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Rosa Nehmelman For Herself and On Behalf of Similarly Situated Others v. Penn National Gaming

May 20, 2011


The opinion of the court was delivered by: Magistrate Judge Finnegan


Plaintiff Rosa Nehmelman has filed suit on behalf of herself and similarly situated others seeking to recover unpaid wages due under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201 et seq., and the Illinois Minimum Wage Law ("IMWL"), 820 ILCS 105/1 et seq. Specifically, Plaintiff charges Defendants Penn National Gaming, Inc. ("PNGI") and its wholly-owned subsidiary Empress Casino Joliet d/b/a Hollywood Casino Joliet ("Empress") (collectively "Defendants") with violating both wage statutes by failing to pay certain employees for all hours worked per shift, or for hours worked in excess of 40 per week. The parties have consented to the jurisdiction of the United States Magistrate Judge pursuant to 28 U.S.C. § 636(c), and Defendants now move to dismiss Plaintiff's Amended Complaint in its entirety. For the reasons set forth here, the motion is denied.


PNGI is a Pennsylvania corporation that "operates, owns and manages" casinos throughout the United States, including Empress in Illinois. (Doc. 8 ¶¶ 5, 10, 11). Plaintiff claims that she and similarly situated others are full-time hourly employees who "work for Defendants as Dealers and Slot Reps in the table games department." (Id. ¶ 13). Dealers are responsible for hosting the gambling tables, while Slot Reps are responsible for hosting and managing slot machines. (Id. ¶ 16). Employees in both positions are paid on a "per shift" basis rather than by hours worked, and are "typically scheduled for five eight hour shifts, four ten hour shifts or some other combination of shifts which result in 40 hours per week." (Id. ¶ 17). Plaintiff contends that this results in employees not receiving overtime pay for all hours worked in excess of 40 per week. (Id. ¶ 18).

Plaintiff also alleges that Dealers and Slot Reps are not paid for some of their working hours due to improper casino policies. For example, Dealers and Slot Reps are required to clock in and start working seven minutes before the official start of their scheduled shifts, but are not paid for those extra minutes of work. (Id. ¶¶ 19, 20). In addition, though these employees must clock out no later than seven minutes after the official end of their scheduled shifts, they typically work longer than that in order to conclude ongoing games, close out tables, wait for the new shift employees to arrive and/or return keys to the key room. (Id. ¶¶ 24-28). Dealers and Slot Reps also receive no pay for their attendance at mandatory twice-weekly meetings, nor are dealers paid for taking mandatory gaming classes to maintain their dealing skills. (Id. ¶¶ 22, 23, 30-33).

Plaintiff filed suit on January 3, 2011, alleging that all of these practices violate the FLSA and IMWL. She seeks to represent a class of current and former Dealers and Slot Reps who worked for Defendants "during the last three years." Defendants have moved to dismiss Plaintiff's Amended Complaint, claiming that pursuant to a prior bankruptcy proceeding, she has no standing to sue under Rule 12(b)(1) and is judicially estopped from recovering in this action. Defendants also contend that Plaintiff has failed to state claims against them under Rule 12(b)(6), and that the Court lacks personal jurisdiction over PNGI under Rule 12(b)(2). Plaintiff challenges these arguments and asks that the motion be denied.


A. Standing and Judicial Estoppel

Defendants' first two arguments turn on the fact that Plaintiff petitioned for bankruptcy under Chapter 7 of the Bankruptcy Code on August 24, 2009. At that time, all of Plaintiff's property became part of the bankruptcy estate, including "all legal or equitable interests of the debtor in property as of the commencement of the case." 11 U.S.C. § 541(a)(1). See also In re Stinnett, 465 F.3d 309, 312 (7th Cir. 2006). Plaintiff did not disclose any wage claims in her bankruptcy filings, but her lawsuit seeks to recover for unpaid wages dating as far back as January 3, 2008. Defendants object that Plaintiff has no standing to sue, and that she is judicially estopped from pursuing these undisclosed claims.

1. Standing to Sue

"Standing is an essential component of Article III's case-or-controversy requirement." Apex Digital, Inc. v. Sears, Roebuck & Co., 572 F.3d 440, 443 (7th Cir. 2009) (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)). "In essence the question of standing is whether the litigant is entitled to have the court decide the merits of the dispute or particular issues." Id. (quoting Perry v. Village of Arlington Heights, 186 F.3d 826, 829 (7th Cir. 1999)). When considering a motion to dismiss under Rule 12(b)(1), the Court "must accept as true all well-pleaded factual allegations and draw all reasonable inferences in favor of the plaintiff." City of Greenville, Ill. v. Syngenta Crop Protection, Inc., 756 F. Supp. 2d 1001, 1005 (S.D. Ill. 2010) (quoting Long v. Shorebank Dev. Corp., 182 F.3d 548, 554 (7th Cir. 1999)). Plaintiff, however, bears the burden of proving that standing exists, and the Court may consider material outside the pleadings. Apex Digital, 572 F.3d at 443; Berg v. eHome Credit Corp., No. 08 C 5530, 2011 WL 761486, at *1 (N.D. Ill. Feb. 25, 2011). Plaintiff concedes that she is not the real party in interest with respect to any of her wage claims that accrued before August 24, 2009. (Doc. 25, at 4). This is because pre-bankruptcy claims belong to the bankruptcy trustee, for the benefit of the debtor's creditors. See Hernandez v. Forest Preserve Dist. of Cook County, Illinois, No. 08 C 5731, 2010 WL 1292499, at *3 (N.D. Ill. Mar. 29, 2010) (citing Matthews v. Potter, 316 Fed. Appx. 518, 521 (7th Cir. 2009) and Biesek v. Soo Line R. Co., 440 F.3d 410, 413 (7th Cir. 2006)). There is no dispute that Plaintiff's pre-bankruptcy wage claims were neither scheduled nor otherwise administered by the time the bankruptcy proceeding closed. Those claims thus "forever remain[] property of the estate, and the trustee remains the real party in interest."

Calvin v. Potter, No. 07 C 3056, 2009 WL 2588884, at *2 (N.D. Ill. Aug. 20, 2009) (citing 11 U.S.C. § 554(d)).

Defendants argue that because Plaintiff is not the real party in interest with respect to all of her stated wage claims, she lacks prudential standing in this case and her lawsuit must be dismissed. (Doc. 12, at 5). Prudential standing "embodies 'judicially self-imposed limits on the exercise of federal jurisdiction.'" Disability Rights Wisconsin, Inc. v. Walworth County Bd. of Supervisors, 522 F.3d 796, 800 (7th Cir. 2008) (quoting Elk Grove Unified Sch. Dist. v. Newdow, 542 U.S. 1, 12 (2004)). It "encompasses 'the general prohibition on a litigant's raising another person's legal rights, the rule barring adjudication of generalized grievances more appropriately addressed in the representative branches, and the requirement that a plaintiff's complaint fall within the zone of interests protected by the law invoked." Elk Grove Unified Sch. Dist., 542 U.S. at 12. Defendants claim that where, as here, "the debtor lacks standing to sue, the Court does not have subject matter jurisdiction." (Doc. 12, at 5).

Plaintiff responds that she does have standing to sue in this case because new wage claims continued to accrue after August 24, 2009 each time she received a new paycheck. She relies exclusively on Ledbetter v. Goodyear Tire & Rubber Co., 550 U.S. 618 (2007), in which the plaintiff sought to apply a "paycheck accrual rule" to Title VII cases. Id. at 640. The plaintiff urged the Supreme Court to look to FLSA cases, arguing that it was "well established that the statute of limitations for violations of the minimum wage and overtime provisions of the [FLSA] runs anew with each paycheck." Id. at 641. The Court did not comment on the merits of this assertion, instead explaining that the FLSA does not require proof of a specific intent to discriminate and, thus, is not instructive with respect to Title VII discrimination claims. Id.

Defendants note that Ledbetter is not an FLSA case, and argue that it in no way establishes that FLSA claims accrue each paycheck. Defendants do not offer an alternative accrual theory, but in their view, there is no distinction between pre- and post-bankruptcy wage claims, and Plaintiff should not be allowed to "disown the pre-bankruptcy claims she seeks in her Amended Complaint by way of arguments in her response brief." (Doc. 12, at 3-5; Doc. 27, at 3). The Court agrees that Ledbetter does not conclusively establish that FLSA claims accrue each paycheck. That said, courts in this district and others have found that for statute of limitations purposes, FLSA claims do indeed accrue each payday. See, e.g., Schultz v. American Family Mut. Ins. Co., No. 04 C 5512, 2005 WL 5909003, at *5 (N.D. Ill. Nov. 1, 2005) ("An FLSA claim accrues at each regular payday immediately following the work period during which the services, for which compensation is sought, were rendered.") (internal quotations omitted); Cortez v. Medina's Landscaping, Inc., No. 00 C 6320, 2002 WL 31175471, at *1 (N.D. Ill. Sept. 30, 2002) ("As a general rule, an FLSA claim accrues at each regular payday . . ."); Powers v. Centennial Communications Corp., No. 1:08-cv-208-PPS, 2010 WL 746776, at *2 n.1 (N.D. Ind. Feb. 26, 2010) ("FLSA claims accrue at each regular payday . . ."); Moreno v. United States, 82 Fed. Cl. 387, 404 n.37 (2008) ("[T]he 'usual rule' is that 'a claim for unpaid overtime under the FLSA accrues at the end of each pay period when it is not paid.'"); Knight v. Columbus, Ga, 19 F.3d 579, 581 (11th Cir. 1994) ("[T]he FLSA has been violated each time the [defendant] issued [a plaintiff] a paycheck that failed to include payment for overtime hours actually worked."); Uriarte v. City of Calexico, No. 10-cv-498 L(AJB), 2011 WL 9588, at *3 (S.D. Cal. Jan. 3, 2011) ("FLSA claims are continuing claims and a separate cause of action 'accrues' every payday that overtime is not paid.").

To the extent Plaintiff alleges that Defendants failed to pay her overtime and other wages due each time she received a paycheck, and she continued to receive paychecks for work performed after August 24, 2009 until her discharge on December 15, 2010, the Court is satisfied that she has standing to sue for those post-bankruptcy violations. See Parvati Corp. v. City of Oak Forest, Ill., 630 F.3d 512, 516 (7th Cir. 2010) (standing exists where plaintiff suffered an injury in-fact that is fairly traceable to the defendant's actions and capable of being redressed by a favorable court decision). As for Defendants' objection that Plaintiff is improperly disclaiming pre-bankruptcy violations alleged in the Amended Complaint, the Court is aware of no case suggesting that Plaintiff cannot pursue class claims extending back to January 3, 2008 even if she herself can only recover for violations dating after August 24, 2009. See Arreola v. Godinez, 546 F.3d 788, 795 (7th Cir. 2008) ("[I]t is best to confine the term 'standing' to the Article III inquiry and thus to keep it separate from the plaintiff's entitlement to relief or her ability to satisfy the Rule 23 criteria.") Defendants' motion to dismiss for lack of standing is denied.

2. Judicial Estoppel

Defendants contend that even accepting that Plaintiff has standing to sue, she is judicially estopped from pursuing any wage claims because she failed to mention them in her bankruptcy filing. Judicial estoppel is an equitable doctrine designed to "prevent the perversion of the judicial process." Cannon-Stokes v. Potter, 453 F.3d 446, 448 (7th Cir. 2006) (quoting Matter of Cassidy, 892 F.2d 637, 641 (7th Cir. 1990)). It embodies the concept that "a party who prevails on one ground in a lawsuit may not in another lawsuit repudiate that ground." United States v. Christian, 342 F.3d 744, 747 (7th Cir. 2003). It may apply where: "(1) the later position is clearly inconsistent with the earlier position; (2) the facts at issue are the same in both cases; (3) the party to be estopped convinced the ...

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