IN THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF PENNSYLVANIA
September 8, 2011
COLLETTE DAVIS, ET AL., PLAINTIFFS,
ABINGTON MEMORIAL HOSPITAL, ET AL., DEFENDANTS. SUSAN FRATTAROLA, ET AL., PLAINTIFFS,
MERCY HEALTH SYSTEM OF SOUTHEASTERN PENNSYLVANIA, ET AL., DEFENDANTS. KENNETH LYNN, ET AL., PLAINTIFFS,
ARIA HEALTH SYSTEM, ET AL., DEFENDANTS. KENNETH LYNN, ET AL., PLAINTIFFS,
JEFFERSON HEALTH SYSTEM, INC., ET AL., DEFENDANTS. CASSANDRA RUFF, ET AL., PLAINTIFFS,
ALBERT EINSTEIN HEALTHCARE NETWORK, ET AL., DEFENDANTS. JOHN DUNCHESKIE, ET AL., PLAINTIFFS,
TEMPLE UNIVERSITY HEALTH SYSTEM, ET AL., DEFENDANTS.
The opinion of the court was delivered by: Rufe, J.
MEMORANDUM ORDER & OPINION
In these six related putative collective and class actions, Plaintiffs claim that their employers, various hospital systems and their affiliates, located in and around the Philadelphia metropolitan area, violated federal and state laws by failing to pay them for all hours they worked. Defendants' joint motion to dismiss, Plaintiffs' joint opposition thereto, and Defendants' joint reply are before the Court.*fn1 This Motion has been fully briefed and is now ripe for disposition.
A. PROCEDURAL BACKGROUND
In November 2009, the Plaintiffs in each of these six cases filed parallel complaints against six agglomerations of health-care providers in this Court and in the Philadelphia County Court of Common Pleas.*fn2 Both the state and federal complaints alleged that Plaintiffs were not properly paid by their employers for all time that they allegedly worked. The complaints filed in this Court brought only federal claims; the state court complaints included only state law claims.
Although maintained as separate actions, the allegations in each set of complaints were essentially identical.
In December 2009, the Defendants in each of these actions removed the state court actions to this Court on grounds that the asserted state law claims fell within the scope of Section 502(a)(1) of the Employee Retirement Income Security Act ("ERISA").*fn3 Three of the six defendants also relied upon the express preemption provisions of ERISA Section 514(a),*fn4 and three defendants removed on grounds that Plaintiffs' Wage Payment and Collection Law ("WCPL")*fn5 and breach-of-contract claims were preempted by, and removable under, Section 301 of the Labor Management Relations Act ("LMRA").*fn6 Plaintiffs subsequently moved to remand.
The Court denied Plaintiffs' motions, concluding that ERISA preempted all Plaintiffs' state law claims in their entirety, and that, in the three cases which raised the issue,*fn7 Section 301 of the LMRA preempted Plaintiffs WPCL and breach-of-contract claims.*fn8
After consolidating their state and federal claims into a single complaint, Plaintiffs in each case filed Amended Complaints on October 15, 2010. Paying little heed to the Court's holdings regarding ERISA and the LMRA's preemptive effect, Plaintiffs reassert all state law claims in the pending eighteen-count Amended Complaints (each of which is identical in all material respects).
Thus, Plaintiffs maintain that they were denied applicable premium pay and overtime in violation of the Fair Labor Standards Act ("FLSA"),*fn9 the Pennsylvania Minimum Wage Act ("PMWA"),*fn10 and the WPCL. Plaintiffs also assert claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO")*fn11 and common law for the same conduct. Finally, Plaintiffs allege that Defendants failed to keep accurate records of employees' hours worked and breached their fiduciary duties in violation of ERISA and Pennsylvania law.*fn12
Defendants responded by jointly moving to dismiss all pending Amended Complaints, pursuant to Federal Rules of Procedure 12(b)(6) and 12(b)(1).*fn13 For purposes of this joint motion, the Parties rely upon and reference the Amended Complaint in Ruff, et al. v. Albert Einstein Healthcare Network, et al.*fn14 as representative of all the Amended Complaints filed in these actions.*fn15 The Court will do likewise.
B. FACTUAL BACKGROUND
The three named Plaintiffs are employed by one or more of the
Defendants (the complaint
does not specify) and are hourly, non-exempt workers.*fn16
They seek to represent a class of some 7,100 similarly situated individuals.*fn17
The named Plaintiffs allege that they are employees of the "Albert Einstein Health Care Network," which they define as an association of 86 entities and two individuals.*fn18 These entities come in three forms: (1) the "Named Defendants," a group of "related organizations" that includes Defendants Albert Einstein Healthcare Network,*fn19 Albert Einstein Medical Center, Elkins Park Hospital, Germantown Hospital, Albert Einstein Medical Center Employees Retirement Plan, and Albert Einstein Healthcare Network Tax Sheltered Annuity Plan, and two officers of Albert Einstein Healthcare Network;*fn20 (2) a group of twenty-one "Health Centers" (presumably owned by the Named Defendants);*fn21 and (3) a group of fifty-nine "Affiliates."*fn22 Plaintiffs contend that the Defendants maintained three illegal work and pay policies ("the Unpaid Work Policies"):*fn23 (1) the "Unpaid Meal Break Policy," pursuant to which Defendants automatically took a daily half-hour deduction from Plaintiffs' paychecks for a meal break, even though Plaintiffs often had to work through those breaks;*fn24 (2) the "Unpaid Preliminary and Postliminary Work Policy," pursuant to which Defendants did not pay Plaintiffs for work performed before and after their shifts;*fn25 and the "Unpaid Training Policy" pursuant to which Defendants did not pay Plaintiffs for time spent at compensable training sessions.*fn26
In reviewing a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief may be granted, the Court must accept a plaintiff's factual allegations as true and construe the complaint in the light most favorable to the plaintiff.*fn27 Courts are not, however, bound to accept as true legal conclusions couched as factual allegations,*fn28 or "accept as true unsupported conclusions and unwarranted inferences."*fn29 The Complaint must set forth "direct or inferential allegations [for] all the material elements necessary to sustain recovery under some viable legal theory."*fn30 And it must allege "enough facts to state a claim for relief that is plausible on its face."*fn31 "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that the defendant acted unlawfully."*fn32
A. FLSA CLAIMS
The basic prerequisite for any FLSA lawsuit is an employment relationship between the plaintiffs and defendant.*fn33 Thus, in a FLSA collective action, every defendant must have been the employer of at least one named plaintiff. The FLSA definition of employer is broad, and encompasses any entity that "directly or indirectly" employed the Plaintiffs.*fn34 To determine whether a particular entity is an employer, the court looks to the economic realities of the particular work environment.*fn35 This test focuses on whether an employee is economically dependent on an employer, rather than on "technical concepts" of employment,*fn36 and permits an employee to have multiple employers that are simultaneously responsible for compliance with FLSA.*fn37
Defendants contend, inter alia, that Plaintiffs have not sufficiently pled that any particular defendant is an "employer" under the FLSA. The Court agrees. The number of alleged employers listed in each complaint ranges from 66 to 218, with 86 entities and two individuals listed in the Ruff complaint.*fn38 That bounty of potential employers notwithstanding, Plaintiffs somehow fail to allege facts establishing a single employer-employee relationship.
For example, in Ruff, Plaintiffs allege that they are simultaneously the "employees" of 86 entities and two individuals. Nowhere, however, does the Complaint set forth basic information about the named Plaintiffs. Plaintiffs do not allege: to which of these 86 entities they reported each day; from whom they received their paycheck; information about who, specifically, set their rate of pay and other conditions of their employment; or who directly supervised their employment. Plaintiffs suggest that it is immaterial (1) for whom they actually performed services during their employment; and (2) the actual relationship of their direct employer with the various Named Defendants, Healthcare facilities, and Affiliates specified in the complaint because all defendants are liable under either the joint-employer or single-employer theory of liability.
But Plaintiffs have taken the concept of "joint employer" several steps too far. A joint employment relationship can exist when employers are not "completely associated" with respect to the employment of individuals, or where one employer is controlled by another, or the employers are under common control.*fn39 Plaintiffs fail to allege that one or several entities jointly employ them, contending instead that 86 organizations-some of which are separately incorporated or organized-all benefit in some way from their labors, and that they, in turn, are "economically dependent" on each of those entities. Thus, according to Plaintiffs' theory, all of the defendants are all of their employers. The Amended Complaint, however, lacks any factual support to substantiate this conclusory assertion.
Although these 86 entities, while separate units, could be acting jointly to control the terms of Plaintiffs' employment, the Court cannot assess whether a joint-employer relationship exists without facts alleging the basic terms of the primary employment-employer relationship.
Thus, Plaintiffs have put the cart before the horse: they fill the Amended Complaint with conclusory labels describing the relationships between the Defendants,*fn40 but never allege for which of the 86 entities they actually worked or the nature of the relationship between those entities. And without facts alleging who exercised primary control over Defendants, the Court cannot embark on a joint-employer analysis.
Other Courts have reached the same conclusion. In Cavallaro v. UMass Memorial Health Care, Inc.,*fn41 a Massachusetts District Court rejected a substantially similar complaint alleging a joint-employer relationship.*fn42 The court faulted the plaintiffs for their failure to "allege when they began working, what position they [held], or which defendants supervise their daily work schedules . . . the location at which they work, what they do at work, or what tasks they perform."
Similarly, in Nakahata v. New York-Presbyterian Healthcare System, Inc.,*fn43 a Southern District of New York Court, again analyzing a substantially similar complaint, concluded that "the complaints are deficient due to the failure to specify which entity, among the many named defendants, employed the respective plaintiffs. Certainly if one entity did not pay an employee for overtime, that is an insufficient basis for naming every other health care facility affiliated with the employer." Cavarallo and Nakahata are persuasive: were the Court to permit the Plaintiffs to proceed without identifying where they worked or in what capacity, Defendants would be forced to guess which of their many business relationships gave rise to FLSA liability.
The single-employer theory of liability is likewise of no help to Plaintiffs because of their pleading deficiencies.*fn44 Under this theory, "nominally separate companies may be so interrelated that they constitute a single employer."*fn45 Plaintiffs' failure to identify that any single defendant as their employer is fatal. As Cavarallo explained, allegations about the plaintiffs' nominal employer are a prerequisite for single-employer theory:
The single-employer theory of liability typically arises when one entity is a plaintiff's legal employer, but the plaintiff seeks to hold another entity liable because of corporate interrelation. [P]laintiffs have not alleged facts that establish that any one of the individual defendants is their nominal employer. Without the foundation for in the first instance identifying which defendant is plaintiffs' legal employer, it would serve no purpose to inquire into whether the . . . other corporate defendants are sufficiently interrelated so as to constitute one integrated employer.*fn46
In short, in order to proceed on their FLSA claim, Plaintiffs must include basic information about the named Plaintiffs.*fn47 Without this information, the Court and the Defendants are unable to determine the extent to which any of the 86 entities and/or individuals could be liable, either as primary violators, or through any derivative liability theory.*fn48 The Amended Complaint is thus the antithesis of "notice" pleading, and must be dismissed.*fn49
B. ERISA CLAIMS
Counts Two and Three of Plaintiffs' Amended Complaint allege that because of the illegal work and pay policies, Defendants failed to keep accurate records of hours worked by plaintiffs in violation of ERISA § 209(a)(1), and breached its fiduciary duty under the Albert Einstein Medical Center Employees Retirement Plan and Albert Einstein Healthcare Network Tax Sheltered Annuity Plan.
Because Plaintiffs have failed to allege a FLSA violation, these claims also fail.*fn50 Without sufficient allegations establishing an employer-employee relationship, it is impossible to determine whether any of the defendants, named or otherwise, owed Plaintiffs a fiduciary duty, or had "sufficient control over the hours plaintiffs are deemed to have worked.*fn51 Further, absent any description of the terms of the ERISA plans to which Plaintiffs were subject,*fn52 it is impossible to determine whether it was "the responsibility of the ERISA plan to keep records, in the first instance, of the number of hours plaintiffs worked."*fn53
C. RICO CLAIMS
Plaintiffs also attempt to cast the Defendants' failure to provide full compensation as a RICO violation. Plaintiffs contend that the Defendants devised a scheme to underpay them, and that they furthered that scheme by mailing to the Plaintiffs misleading paychecks which led Plaintiffs to believe "defendants had included all compensable work time."*fn54 The plan language in Frattarola, Jefferson, and Aria-which is similar to that at issue in Henderson-requires Plan Administrators to calculate benefits based on wages paid, not owed. Thus, even if Plaintiffs corrected the other deficiencies in their ERISA claims, Plaintiffs in these cases cannot state a Section 209 claim against Defendants, or a related claim that Defendants failed its fiduciary obligation to investigate and ensure contributions were being accurately provided to the fund on this basis.
To assert a valid RICO claim, a plaintiff must allege (1) conduct (2) of an enterprise (3) through a pattern (4) of racketeering activity, and an injury to property or business resulting from the conduct.*fn55 "Racketeering Activity" refers to any one of the crimes listed as predicate acts by the statute.*fn56 These predicate acts include mail fraud, the criminal activity that Plaintiffs have alleged here.*fn57 Because fraud is the alleged predicate act, the heightened pleading requirements of Federal Rule of Civil Procedure 9(b) apply.*fn58
Plaintiffs' claim, which is deficient in several respects, fails chiefly because it does not adequately allege the predicate act of mail fraud. Mail fraud consists of (1) a scheme to defraud, (2) use of the mail or interstate wires to further that scheme, and (3) fraudulent intent.*fn59 Though the mailings need not constitute an essential element of the fraud or even contain a single misrepresentation, the mailing must be "incident to an essential part of the scheme, or a step in the plot."*fn60
In a number of similar cases, courts have rejected nearly identical allegations for failure to properly allege mail fraud. As explained by Cavallaro v. UMass Memorial Health Care Inc.,*fn61 (in an opinion issued prior to the one cited above), mailing paychecks that inform the plaintiffs that they were undercompensated does not further the alleged fraud:
Plaintiffs have failed to show how defendants furthered their allegedly fraudulent scheme by mailing the paychecks in question. According to plaintiffs, the mailed paychecks fraudulently omitted time that they had actually worked, and thus concealed from them the fact that they were not being fully compensated. But if the paychecks were as plaintiffs allege, they did not further defendants' fraudulent scheme; to the contrary, they made the scheme's discovery more likely . . . . Under plaintiff's version of events, the paychecks did not accurately reflect the number of hours worked, although they did accurately reflect the number of hours for which plaintiffs were paid . . . . [S]uch a state of affairs would alert the plaintiffs to the fraudulent scheme, not conceal it. . . . [H]ere, the plaintiffs . . . . know how many hours they have worked and how much money they have been paid. Merely by looking at the face of their paychecks, the plaintiffs can ascertain whether they are being underpaid. And because those paychecks put them on notice of the alleged fraudulent scheme, plaintiffs have failed to state a cause of action under § 1961(c).*fn62
Several courts have adopted the irrefutable logic of this analysis; this Court will follow in kind.*fn63 The RICO allegations are also deficient because they do not meet the heightened pleading standard applicable to alleged mail fraud. RICO mail fraud allegations must "identify the purpose of the mailing within the defendant's fraudulent scheme and specify the fraudulent statement, the time, place, and speaker, and content of the alleged misrepresentation."*fn64
Plaintiffs' complaint does not identify with specificity the "speaker" (or in this case, the issuer) of the allegedly fraudulent paychecks, instead generally contending that "defendants" were responsible for the mailing. To meet the heightened standard, Plaintiffs must, at the very least, specify which of the 86 entities or two individuals mailed the paychecks.*fn65 Thus, Plaintiffs' RICO claims are dismissed.
D. STATE LAW CLAIMS
The only claims remaining (Counts 5 through 18) are based on Pennsylvania law. Although federal courts with original jurisdiction over a federal claim have supplemental jurisdiction over state claims that form "part of the same case or controversy," a court may decline to exercise supplemental jurisdiction over state law claims if "the district court has dismissed all claims over which it has original jurisdiction."*fn66 It is appropriate to decline the exercise of supplemental jurisdiction if the litigation is in its early stages, and where the complaint asserts federal question jurisdiction.*fn67 Here, these factors warrant dismissal of Plaintiffs' state law claims. If Plaintiffs should choose to replead their ERISA claims, however, they are directed to review this Court's previous holding regarding the preemptive effect of ERISA and the LMRA.*fn68
E. LEAVE TO AMEND
Federal Rule of Civil Procedure 15(a) directs the Court to "freely give leave when justice so requires."*fn69 Under this standard, courts will grant a party leave to amend unless the opposing party can establish prejudice, undue delay, bad faith on the part of the movant or futility of amendment. Because there has been no such showing here, Plaintiffs will be granted leave to amend their complaint.
For the foregoing reasons, the Amended Complaints in each of the six related actions at issue shall be dismissed. In dismissing Plaintiffs' claims, this Court joins at least seven other district courts that have dismissed substantially similar complaints as little more than an "aggregation of conclusory statements and general allegations."*fn70 Thus, Plaintiffs' counsel, who represent the Plaintiffs in each of those actions, are on sufficient notice that "[i]t is not enough to simply parrot, word-for-word, the 'vague and conclusory allegations' used 'in more than a dozen actions.'"*fn71 For the Parties' sake, and in the interests of reducing the substantial costs already associated with this litigation, the Court directs Plaintiffs' counsel to remedy the gaping deficiencies noted by this Court and others*fn72 if it chooses to replead.
An appropriate order for each case follows.