UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF ILLINOIS EASTERN DIVISION
November 2, 2012
STEPHEN STRAUSS, GUASTAVO HUERTA, MARIA ESCOBAR, SYLVIA ANIOLA, GERARDO PINABAJ, MARTIN OSEGUERA AND MARIO GALVAN, ON BEHALF OF THEMSELVES AND OTHERS SIMILARLY SITUATED, PLAINTIFFS,
ITALIAN VILLAGE RESTAURANT, INC.,
ITALIAN VILLAGE RESTAURANT, INC., THIRD- PARTY PLAINTIFF,
HOWARD L. MOCERF, AN INDIVIDUAL, DUANE MORRIS, LLP, AN ILLINOIS LIMITED LIABILITY COMPANY, RAYMOND J. SULLIVAN, AN INDIVIDUAL, AND SULLIVAN & SULLIVAN, LTD., THIRD-PARTY DEFENDANTS.
The opinion of the court was delivered by: Magistrate Judge Susan E. Cox
MEMORANDUM OPINION AND ORDER
Plaintiffs Stephen Strauss, Gustavo Huerta, Maria Escobar,Sylvia Aniola, Gerardo Pinabaj, Martin Oseguera, and Mario Galvan ("plaintiffs"), all current or former employees of Italian Village Restaurant, Inc. ("Italian Village"), filed suit against the restaurant alleging that it had violated the minimum wage and overtime wage requirements of the Fair Labor Standards Act ("FLSA") and Illinois Minimum Wage Law ("IMWL").*fn1 On June 20, 2011, the parties jointly consented to have the case reassigned to a Magistrate Judge, and on June 28, 2011, the case was assigned to this Court.*fn2
On December 28, 2011, defendant/third-party plaintiff filed a third-party complaint seeking indemnity against Howard L. Mocerf, Duane Morris, LLP, Raymond J. Sullivan, and Sullivan & Sullivan, Ltd. ("third-party defendants").*fn3 On March 8, 2012, third-party plaintiff filed its First Amended Complaint, consisting of sixteen counts: four counts each against the four third-party defendants.*fn4 Third-party defendants Duane Morris, LLP and Howard Mocerf have now filed a joint motion to dismiss the amended third-party complaint, as have Raymond J. Sullivan and Sullivan & Sullivan, Ltd.*fn5
For the reasons stated below, both motions are granted in their entirety and further leave to amend is denied.
I. FACTUAL BACKGROUND
Third-party plaintiff, the Italian Village ("the Italian Village") is an Illinois Corporation doing business as a restaurant in Chicago.*fn6 Third-party defendant, Howard Mocerf ("Mocerf") is an attorney licensed to practice law in the State of Illinois.*fn7 Third-Party Defendant, Duane Morris, LLC ("Duane Morris"), is a law firm and an Illinois Limited Liability Company doing business in Chicago.*fn8 Third-Party Defendant, Raymond J. Sullivan ("Sullivan"), is a certified public accountant practicing in Crestwood, Illinois.*fn9 Third-Party Defendant, Sullivan & Sullivan, is a limited liability company doing business in Crestwood, Illinois.*fn10
The Italian Village retained Mocerf, a partner at Duane Morris, to negotiate and prepare employment contracts for its employees, including provisions regarding wages.*fn11 Third-party plaintiff also retained Mocerf to advise it of any and all relevant statutes regarding employee wages and notification requirements, including the Fair Labor Standards Act and the Illinois Minimum Wage Law.*fn12 In 2005 and 2009, Mocerf prepared and negotiated employment contracts for employees at the Italian Village Restaurant, including the provisions regarding employee wages and the necessary notifications for tipped employees pursuant to the Fair Labor Standards Act and the Illinois Minimum Wage Law.*fn13
The Italian Village also retained Sullivan as a certified public accountant to be in charge of processing and managing the payroll for its employees.*fn14 Sullivan was retained to manage the Italian Village's employee payroll according to relevant statutory law, including the Fair Labor Standards Act and the Illinois Minimum Wage Law.*fn15
In response to plaintiffs' suit, the Italian Village filed a sixteen count complaint against third party defendants. The essence of all of these counts is that these third parties, and not the Italian Village, are truly responsible for any violations of the state and federal laws governing the Italian Village's employees' wages and hours. Counts I-IV allege that each of the third-party defendants are joint-tortfeasors as to plaintiffs' FLSA claims.*fn16 Counts V-VIII allege that each of the third-party defendants are joint-tortfeasors as to plaintiffs' IMWL claims.*fn17 Counts IX-X allege legal malpractice on the part of Mocerf and Duane Morris.*fn18 Counts XI-XII allege accounting malpractice on the part of Sullivan and Sullivan & Sullivan.*fn19 Counts XIII-XIV allege legal malpractice/implied indemnity on the part of Mocerf and Duane Morris.*fn20 Lastly, Counts XV-XVI allege accounting malpractice/implied indemnity on the part of Sullivan and Sullivan & Sullivan.*fn21
A. Counts I-IV
Counts I-IV allege that each of the four third-party defendants are joint-tortfeasors under the FLSA. For third-party defendants to be found liable under the FLSA, they must be "employers" within the meaning of the FSLA. Section 203(d) of the FLSA defines employers as "any person acting directly or indirectly in the interest of an employer in relation to an employee." *fn22 Third-party defendants argue that they are not "employers" under the Act because they had no control or power over plaintiffs, and thus that Counts I-IV should be dismissed.*fn23 The Italian Village counters that third-party defendants had control over the decisions that resulted in any violations of the Act and accordingly are liable.*fn24
Multiple employers may be held liable under the FLSA when "the facts establish that the employee is employed jointly by two or more employers."*fn25 The Supreme Court has held that the determination of whether a party is an employer is based on the "economic reality" of the situation.*fn26
Courts have considered a variety of factors when making this determination, including the ability to hire or fire the employees, supervision of the employees' schedules, determination of wages, and the maintenance of employment records.*fn27 The Seventh Circuit has held that an "employer must exercise control over the working conditions of the employee."*fn28
As these third-party defendants accurately point out, there is nothing in the Italian Villages's conclusory allegations in these counts that suggests that these defendants could ever be considered "employers" within the meaning of the FLSA. There are no allegations that these third-party defendants had any control over these plaintiffs' working conditions as the case law require; that they could hire, fire or manage them.*fn29 Nor could there be. These firms were hired by the Italian Village to negotiate the employment contracts and to manage employee payroll. Their work in this respect was controlled by the Italian Village. Regardless of how much The Italian Village chose to rely on the advice and counsel of their third-party contractors with respect to these issues, there is no authority that the Court could find that supports the argument that the Italian Village's reliance on these firms' transforms these into "employers" under the FLSA.
Essentially the Italian Village is asking the Court to by-pass the statutory scheme set forth in the FLSA and shift responsibility for compliance with the FLSA from itself, the employer, to third-party consultants which it paid for services rendered. But nothing in the FLSA suggests that the Italian Village's alleged "reasonable reliance" on its consultants can shift compliance with the law on to them as well. Moreover, there is ample authority that holds that the FLSA precludes all such potential blame-shifting and bars third-party actions for contribution and indemnity using any tort theories.*fn30
The Italian Village's response to this raft of authority is that it is directed only at attempts by employers to shift liability to certain key employees, not to third parties like the accountants and attorneys sued here. Actually this is not correct. In Chao v. St. Louis Internal Medicine,*fn31 the court held that an accounting firm could not be sued as a third-party defendant in an FSLA case under a tort theory. But even if this case did not so hold, this Court can see no real distinction between efforts to shift liability to employees, which is prohibited by the case law, and the Italian Village's efforts to shift liability to their third-party consultants. Either scenario is barred by the FLSA's express language that liability for compliance rests with the employer and the employer only so that the statute's mandates are not diluted. Both of third-party defendants' motions are granted with respect to Counts I-IV.
B. Counts V-VIII
Counts V-VIII are very similar joint tortfeasor claims under the IMWL. Courts in the Northern District of Illinois have looked to FLSA analysis when making employer determinations under the IMWL "because the IMWL parallels the FLSA."*fn32 Furthermore, "the Illinois Administrative Code also provides that the FLSA regulations are to be used as guidance in interpreting the IMWL."*fn33 The Italian Village concedes this point by failing to even offer a reason why the IMWL should be interpreted any differently from the FLSA. Accordingly, because the third-party defendants are not "employers" within the meaning of the FLSA, we decline to find them to be so under the IMWL. Consequently, both of third-party defendants' motions are granted with respect to Counts V-VIII.
C. Counts IX-XVI
Counts IX-XII are very similar to Counts XIII-XVI. Counts IX and X are labeled as legal malpractice claims against the Duane Morris law firm and attorney Howard Mocerf and Counts XI and XII are labeled as accounting malpractice claims against Sullivan and Sullivan and accountant Raymond Sullivan. On the other hand, Counts XIII and XIV are labeled as "Legal Malpractice/Implied Indemnity" while Counts XV and XVI are labeled "Accounting Malpractice/Implied Indemnity."*fn34
Regardless of how they are named, each of these eight counts contain
almost identical language.*fn35 Counts IX-XII allege
that third-party defendants are liable for third-party plaintiffs'
attorney's fees, along with "any liquidated damages and interest
assessed against [third-party plaintiff]."*fn36
Conversely, Counts XIII-XVI allege that third-party defendants are
"liable to [third-
party plaintiff] for any and all damages that may be assessed against
[third-party plaintiff] pursuant to implied indemnity."*fn37
So, despite the slightly different language and to whom they
are addressed, Counts IX-XII and Counts XIII-XVI are all forms of
indemnity or contribution.
There is nothing in the FLSA or the IMWL that allows employers to bring an action against a third party to avoid its statutory responsibilities under these laws. As we already have stated, these statutes only allow actions against employers as that term has been defined. The Italian Village nonetheless contends that this case involves matters of "first impression" because they have alleged reasonable reliance upon attorneys and accountants to ensure statutory compliance.
We reject this contention. In a similar context, the Supreme Court
stated that "[n]either the Equal Pay Act nor Title VII expressly
creates a right to contribution in favor of employers."*fn38
That, combined with the fact that Congress enacted those two
statutes for the benefit of employees, led the Court to conclude that
employers could not bring third-party suits in Equal Pay Act or Title
VII actions.*fn39 Although the Seventh Circuit has not
addressed this issue, every other federal court which has examined
this issue has extended these holdings to bar such actions under the
The logic of these cases is compelling. The FLSA, like the Equal Pay Act and Title VII, does not provide an explicit right to contribution for employers. Like these statutes, Congress enacted the FLSA for the benefit of employees, not employers. The Italian Village offers no contrary authority to support its argument that it should be entitled to contribution. Consequently, Counts IX-XVI cannot be brought with respect to the FLSA, and both motions to dismiss are granted.
The same logic applies to the IMWL. We are persuaded by the logic of
our colleague, Judge Geraldine Soat Brown in Villareal v. El Chile,
Inc.*fn41 In this case, the court correctly noted that
when a federal court rules on an issue under Illinois law, it must
follow the precedent of the Illinois Supreme Court.*fn42
Because no such precedent exists here, the court in Villareal
turned to federal FLSA cases because of the statute's similarity to
the IMWL.*fn43 Both statutes are designed to protect
employees, and the court reasoned that both statutes' "goals would be
undermined by diminishing the employers compliance incentives if an
employer were permitted to seek indemnity or
contribution."*fn44 Although Villareal concerned an
employer filing for contribution from its employees, the court's
holding is still persuasive to this context. Because the IMWL is
similar to the FLSA, the contribution and indemnity analysis conducted
above with respect to the FLSA also applies to the IMWL. Once again,
third-party plaintiff presents no case law to counter third-party
defendants' assertion that this extension is appropriate. Therefore,
third-party defendants' motion is granted with respect to Counts
IX-XVI and the IMWL as well.
Because the motion has been granted in full, the Court does not need to address the remainder of third-party defendants' claims involving FRCP 14 and preemption.
For the foregoing reasons, third-party defendants' Mocerf and Duane Morris' and Sullivan and Sullivan & Sullivan's motions to dismiss are granted [dkts. 62, 68].
IT IS SO ORDERED.
UNITED STATES MAGISTRATE JUDGE Susan E. Cox