Walsh v. Peters

MARTIN J. WALSH,¹ Plaintiff/Counter-Defendant, v. LOIS PETERS, et al., Defendants/Counter-Plaintiffs.

Civil Action No. GLR-18-2933

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND

April 28, 2021

MEMORANDUM OPINION

THIS MATTER is before the Court on the Motion to Dismiss Defendants' Amended Counterclaim filed by Plaintiff/Counter-Defendant Martin J. Walsh, Secretary of the U.S. Department of Labor (the "Secretary") (ECF No. 36).² The Motion is ripe for disposition and no hearing is necessary. See Local Rule 105.6 (D.Md. 2018). For the reasons outlined below, the Court will grant the Secretary's Motion.

I. BACKGROUND³

This lawsuit alleges that Defendants/Counter-Plaintiffs International Health Care Consultants, Inc. ("IHCC"), Ashleigh's Senior Assisted Living, Inc. ("Ashleigh's"), Cedar Lane Senior Assisted Living Facility, Inc. ("Cedar Lane"), Lois Peters, and Frank Dickerson (collectively, "Defendants") violated the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. ("FLSA"), by failing to properly compensate their employees and maintain accurate records of employee hours. (See Compl. ¶¶ 11-17, ECF No. 1). According to the Complaint, IHCC acts as a sort of parent organization for several group homes that provide services for the elderly, whereas Cedar Lane and Ashleigh's are corporations engaged in the operation of specific group homes within the IHCC umbrella. (Id. ¶¶ 4-6). Peters owns the group homes, while Dickerson exercises closer oversight over their day-to-day management. (Id. ¶¶ 2-3, 7-8).

The U.S. Department of Labor ("DOL") began investigating IHCC in September 2017. (Am. Countercl. ¶ 10, ECF No. 35). According to Defendants, over the course of the investigation, DOL Investigator Oscar Blanco required IHCC "to go significantly beyond what is required to comply with the FLSA in order to close the investigation." (Id. ¶ 11). Blanco eventually determined that IHCC was violating the FLSA and required it to change its policies before he would close the DOL investigation. (Id. ¶ 12). In conjunction with a closing conference on February 14, 2018, DOL issued IHCC a Form WH-56 summary ofunpaid wages stating that Defendants owed their employees "$1,460,900.34 in purportedly unpaid wages and $1,460,900.34 in purported liquidated damages, for a total of $2,921,800.68." (Id. ¶ 13). DOL pressured Defendants to either sign the WH-56 or enter a tolling agreement, averring that if they declined to do so, DOL would seek civil penalties. (Id. ¶ 14).

Following the closing conference, DOL provided Defendants a spreadsheet detailing the basis for the figures presented in the WH-56. (Id. ¶¶ 17-18). The spreadsheet contained several errors, requiring DOL to rescind the initial WH-56 and issue a new one seeking "$802,278.78 in back pay and $802,278.78 in liquidated damages for a total of $1,604,557.56." (Id. ¶¶ 19-25). The updated figures, however, were rooted in additional errors. (Id. ¶¶ 27-28). Specifically, Defendants allege that DOL wrongly concluded that IHCC employees worked twenty-four hours per day. (Id. ¶¶ 29-64). Defendants state that this position disregarded controlling law and DOL's own regulations. (Id. ¶¶ 65-81).

On July 26, 2018, DOL sent a letter to Peters notifying her for the first time of a previous letter—which Defendants had never seen—assessing a civil monetary penalty of $16,716 on one or more Defendants. (Id. ¶¶ 84-85). In its July 26 letter, DOL notified Peters that it was withdrawing the penalty, but warned that its decision to do so did not preclude it from issuing a subsequent penalty. (Id. ¶¶ 86-87). On August 6, 2018, counsel for Defendants received another letter from DOL indicating that it was assessing a civil money penalty in the amount of $16,716. (Id. ¶¶ 88-89). In contravention of DOL regulations, the letter did not set forth the basis for assessing the penalty. (Id. ¶¶ 91-96). Defendants submitted a response on August 5, 2018, containing exceptions to DOL'sdetermination and requesting a hearing. (Id. ¶ 98). On August 22, 2018, DOL sent a letter directly to Peters indicating that it would notify her "as soon as the date, time, and place of a hearing had been determined." (Id. ¶ 99). DOL did not send any such notification, nor did it send any other correspondence to Defendants. (Id. ¶ 100). Instead, DOL filed the Complaint in this case on September 21, 2018. (Id. ¶ 103).

Defendants moved for dismissal of the Complaint on November 21, 2018. (ECF No. 10). By Memorandum Opinion and Order dated September 30, 2019, this Court denied the motion to dismiss. (ECF Nos. 20, 21). Defendants moved for reconsideration of the Court's Order, and the Court denied that motion on August 14, 2020. (ECF Nos. 22, 29).

On September 4, 2020, Defendants filed an Answer to the Complaint together with a Counterclaim against the Secretary alleging that DOL violated the Administrative Procedure Act, 5 U.S.C. §§ 551 et seq. ("APA"), through its actions preceding this lawsuit. (ECF No. 30). On October 16, 2020, the Secretary moved to dismiss the Counterclaim. (ECF No. 34). On October 29, 2020, Defendants filed an Amended Counterclaim once again alleging that DOL's actions violated the APA. (Am. Countercl. ¶¶ 104-12). Defendants seek declaratory and injunctive relief and attorneys' fees. (Id. at 19-20).

On November 12, 2020, the Secretary moved to dismiss the Amended Counterclaim pursuant to Federal Rules of Civil Procedure 12(b)(1) and 12(b)(6). (ECF No. 36). Defendants filed an Opposition on December 4, 2020. (ECF No. 39). The Secretary filed a Reply on December 16, 2020. (ECF No. 40).

II. DISCUSSION

A. Standard of Review

1. Rule 12(b)(1)

Federal Rule of Civil Procedure 12(b)(1) governs motions to dismiss for lack of subject-matter jurisdiction. A defendant challenging a complaint under Rule 12(b)(1) may advance a "facial challenge, asserting that the allegations in the complaint are insufficient to establish subject matter jurisdiction, or a factual challenge, asserting 'that the jurisdictional allegations of the complaint [are] not true.'" Hasley v. Ward Mfg., LLC, No. RDB-13-1607, 2014 WL 3368050, at *1 (D.Md. July 8, 2014) (alteration in original) (quoting Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009)).

When a defendant raises a facial challenge, the Court affords the plaintiff "the same procedural protection as he would receive under a Rule 12(b)(6) consideration." Kerns, 585 F.3d at 192 (quoting Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982)). As such, the Court takes the facts alleged in the complaint as true and denies the motion if the complaint alleges sufficient facts to invoke subject matter jurisdiction.

With a factual challenge, the plaintiff bears the burden of proving the facts supporting subject matter jurisdiction by a preponderance of the evidence. U.S. ex rel. Vuyyuru v. Jadhav, 555 F.3d 337, 347 (4th Cir. 2009). In determining whether the plaintiff has met this burden, the Court "is to regard the pleadings' allegations as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment." Richmond, Fredericksburg & Potomac R. Co. v. United States, 945 F.2d 765, 768 (4th Cir. 1991) (citing Adams, 697 F.2d at 1219).Nevertheless, the Court applies "the standard applicable to a motion for summary judgment, under which the nonmoving party must set forth specific facts beyond the pleadings to show that a genuine issue of material fact exists." Id. (citing Trentacosta v. Frontier Pac. Aircraft Indus., Inc., 813 F.2d 1553, 1559 (9th Cir. 1987)). The movant "should prevail only if the material jurisdictional facts are not in dispute and the [movant] is entitled to prevail as a matter of law." Id. (citing Trentacosta, 813 F.2d at 1558). Unlike under the summary judgment standard, however, the Court is permitted to decide disputed issues of fact, Kerns v. United States, 585 F.3d 187, 192 (4th Cir. 2009), and weigh the evidence, Adams, 697 F.2d at 1219.

"Sovereign immunity shields the United States from suit absent a consent to be sued that is 'unequivocally expressed.'" United States v. Bormes, 568 U.S. 6, 10 (2012) (quoting United States v. Nordic Vill., Inc., 503 U.S. 30, 33 (1992)). Sovereign immunity also applies to agencies and instrumentalities of the government, such as DOL. See Regents of Univ. of Cal. v. Doe, 519 U.S. 425, 429 (1997). Finding that the government has not consented to the suit at bar requires a court to dismiss the claim for lack of subject matter jurisdiction. Matter of Moore, 488 F.Supp.3d 231, 236 (D.Md. 2020) (citing Williams v. United States, 50 F.3d 299, 304-05 (4th Cir. 1995)).

2. Rule 12(b)(6)

The purpose of a Rule 12(b)(6) motion is to "test[ ] the sufficiency of a complaint," not to "resolve contests surrounding the facts, the merits of a claim, or the applicability of defenses." King v. Rubenstein, 825 F.3d 206, 214 (4th Cir. 2016) (quoting Edwards v. City of Goldsboro, 178 F.3d 231, 243 (4th Cir. 1999) (citation omitted)). A complaint fails tostate a claim if it does not contain "a short and plain statement of the claim showing that the pleader is entitled to relief," Fed.R.Civ.P. 8(a)(2), or does not "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 the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Id. (citing Twombly, 550 U.S. at 556). "Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice." Id. (citing Twombly, 550 U.S. at 555). Though the plaintiff is not required to forecast evidence to prove the elements of the claim, the complaint must allege sufficient facts to establish each element. Goss v. Bank of Am., N.A., 917 F.Supp.2d 445, 449 (D.Md. 2013) (quoting ...