Kollin v. Brio Inc.

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Cheryl Kollin, et al., Plaintiffs, v. Brio Incorporated, et al., Defendants.

No. CV-22-01610-PHX-JAT

United States District Court, D. Arizona

June 14, 2023

ORDER

James A. Teilborg, Senior United States District Judge

Pending before the Court is Defendants' Motion to Dismiss First Amended Complaint for Failure to State a Claim and for Lack of Subject Matter Jurisdiction. (Doc. 18). Plaintiffs have filed a response. (Doc. 20). Defendants have filed a reply. (Doc. 23). This Court will now rule.

I. BACKGROUND

Dr Cheryl Kollin worked for Brio Medical as medical director and treasurer from November 2019 to March 2022. (Doc. 11 at 3). She is a licensed naturopathic physician who has the authority to “diagnose conditions, treat patients, and to prescribe vaccines, antibiotics, and Federal Drug Administration controlled substances.” (Id. at 2). As part of her employment agreement with Brio, Dr. Kollin was to be paid “an annualized salary of $225,000 in bi-weekly installments.” (Id. at 5). She was also given a seat on the board and five percent of the company stock. (Id.). She alleges that she worked an average of sixty-five hours per week, but was underpaid for every pay period between November 30, 2020, through March 31 2022. She further claims that she received no wages between February 1, and February 15, 2020. (Id.). She was again not paid, she claims, from November 16 to November 30, 2020. (Id. at 7).

Less than four months after Dr. Kollin started with Brio, she took out a loan, through her LLC Kollin Medical, to purchase additional shares in Brio. (See id. at 6). As part of this transaction, Brio entered into a stock agreement with Dr. Kollin in which it agreed to pay the “monthly cost of the loan” upon receipt of the money loaned. (Id.). Brio failed to pay these monthly payments for December 2020, January 2021, and December 2021. (See id.). On March 15, 2022, Dr. Kollin was fired by Brio for “failure to create advertising materials.” (Id. at 10). Brio then notified her that it would no longer be making the payments on the loan. (See id. at 11).

In September of 2022, Dr. Kollin filed a complaint alleging violation of the minimum wage, overtime, and retaliation provisions of the FLSA. (Id. at 12-13). Additionally, she brought a number of state law claims, both personal and derivative as a shareholder of Brio Medical, for breach of contract, violation of state labor laws, and other breaches of fiduciary duties. (See id. 15-26).

II. LEGAL STANDARD

a. Rule 12(b)(6)

A complaint or claim can be dismissed under Rule 12(b)(6) either because it lacks “a cognizable legal theory” or because there are no “sufficient facts alleged under a cognizable legal theory.” Johnson v. Riverside Heatlhcare Sys., LP, 534 F.3d 1116, 112122 (9th Cir. 2008) (quoting Balistreri v. Pacifica Police Dep't, 901 F.2d 696, 699 (9th Cir. 1990)) (internal quotations omitted). In determining whether a complaint states a claim under this standard, the Court regards the allegations in the complaint as true and construes the pleadings in the light most favorable to the nonmovant. See Outdoor Media Group, Inc. v. City of Beaumont, 506 F.3d 895, 900 (9th Cir. 2007). A pleading must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” Fed.R.Civ.P. 8(a)(2). This statement “need only give the defendant fair notice of what the claim is and the grounds upon which it rests,” but “[s]pecific facts are not necessary.” Erickson v. Pardus, 551 U.S. 89, 93 (2007) (internal quotation marks omitted). To survive a motion to dismiss, a complaint must state a claim that is “plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). This means that the Plaintiff must plead “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.; Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007) (to survive a motion to dismiss, a plaintiff must allege “enough facts to state a claim to relief that is plausible on its face”).

b. FLSA Exceptions

The FLSA, among other things, requires employers to pay their employees a minimum wage. See 29 U.S.C. § 206. It also requires payment of overtime if an employee works more than forty hours per week. See 29 U.S.C. § 207. Certain employees are exempt from these requirements, however. The Act provides that employers do not have to pay a minimum wage or overtime to “any employee employed in a bona fide executive, administrative, or professional capacity ....” 29 U.S.C. § 213. The Act gives the Secretary of Labor the authority to “define and delimit” those terms. Id. As set forth in the regulations, the term “professional capacity” includes “any employee who is the holder of a valid license or certificate permitting the practice of law or medicine or any of their branches and is actually engaged in the practice thereof.” 29 C.F.R. § 541.304. Specifically, in the field of medicine, this applies to “physicians or other practitioners licensed and practicing in the field of medical science or healing ....” Id. The regulation goes on to list a number of the medical specialties included in this exemption. Id. The issue of whether an employee is exempt is a question of law, but the specifics regarding the employee's job responsibilities may involve fact questions. See Adler v. SimonMed Imaging, Inc., 465 F.Supp.3d 953, 960 (D. Ariz. June 10, 2020). Furthermore, the employer bears the burden of showing that the exemption applies. See id. In doing this, the employer must show that the employee “[m]eets every requirement before the employee will be deprived of the protection of the Act.” Bothell v. Phase Metrics, Inc., 299 F.3d 1120, 1125 (9th Cir. 2002) (internal quotations omitted).

III. ANALYSIS

a. Minimum Wage and Overtime Protections

Dr. Kollin is a licensed physician in the state of Arizona, who is currently engaged in the practice of naturopathic medicine. Consequently, she is an “employee employed in a bona fide ... professional capacity” and thus cannot bring a minimum wage or overtime claim under the FLSA. The question of whether licensed naturopaths are “physicians or other practitioner” seems to be one of first impression in the 9th Circuit. Therefore, in order to determine whether such physicians are covered by the exemption, three words must be analyzed: medicine, branch, and practitioner. This Court finds that naturopathic medicine is included within “medicine” as that word is used in regulation. Further, naturopathic medicine is a “branch” of medicine, and Dr. Kollin is a “practitioner” of medicine. Thus, the exemption applies to her.

The exemption from mandatory minimum wages and overtime pay only applies to those who are licensed to practice “medicine” in their state. The word “medicine” encompasses much more than the modern healing sciences employed by Medical Doctors. Webster's Third International Dictionary defines it as “the science and art dealing with the maintenance of health and the prevention, alleviation, or cure of disease ....” Medicine, Webster's Third New International Dictionary of the English Language (1st ed. 1981). It thus generally covers most scientific practices relating to maintaining health and curing illness. This is confirmed by Black's Law Dictionary, which defines “medicine” as, “[t]he scientific study and practice of preserving heath and treating disease or injury; the science and art of preventing, curing, and alleviating sickness or affliction.” Medicine, Black's Law Dictionary (11th ed. 2019). This definition is large enough to encompass naturopathic medicine. The Arizona Revised Statutes define the practice of naturopathic medicine as “a medical system of diagnosing and treating diseases, injuries, ailments, infirmities and other conditions of the human mind and body, including by natural means, drugless methods, drugs, nonsurgical methods, devices, physical, electrical, hygienic and sanitary measures and all forms of physical agents and modalities.” A.R.S. § 32-1501(28). The dictionary definitions of “medicine” and the statutory definition of the “practice of naturopathic medicine,” overlap in significant respects. Consequently, this Court finds that medicine includes naturopathic medicine.

Although they overlap in general, as Plaintiff has argued, it could be that in the context of the regulation “medicine” is limited to the work of a licensed Medical Doctor. Thus, it is necessary to define the term “branch” as used in the regulation. As defined by Webster, “branch” means “a part of a complex body: as ... an area of knowledge that may be considered or studied apart from related areas[.]” Branch, Webster's Third New International Dictionary of the English Language (1st ed. 1981). It then gives “pathology” as an example of a branch of medicine. Thus, in order to be considered a branch of medicine, the area of knowledge must be a specific subset of medicine. It must involve a specific area of the healing arts that can be studied separately but that is still considered part of medicine generally. Again, looking to the definition of the “practice of naturopathic medicine” set forth in the Arizona Statutes, it would seem that naturopathic medicine is a “branch” of medicine. The functions and goals are all the same, its focus is on “diagnosing and treating” diseases and illness. Yet, it is specialized in that it utilizes different methods to achieve that result. Thus, it can be studied separately. Indeed, in order to be licensed to practice naturopathic medicine in Arizona, a prospective naturopath must “[b]e a graduate of an approved school of naturopathic medicine.” A.R.S. §32-1522(A)(1). It therefore is a unique subset, or “branch,” of medicine.

The exemption only...