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Vega v. Mid-America Taping & Reeling, Inc.

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

June 12, 2018

JAVIER VEGA and RIGOBERTO BARRETO, individually and behalf of all others similarly situated, Plaintiffs,
v.
MID AMERICA TAPING & REELING, INC, BARBARA PAULS, RICKSTAR ASSOCIATES, LLC, and RASHID ABDALLAH, Defendants.

          MEMORANDUM OPINION AND ORDER

          Hon. Thomas M. Durkin Judge

         Before the Court are Plaintiffs Javier Vega and Rigoberto Barreto's motion for certification of their Illinois Minimum Wage Law (“IMWL”) claim under Federal Rule of Civil Procedure 23 and motion for conditional collective action certification of their Federal Labor Standards Act (“FLSA”) claim. R. 74, 77. On October 27, 2017, the parties completed initial briefing on those motions. R. 81, 86. On February 15, 2018, the Court ordered additional briefing, expressing its concerns about, among other things, its jurisdiction and Plaintiffs' standing. R. 92. On February 23, 2018, the parties filed responsive surreplies. R. 93, 95. Plaintiffs' surreply did not adequately address the standing issue, and so the Court ordered Plaintiffs to file a statement “addressing why they believe they have standing to bring this case.” R. 96. Plaintiffs filed their statement on April 19, 2018, R. 100, and Defendants filed a response on April 30, 2018, R. 101.

         Despite repeated opportunities, and despite the almost-two-year pendency of this action, Plaintiffs have not articulated a cognizable injury in fact with respect to their sole federal claim. See Stewart Title Guar. Co. v. Cadle Co., 74 F.3d 835, 836 (7th Cir. 1996) (district courts should permit plaintiffs an opportunity to address standing issues before sua sponte dismissing a case); see also Warth v. Seldin, 422 U.S. 490, 501 (1975) (“[I]t is within the trial court's power to allow or to require the plaintiff to supply, by amendment to the complaint or by affidavits, further particularized allegations of fact deemed supportive of plaintiff's standing.”). Accordingly, the Court dismisses Plaintiffs' Second Amended Complaint for the reasons described below.

         BACKGROUND

         The parties' submissions discuss a number of facts going to the merits of Plaintiffs' claims and the appropriateness of certification. Only the following is relevant here.

         The Second Amended Complaint (“SAC”) asserts that, in late 2015, Mid America Taping & Reeling, Inc., and its owner Barbara Pauls, announced that in the new year the company would implement E-Verify. E-Verify is a government-offered program that compares company-held employment records with the Social Security Administration's records to confirm that employees are legally authorized to work in the United States. This litigation concerns the arrangement under which hourly employees who could not pass E-Verify continued to work for Mid America.

         The SAC alleges that when Mid America announced its E-Verify plans, Rashid Abdallah, the owner of another company, Rickstar Associates, LLC, was also present. Abdallah told the employees that those who could not pass E-Verify would be terminated from Mid America-yet they could continue to work there by signing independent-contractor agreements with Rickstar. About half of Mid America's workforce took Abdallah up on his offer and signed the agreements, including Plaintiffs. See R. 75-3 at 7-9. After doing so, those individuals continued to report to work at Mid America and their job responsibilities remained the same. They also continued to receive “the statutory minimum wage in effect at the time” under the IMWL, or $8.25 per hour. R. 75 at 6; 820 ILCS 105/4. The FLSA mandates a wage of $7.25. 29 U.S.C. § 206(a)(1)(C). The SAC, however, claims that the arrangement resulted in wages below the IMWL's and the FLSA's minimums. Specifically, it alleges that the arrangement misclassified them as contractors rather than hourly employees. By doing so, Defendants failed to deduct “taxes and contributions” and to “pay the employer portion of Social Security and Medicare and unemployment taxes.” R. 57 ¶¶ 61, 121; see also Id. ¶¶ 139, 146.

         Based on that misclassification, the SAC brought one count under the FLSA, and one count under the IMWL. The SAC also brought claims under the Illinois Wage Payment and Collection Act, claims for fraud and fraudulent misrepresentation (based on a semi-related scheme by which Rickstar offered a “Labor Certificate Program” promising legal residence in exchange for pay deductions), and a claim for unjust enrichment.

         LEGAL STANDARD

         “The federal courts are under an independent obligation to examine their own jurisdiction, and standing is perhaps the most important of the jurisdictional doctrines.” United States v. $304, 980.00 in U.S. Currency, 732 F.3d 812, 817 (7th Cir. 2013); see also Summers v. Earth Island Inst., 555 U.S. 488, 499 (2009) (“[I]t is well established that the court has an independent obligation to assure that standing exists, regardless of whether it is challenged by any of the parties.”); Metallgesellschaft AG v. Sumitomo Corp. of Am., 325 F.3d 836, 842 (7th Cir. 2003) (“[A] district court may dismiss a case sua sponte for lack of Article III standing if it finds that the plaintiff has not suffered injury-in-fact.”). In addition to this independent obligation, a named plaintiff's Article III standing is an issue antecedent to the class-certification analysis. See, e.g., Meyers v. Nicolet Rest. of De Pere, LLC, 843 F.3d 724, 726 (7th Cir. 2016) (“[B]ecause we conclude that Meyers lacks standing, we do not reach the certification question.”); In re Aqua Dots Prod. Liab. Litig., 654 F.3d 748, 750 (7th Cir. 2011) (“Before addressing the question of certification, we must consider . . . [whether] plaintiffs lack standing to sue.”). That is, while a named plaintiff's standing to bring certain claims on behalf of the class need not be decided before class certification, see Payton v. Cnty. of Kane, 308 F.3d 673, 680 (7th Cir. 2002), a named plaintiff's Article III standing to bring her own claim is a “threshold jurisdictional issue, ” see Marquez v. Weinstein, Pinson & Riley, P.S., 2017 WL 4164170, at *2 (N.D. Ill. Sept. 20, 2017). Accord Lewert v. P.F. Chang's China Bistro, Inc., 819 F.3d 963, 966-69 (7th Cir. 2016) (assessing standing in a putative class action with respect only to the named plaintiffs); see also William B. Rubenstein, Newberg On Class Actions, Ch. 1 § 2:1 (5th ed. 2011) (“Because standing goes to a federal court's subject-matter jurisdiction, courts are required to examine whether the plaintiffs have standing regardless of whether the parties raise the issue.”).

         “The requirement that litigants possess standing ensures that courts do not decide abstract principles of law but rather concrete cases and controversies.” Meyers, 843 F.3d at 726. To stave off advisory opinions, the “standing inquiry requires careful judicial examination of a complaint's allegations to ascertain whether the particular plaintiff is entitled to an adjudication of the particular claims asserted.” Scanlan v. Eisenberg, 669 F.3d 838, 846 (7th Cir. 2012) (quoting Allen v. Wright, 468 U.S. 737, 752 (1984)). “[F]or each claim of wrongdoing alleged, a plaintiff must demonstrate . . . that he has suffered (or is imminently threatened with) an injury that is traceable to the wrongdoing alleged in that particular claim.” Johnson v. U.S. Office of Pers. Mgmt., 783 F.3d 655, 661 (7th Cir. 2015) (emphasis in original); see also DaimlerChrysler Corp. v. Cuno, 547 U.S. 332, 352 (“[O]ur standing cases confirm that a plaintiff must demonstrate standing for each claim he seeks to press.”).

         The burden of showing standing rests on the “party invoking federal jurisdiction, ” Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-561 (1992), and it “increases as the case proceeds through stages of litigation, ” Ferenzi v. City of Chicago, 2018 WL 1561728, at *3 (N.D. Ill. Mar. 30, 2018). Specifically, in Lujan, the Supreme Court held that each of standing's elements “must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.” 504 U.S. at 561. As to the manner and evidence required at the class-certification stage, the Supreme Court later made clear that a plaintiff's case is no longer subject to a “mere pleading standard” at class certification. Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 350 (2011). Rather, a plaintiff seeking certification must “affirmatively demonstrate” that it is appropriate, id., with “evidentiary proof, ” Comcast Corp. v. Behrend, 133 S.Ct. 1426, 1432 (2013). See also, e.g., In re Facebook Privacy Litig., 192 F.Supp.3d 1053, 1057 (N.D. Cal. 2016) (“Class discovery is closed, and plaintiffs have moved to certify the class. At this stage, plaintiffs must show standing ‘through evidentiary proof.'”) (citing Comcast, 133 S.Ct. at 1432).

         ANALYSIS

         From this case's filing to the present, Plaintiffs' theory of standing for the FLSA claim has been a moving target. The first complaint was conclusory, but asserted a failure to pay overtime and minimum wage. The SAC clarified that although Defendants in fact paid more than the FLSA minimum wage, they had misclassified Plaintiffs and the class as independent contractors and resultantly failed to “pay the employer portion of Social Security and Medicare and unemployment taxes.” R. 57 ¶¶ 61, 121; see also Id. ¶¶ 139, 146. The SAC did not claim that Plaintiffs were liable for those taxes, nor suggest that paying them would force effective wages beneath the FLSA's minimum. Plaintiffs' class-certification briefs, however, did. After abandoning the claim for overtime pay (recognizing that Defendants never denied either Plaintiff such pay), Plaintiffs claimed that because “they were paid as supposed independent contractors, Plaintiffs and the putative collective have had to pay their own taxes.” R. ...


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