla., 21 F.3d 1531, 1534 (11th Cir. 1994). "A pleading must contain 'a short and plain statement of the claimshowing that the pleader is entitled to relief.'" Ashcroft v. Iqbal, 556 U.S. 662, 677-78 (2009) (quoting Fed. R. Civ. P. 8(a)(2)). While detailed factual allegations are not always necessary in order to prevent dismissal of a complaint, the allegations must "'give the defendant fair notice of what the . . . claim is and the grounds upon which it rests.'" Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (quoting Conley v. Gibson, 355 U.S. 41, 47 (1957)). While a court must accept as true a plaintiff's allegations, a court may dismiss a complaint on a dispositive issue of law. Marshall Cnty. Bd. of Educ. v. Marshall Cnty. Gas Dist., 992 F.2d 1171, 1174 (11th Cir. 1993).

III. DISCUSSION

Proficient argues that Plaintiffs' amended complaint should be dismissed for the following reasons: (1) there is no cause of action for successor liability under the FLSA in this Circuit; (2) Plaintiffs failed to allege a merger or transfer of assets between ASI and Proficient, as they are required; and (3) Plaintiffs are improperly attempting to obtain a priority position in ASI's bankruptcy without going to the bankruptcy court.

A. Successor Liability Under the FLSA

Proficient's argument is that Plaintiffs have not stated a claim for successor liability under Florida law and that there is no authority in this Circuit to abrogate Florida's general successor liability rule in FLSA cases. In other words, Proficient argues that this Circuit has not recognized successor liability under the FLSA.

The problems with Proficient's argument are two-fold. First, as far as this Court can tell, every other federal appellate and district court that has faced this issue has found that successor liability exists under the FLSA. Thus, this Court has little difficulty concluding that if faced with the issue, the Eleventh Circuit Court of Appeals would find that successor liability exists under the FLSA.4 Second, it is not entirely clear that Florida law is, or should be, the applicable law in determining whether there is successor liability under the FLSA. As will be explained below, the federal courts are split on which law applies to determine whether successor liability exists in a given FLSA case. But that issue is of no moment here, because Plaintiffs have stated a claim even if Florida law applies.

1. The Federal Courts That Have Considered the Issue are Unanimous That FLSA Successor Liability Exists

While other federal courts have found that successor liability exists under the FLSA, the Eleventh Circuit has not decided the issue. Hurtado v. Raly Dev., Inc., No. 11-24476-Civ-Altonaga, 2012 WL 3687488, at *15-16 (S.D. Fla. Aug. 27, 2012) (applying Ninth Circuit's FLSA successor liability test to find no successor liability under the specific facts because plaintiffs failed to meet that test, but not deciding either way whether FLSA successor liability exists and noting that the Eleventh Circuit has not decided the issue). However, the converse of this proposition is also true: this Circuit has not decided that successor liability under the FLSA does not exist.

Therefore, the issue is open in the Eleventh Circuit and the Court is required to determine how the Eleventh Circuit would resolve the issue.

In the second half of the twentieth century, the Supreme Court developed a federal common law successor liability doctrine applicable to certain federal labor laws. John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 548-49 (1964) (Labor Management Relations Act); Golden State Bottling Co., Inc. v. N.L.R.B., 414 U.S. 168, 181-85 (1973) (National Labor Relations Act ("NLRA")). This federal common law successor liability doctrine now extends to almost every federal labor statute. See, e.g., Upholsterers' Int'l Union Pension Fund v. Artistic Furniture of Pontiac, 920 F.2d 1323 (7th Cir. 1990) (Multiemployer Pension Plan Amendments Act ("MPPAA")); Sec. of Labor v. Mullins, 888 F.2d 1448 (D.C. Cir. 1989) (Mine Safety and Health Act); Criswell v. Delta Air Lines, Inc., 868 F.2d 1093 (9th Cir. 1989) (Age Discrimination in Employment Act); Trs. for Alaska Laborers-Constr. Indus. Health & Sec. Fund v. Ferrell, 812 F.2d 512 (9th Cir. 1987)(Employment Retirement Income Security Act ("ERISA")); Musikiwamba v. ESSI, Inc., 760 F.2d 740 (7th Cir. 1985) (42 U.S.C. § 1981); In re Nat'l Airlines, Inc., 700 F.2d 695, 698 (11th Cir. 1983) (Title VII).

The rationale behind the extension of successor liability is to prevent labor unrest or to protect workers' rights. Teed v. Thomas & Betts Power Solutions, LLC, 711 F.3d 763, 766 (7th Cir. 2013); see also Golden State Bottling Co., Inc, 414 U.S. at 181-85. In either case, imposing successor liability furthers the relevant labor statute's goals because workers are not able to stop a sudden change in ownership aimed at extinguishing their employer's liability to them, and they would likely be left without a remedy unless they could invoke the successor liability theory. Teed, 711 F.3d at 766; Steinbach v. Hubbard, 51 F.3d 843, 845 (9th Cir. 1995).

The underlying legal and policy rationales for extending successor liability to federal labor statutes are equally applicable to the FLSA. "The FLSA was passed to protect workers' standards of living through the regulation of working conditions. 29 U.S.C. § 202. That fundamental purpose is as fully deserving of protection as the labor peace, anti-discrimination, and worker security policies underlying the NLRA, Title VII, 42 U.S.C. § 1981, ERISA, and MPPAA." Steinbach, 51 F.3d at 845 (extending successor liability to the FLSA). Pragmatically, without successor liability, an FLSA violator could escape liability, or make it harder for employees to obtain relief, by selling ortransferring its assets to a buyer and then dissolving. Teed, 711 F.3d at 766. And this is why, as best as this Court can tell, every federal court that has considered the issue has found that successor liability exists under the FLSA.5 In fact, there is not "a single opinion where successor liability has been rejected as a matter of law in an FLSA case." Thompson v. Bruister & Assocs., Inc., No. 3:07-00412, 2013 WL 1099796, at *5 (M.D. Tenn. Mar. 15, 2013) (finding that successor liability exists under the FLSA in the Sixth Circuit).

While it is true that the Eleventh Circuit has not decided whether successor liability exists in FLSA cases, it has decided the issue in the context of another federal employment statute. In In re National Airlines, Inc., the Eleventh Circuit readily found that the Supreme Court's...

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