Opinion
Case No. CIV-18-583-SLP
02-05-2019
Dorret FRANCIS; Anthony Kennedy; and Christine Pearce, on behalf of themselves and all others similarly situated, Plaintiffs, v. APEX USA, INC.; Hotelmacher, LLC, dba Holiday Inn Express; Sontag, Inc., dba Hampton Inn Clinton; Steakmacher, LLC dba Montana Mike's Steakhouse; Schumacher Investments, LLC dba Water Zoo Indoor Water Park ; Walter Schumacher; and Carolyn Schumacher, Defendants.
Brady R. Henderson, Megan E. Lambert, American Civil Liberties Union of Oklahoma, Oklahoma City, OK, Caitlin Boehne, Christopher J. Willett, Rebecca C. Eisenbrey, Equal Justice Center, Austin, TX, Carole Vigne, Legal Aid at Work, San Francisco, CA, Catherine Fisher, Eben Colby, Isaac N. Saidel-Goley, Skadden Arps Slate Meagher & Flom LLP, Boston, MA, for Plaintiffs. A. Wayne Billings, C. Eric Shephard, Kevin R. Donelson, Fellers Snider Blankenship Bailey & Tippens, for Defendants.
Brady R. Henderson, Megan E. Lambert, American Civil Liberties Union of Oklahoma, Oklahoma City, OK, Caitlin Boehne, Christopher J. Willett, Rebecca C. Eisenbrey, Equal Justice Center, Austin, TX, Carole Vigne, Legal Aid at Work, San Francisco, CA, Catherine Fisher, Eben Colby, Isaac N. Saidel-Goley, Skadden Arps Slate Meagher & Flom LLP, Boston, MA, for Plaintiffs.
A. Wayne Billings, C. Eric Shephard, Kevin R. Donelson, Fellers Snider Blankenship Bailey & Tippens, for Defendants.
ORDER
SCOTT L. PALK, UNITED STATES DISTRICT JUDGE
Before the Court are the Motions to Dismiss and/or Strike Plaintiffs' Class Action Complaint [Doc. Nos. 21-22 and 24-28] filed by each of the Defendants. Plaintiffs have filed a collective Memorandum in Opposition [Doc. No. 31] and Defendants have filed a collective Reply [Doc. No. 32]. The matter is fully briefed and ready for decision. For the reasons set forth below, Defendants' Motions are denied.
Defendants' Motions are virtually identical. For ease of reference and unless otherwise indicated, when referring to Defendants' Motions, the Court cites the Motion to Dismiss of Defendant APEX USA, Inc. [Doc. No. 21] (APEX Mot.).
The Court's citations to the filings in this matter reference the page number in the ECF header.
Defendants recently filed a Notice [Doc. No. 40] and Supplemental Notice [Doc. No. 41] stating that "Defendants have settled with the United States Department of Labor." Id. at 1. The United States Department of Labor is not a party to this action. Moreover, Defendants do not reference their pending Motions to Dismiss in the Notices or otherwise purport to explain the significance of the Notices on the claims in this action. The Court, therefore, has not considered the Notices in ruling on Defendants' Motions to Dismiss.
I. INTRODUCTION
Plaintiffs and putative class members (collectively, Plaintiffs) are J-1 visa students who worked for one or more of the Defendants in the State of Oklahoma. Defendants are individuals and entities engaged in the hospitality industry and own or operate businesses including two hotels, a restaurant and a water park in Clinton, Oklahoma. Plaintiffs allege, inter alia, that Defendants recruited Plaintiffs through a J-1 sponsor agency. Plaintiffs further allege Defendants subjected them to forced labor during the course of their employment in violation of the Trafficking Victims Protection Act of 2000 (TVPA) as amended by the Trafficking Victims Protection Reauthorization Act of 2008 (TVPRA).
A related action is pending before this Court against the majority of these same Defendants. In the related action, Plaintiffs are Filipino nationals working in the United States pursuant to H-2B visas. Plaintiffs in that action similarly allege Defendants violated the TVPRA with respect to their employment. See Casilao v. Hotelmacher , Case No. CIV-17-800-SLP (W.D. Okla.). The Defendants' alleged conduct in each of the actions is substantially the same. Consequently, Defendants' motions to dismiss in both actions raise substantially similar arguments.
II. GOVERNING STANDARD
To survive a motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil Procedure, a plaintiff must plead sufficient factual allegations "to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim is facially plausible "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that they defendant is liable for the misconduct alleged." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).
To evaluate the sufficiency of the allegations of the complaint under the " Twombly / Iqbal pleading standard" the court undertakes a "two-prong approach." Alpenglow Botanicals, LLC v. United States , 894 F.3d 1187, 1195 (10th Cir. 2018) (citation omitted). Under the first prong, the court determines which allegations are not entitled to the assumption of truth and includes "legal conclusions" and "threadbare recitals of the elements of a cause of action, supported by mere conclusory statements." Id. (citation omitted). The second prong requires the court to assume the truth of the well-pleaded factual allegations and determine whether they state a plausible claim for relief. Id. (citation omitted).
"Generally, the sufficiency of a complaint must rest on its contents alone." Gee v. Pacheco , 627 F.3d 1178, 1186 (10th Cir. 2010). Thus, "[w]hen a party presents matters outside of the pleadings for consideration ... ‘the court must either exclude the material or treat the motion as one for summary judgment.’ " Brokers' Choice of Am., Inc. v. NBC Universal, Inc. , 861 F.3d 1081, 1103 (10th Cir. 2017) (quoting Alexander v. Oklahoma , 382 F.3d 1206, 1214 (10th Cir. 2004) ). Certain exceptions exist, and the court may consider: (1) documents attached to the complaint as exhibits; (2) documents referenced in the complaint that are central to the plaintiff's claims if the parties do not dispute the documents' authenticity; and (3) matters of which the court may take judicial notice. Gee , 627 F.3d at 1186.
III. FACTUAL ALLEGATIONS OF THE COMPLAINT
The Court views the factual allegations of the Complaint in the light most favorable to Plaintiffs as the non-moving parties. Straub v. BNSF Ry. Co. , 909 F.3d 1280, 1287 (10th Cir. 2018). Defendants make factual assertions (unsupported by evidence) about matters outside the Complaint. For example, Defendants' argue that "one of the named Plaintiffs, Anthony Kennedy, was sponsored by Apex on three separate occasions voluntarily." See APEX Mot. at 6. But these factual assertions are improper in the context of a motion to dismiss, as Defendants concede. Id. at 7 (recognizing that "this Motion is not the appropriate vehicle for fact questions").
During the time period May 29, 2008 through December 31, 2013, Defendants recruited Plaintiffs from Jamaica for work in the United States pursuant to the J-1 visa program. Plaintiffs were recruited to work for one or more of the Defendant entities located in Clinton, Oklahoma – Sontag, Inc. dba Hampton Inn Clinton; Hotelmacher LLC dba Holiday Inn Express; Steakmacher, LLC, dba Montana Mike's Steakhouse; and Schumacher Investments, LLC, dba Water Zoo Indoor Water Park. Defendants Walter Schumacher and Carolyn Schumacher, husband and wife, own and/or operate the Defendant entities. Defendant Apex USA, Inc. (APEX) is a not-for-profit corporation organized under the laws of Oklahoma and headquartered in Clinton, Oklahoma. APEX was designated as a J-1 sponsor by the United States Department of State.
Defendants used non-party individuals to act as recruiters (the Recruiters) to recruit Plaintiffs for employment. On behalf of the Defendant entities, Defendants Walter and Carolyn Schumacher directed the recruitment efforts. The Recruiters would supply information regarding terms of employment with one or more of the Defendant entities through an offer of employment letter (Offer Letter). The basic pay rates in the Offer Letter equaled or exceeded the federal minimum wage. Plaintiffs were promised, inter alia, certain earning potential and wages and affordable housing within walking distance of the place of employment.
Throughout the recruitment process, the Recruiters demanded and collected various fees from Plaintiffs s including airfare and travel expenses, consular fees and U.S. embassy interview fees. The extent of the fees was intentionally hidden from Plaintiffs and staggered so that Plaintiffs felt compelled to continue paying the required fees in fear of losing the previously paid fees.
To pay these fees, Plaintiffs used their savings and borrowed money from family members, friends and banks. Defendants did not pay Plaintiffs the wages as represented and, in some circumstances, Plaintiffs earned so little that they could not afford return airfare or repay the debt incurred. Defendants also failed to provide suitable and affordable housing as represented. For example, Plaintiffs were housed in three-bedroom houses owned by Defendant Schumacher along with up to 15 other class members.
Plaintiffs felt they had no choice but to continue to work for Defendants. Plaintiffs could not repay their debts, could not afford the return travel home and did not believe they could obtain additional employment in Clinton. Defendant Walter Schumacher told Plaintiffs they would not get hired anywhere else in Clinton. And Defendants retaliated against at least one Plaintiff when she attempted to obtain additional employment by changing her work schedule such that maintaining a second job for a non-Defendant employer was impossible. Another Plaintiff was told that she was being denied a position at a local K-Mart because she worked for Defendants.
During their employment, Defendant Schumacher subjected Plaintiffs to threats of implied physical harm. For example, Defendant Schumacher told Plaintiffs that he carried a firearm in his car. Defendant Schumacher also made it known to Plaintiffs that he was a current and/or former police sheriff suggesting his close ties to law enforcement. He also threatened Plaintiffs with deportation when they complained about wages and working conditions. Under the totality of these circumstances, Plaintiffs felt compelled to continue working for Defendants.
IV. DISCUSSION – PART ONE: SUFFICIENCY OF THE ALLEGATIONS OF THE COMPLAINT
Plaintiffs' sole claim for relief arises under the TVPRA which "establishes a civil cause of action for victims of prohibited trafficking activity." See Menocal v. GEO Group, Inc. , 882 F.3d 905, 916 (10th Cir. 2018) ; 28 U.S.C. § 1595(a). Plaintiffs bring claims pursuant to the TVPRA's forced labor provision, 28 U.S.C. § 1589(a). A defendant is liable under 18 U.S.C. § 1589(a) if he or she "knowingly provides or obtains the labor or service of a person" through the following:
(1) by means of force, threats of force, physical restraint, or threats of physical restraint to that person or another person;
(2) by means of serious harm or threats of serious harm to that person or another person;
(3) by means of the abuse or threatened abuse of law or legal process; or
(4) by means of any scheme, plan, or pattern intended to cause the person to believe that, if that person did not perform such labor or services, that person or another person would suffer serious harm or physical restraint.
The TVPRA defines "serious harm" to include "any harm, whether physical or nonphysical, including psychological, financial, or reputational harm, that is sufficiently serious, under all the surrounding circumstances, to compel a reasonable person of the same background and in the same circumstances to perform or to continue performing labor or services in order to avoid incurring that harm." 18 U.S.C. § 1589(c)(2). The statute is " ‘intended to reach cases in which persons are held in a condition of servitude through nonviolent coercion.’ " Camayo v. John Peroulis & Sons Sheep, Inc. , Nos. 10-cv-00772-MSK-MJW and 11-cv-01132-MSK-MJW, 2012 WL 4359086 at *4 n. 4 (D. Colo. Sept. 24, 2012) (unpublished op.) (quoting Kiwanuka v. Bakilana , 844 F. Supp.2d 107, 115 (D. D.C. 2012) ). "The ‘threat of financial harm constitutes serious harm within the meaning of the TVPA.’ " Paguirigan v. Prompt Nursing Emp't Agency LLC , No. 17-cv-1302(NG)(JO), 2018 WL 4347799 at *8 (E.D. N.Y. Sept. 12, 2018) (unpublished op.) (internal quotation marks and citations omitted).
Defendants argue that Plaintiffs improperly attempt to recast breach of contract claims as threats of serious harm under § 1589(c)(2). But the Court concludes that the Complaint sufficiently alleges serious harm and a scheme, pattern or practice by setting forth facts to demonstrate Defendants engaged in fraudulent conduct that resulted in nonphysical and/or financial harm to Plaintiffs. In making this determination, the Court takes into account the particular vulnerabilities of the Plaintiffs and the circumstances surrounding their recruitment and employment by Defendants. See, e.g. , Ross v. Jenkins , 325 F. Supp.3d 1141, 1164 (D. Kan. 2018) (When assessing whether harm is sufficiently ‘serious’ to satisfy the TVPRA, ... the relevant inquiry is whether the defendant "intentionally cause[d] the oppressed person reasonably to believe, given her special vulnerabilities, that she ha[d] no alternative but to remain in involuntary service for a time." (citations and internal quotation marks omitted)).
Plaintiffs allege financial harm because Defendants acted through a fraudulent scheme to induce them to work in Oklahoma but then did not provide the employment opportunities as represented. Plaintiffs allege that Defendants charged hidden fees and staggered payments such that the felt compelled to continue to make payments out of fear of losing sums previously paid. Plaintiffs further allege Defendants misrepresented the number of hours per week Plaintiffs could work, the hourly wage rates that would be paid, and that Plaintiffs would be able to work multiple jobs. Plaintiffs allege Defendants subjected them to low pay, few hours and excessive living expenses. Consequently, Plaintiffs could not pay their living expenses in Oklahoma, repay the debts they incurred to secure the employment, or afford travel home. Plaintiffs allege they felt compelled to continue to work under these circumstances. And, Plaintiffs allege Defendants engaged in conduct which precluded them from obtaining other employment. These allegations suffice. See, e.g. , David v. Signal Intern., LLC , 37 F. Supp.3d 822, 832 (E.D. La. 2014) ("Because Plaintiffs have alleged Burnett induced them into incurring substantial debts and Plaintiffs were compelled to continue working to repay those debts, Plaintiffs' complaints contain sufficient facts to state a claim under Section 1589(a)(2)."); Nuñag-Tanedo v. E. Baton Rouge , 790 F. Supp. 2d 1134, 1146 (C.D. Cal. 2011) (Fraudulent scheme to financially manipulate plaintiffs stated valid claim under TVPRA; plaintiffs, having incurred massive debts associated with recruitment and other fees, felt compelled to continue to work as such debt would be crushing to plaintiffs without access to the promised jobs in the United States). Because the Court finds sufficient allegations of financial harm and a scheme, pattern or plan to withstand dismissal, the Court need not separately address the sufficiency of the allegations concerning nonphysical and/or psychological harm or abuse of legal process. Defendants' Motions to dismiss the TVPRA claims are denied.
Plaintiffs allege the total out-of-pocket expenses incurred were typically between $2,000 and $3,000 USD. Plaintiffs allege this amount is significant when compared to the minimum wage in Jamaica in 2010 for a 40 hour work-week of approximately $32 USD. Compl., ¶ 54.
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V. DISCUSSION PART TWO: SUFFICIENCY OF CLASS ALLEGATIONS
Defendants alternatively move to strike Plaintiffs' class allegations pursuant to Fed. R. Civ. P. 23(d)(1)(D). Defendants contend Plaintiffs have failed to adequately plead numerosity or demonstrate issues common to the class predominate.
Rule 23(d)(1)(D) provides that in conducting an action asserted under Rule 23, the court may "require that the pleadings be amended to eliminate allegations about representation of absent persons and that the action proceed accordingly." Fed. R. Civ. P. 23(d)(1)(D). Federal district courts have relied on Rule 23(d)(1)(D) "to strike class allegations at the pleading stage where it is clear from the pleadings that the requirements for class certification under Rule 23 cannot be satisfied." In re Syngenta AG MIR 162 Corn Litig. , No. 14-md-2591-JWL, 2016 WL 1391045 at *2 (D. Kan. April 7, 2016) (unpublished op.); see also Dollison v. Am. Nat'l Ins. Co. , No. 13-CV-100-CVE, 2013 WL 1944891 at *9 (N.D. Okla. May 9, 2013) (unpublished op.) ("A court may strike class allegations under [ Rule 23(d) ] where a complaint fails to plead the minimum facts necessary to establish the existence of a class satisfying Rule 23's mandate.") (citation omitted). "[E]arly resolution of class certification issues or other issues regarding the viability of claims that may be decided on the pleadings serves the interests of efficiency by avoiding the continued litigation of claims that ultimately cannot survive." In re Syngenta , 2016 WL 1391045 at *2.
Rule 23(d)(1)(D) imposes a "high standard" and a motion to strike class allegations is a "drastic remedy." Tullie v. Quick Cash, Inc. , No. 14-cv-0491 SMV/SCY, 2014 WL 12782961 at *2 (D. N.M. Dec. 2, 2014) (unpublished op.) (citations omitted). Thus, "courts in this circuit and elsewhere have ... viewed motions to strike or dismiss class allegations at the pleading stage with particular disfavor" as they "seek to preemptively terminate the class aspects solely on the basis of what is alleged in the complaint, and before the plaintiff has had any meaningful chance to conduct discovery." Hockenbury v. Hanover Ins. Co. , No. CIV-15-1003-D, 2016 WL 552967 at *3 (W.D. Okla. Feb. 10, 2016) (unpublished op.) (citing cases); cf. Wilson v. Landers McLarty Olathe KS, LLC , No. 18-2051-JAR-GEB, 2018 WL 5617832, at *7 (D. Kan. Oct. 29, 2018) (unpublished op.) (finding "the better course is to allow discovery to proceed on class certification and consider these issues in the context of a motion to certify the class" rather than dismiss at the pleading stage being "mindful of the [court's' obligation to conduct a ‘rigorous analysis’ into whether the prerequisites of Rule 23 are met"); Wornicki v. Brokerpriceopinion.com, Inc. , No. 13-cv-03258-PAB-KMT, 2015 WL 1403814 at *4 (D. Colo. March 23, 2015) (unpublished op.) (recognizing that courts within district "have held motions to strike class allegations to a high standard of proof").
To certify the class, Plaintiffs must show the purported class meets the four threshold requirements of Rule 23(a) – numerosity, commonality, typicality and adequacy of representation. See Fed. R. Civ. P. 23 ; Shook v. El Paso Cnty. , 386 F.3d 963, 968 (10th Cir. 2004). If these threshold requirements are satisfied, the court must "then examine whether the action falls within one of three categories of suits set forth in Rule 23(b)." Shook , 386 F.3d at 971.
Defendants move to strike class allegations on grounds Plaintiffs fail to plead sufficient facts to establish Rule 23(a)'s numerosity requirement. Defendants further challenge Plaintiffs' class allegations as insufficiently demonstrating satisfaction of the predominance requirement of Rule 23(b)(3).
A. Numerosity
Rule 23(a) requires that the class be so numerous that joinder of all members individually is "impracticable." Fed. R. Civ. P. 23(a)(1). No specific numerical threshold is required. Rather, each case must be examined independently. General Tel. Co. v. E.E.O.C. , 446 U.S. 318, 330, 100 S.Ct. 1698, 64 L.Ed.2d 319 (1980) ; see also Colorado Cross Disability Coal. v. Abercrombie & Fitch Co. , 765 F.3d 1205, 1215 (10th Cir. 2014) ("Plaintiff's must offer some evidence of established, ascertainable numbers constituting the class, but there is no set formula to determine if the class is so numerous that it should be so certified." (internal quotations marks and citation omitted)). Due to the "fact-specific" nature of the inquiry, district courts are granted "wide latitude" in making the numerosity determination. Trevizo v. Adams , 455 F.3d 1155, 1162 (10th Cir. 2006).
The Complaint alleges that "the Class is believed to include 50 to upwards of 100 individuals." Compl. ¶ 84. The Complaint further alleges that the putative class members worked for Defendants between May 29, 2008 and December 31, 2013. Compl., ¶ 7.
It is not clear from these allegations that Plaintiffs could not satisfy the numerosity requirement for class certification. Cf. Bennett v. Sprint Nextel Corp. , 298 F.R.D. 498, 504-05 (D. Kan. 2014) ("[A] good faith estimate of at least 50 members is a sufficient size to maintain a class action."); Ditty v. Check Rite, Ltd. , 182 F.R.D. 639, 641 (D. Utah 1998) (It is not "necessary that the plaintiffs identify the exact number of class members involved; courts have often used common sense assumptions to support a finding of numerosity."). Thus, the Court finds striking the class allegations on this ground is not warranted.
B. Predominance
Defendants particularly focus on Rule 23(b)(3)'s predominance requirement in moving to strike Plaintiffs' class allegations. Defendants argue that "[e]ach potential class member's claims will turn on highly individualized inquires" to include: (1) the "specific conditions", "i.e., the nature of any threats" to which each employee was exposed; (2) the particular vulnerabilities of each class member; and (5) the amount of each class member's damages. APEX Mot. at 19.
The Tenth Circuit recently addressed the predominance requirement where class allegations of violations of § 1589(a) of the TVPRA were at issue. See Menocal , 882 F.3d at 914-15. The court explained:
The Rule 23(b)(3) predominance inquiry tests whether proposed classes are sufficiently cohesive to warrant adjudication by representation. It is not necessary that all of the elements of the claim entail questions of fact and law that are common to the class, nor that the answers to those common questions be dispositive. Put differently, the predominance prong asks whether the common, aggregation-enabling, issues in the case are more prevalent or important than the non-common, aggregation-defeating, individual issues.
Id. (internal quotation marks and citations omitted). Thus, in conducting the predominance inquiry, the court must "characterize the issues in the case as common or not, and then weigh which issues will predominate." Id. at 915 (internal quotation marks and citation omitted).
The crux of Defendants' predominance argument is premised in the causation element of Plaintiffs' TVPRA claim. To establish a violation of the TVPRA's forced labor provision, Plaintiffs "must prove that an unlawful means of coercion caused them to render labor." Id. at 918. Plaintiffs may prove this "causation element" of their TVPRA claim through "common circumstantial evidence." Id. at 918-19.
As discussed in the context of the Court's ruling on the sufficiency of the allegations of the Complaint under Rule 12(b)(6), Plaintiffs have alleged facts demonstrating Defendants engaged in a scheme to cause them financial harm. To the extent Plaintiffs' TVPRA claim, therefore is based on "allegations of a single, common scheme", Plaintiffs' may be able to establish causation in this manner. Id. at 919 ("[A] court may ... allow a class to rely on circumstantial evidence that the class shares to establish causation on a class-wide basis" and "the TVPA class members share the relevant evidence in common because their claims are based on allegations of a single common scheme."); see also Paguirigan , 2018 WL 4347799 at *8 (rejecting challenge to class certification on grounds that whether a particular plaintiff suffered harm sufficiently serious to compel continued labor or services would require an individualized consideration – "[t]he question is not whether each individual felt compelled to continue her employment as a result of defendant's conduct, but whether a reasonable person of the same background and of the same circumstances would find that conduct a threat of serious harm").
Defendants' damages argument is also insufficient grounds upon which to strike the class allegations. The fact that damages may have to be ascertained on an individual basis is not, standing alone, sufficient to defeat class certification. Id. at 922 ("The presence of individualized damage issues does not defeat the predominance of questions common to the TVPA class.").
The Court emphasizes that no ruling is made at this time as to whether Plaintiffs can meet the requirements of Rule 23. The Court holds only that at the pleading stage , it is premature to strike the class allegations. The "high burden" attendant to this "drastic remedy" has not been satisfied. And, the Court deems the better course is to allow discovery prior to reaching the merits of the class certification issue.
VI. CONCLUSION
IT IS THEREFORE ORDERED that Defendants' Motions to Dismiss and/or Strike Plaintiffs' Class Action Complaint [Doc. Nos. 21-22 and 24-28] are DENIED.
IT IS SO ORDERED this 5th day of February, 2019.