Beltran v. Interexchange, Inc.

JOHANA PAOLA BELTRAN, LUSAPHO HLATSHANENI,BEAUDETTE DEETLEFS, DAYANNA PAOLA CARDENAS CAICEDO,and ALEXANDRA IVETTE GONZALEZ, Plaintiffs, v. INTEREXCHANGE, INC, USAUPAIR, INC., GREAT AUPAIR, LLC,EXPERT GROUP INTERNATIONAL INC., d/b/a Expert AuPair,EURAUPAIR INTERCULTURAL CHILD CARE PROGRAMS,CULTURAL HOMSTAY INTERNATIONAL,CULTURAL CARE, INC. d/b/a Cultural Care Au Pair,AUPAIRCARE INC., AU PAIR INTERNATIONAL, INC.,APF GLOBAL EXCHANGE, NFP, d/b/a AuPair Foundation,AMERICAN INSTITUTE FOR FOREIGN STUDY d/b/a Au Pair in America,AMERICAN CULTURAL EXCHANGE, LLC, d/b/a/ GoAuPair,AGENT AU PAIR, A.P.EX. AMERICAN PROFESSIONAL EXCHANGE,LLC d/b/a/ ProAuPair, and 20/20 CARE EXCHANGE, INC.d/b/a The International Au Pair Exchange, Defendants.

Civil Action No. 14-cv-03074-CMA-KMT

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO

February 22, 2016

RECOMMENDATION OF UNITED STATES MAGISTRATE JUDGE

Magistrate Judge Kathleen M. Tafoya

This case comes before the court on "Defendant Cultural Care, Inc.'s Motion to Dismiss All Claims in First Amended Complaint Pursuant to Federal Rule of Civil Procedure 12(B)(6)" (Doc. No. 127, filed April 17, 2015), "Motion to Dismiss the First Amended Complaint by Defendant Interexchange, Inc." (Doc. No. 130, filed April 20, 2015), "Defendant American Cultural Exchange, LLC, D/B/A Go Au Pair's Motion to Dismiss Counts I, III, IV, V, VI, VII, VIII, IX and X of the First Amended Complaint" (Doc. No. 131, filed April 20, 2015), "Joint Motion by Certain Sponsor Defendants to Dismiss the First Amended Complaint and Certification of Compliance with Civil Practice Standard 7.1D." (Doc. No. 135, filed April 20, 2015), and "Defendant American Institute for Foreign Study's ["AIFS"] Motion to Dismiss Amended Complaint" (Doc. No. 136, filed April 20, 2015). Plaintiffs filed a "Consolidated Opposition to Defendants' Motions to Dismiss" (Doc. No. 199 ["Resp."], filed July 10, 2015) and each Defendant replied. (Doc. Nos. 207, 211, 214, 215, 216).

Also before the court is "Defendant Cultural Care, Inc.'s Motion to Strike Material in Plaintiffs' Consolidated Opposition to Defendants' Motions to Dismiss" (Doc. No. 206, filed August 6, 2015), to which Plaintiffs have responded (Doc. No. 220, August 31, 2015) and Defendant replied. (Doc. No. 225, filed September 17, 2015). Finally, Plaintiffs filed a "Cross-Motion to Strike Certain Exhibits Submitted by the Defendants" (Doc. No. 221, filed August 31, 2015), to which certain Defendants responded (Doc. No. 227, filed September 24, 2015) and Plaintiffs replied. (Doc. No. 231, filed October 8, 2015).

STATEMENT OF THE CASE

This case arises out of the au pair program, made possible by the J-1 visa program, and currently overseen by the United States Department of State ("DOS"). (Doc. No. 101 ["Am. Comp."] at 2). The J-1 visa program was created to facilitate cultural exchange between nations and the applicable visas are carried out under the authority of the Mutual Educational andCultural Exchange Act of 1961 ("Cultural Exchange Act"). (Am. Comp. at 2, 10; 22 U.S.C. § 2451, et seq.) The J-1 au pair program was created in 1986 and was administered by the United States Information Agency ("USIA"). (Am. Comp. at 12.) Initially, the au pair program was considered solely a "cultural exchange" program and was not subject to any employment or labor law protections. (Id.) However, the au pairs were required to work 45 hours per week providing child care services to their host families. (Id.) Under this program, the au pairs were paid $100.00 per week for their services, plus room and board. (Am. Comp. at 13.) The USIA delegated oversight to entities that it designated to act as sponsors ("Sponsors") for the J-1 visa au pair program. (Am. Comp. at 11.)

In 1990, in response to a Congressional request, the General Accounting Office ("GAO") issued a report to Congress entitled, "Inappropriate Uses of Educational and Cultural Exchange Visas" (the "GAO Report"), in which the GAO determined, inter alia, that the au pair program was in reality a work program administered under the auspices of "cultural exchange" that required 45 hours per week of work. 60 Fed. Reg. at 8547-48 (Feb. 15, 1995) (codified at 22 C.F.R. pt. 514).¹ "Authorizing J visas for participants and activities that are not clearly for educational and cultural purposes as specified in the act dilute[s] the integrity of the J visa and obscures the distinction between the J visa and other visas granted for work purposes." Id. at 8548. Similar objections to the au pair program were raised by the DOS, the Immigration and Naturalization Service and the U.S. Department of Labor ("DOL"), all of whom agreed with the GAO Report that the au pair program possessed all the characteristics of a full-time child care work program. Id.

Following the GAO report and several subsequent tragic events involving au pairs, Congress authorized and directed the USIA to promulgate regulations governing au pair placements. Id. The USIA recognized that the au pair program lacked a bona fide educational component sufficient to meet the requirements of the Cultural Exchange Act. Id. Critics of the program had complained that it amounted to no more than the import of cheap foreign labor in the guise of an educational and cultural exchange program. Id. at 8550. The USIA consulted with the DOL regarding the employment aspect of the program and the DOL advised the USIA that the au pair program created an employment relationship and fell under the purview of the Fair Labor Standards Act ("FLSA"). Id.

In December 1994, the USIA, in direct consultation with the DOL, conducted a formal rulemaking to issue a rule recognizing that au pair participants are full-time employees entitled to the protections afforded all employees under domestic labor laws, including the FLSA. Id. at 8547-48, 8550-51. The final rule required compensation of au pairs "at a rate of not less than $115.00 per week" plus a weekly credit reflecting the actual cost incurred for room and board, not to exceed $76.00 per week. Id. at 8551. (emphasis in original).²

In June 1997, the USIA issued an interim rule in order to "ensure that there is no future confusion regarding the payment of minimum wage." 62 Fed. Reg. at 34633 (June 27, 1997) (codified at 22 C.F.R. pt. 514). Rather than stating the specific minimum amount an au pair hadto be compensated, the USIA amended the rule to provide, "Sponsors shall require that au pair participants: (1) Are compensated at a weekly rate based upon 45 hours per week and paid in conformance with the requirements of the [FLSA] as interpreted and implemented by the [DOL]." Id. at 34634.³ This same rule is now codified at 22 C.F.R. § 62.31(j)(1).

Today, the DOS, rather than the USIA, oversees the au pair program. (Am. Comp. at 19.) Sponsor Defendants are the exclusive entities authorized to recruit and place au pairs with host families in the United States. (Am. Comp. at 11.) DOS regulations mandate that Sponsors ensure various conditions of employment for the au pairs, including but not limited to that host families are capable of and do meet various requirements and that au pairs are compensated in compliance with labor laws and do not work beyond specified limits. (Am. Comp. at 11-12.) The Sponsors' extensive role throughout the au pair program is discussed in more detail herein.

Plaintiffs named each of the designated Sponsors as Defendants in this action (collectively referred to herein as "Sponsors" or "Defendants"). Plaintiffs allege that in spite of the fact that the applicable regulations require that au pairs receive not less than the applicable minimum wage as compensation, Sponsors have conspired and agreed to set all of the au pairs' weekly wages at the purported minimum amount, currently $195.75 per week plus room and board. (Am. Comp. at 16-33.)⁴ Additionally, Plaintiffs contend the Sponsors falsely inform bothau pairs and host families that this minimum wage is the maximum wage au pairs are permitted to receive. (Am. Comp. at 30, 33-34, 40-60, 73-74.)⁵ Sponsors universally advertise that the au pairs fees will be $195.75 per week plus room and board. (Am. Comp. at 22-29.) The required fees that each host family must pay to each Sponsor range in amount from $ 7,000.00 to $8,700.00. (Id.)

By this action, Plaintiffs assert, on behalf of themselves and all those similarly situated, federal claims under the Sherman Antitrust Act, 15 U.S.C. § 1, et seq., the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964, et seq., and the FLSA, as well as state law claims based on Breach of Fiduciary Duty, Negligent Misrepresentation, Constructive Fraud or Fraudulent Concealment, Consumer Protection laws, Breach of Contract or Quasi Contract, Unpaid Wages, and claims pursuant to various state wage laws.

LEGAL STANDARD

Failure to State a Claim Upon Which Relief Can Be Granted

Federal Rule of Civil Procedure 12(b)(6) provides that a defendant may move to dismiss a claim for "failure to state a claim upon which relief can be granted." Fed. R. Civ. P. 12(b)(6). "The court's function on a Rule 12(b)(6) motion is not to weigh potential evidence that the parties might present at trial, but to assess whether the plaintiff's complaint alone is legally sufficient to state a claim for which relief may be granted." Dubbs v. Head Start, Inc., 336 F.3d 1194, 1201 (10th Cir. 2003) (citations and quotation marks omitted).

"A court reviewing the sufficiency of a complaint presumes all of plaintiff's factual allegations are true and construes them in the light most favorable to the plaintiff." Hall v. Bellmon, 935 F.2d 1106, 1198 (10th Cir. 1991). "To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)). Plausibility, in the context of a ...