Garcia v. Peterson

Decision Date20 July 2018
Docket NumberCIVIL ACTION H-17-1601
Parties Jose GARCIA, et al., Plaintiffs, v. Vasilia a/k/a "Vauna" PETERSON, et al., Defendants.
CourtU.S. District Court — Southern District of Texas

Murray J. Fogler, Robert Henry Ford, Fogler, Brar, Ford, O'Neil & Gray LLP, Benjamin Witten Allen, Feldman & Feldman, PC, Houston, TX, for Plaintiffs.

Alice Kwak, Jeffrey S. Ranen, Katherine C. Den Bleyker, Lewis Brisbois Bisgaard & Smith LLP, Los Angeles, CA, William Scott Helfand, Lewis Brisbois Bisgaard & Smith, LLP, Houston, TX, Sarah J. Lopano, Pro Hac Vice, Jamil N. Alibhai, Edwin Andrew Huffman, Munck Wilson Mandala LLP, Dallas, TX, John Maston O'Neal, Pro Hac Vice, Quarles & Brady LLP, Phoenix, AZ, for Defendants.


Gray H. Miller, United States District JudgePending before the court is a motion to dismiss for improper venue, lack of personal jurisdiction, and failure to state a claim filed by defendants MidCap Financial Trust, f/k/a MidCap Financial, LLC ("MidCap Trust"), and MidCap Funding X Trust ("MidCap Funding") (collectively, "MidCap"). Dkt. 41, 42. This motion was originally filed on September 29, 2017. Dkt. 41, 42. The plaintiffs, who are a group of moving truck drivers, filed a motion for leave to conduct jurisdictional discovery, which the court granted on November 8, 2017. Dkts. 49, 59. The court originally required that the discovery be completed by January 5, 2018, and that the plaintiffs file a supplemental response to MidCap's pending motion for jurisdictional discovery by January 19, 2018. Dkt. 59. The Magistrate Judge extended the deadline for jurisdictional discovery until March 23, 2018, and required the plaintiffs to file a response by April 6, 2018, and MidCap to file a reply by April 13, 2018. Dkt. 85. The plaintiffs filed their supplemental response on April 6 (Dkt. 92), and MidCap filed a reply on April 13 (Dkt. 98).

In the interim, the plaintiffs sought leave to amend their complaint, the court granted leave, and the plaintiffs filed a second amended complaint. Dkts. 94, 103, 104. On April 30, 2018, MidCap filed a notice requesting that the court apply their pending motion to dismiss, which was originally filed in response to the first amended complaint, to the second amended complaint, which the court may do under the Federal Rules of Civil Procedure. Dkt. 105. The original motion to dismiss is now fully briefed and ready for disposition. The court has reviewed all of the relevant documents in the record and the applicable law and is of the opinion that the motion to dismiss for improper venue should be DENIED, the motion to dismiss for lack of personal jurisdiction should be GRANTED IN PART AND DENIED IN PART, and the motion to dismiss for failure to state a claim should be DENIED.


This is a Fair Labor Standards Act ("FLSA") case filed by twenty-eight plaintiffs on behalf of themselves and those similarly situated. Dkt. 104. Eleven of the named plaintiffs reside in Texas, and seventeen of the named plaintiffs live outside of Texas. Id. The plaintiffs were drivers for Graebel Companies, Inc., and they were classified as independent contractors. Id. The plaintiffs contend that Graebel Companies, Inc., underwent a change in ownership in 2014, became Graebel Van Lines, LLC in 2015, and was eventually dissolved in March 2017.1 Id. They assert that the MidCap financed the purchase of Graebel Companies, Inc., and provided working capital. Id. MidCap thus had a security interest in Graebel's and its subsidiaries' assets. Id. The plaintiffs allege that when the reorganization occurred, the new owners asserted more direct control over the drivers and implemented changes that were detrimental to the company. Id.

The plaintiffs contend that by 2016, Graebel decided to start liquidating at the direction and control of MidCap and a turnaround company, and the liquidation plan was designed to leave the plaintiffs without wages for months. Id. They allege that they started receiving only a portion of their pay in October 2016 and that the amount they received was determined via a formula and at the direction of MidCap. Id. This formula allegedly calculated an "advance" that the drivers would receive based on the gross weight they transported. Id. Graebel's local terminal managers assured the drivers that they would receive their entire pay, not just the advances, and that they should continue to perform moving services at Graebel's instruction and supervision. Id. The drivers contend, however, that they never received the balance and were paid nothing for much of the work they performed. Id. They allege that they learned they would probably never be paid when Graebel announced its liquidation in mid-March 2017. Id.

The plaintiffs claim that MidCap and the other defendants are liable for the actions of Graebel under agency, veil-piercing, or alter-ego theories of vicarious liability and that the corporate forms of the Graebel entities ought to be disregarded. Id. They contend that the defendants "used the Graebel Entities to dupe the [plaintiffs] into continuing to drive for Graebel." Id. They allege that the corporate forms of the Graebel entities were organized and operated as a mere tool or business conduit of the defendants and that MidCap and the other defendants used the Graebel entities as a means to shield themselves from liability for claims by unpaid drivers. Id. They assert that the Graebel entities were inadequately capitalized and that by the time MidCap " ‘called’ the note on its revolving line of credit [in February 2017], MidCap had gained complete control and ownership of the Graebel Entities for all practical purposes and from that time on, at the very least acted as the alter ego of the Graebel Entities." Id. The plaintiffs additionally allege that MidCap is liable for Graebel's fraudulent representations because Graebel made those representations at the direction of MidCap's agent, who had the right to control how Graebel allocated its capital. Id. The causes of action the plaintiffs assert against MidCap are (1) violation of the FLSA for failure to pay wages because MidCap was an "employer" under the FLSA; (2) violation of the FLSA for failure to keep records; (3) breach of contract; (4) quantum meruit; (5) fraud; (6) conspiracy and aider and abettor liability for fraud; and (7) veil piercing, alter ego, and agency liability. Id.

MidCap moves for the court to dismiss the claims asserted against it because (1) the court lacks personal jurisdiction over MidCap; (2) the plaintiffs have not shown venue is proper in Texas; and (3) the plaintiffs fail to state a claim for which relief can be granted under Rules 8(a) and 9(b). Dkt. 41, 42. With regard to personal jurisdiction, MidCap points out that each plaintiff must establish separately that his or her claims arise out of or relate to MidCap's activities in Texas. Id. (citing Bristol-Myers Squibb Co. v. Superior Court of Cal. , ––– U.S. ––––, 137 S.Ct. 1773, 198 L.Ed.2d 395 (2017) ). It asserts that despite being allowed to conduct discovery on their alter ego allegations, the plaintiffs have no evidence to support their jurisdictional theories. Dkt. 98.

With regard to venue, MidCap contends that the plaintiffs have not shown that a substantial part of each plaintiff's claim against MidCap arose in the Southern District of Texas. Dkt. 41, 42. Additionally, MidCap asserts that the "employment agreements for the non-Texas Plaintiffs have mandatory venue clauses that require those Plaintiffs to pursue litigation arising from their employment in other states." Id.

Finally, with regard to their assertion that the plaintiffs fail to state a claim for which relief can be granted, MidCap contends that (1) the plaintiffs' Fair Labor Standards Act ("FLSA") claims fail because they are not parties covered by the FLSA; (2) the plaintiffs do not provide any factual support for their FLSA claim; (3) the plaintiffs fail to describe the putative class for the proposed FLSA collective action; (4) the plaintiffs cannot maintain both a conspiracy claim and claims of imputed liability because if there is an agency relationship, there can be no conspiracy; (5) the plaintiffs fail to state a claim for conspiracy because they do not plead it with particularity; (6) the plaintiffs cannot assert a claim for "aider and abettor liability" because no such claim exists independent of a conspiracy claim in Texas; (7) the plaintiffs do not meet Rule 9(b)'s standard with regard to the corporate veil and alter ego theories for imputing the fraud claims to MidCap; (8) the plaintiffs fail to state a claim for breach of contract with regard to the corporate veil and alter ego theories for imputing the claims to MidCap; and (9) the plaintiffs fail to state a claim to impute liability under an agency theory. Id.

The court will first review the legal standards for motions to dismiss for improper venue, lack of personal jurisdiction, and failure to state a claim. It will then substantively address venue, personal jurisdiction, and the adequacy of the pleading in seriatim .

A. Venue

Under 28 U.S.C. § 1391,

A civil action may be brought in...(1) a judicial district in which any defendant resides, if all defendants are residents of the State in which the district is located; (2) a judicial district in which a substantial part of the events or omissions giving rise to the claim occurred, or a substantial part of property that is subject of the action is situated; or (3) if there is no district in which an action may otherwise be brought as provided in this section, any judicial district in which any defendant is subject to the court's personal jurisdiction with respect to such action.

28 U.S.C. § 1391(b). "On a Rule 12(b)(3) motion to dismiss for improper venue, the court must accept as true all allegations in the complaint and resolve all conflicts in favor of the plaintiff." Braspetro Oil Servs. Co. v. Modec...

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