Manning v. Boston Medical Center Corp. , 725 F.3d 34 ( 2013 )

United States Court of Appeals
For the First Circuit
Nos. 12-1573, 12-1653
ELIZABETH MANNING ET AL.,
Plaintiffs, Appellants,
v.
BOSTON MEDICAL CENTER CORPORATION;
ELAINE ULLIAN; JAMES CANAVAN,
Defendants, Appellees,
BOSTON REGIONAL MEDICAL CENTER, INC.; BOSTON REGIONAL MEDICAL
CENTER, LLC; BOSTON MEDICAL CENTER 403B RETIREMENT PLAN,
Defendants.
APPEAL FROM THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF MASSACHUSETTS
[Hon. Rya W. Zobel, U.S. District Judge]
Before
Thompson, Stahl, and Lipez,
Circuit Judges.
Guy A. Talia, with whom Patrick J. Solomon and Thomas &
Solomon LLP were on brief, for appellants.
C.J. Eaton, with whom Richard L. Alfred, Kristin G. McGurn,
Jessica M. Schauer, and Seyfarth Shaw LLP were on brief, for
appellees.
August 1, 2013
LIPEZ, Circuit Judge. Plaintiffs Elizabeth Manning, Lisa
Rivers, Rhonda Williams, and Reva McCarthy bring this wage-and-hour
action against defendants Boston Medical Center Corporation
("BMC"), Elaine Ullian, and James Canavan. Current and former BMC
employees, plaintiffs allege that defendants deprived them of their
wages through the use of timekeeping policies and employment
practices that required them to work through their meal and rest
periods, put in extra work time before and after their regularly
scheduled work shifts, and attend mandatory training sessions. The
complaint asserts causes of action under the Fair Labor Standards
Act ("FLSA") and Massachusetts common law for recovery of their
unpaid wages. Plaintiffs also seek certification of a collective
action pursuant to FLSA § 16(b), 29 U.S.C. § 216(b), and a class
action pursuant to Federal Rule of Civil Procedure 23.
This case began as two separate actions, one in federal
court raising FLSA claims, and another in the Massachusetts
Commonwealth court raising state law claims. Defendants removed
the latter action to federal court. After the two cases were
joined via the filing of a single amended complaint, defendants
moved to dismiss all of the claims, both federal and state, and
sought to strike the class and collective action allegations. The
district court granted defendants' motion in its entirety, and
plaintiffs now appeal.
-2-
We have seen this case before, albeit with different
parties. As explained in our prior opinions, see Pruell v. Caritas
Christi, 678 F.3d 10 (1st Cir. 2012); Cavallaro v. UMass Memorial
Healthcare, Inc., 678 F.3d 1 (1st Cir. 2012), numerous lawsuits of
this kind have been filed against hospitals across the country, all
alleging similar forms of systematic undercompensation. These
cases, which we have previously dubbed "hospital compensation
cases," assert "that [defendants] require[] unpaid work through
meal-breaks due to an automatic timekeeping deduction, unpaid
preliminary and postliminary work, and unpaid training sessions."
Pruell, 678 F.3d at 13-14. A number of these actions are being
litigated by counsel for plaintiffs in this case. See id. at 11;
Cavallaro, 678 F.3d at 2.
After careful consideration of the numerous arguments
raised on appeal, we vacate the district court's dismissal of the
FLSA claims against BMC and Ullian, as well as the Massachusetts
common law claims for breach of contract, promissory estoppel,
money had and received, unjust enrichment, and conversion. We also
vacate the striking of plaintiffs' class and collective
allegations. We affirm the district court's directive that the
plaintiffs in the two cases file a single consolidated complaint
and, by extension, the district court's assumption of jurisdiction
over the state law claims. We also affirm the dismissal of the
FLSA claims against Canavan, the fraud and negligent
-3-
misrepresentation claims, and the denial of further leave to amend
the complaint.
I.
A. Factual Background
BMC refers to a group of related organizations that
operate a set of healthcare facilities in the Boston area. The two
individual defendants are Elaine Ullian, BMC's former president and
chief executive officer, and James Canavan, BMC's former senior
human resources director. Plaintiffs are three registered nurses
(Manning, Rivers, and Williams) and one administrative assistant
(McCarthy) who worked or currently work for BMC at several of its
locations. They seek to represent a group of over 4,000 people who
were or are currently employed by BMC as hourly workers. This
group includes individuals in a broad range of positions, from
nurses, medical assistants, technicians, and physical therapists,
to administrative staff, custodians, and home health aides.
The crux of plaintiffs' claims is that defendants denied
BMC's workers full compensation for their work through a
combination of unlawful pay practices and timekeeping policies.
The complaint alleges that BMC employees are not properly
compensated for time spent performing work during their regularly
scheduled meal breaks, as well as time spent before and after their
scheduled shifts. The work that employees perform during their
meal breaks and before and after their shifts includes tending to
-4-
patients, doing paperwork, preparing charts, and responding to
phone calls. Employees are often not relieved by other employees
when the time comes for their meal breaks, forcing them to work
during times when they are ostensibly not supposed to be working.
The complaint suggests that BMC consciously takes
advantage of its employees' dedication and commitment to their
patients, knowing that they would not abandon their caregiving
responsibilities simply because their work hours are over or
because they are due to take a meal or rest break.1
A key aspect of plaintiffs' claims is the interaction of
BMC's alleged policies and practices with the company's timekeeping
system. BMC maintains time records using an automated system that
is programmed to deduct time from the employees' paychecks for
meals, breaks, or other noncompensable time. Despite the fact that
plaintiffs spend much of this time performing regular work
responsibilities, the deductions for their meal break time are
automatic. Plaintiffs also allege that they are "not allowed to
1
Attached to the complaint is an article from The New York
Times describing some of the hospital compensation cases. This
article quotes a registered nurse who worked for a hospital in
Pennsylvania:
'Most nurses put the patient first . . . . We often gave
up lunch breaks to see that a patient was taken care of
properly. . . . If you brought your lunch from home or
got food in the cafeteria and took it to the nursing
unit, you would be interrupted by phone calls, by
physicians and family members who wanted to talk to you.
We really did not have an uninterrupted meal break.'
-5-
record all their work performed" before and after their shifts,
and, even when they are permitted to record that time, they are not
compensated "properly."
Additionally, BMC employees are not paid for time spent
during required training sessions. These trainings take place
during regular work hours and cover subjects directly related to
employees' work responsibilities, including new areas of medical
research and procedure as well as instruction on basic protocols
such as administering cardiopulmonary resuscitation ("CPR").
The complaint further states that BMC and the employees'
supervisors are well aware that employees are performing work
without being paid. Employees are often asked to take on
responsibilities during their meal breaks and before and after
their work shifts. The work is performed on BMC's premises during
operational hours, "in full view of the defendants' managers and
supervisors." Plaintiffs also allege that due to staffing
shortages and other industry demands, BMC's management knows that
the tasks they assign require their employees to work through their
meal breaks and before and after their regularly scheduled shifts.
B. Procedural History
As noted, this case began as two separate actions, one
initiated in the District of Massachusetts and the other in the
Commonwealth courts. We recount their respective paths to this
court.
-6-
1. The Initiation of the Two Actions
Three of the named plaintiffs, Manning, Rivers, and
Williams, filed an action in federal court in September 2009
("Manning I"), alleging claims under the FLSA and other federal
statutes.2 Defendants moved to dismiss all of those claims under
Federal Rule of Civil Procedure 12(b)(6). As to the FLSA claim
specifically, the motion challenged the sufficiency of the
complaint's factual allegations and also contended that because the
then-existing plaintiffs were all union members, the claim was
precluded by the operation of federal labor laws governing the
union-employer relationship, including the National Labor Relations
Act ("NLRA").
Also in September 2009, Manning, Rivers, and Williams
initiated a parallel action in the Massachusetts Commonwealth
courts ("Manning II"). This complaint pled a number of
Massachusetts statutory and common law claims, relying on the same
facts as the federal case. Defendants removed the case to federal
court, contending that all of plaintiffs' claims were completely
preempted by § 301 of the Labor Management Relations Act ("LMRA"),
29 U.S.C. § 185(a), because plaintiffs were union workers covered
by a collective bargaining agreement ("CBA") and their causes of
action were founded directly on or necessarily required the
2
Of the federal claims, only the dismissal of the FLSA claim
is before us on appeal.
-7-
interpretation of the CBA. Defendants then requested consolidation
of Manning I and Manning II under Federal Rule of Civil Procedure
42, and also filed a motion to dismiss the Manning II complaint for
failure to state a claim. Plaintiffs, for their part, sought to
remand Manning II as improperly removed.
On September 16, 2010, the district court held a hearing
on all of the pending motions in Manning I and Manning II. The
court then took the motions under submission and stated that it
would defer ruling on defendants' motion to consolidate the two
actions until it resolved the motions to dismiss, as the dismissal
of the complaints would moot the consolidation request.
In February 2011, the court granted the motion to dismiss
the Manning I complaint, ruling that the facts alleged were
insufficient to state a plausible claim for relief under the FLSA.
The district court stated that the "complaint runs to 25 pages and
158 paragraphs, yet it lacks even the most basic information about
[plaintiffs'] claims." The court observed that among other
deficiencies, the complaint did not identify the defendants for
whom the plaintiffs worked, the plaintiffs' jobs and occupations,
or the amounts of unpaid wages. The court dismissed the FLSA claim
without prejudice and gave plaintiffs leave to amend to correct the
identified deficiencies.
In March 2011, the district court ruled on the motions
pending in Manning II. The court denied plaintiffs' remand motion,
-8-
holding that LMRA complete preemption applied to plaintiffs'
Massachusetts claims, thus converting them into federal causes of
action and rendering the case properly removed. The court also
granted defendants' motion to dismiss the Manning II complaint,
referring to its order dismissing the Manning I complaint and
similarly ruling that the common law claims were insufficiently
pled. The court also observed that BMC's status as a public
charity rendered it statutorily exempt from plaintiffs'
Massachusetts wage-and-hour claims and dismissed them as well.
Plaintiffs were given leave to amend their complaint to plead a
"recharacterized § 301 count" in Manning II.
2. Subsequent Proceedings and the Order Dismissing the
Amended Complaint
Anticipating the filing of amended complaints, the court
held a joint scheduling conference on April 14, 2011, for Manning
I and Manning II. Although we have not been provided with a
transcript of this hearing, the parties agree that the court
directed plaintiffs to file a single complaint containing both
their FLSA and state law claims.3 Plaintiffs responded by filing
3
The district court's order dismissing plaintiffs' amended
complaint suggests otherwise, given the observation that its order
in Manning II directed plaintiffs to file a cause of action under
the LMRA in that case. The court's formal orders on the motions in
Manning I and Manning II do not expressly direct the plaintiffs to
file a single consolidated complaint.
We note, however, that the district court's docket in Manning
I contains an entry dated 4/14/2011, which includes the clerk's
note regarding the joint hearing. This entry states, with emphasis
added: "Amended Pleadings due by 4/29/2011[] (1 complaint)." The
-9-
an amended complaint in Manning I only. This complaint alleged a
cause of action under the FLSA, brought on behalf of all plaintiffs
against all defendants, as well as a number of contract, fraud, and
tort claims pursuant to Massachusetts law brought only on behalf of
BMC employees not covered by a CBA. The complaint added McCarthy,
a nonunion employee, as a plaintiff in order to represent the
nonunionized BMC workers in the putative class. Plaintiffs also
moved for conditional certification and expedited notice under the
FLSA's collective action provisions. Defendants, for their part,
moved to dismiss the amended complaint and further urged the court
to strike the complaint's class and collective action allegations
under Federal Rule of Civil Procedure 12(f). See Fed. R. Civ. P.
12(f) (permitting court to strike "redundant, immaterial,
impertinent, or scandalous matter" from pleading).
In April 2012, the court dismissed the amended complaint
in its entirety. The court concluded that while the pleading had
significantly increased in length, it failed to remedy the problems
the court had identified in the original Manning I and Manning II
complaints. The amended complaint, the court said, contained no
factual matter indicating that defendants had a concrete policy in
place that required BMC employees to work through their meal and
rest breaks, before and after hours, or during their training
reference to "1 complaint" bears out the parties' description of
the court's directive.
-10-
periods. Even assuming that such a policy existed, the complaint
failed to demonstrate that any of BMC's managers or supervisors had
knowledge of plaintiffs' unpaid work. Similarly, the court ruled
that the claims against the individual defendants were insufficient
to make out a plausible claim for relief, and that the plaintiffs'
state common law claims were too conclusory to survive dismissal.
For related reasons, the court granted defendants' motion
to strike the class and collective action allegations. The court
noted that plaintiffs sought to represent numerous BMC employees
who worked in a multitude of different positions. "[T]he existence
of such 'policies,'" the court opined, "across a group of putative
plaintiffs whose job function, hours, and daily tasks share little
to no common ground is simply not plausible."
Finally, the court denied plaintiffs leave to file a
second amended complaint, observing that plaintiffs' counsel had
brought at least five other hospital compensation cases in the
District of Massachusetts alone, and that similar cases against
health care facilities were proliferating throughout the country.
These cases used complaints that were "substantially identical" to
the one at issue in this case, and the court observed that other
district courts had routinely dismissed such complaints as
insufficiently pled. Accordingly, the plaintiffs "have received
the benefit of numerous rulings from federal judges . . . on the
requisites for proper pleadings," and their continuing inability to
-11-
allege a cause of action attested to the futility of further
opportunities to amend.
Having dismissed all claims with prejudice, the court
entered judgment for defendants in Manning I and terminated Manning
II on its docket. Plaintiffs took appeals from both cases. We
consolidated those appeals for the purposes of briefing and
argument.
II.
A. The Sufficiency of the FLSA Allegations
We exercise de novo review over a district court's
dismissal of a complaint under Rule 12(b)(6). Uphoff Figueroa v.
Alejandro, 597 F.3d 423, 429 (1st Cir. 2010). Federal Rule of
Civil Procedure 8(a)(2) requires that the complaint contain "a
short and plain statement of the claim showing that the pleader is
entitled to relief." Such a statement "needs only enough detail to
provide a defendant with 'fair notice of what the . . . claim is
and the grounds upon which it rests.'" Ocasio-Hernández v.
Fortuño-Burset, 640 F.3d 1, 12 (1st Cir. 2011) (quoting Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)) (internal
quotation marks omitted).
We assess the sufficiency of the complaint's factual
allegations in two steps. First, conclusory allegations that
merely parrot the relevant legal standard are disregarded, as they
are not entitled to the presumption of truth. Id. Second, we
-12-
accept the remaining factual allegations as true and decide if,
drawing all reasonable inferences in plaintiffs' favor, they are
sufficient to show an entitlement to relief. Id. The allegations
must be enough to render the claim plausible: "[w]here a complaint
pleads facts that are 'merely consistent with' a defendant's
liability, it 'stops short of the line between [mere] possibility
and plausibility of entitlement to relief.'" Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 557)
(quotation marks omitted). We appropriately draw on our "judicial
experience and common sense" in evaluating a complaint, id. at 679,
but we may not disregard factual allegations "even if it strikes a
savvy judge that actual proof of those facts is improbable."
Twombly, 550 U.S. at 556. "The relevant question . . . in
assessing plausibility is not whether the complaint makes any
particular factual allegations but, rather, whether 'the complaint
warrant[s] dismissal because it failed in toto to render
plaintiffs' entitlement to relief plausible.'" Rodríguez-Reyes v.
Molina-Rodríguez, 711 F.3d 49, 55 (1st Cir. 2013) (quoting Twombly,
550 U.S. at 569 n.14).
1. The Sufficiency of the FLSA Allegations Against BMC
Plaintiffs seek recovery under the FLSA for unpaid
overtime compensation. The basic elements of a FLSA claim are that
(1) plaintiffs must be employed by the defendants; (2) the work
involved interstate activity; and, most importantly for present
-13-
purposes, (3) plaintiffs "performed work for which they were
under-compensated." Pruell, 678 F.3d at 12. A claim for unpaid
overtime wages must demonstrate that the plaintiffs were employed
"for a workweek longer than forty hours" and that any hours worked
in excess of forty per week were not compensated "at a rate not
less than one and one-half times the regular rate." 29 U.S.C. §
207(a)(1); see also Román v. Maietta Const., Inc., 147 F.3d 71, 75
(1st Cir. 1998).
The parties' arguments about the sufficiency of the
allegations against BMC boil down to three issues: (1) whether the
complaint sufficiently pleads BMC's actual or constructive
knowledge of plaintiffs' undercompensation; (2) whether the facts
alleged make out a claim that plaintiffs performed compensable work
for longer than forty hours per week; and (3) whether each named
plaintiff has sufficiently alleged that she worked compensable
overtime.
a. Knowledge
The FLSA defines the term "employ" as "to suffer or
permit to work." 29 U.S.C. § 203(g). The parties agree that under
this definition, "an employer's actual or imputed knowledge . . .
is a necessary condition to finding the employer suffers or permits
that work." Chao v. Gotham Registry, Inc., 514 F.3d 280, 287 (2d
Cir. 2008); see also Newton v. City of Henderson, 47 F.3d 746, 748
(5th Cir. 1995); Davis v. Food Lion, 792 F.2d 1274, 1276 (4th Cir.
-14-
1986). Actual knowledge is not required; "constructive knowledge
will suffice." Holzapfel v. Town of Newburgh, 145 F.3d 516, 524
(2d Cir. 1998); see also 29 C.F.R. § 785.11 ("Work not requested
but suffered or permitted is work time. . . . The employer knows or
has reason to believe that [the employee] is continuing to work and
the time is working time.").
Here, the complaint relies on a mix of actual knowledge
and constructive knowledge theories. The pleading alleges that the
employees' uncompensated work was performed "on defendants'
premises during operational hours, and in full view of defendants'
managers and supervisors." The pleading further states that
plaintiffs had conversations with their managers about their
uncompensated work. On "a number of occasions," employees directly
questioned BMC managers about the practice of deducting time
automatically from employees' paychecks, and the managers responded
that the employees were "fully paid for their work time."
Additionally, BMC managers regularly set performance deadlines that
required employees to work through their designated breaks. As for
the training sessions, defendants scheduled them to take place
during regular work hours and led the required sessions,
demonstrating that they knew that the trainings were taking place.
Defendants assail these allegations as too vague to
support BMC's knowledge of employees' unpaid work. They argue that
even though the allegations are factual in nature, "some
-15-
allegations, while not stating ultimate legal conclusions, are
nevertheless so threadbare or speculative that they fail to cross
the line between the conclusory and the factual." Peñalbert–Rosa
v. Fortuño–Burset, 631 F.3d 592, 595 (1st Cir. 2011) (citation
omitted) (internal quotation marks omitted). Defendants note that
the pleading is vague about a number of points, such as the
identities and roles of the "managers" with whom plaintiffs spoke
and the frequency and content of these purported interactions.
Rule 8 does not demand this degree of particularity.
Even where direct allegations of knowledge are pled in a conclusory
fashion, defendants' knowledge of unlawful conduct "may be
inferable from other allegations in the complaint." Rodríguez-
Reyes, 711 F.3d at 55; see also Grajales v. P.R. Ports Auth., 682
F.3d 40, 47 (1st Cir. 2012). Boiled down to its essence,
plaintiffs' claim is that the intersection of several BMC
employment practices frequently required them to work through their
scheduled breaks, before and after work hours, and during training
sessions. This work, often required by defendants, was performed
in the open. Although defendants suffered and permitted this work
to take place, they also knew that their automatic timekeeping
system would deduct certain categories of noncompensable time from
the employees' paychecks. Yet defendants did nothing to account
for the extra time worked. These facts, taken in toto, are
sufficient to establish a plausible inference of defendants'
-16-
knowledge. To require that plaintiffs, seeking to represent a
whole class of individuals, describe the specific managers they
talked with, and document, by time, place, and date, the instances
in which they had a relevant conversation with those managers,
would exceed Rule 8's requirement of a "short and plain statement"
making out a claim for relief. See Grajales, 682 F.3d at 47 ("In
connection with a threshold plausibility inquiry, a high degree of
factual specificity is not required."). Here, the complaint
sufficiently pleads that the employees were performing
uncompensated work with defendants' constructive or actual
knowledge.
b. Compensable Work
The Supreme Court has defined "work" under the FLSA as
"physical or mental exertion (whether burdensome or not) controlled
or required by the employer and pursued necessarily and primarily
for the benefit of the employer and his business." Tenn. Coal,
Iron & R.R. Co. v. Muscoda Local No. 123, 321 U.S. 590, 598 (1944);
see also IBP, Inc. v. Alvarez, 546 U.S. 21, 25-30 (2005).
Accordingly, not all activities an employee performs are
necessarily compensable. See Pruell, 678 F.3d at 14 (discussing
regulations excluding certain types of training or activities from
FLSA's definition of work). The determination of whether an
employee's activities constitute "work" depends not on "rigid per
se definitions," but rather "the circumstances of the whole
-17-
activity." Reich v. ConAgra, Inc., 987 F.2d 1357, 1361 (8th Cir.
1993) (citation omitted) (quotation marks omitted); see also Gotham
Registry, 514 F.3d at 286-87 (applying Tennessee Coal test to
determine whether employees engaged in compensable activities).
In affirming the dismissal of a complaint raising similar
allegations, our recent opinion in Pruell observed that "the
amended complaint does not provide examples (let alone estimates as
to the amounts) of such unpaid time for either plaintiff or
describe the nature of the work performed during those times." 678
F.3d at 14. Defendants level a similar contention against this
complaint, asserting that it fails to allege that plaintiffs
engaged in compensable work with sufficient specificity.
While we agree that some of the complaint's allegations
straddle the line between the conclusory and the factual, the
pleading contains enough substantive content to elevate the FLSA
claims above the mere possibility of defendants' liability. As
discussed above, the complaint's gist is that because the
employees' assigned tasks often need to be completed by certain
times, and because of understaffing and lack of relief during meal
and work breaks, BMC employees must frequently complete their
regular working activities during their meal breaks or before and
after their scheduled shifts. For example, Manning and Williams,
who worked as nurses, spent this time charting, performing
administrative tasks, monitoring patients, and providing treatment.
-18-
Rivers, a registered nurse, similarly used this time to assist
patients who had difficulty sleeping. McCarthy, an administrative
assistant, spent her uncompensated time placing and answering phone
calls, drafting correspondence, and filing paperwork.
This work was essentially indistinguishable from work
performed during the employees' regularly scheduled hours and
"[s]uch work from [their] standpoint [was] fungible." Gotham
Registry, 514 F.3d at 286. The fact that this assertion is not
accompanied by a detailed list of each and every activity the
plaintiffs and their fellows performed without compensation does
not mandate the complaint's dismissal. "Work is work, after all,"
id., and we see no reason to demand such exhaustive detail.
c. Overtime Worked
The parties debate whether the complaint properly alleges
that each of the individually named plaintiffs worked more than
forty hours in a given workweek, as required to bring a FLSA
overtime claim. In support of dismissal, defendants rely heavily
on the Second Circuit's recent opinion in Lundy v. Catholic Health
Sys. of Long Island Inc., 711 F.3d 106 (2d Cir. 2013), which is
another hospital compensation case. There, the Second Circuit
carefully examined each named plaintiff's allegations and discussed
the likelihood that he or she worked more than forty hours in a
given week. The Lundy court criticized the complaint's repeated
use of imprecise words such as "occasionally" and "typically" to
-19-
describe the named plaintiffs' work hours. Id. at 114-15. This
vagueness, combined with the fact that the amounts of purportedly
uncompensated time were relatively small, provided "but low-octane
fuel for speculation" that plaintiffs truly had worked enough hours
to be entitled to overtime pay. Id. at 115.
Although defendants characterize the instant complaint as
"strikingly similar" to the pleading at issue in Lundy, a close
reading reveals otherwise. As to two of the four named plaintiffs,
Rivers and McCarthy, the complaint alleges that they were regularly
scheduled for forty-hour/week shifts. Any time that they worked
during meal breaks, before or after their shifts, and in training
periods, would thus entitle them to overtime compensation. A third
plaintiff, Manning, was usually scheduled for thirty-six hour/week
shifts, but "approximately once a month" her shift schedules
resulted in a forty-hour week. Hence, approximately once a month,
the alleged uncompensated time would put her over the numerical
threshold.
The sufficiency of the allegations as to Rhonda Williams,
who was employed by BMC as of the time of the complaint's filing,
presents a closer question. The pleading states that "from January
2004 until 2006," she "typically" was scheduled for forty-hour
workweeks. While this allegation would seem to bring her into the
same category as Rivers and McCarthy, the FLSA imposes a two-year
statute of limitations, extending to three years for willful
-20-
violations. 29 U.S.C. § 255(a). This case was initiated in
September 2009, meaning that Williams was not regularly scheduled
to work forty-hour weeks within either limitations period. From
2006 onward, Williams's "typical[]" schedule was reduced to twenty-
four hours/week, which is plainly insufficient to bring her even
close to the threshold.
Williams also alleges, however, that she was scheduled
for a forty-hour week shift "at least once a year" after her
regular hours changed. During such a week, any hours she worked
above the forty-hour threshold would entitle her to overtime pay.
As noted, the complaint's basic thrust is that defendants' pay
practices continuously required BMC employees to work time for
which they did not receive compensation. This fact supports the
reasonable inference that during any week in which Williams was
scheduled to work forty hours, she also performed at least some
uncompensated work.
Consequently, we conclude that the named plaintiffs,
Williams included, have alleged enough to survive dismissal.
2. The Individual Defendants
The FLSA claims are also directed against two individual
defendants: Elaine Ullian, BMC's president and CEO from 1994 until
2010, and James Canavan, BMC's senior human resources director from
1997 until 2010. FLSA liability attaches to any "employer," which
is defined broadly to include "any person acting directly or
-21-
indirectly in the interest of an employer in relation to an
employee." 29 U.S.C. § 203(d). Courts have generally agreed that
"a corporate officer with operational control of a corporation's
covered enterprise is an employer along with the corporation,
jointly and severally liable . . . for unpaid wages." Donovan v.
Agnew, 712 F.2d 1509, 1511 (1st Cir. 1983).
In Agnew, our seminal case on FLSA individual liability,
we balanced "the shield from personal liability [that] is one of
the major purposes of doing business in a corporate form" against
Congress's clear refusal "to incorporate the common law parameters
of the employer-employee relationship" into the FLSA. Id. at 1513.
Examining the Supreme Court's precedents interpreting the FLSA and
other employment statutes, we noted that they charted a middle
course, applying a context-dependent "economic reality" test that
looked to the totality of the individual's level of involvement
with the corporation's day-to-day operations, as well as their
direct participation in creating or adopting the unlawful pay
practices. Id. at 1513-14. While recognizing the fact-based
nature of this test, we admonished that courts should not apply the
analysis in a manner that would "make any supervisory employee,
even those without any control over the corporation's payroll,
personally liable for the unpaid or deficient wages of other
employees." Id. at 1513.
-22-
 We added substance to the economic reality test in
Baystate Alternative Staffing, Inc. v. Herman, 163 F.3d 668 (1st
Cir. 1998), explaining that
[the] analysis focuse[s] on the role played by
the corporate officers in causing the
corporation to undercompensate employees and
to prefer the payment of other obligations
and/or the retention of profits. In addition
to direct evidence of such a role, other
relevant indicia may exist as well -- for
example, an individual's operational control
over significant aspects of the business and
an individual's ownership interest in the
business. Such indicia, while not
dispositive, are important . . . because they
suggest that an individual controls a
corporation's financial affairs and can cause
the corporation to compensate (or not to
compensate) employees in accordance with the
FLSA.
Id. at 678 (emphasis added) (internal citation omitted). We
cautioned that these indicia must add up to something more than
merely "the exercise of control by a corporate officer or corporate
employee over the 'work situation'" generally, as otherwise "almost
any supervisory or managerial employee of a corporation could be
held personally liable for the unpaid wages of other employees."
Id. at 679; see also Chao v. Hotel Oasis, Inc., 493 F.3d 26, 34
(1st Cir. 2007) (concluding that corporate officer was "not just
any employee with some supervisory control over other employees,"
but rather was "instrumental in causing the corporation to violate
the FLSA" (internal quotation marks omitted)).
-23-
Our FLSA individual liability cases typically address "a
corporate officer with operational control of a corporation's
covered enterprise," rather than a mere employee. Agnew, 712 F.2d
at 1511 (two individuals who "together were President, Treasurer,
Secretary and sole members of the Board of Directors"); see also
Hotel Oasis, 493 F.3d at 34 ("president of the corporation"). We
have similarly identified an ownership stake as highly probative of
an individual's employer status, see Baystate, 163 F.3d at 678, as
it suggests a high level of dominance over the company's
operations. See Lambert v. Ackerley, 180 F.3d 997, 1012 (9th Cir.
1999) (approving jury instruction that individuals were liable if
they had a "significant ownership interest with operational control
of significant aspects of the corporation's day-to-day functions"
(emphasis added)); Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132,
140 (2d Cir. 1999) ("Because [the defendant] controlled the company
financially, it was no idle threat when he testified that he could
have dissolved the company if [the other defendants] had not
followed his directions."). The company's profits also inure
directly to an individual with an ownership interest, meaning that
the individual "employs" the worker in a very concrete and literal
sense. See Dole v. Elliot Travel & Tours, Inc., 942 F.2d 962, 966
(6th Cir. 1991) (holding individual liable where "the evidence
clearly demonstrates that [individual] was the 'top man' . . . and
the corporation functioned for his profit").
-24-
This is not to say that the FLSA's definition of employer
excludes those without high executive positions or ownership
interests, as the economic reality test speaks broadly of
individuals who have "operational control over significant aspects
of the business." Baystate, 163 F.3d at 678; see also Lamonica v.
Safe Hurricane Shutters, Inc., 711 F.3d 1299, 1310 (11th Cir. 2013)
(observing that "a supervisor's title does not in itself establish
or preclude his or her liability under the FLSA"). But the case
law's emphasis on ownership and financial control is sensible
because these factors suggest a strong degree of authority over the
corporation's finances and, as a corollary, the ability to "caus[e]
the corporation to undercompensate employees and to prefer the
payment of other obligations and/or the retention of profits."
Baystate, 163 F.3d at 678.
a. Elaine Ullian
Against this backdrop, we turn to the allegations against
Ullian, BMC's former president and CEO. Plaintiffs say that Ullian
"had the authority to, and did, make decisions that concerned the
policies defendants adopted and the implementation of those
policies." They claim that she exercised her dominance over BMC's
operations by coordinating a major merger of several Boston area
hospitals, overseeing the corporation's budget, and setting
company-wide policy. She also was "involved in" a number of major
employment-related decisions, including hiring employees from
-25-
community organizations, reducing jobs and services due to budget
cuts, negotiating with unions, and ensuring that minorities were
represented in BMC's workforce.
These allegations do not say that Ullian possessed any
ownership interest in BMC, which we have identified as a
significant factor in the individual liability analysis.
Nevertheless, her role as BMC's president and chief executive
officer suggests that she was in a position to exert substantial
authority over corporate policy relating to employee wages. See
Hotel Oasis, 493 F.3d at 34 (emphasizing that individual "was the
corporate officer principally in charge of directing employment
practices, [including] requiring employees to attend meetings
unpaid, and setting employees' wages and schedules"). While
allegations reliant solely on Ullian's position within BMC would
not be sufficient to hold her individually liable, the complaint
contains allegations indicating that she "controlled [the
company's] purse-strings or made corporate policy about [its]
compensation practices." Baystate, 163 F.3d at 678.
Specifically, Ullian was involved in an array of
decisions related to managing BMC's finances. For example, she was
involved in the hospital budget and made decisions to allocate
substantial resources to certain projects. Moreover, she was
"involved in the reduction of jobs and services" at BMC due to
budgetary constraints, and was similarly involved in strategic
-26-
decisions to cut staff positions and reduce the company's spending.
These assertions support the notion that Ullian had the authority
to, and did, make critical decisions regarding the allocation of
BMC's resources, thereby buttressing the inference that she had the
type of operational control over the company that would give rise
to individual FLSA liability.
The dissent notes these same factual allegations, but
concludes that they are "merely consistent with" an inference of
liability, Twombly, 550 U.S. at 557, rather than sufficient to
raise a plausible claim. Although the dissent acknowledges that
plaintiffs need not state "particular facts showing that an
individual defendant made a specific decision or took a particular
action that directly caused the plaintiffs' undercompensation," it
criticizes the complaint for failing to show "that the plaintiffs'
compensation was sufficiently within the defendant's bailiwick to
justify holding her personally liable." It also takes issue with
the complaint's lack of allegations "connecting Ullian to any
component of" the timekeeping practices and work and training
requirements that caused the systematic undercompensation.
But "[t]he relevant question . . . in assessing
plausibility is not whether the complaint makes any particular
factual allegations." Rodríguez-Reyes, 711 F.3d at 55. Instead,
we look to whether, "taken in their entirety," the facts alleged
are enough to state a claim. Id. With respect, we believe the
-27-
dissent devalues the familiar process of drawing inferences from
"relevant indicia" of employer status, such as "an individual's
operational control over significant aspects of the business."
Baystate, 163 F.3d at 678.
Even after the complaint's conclusory and generalized
assertions are discarded, the pleading discusses Ullian's
involvement in employment, training, and payroll operations, her
participation in recruiting activities, and decisions she made to
reduce staff due to budget cuts. These allegations describe an
executive who not only possessed, but repeatedly exercised the
authority to establish company-wide policy regarding employment-
related matters and made significant decisions regarding the
allocation of financial resources that directly affected BMC's
employees. These facts denominate concrete actions that had
measurable and immediate impacts on BMC's workforce. Thus, the
complaint raises a plausible inference not only that compensation-
related matters were well within Ullian's bailiwick, but also that
she "control[led the] corporation's financial affairs and . . .
cause[d] the corporation to compensate (or not to compensate)
employees in accordance with the FLSA." Id. at 678.
While specific allegations linking Ullian to BMC's
automated timekeeping system or the practice of working through
meal and rest periods would have further buttressed plaintiffs'
FLSA claim, that kind of direct evidence is not essential to the
-28-
assertion of a plausible claim. Moreover, demanding that type of
allegation is often unrealistic at this stage when "some of the
information needed may be in the control of defendants." Pruell,
678 F.3d at 15.
Importantly, one of our prior opinions found individual
FLSA liability in a nearly identical factual context. In Hotel
Oasis, we deemed the president of the corporation personally liable
because he "had ultimate control over the business's day-to-day
operations." 493 F.3d at 34. The individual in question was the
corporate officer "principally in charge of directing employment
practices, such as hiring and firing employees, requiring employees
to attend meetings unpaid, and setting employees' wages and
schedules." Id. Notably, these facts were sufficient to establish
a claim against the individual regardless of whether he possessed
an ownership interest in company. Id. at 34 n.9. As enumerated
above, the allegations against Ullian hew closely to the facts we
found sufficient to establish individual liability in Hotel Oasis.
Consequently, the dismissal of the FLSA claims against her must be
vacated.
b. Thomas Canavan
The complaint also seeks to hold Canavan, BMC's former
senior human resources director, personally liable for the alleged
FLSA violations. Canavan lacks any ownership interest in BMC, does
not serve as a high-level corporate officer, and is not a member of
-29-
the company's board of directors. Unlike Ullian, he apparently
occupied a position more akin to a senior employee than a corporate
official. Although FLSA's definition of "employer" does not
necessarily exclude senior-level employees, our previous cases have
not yet extended FLSA liability to such an individual.4
In view of the case law's emphasis on individuals with
corporate officer status and/or an ownership stake in the company,
and the lack of any such assertions relating to Canavan, the
allegations as to his involvement in setting and enforcing the
unlawful pay practices at issue become all the more important.
Although there are such allegations against him, they are nothing
more than unadorned assertions that are not supplemented by
specific allegations supporting the inference that Canavan
controlled BMC's purse-strings or made decisions about the
allocation of financial resources. See Baystate, 163 F.3d at 678;
compare Donovan v. Grim Hotel Co., 747 F.2d 966, 971 (5th Cir.
1984) (finding individual liable when "he held their purse-strings
and guided their policies," companies "were part of the . . .
family business," and "functioned for the profit of his family").
As we have detailed, there were such allegations against Ullian.
4
Indeed, plaintiffs have not identified a case where a
circuit court imposed FLSA liability on a human resources manager
who possessed no ownership stake in the company. But see Carpenter
v. Refrigeration Sales Corp., 49 F. Supp. 2d 1028, 1031 (N.D. Ohio
1999) (ruling that head of human resources department was
"employer" under Family and Medical Leave Act).
-30-
Their absence with respect to Canavan undermines any inference of
individual liability.
Similarly, to say, as the complaint does, that Canavan
had some involvement in "maintaining records" or "payroll
functions" is not enough to support a reasonable inference of
liability, given that plaintiffs nowhere assert that there was
anything per se unlawful about taking automatic deductions from
employees' time. If anything, these allegations are merely
consistent with the notion that Canavan was performing his job
functions, rather than engaging in conduct that led to the alleged
violations.
For these reasons, the complaint does not state a claim
against Canavan.
B. The Arbitrability of Plaintiffs' FLSA Claims
Defendants also mount a challenge to the viability of
plaintiffs' FLSA claims based on federal laws governing unions,
including the National Labor Relations Act ("NLRA") and the LMRA.
Although defendants' argument is somewhat hazy, we understand it
this way. LMRA § 301 embodies a strong federal policy in favor of
"protect[ing] the use of arbitration and grievance procedures
common to CBAs." Cavallaro, 678 F.3d at 5. Thus, the LMRA exerts
a strong preemptive effect over state law causes of action "so long
as relief can be provided within the CBA process." Id. at 6. The
FLSA, for its part, permits employers and employees to contract
-31-
about certain terms and conditions of employment, including the
parties' definition of "work," as long as those contractual
provisions remain consistent with the FLSA's provisions and
purposes. Although the LMRA's broad protection of arbitration
focuses on state law claims, defendants maintain that the FLSA
claims similarly should be subject to the federal policy in favor
of arbitrating disputes between employers and union workers
regarding the payment of wages. The best way to do so is to
require the unionized plaintiffs (Manning, Rivers, and Williams) to
arbitrate their FLSA claims before proceeding to federal court.5
This "exhaustion" argument runs aground on well-settled
case law governing the arbitrability of federal statutory claims.6
In O'Brien v. Town of Agawam, 350 F.3d 279 (1st Cir. 2003), we
addressed the argument that the FLSA claims of certain unionized
5
We note that defendants do not address McCarthy, a nonunion
plaintiff whose FLSA claims cannot be covered by a CBA. McCarthy's
FLSA claims would thus appear to remain untouched even if we
accepted defendants' view of the law.
6
Plaintiffs maintain that defendants should have raised this
argument in a cross appeal, because adopting it would alter or
amend the judgment in defendants' favor. To the contrary, the
district court's order dismissed plaintiffs' FLSA claims with
prejudice. Accepting defendants' "exhaustion" argument would cause
the same result -- the dismissal of plaintiffs' FLSA claims with
prejudice. Affirming the dismissal using this reasoning would be
an appropriate exercise of our ability to affirm on any basis
present in the record, and no cross-appeal was necessary to put
this issue before us. See, e.g., United Fire & Cas. Co. v. Boulder
Plaza Residential, LLC, 633 F.3d 951, 958 (10th Cir. 2011); Smith
v. Johnson & Johnson, 593 F.3d 280, 283 n.2 (3d Cir. 2010); Rivero
v. City & Cnty. of San Francisco, 316 F.3d 857, 862 (9th Cir.
2002).
-32-
workers were "barred from federal court because they are
essentially contract claims for unpaid overtime" and therefore
subject to the CBA's grievance and arbitration procedures.7 Id. at
284. We rejected this proposition, observing that "[r]ights
conferred by Congress are conceptually distinct from those created
by private agreement, and there is no authority for the proposition
that rights under the FLSA merge into contractual ones whenever the
two overlap." Id. at 285; see also Gilmer v. Interstate/Johnson
Lane Corp., 500 U.S. 20, 35 (1991) (distinguishing between
"contractual rights under a collective-bargaining agreement and
individual statutory rights").
As a consequence, FLSA claims are not subject to a CBA's
grievance and arbitration procedures simply because they address
similar subject matter or because the CBAs define compensable
"work." Indeed, the state of the law is somewhat unsettled as to
whether a FLSA claim may ever be waived by a CBA.8 Whatever the
7
In a notable omission, both defendants and plaintiffs have
failed to discuss or even cite Agawam in their briefs, despite its
clear applicability to this case.
8
The Supreme Court's opinion in Barrentine v. Arkansas-Best
Freight Sys., Inc., 450 U.S. 728 (1981), contained broad language
strongly suggesting that FLSA claims were never appropriate for
arbitration. Id. at 742-45. But the Court's recent opinion in 14
Penn Plaza LLC v. Pyett, 556 U.S. 247 (2009), held that a provision
requiring the arbitration of statutory age discrimination claims
was enforceable, and indicated that unless a statutory scheme
specifically removed a "particular class of grievances from the
NLRA's broad sweep," a CBA's arbitration clause should be given
full effect. Id. at 257-58. In reaching this conclusion, Pyett
disapproved of Barrentine and similar opinions addressing other
-33-
answer to that question may be, the law is plain on one point: in
order for a CBA to subject a federal statutory claim to
arbitration, any such waiver must be "clear and unmistakable" on
its face. Agawam, 350 F.3d at 285; see also Cavallaro, 678 F.3d at
7. The Supreme Court has repeatedly reaffirmed this rule. See
Pyett, 556 U.S. at 260 (holding that union members' age
discrimination claims must be subject to CBA's arbitration
provisions because CBA "clearly and unmistakably requires
respondents to arbitrate" them); Wright v. Universal Mar. Serv.
Corp., 525 U.S. 70, 80 (1998) (holding that requirement contained
in CBA requiring parties to arbitrate employment discrimination
claims must be clear and unmistakable, and that "less-than-
explicit" waiver was insufficient).9
employment statutes, insofar as they suggested that federal
statutory claims could not be addressed properly through
arbitration. Id. at 265-72.
Pyett strongly indicates that FLSA claims are indeed
arbitrable. Some courts, however, have suggested that the FLSA's
structure and language may distinguish it from the ADEA and other
employment discrimination statutes for these purposes. Compare
Austin v. Owens-Brockway Glass Container, Inc., 78 F.3d 875, 883
n.2 (4th Cir. 1996) (observing that Title VII and Americans with
Disabilities Act contain provisions encouraging arbitration,
whereas FLSA does not), with Kuehner v. Dickinson & Co., 84 F.3d
316, 319 (9th Cir. 1996) (stating that employee was "[u]nable to
identify support in the text or legislative history of the FLSA"
for notion that FLSA excludes certain claims from arbitration). As
we explain, we need not answer that question today.
9
Agawam and the other opinions discussed above defeat
defendants' reliance on Leahy v. City of Chicago, 96 F.3d 228, 232
(7th Cir. 1996). There, a divided panel held that "if the [CBA's]
guarantee of overtime compensation for time worked in excess of
eight hours . . . protects [the plaintiffs'] FLSA rights to
-34-
As to what kind of provision would work a clear and
unmistakable waiver, we have observed that "[a] broadly-worded
arbitration clause such as one covering 'any dispute concerning or
arising out of the terms and/or conditions of [the CBA] . . . '
will not suffice; rather, something closer to specific enumeration
of the statutory claims to be arbitrated is required." Cavallaro,
678 F.3d at 7 n.7. For example, in Wright, the Court held that the
CBA in that case was not sufficiently lucid when it contained "very
general" clauses requiring arbitration of "'[m]atters under
dispute'" and "'matters affecting wages, hours, and other terms and
conditions of employment,'" without the "explicit incorporation of
statutory antidiscrimination requirements." 525 U.S. at 80-81. In
Agawam, we deemed insufficient arbitration language referring only
to "'grievances,' which in turn [were] defined as allegations that
the Town violated the CBA" without any reference to the
"arbitration of statutory claims, let alone a clear and
unmistakable waiver of a judicial forum for such claims." 350 F.3d
at 285-86.
Here, the defendants cannot point to a single provision
of the relevant CBAs that works a clear and unmistakable waiver of
overtime compensation, then the agreement is a defense to liability
under the FLSA." Id. at 232. The Leahy court held that as long as
the CBA grants workers all the protection the FLSA affords, then
the CBA provides the exclusive means of vindicating the workers'
FLSA rights and their claims must be dismissed. As Agawam
explains, however, this analysis incorrectly conflates contractual
rights with statutory ones. 350 F.3d at 285.
-35-
their FLSA claims. The CBAs' arbitration provisions do contain
general grievance procedures, but define "grievances" as disputes
or concerns arising out of the interpretation of the CBAs
themselves. These provisions do not mention the employees'
statutory claims, much less clearly or unmistakably agree to
subject them to arbitration. Accordingly, nothing in the CBAs can
even be remotely construed to require the plaintiffs to seek
redress for their FLSA claims through the CBA's grievance
processes.
In sum, a well-developed body of precedent dictates that
a CBA's waiver of federal statutory claims must be clear and
unmistakable. No such waiver exists in the CBAs at issue here.
Consequently, the CBAs do not foreclose plaintiffs' claims under
the FLSA.10
10
Contrary to defendants' assertions, the LMRA and its
attendant preemption doctrine do not support the arbitrability of
plaintiffs' FLSA claims. As defendants acknowledge, this body of
law typically addresses the effect of federal labor law upon state
law causes of action and accordingly says little about the proper
relationship between two federal statutory schemes. See Cavallaro,
678 F.3d at 4-5; see also Part II.C.1, infra. The Supreme Court
and our opinion in Agawam have prescribed a different analysis when
it comes to the latter circumstance. In short, defendants'
reliance on LMRA preemption doctrine is simply a rephrasing of
their "waiver" argument, and we accordingly reject it as well.
Similarly unavailing is defendants' reliance on Tamburello v.
Comm-Tract Corp., 67 F.3d 973 (1st Cir. 1995), where we deemed a
RICO claim "preempted" by federal labor law when the claim asserted
a violation of federal labor law as a predicate act. Id. at 976-
78. This case does not implicate Tamburello's unique posture,
however, as here plaintiffs assert statutory rights that exist
wholly independent of the CBA and do not depend upon its
interpretation.
-36-
C. McCarthy's State Common Law Claims
Plaintiffs also challenge the district court's
disposition of their state law claims, asserting that the trial
court erroneously forced a nonunion plaintiff, McCarthy, to join
her state law claims with the federal claims asserted by the other
named plaintiffs, all of whom were union members covered by CBAs.
In the alternative, plaintiffs argue that the district court erred
in dismissing McCarthy's state law claims under Rule 12(b)(6).
1. The Consolidation of McCarthy's Claims with the Union
Plaintiffs' Claims
The state law claims at issue in this case had their
genesis in Manning II, which began in the Commonwealth courts but
was subsequently removed to federal court via LMRA complete
preemption. "'Complete preemption' . . . applies where a
purported state claim either is re-characterized as a federal claim
or . . . is otherwise so related to federal law as to permit the
removal." Cavallaro, 678 F.3d at 4. In the labor context, this
doctrine reaches all "state law claims 'founded directly on rights
created by collective-bargaining agreements' or 'substantially
dependent on analysis of a collective-bargaining agreement.'" Id.
at 5 (quoting Caterpillar Inc. v. Williams, 482 U.S. 386, 394
(1987)). LMRA complete preemption thus transforms a claim pled
under state law into a claim arising under federal labor law,
-37-
thereby establishing a basis for federal jurisdiction and changing
the substantive law governing the claim itself.11 Id. at 5-7.
The three original plaintiffs in Manning II were all
union members, and all asserted state law claims that the district
court found to be substantially dependent on interpreting the CBAs,
rendering them completely preempted. Plaintiffs raise no dispute
with this legal conclusion on appeal.12 Instead, they object to the
district court's directive that the plaintiffs file a single
amended complaint pleading the federal and state law claims that
began as two separate cases in Manning I and Manning II.
Plaintiffs observe that McCarthy, as a nonunion employee not
covered by a CBA, had the ability to raise state law claims that
were not completely preempted by the LMRA. See Pruell v. Caritas
Christi, 645 F.3d 81, 84 (1st Cir. 2011) ("So long as non-union
plaintiffs pursue their own claims or represent others who are also
11
Complete preemption is rooted in § 301 of the LMRA, 29
U.S.C. § 185, which governs "[s]uits for violation of contracts
between an employer and a labor organization representing
employees." Id. § 185(a). Although the LMRA lacks an express
preemption provision, the Supreme Court has construed this
provision as supporting the preemption of state law claims. See
Cavallaro, 678 F.3d at 5 (discussing line of LMRA preemption
opinions).
12
In their reply brief, plaintiffs cite the complaint's
allegation that Rivers joined a union only after having worked at
BMC for approximately five years, and suggest that any claims
arising out of Rivers's pre-union term of employment are not
completely preempted. The failure to argue this issue in their
opening brief dooms any attempt to distinguish Rivers's claims.
See Rubin v. Islamic Republic of Iran, 709 F.3d 49, 54 (1st Cir.
2013).
-38-
not covered by CBAs, that is a state case under state law."). But
bringing McCarthy's claims as a separate action in the Commonwealth
courts, plaintiffs say, would have violated the district court's
directive to file a single consolidated complaint that included the
putative class members' state law claims.
There is no evidence that the district court intended to
preclude McCarthy from pursuing state law claims in state court.
To recap, the three named plaintiffs who initiated both Manning I
and Manning II were all asserted to be union members. At the time
the district court directed plaintiffs to file a single
consolidated complaint, these were the only three plaintiffs in the
case. Thus, the district court understood the case to concern only
plaintiffs who were union members, and plaintiffs cite nothing in
the record showing that the district court was even aware of the
existence of a named plaintiff who had the undisputed ability to
assert nonpreempted state law claims. Based on the circumstances
before it, the district court acted on the reasonable assumption
that if the then-existent plaintiffs wanted to bring any state law
claims, they should be joined with their federal causes of action.
See 28 U.S.C. § 1367(a).
Even if the district court had been made aware of
McCarthy as a plaintiff, exercising supplemental jurisdiction over
her claims would have been more than appropriate, since they were
undisputedly part of the same case or controversy. See Cavallaro,
-39-
678 F.3d at 5. To be sure, the exercise of this jurisdiction was
within the court's discretion, and McCarthy could have moved to
dismiss her particular claims without prejudice. See 28 U.S.C. §
1367(c) (permitting district courts to decline supplemental
jurisdiction in certain enumerated circumstances). But McCarthy
never requested the chance to bring her claims outside federal
court. While the amended complaint includes a footnote stating
that the state law claims were joined to the federal causes of
action per the district court's directive, this vague notation says
only that the plaintiffs "reserve all rights." McCarthy cannot now
complain of the court's failure to address this issue when she did
not put such a request before the court below.
Finally, to the extent that plaintiffs attack the
district court's directive to file a single consolidated complaint,
that contention is meritless. See Sutcliffe Storage & Warehouse
Co. v. United States, 162 F.2d 849, 851 (1st Cir. 1947) (stating
that "district court would be acting quite within its discretion in
taking steps to consolidate or otherwise avoid the duplication of
such closely similar cases, whatever the substantive rights of the
parties").
For these reasons, all of the named plaintiffs' claims,
both federal and state, were properly before the district court.
-40-
2. The Merits of McCarthy's State Law Claims
The district court grouped the state law claims into
three categories: (1) contract and quasi-contract claims (Counts
II-IV and IX); (2) fraud claims (Counts VII and VIII); and (3)
unjust enrichment, money had and received, and conversion claims
(Counts V, VI and X). To clarify the scope of this appeal, the
district court ruled that insofar as these common law claims sought
to recover overtime pay, they were preempted because they
conflicted with the FLSA's comprehensive remedial scheme. Cf.
Román, 147 F.3d at 76 (addressing preemption of Maine law and
suggesting that "the FLSA is the exclusive remedy for enforcement
of rights created under the FLSA") (internal quotation marks
omitted). The parties do not dispute this proposition. McCarthy's
state law claims are accordingly limited to the recovery of
"straight-time" pay, i.e., unpaid wages for non-overtime hours at
her regular hourly rate.
Plaintiffs challenge the district court's conclusion that
McCarthy's state law claims were pled in too conclusory a fashion
to withstand dismissal. Defendants, for their part, urge us to
adopt the district court's reasoning. In the alternative, they
assert that all the common law claims are precluded or "preempted"
by Massachusetts wage-and-hour statutes. We begin with the
question of whether the Massachusetts wage-and-hour law precludes
-41-
McCarthy's common law claims, and then turn to the sufficiency of
the complaint.
a. The Effect of the Massachusetts Wage-and-Hour
Statutes on the Common Law Claims
Defendants note that the district court dismissed the
original Manning II complaint's statutory Massachusetts wage-and-
hour claims because those statutes exempt "an employee of an
incorporated hospital . . . which is conducted as a public
charity," Mass. Gen. Laws ch. 149, § 148, and "any employee who is
employed . . . in a hospital," id. ch. 151, § 1A(16). Defendants
argue that McCarthy seeks to evade the force of these exemptions by
clothing her statutory claims as contractual ones. They contend
that all of McCarthy's common law claims are premised on the
violation of Massachusetts wage-and-hour statutes, and that those
statutes should be construed to "preempt" any recovery of unpaid
wages through common law causes of action.13
We are not persuaded. When exercising diversity or
supplemental jurisdiction over state law claims, we apply
substantive state law. See Barton v. Clancy, 632 F.3d 9, 17 (1st
Cir. 2011). In doing so, our duty is to "make an informed prophecy
as to the state court's likely stance." Andrew Robinson Int'l,
13
McCarthy contends that we are barred from evaluating whether
Massachusetts wage-and-hour statutes preclude or displace their
common law claims, since doing so would have the effect of
enlarging the judgment in defendants' favor. For the reasons
explained in footnote 6, supra, she is wrong. See Powell v.
Schriver, 175 F.3d 107, 113 (2d Cir. 1999).
-42-
Inc. v. Hartford Fire Ins. Co., 547 F.3d 48, 51 (1st Cir. 2008).
To begin, the Massachusetts courts have noted that duties arising
out of a contract may be distinguished from those imposed by
statute, and the two do not merge simply because they cover similar
subject matter. Indeed, the Massachusetts courts have been clear
that "an existing common law remedy is not to be taken away by
statute unless by direct enactment or necessary implication."
Eyssi v. City of Lawrence, 618 N.E.2d 1358, 1361 (Mass. 1993)
(citation omitted) (internal quotation marks omitted); see also
King v. Viscoloid Co., 106 N.E. 988, 989 (Mass. 1914) (same).
In Salvas v. Wal-Mart Stores, Inc., the Massachusetts
Supreme Judicial Court ("SJC") applied these principles to a claim
on behalf of a group of workers who alleged that their employer had
deprived them of their meal periods without payment. 893 N.E.2d
1187, 1215 (Mass. 2008). There, the plaintiffs pled a cause of
action under Massachusetts General Laws Chapter 149, § 100, for
unpaid meal breaks, as well as a breach of contract claim based on
the same deprivation. Id. Although the statutory claim failed
because the relevant law did not provide for either an express or
an implied private right of action, id. at 1216, the court held
that "[t]he lack of a statutory private right of action presents no
bar to the plaintiffs' claim that [defendant] violated a
contractual duty to provide meal periods to the plaintiff class."
Id. The SJC observed that "[t]o an hourly employee . . . , the
-43-
opportunity to stop work and eat a meal in peace during a busy
workday may constitute a benefit of significant value," which the
parties could bargain for in the course of establishing an
enforceable contract. Id. at 1217. As a consequence, plaintiffs'
inability to avail themselves of a remedy under the wage-and-hour
laws did not preclude a common law claim that sought to vindicate
distinct legal rights.
Salvas closely tracks this case. Although McCarthy
cannot bring statutory wage-and-hour claims against defendants
directly due to BMC's exempt status, that prohibition does not
compel the erasure of her remedies at common law. See Eyssi, 618
N.E.2d at 1361-62 (holding that amendments to workers' compensation
statutes did not bar common law loss of consortium action brought
by spouse or child of police officer).
Seeking to conjure a contrary argument, defendants rely
on two SJC cases that they read for the proposition that "[w]here
a statute has been enacted seemingly to cover the whole subject to
which it relates . . . other provisions of the common law . . . are
thereby superseded." School Comm. of City of Lowell v. City of
Lowell, 164 N.E. 91, 92 (Mass. 1928). But these cases do not sweep
so broadly. For one, Lowell addressed a right that was "wholly the
creature of statute" and that "[did] not exist at common law." Id.
at 93. By contrast, the common law rights plaintiffs seek to
vindicate here have long preceded the Massachusetts wage-and-hour
-44-
laws. The other SJC case defendants cite, School Committee of
Boston v. Reilly, 285 N.E.2d 795 (Mass. 1972), actually undermines
their contentions. There, the SJC considered the relationship
between a criminal statute prohibiting municipal employees from
engaging in strikes or work stoppages, and the terms of a CBA
between the Boston school system and the teachers' union that also
prohibited strikes. Id. at 796. When the teachers' union engaged
in a work stoppage, the school district sued under the CBA and
obtained an injunction. Id. at 797. Rejecting the teachers'
contention that the criminal statutes provided the exclusive remedy
for the union's conduct, the SJC saw nothing that "would warrant
the conclusion that [the criminal statute's] enactment was intended
to restrict previously existing common law remedies for breach of
contract in the employer-employee context." Id. at 798.14
In short, defendants have not identified any persuasive
evidence that the Massachusetts legislature sought to eliminate
longstanding common law causes of action through the wage-and-hour
laws. We therefore conclude that these laws do not preclude
McCarthy from asserting the common law claims pled in this case.
b. The Sufficiency of the State Law Claims
14
Defendants' remaining authorities consist of unpublished
Massachusetts trial court opinions that are either inapposite or
fail to engage with the doctrine described above. We thus see no
reason to adopt their reasoning.
-45-
We now turn to the sufficiency of the state law claims
under Rule 12(b)(6), grouping them as the district court did into
contract claims, fraud claims, and unjust enrichment claims. As
stated above, the parties are in accord that these claims are for
recovery of "straight-time" pay only.
i. The Contract Claims
McCarthy contends that the district court "misapprehended
that an employer-employee relationship is, at heart, a contractual
one" and that the court erred in ruling that the amended complaint
failed to allege a contract. We agree. While the complaint may
not be larded with detail, the basic claim is clear. The
defendants, by hiring and employing the plaintiffs, "entered into
[] employment contract[s] with [them]." There is no requirement of
greater formality to establish an employment contract. Indeed, "an
informal contract of employment may arise by the simple act of
handing a job applicant a shovel and providing a workplace."
Hishon v. King & Spalding, 467 U.S. 69, 74 (1984).
Per the complaint, the terms of this alleged contract were
similarly straightforward -- McCarthy and her fellows would
"provide their labor and services in a specified role for
defendants, in exchange for an agreed upon hourly pay rate for 'all
hours worked' by plaintiffs." "At a very minimum, an at-will
employment relationship encompasses an agreement by the employee to
perform specified work and an agreement by the employer to pay for
-46-
the work performed." Gasior v. Mass. Gen. Hosp., 846 N.E.2d 1133,
1137 n.7 (Mass. 2006). The heart of the state law claims is that,
through the timekeeping and payroll policies detailed above,
defendants breached the agreements and/or promises to pay all of
the wages due. The complaint also includes allegations stating
that defendants breached the duty of good faith by failing to pay
plaintiffs for their hours worked, and that the employees relied,
to their detriment, on defendants' promises to pay all the wages
owed. While these factual allegations are relatively simple, so
are the elements of a claim sounding in contract. We see no need
to demand more specificity when the core assertion is obvious
enough. Cf. Spears v. Miller, No. 1683, 2006 WL 2808145, at *3
(Mass. App. Div. Sept. 26, 2006) (observing that while "complaint
was silent as to [employees'] precise employment arrangements,"
allegations that employer "employed them" and that employer
"'agreed to pay' them 'legally mandated overtime pay'" were
sufficient to state breach of contract claim).
For these reasons, the dismissal of McCarthy's claims
sounding in contract must be vacated.
ii. The Fraud and Unjust Enrichment Claims
The remaining common law claims may be disposed of more
simply. As an initial matter, we note that McCarthy articulates no
challenge to the district court's conclusion that the fraud claims
did not meet the heightened pleading threshold set by Rule 9(b).
-47-
See Fed. R. Civ. P. 9(b) (requiring that fraud or mistake claims
"state with particularity the circumstances constituting fraud or
mistake"). Although McCarthy contends that the dismissal of the
common law claims should be vacated insofar as it is based on the
complaint's failure to plead knowledge, that pleading defect was
not the basis of the district court's dismissal of the fraud
claims. Due to the failure to provide any developed argumentation
as to why the fraud claims should survive Rule 9(b), we affirm the
dismissal of Count VII, the fraud claim, and Count VIII, the
negligent misrepresentation claim. See Elena v. Municipality of
San Juan, 677 F.3d 1, 8 (1st Cir. 2012) (deeming claim waived on
appeal when plaintiffs "make no attempt at any analysis whatsoever,
let alone developed argument").
By contrast, the district court's dismissal of the unjust
enrichment, money had and received, and conversion claims was based
entirely on its erroneous conclusion that the complaint did not
sufficiently plead that "defendants required or had knowledge of
the work allegedly performed by plaintiffs." See Part II.A.1.a,
supra. Neither the district court nor defendants on appeal have
proffered another basis for affirming the district court's order.
Consequently, the dismissal of the unjust enrichment, conversion,
and money had and received claims should be vacated.
D. Plaintiffs' Class Action and Collective Action Allegations
-48-
In addition to dismissing plaintiffs' substantive causes of
action, the district court struck the class and collective action
allegations. The amended complaint seeks both certification of a
class action under Federal Rule of Civil Procedure 23 for the
nonunion members' state law claims seeking straight-time pay, and
a collective action under FLSA Section 16(b), 29 U.S.C. § 216(b),
for the plaintiffs' FLSA overtime claims. Although Rule 23 and the
FLSA impose different certification requirements, the district
court used the same reasoning to strike both sets of allegations,
and the parties by and large do not distinguish between the two
regimes. We consequently assume that the same analysis applies to
both.15 For simplicity's sake, we refer to the relevant allegations
as "class action" allegations.
The dispositive question for purposes of this appeal is
whether the complaint pleads the existence of a group of putative
class members whose claims are susceptible of resolution on a
classwide basis. See Wal-Mart Stores, Inc., v. Dukes, 131 S. Ct.
2541, 2551 (2011) (holding that common issue of fact "must be of
15
Conditional certification of a FLSA collective action
requires that the putative plaintiffs be "similarly situated." 29
U.S.C. § 216(b). By contrast, Rule 23 calls for the class to share
common questions of law or fact, Fed. R. Civ. P. 23(a)(2), and if
certification is sought under Rule 23(b)(3), as is typical in wage-
and-hour suits, that common issues predominate over individual
ones, id. 23(b)(3). Although we treat class and collective
certification requirements as the same for the purposes of this
appeal, we do not suggest that this conflation is appropriate in
all circumstances.
-49-
such a nature that it is capable of classwide resolution -– which
means that determination of its truth or falsity will resolve an
issue that is central to the validity of each one of the claims in
one stroke"). The Supreme Court has recognized that "[s]ometimes
the issues are plain enough from the pleadings to determine whether
the interests of the absent parties are fairly encompassed within
the named plaintiff's claim." Gen. Tel. Co. of Sw. v. Falcon, 457
U.S. 147, 160 (1982). If it is obvious from the pleadings that the
proceeding cannot possibly move forward on a classwide basis,
district courts use their authority under Federal Rule of Civil
Procedure 12(f) to delete the complaint's class allegations.16 See,
e.g., Pilgrim v. Universal Health Card, LLC, 660 F.3d 943, 949 (6th
Cir. 2011) (upholding striking of class allegations prior to close
of discovery and motion to certify class).
Nonetheless, courts should exercise caution when striking
class action allegations based solely on the pleadings, for two
reasons. First, while ruling on a motion to strike is committed to
the district court's sound judgment, "such motions are narrow in
scope, disfavored in practice, and not calculated readily to invoke
the court's discretion." Boreri v. Fiat S.p.A., 763 F.2d 17, 23
(1st Cir. 1985). This is so because "striking a portion of a
16
In their reply brief, plaintiffs contend that the FLSA does
not expressly require that the complaint plead the requirements of
a collective action. Because this assertion was raised too late,
we do not pass upon its merits.
-50-
pleading is a drastic remedy and . . . it is often sought by the
movant simply as a dilatory or harassing tactic." 5C Charles Alan
Wright, et. al., Federal Practice & Procedure § 1380 (3d ed. 2011).
Second, courts have repeatedly emphasized that striking class
allegations under Rule 12(f)
is even more disfavored because it requires a
reviewing court to preemptively terminate the class
aspects of . . . litigation, solely on the basis of
what is alleged in the complaint, and before
plaintiffs are permitted to complete the discovery
to which they would otherwise be entitled on
questions relevant to class certification.
Mazzola v. Roomster Corp., 849 F. Supp. 2d 395, 410 (S.D.N.Y. 2012)
(citations omitted) (internal quotation marks omitted); see also
Cholakyan v. Mercedes-Benz USA, LLC, 796 F. Supp. 2d 1220, 1245
(C.D. Cal. 2011) (noting that "it is in fact rare to [strike class
allegations] in advance of a motion for class certification" and
collecting cases). Accordingly, a court should typically await the
development of a factual record before determining whether the case
should move forward on a representative basis.
Here, the district court’s analysis as to the class
allegations was deeply intertwined with its dismissal of
plaintiffs' substantive claims. The court ruled that the facts as
alleged did not suggest the existence of an "official policy" that
applied to "each of the more than 50 discrete occupational classes
plaintiffs claim make up the potential class." What is more, the
district court believed that the existence of such a widespread
-51-
policy across such a diverse group of employees was "simply not
plausible."
As we have explained, however, the core of plaintiffs'
allegations is in fact straightforward -- namely, that through a
combination of timekeeping policies and other human resources
practices, BMC employees were consistently required to work through
their meal breaks and for periods of time before and after their
regular work hours without compensation. This work took place
openly at the hospital's facilities, with the employer's actual or
constructive knowledge. Accepting the complaint's allegations as
true, as we must, these facts support the plausible inference that
this combination of policies affected BMC's employees across the
board, notwithstanding their different roles within the company.
Even if the court had concerns about plaintiffs' ability to
represent such a diverse group of employees, those concerns do not
justify the drastic measure of striking the class allegations in
their entirety. Cf. Twombly, 550 U.S. at 563 n.8 ("[W]hen a
complaint adequately states a claim, it may not be dismissed based
on a district court's assessment that the plaintiff will fail to
find evidentiary support for his allegations or prove his claim to
the satisfaction of the factfinder."). Moreover, the district
court has many tools at its disposal to address concerns regarding
the appropriate contours of the putative class, including
redefining the class during the certification process or creating
-52-
subclasses. Cf. Fengler v. Crouse Health Found., Inc., 595 F.
Supp. 2d 189, 197 (N.D.N.Y. 2009) (granting class certification in
hospital compensation case, but excluding "non-patient care
workers," such as cafeteria workers and security staff, because
plaintiffs failed to show that these employees worked without pay
with hospital administrators' knowledge). Therefore, plaintiffs
should have the chance to prove their assertions through discovery
and a properly-brought motion for class certification.
Defendants suggest that plaintiffs invited the district
court to resolve the class issues on the pleadings when they moved
for conditional certification of a FLSA collective action on behalf
of BMC employees affected by the alleged "meal break deduction
policy." We fail to see how plaintiffs' motion supports striking
the class allegations at this early stage. The mere fact that
plaintiffs raised the issue to the court did not warrant confining
the inquiry to the pleadings alone, and the trial court would have
been well within its discretion to defer ruling on the conditional
certification request until a later stage of the case. See, e.g.,
Perez v. Prime Steak House Rest. Corp., ___ F. Supp. 2d ____, 2013
WL 1635527, at *8 (D.P.R. Apr. 17, 2013). Moreover, plaintiffs
point out that the district court elected not to address the
evidence plaintiffs proffered in support of their motion for
conditional certification. This fact emphasizes the prematurity of
-53-
the district court's decision to strike the class and collective
allegations on the pleadings.
Consequently, we must vacate the court's order striking the
class and collective action allegations from the complaint.
E. Leave to Amend
Finally, plaintiffs request that they be given leave to
correct any deficiencies in the pleading, to the extent that the
district court's dismissal is affirmed. Federal Rule of Civil
Procedure 15(a)(2) states that "[a] court should freely give leave
when justice so requires." This rule does not mean that "a trial
court must mindlessly grant every request for leave to amend."
Aponte–Torres v. Univ. of P.R., 445 F.3d 50, 58 (1st Cir. 2006).
Leave to amend is appropriately denied when, inter alia, "the
request is characterized by 'undue delay, bad faith, futility, [or]
the absence of due diligence on the movant's part.'"
Calderón-Serra v. Wilmington Trust Co., 715 F.3d 14, 19 (1st Cir.
2013) (quoting Palmer v. Champion Mortg., 465 F.3d 24, 30 (1st Cir.
2006)). We review the district court's denial of leave to amend
for abuse of discretion. Platten v. HG Bermuda Exempted Ltd., 437
F.3d 118, 131 (1st Cir. 2006).
Here, we affirm the dismissal of the FLSA claims against
Canavan, as well as the fraud claims. These claims were originally
pled in the two separate complaints that initiated Manning I and
Manning II, respectively. The district court identified a number
-54-
of deficiencies in both of these pleadings, and the amended
complaint now before us represents plaintiffs' attempt to cure
those problems. While the trial judge could certainly have given
plaintiffs yet another try, the court was by no means required to
do so. This is especially true as to the fraud allegations, where
plaintiffs fell far short of meeting the heightened pleading
standard imposed by Rule 9(b). Although the district court was
incorrect to dismiss all of plaintiffs' claims, it was within its
discretion to conclude that the time had arrived to settle the
pleadings.
We also observe that many of the hospital compensation
lawsuits being brought throughout the country, including those
litigated by plaintiffs' counsel in this case, use complaints that
assert the same basic factual allegations and claims raised here.
A number of courts have expressed their frustration with the lack
of detail in these complaints. See Pruell, 678 F.3d at 14 & n.2
(collecting cases and noting district courts' "displeasure" with
their complaints). While these cases may involve complaints that
differ in some respects from the pleading at issue in this case,
the dismissal of many of these similar allegations, including those
written by plaintiffs' counsel here, should have put plaintiffs'
counsel on notice of the necessity of a thorough drafting job.
This circumstance further supports the trial judge’s conclusion
that giving them another chance would have served little purpose.
-55-
In sum, we must "defer to the district court's hands-on
judgment so long as the record evinces an adequate reason for the
denial." Aponte–Torres, 445 F.3d at 58. Given the facts of this
case we cannot say that denial of further leave to amend was an
abuse of discretion.
III.
For the reasons stated, we vacate the district court's order
in part and affirm it in part. Specifically, we vacate the
dismissal of the FLSA claim against BMC and Ullian (Count I), the
contract claims (Counts II-IV, and IX), and the money had and
received, unjust enrichment, and conversion claims (Counts V, VI,
and X). We also vacate the district court's order striking the
class and collective action allegations.
We affirm the dismissal of the FLSA claims against Canavan
(Count I). We also affirm the district court's exercise of
jurisdiction over the plaintiffs' state law claims, and the court's
directive requiring plaintiffs to file a single consolidated
complaint alleging all their causes of action. Further, we affirm
the dismissal of the fraud and negligent misrepresentation claims
(Counts VII and VIII), and the denial of leave to amend.
The case is remanded for proceedings consistent with this
opinion. The parties are to bear their own costs.
So ordered.
– Dissenting Opinion Follows –
-56-
STAHL, Circuit Judge, concurring in part and dissenting
in part. I join the court's thorough opinion in all but one
respect. I part ways with my colleagues as to whether the
plaintiffs have stated a claim against Elaine Ullian, BMC's
erstwhile president and CEO. In my view, the plaintiffs' vague,
boilerplate allegations do not nudge their claim against Ullian
across the line from conceivable to plausible. See Bell Atl. Corp.
v. Twombly, 550 U.S. 544, 570 (2007). Thus, I respectfully dissent
from the court's decision on this point.
As the majority explains, our precedents use an "economic
reality" test to gauge whether an individual defendant is the
plaintiff's "employer" for FLSA purposes.17 See Chao v. Hotel
Oasis, Inc., 493 F.3d 26, 34 (1st Cir. 2007); Baystate Alternative
Staffing, Inc. v. Herman, 163 F.3d 668, 678 (1st Cir. 1998);
Donovan v. Agnew, 712 F.2d 1509, 1513 (1st Cir. 1983). This test
"focuse[s] on the role played by the corporate officer[] in causing
the corporation to undercompensate employees." Baystate, 163 F.3d
at 678. "[R]elevant indicia" of employer status include the
defendant's "operational control over significant aspects of the
business" and "ownership interest in the business," if any; these
17
The FLSA defines "employer" to "include[] any person
acting directly or indirectly in the interest of an employer in
relation to an employee and includes a public agency." 29 U.S.C.
§ 203(d). This definition has aptly been called "unhelpful."
Jackson v. Conrad, No. 09-00425, 2010 WL 3852343, at *1 (D.D.C.
Sept. 30, 2010) (quoting Henthorn v. Dep't of Navy, 29 F.3d 682,
684 (D.C. Cir. 1994)) (internal quotation marks omitted).
-57-
factors matter "because they suggest that an individual controls a
corporation's financial affairs and can cause the corporation to
compensate (or not to compensate) employees in accordance with the
FLSA." Id.; see Hotel Oasis, 493 F.3d at 34. This focus on actual
operational control means that "a supervisor's title does not in
itself establish or preclude his or her liability under the FLSA."
Lamonica v. Safe Hurricane Shutters, Inc., 711 F.3d 1299, 1310
(11th Cir. 2013).
Importantly, our cases warn against construing the FLSA
definition of "employer" too broadly when ruling on claims against
individual defendants. See Hotel Oasis, 493 F.3d at 34; Baystate,
163 F.3d at 679; Agnew, 712 F.2d at 1513. In our first encounter
with individual liability under the FLSA, we concluded that "it
should not lightly be inferred that Congress intended to disregard
in this context the shield from personal liability which is one of
the major purposes of doing business in a corporate form." Agnew,
712 F.2d at 1513. We thus eschewed a literal reading of the FLSA's
"broadly inclusive definition of 'employer,'" which would impose
personal liability on "any supervisory employee," and adopted the
economic reality test instead. Id.; see Baystate, 163 F.3d at 679
(reaffirming that "such an expansive application of the definition
of an 'employer' to a personal liability determination pursuant to
the FLSA is untenable"). We should apply that test with this
concern about unbounded liability in mind. See Hotel Oasis, 493
-58-
F.3d at 34 (describing Agnew as "narrowly" deciding that the FLSA
"did not preclude personal liability" for officers with significant
ownership interests and significant day-to-day operational control,
including over compensation of employees, who personally made
decisions leading to undercompensation); Agnew, 712 F.2d at 1513.
One other factor impacts how we must analyze the
plaintiffs' claim against Ullian: this case, unlike Agnew,
Baystate, or Hotel Oasis, was resolved on a motion to dismiss.
Thus, for the plaintiffs' claim against Ullian to proceed, their
complaint "must contain sufficient factual matter, accepted as
true, to 'state a claim to relief that is plausible on its face.'"
Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550
U.S. at 570). Put another way, the complaint's "non-conclusory
factual content," Gianfrancesco v. Town of Wrentham, 712 F.3d 634,
639 (1st Cir. 2013), must allow us to draw the reasonable inference
that Ullian was the plaintiffs' "employer" under the economic
reality test. This inference cannot rest solely on allegations
that, "while not stating ultimate legal conclusions, are
nevertheless so threadbare or speculative that they fail to cross
the line between the conclusory and the factual." Pruell v.
Caritas Christi, 678 F.3d 10, 13 (1st Cir. 2012) (quoting
Peñalbert–Rosa v. Fortuño–Burset, 631 F.3d 592, 595 (1st Cir.
2011)) (internal quotation mark omitted). Here, the plaintiffs'
-59-
claim against Ullian relies on just such "borderline" allegations.
See id.
Most of the allegations against Ullian amount to this:
she was BMC's CEO and had many of the responsibilities one would
expect a CEO to have. The complaint says that Ullian "controlled
significant functions of the business"; "was involved in the budget
for the hospital"; "was involved in regular presentations and
meetings in the community on behalf of" BMC; "had the authority to,
and did, make decisions that concerned the policies defendants
adopted and the implementation of those policies"; "had the
authority to, and did, make decisions that concerned defendants'
operations, including functions related to employment, human
resources, training, payroll, and benefits"; and was actively
involved in recruiting, hiring, and reductions in force due to
budget cuts. Thus, we know that Ullian had many of the high-level
(if vaguely described) responsibilities that a CEO normally has,
but our cases make clear that merely holding a high-level
supervisory or executive position is not enough to trigger
individual FLSA liability. See Agnew, 712 F.2d at 1513; see also
Irizarry v. Catsimatidis, --- F.3d ---, 2013 WL 3388443, at *6 (2d
Cir. July 9, 2013) ("Most circuits . . . [require] that a company
owner, president, or stockholder must have at least some degree of
involvement in the way the company interacts with employees to be
a FLSA 'employer.'"). And many of the allegations that seek to tie
-60-
Ullian to the plaintiffs' employment situation are "nominally cast
in factual terms but [are] so general and conclusory as to amount
merely to an assertion that unspecified facts exist to conform to
the legal blueprint." Menard v. CSX Transp., Inc., 698 F.3d 40, 45
(1st Cir. 2012). For example: "As President and CEO, Elaine Ullian
actively advised defendants' agents on the enforcement of the
illegal policies complained of in this case." It is hard to
imagine what facts underlie this assertion.
Some allegations are more specific: we are told of
Ullian's role in overseeing a merger, constructing a new hospital
building, implementing an electronic records system, setting policy
regarding pharmaceutical and medical device representatives, and
taking part in a rally supporting health-care services for the
underprivileged. Taken together, these allegations plausibly
establish that Ullian "had the authority to manage certain aspects
of the business's operations on a day-to-day basis." Baystate, 163
F.3d at 678. But, in Baystate, that was not enough; we also called
for some indication of "personal responsibility for making
decisions about the conduct of the business that contributed to the
violations of the Act." Id. As the Second Circuit recently put
it:
Evidence that an individual is an owner or
officer of a company, or otherwise makes
corporate decisions that have nothing to do
with an employee's function, is insufficient
to demonstrate 'employer' status. Instead, to
be an 'employer,' an individual defendant must
-61-
possess control over a company's actual
'operations' in a manner that relates to a
plaintiff's employment.
Irizarry, --- F.3d ---, 2013 WL 3388443, at *8; cf. Patel v. Wargo,
803 F.2d 632, 638 (11th Cir. 1986) (defendant who was both
president and vice president of a corporation, as well as a
director and principal stockholder, was not an employer because he
"did not have operational control of significant aspects of [the
company]'s day-to-day functions, including compensation of
employees or other matters 'in relation to an employee'" (citing
Agnew, 712 F.2d at 1514)).18
The closest the complaint comes to alleging that Ullian
had operational control over plaintiffs' employment and
compensation is in the allegations that she: had the authority to
hire and fire employees; sought to ensure minority representation
in the workforce; was involved in layoffs; and "was involved in the
negotiation with unions, including relating to the unfair labor
practices of nurses." But these fairly broad allegations, even
when read together with the rest of the complaint, see
Ocasio-Hernández v. Fortuno-Burset, 640 F.3d 1, 14 (1st Cir. 2011),
do not create a plausible inference that Ullian played a role "in
causing [BMC] to undercompensate" the plaintiffs, Baystate, 163
18
This is not to suggest that allegations of an individual
defendant's authority over other aspects of a business are
irrelevant to the employer inquiry; they are not. See Irizarry,
2013 WL 3388443, at *8. But neither are they sufficient.
-62-
F.3d at 678. To be sure, I do not think our cases require, at the
pleading stage, particular facts showing that an individual
defendant made a specific decision or took a particular action that
directly caused the plaintiffs' undercompensation. But something
more than boilerplate assertions of "authority" is required; a
complaint must present facts plausibly showing that the plaintiffs'
compensation was sufficiently within the defendant's bailiwick to
justify holding her personally liable.19 Cf. Agnew, 712 F.2d at
1513. Here, I see no such facts. The gist of the plaintiffs'
complaint is that BMC's automated timekeeping system combined with
its inflexible work and training requirements to cause systematic
undercompensation. There are no allegations connecting Ullian to
any component of this regime, let alone establishing that she had
"operational control" over it. See Baystate, 163 F.3d at 678.
Finally, as the majority acknowledges, an individual FLSA
defendant's ownership interest in the business is a major
consideration under our precedents. See Hotel Oasis, 493 F.3d at
34; Agnew, 712 F.2d at 1511-12. Here, there is of course no
allegation that Ullian had any ownership interest in BMC, which is
19
I call the complaint's allegations against Ullian
"boilerplate" not only because of their vagueness but also because
they mirror the allegations made against the individual defendants
in other FLSA suits filed by the plaintiffs' counsel. E.g.,
Amended Complaint at 17-18, Nakahata v. N.Y.-Presbyterian
Healthcare Sys., Inc., 10 CIV. 2661 PAC, 2011 WL 321186 (S.D.N.Y.
Jan. 28, 2011) (No. 10-2661), ECF. No. 39.
-63-
a non-profit organization. Moreover, BMC is a large organization.
All else being equal, BMC's size makes it less plausible that the
president and CEO had a hand in causing the employees'
undercompensation than it would be in, say, a smaller, closely held
company. In sum, given the allegations in the complaint and our
determination that an expansive definition of the term "employer"
in this context is "untenable," Baystate, 163 F.3d at 679, I cannot
conclude that the plaintiffs have stated a claim against Ullian.
I am cognizant that, before discovery, a plaintiff cannot
know everything about a defendant's potentially wrongful conduct,
especially when it comes to the inner workings of a corporate or
institutional defendant. Thus, our post-Twombly cases have
recognized that "'some latitude' may be appropriate where a
plausible claim may be indicated 'based on what is known,' at least
where . . . 'some of the information needed may be in the control
of [the] defendants.'" Menard, 698 F.3d at 45 (alteration in
original) (quoting Pruell, 678 F.3d at 15). But "a plausible
claim" is still required. And Twombly and Iqbal make clear that a
claim is not plausible when the "complaint pleads facts that are
'merely consistent with' a defendant's liability." Iqbal, 556 U.S.
at 678 (quoting Twombly, 550 U.S. at 557). That is what we have
here. It is perhaps possible that Ullian is the plaintiffs'
employer under the FLSA. The allegations in the complaint are
consistent with that possibility. But broad assertions that Ullian
-64-
had authority that might encompass the requisite degree of control
over the plaintiffs' employment do not "raise a reasonable
expectation that discovery will reveal evidence of" liability.
Twombly, 550 U.S. at 556. For that reason, I respectfully dissent
from the court's decision that the plaintiffs have stated a
plausible claim against Ullian. I join the court's opinion in all
other respects.
-65-