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Kim v. Korean News of Chicago, Inc.

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

July 19, 2017

In Kyu Kim, Plaintiff,
v.
The Korean News of Chicago, Inc., Andrew Huh, Sook Y. Kim, and Robert B. Kim, Defendants.

          MEMORANDUM OPINION & ORDER

          Honorable Thomas M. Durkin United States District Judge.

         In-Kyu Kim (“Plaintiff”) alleges to have begun his career in journalism forty years ago in Korea. R. 1 ¶ 51. He came to the United States in 2000 as the chief editor of The Korea Times. Id. ¶ 52. He worked for various Korean publications in the United States over the next several years. Id. ¶¶ 53-54. During a stint in Chicago with The Korea Times from 2006-2008, Plaintiff met Defendant Robert Kim, a local travel agent. Id. ¶ 55. Mr. Kim mentioned his interest to Plaintiff in purchasing the Chicago Branch of The Korea Times, which, at the time, was listed for sale at $2, 000, 000. Id. ¶ 56.

         In the beginning of April 2014, the CEO of The Korea Times offered to sell the Chicago Branch to Plaintiff at the deeply discounted price of $500, 000. Id. ¶ 57. This offer was made to Plaintiff exclusively, in light of his longstanding relationship with the publication. Id. Plaintiff did not have the funds to make the purchase, but he contacted Mr. Kim, who, along with fellow travel agent and co-defendant Andrew Huh, put up the funds to make the purchase. Id. ¶¶ 58-61. Negotiating the terms of the sale was allegedly contentious, and Plaintiff claims to have worked eight to ten hours weekly over a period of several months as a go-between between the buying and selling parties. Id. ¶ 60. Plaintiff alleges that Mr. Kim and Mr. Huh verbally agreed that in recognition of Plaintiff having brought them the business opportunity and negotiating the terms of sale on their behalf, he would be given a 30% share of the corporation, with the remaining 70% to be split equally between Mr. Kim's wife, co-defendant Sook Kim, and Mr. Huh.[1] Id. ¶ 62. Plaintiff alleges that despite his successful consummation of the deal, that promise was never fulfilled, and he was never otherwise compensated for his efforts. Id. ¶¶ 10, 116.

         Plaintiff further alleges that once the deal was done, Mr. Kim asked him to run the business of the paper, which Mr. Kim and Mr. Huh incorporated as The Korean News of Chicago, Inc. Id. ¶¶ 63-64. He alleges that Mr. Kim promised to pay him $2, 000 per month for his work, to provide him with his own apartment and vehicle, and to raise Plaintiff's wages when the business stabilized. Id. ¶ 64. Relying on those promises, Plaintiff and his wife moved from New York to Chicago. Id. ¶ 65. When they arrived, they were not given their own apartment, but rather “a corner of Kim's living room to sleep” in. Id. ¶ 66. Plaintiff was given a vehicle, but it was registered to the company, not to him personally. Id. ¶ 68. Plaintiff alleges he worked long hours for the paper seven days a week from August 15, 2014 to February 4, 2015 at the direction and under the supervision of Mr. Kim and Mr. Huh. Id. ¶¶ 11, 70. He was paid “a fixed amount per week regardless of the number of hours he worked in a day or the number of hours he worked in a workweek.” Id.¶ 12-14.

         In October 2014, just a few months after the close of the sale, Mr. Kim instructed Plaintiff to look for a purchaser for the paper. Id. ¶ 71. He alleges he did so, though apparently without success. Id. In January 2015, Plaintiff received a letter from an attorney indicating that he and his wife were to leave the Kims' home. Id. In February 2015, Plaintiff received an email from Mr. Kim stating that his employment had been terminated by the company's board, on which Plaintiff alleges all three of the individual defendants held seats as officers. Id. ¶ 72.

         Plaintiff has sued the Kims, Mr. Huh, and The Korean News of Chicago, Inc. under the Fair Labor Standards Act (“FLSA”) and Illinois Minimum Wage Law (“IMWL”), alleging that the defendants failed to compensate him in accordance with federal and state overtime pay and minimum wage laws. Id. (Counts I-IV). He has also sued the defendants for breach of the oral agreement to make him a 30% owner of the company. Id. (Count V). The defendants move to dismiss arguing that by alleging that he was promised a 30% stake in the business and that he ran all of the newspaper's major operations, Plaintiff has pled himself out of court, because “business owners” who engage in “management activities” are among the “bona fide executives” exempt from the FLSA's minimum and overtime wage requirements. R. 14 at 3-4. The defendants also seek the dismissal of Mrs. Kim from the labor claims on the basis that Plaintiff has failed to allege that she is an “employer” within the meaning of the FLSA. Id. at 5-6. Finally, the defendants argue that Plaintiff has failed to allege sufficient detail to support his breach of contract claim against Mrs. Kim and Mr. Huh. Id. at 7-8. The Court addresses each argument in turn.

         1. Whether Plaintiff is exempt is a question for summary judgment.

         “The burden is on the employer to prove that an employee is exempt under FLSA . . . and such exemptions are to be narrowly construed against the employer seeking the exemption.” Deschepper v. Midwest Wine & Spirits, Inc., 84 F.Supp.3d 767, 777 (N.D. Ill. 2015) (citing Schmidt v. Eagle Waste & Recycling, 599 F.3d 626, 631 (7th Cir. 2010)). “The application of an exemption under the FLSA is a matter of affirmative defense, ” and “[a] plaintiff need not plead around potential affirmative defenses.” Id. (internal brackets omitted) (quoting Corning Glass Works v. Brennan, 417 U.S. 188, 196-97 (1974)); see also Schaefer-LaRose v. Eli Lilly & Co., 679 F.3d 560, 571 (7th Cir. 2012) (citing Corning Glass). However, if Plaintiff pleads facts that “irrefutably” demonstrate that an exemption applies, dismissal on the pleadings may be appropriate. See id.

         The “business owner” exemption applies to “any employee who owns at least a bona fide 20-percent equity interest in the enterprise in which the employee is employed . . . and who is actively engaged in its management.” 29 C.F.R. § 541.101. Plaintiff has not pled himself out of court by alleging that he was promised but not given 30% ownership of the company. Indeed, Plaintiff expressly alleges that while he should have been a 30% owner, he was not (on account of the defendants' breach of contract). Unless the defendants come forward with affirmative evidence establishing that Plaintiff was actually part-owner, the facts as alleged actually preclude application of the business owner exemption. Moreover, ownership is not the whole of the requirement for the exemption to apply. Rather, to be exempt, an employee must have a bona fide equity interest “and [be] actively engaged in [the company's] management.” 29 C.F.R. § 541.101 (emphasis added). “Management” is defined by the regulations as including, but not being limited to, activities such as:

interviewing, selecting, and training of employees; setting and adjusting their rates of pay and hours of work; directing the work of employees; maintaining production or sales records for use in supervision or control; appraising employees' productivity and efficiency for the purpose of recommending promotions or other changes in status; handling employee complaints and grievances; disciplining employees; planning the work; determining the techniques to be used; apportioning the work among the employees; determining the type of materials, supplies, machinery, equipment or tools to be used or merchandise to be bought, stocked and sold; controlling the flow and distribution of materials or merchandise and supplies; providing for the safety and security of the employees or the property; planning and controlling the budget; and monitoring or implementing legal compliance measures.

29 C.F.R. § 541.102. Clearly, deciding whether Plaintiff actively engaged in the management of the company is a complicated issue of fact to be decided by reference to an array of factors not yet developed in the record. Contrary to the defendants' arguments, Plaintiff has not made admissions such that the exemption irrefutably applies simply by alleging that he worked as a publisher and attempted to find a buyer for the company. Questions remain as to both prongs of the “business owner” exemption. It is therefore not appropriate to resolve the issue at this stage in the proceedings.

         2. The complaint plausibly alleges that Mrs. Kim was an employer.

         The defendants cite to two cases which consider, based on affidavits and other evidence at summary judgment, whether certain individuals met the definition of employer set forth in the FLSA. See R. 14 at 5 (citing Villareal v. El Chile, Inc., 776 F.Supp.2d 778 (N.D. Ill. 2011) (denying summary judgment for Plaintiff where a question of fact remained as to whether either or both of the defendants were employers within the meaning of the FLSA); Alvarez v. Downtown Food Enterprises, Inc., 2010 WL 5158122, at *1 (N.D. Ill.Dec. 13, 2010) (granting summary judgment where the defendant's affidavit regarding her lack of authority over the plaintiffs' employment was apparently uncontested); see also R. 19 at 4 (relying on the “ample precedent” cited in their opening brief). Neither of the cases is particularly persuasive in the context of a motion to dismiss, where the standard is not proof, but plausibility.

         The FLSA defines “employer” to include “any person acting directly or indirectly in the interest of an employer in relation to an employee.” 29 U.S.C. § 203(d). “The FLSA contemplates several simultaneous employers who may be responsible for compliance with the FLSA.” Villareal, 776 F.Supp.2d at 784 (citing Falk v. Brennan, 414 U.S. 190, 191 (1973)). Courts have held that a determination of whether an individual is liable under the FLSA “must focus upon the totality of the circumstances, underscoring the economic reality of the employment relationship.” Id. at 785 (citation omitted). Whether an individual is liable as an employer ‚Äúdepends not ...


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