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VEGA v. CONTRACT CLEANING MAINTENANCE

October 18, 2004.

GLORIA VEGA, et al., on behalf of themselves and all others similarly situated, Plaintiffs,
v.
CONTRACT CLEANING MAINTENANCE, INC., et al., Defendants.



The opinion of the court was delivered by: AMY J. ST. EVE, District Judge

MEMORANDUM OPINION AND ORDER

Plaintiffs Gloria Vega and others filed an eleven count complaint against Defendants Contract Cleaning Maintenance, Inc. ("CCM"), Contract Cleaning Systems, Inc. ("CCS"), Corporate Building Systems, Inc. ("CBS"), Carole Boltz,*fn1 Eric Boltz, Sarah Ann Boltz, Boltz Family Limited Partnership ("Boltz FLP"), and United Parcel Service, Inc. ("UPS"). Plaintiffs base the complaint primarily on allegations that Defendants schemed to misclassify non-managerial janitors and maintenance workers as independent contractors rather than as employees, and falsified employee records to indicate that individuals classified as employees never worked more than forty hours a week. The claims include violations of the Fair Labor Standards Act ("FLSA"), the Racketeering Influenced and Corrupt Organizations Act ("RICO"), the Illinois Minimum Wage Law, the Illinois Wage Payment and Collection Act ("the Illinois Wage Act"), the Illinois Workers' Compensation Act and Illinois and Texas common law. Before the Court are three motions to dismiss. Defendant UPS moves to dismiss all claims against it based on its assertions that it cannot be considered a joint employer and that Plaintiffs have failed to plead a RICO conspiracy pursuant to Federal Rules of Civil Procedure 12(b)(6) and 9(b). Defendants CCS, Eric Boltz, Sarah Ann Boltz and Boltz FLP (collectively referred to herein as "CCS/Boltz") move to dismiss the common law fraud claims for failure to state a claim and for failure to allege fraud with particularity. These Defendants also move to dismiss the RICO claims arguing the claims lack particularity and fail to otherwise allege recognized RICO violations. Finally, CCM moves to dismiss the RICO claims by incorporating and adopting the arguments and reasoning of both CCS/Boltz and UPS. For the reasons detailed below, the motions are granted in part and denied in part.

FACTUAL ALLEGATIONS*fn2

  I. The Parties

  A. Plaintiffs

  Plaintiffs Gloria Vega, Hugo Ayala, Patricia Ayvar, Mario Diaz, Flora Duran, Juana Flores, Roberto Lopez Flores, Angelica Gonzalez, Daniel Gonzales, Jose Antonio Jimenez, Lino Landes, Alica Lira, Enrique Martinez, Juana Ortiz, Ricardo Perez, Adela Neri Reyes, Reynaldo Salgado, Benito A. Silva, Martha Vargas, Bertha Zavala, Luis Zavala and Virginia Zavala were employed by CCM, UPS, CBS and Carole and Eric Boltz. (R. 30-1, Compl. at ¶ 4.) Plaintiffs Juan S. Esquivel and Candelaria Martinez Esquivel were employed by CCS, UPS and Carole, Eric and Sarah Ann Boltz in Texas. (Id. at ¶ 5.) B. Defendants

  1. Corporate and Partnership Defendants

  Defendants CCM and CBS are both Illinois corporations engaged in the provision of janitorial and maintenance services. (Id. at ¶¶ 10-11.) Defendant CCS is a Nevada corporation providing janitorial and maintenance services in Texas and other states. (Id. at ¶ 13.) Defendant Boltz FLP is a limited partnership registered in Texas. Its general partner is CCS, and it derives income from the operations of CCM and CCS. (Id. at ¶ 18.) Defendant UPS is a corporation engaged in the interstate shipment of letters and packages. (Id. at ¶ 19.)

  2. Individual Defendants

  Defendant Eric Boltz serves as the secretary of CCM and president of CCS. Carole Boltz was the president of CCM. Both Carole and Eric Boltz were once part owners of CCM, and Eric Boltz is now part owner of CCS. (Id. at ¶ 15-16.) Both Carole and Eric Boltz controlled the employment practices of CCM and CCS and derived revenue from the operations of both corporations. (Id.) Defendant Sarah Ann Boltz serves as the secretary and treasurer of CCS. Sarah Ann Boltz has exercised control over the employment practices of CCS and has derived revenue from the operations of CCM and CCS. (Id. at ¶ 17.)

  C. Boltz Janitorial Enterprise

  Plaintiffs refer to all of the various corporations, partnerships, and other entities through which the Boltz family either provided janitorial and maintenance services or held and invested revenue derived from such services as the Boltz Janitorial Enterprise ("BJE"). (Id. at ¶ 31.) Plaintiffs allege that BJE is an association-in-fact. (Id. at ¶ 233.)

  II. Substantive Allegations

  According to Plaintiffs, the Boltz Defendants, through CCM, CCS and other BJE entities, engaged in a fraudulent scheme at UPS's facilities and other work sites to evade their obligations under the FLSA, other federal and state employment and tax laws and the common law. (R. 30-1, Compl. at ¶ 52.) Plaintiffs allege that the Boltz Defendants and their entities systematically misclassified their non-managerial janitors and maintenance workers as independent contractors in order to evade their legal obligations to pay employees at a rate of one and one-half times their regular rate for all hours worked in excess of forty hours per week, to pay the employees twice a month, to provide their employees with workers' compensation insurance without cost to the employees, to pay various payroll taxes for these employees and to make unemployment insurance contributions for these employees. (Id. at ¶ 54.) Plaintiffs further contend that when members of the Boltz family and their entities properly classified some of their janitors and maintenance workers as employees, they then falsified their employee records to create the appearance that the employees never worked more than forty hours a week even though they routinely worked overtime. (Id. at ¶ 55.) Plaintiffs allege that Defendants CCM and CCS did not deduct any taxes or indicate that they were paying payroll taxes on Plaintiffs' behalf, and that CCM and CCS further deducted an amount labeled "insurance deduction" from Plaintiffs' wages without their consent. (Id. at ¶¶ 67-69, 72, 81-82, 85.) Plaintiffs claim that they never received a copy of any insurance policy purchased with the deducted funds, any summary of its terms or any claim forms. (Id. at ¶¶ 71, 72, 84, 85.)

  Agents of the Boltz family, CCM and CCS orally informed Plaintiffs and other janitors and maintenance workers that they were independent contractors, and had them sign a document written in English representing themselves as independent contractors. (Id. at ¶¶ 94, 96, 97.) When Plaintiffs requested favorable changes in their terms of employment, Defendant members of the Boltz family, CCM and CCS denied their requests and informed them that their status as independent contractors precluded the changes. (Id. at ¶ 99.) Plaintiffs claim that they were not independent contractors under any relevant law. (Id. at ¶ 100.) Plaintiffs further allege that the Boltz Defendants, CCM and CCS determined Plaintiffs' work schedules, provided Plaintiffs with all necessary equipment, tools and supplies, and paid Plaintiffs on an hourly basis. (Id. at ¶¶ 101-103.) Defendants did not permit Plaintiffs to hire or utilize assistants in the performance of their tasks for Defendants, and Plaintiffs did not do so. (Id. at ¶ 105.) Plaintiffs claim that they typically worked five or six days per week, year round, and performed ongoing maintenance and janitorial tasks for the Defendants. (Id. at ¶ 108.)

  Plaintiffs further allege that Carole Boltz devised practices and procedures to make it falsely appear as though Plaintiffs and other employees were independent contractors. (Id. at ¶ 112.) Plaintiffs contend that the Boltz Defendants, CCM and CCS deducted 1% from Plaintiffs' gross wages to purportedly pay for equipment, tools and supplies so that they could claim that Plaintiffs supplied their own equipment. (Id. at ¶ 113.) CCM, CCS and UPS, however, supplied these items, which remained their property at all times. Plaintiffs allege that no correlation exists between the cost of the equipment, tools and supplies and the amount deducted from Plaintiffs' wages. (Id.) Further, Plaintiffs had no discretion in deciding the type of equipment, tools and supplies that Defendants purchased. (Id.) Carole Boltz, according to Plaintiffs, dubbed the managers of their enterprises "inspectors" instead of managers even though they undertook the duties of a typical manager such as hiring, firing and supervising employees. (Id. at ¶ 114.)

  III. The Complaint

  Plaintiffs filed a Third Amended Complaint on May 28, 2004. The Complaint contains eleven causes of action, two of which allege various violations of the RICO statute and six of which allege violations of other state and federal statutes. The remaining counts are state common law claims.

  A. Statutory causes of action other than RICO

  Count one alleges violations of the FLSA and is directed at all Defendants except Boltz FLP. Specifically the count alleges that Defendants did not pay Plaintiffs overtime for all hours worked in excess of forty hours in a single work week. Plaintiffs contend Defendants willfully carried out these acts in violation of 29 USC § 207(a). (R. 30-1, Compl. at ¶¶ 161-62.)

  The remaining statutory causes of action allege violations of Illinois statutory law. Counts two, three, six and seven are directed at CCM, CBS, UPS and Eric Boltz. Count two alleges a violation of the Illinois Minimum Wage Law for Defendants' failure to pay Plaintiffs overtime for hours worked in excess of forty hours in a single work week. (Id. at ¶ 164.) Counts three, six and seven each allege violations of the Illinois Wage Act. (Id. at ¶¶ 173, 191, 198). Finally, count five alleges a violation of the Illinois Workers' Compensation Act against CCM and CBS. (Id. at ¶ 186.)

  B. Common law causes of action

  The remaining state law claims allege violations of common law and are directed at different sets of Defendants. Count four alleges that CCM, CBS and CCS breached oral contracts in violation of Illinois and Texas common law. (Id. at ¶ 179.) Counts eight and nine allege violations of Illinois and Texas common law against CCM, CCS and Eric Boltz. Count eight alleges constructive fraud, and count nine alleges fraud and misrepresentation. (Id. at ¶¶ 219, 228.)

  C. The RICO causes of action

  Plaintiffs allege four RICO violations. Plaintiffs claim all Defendants except CBS and UPS violated 18 U.S.C. §§ 1962(a)-(c), and they claim all Defendants but CBS violated 18 U.S.C. § 1962(d). ...


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