Valdez v. Celerity Logistics, Inc.

• Decision Date: 26 February 2014
• Docket Number: Civil Action No. 3:12–CV–4368–D.
• Parties: Jesus Andres VALDEZ, et al., Plaintiffs, v. CELERITY LOGISTICS, INC., et al., Defendants.
• Court: U.S. District Court — Northern District of Texas

999 F.Supp.2d 936

Jesus Andres VALDEZ, et al., Plaintiffs

v.CELERITY LOGISTICS, INC., et al., Defendants.

Civil Action No. 3:12–CV–4368–D.

United States District Court, N.D. Texas, Dallas Division.

Feb. 26, 2014.

Jamie Harrison Zidell, Robert Lee Manteuffel, Weina Zhou, JH Zidell PC, Dallas, TX, for Plaintiffs.

Jay Marshall Wallace, Marie Ann McCrary, Ross Angus Williams, Bell Nunnally & Martin LLP, Dallas, TX, for Defendants.

MEMORANDUM OPINION AND ORDER

SIDNEY A. FITZWATER, Chief Judge.

In this action alleging overtime pay and minimum wage violations and retaliation under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq., defendants move to dismiss under Fed.R.Civ.P. 12(b)(6) for failure to state a claim on which relief can be granted, and one defendant moves under Rule 12(e) for a more definite statement. Among the questions presented by the motions to dismiss is whether plaintiffs have pleaded a plausible claim for successor liability. For the reasons that follow, the court grants the motions to dismiss, grants plaintiffs leave to replead, and denies the motion for more definite statement.

I

This is an action under the FLSA by plaintiffs Jesus Andres Valdez, Marta Patricia Castillo, and all others similarly situated against defendants Segue Distribution, Inc. (“Segue”), Celerity Logistics, Inc. (“CLI”), Celerity Acquisitions, Inc. d/b/a Celerity Logistics Company (“CAI”), Insperity, Inc. f/k/a Administaff, Inc., BeavEx, Inc. (“BeavEx”),¹ Mike Medley, and Scott Watts. Plaintiffs assert claims for overtime and minimum wage violations under the FLSA, as well as for successor liability and for retaliation under the FLSA's anti-retaliation provision, 29 U.S.C. § 215(a)(3). Pertinent to the instant motions, plaintiffs allege that BeavEx acquired the assets of CAI, who had previously acquired the assets of CLI, who had previously acquired the assets of Segue. Plaintiffs further allege that each successor (BeavEx, CAI, and CLI) “has or had the same managers / supervisors, business model, employees, equipment and facilities and provides or provided the same services to the same clientele as its predecessor.” Am. Compl. ¶¶ 29(CLI), 30(CAI), 31 (BeavEx). Under plaintiffs' successor liability theory, BeavEx, as the successor corporation to CAI, is liable for the liabilities of CAI, who is in turn liable for the liabilities of CLI, who is in turn liable for the liabilities of Segue.²

CLI and CAI move to dismiss plaintiffs' successor liability claim, contending that successor liability does not apply to FLSA claims, and that, even if it does, plaintiffs have not pleaded a plausible claim for successor liability. By separate motion,³ BeavEx moves to dismiss plaintiffs' successor liability claim on similar grounds, and it also moves under Rule 12(e) for a more definite statement regarding plaintiffs' allegations about their employment with BeavEx.⁴ Plaintiffs oppose the motions.

II

“In deciding a Rule 12(b)(6) motion to dismiss, the court evaluates the sufficiency of plaintiffs' amended complaint by ‘accepting all well-pleaded facts as true, viewing them in the light most favorable to the plaintiff.’ ” Bramlett v. Med. Protective Co. of Fort Wayne, Ind., 855 F.Supp.2d 615, 618 (N.D.Tex.2012) (Fitzwater, C.J.) (quoting In re Katrina Canal Breaches Litig., 495 F.3d 191, 205 (5th Cir.2007) (internal quotation marks and alteration omitted)). To survive a motion to dismiss under Rule 12(b)(6), plaintiffs must plead “enough facts to state a claim to relief that is plausible on its face.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). “A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). “The plausibility standard is not akin to a ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.; see also Twombly, 550 U.S. at 555, 127 S.Ct. 1955 (“Factual allegations must be enough to raise a right to relief above the speculative level[.]”). “[W]here the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged—but it has not ‘shown’—‘that the pleader is entitled to relief.’ ” Iqbal, 556 U.S. at 679, 129 S.Ct. 1937 (quoting Rule 8(a)(2)) (alteration omitted). “Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice.” Id. at 678, 129 S.Ct. 1937 (citation omitted).

III

The court first considers defendants' Rule 12(b)(6) motions to dismiss plaintiffs' successor liability claim.

A

Defendants contend that the successor liability doctrine does not apply to FLSA claims, and that, even if it does, plaintiffs have failed to state a claim for successor liability because they have not pleaded facts, with sufficient specificity, that would satisfy the requirements of such a claim. Plaintiffs respond that successor liability is cognizable under the FLSA and that the allegations in their amended complaint are sufficient to state a plausible claim.

B

When a company is sold in an asset sale, the buyer ordinarily acquires the company's assets but not its liabilities. See Teed v. Thomas & Betts Power Solutions, L.L. C., 711 F.3d 763, 764 (7th Cir.2013). Under federal common law, there is an exception to this general rule known as the doctrine of successorship or successor liability. This doctrine is “derived from labor law principles enunciated in four Supreme Court cases.” Rojas v. TK Commc'ns, Inc., 87 F.3d 745, 749 (5th Cir.1996) (citing John Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 84 S.Ct. 909, 11 L.Ed.2d 898 (1964) ; NLRB v. Burns Int'l Sec. Servs., Inc., 406 U.S. 272, 92 S.Ct. 1571, 32 L.Ed.2d 61 (1972) ; Howard Johnson Co. v. Det. Local Joint Exec. Bd., 417 U.S. 249, 94 S.Ct. 2236, 41 L.Ed.2d 46 (1974) ; Fall River Dyeing & Finishing Corp. v. NLRB, 482 U.S. 27, 107 S.Ct. 2225, 96 L.Ed.2d 22 (1987) ). Although initially developed in the context of labor relations, the doctrine of successor liability has been extended to statutes governing employment discrimination, such as Title VII of the Civil Rights Act of 1964 (“Title VII”), 42 U.S.C. § 2000e et seq. Id. at 750. The doctrine's underlying policy “is that an employee's statutory rights should not be vitiated by the mere fact of a sudden change in the employer's business.” Musikiwamba v. ESSI, Inc., 760 F.2d 740, 750 (7th Cir.1985) ; see also Rojas, 87 F.3d at 750 (“The policy underlying the successor doctrine [is] to protect an employee when the ownership of his employer suddenly changes[.]”). The doctrine is generally applied in circumstances where, absent successor liability, an employer could complete a corporate sale that would extinguish its liability to the workers, and the workers would be powerless to stop it. See Teed, 711 F.3d at 766.

The Fifth Circuit has not decided whether successor liability is available under the FLSA. In Powe v. May, 62 Fed.Appx. 557 (5th Cir.2003) (per curiam), the panel assumed, without deciding, that the doctrine applies to the FLSA. CLI and CAI suggest that Powe supports the conclusion that successor liability is never appropriate under the FLSA, but their assertion lacks force.

In Powe a former deputy sheriff of a Louisiana parish sued the current sheriff for violations of the FLSA that occurred during the tenure of the defendant-sheriff's predecessor. Id. at 557. The district court concluded that the current sheriff could not be held liable under the successor doctrine for the acts of his predecessor, and the Fifth Circuit affirmed.Id. The Fifth Circuit explained:

Because we find that liability under the federal successorship doctrine is inappropriate in this case, we assume without deciding that the doctrine applies to the FLSA. There are three main criteria for imposing successor liability: (1) a substantial continuity of business operations from the previous entity to its successor; (2) notice to the successor; and (3) the successor's ability to provide relief. There is insufficient continuity between [the prior sheriff's] administration and [the defendant's] administration to justify the imposition of successor liability.

Id. (citing Rojas, 87 F.3d at 750 ). The panel reasoned that substantial continuity did not exist because, under the Louisiana Constitution, each sheriff is elected and every sheriff is a political subdivision unto himself. Id. It also noted that, under Louisiana law, there is no continuity of assets between administrations because each sheriff is responsible for raising and spending his own funds. Id. And the panel concluded that imposing successor liability would be counterproductive because it would hinder the defendant's ability to police the parish but would not deter future FLSA violations, because the successor's term would expire on a predetermined basis. Id.

Although in Powe the Fifth Circuit affirmed the district court's conclusion that there was no successor liability, the case does not stand for the proposition that successor liability never applies under the FLSA. The panel assumed, without deciding, that the doctrine did apply, and nothing in the opinion suggests that the Fifth Circuit would decline to enforce successor liability in an appropriate FLSA case. The panel relied on factors that are unique to the political and economic reality of a sheriff's office in Louisiana. These factors are inapposite to a case like this one.

Two other circuits have squarely addressed the question, and both have held that successor liability is available under the FLSA. In Steinbach v. Hubbard, 51 F.3d 843 (9th Cir.1995), the Ninth Circuit borrowed the test for analyzing successor liability claims under the National Labor Relations Act and held that successor liability can attach under the FLSA depending on...