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M. Tomas Cardenas v. Ray R. Grozdic

June 20, 2012


The opinion of the court was delivered by: Judge Virginia M. Kendall


This case arises out of a unique pay arrangement between the parties where M. Tomas Cardenas believed he was having wages applies to various properties by agreement of his employer, but after years passed he never saw the increased payments or the ownership in property. Cardenas sued his former employers, Ray R. Grozdic, Mike M. Grozdic, and Real Estate Advisors, Inc. (collectively "Defendants"). He alleges that they violated the Fair Labor Standards Act, 29 U.S.C. § 201 et seq., in connection with the payment of overtime wages (Count I); and the Illinois Wage Payment and Collection Act, 820 ILCS 115/1 et seq., based on a failure to pay earned wages at the rate agreed upon by the parties (Count III).*fn1 The Defendants move to dismiss the Complaint for failure to state a claim. For the reasons stated below, the Motion to Dismiss is denied.

I. Background

In considering a motion to dismiss, all of the well-pleaded allegations are accepted as true, and all reasonable inferences are drawn in favor of the non-moving party. See Killingsworth v. HSBC Bank, 507 F.3d 614, 618 (7th Cir. 2007) (citing Savory v. Lyons, 469 F.3d 667, 670 (7th Cir. 2006)). In approximately January 2002, Defendants Ray Grozdic and Mike Grozdic hired Cardenas to perform specific duties related to the leasing, maintenance, and improvement of residential units owned by the Grodzics. Ray Grozdic is involved in the day-to-day operations of Real Estate Advisors, Inc., and is the owner of multi-unit residential complexes that are managed by Real Estate Advisors, Inc. Mike Grodzic, who is also involved in the day-to-day operations of the company, is Ray Grozdic's son, and is the sole principal shareholder of Real Estate Advisors, Inc. The duties that Cardenas was hired to perform included arranging viewing appointments for prospective tenants, initiating lease agreements, collecting rents, cleaning, repairing, and improving the residential units.

Cardenas alleges that during this employment, and up until the time he was terminated on November 17, 2011, he worked Monday through Friday from the hours of 5 p.m. to 12 a.m., and oftentimes longer. He also claims that he worked on Saturdays and Sundays from 7 a.m. to 7 p.m., and oftentimes longer. Cardenas alleges that he began working at a rate of $10.00 per hour and that after one year, the Defendants agreed to pay him at a rate of $18.00 per hour. During this time, Cardenas alleges that he was regularly working at least sixty hours per week and was therefore entitled to a rate of pay of one and one-half times his regular hourly rate for all hours worked in excess of forty hours per week.

Cardenas alleges that he was not paid his wages in hand, and instead asserts that the Grodzics provided Cardenas with an apartment which the Grozdics valued at $1,000.00 per month. Cardenas alleges that the Grozdics withheld the remaining compensation due, promising that at some point in the future the Grodzics would use the "earnings" accumulated by Cardenas to purchase more buildings and eventually transfer ownership of some building to Cardenas.

Cardenas states in his Complaint that this transfer of ownership was to take place once Ray Grozdic reached 65 years of age and retired. Cardenas alleges that Ray Grodzic turned 65 in May 2011. Cardenas subsequently asked the Grodzics multiple times when he would be transferred an ownership stake in some of the buildings. He continued to make these inquiries until he was relieved of his duties by Ray Grozdic in November 2011. The termination letter Cardenas received stated that Cardenas was no longer authorized to perform any work on behalf of the Grozdics and that he would no longer receive rental credit for the apartment in which he lived.

By a letter dated and mailed December 15, 2011, Cardenas demanded that the Grodzics pay him his earned and unpaid wages promptly. The letter was to no avail, and Cardenas timely filed a complaint with this Court. The Defendants followed with this Motion to Dismiss. The Defendants argue that neither the company, Real Estate Advisors, Inc., nor its two owners, Ray Grodzic and Mike Grodzic, are covered as an "enterprise engaged in commerce" under the Fair Labor Standards Act, and are therefore are not subject to the provisions of that law. See 29 U.S.C. § 203(s)(1)(A). The Defendants request that if the Court dismisses the allegations of the Complaint arising under federal law, the Court should relinquish jurisdiction over Count III of the Complaint based on a prudential denial of supplemental jurisdiction.

II. Standard of Review

When considering a Rule 12(b)(6) motion to dismiss, the Court accepts as true all facts alleged in the complaint and construes all reasonable inferences in favor of the non-moving party. See Killingsworth, 507 F.3d at 618 (citing Savory, 469 F.3d at 670); accord Murphy v. Walker, 51 F.3d 714, 717 (7th Cir. 1995). To properly state a valid claim, the complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a)(2). "Detailed factual allegations" are not required, but the plaintiff must allege facts that, when "accepted as true ... 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009), (quoting Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To determine whether a complaint meets this standard the "reviewing court [must] draw on its judicial experience and common sense." Iqbal, 556 U.S. at 678. If the factual allegations are well-pleaded, the Court assumes their veracity and then proceeds to determine whether they plausibly give rise to an entitlement to relief. Id. at 679. A claim has facial plausibility when its factual content allows the Court to draw a reasonable inference that the defendant is liable for the misconduct alleged. See id. at 678.

III. Discussion

At issues is whether Real Estate Advisors, Inc. is an "enterprise engaged in commerce" and whether the Grodzics are individual "employers" within the meaning of those terms under the FLSA. The interpretation of these employment definitions under the Act must be "broad and comprehensive in order to accomplish the remedial purposes of the Act." Sec'y of Labor, U.S. Dep't of Labor v. Lauritzen, 835 F.2d 1529, 1534 (7th Cir.1987).

An employee is covered by the FLSA when either (1) the employee is engaged in commerce ("individual coverage"); or (2) the employer is an enterprise engaged in commerce ("enterprise coverage"). See 29 U.S.C. §§ 206, 207. The FLSA defines "enterprise" as the "related activities performed (either through unified operation or common control) by any person or persons for a common business purpose." 29 U.S.C. § 203(r)(1). Real Estate Advisor's Inc. constitutes an "enterprise" under the act because the management activities of a rental unit meet the three statutory tests of an enterprise: (1) related activities; (2) a unified operation or common control; and (3) a common business purpose. See Brennan v. Arnheim & Neely, Inc., 410 U.S. 512 (1973) (a fully integrated real estate management company that directs management operations at several separately owned buildings is a single 'enterprise' for purposes of the Act). But classification as an "enterprise," by itself, does not mean that an entity is covered by the FLSA. The enterprise must also be "engaged in commerce."

If a corporate defendant fits the definition of an enterprise, it still must only follow the overtime compensation rules of 29 U.S.C § 207 if it is "engaged in commerce." To be "engaged in commerce" a corporation must be: (1) an enterprise that "has employees engaged in commerce or in the production of goods for commerce, or that has employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person"; and (2) has an annual gross volume of sales over $500,000.00. See 29 U.S.C. § 203(s)(1)(A)(i), (ii). Thus, to be classified as an "enterprise engaged in commerce" requires, among other things, annual gross revenue of $500,000.00 or greater. See 29 U.S.C. § 203(s)(1)(A); accord Falk v. Brennan, 414 U.S. 190, 191 (1973). If these elements are ...

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