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Martinez v. Citizen's Taxi Dispatch, Inc.

United States District Court, N.D. Illinois, Eastern Division

May 26, 2017

DANIEL MARTINEZ, individually and on behalf of all others similarly situated, Plaintiff,
v.
CITIZEN'S TAXI DISPATCH, INC. & PATRICIA SHELTON, Defendants.

          MEMORANDUM OPINION AND ORDER

          Young B. Kim, United States Magistrate Judge

         Daniel Martinez brings this purported collective and class action against Citizen's Taxi Dispatch, Inc. (“Citizen's Taxi”) and its owner, Patricia Shelton (together, “Defendants”), alleging that they violated the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201, et seq., the Illinois Minimum Wage Law (“IWML”), 820 ILCS 105/1, et seq., and the Illinois Wage Payment and Collection Act (“IWPCA”), 820 ILCS 115/9, by failing to pay him overtime wages for time worked in excess of 40 hours in a workweek and by making unlawful deductions from his pay. Martinez also brings an unjust enrichment claim under Illinois common law, stemming from Defendants' requirement that its drivers pay work-related expenses. Before the court is Defendants' motion to dismiss the complaint under Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). For the following reasons, the motion is granted in part without prejudice and denied in part:

         Background

         For purposes of the current motion, the court accepts as true the following well-pleaded facts taken from Martinez's complaint, drawing all reasonable inferences in his favor. See Berger v. Nat'l College Athletic Assoc., 843 F.3d 285, 289-90 (7th Cir. 2016). Citizen's Taxi provides general taxi services to individuals in and around DuPage County, Illinois, but its primary business involves contracts with local school districts to provide student transportation to and from schools in Wheaton and Warrenville, Illinois. (R. 1, Compl. ¶¶ 13-15.) According to Martinez, “the vast majority” of its business centers on school transportation contracts, and Citizen's Taxi negotiates these contracts directly with the school districts. (Id. ¶¶ 15, 30.)

         As a condition of employment, Citizen's Taxi requires all of its drivers to sign a contract characterizing the drivers as independent contractors. (Id. ¶ 22.) Despite this characterization, Citizen's Taxi controls the manner in which its drivers perform their jobs by (among other things): requiring them to complete a qualification process and random drug testing; assigning them a set weekly schedule; denying them authority to refuse or negotiate their route assignments; disciplining them for not completing scheduled runs; requiring them to pick up and drop off students at precise times; and fielding client complaints. (Id. ¶¶ 24-25.) Citizen's Taxi also requires its drivers to rent its vehicles used to fulfill contracts with school districts, and deducts the weekly rental fee from drivers' paychecks. (Id. ¶ 27.) Citizen's Taxi also deducts other expenses from its drivers' paychecks, including municipal tickets paid by the company and towing costs associated with retrieving cabs from discharged employees. (Id. ¶ 32.) Furthermore, drivers pay for car maintenance and repair costs, toll payments, and fuel costs. (Id. ¶ 33.)

         Citizen's Taxi employed Martinez from February through September 2016, primarily to transport students under its school transportation contracts. (Id. ¶¶ 17-18.) During his employment Martinez worked a set schedule which typically did not change from week to week. (Id. ¶ 20.) During his employment Martinez worked in excess of 40 hours per week but did not receive overtime pay. Specifically, Martinez worked approximately 56 hours during the week of April 4, 2016, and approximately 54 hours during the week of May 16, 2016. (Id. ¶ 46.) He was not paid at a rate of one-and-a-half times his regular rate of pay for hours he worked in excess of 40 during either of those weeks. (Id.) According to Martinez, Citizen's Taxi's drivers “regularly” work more than 40 hours per week without being paid overtime compensation. (Id. ¶ 34.)

         Analysis

         Defendants move to dismiss Martinez's FLSA claim pursuant to Rule 12(b)(1), arguing that the FLSA does not apply to Citizen's Taxi and that this court therefore lacks subject matter jurisdiction to consider the claim. They also move to dismiss the FLSA claim and Martinez's state-law claims under Rule 12(b)(6). Although this court must address jurisdictional arguments first when they are distinct from arguments that a complaint fails to state a claim on the merits, see Yassan v. J.P. Morgan Chase & Co., 708 F.3d 963, 967 n.1 (7th Cir. 2013), where a Rule 12(b)(1) motion presents an “indirect attack on the merits” of an FLSA claim, this court may treat the motion as if it arises under Rule 12(b)(6), see Brown v. Club Assist Road Serv. U.S., Inc., No. 12 CV 5710, 2013 WL 5304100, at *4 (N.D. Ill. Sept. 19, 2013) (quoting Peckmann v. Thompson, 966 F.2d 295, 297 (7th Cir. 1992)).

         Here, Defendants' Rule 12(b)(1) motion indirectly challenges the merits of Martinez's FLSA claim. Defendants argue that Citizen's Taxi is not subject to the FLSA's overtime pay requirements because it is not an “enterprise engaged in commerce” within the meaning of the FLSA's overtime provision, see 29 U.S.C. § 207(a)(1), or alternatively, because the FLSA excludes from overtime laws the employees of businesses operating taxicabs, see Id. § 213(b)(17). The Supreme Court has clarified that “when Congress does not rank a statutory limitation on coverage as jurisdictional, courts should treat the restriction as nonjurisdictional in character.” Arbaugh v. Y & H Corp., 546 U.S. 500, 516 (2006). The FLSA does not define “enterprise engaged in commerce or in the production of goods for commerce” in 29 U.S.C. § 203(s) as a jurisdictional element of an FLSA claim. See Chao v. Hotel Oasis, Inc., 493 F.3d 26, 33 (1st Cir. 2007); Brown v. ABM Indus., Inc., No. 15 CV 6729, 2015 WL 7731946, at *3 (N.D. Ill.Dec. 1, 2015). Nor does the list of exemptions set forth in 29 U.S.C. § 213(b) suggest that a finding that a defendant qualifies for an exemption strips the court of jurisdiction to consider the claim. Within this district the court has repeatedly held that “[w]hether plaintiffs fall within the protection of the FLSA is an issue regarding the merits of their claims, not the court's jurisdiction.” Rivera v. Heights Landscaping, Inc., No. 03 CV 6428, 2004 WL 434214, at *1 (N.D. Ill. March 5, 2004); see also Brown, 2015 WL 7731946, at *3; Torres v. Pallets 4 Less, Inc., No. 14 CV 4219, 2015 WL 920782, at *3 (N.D. Ill. March 2, 2015); Rivas v. Marcelo Hand Car Wash, Inc., No. 10 CV 1396, 2010 WL 4386858, at *1 (N.D. Ill. Oct. 28, 2010). After the Supreme Court decided Arbaugh, other circuits have reached the same conclusion.[1] See, e.g., Chao, 493 F.3d at 33 (holding that whether business meets annual dollar value requirements for enterprise coverage under FLSA is a nonjurisdictional merits question); Fernandez v. Centerplate/NBSE, 441 F.3d 1006, 1009 (D.C. Cir. 2006) (concluding that plaintiff's inability to prove particular element of FLSA claim does not require dismissal for lack of jurisdiction). Accordingly, the court will treat Defendants' motion to dismiss as if it were brought solely under Rule 12(b)(6). See Brown, 2015 WL 7731946, at *3.

         A Rule 12(b)(6) motion to dismiss tests the sufficiency of the complaint, see General Elec. Corp. v. Lease Resolution Corp., 128 F.3d 1074, 1080 (7th Cir. 1997), rather than the merits of the case. Under Rule 8(a), all that is required to meet the sufficiency standard is “a short and plain statement of the claim showing that the pleader is entitled to relief.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007) (citing Fed.R.Civ.P. 8(a)) (quotation omitted). Under that standard “[a] pleading that offers ‘labels and conclusions' or a ‘formulaic recitation of the elements'” of the claim is insufficient, Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555), because the factual allegations must give the defendants “fair notice of what the claim is and the grounds upon which it rests, ” Twombly, 550 U.S. at 555 (quotation omitted). The allegations must also be facially plausible, meaning that they provide enough factual content to allow “the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Iqbal, 556 U.S. at 678. In other words, “the plaintiff must give enough details about the subject-matter of the case to present a story that holds together.” Swanson v. Citibank, N.A., 614 F.3d 400, 404 (7th Cir. 2010).

         A. The FLSA Claim

         Looking at Defendants' arguments regarding the applicability of the FLSA through the lens of Rule 12(b)(6), they first argue that dismissal is appropriate because there are insufficient allegations to support Martinez's assertion that Citizen's Taxi is an “enterprise engaged in interstate commerce” within the meaning of the FLSA. (R. 1, Compl. ¶ 10.) The FLSA imposes minimum and hourly overtime wage requirements with respect to employees who meet certain criteria. To satisfy the criteria for what is known as individual coverage, a plaintiff must allege that he is an employee “engaged in commerce or in the production of goods for commerce.” 29 U.S.C. § 207(a)(1); Martinez v. Manolos Tamales, Inc., No. 14 CV 9686, 2015 WL 5144024, at *1 (N.D. Ill. Aug. 31, 2015). The test for individual coverage is relatively strict, requiring that the employee “is so directly and vitally related to the functioning of an instrumentality or facility of interstate commerce as to be, in practical effect, a part of it, rather than isolated, local activity.” Mitchell v. C.W. Vollmer & Co., 349 U.S. 427, 429 (1955). Here, Martinez does not argue that he is subject to individual coverage under the FLSA, but rather he invokes the broader avenue known as “enterprise coverage.” See Ortega v. Due Fratelli, Inc., No. 14 CV 6669, 2015 WL 7731863, at *3 (N.D. Ill.Dec. 1, 2015). Enterprise coverage applies to anyone who is employed in “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.”[2] 29 U.S.C. §§ 203(s)(1)(A)(i), 207(a)(i); Radulescu v. Moldowan, 845 F.Supp. 1260, 1262 (N.D. Ill. 1994). In this district the court has interpreted enterprise coverage as not requiring a company to actually transport goods over state lines. See Cardenas v. Grozdic, No. 12 CV 292, 2012 WL 2359399, at *3 (N.D. Ill. June 20, 2012) (collecting cases). Instead, it is sufficient to allege that in the course of their employment a local company's employees “used tools and accessories that were manufactured in other states and transported to Illinois.” Id.

         Defendants accurately point out that none of the allegations in Martinez's complaint make any reference to Citizen's Taxi's drivers handling or transporting goods that have crossed interstate lines or otherwise establish a basis for enterprise coverage. (See R. 1, Compl. ¶ 10.) In fact, the allegations specify that Citizen's Taxi is in the business of providing transportation services “in and around DuPage County, Illinois.” (Id. ¶ 13.) In response to Defendants' motion to dismiss, Martinez points to matters outside the complaint, including a deposition transcript and an affidavit that he attaches to his response brief, to support his enterprise coverage allegations. Based on these materials, Martinez asserts that he will be able to show that Citizen's Taxi meets the commerce requirements of enterprise coverage because “its drivers transport clients to and from O'Hare and Midway on a daily basis, ” and because they “transport packages on a near-daily basis” to and from interstate shipping facilities like the post office. (R. 24, Pl.'s Resp. at 6-7.) Defendants also attached an affidavit to their opening brief and a declaration to their reply brief in support of the motion to dismiss. (R. 12, Defs.' Mot. Ex. A; R. 28, Defs.' Reply, Ex. B.)

         As an initial matter, neither party has addressed whether it is permissible for the court in reviewing a Rule 12(b)(6) motion to take into account facts that do not appear in Martinez's complaint, but only in exhibits to his response brief, or in materials Defendants submitted along with their briefs. Under Rule 12(d), this court cannot consider extrinsic documents that Defendants submit in support of a motion to dismiss without converting the motion to one for summary judgment- something neither party has asked the court to do here.[3]See Fed. R. Civ. P. 12(d); Torres, 2015 WL 920782, at *3. However, the Seventh Circuit has made clear that a plaintiff has more flexibility in opposing a Rule 12(b)(6) motion and “may submit materials outside the pleadings to illustrate the facts the party expects to be able to prove.” Geinosky v. City of Chicago, 675 F.3d 743, 751 n.1 (7th Cir. 2012). In fact, “nothing prevents a plaintiff opposing dismissal from elaborating on the complaint or even attaching materials to an opposition brief illustrating the facts the plaintiff expects to be able to prove.” Defender Sec. Co. v. First Mercury Ins. Co., 803 F.3d 327, 335 (7th ...


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