ESI/Emp. Solutions, L.P. v. City of Dall.
| Citation | 528 F.Supp.3d 564 |
| Decision Date | 25 March 2021 |
| Docket Number | CIVIL NO. 4:19-CV-570-SDJ |
| Parties | ESI/EMPLOYEE SOLUTIONS, L.P., et al. v. CITY OF DALLAS, et al. |
| Court | U.S. District Court — Eastern District of Texas |
Joseph Aaron Barnes, Sr., Ryan Daniel Walters, Robert Earl Henneke, Texas Public Policy Foundation, Austin, TX, for ESI/Employee Solutions, LP, Hagan Law Group LLC.
William Thomas Thompson, Anne Marie Mackin, Office of The Attorney General of Texas, Austin, TX, for State of Texas.
Kathleen MacInnes Fones, Charles Steven Estee, Stacy Jordan Rodriguez, Dallas City Attorney's Office, Dallas, TX, for Dallas City of, T.C. Broadnax, Beverly Davis.
The City of Dallas (the "City")1 enacted an ordinance requiring employers to provide Dallas-based employees one hour of paid sick leave for every thirty hours worked (the "Ordinance"). DALL. , TEX. , CODE §§ 20–1 through 20–12. Plaintiffs ESI/Employee Solutions, L.P., and Hagan Law Group L.L.C. (the "Employer-Plaintiffs"), two employers subject to the Ordinance, filed a lawsuit alleging that the Ordinance violates the First, Fourth, and Fourteenth Amendments to the United States Constitution. They also joined the State of Texas (together, "Plaintiffs") in alleging that the Ordinance was preempted by Texas state law. Following the Court's ruling on a previous motion to dismiss, only two claims remain in the case: the Fourth Amendment claim and the state preemption claim.
Before the Court is Defendants’ Motion to Dismiss Under Rule 12(b)(1), Renewed Motion to Decline Supplemental Jurisdiction, and Memorandum in Support. (Dkt. #69). The City seeks dismissal of both remaining claims. The City first asserts that the Employer-Plaintiffs’ Fourth Amendment claim should be dismissed because it has been rendered moot by a recent amendment to the Dallas City Code. The City further argues that, based on the anticipated dismissal of the Fourth Amendment claim, the Court should no longer exercise supplemental jurisdiction over the state preemption claim.
Having reviewed the Motion, the parties’ briefing, and the relevant law, the Court finds that the Motion should be GRANTED in part and DENIED in part. Because a recent amendment to the City's municipal code makes clear that precompliance review will now be available for parties that receive administrative subpoenas under the Ordinance, the Employer-Plaintiffs’ Fourth Amendment claim will be dismissed as moot. However, the Court will retain jurisdiction over the remaining state preemption claim.
The Ordinance requires employers to grant one hour of paid sick leave for every thirty hours worked by an employee within the Dallas city limits, regardless of the employer's location. Id. §§ 20–4(a), (b). The Ordinance also authorizes the City to conduct investigations, triggered by employee complaints, to assess employer compliance. Such investigations may include the use of administrative subpoenas to compel witness attendance or material and document production. Id. § 20–10(a)–(b). Violations of any portion of the Ordinance result in a fine. Id. § 20–11(a).
The Employer-Plaintiffs challenged the constitutional validity of the Ordinance, alleging violations of the First, Fourth, and Fourteenth Amendments to the United States Constitution. Together with the State of Texas, the Employer-Plaintiffs also assert that the Ordinance is preempted by state law. The Employer-Plaintiffs and Texas also filed a preliminary-injunction motion seeking to prevent the enforcement of the Ordinance pending the resolution of this case. For its part, the City moved to dismiss all claims asserted by Plaintiffs under Federal Rule of Civil Procedure 12(b)(1) and (b)(6).
The City's dismissal motion was granted in part. The Employer-Plaintiffs’ First and Fourteenth Amendment claims were dismissed, but the Court held that Plaintiffs had adequately pleaded the Fourth Amendment and state preemption claims to avoid dismissal of those causes of action. ESI/Emp. Sols., L.P. v. City of Dallas , 450 F.Supp.3d 700, 727–32 (E.D. Tex. 2020) (" ESI "). The Court went on to grant the preliminary injunction requested by the Plaintiffs, holding that, as to the state preemption claim, the Plaintiffs had established a substantial likelihood of success on the merits, a threat of irreparable injury, and that the balance of equities and the public interest favored a preliminary injunction. Id. at 732–38. Based on these conclusions, the Court enjoined the City from enforcing the Ordinance pending resolution of the case. Because the Court concluded that Plaintiffs’ state preemption claim met the requirements for a preliminary injunction, the Court did not address the question of whether injunctive relief was also merited as to the Employer-Plaintiffs’ Fourth Amendment claim.
The Employer-Plaintiffs’ Fourth Amendment claim turns on the assertion that the Ordinance "requires employers to submit to unlimited, unreasonable administrative subpoenas with no provision for judicial review before being required to comply." (Dkt. #9 ¶ 65). According to the Employer-Plaintiffs, the Ordinance violates, on its face, the freedom from unreasonable search and seizure under the Fourth Amendment to the United States Constitution. (Dkt. #9 ¶ 66). The Employer-Plaintiffs specifically point to Section 20–10(b) of the Ordinance, which empowers the City to "issue subpoenas to compel the attendance of a witness or the production of materials or documents in order to obtain relevant information and testimony." DALL. , TEX. , CODE § 20–10(b). Section 20–10(b) goes on to state that "[r]efusal to appear or to produce any document or other evidence after receiving a subpoena pursuant to this Section is a violation of this chapter and subject to sanctions as described in Section 2–9 of the Dallas City Code." Id. Because nothing in Section 20–10(b) or elsewhere in the Ordinance sets forth a procedure for obtaining precompliance review of these administrative subpoenas, the Employer-Plaintiffs allege the Ordinance facially violates the Fourth Amendment.
The City's previous dismissal motion countered that a different portion of the Dallas City Code, Section 2–8, sets forth the procedure for precompliance review of the subpoenas. At that time, and prior to its recent amendment, Section 2–8 stated that "[i]n all hearings and investigations" conducted by the City, the City may "subpoena witnesses and compel the production of books, papers and other evidence material to such inquiry in the same manner as is now prescribed by the laws of this state for compelling the attendance of witnesses and production of evidence in the corporation court." Id. § 2–8. This Court previously held that the structure of the Ordinance did not support the City's contention that the prior version of Section 2–8 applied to administrative subpoenas under Section 20–10(b) and that the prior version of Section 2–8 described only how a subpoena might be issued, not a procedure for precompliance review. ESI , 450 F.Supp.3d at 726–27.
Following the Court's order enjoining the enforcement of the Ordinance pending the resolution of this case, the City passed an ordinance amending Section 2–8 of the Dallas City Code (the "Amendment"). The Amendment adds to Section 2–8 the following language:
A person receiving a subpoena in accordance with this section may, before the return date specified in the subpoena, petition the corporation court for a motion to modify or quash the subpoena. This provision for pre-compliance review applies to all subpoenas, including but not limited to those pursuant to ... [Section] 20–10....
DALL. , TEX. , CODE § 2–8. Based on this Amendment to Section 2–8 of the Dallas City Code, the City has now submitted another Rule 12(b)(1) dismissal motion, asserting that the Amendment renders the Employer-Plaintiffs’ Fourth Amendment claim moot and deprives the Court of subject-matter jurisdiction over both the Fourth Amendment claim and, by extension, the state preemption claims.
"Federal courts are courts of limited jurisdiction, possessing only that power authorized by Constitution and statute." Gunn v. Minton , 568 U.S. 251, 256, 133 S.Ct. 1059, 185 L.Ed.2d 72 (2013) (internal quotation marks omitted). A federal court has original jurisdiction to hear a suit when it is asked to adjudicate a case or controversy that arises under federal-question or diversity jurisdiction. U.S. CONST. , art. III, § 2, cl. 1 ; 28 U.S.C. §§ 1331 – 32. Courts have "an independent obligation to determine whether subject-matter jurisdiction exists." Arbaugh v. Y&H Corp. , 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006). However, a defendant may also challenge a court's subject-matter jurisdiction by filing a motion to dismiss under Federal Rule of Civil Procedure 12(b)(1). A Rule 12(b)(1) challenge to a court's subject-matter jurisdiction may address the sufficiency of the facts pleaded in the complaint (a "facial" attack) or may challenge the accuracy of the facts underpinning the claimed federal jurisdiction (a "factual" attack). See King v. U.S. Dep't of Veteran's Affs. , 728 F.3d 410, 413 (5th Cir. 2013) (quoting Ramming v. United States , 281 F.3d 158, 161 (5th Cir. 2001) ). "An attack is ‘factual’ rather than ‘facial’ if the defendant ‘submits affidavits, testimony, or other evidentiary materials’ " to controvert subject-matter jurisdiction. Superior MRI Servs., Inc. v. All. Healthcare Servs., Inc. , 778 F.3d 502, 504 (5th Cir. 2015) (quoting Paterson v. Weinberger , 644 F.2d 521, 523 (5th Cir. 1981) ).
When, as here, a defendant contests the facial sufficiency of the facts pleaded in the complaint to confer jurisdiction, those facts are entitled to a presumption of truth. See Ass'n of Am. Physicians & Surgeons, Inc. v. Tex. Med. Bd. , 627 F.3d 547, 553 (5th Cir. 2010) (...
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