Russell v. Continental Restaurant, Inc.

• Decision Date: 12 May 2006
• Docket Number: Civil Action No. AW-06-214.
• Citation: 430 F.Supp.2d 521
• Parties: Joyce B. RUSSELL, Plaintiff, v. CONTINENTAL RESTAURANT, INC., et al., Defendants.
• Court: U.S. District Court — District of Maryland

Page 521

430 F.Supp.2d 521

Joyce B. RUSSELL, Plaintiff, v. CONTINENTAL RESTAURANT, INC., et al., Defendants.

Civil Action No. AW-06-214.

United States District Court, D. Maryland, Southern Division.

May 12, 2006.

Mitchell I. Batt, Sullivan, Talbott and Batt, Rockville, MD, for Plaintiff.

Jay R. Fries, Kathleen A. Talty, Kruchko and Fries, Baltimore, MD, for Defendants.

MEMORANDUM OPINION

WILLIAMS, District Judge.

Plaintiff Joyce B. Russell ("Russell" or "Plaintiff') brings this suit against Continental Restaurant, t/a Pegaso Restaurant, ("Pegaso"), Nasrin Nawabi-Nazari ("Nawabi-Nazari"), and Nazir Nazari ("Nazari") (collectively, "Defendants") alleging violations of Fair Labor Standards Act of 1938, 29 U.S.C. §§ 201 to 219 (2006), the Maryland Wage and Hour Law, Md.Code Ann., Lab. and Empl. §§ 3-401 to 431 (West 2006), as well as the Maryland Wage Payment and Collection Act, Md.Code Ann., Lab. and Empl. §§ 3-501 to 3-509. Currently pending before the Court is Defendants' Motion to Dismiss the Amended Complaint [10]. The Court has reviewed the entire record, as well as the Pleadings, with respect to the instant motion. No hearing is deemed necessary. See Local Rule 105.6 (D.Md.2004). For the reasons stated below, the Court will GRANT Defendants' Motion and dismiss this case for lack of subject matter jurisdiction.

FACTUAL AND PROCEDURAL BACKGROUND

Pegaso is a restaurant located in Montgomery County, Maryland. Defendants Nawabi-Nazari and Nazari own Pegaso and play an active role in the daily operation of the restaurant. According to tax returns submitted to this Court, Pegaso's gross sales receipts did not exceed $500,000 for 2003, 2004, or 2005.

Plaintiff worked as a waitress for Pegaso from July 2002 to January 15, 2006. Before July 2002, Plaintiff was employed by Pegaso's predecessor. Describing her duties as a waitress at the restaurant, Plaintiff states that she "and other employees handled goods ... which were moved in or produced for commerce and transported to the restaurant across interstate lines." Am. Compl. ¶ 14. She also states that she served customers who may have traveled interstate.

Plaintiff has alleged that during the course of her employment with Pegaso, she regularly worked in excess of forty hours per week and was not paid overtime for these hours worked. She also asserts that Pegaso did not pay her minimum wage for any of these hours.

Plaintiff commenced this suit against Defendants on January 25, 2006. On March 14, 2006, Plaintiff filed an Amended Complaint. In response to the Amended Complaint, Defendants have filed the instant Motion to Dismiss, alleging that this Court lacks subject matter jurisdiction over this matter. This Motion is ripe and ready for review, and an Opinion will now issue.

STANDARD OF REVIEW

A motion to dismiss under Rule 12(b)(1) of the Federal Rules of Civil Procedure for lack of subject matter jurisdiction may be founded on either of two bases. As with a motion to dismiss under Rule 12(b)(6), a Rule 12(b)(1) motion to dismiss may challenge subject matter jurisdiction by demonstrating that the complaint "fails to allege facts upon which subject matter jurisdiction can be based." Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir.1982). With this type of 12(b)(1) motion, the "facts in the complaint are assumed to be true, and the plaintiff, in effect, is afforded the same procedural protection as [it] would receive under a Rule 12(b)(6) consideration." Id.

In the alternative, a Rule 12(b)(1) motion may assert a lack of subject matter jurisdiction "in fact" apart from any pleading. See id. In such cases, a court may look beyond the allegations in the complaint to determine whether any evidence supports the exercise of jurisdiction. See Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th Cir.1991); see also Sharafeldin v. Maryland Dept. of Public Safety & Correctional Services, 94 F.Supp.2d 680, 684-85 (D.Md.2000) (when a defendant challenges subject matter jurisdiction on a motion to dismiss, the court may consider evidence outside the pleadings without converting the motion to a motion for summary judgment).

Whether the defendant attacks jurisdiction under the former or latter theory, once the issue of subject matter jurisdiction has been raised, the plaintiff bears the burden of proving that subject matter jurisdiction exists in the federal courts. Evans v. B.F. Perkins Co., a Div. of Standex Int'l Corp., 166 F.3d 642, 647 (4th Cir. 1999).

ANALYSIS

Plaintiff alleges in the Amended Complaint that this Court has jurisdiction over her suit under 28 U.S.C. § 1331. Section 1331 confers district courts with original jurisdiction "of all civil actions arising under the Constitution, laws, or treaties of the United States." 28 U.S.C. § 1331. The Fair Labor Standards Act of 1938 (the "FLSA") is a federal law. Therefore, the question that this Court must resolve is whether, under any circumstances, the FLSA could provide a remedy for the conduct alleged in Plaintiff's Amended Complaint.

I. The Fair Labor Standards Act of 1938

Count I of the Amended Complaint alleges violations of Sections 206 and 207 of the FLSA. Section 206 requires that employers pay employees "engaged in commerce or in the production of goods for commerce" at least the minimum wage set by statute, which presently is $5.15 per hour. See 29 U.S.C. § 206(a)(1). Section 207 prohibits businesses from employing workers "engaged in commerce or in the production of goods for commerce" for more than forty hours per week unless the employer pays the worker at one and one-half times his or her regular rate for the hours in excess of forty hours. See 29 U.S.C. § 207. Defendants argue that neither provision applies to Pegaso because the restaurant is not an "enterprise engaged in commerce" under the FLSA and Plaintiff was not "engaged in commerce or in the production of goods for commerce."

The FLSA covers all employees, regardless of the type of work they perform, if they are employed by "an enterprise engaged in commerce," as defined by Section 3(s) of the statute.¹ In order for an enterprise to be "engaged in commerce," it must have annual gross volume of sales made or business done in excess of $500,000. See 29 U.S.C. § 203(s)(1)(A)(ii). Defendants have attached both an affidavit and the tax returns for the prior three years to their Motion to Dismiss, and these documents reflect that Pegaso's gross sale volume falls short of $500,000. In light of the evidence presented by Defendants, this Court finds Defendants have established that the restaurant does not meet the FLSA "enterprise" standard.

Plaintiff claims that it is premature for this Court to make a dispositive finding with respect to the gross volume of sales issue and asks that this Court provide her an opportunity to conduct further discovery. As discovery on this matter would not lead to any genuine issues of fact, this Court cannot accede to Plaintiff's request. Cf. Strag v. Board of Trustees, 55 F.3d 943, 954 (4th Cir.1995) (holding that a court may deny a Rule 56(f) motion "where the additional evidence sought for discovery would not have by itself created a genuine issue of material fact sufficient to defeat summary judgment").

Even if an employer does not meet the "enterprise engaged in commerce" requirements, the FLSA's provision may cover a particular employee if that employee was "engaged in commerce or in the production of goods." See 29 U.S.C. §§ 206 and 207. To determine whether an employee performed such work, a court must focus its inquiry on the activities of the employee and not on the business of the employer. See Mitchell v. Lublin McGaughy and Assocs., 358 U.S. 207, 211, 79 S.Ct. 260, 3 L.Ed.2d 243 (1959).

Although courts have read the FLSA expansively, it is uniformly recognized that in enacting the FLSA, Congress did not exercise its full authority under the Commerce Clause. See id. ("Congress, by excluding from the Act's coverage employees whose activities merely `affect commerce,' indicated its intent not to make the scope of the Act coextensive with its power to regulate commerce"); McLeod v Threlkeld, 319 U.S. 491, 497, 63 S.Ct. 1248, 87 L.Ed. 1538 (1943); see also Wirtz v. R.E. Lee Electric Co., 339 F.2d 686, 689 (4th Cir.1964). In McLeod v. Threlkeld, the Supreme Court found it significant that Congress rejected a proposal to have the FLSA cover employees "engaged in commerce in any industry affecting commerce" in favor of the language, "each of his employees who is engaged in commerce or in the production of goods for commerce." McLeod, 319 U.S. at 497 n. 2, 63 S.Ct. 1248 (citing Kirschbaum v. Walling, 316 U.S. 517, 62 S.Ct. 1116, 86 L.Ed. 1638 (1942) and Walling v. Jacksonville Paper Co., 317 U.S. 564, 63 S.Ct. 332, 87 L.Ed. 460 (1943)). Based on the legislative history, the Court surmised that "[t]he selection of the smaller group was deliberate and purposeful." Id.

The implementing regulations to the FLSA emphasize this point, noting:

Although [the FLSA's definition of "engaged in commerce"] does not include employees engaged in activities which merely "affect" such interstate or foreign commerce, ... coverage of the act based on engaging in commerce extends to every employee employed "in the channels of" such commerce or in activities so closely related to such commerce, as a practical matter, that they should be considered a part of it.

29 C.F.R. § 776.9. Therefore the definitive test is not whether the employee's tasks have some remote effect on interstate commerce, but whether the employee participated in the channels of commerce.

Plaintiff does not attempt to argue that she assisted in the production of goods for commerce, but rather asserts that she was "engaged in commerce" when she performed the following duties: (1) communicating across state lines with respect to vendors, customers, and credit card payments and (2) handling goods which were "moved in...