Opinion
1:21-cv-00002
2021-09-27
Jarrit SMITH and Jacob Smith, Plaintiffs, v. JEENS, INC. d/b/a McDonald's; Leonard Management, Inc.; McDonald's USA, LLC; and Chance Young, Individually and in his Corporate Capacities, Defendants.
Melissa C. Hasso, Emily Elaine Wilson, Mark D. Sherinian, Sherinian & Hasso Law Firm, Des Moines, IA, for Plaintiffs. Margaret Ann Hanson, Jo Ellen Whitney, Spencer Matthew Willems, Dentons Davis Brown PC, Des Moines, IA, for Defendants JEENS, Inc., Leonard Management, Inc. Ethan S. Olson, Nyemaster Goode PC, Cedar Rapids, IA, Alexandra S. Oxyer, Pro Hac Vice, Edward C. Young, Pro Hac Vice, Nigel F. Telman, Pro Hac Vice, Proskauer Rose LLP, Chicago, IL, Mary E. Funk, Nyemaster Goode PC, Des Moines, IA, Nicole A. Eichberger, Pro Hac Vice, Proskauer Rose LLP, New Orleans, LA, for Defendant McDonald's USA, LLC. Kathryn E. Jones, Marcia A. Washkuhn, Meaghan M. Gandy, Pro Hac Vice, Kutak Rock LLP, Omaha, NE, for Defendant Chance Young.
Melissa C. Hasso, Emily Elaine Wilson, Mark D. Sherinian, Sherinian & Hasso Law Firm, Des Moines, IA, for Plaintiffs.
Margaret Ann Hanson, Jo Ellen Whitney, Spencer Matthew Willems, Dentons Davis Brown PC, Des Moines, IA, for Defendants JEENS, Inc., Leonard Management, Inc.
Ethan S. Olson, Nyemaster Goode PC, Cedar Rapids, IA, Alexandra S. Oxyer, Pro Hac Vice, Edward C. Young, Pro Hac Vice, Nigel F. Telman, Pro Hac Vice, Proskauer Rose LLP, Chicago, IL, Mary E. Funk, Nyemaster Goode PC, Des Moines, IA, Nicole A. Eichberger, Pro Hac Vice, Proskauer Rose LLP, New Orleans, LA, for Defendant McDonald's USA, LLC.
Kathryn E. Jones, Marcia A. Washkuhn, Meaghan M. Gandy, Pro Hac Vice, Kutak Rock LLP, Omaha, NE, for Defendant Chance Young.
ORDER
ROBERT W. PRATT, Judge Before the Court is Defendant McDonald's USA, LLC's Motion to Dismiss Plaintiffs’ Amended Complaint (ECF No. 29) filed on May 17, 2021, pursuant to Federal Rules of Civil Procedure 8 and 12(b)(6). ECF No. 34. Plaintiffs Jarrit Smith and Jacob Smith filed a Resistance on June 1, 2021. ECF No. 40. Defendant filed its Reply on June 8, 2021. ECF No. 41. Neither party requested oral argument, and the Court does not believe oral argument will substantially aid it in resolving the issues before the Court. The matter is fully submitted.
I. FACTUAL AND PROCEDURAL BACKGROUND
This case concerns various allegations of unlawful employment practices by McDonald's USA, LLC under Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e-2(a)(1), and the Iowa Civil Rights Act (ICRA), Iowa Code chapter 216. ECF No. 29. Defendant McDonald's USA is a franchisor to Defendants JEENS, Inc., doing business as McDonald's, and Leonard Management, Inc. ECF No. 29 ¶ 10. Plaintiffs started working at the McDonald's franchise located in Atlantic, Iowa when they were minors and worked there for several years. Id. ¶¶ 27–28, 78–79. Defendant McDonald's USA is alleged to have employed Defendant Chance Young as Plaintiffs’ supervisor or manager at that McDonald's. Id. ¶ 16. Plaintiffs allege that, during their employment, they were sexually harassed almost daily by Defendant Young. Id. ¶¶ 31, 82. Plaintiffs also allege that Defendant Young's conduct created "a discriminatory and harassing work environment because of sex." Id. ¶¶ 61, 111. After receiving a phone call from Plaintiffs’ mother at its corporate office regarding the allegations of sexual harassment, Defendant McDonald's USA conducted an on-site investigation that confirmed Defendant Young had sexually harassed Plaintiffs. Id. ¶¶ 46, 48–49, 100. Defendant Young's employment was subsequently terminated. Id. ¶ 50.
Plaintiffs allege that Defendant McDonald's USA exercised control over the McDonald's franchise in Atlantic, Iowa. Id. ¶ 12. Defendant McDonald's USA is alleged to have controlled the policies and procedures designed to prevent the workplace harassment and discrimination at the McDonald's franchise. Id. Plaintiffs further allege that Defendant McDonald's USA controlled policies and procedures for making and responding to employees’ harassment and discrimination complaints. Id. ¶ 13. Additionally, Defendant McDonald's USA developed a training program for McDonald's employees to identify and report harassment and bullying. Id. ¶¶ 12, 14. Plaintiffs allege Defendant Young's harassment was contrary to the antidiscrimination and harassment policies, trainings, and procedures promulgated by Defendant McDonald's USA. Id. ¶¶ 13–15. Plaintiffs also allege McDonald's USA retaliated against them by reducing their hours after their sexual harassment was reported. See, e.g., id. ¶¶ 51–53, 57, 101–103, 107.
In their Amended Complaint, Plaintiffs allege claims of sexual harassment and retaliation in violation of ICRA (Counts One and Five) and Title VII (Counts Two and Six) against all Defendants. ECF No. 29. Plaintiffs also allege claims of battery (Counts Three and Seven) against Defendant Young, and negligent retention (Counts Four and Eight) against Defendants JEENS, Inc.; Leonard Management, Inc.; and McDonald's USA. Id. Plaintiffs thus allege Defendant McDonald's USA is jointly liable with Defendants Young, JEENS, Inc., and Leonard Management, Inc. for Plaintiffs’ alleged damages.
Defendant McDonald's USA now moves to dismiss all of Plaintiffs’ claims against it. ECF No. 34.
II. LEGAL STANDARD
In assessing a motion to dismiss under Rule 12(b)(6), this Court must accept "factual allegations in the complaint ... as true" and view them in the light most favorable to the plaintiff. Hager v. Ark. Dep't of Health , 735 F.3d 1009, 1013 (8th Cir. 2013). The facts must constitute a claim "plausible on its face." Ashcroft v. Iqbal , 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) ). The Court need not accept a "naked [legal] assertion ... without some further factual enhancement." Twombly , 550 U.S. at 557, 127 S.Ct. 1955. "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal , 556 U.S. at 678, 129 S.Ct. 1937. A reasonable inference is "more than a sheer possibility that a defendant acted unlawfully." Id. To be clear, "[t]he issue is not whether the plaintiff will ultimately prevail, but whether the plaintiff is entitled to present evidence in support of his claim." Twombly , 550 U.S. at 556, 127 S.Ct. 1955.
III. ANALYSIS
Defendant McDonald's USA argues four points in its Motion to Dismiss. First, it argues Plaintiffs were not its employees according to the definition of "employer" in Title VII and therefore they cannot pursue their claims against Defendant McDonald's USA under Title VII (Counts Two and Six). ECF No. 31 ¶ 2. Second, Defendant McDonald's USA argues Plaintiffs’ Amended Complaint violates Rule 8 by utilizing "group pleading" or making allegations against a collective "Defendants" rather than specifying the actions of Defendant McDonald's USA. ECF No. 34 ¶ 3; see, e.g. , ECF No. 29 ¶¶ 26, 74, 110, 123. Third, Defendant McDonald's USA asserts that under ICRA, franchisors are not the employer of their franchisees’ employees, and thus no "employee of McDonald's USA aided or was otherwise involved in the conduct underlying Plaintiffs’ claims." ECF No. 29 ¶ 4. Fourth, Defendant McDonald's USA argues Plaintiffs fail to allege plausible negligent-retention claims because Defendant McDonald's USA was never in an employment or agency relationship with Defendant Young. ECF No. 34 ¶ 6. As such, it could not owe Plaintiffs a duty of care or have reason to know that Defendant Young posed a danger. Id. A. Plaintiffs’ Sexual Harassment and Retaliation Claims Under Title VII
Plaintiffs’ First Amended Complaint alleges additional claims for age discrimination under ICRA against Defendant McDonald's USA (Counts One and Five). ECF No. 29 ¶¶ 57, 106. Thereafter, Plaintiffs stipulated to partial dismissal of their age-discrimination claims in Counts One and Five. ECF No. 51. Defendant's Motion is thus moot as to Plaintiffs’ age-discrimination claims.
Defendant McDonald's USA argues that Plaintiffs cannot state a claim to relief under Title VII because they fail to assert any basis for McDonald's USA's liability. ECF No. 34-1. Defendant McDonald's USA does not appear to deny that the alleged sexual harassment occurred. Instead, Defendant McDonald's USA denies that it can be held liable by challenging the existence of an employment or agency relationship. Under Title VII "a liberal construction" is to be given to the definition of "employer" so as "to carry out the purposes of Congress to eliminate the inconvenience, unfairness and humiliation of ... discrimination." Baker v. Stuart Broad. Co. , 560 F.2d 389, 397 (8th Cir. 1977) (quoting Parham v. Sw. Bell Tel. , 433 F.2d 421, 425 (8th Cir. 1970) ). Indeed, there are times when "the remedial purposes of Title VII" require courts to permit consolidation of "two corporations as one, for the purposes of the definition of ‘employer.’ " Id. The test of whether two entities are considered a joint employer for purposes of Title VII is "(1) interrelation of operations, (2) common management, (3) centralized control of labor relations; and (4) common ownership or financial control." Id. at 392. The Baker test is further "supported by [Equal Employment Opportunity Commission (EEOC)] guidance and Congressional intent." Sandoval v. Am. Bldg. Maint. Indus. , 578 F.3d 787, 793 (8th Cir. 2009). According to the EEOC, "the extent to which there is a centralized source of authority for development of personnel policy" ought to be considered in determining whether the entities share common management. Id. An example is when a parent corporation "dictate[s] mandatory sexual harassment and diversity training" to its subsidiary. Id. at 797–98.
Historically, franchisors have not been viewed by the courts as joint employers of their franchisees’ primary employees under the federal employment statutes, except under those limited circumstances where the franchisor exercised a high degree of direct and immediate control over the franchisees’ employees’ terms and conditions of employment. See, e.g., Salazar v. McDonald's Corp. , 939 F.3d 1051, 1055, 1059 (9th Cir. 2019) (granting McDonald's motion for summary judgment in case involving state-law labor violations). But determining the level of control, actual existence of a joint employer relationship, or agency relationship in the alternative, is a material question of fact dependent on discovery and development of the factual record. See Braden v. Wal-Mart Stores, Inc. , 588 F.3d 585, 598 (8th Cir. 2009).
Here, Plaintiffs make sufficient factual allegations to plausibly allege Defendant McDonald's USA is a joint employer under Title VII for their claims of sexual harassment and retaliation. Plaintiffs allege Defendant exercised control over Defendants JEENs, Inc. and Leonard Management by issuing policies and procedures for the prevention of workplace discrimination and harassment, training employees and managers on such policies and procedures, making and responding to employees’ complaints (including Plaintiffs’ complaint), initiating a training program to educate workers about harassment and bullying and how to report such behavior, and taking action to prevent sexual harassment at McDonald's restaurants. ECF No. 29 ¶¶ 11–15. Plaintiffs further allege Defendant McDonald's USA listened to their complaint and forwarded it on to Defendant Leonard Management, Inc. Id. ¶¶ 46–47. In addition, Plaintiffs allege that McDonald's USA conducted an on-site investigation into the harassment. Id. ¶ 48. At this stage of the proceedings, the Court must accept Plaintiffs’ factual allegations as true and view them in the light most favorable to them. Hager , 735 F.3d at 1013. Taking a liberal view of the definition of employer, Plaintiffs allege sufficient facts such that it is plausible they can meet the Baker joint employment test for interrelation of operations, common management with Defendant Leonard Management, Inc., centralized control of labor relations and personnel policies, and common ownership or control. 560 F.2d at 397.
However, even if it is plausible that Defendant McDonald's USA falls under the definition of employer for Title VII, Plaintiffs have not made sufficient factual allegations to allege Defendant McDonald's USA retaliated against them. The retaliation provision of Title VII states it is unlawful for an employer to discriminate against its employees for making charges against it. 42 U.S.C. § 2000e-3(a). To establish a claim for Title VII retaliation Plaintiffs must prove they (1) engaged in protected Title VII activity, (2) an adverse employment action was taken, and (3) there was a causal connection between the protected activity and the adverse employment action. Stricker v. Cessford Const. Co. , 179 F. Supp. 2d 987, 1011 (N.D. Iowa 2001). Here, Plaintiffs allege they were retaliated against following their complaint of workplace discrimination and harassment. In looking at Plaintiffs’ retaliation claims in the Amended Complaint, it appears the basis of their claims is a reduction in their scheduled work hours. But Plaintiffs have not alleged sufficient facts demonstrating how Defendant McDonald's USA caused the reduction in their work hours following their sexual harassment complaint. Plaintiffs’ retaliation claims in Counts Two and Six are mere conclusory allegations and are therefore dismissed.
For purposes of this Motion and viewing the facts in the light most favorable to Plaintiffs, there is more than a sheer possibility that Defendant McDonald's USA had some control over Defendants JEENS, Inc. and Leonard Management's sexual harassment and discrimination policies, procedures, and practices to be considered an employer under Title VII. Plaintiffs’ Amended Complaint "state[s] a claim to relief that is plausible on its face" as to Plaintiffs’ Title VII harassment claims. Twombly , 550 U.S. at 570, 127 S.Ct. 1955. The law requires no more to defeat a motion to dismiss for failure to state a claim. Id. However, the retaliation charges in Counts Two and Six must be dismissed on grounds that Plaintiffs fail to allege plausible retaliation claims against Defendant McDonald's USA.
Defendant McDonald's USA also argues that Plaintiffs’ Title VII claims fail under Rule 8. Rule 8 requires Plaintiffs to provide "a short and plain statement of the claim showing that the pleader is entitled to relief." The purpose is to put defendants on notice of the claims against them. Clausen & Sons, Inc. v. Theo. Hamm Brewing Co. , 395 F.2d 388, 390 (8th Cir. 1968). The standard is not what specific facts "would have been preferable for the Plaintiff[s] to plead," but whether the allegations sufficiently put each defendant on notice of the claims against it. Johnson v. McDonald Corp. , 542 F.Supp.3d 888, 891-92 (E.D. Mo. 2021).
Here, Plaintiffs have met their burden under Rule 8. They specifically allege Defendant McDonald's USA is one of several defendants who violated their rights under Title VII. The Court recognizes that Plaintiff Jarrit Smith fails to allege that Defendant McDonald's USA is an employer under Title VII. See ECF No. 29 ¶ 60. But there are sufficient facts in the pleading, when viewed as a whole, that give rise to the reasonable inference that Plaintiff Jarrit Smith alleges Defendant McDonald's USA was his employer for purposes of Title VII liability. See Summers Mfg. Co. v. Tri-County AG, LLC , 300 F. Supp. 3d 1025, 1034 (S.D. Iowa 2017) (holding courts "must read the pleading as a whole, rather than ‘parsed piece by piece to determine whether each allegation, in isolation, is plausible’ " (citing Braden , 588 F.3d at 594 )). The Court also rejects Defendant McDonald's USA's argument that Plaintiffs improperly utilized "group pleading" in their Amended Complaint. Plaintiffs were employed by a McDonald's franchise for several years, but they were not high-level employees. They may not have known what individual role each entity in the franchisee-franchisor relationship played within the corporate structure. Nevertheless, at the pleading stage, their allegations for harassment are specific enough to put Defendant McDonald's USA on notice of the claims against it. Thus, the sexual harassment claims in Counts Two and Six of Plaintiffs’ Amended Complaint survive Defendant McDonald's USA's Motion to Dismiss. For the reasons previously stated above, Plaintiffs’ retaliation claims in Counts Two and Six of their Amended Complaint do not survive the Motion to Dismiss.
B. Plaintiffs’ Harassment and Retaliation Claims under ICRA
Next, Defendant McDonald's USA argues that Plaintiffs’ claims under ICRA must fail because Iowa law expressly states that franchisors are not the employer of their franchisees’ employees. Iowa Code section 216.22(2) provides, "a franchisor shall not be considered to be an employer of a franchisee or of an employee of a franchisee" except under limited factual circumstances. These limited factual circumstances include agreeing in writing to be the employer of the franchisee or its employees or exercising control not customarily exercised by a franchisor for the purpose of protecting a franchisor's trademarks and brand. Id. § 216.22(2)(a)–(b). Iowa law is clear that McDonald's USA cannot be considered Plaintiffs’ employer unless Plaintiffs allege that either of the limited circumstances apply in this case. Plaintiffs have failed to allege either of the limited circumstances apply to allow McDonald's USA to be considered their employer. Thus, Counts One and Five of Plaintiffs’ Amended Complaint alleging harassment and retaliation under ICRA against Defendant McDonald's USA are dismissed.
C. Negligent Retention
Defendant argues Plaintiffs cannot state a claim for relief on their negligent-retention claims because they fail to allege the existence of an employment or agency relationship between Defendant McDonald's USA and any other employee at the McDonald's franchise. Defendant also argues Plaintiffs fail to allege Defendant McDonald's USA knew or should have known Defendant Young was sexually harassing Plaintiffs. Under Iowa law, a claim for negligent retention, like negligent hiring, requires a plaintiff to show: (1) the existence of an employment or agency relationship between the tortfeasor employee and the defendant employer; (2) that the employer knew or should have known of the employee's unfitness at the time the employee engaged in wrongful conduct; and (3) by negligently retaining the employee, his unfitness or dangerousness proximately caused the plaintiffs’ resulting injuries. Godar v. Edwards , 588 N.W.2d 701, 708–09 (Iowa 1999) ; Stricker , 179 F. Supp. 2d at 1017–19. Existence of a joint employment relationship for negligent-retention claims depends on whether the franchisor controls daily operations of the franchisee to impose a duty of care owed to a franchisee's employees. See, e.g., Hoffnagle v. McDonald's Corp. , 522 N.W.2d 808, 814 (Iowa 1994) ; Marchionda v. Embassy Suites Franchise, LLC , 359 F. Supp. 3d 681, 697 (S.D. Iowa 2018). Here, Plaintiffs cannot state plausible claims for negligent retention because they fail to allege Defendant McDonald's USA owed them a duty of care. Plaintiffs do not allege Defendant McDonald's USA controlled the daily operations of Defendants JEENS, Inc. and Leonard Management or that it had any say in the hiring, firing, or supervising of Defendant Chance Young. In addition, Plaintiffs fail to allege who at McDonald's USA knew or should have known of Defendant Young's unfitness and dangerous characteristics. Nor do Plaintiffs allege whose decision it was to retain Defendant Young despite his unfitness. Accordingly, Plaintiffs’ claims for negligent retention under Counts Four and Eight against Defendant McDonald's USA are dismissed.
D. Leave to Amend
Finally, the Court considers Plaintiffs’ alternative request for leave to amend their Amended Complaint to sufficiently plead their claims. A district court has discretion to allow plaintiffs to file an amended complaint to correct deficiencies in their pleadings. See Drobnak v. Andersen Corp. , 561 F.3d 778, 787 (8th Cir. 2009) ; see also Horras v. Am. Capital Strategies, Ltd. , 729 F.3d 798, 804 (8th Cir. 2013) (observing that district courts have "considerable discretion" in determining whether to grant a plaintiff leave to amend her or his complaint (citation omitted)). Indeed, Rule 15 provides that a "court should freely give leave [to amend a complaint] when justice so requires." Fed. R. Civ. P. 15(a)(2); see also United States ex rel. Roop v. Hypoguard USA, Inc. , 559 F.3d 818, 824 (8th Cir. 2009) (noting district courts "may not ignore the Rule 15(a)(2) considerations that favor affording parties an opportunity to test their claims on the merits"). "Ordinarily dismissal of a plaintiff's complaint for failure to comply with Rule 8 should be with leave to amend." Michaelis v. Neb. State Bar Ass'n , 717 F.2d 437, 438–39 (8th Cir. 1983) (per curiam). Accordingly, the Court allows Plaintiffs to file a second amended complaint to correct the herein identified deficiencies.
IV. CONCLUSION
For the foregoing reasons, Defendant McDonald's USA's Motion to Dismiss Plaintiffs’ First Amended Complaint (ECF No. 29) is GRANTED IN PART and DENIED IN PART. The Court DENIES Defendant McDonald's USA's Motion as to Plaintiffs’ Title VII sexual harassment claims in Counts Two and Six. The Court GRANTS Defendant McDonald's USA's Motion as to Plaintiffs’ Title VII retaliation claims in Counts Two and Six, Plaintiffs’ claims under ICRA in Counts One and Five, and Plaintiffs’ claims for state common-law negligent-retention in Counts Four and Eight. Counts One and Five are DISMISSED WITH PREJUDICE as to Defendant McDonald's USA. Counts Four and Eight and the retaliation claims in Counts Two and Six are DISMISSED WITHOUT PREJUDICE as to Defendant McDonald's USA.
Plaintiffs are granted leave to file a second amended complaint within fifteen (15) days of the entry of this Order to sufficiently allege claims against Defendant McDonald's USA in Counts Two, Four, Six, and Eight.
IT IS SO ORDERED.