Perez v. Gulf Coast Mgmt. Co., CIVIL ACTION NO. 14-00426-N

CourtUnited States District Courts. 11th Circuit. United States District Court of Southern District of Alabama
Writing for the CourtKATHERINE P. NELSON UNITED STATES MAGISTRATE JUDGE
PartiesTHOMAS E. PEREZ, Secretary of the United States Department of Labor, Plaintiff, v. GULF COAST MANAGEMENT COMPANY, LLC, d/b/a HAMPTON INN SARALAND, and ANAND PATEL, individually, Defendants.
Docket NumberCIVIL ACTION NO. 14-00426-N
Decision Date03 March 2015

THOMAS E. PEREZ, Secretary of the United States
Department of Labor, Plaintiff,
v.
GULF COAST MANAGEMENT COMPANY, LLC, d/b/a HAMPTON
INN SARALAND, and ANAND PATEL, individually, Defendants.

CIVIL ACTION NO. 14-00426-N

UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF ALABAMA SOUTHERN DIVISION

March 3, 2015


ORDER

This action is before the Court on the Motion for Default Judgment (Doc. 14) filed by Plaintiff Thomas E. Perez, Secretary of the United States Department of Labor (hereinafter, "the Secretary"). Upon consideration, and for the reasons stated herein, the Court finds that the motion is due to be GRANTED, as set out.1

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I. Procedural History

The Secretary commenced this action on September 12, 2014, by filing a Complaint (Doc. 1) against the Defendants alleging violations of the Fair Labor Standards Act of 1938, as amended, 29 U.S.C. § 201, et seq. ("the FLSA"). On October 23, 2014, Defendant Anand Patel ("Patel") executed a waiver of service in this District that was sent on September 24, 2014 (see Doc. 6; Doc. 8 at 2, ¶ 4); thus, his responsive pleading was due November 24, 2014. See Fed. R. Civ. P. 4(d)(3), 12(a)(1)(A)(ii), & 6(a)(1)(C). A process server served Defendant Gulf Coast Management Company, LLC ("GCMC"), through its registered agent Ramon Patel, on November 8, 2014 (see Doc. 7; Doc. 8 at 2, ¶ 5); thus, its responsive pleading was due December 1, 2014. See Fed. R. Civ. P. 12(a)(1)(A)(i) & 6(a)(1)(C). To date, neither Defendant has appeared, filed a responsive pleading, or otherwise defended in this action.

On January 12, 2015, upon application by the Secretary (see Doc. 11), the Clerk of Court entered default against both Defendants under Federal Rule of Civil Procedure 55(a). (See Doc. 12). On February 5, 2015, the Secretary filed the present Motion for Default Judgment (Doc. 14) under Federal Rule of Civil Procedure 55(b)(2) against both Defendants, requesting that the Court "enter judgment as prayed for in the Complaint."2

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II. Analysis

In this Circuit, "default judgments are disfavored. Courts prefer adjudication on the merits. Since this case involves a default judgment there must be strict compliance with the legal prerequisites establishing the court's power to render the judgment." Varnes v. Local 91, Glass Bottle Blowers Ass'n of U.S. & Canada, 674 F.2d 1365, 1369 (11th Cir. 1982) (internal citation omitted). See also In re Worldwide Web Sys., Inc., 328 F.3d 1291, 1295 (11th Cir. 2003) ("[T]here is a strong

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policy of determining cases on their merits and we therefore view defaults with disfavor.").

A. Subject Matter Jurisdiction

"It is . . . axiomatic that the inferior federal courts are courts of limited jurisdiction. They are 'empowered to hear only those cases within the judicial power of the United States as defined by Article III of the Constitution,' and which have been entrusted to them by a jurisdictional grant authorized by Congress." Univ. of S. Ala. v. Am. Tobacco Co., 168 F.3d 405, 409 (11th Cir. 1999) (quoting Taylor v. Appleton, 30 F.3d 1365, 1367 (11th Cir. 1994)). Accordingly, "it is well settled that a federal court is obligated to inquire into subject matter jurisdiction sua sponte whenever it may be lacking." Id.

Under 28 U.S.C. § 1345, "[e]xcept as otherwise provided by Act of Congress, the district courts shall have original jurisdiction of all civil actions, suits or proceedings commenced by the United States, or by any agency or officer thereof expressly authorized to sue by Act of Congress." "This suit was brought not by the United States but by the Secretary of Labor. Therefore, the issue is not whether the United States could initiate such a suit in the district court but whether the Secretary can...[F]or section 1345 jurisdiction to exist over this action, the Secretary must be expressly authorized to sue." Marshall v. Gibson's Products, Inc. of Plano, 584 F.2d 668, 676 (5th Cir. 1978).3

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The Secretary has asserted claims that the Defendants have violated the minimum wage and overtime compensation requirements of 29 U.S.C. §§ 206 and 207, respectively, which also constitute violations of 29 U.S.C. § 215(a)(2) (making it "unlawful for any person to violate any of the provisions of section 206 or section 207 of this title..."). The Secretary has demanded damages under 29 U.S.C. § 216(c), which expressly provides that the "Secretary is authorized to supervise the payment of the unpaid minimum wages or the unpaid overtime compensation owing to any employee or employees under section 206 or section 207 [and] may bring an action in any court of competent jurisdiction to recover the amount of unpaid minimum wages or overtime compensation and an equal amount as liquidated damages." See Mitchell v. Robert De Mario Jewelry, Inc., 260 F.2d 929, 932 (5th Cir. 1958) ("In the drafting of the 1949 [Fair Labor Standards Amendments] there was included as Section 16(c) the provision that, with the exceptions stated, the Administrator, now the Secretary, could sue with the consent of the employees for unpaid minimum wages and unpaid overtime compensation. Thus was created a cause of action in the Secretary. Suits by him under the statute are, in effect, suits by the United States."), rev'd on other grounds, Mitchell v. Robert DeMario Jewelry, Inc., 361 U.S. 288 (1960).

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The Secretary has also requested injunctive relief under 29 U.S.C. § 217, which provides that the "district courts... shall have jurisdiction, for cause shown, to restrain violations of section 215 of this title, including in the case of violations of section 215(a)(2) of this title the restraint of any withholding of payment of minimum wages or overtime compensation found by the court to be due to employees under this chapter..." The Eleventh Circuit has held that "the Secretary of Labor has the exclusive right to bring an action for injunctive relief" under the FLSA. Powell v. State of Fla., 132 F.3d 677, 678 (11th Cir. 1998) (per curiam). Thus, because the FLSA has expressly authorized the Secretary to sue for the relief requested, this Court has subject matter jurisdiction under § 1345.

B. Personal Jurisdiction and Venue4

The Secretary's Complaint alleges that both Defendants conduct business in Mobile County, Alabama, and that all relevant actions occurred in this district. These uncontested allegations indicate that the Court can properly exercise personal jurisdiction over both Defendants and that venue is proper in this District.

C. Sufficiency of the Complaint

"An allegation - other than one relating to the amount of damages - is admitted if a responsive pleading is required and the allegation is not denied." Fed. R. Civ. P. 8(b)(6). "While 'a default is not treated as an absolute confession by the

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defendant of his liability and of the plaintiff's right to recover,' a defaulted defendant is deemed to 'admit[ ] the plaintiff's well-pleaded allegations of fact.' The defendant, however, 'is not held to admit facts that are not well-pleaded or to admit conclusions of law.' Thus, before entering a default judgment for damages, the district court must ensure that the well-pleaded allegations in the complaint, which are taken as true due to the default, actually state a substantive cause of action and that there is a substantive, sufficient basis in the pleadings for the particular relief sought." Tyco Fire & Sec., LLC v. Alcocer, 218 F. App'x 860, 863 (11th Cir. 2007) (per curiam) (unpublished) (quoting Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)) (footnote omitted). See also Chudasama v. Mazda Motor Corp., 123 F.3d 1353, 1371 n.41 (11th Cir. 1997) ("[A] default judgment cannot stand on a complaint that fails to state a claim." (citing Nishimatsu Constr., 515 F.2d at 1206 ("See Nishimatsu Constr. Co. v. Houston Nat'l Bank, 515 F.2d 1200, 1206 (5th Cir.1975) ("A default judgment is unassailable on the merits but only so far as it is supported by well-pleaded allegations, assumed to be true.")).

The FLSA currently provides that, subject to certain inapplicable exceptions, "[e]very employer shall pay to each of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, wages" in the amount of $7.25 an hour. 29 U.S.C. § 206(a)(1)(C). The FLSA also provides that, subject to certain inapplicable exceptions, "no employer shall employ

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any of his employees who in any workweek is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed. 29 U.S.C. § 207(a)(1). It is "unlawful for any person...to violate any of the provisions of section 206 or section 207..." 29 U.S.C. § 215(a)(2).

By failing to answer the allegations in the Complaint, Patel has admitted that, at all relevant times, he "acted directly or indirectly in the interest of" GCMC "in relation to their employees," as he "makes final decisions on the operation of the enterprise, is responsible for maintaining compliance with the Hilton franchise agreement, and the general manager answers directly to him." (Id. at 2). Thus, Patel deemed an "employer" for purposes of the FLSA. See 29 U.S.C. § 203(d) (" 'Employer' includes any person acting directly or indirectly in the interest of an employer in relation to an employee...").

Moreover, by failing to answer the allegations in the Complaint, both Defendants have admitted that they "engaged in related activities performed either through unified operation or common control for a common business purposes" (Doc. 1 at 2), which constitutes an "enterprise" under the FLSA. See 29...

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