Perez v. LA Piedad Corporation D/B/A EL Mezcal Mexican Restaurant

MOTION to dismiss case

W.D. Mo.October 6, 2016

IN THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF MISSOURI THOMAS E. PEREZ SECRETARY OF LABOR, U.S. DEPARTMENT OF LABOR, Petitioner, v. Case No. 4:16-mc-9015 LA PIEDAD CORPORATION D/B/A EL MEZCAL MEXICAN RESTAURANT Respondent. MOTION TO DISMISS COMES NOW La Piedad Corporation dba El Mezcal Mexican Restaurant, respondent, by and through its attorney David Alegria and for its Motion to Dismiss pursuant to Fed. R. Civ. P. 12 (b)(1), (2), (4), (5) and Rule 50(a)(2), shows to the Court the following: IMPROPER/INSUFFICIENT SERVICE Both, Rule 4(e) F.R.C.P. and Missouri Rule 54.13 governs service of process on corporations and provides that service may be effected by serving the corporation’s registered agent or an otherwise authorized individual. At paragraph 17 of its petition, petitioner states that: “Upon further investigation, Wage and Hour gathered information that El Mezcal’s legal name is La Piedad Corporation.” At paragraph 18, petitioner states that La Piedad Corporation’s Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 1 of 11 registered agent is Javier Lopez with an address at 3400 Thornbird, Blue Springs, Missouri 64015. Further, that this is the address listed for Javier Lopez as the registered agent for La Piedad Corporation with the Missouri Secretary of State. Inexplicably, having all necessary information for proper service, petitioner claims that it served an assistant manager at the restaurant. Document 3, the Process Receipt and Return form indicates that a Jesus Melgoza Lopez, listed as assistant manager was served. The law is clear. " Before a federal court may exercise personal jurisdiction over a defendant, the procedural requirements of service of summons must be satisfied." Omni Capital Int'l Ltd. v. Rudolf Wolff & Co., 484 U.S. 97, 104, 108 S.Ct. 404, 98 L.Ed.2d 415 (1987). It is equally clear that: " If service is contested, the ‘ plaintiff bears the burden of establishing the validity ... pursuant to Rule 4.’ " Shlikas v. SLM Corp., No. WDQ-09-2806, 2011 WL 2118843, at *2 (D.Md. May 25, 2011) (quoting O'Meara v. Waters, 464 F.Supp.2d 474, 476 (D.Md.2006)). In this case, taking petitioner’s statements as true, petitioner failed to effectuate proper service upon respondent. The District Court can dismiss a complaint for failure to effectively serve a defendant with process. Blair v. City of Worcester, 293 F.R.D. 78 522 F.3d 105, 110 (1st Cir. 2008). 2 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 2 of 11 In Quann v. Whitegate-Edgewater, 112 F.R.D. 649, 655 (D.Md.1986), the Court indicated that: “Service of process at a defendant's place of business does not satisfy the requirements of Rule 4(d)(1) [now Rule 4(e)(2)]." In Quann, the Court also indicated that service to an individual who has not been authorized to receive service of process at a defendant's place of business does not constitute " delivering a copy of each to an agent authorized by appointment or by law to receive service of process," Fed.R.Civ.P. 4(e)(2)(C), because " ‘ an agent ... must be one who is authorized either by appointment or by law to receive service.’ " Quann, 112 F.R.D. at 655 (quoting Gipson v. Twp. of Bass River, 82 F.R.D. 122, 125 (D.N.J.1979) (citing Fed.R.Civ.P. 4(d)(1). Indeed, " ‘ [t]he cases dealing with agency by appointment indicate that an actual appointment for the specific purpose of receiving process is normally expected.’ " Id. (quoting Gipson, 82 F.R.D. at 125). Therefore, respondent is entitled to dismissal for improper and insufficient service of process. NO COVERAGE Substantively, at paragraph 6 of petitioner’s petition it indicates that respondent permitted three (3) of its investigators to interview employees, reviewed payroll records on site and took pictures of payroll records. 3 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 3 of 11 At paragraph 9, petitioner indicates that thereafter, respondent provided annual sales from 2013 to 2015. Therefore, there is no legitimate purpose for further inquiry other than to destroy respondent’s business. Respondent here is the quintesential example of the mom and pop business in the U.S. and it is therefore, not subject to the provisions of the FLSA. As petitioner indicates and presented to the Court in Exhibit 2 attached to petitioner’s petition, respondent’s annual sales in 2013, 2014 and 2015 were $418,718.56 for 2013, $444,205.74 for 2014 and $468,233.86. Further, all of its operations are local and intrastate. An employer falls under the enterprise coverage section of the FLSA if it 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) has at least $500,000 of " annual gross volume of sales made or business done." 29 U.S.C. § 203(s)(1)(A). Polycarpe v. E&S Landscaping Service, Inc., 616 F.3d 1217 (11th Cir. 2010) If respondent is not covered by the act, it follows that such employer is not required to keep or maintain FLSA records. Non existing records cannot be produced. In enacting the FLSA, Congress wanted to keep local businesses 4 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 4 of 11 outside the scope of the FLSA. So Congress made "[a]mple provision ... to insure the original intent of the sponsors of the act to exclude the small local retail merchants such as the corner grocer, neighborhood drugstore, barbershop or beauty parlor [would be] carried out." 1961 U.S.C.C.A.N. at 1645-46. Congress did this by creating a "mom and pop" exclusion, requiring that an enterprise have gross sales of a certain amount for FLSA coverage to exist. Martin v. Bedell, 955 F.2d 1029, 1032 (5th Cir.1992). Currently, the threshold amount for coverage is $500,000. 29 U.S.C. Sec. 203(s)(1)(A)(ii). Reich v. Gateway Press, Inc., 13 F.3d 685 (3rd Cir. 1994). Respondent is therefore exempt from the FLSA pursuant to 29 U.S.C. § 203(s)(1) [3] because its gross receipts did not exceed $500,000 during 2013, 2014 and 2015, the relevant period. By including a statutory dollar limitation in the definition of "enterprise," Congress intended to exempt small businesses from the FLSA. Brennan v. Arnheim & Neely, Inc., 410 U.S. 512, 521, 93 S.Ct. 1138, 1143-44, 35 L.Ed.2d 463 (1973). One purpose of the dollar volume limitation is the exemption of small businesses. Reich v. Stewart, 121 F.3d 400 (8th Cir. 1997). If petitioner is allow to bear upon respondent the full weight of the Federal Government and subject respondent to a full blown investigation, 5 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 5 of 11 congress’s intent to exempt mom and pop business becomes meaningless and empty. It is clear from the language of the statute that, for enterprise coverage under the FLSA to apply, the enterprise must be engaged in commerce under the statute and must gross over $500, 000 annually. 29 U.S.C. § 203(s)(1)(A)(i)-(ii). Both prongs must be met. Several cases have concluded that the FLSA did not apply to employers because the interstate commerce prong had not been met. In Thorne v. All Restoration Servs., Inc., the Court held that Thorne's argument that respondent was engaged in interstate commerce failed because he did not present sufficient evidence of interstate transactions to overcome a Rule 50 motion for dismissal. 448 F.3d 1265, 1267 (11th Cir. 2006). In Thorne, petitioner presented bills for purchases made at a local Home Depot and stated that tools he purchased may have crossed interstate lines. However, this was insufficient to implicate interstate commerce under the FLSA. Id. "When goods reach the customer for whom they were intended, the interstate journey ends and employees engaged in any further intrastate movement of the goods are not covered under the [FLSA]." Id.; Scott v. K.W. Max Invs., Inc., 256 F.App'x 244, 249 (11th Cir. 2007) (unpublished opinion) Scott held that production of the employer's tax returns was 6 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 6 of 11 insufficient to create a genuine issue of material fact regarding the interstate commerce prong. Polycarpe v. E & S Landscaping Serv., Inc., 572 F.Supp.2d 1318, 1321 (S.D. Fla. 2008), noting that the defendant provided an affidavit stating that all of the trees, sod, and other materials were produced in Florida, and holding that the fact that the defendant used credit cards, banks, and gasoline was not sufficient to overcome the overwhelming evidence that defendant's landscaping business was of a local nature. Sandoval v. Florida Paradise Lawn Maintenance, Inc., 08-12903 In Thorne, Scott, and Polycarpe petitioners did not present sufficient evidence to establish a genuine issue of material fact regarding the first prong of enterprise coverage under 29 U.S.C. § 203(s)(1)(A)(i). Petitioners could not show interstate commerce. Respondents position was that all of the products used in their businesses were purchased and produced locally. Petitioners did not provide any evidence that any work was done outside of Florida or that any customers were located outside of Florida. Although petitioners were able to establish a genuine issue of material regarding respondent’s annual gross revenue, this alone was insufficient to avoid summary judgment. Petitioners failed to present evidence establishing a genuine issue of material fact regarding the interstate commerce prong of enterprise coverage. Sandoval v. Florida Paradise Lawn Maintenance, Inc., 08-12903 7 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 7 of 11 Even if respondent’s business was an enterprise under § 203(r), the intrastate nature of its business deprives the district court of jurisdiction under the FLSA. Donovan v. Scoles, 652 F.2d 16 (9th Cir. 1981) Respondent submits to the Court that a business with sales hovering a little over $400,000.00, even at an 10% rate of profit, it is $40,000.00 annually. Such small business can not endure the wrath unleashed upon it by the federal government and keep its doors open. If respondent is not able to obtain relief from this Court, respondent will be forced to close its business and put itself and employees out of work. It is for this precise reason that congress has imposed the $500,000 statutory threshold. Congress did not intend to cover all establishments by expanding the coverage of the Act through the enterprise approach. Instead, it drew an economic line. "It is the line which the Congress must draw in determining who shall and who shall not be covered by a minimum wage." S.Rep. No. 145, 87th Cong., 1st Sess., 5. Nor was the definition of enterprise intended to swallow up the exclusion of small businesses. To be entitled to enforce its subpoena, petitioner must first show coverage by the Act. Josendis, 662 F.3d at 1298. Respondent should not be burdened with having to comply with a subpoena if the agency issuing it has no jurisdiction to regulate the wages that respondent pays. Questions of regulatory jurisdiction are properly 8 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 8 of 11 addressed at the subpoena-enforcement stage if they are ripe for determination at that stage. EEOC v. Cherokee Nation, 871 F.2d 937 (10th Cir.1989); United States v. Newport News Shipbuilding & Dry Dock Co., 837 F.2d 162, 165-66 (4th Cir.1988); EEOC v. Ocean City Police Dept., 820 F.2d 1378 (4th Cir.1987); FTC v. Shaffner, 626 F.2d 32, 36 (7th Cir.1980); United States v. Frontier Airlines, Inc., 563 F.2d 1008, 1009 (10th Cir.1977); cf. Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186, 216, 66 S.Ct. 494, 509, 90 L.Ed. 614 (1946). Compliance with a subpoena is a burden, and one that a person or institution that can show it is not subject to the regulatory regime in aid of which the subpoena was issued should not be required to bear. Cf. id. at 217, 66 S.Ct. at 509. Reich v. Great Lakes Indian Fish and Wildlife Com'n, 4 F.3d 490 (7th Cir. 1993) Respondent admits that certain courts under certain factual scenarios have ruled that that FLSA coverage is generally not an appropriate defense in a subpoena enforcement action. However, even such Courts have ruled that if the defense is purely legal, the coverage defense is permitted. EEOC v. Karuk Tribe Hous. Auth., 260 F.3d 1071, 1073 (9th Cir. 2001); Reich v. Great Lakes Indian Fish & Wildlife Comm'n, 4 F.3d 490, 491-92 (7th Cir. 1993); EEOC v. Cherokee Nation, 871 F.2d 937, 938 & n.1 (10th Cir. 1989); United States v. Frontier Airlines, Inc., 563 F.2d 1008, 1009 (10th Cir. 9 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 9 of 11 1977), or where it was facially obvious that the subpoena recipient was wholly outside the coverage of the relevant statutory regime. EEOC v. Sidley Austin Brown & Wood, 315 F.3d 696, 700 (7th Cir. 2002); EEOC v. Ocean City Police Dep't, 820 F.2d 1378, 1382 (4th Cir. 1987), vacated on other grounds, 486 U.S. 1019 (1988); Walling, 137 F.2d at 505. If the coverage defense involve a pure question of law, and it is facially obvious that respondent lies wholly outside the FLSA the defense is permitted. Because respondent’s annual sales do not meet the $500,000.00 jurisdictional threshold imposed by congress, the court lacks subject matter jurisdiction. The Court also lacks personal jurisdiction for insufficient service of process. WHEREFORE, for the foregoing reasons plaintiff respectfully requests that defendant’s petition to enforce subpoena be denied. Respectfully submitted, By: s/davidoalegria DAVID O. ALEGRIA, S. Ct. # 6785 5895 S.W. 29th St. Topeka, Kansas 66614 (785) 783-7065 ATTORNEY FOR RESPONDENT 10 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 10 of 11 CERTIFICATE OF SERVICE I hereby certify that on the 6th day of October, 2016 the above and foregoing was filed with the Clerk of the District Court using the electronic filing system that in turn will give notice to all parties of record. s/David O. Alegria DAVID O. ALEGRIA, KS # 13111, MO # 66785 11 Case 4:16-mc-09015-BP Document 4 Filed 10/06/16 Page 11 of 11