Velasco v. Elliot

JOSE VELASCO, Plaintiff, v. DAN ELLIOT, Defendant.

Case No. 18-cv-03191-VKD

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA SAN JOSE DIVISION

November 20, 2018

ORDER GRANTING IN PART AND DENYING IN PART MOTION TO DISMISS WITH LEAVE TO AMEND

Re: Dkt. No. 14

Plaintiff Jose Velasco filed this action on May 29, 2018, suing defendant Dan Elliott individually and d/b/a Dan Elliott's Roofing Company. Dkt. No. 1. Mr. Velasco filed a First Amended Complaint ("FAC") as of right on June 5, 2018, asserting the following claims: (1) failure to pay overtime wages in violation of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 207, 216(b), 255(a); (2) failure to pay overtime wages in violation of California Labor Code §§ 510, 1194, and 1197; (3) failure to pay minimum wage in violation of California Labor Code §§ 1182.12, 1194.2 and Wage Order §4-2001; (4) failure to provide accurate wage stubs and record keeping in violation of California Labor Code § 226; (5) waiting time penalties for failure to pay overtime wages under California Labor Code § 203; and (6) unfair business practices under California Business and Professions Code §17200 et seq. Id. ¶¶ 24-57. Mr. Velasco appears to assert that the Court has federal question jurisdiction over the FLSA claim and supplemental jurisdiction over the state law claims under 28 U.S.C. § 1367(a). See id. ¶¶ 1, 3, 24-31.

Mr. Elliott now moves to dismiss the FAC on the grounds that this Court lacks subject matter jurisdiction over Mr. Velasco's FLSA claim, and that Mr. Velasco fails to state a claim for violation of either the FLSA or California state law. Dkt. No. 14.

All parties have consented to magistrate judge jurisdiction.¹ Dkt. Nos. 12, 23. Having considered the parties' moving papers and arguments at the September 25, 2018 hearing² on the matter, the Court grants in part and denies in part the motion to dismiss with leave to amend.

I. BACKGROUND

According to the FAC, Mr. Velasco worked for Mr. Elliott's roofing company for some period of time as a roofer. Dkt. No. 1 ¶ 11. Mr. Velasco alleges that Mr. Elliott failed to properly record the hours that he worked and provided him with paystubs listing an incorrect number of regular and overtime hours worked. Id. ¶¶ 12, 14. Mr. Velasco also says that he worked from approximately 8:00 a.m. to sometime between 4:00 p.m. and 6:00 p.m. on weekdays, and that he worked for six hours two Saturdays a month. Id. ¶¶ 19, 20. On that basis, Mr. Velasco says, he worked on average five hours per week of overtime. Id. ¶ 21. Mr. Elliott fired Mr. Velasco in December 2016. Id. ¶ 23.

II. LEGAL STANDARD

A. Rule 12(b)(1)

Federal courts can adjudicate only those cases which the Constitution and Congress authorize them to adjudicate—those involving diversity of citizenship or a federal question, or those to which the United States is a party. Mims v. Arrow Financial Services, LLC, 565 U.S. 368, 376-77 (2012); see also Chen-Cheng Wang ex rel. United States v. FMC Corp., 975 F.2d 1412, 1415 (9th Cir. 1992) ("Federal courts have no power to consider claims for which they lack subject-matter jurisdiction."), overruled on other grounds by United States ex rel. Hartpence v. Kinetic Concepts, Inc., 792 F.3d 1121 (9th Cir. 2015). The Court has a continuing obligation to ensure that it has subject matter jurisdiction. See Fed. R. Civ. P. 12(h)(3). A defendant may raise the defense of lack of subject matter jurisdiction by motion pursuant to Rule 12(b)(1) of theFederal Rules of Civil Procedure. The plaintiff always bears the burden of establishing subject matter jurisdiction. Kokkonen v. Guardian Life Ins., 511 U.S. 375, 377 (1994).

A jurisdictional challenge may be facial or factual. Safe Air for Everyone v. Meyer, 373 F.3d 1035, 1039 (9th Cir. 2004). Where the attack is facial, the Court determines whether the allegations contained in the complaint are sufficient on their face to invoke federal jurisdiction, accepting all material allegations in the complaint as true and construing them in favor of the party asserting jurisdiction. Id.; see also Warth v. Seldin, 422 U.S. 490, 501 (1975). Where the attack is factual, however, "the court need not presume the truthfulness of the plaintiff's allegations." Safe Air for Everyone, 373 F.3d at 1039. In resolving a factual dispute as to the existence of subject matter jurisdiction, a court may review extrinsic evidence beyond the complaint without converting a motion to dismiss into one for summary judgment. Id. Once the moving party has made a factual challenge by offering affidavits or other evidence to dispute the allegations in the complaint, the party opposing the motion must "present affidavits or any other evidence necessary to satisfy its burden of establishing that the court, in fact, possesses subject matter jurisdiction." St. Clair v. City of Chico, 880 F.2d 199, 201 (9th Cir. 1989); see also Savage v. Glendale Union High Sch. Dist. No. 205, 343 F.3d 1036, 1040 n.2 (9th Cir. 2003).

"Jurisdictional dismissals in cases premised on federal-question jurisdiction are exceptional, and must satisfy the requirements specified in Bell v. Hood, 327 U.S. 678, 66 S. Ct. 773, 90 L. Ed. 939 (1946)." Sun Valley Gas., Inc. v. Ernst Enters., 711 F.2d 138, 140 (9th Cir. 1983). The Supreme Court has determined that jurisdictional dismissals are warranted "where the alleged claim under the Constitution or federal statues clearly appears to be immaterial and made solely for the purpose of obtaining federal jurisdiction or where such claim is wholly insubstantial and frivolous." Bell, 327 U.S. at 682-83.

B. Rule 12(b)(6)

A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure tests the legal sufficiency of a claim. Conservation Force v. Salazar, 646 F.3d 1240, 1241-42 (9th Cir. 2011) (quoting Navarro v. Block, 250 F.3d 729, 732 (9th Cir. 2001)). When determining whether a claim has been stated, the Court accepts as true all well-pled factual allegations and construesthem in the light most favorable to the plaintiff. Reese v. BP Exploration (Alaska) Inc., 643 F.3d 681, 690 (9th Cir. 2011). While a complaint need not contain detailed factual allegations, it "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) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). A claim is facially plausible when it "allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id.

While leave to amend generally is granted liberally, the Court has discretion to dismiss a claim without leave to amend if amendment would be futile. Rivera v. BAC Home Loans Servicing, L.P., 756 F. Supp. 2d 1193, 1197 (N.D. Cal. 2010) (citing Dumas v. Kipp, 90 F.3d 386, 393 (9th Cir. 1996)).

III. DISCUSSION

Mr. Elliott moves for dismissal on two primary grounds: (1) the Court lacks subject matter jurisdiction because Mr. Elliott's company is not an employer subject to the FLSA; and (2) Mr. Velasco has not stated a claim for relief under the FLSA or under California state law.

A. Subject Matter Jurisdiction

The FLSA's overtime provisions apply to any employee who "is engaged in commerce or in the production of goods for commerce, or is employed in an enterprise engaged in commerce or in the production of goods for commerce." 29 U.S.C. § 207. The FLSA defines "commerce" as "trade, commerce, transportation, transmission, or communication among the several States or between any State and any place outside thereof." Id. § 203(b). An "enterprise engaged in commerce or in the production of goods for commerce" is defined as an enterprise that (1) "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;" and (2) whose annual business done is not less than $500,000. Id. § 203(s)(1)(A)(i)-(ii).

An employer is subject to the FLSA's overtime provisions if the employee can establish liability under an "individual coverage" theory or an "enterprise coverage" theory. Yan v. Gen. Pot, Inc., 78 F. Supp. 3d 997, 1002 (N.D. Cal. 2015). For "individual coverage" to apply, anemployee must have been (1) engaged in commerce, or (2) engaged in the production of goods for commerce. Id. at 1003 (quoting 29 U.S.C. § 207(a)). For "enterprise coverage" to apply, the enterprise must meet the definition of "enterprise engaged in commerce or in the production of goods for commerce." Id. (quoting 29 U.S.C. § 203(s)(1)(A)(i)-(ii)).

Mr. Elliott raises both facial and factual challenges to this Court's subject matter jurisdiction. See Dkt. No. 25 at 1. First, Mr. Elliott argues that the FAC fails to plead facts to support subject matter jurisdiction. Dkt. No. 14 at 1. He says that the sole paragraph under the FAC's heading, "Subject Matter Jurisdiction and Venue" does not, in fact, address subject matter jurisdiction, and instead merely states: "This Court is a proper venue, since all events giving rise to this lawsuit have occurred in Santa Clara County[.]" Dkt. No. 7 ¶ 3. Second, Mr. Elliott argues that his company is not subject to the provisions of the FLSA because it is not an "enterprise engaged in commerce or in the production of goods for commerce" as defined in the FLSA. Dkt. No. 14 at 2-8. He provides a sworn declaration stating that he only operates in California and that he purchases (and his employees use) supplies only from local California retailers. Dkt. No. 15 ¶¶ 2-3, 6-7. Therefore, Mr. Elliott contends, Mr. Velasco cannot allege FLSA liability under either an individual or enterprise coverage theory, and without the FLSA claim to provide federal question jurisdiction, the Court cannot exercise supplemental jurisdiction over Mr. Velasco's state law claims. Dkt. No. 14 at 7-8.

Mr. Velasco responds that dismissal under Rule...