Nicks v. Koch Meat Co.

• Decision Date: 15 May 2017
• Docket Number: No. 16–cv–6446,16–cv–6446
• Citation: 260 F.Supp.3d 942
• Parties: Jimmy R. NICKS and James Earl Patrick, individually and on behalf of all persons similarly situated, Plaintiffs, v. KOCH MEAT CO., INC., d/b/a Koch Foods, Koch Foods of Mississippi, LLC, and Jet Poultry Services, Inc., Defendants.
• Court: U.S. District Court — Northern District of Illinois

260 F.Supp.3d 942

Jimmy R. NICKS and James Earl Patrick, individually and on behalf of all persons similarly situated, Plaintiffs,

v.KOCH MEAT CO., INC., d/b/a Koch Foods, Koch Foods of Mississippi, LLC, and Jet Poultry Services, Inc., Defendants.

No. 16–cv–6446

United States District Court, N.D. Illinois, Eastern Division.

Signed May 15, 2017

Sarah Rebecca Schalman–Bergen, Alexandra Koropey Piazza, Camille Fundora, Shanon J. Carson, Berger & Montague, P.C., Philadelphia, PA, David Alan Hughes, Hardin & Hughes, LLP, Tuscaloosa, AL, Ismael Tariq Salam, Katrina Carroll, Kyle Alan Shamberg, Lite DePalma Greenberg LLC, Chicago, IL, for Plaintiffs.

Stephen Novack, Andrew P. Shelby, Courtney D. Tedrowe, Novack and Macey LLP, Chicago, IL, Jennifer G. Hall, Scott W. Pedigo, Baker, Donelson, Bearman, Caldwell & Berkowitz, P.C., Jackson, MS, Russell W. Gray, Baker, Donelson, Bearman, Caldwell, & Berowitz, P.C., Chattanooga, TN, for Defendants.

MEMORANDUM OPINION AND ORDER

AMY J. ST. EVE, United States District Court Judge

On December 22, 2016, Plaintiffs Jimmy R. Nicks ("Nicks") and James Earl Patrick ("Patrick"), individually and on behalf of all persons similarly situated, filed an Amended Collective Class Action Complaint against Defendants Koch Foods, Inc. ("Koch Foods"), Koch Meat Co., Inc. d/b/a Koch Poultry Co. ("Koch Meat"), Koch Foods of Mississippi ("Koch Foods MS"), JET Poultry Services, Inc. ("JET"), and several other Koch subsidiaries operating in Georgia, Alabama, and Tennessee ("AL–TN–GA Koch Defendants"), collectively "Defendants," seeking relief under the Fair Labor Standards Act of 1938, 29 U.S.C. § 201, et seq. ("FLSA"). (R. 99.) Koch Foods, Koch Meat, Koch Foods MS, and AL–TN–GA Koch Defendants (collectively, the "Koch Defendants") moved to dismiss the Complaint pursuant to Federal Rule of Civil Procedure 12(b)(3) for improper venue, or in the alternative, requested a transfer to the Southern District of Mississippi pursuant to 28 U.S.C. §§ 1404 or 1406. If the Court does not grant dismissal for improper venue and also does not transfer this case, AL–TN–GA Koch Defendants alternatively moved to dismiss the Complaint pursuant to Rule 12(b)(6) for failure to state a claim, and all the Koch Defendants moved to dismiss all claims related to activities in Alabama, Tennessee, and Georgia for lack of standing under Rule 12(b)(1).

The Court now considers the Koch Defendants' motion. (R. 110.) For the following reasons, the Court denies the Koch Defendants' motion in its entirety.

PROCEDURAL HISTORY

Plaintiffs initially filed a collective action against Defendants on June 21, 2016 on behalf of all individuals employed by Defendants as members of live-haul, chicken catching crews in the United States. (R. 1, Compl. ¶ 14.) JET filed a motion to dismiss on August 3, 2016, and Koch Foods MS filed a motion to dismiss on August 4, 2016. Both motions claimed the Court should dismiss this case for lack of personal jurisdiction and alternatively, for improper venue. On October 27, 2016, the Court denied Koch Foods MS's motion to dismiss without prejudice and granted Plaintiffs permission to conduct limited jurisdictional discovery related to the Koch Defendants' corporate structure, operations, and internal governance structure. (R. 82, Mem. Op. and Order 4.) The Court reserved opinion on the Koch Defendants' venue challenge under 28 U.S.C. 1391(b)(1) and granted limited venue discovery relating to (b)(2). (Id. 7.) In compliance with the Court's order, Plaintiffs ordered discovery on the Koch Defendants and conducted relevant depositions.

On December 19, 2016, Plaintiffs and JET entered into a settlement agreement. (R. 101, Ex. 1, Settlement Agreement with JET.) As part of the settlement, JET agreed that the Court would retain jurisdiction with respect to the enforcement of the settlement terms and that JET would "submit to the jurisdiction of the Court for purposes of interpreting, implementing, and enforcing the settlement." (Id. ¶ 14.) On January 11, 2017, the Court approved the settlement and dismissed the claims against JET with prejudice. (R. 105.)

Based on the limited jurisdictional and venue discovery, Plaintiffs filed the First Amended Complaint, in which Plaintiffs added certain Koch Defendants and modified their allegations. (R. 9, Am. Compl.) The Koch Defendants subsequently filed the present motion to dismiss, or alternatively transfer.

BACKGROUND

Plaintiffs Nicks and Patrick are Mississippi residents who were "previously employed to catch and cage Koch's chickens as member[s] of a live-haul chicken catching crew[.]" (Am. Compl. ¶¶ 10–11.) Plaintiffs worked for the Koch Defendants,¹ who Plaintiffs allege operate "one of the largest vertically integrated poultry processors in the United States." (Id. ¶ 12.) According to Plaintiffs, Koch Foods has a policy and practice of failing to pay overtime premiums and minimum wage to the individuals, like Plaintiffs, who catch chickens at Koch's subsidiary farms in Mississippi, Alabama, Georgia, and Tennessee. (Id. ¶ 2.)

I. Koch Corporate Structure

Plaintiffs allege that although the Koch Defendants have organized themselves as several separately registered companies, these companies are unified in interest and ownership. (Id. ¶ 14.) Koch Foods is registered as a Delaware corporation, headquartered in Park Ridge, Illinois. (Id. ¶ 27.) Koch Foods is the "fictional parent company" of the Koch LLC subsidiaries, including Koch Meat and the eight separate divisions, each of which is referred to as a "Complex," that handle live growing and processing of chickens for Koch in Mississippi, Alabama, Georgia, and Tennessee. (Id. ¶¶ 15, 27.) Koch Meat was the original Koch entity that preceded the creation of Koch Foods, and it was created by current Koch Foods CEO, Joseph Grendys, in 1999. (Id. ¶ 28.) Koch Meat directly pays the officers, directors, and other employees of Koch Foods, as well as the managers of the eight Complexes. (Id. )

The eight Koch Complexes are each registered as limited liability companies ("LLCs") in the state in which they are located, with facilities in-state, but with a corporate headquarters in Park Ridge, Illinois. (Id. ¶¶ 29–50.) Koch Foods Mississippi ("Koch Foods MS") and Koch Farms Mississippi ("Koch Farms MS"), for example, are registered in Mississippi and have facilities in Morton, Mississippi, but they are headquartered in Park Ridge, Illinois. (Id. ¶ 14.)² The Complexes are organized into an Eastern and Western Region, and each Region has a Vice President ("VP") who reports directly to the President and the Chief Operating Officer of Koch Foods, both of whom are located at Koch's Corporate Headquarters in Illinois. (Id. ) Plaintiffs allege that the finances of each Complex are "consolidated with the ultimate goal of increasing the profitability of the entity at a whole." (Id. ¶ 16.) Plaintiffs note that Koch Foods' website states that it has 13,000 employees nationwide with 40 employees at its Illinois headquarters. (Id. ¶ 17.) Plaintiffs allege that Koch Foods has created a "fictitious corporate structure" at each Complex with a "Foods" entity that processes the chickens and a "Farms" entity that grows the chickens, although the entities have the same management and reporting structure. (Id. ¶ 18.) The Foods entities pay all employees at a given Complex, regardless of whether the employee works in the grow-out operation or the chicken processing operation. (Id. ) The Foods entities also maintain lock box accounts at Harris Bank in Illinois and receive payments from outside vendors to a post office box in Illinois. (Id. ¶¶ 53, 81.)

Plaintiffs allege that the Koch Defendants fail to observe corporate formalities or maintain an arm's-length-relationship between each other. (Id. ¶ 19.) Plaintiffs claim, for example, that Koch Foods and Koch Meat do not maintain corporate minutes or a corporate records book, all the Koch Defendants share the same logo, and all employees of the Koch Defendant entities share the same email domain. (Id. ¶¶ 19–22.) Additionally, the various Koch corporate entities share products and funds between themselves. (Id. ¶ 23.) These transactions are recorded as "inter-company transfers" on a consolidated Cash Sheet maintained at the Koch corporate headquarters in Illinois, the same Koch Foods officers represent both sides in the transactions, and no money is exchanged. (Id. ) Plaintiffs claim that the Koch Defendants comingle their funds, and Koch Foods loans money, with no written agreement, to a subsidiary whenever necessary. (Id. ¶ 25.)

The Koch Defendants also share common officers and directors. (Id. ¶ 26.) Joseph Grendys ("Grendys") and Mark Kaminsky ("Kaminsky"), both of whom work out of the Illinois headquarters, are respectively CEO and COO of Koch Foods and they are also listed as officers and directors of each of the separately registered Koch entities that form the eight Complexes. (Id. ) Grendys is the ultimate decision maker for each Koch entity. (Id. ¶ 72.) Plaintiffs allege that the Koch corporate entity that is geographically closest to a given employee is responsible for paying that employee, regardless of whether that employee works for that particular entity. (Id. ¶ 24.) The VP of the Eastern Region, for example, who is a Koch Foods employee, works out of Mississippi, so Koch Foods of Mississippi pays him, even though the Mississippi Complex reports to the Western Region and the Eastern Region VP has no job responsibilities relating to the Mississippi Complex. (Id. )

Each Complex has a Complex Manager, who oversees the live production and processing operations at that Complex. (Id. ¶ 73.) The Complex Managers report to the corresponding Eastern or Western Region VPs, who are responsible for managing the Complexes' operations, including reducing the Complexes' labor costs when possible. (Id. ¶¶ 73–74.) The Region VPs are Koch Foods employees who oversee multiple Koch subsidiaries, but as noted above, they are not...