Schoellhorn v. Camp Gladiator Inc

Motion to Dismiss for Failure to State a Claim

N.D. Tex.September 15, 2016

i UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION SHANNON SCHOELLHORN, on behalf of herself and others similarly situated § § § Plaintiff § § vs. § CAUSE NO. 3:16-CV-02064-B § CAMP GLADIATOR, INC. § Defendant § DEFENDANT’S MOTION TO DISMISS AND BRIEF IN SUPPORT JACKSON WALKER L.L.P. 100 Congress Avenue, Suite 1100 Austin, Texas 78701 (512) 236-2000 (512) 236-2002 - Fax By: /s/ Monte F. James Monte F. James State Bar No. 10547520 mjames@jw.com Scott W. Weatherford State Bar No. 24079554 sweatherford@jw.com ATTORNEYS FOR DEFENDANT CAMP GLADIATOR, INC. Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 1 of 21 PageID 107 ii TABLE OF CONTENTS I. INTRODUCTION AND SUMMARY ................................................................................1 II. FACTUAL AND PROCEDURAL BACKGROUND.........................................................1 III. STANDARD OF REVIEW .................................................................................................2 IV. ARGUMENTS AND AUTHORITIES................................................................................4 A. Plaintiff Fails to Plead Sufficient Facts to Establish FLSA Coverage.....................4 B. Plaintiff Fails to State a Claim for Violation of the FLSA. .....................................5 1. Plaintiff’s Individual Claim .........................................................................5 2. Plaintiff’s Collective Action Claim .............................................................7 C. Plaintiff Fails to State a Claim for Violation of the DTPA......................................9 1. Plaintiff’s DTPA claim lacks adequate factual support and violates Rule 9(b). .....................................................................................................9 2. Plaintiff is not a “consumer” under the DTPA. .........................................11 3. Plaintiff’s DTPA claim based on the BOA is barred by the statute of limitations. .............................................................................................14 V. CONCLUSION ..................................................................................................................15 Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 2 of 21 PageID 108 iii TABLE OF AUTHORITIES Page(s) Cases Ashcroft v. Iqbal, 556 U.S. 662 (2009) ...................................................................................................................3 Bell Atl. Corp. v. Twombly, 550 U.S. 544 (2007) ...................................................................................................................3 Benchmark Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719 (5th Cir. 2003) .....................................................................................................9 Berry v. Indianapolis Life Ins. Co., 608 F. Supp. 2d 785 (N.D. Tex. 2009) ......................................................................................9 Biggers v. BAC Home Loans Servicing, LP, 767 F. Supp. 2d 725 (N.D. Tex. 2011) ....................................................................................11 Bohls v. Oakes, 75 S.W.3d 473 (Tex. App.-San Antonio 2002, pet. denied) .................................................11 Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535 (Tex. 1981) ....................................................................................................11 Collins v. Morgan Stanley Dean Witter, 224 F.3d 496 (5th Cir. 2000) ...................................................................................................14 Dorsey v. Portfolio Equities, Inc., 540 F.3d 333 (5th Cir. 2008) .....................................................................................................9 Ecoquij-Tzep v. Hawaiian Grill, No. 3-16-cv-625, 2016 U.S. Dist. LEXIS 90513, 2016 WL 3745685 (N.D. Tex. July 12, 2016) ....................................................................................................................5 Fisher Controls International, Inc. v. Gibbons, 911 S.W.2d 135, 139 (Tex. App.-Houston [1st Dist.] 1995, no pet.) ...................................12 Flores v. Act Event Services, Inc., 55 F. Supp. 3d 928, 939 40 (N.D. Tex 2014) ........................................................................6, 7 Huchingson v. Rao, No. 5:14-cv-1118-DAE, 2015 U.S. Dist. LEXIS 48674, 2015 WL 1655113 (W.D. Tex. Apr. 14, 2015) .....................................................................................................7, 8 Jones v. Alcoa, Inc., 339 F.3d 359 (5th Cir. 2003) ...................................................................................................14 Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 3 of 21 PageID 109 iv Jones v. Warren Unilube, Inc., No. 5:16-CV-264, 2016 U.S. Dist. LEXIS 117983 (W.D. Tex. Sept. 1, 2016).........................8 Kidwell v. Digital Intelligence Sys., LLC, No. 3:13-CV-4064-B, 2014 U.S. Dist. LEXIS 132992 (N.D. Tex. Sept. 22, 2014) ..........................................................................................................................................5 Martinez v. Petrenko, 792 F.3d 173 (1st Cir. 2015) ......................................................................................................7 Mary Kay, Inc. v. Dunlap, No. 3:12-CV-0029-D, 2012 U.S. Dist. LEXIS 86499 (N.D. Tex. June 21, 2012) ........................................................................................................................................13 Meineke Discount Muffler v. Jaynes, 999 F.2d 120 (5th Cir. 1993) ...................................................................................................11 Mejia v. Bros. Petroleum, LLC, No. 12-2842, 2015 U.S. Dist. LEXIS 74339, 2015 WL 3619894 (E.D. La. June 9, 2015) ........................................................................................................................5 Olufemi-Jones v. Bank of America, N.A., No. 3:12-CV-3428-L, 2013 U.S. Dist. LEXIS 51464, 2013 WL 1482544 (N.D. Tex. Apr. 10, 2013) ........................................................................................................11 Pickering v. Lorillard Tobacco Co., No. 2:10-CV-633-WKW, 2011 WL 111730 (M.D. Ala. January 13, 2011) .............................8 Reyes v. Rite-Way Janitorial Serv., No. H-15-0847, 2015 U.S. Dist. LEXIS 125404 (S.D. Tex. Sept. 21, 2015) ............................5 Shandong Yinguang Chem. Indus. Joint Stock Co., Ltd. v. Potter, 607 F.3d 1029 (5th Cir. 2010) ...................................................................................................3 Sobrinio v. Med. Ctr. Visitor’s Lodge, Inc., 474 F.3d 828 (5th Cir. 2007) .................................................................................................4, 7 Texas Cookie Co. v. Hendricks & Peralta, 747 S.W.2d 873 (Tex. App.-Corpus Christi 1988, writ denied) ...........................................11 Turner v. AmericaHomeKey Inc., 2011 U.S. Dist. LEXIS 91173, 2011 WL 3606688 (N.D. Tex. Aug. 16, 2011) ........................9 Whitlock v. That Toe Company, LLC, No. 3:14-CV-2298-L, 2015 WL 1914606 (N.D. Tex. April 28, 2015) ...................................7 Williams v. Henagan, 595 F.3d 610 (5th Cir. 2010) .....................................................................................................4 Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 4 of 21 PageID 110 v Windle v. Synthes USA Prods., LLC, 2012 U.S. Dist. LEXIS 52397, 2012 WL 1252550 (N.D. Tex. Apr. 13, 2012) ........................................................................................................................................10 Yumilicious Franchise, L.L.C. v. Barrie, No. 3:13-CV-48141, 2014 U.S. Dist. LEXIS 113049 (N.D. Tex. Aug. 14, 2014) ........................................................................................................................................14 Statutes 29 U.S.C. § 203(s)(1)(A)(i)..............................................................................................................4 29 U.S.C. § 203(s)(1)(A)(ii) ............................................................................................................4 29 U.S.C. § 207(a)(1) .......................................................................................................................4 29 U.S.C. § 216 ................................................................................................................................5 Fair Labor Standards Act, 29 U.S.C. § 201 et seq. ..........................................................................1 TEX. BUS. & COM. CODE § 17.45(4) ..............................................................................................11 TEX. BUS. & COM. CODE § 17.565 .................................................................................................14 TEX. BUS. & COM. CODE § 41.302 ...................................................................................................9 TEX. BUS. & COM. CODE § 51.003 .................................................................................................14 Texas Business Opportunity Act, TEX. BUS. & COM. CODE § 41.302 .............................................9 Texas Deceptive Trade Practices Act, TEX. BUS. & COM. CODE § 17.001 et seq. ...........................1 Other Authorities FED. R. CIV. P. 8(a)(2) ......................................................................................................................2 FED. R. CIV. P. 8(a)(2), 12(b)(6) .......................................................................................................2 FED. R. CIV. P. 9(b) ....................................................................................................................9, 10 FED. R. CIV. P. 12(b)(6) ......................................................................................................3, 7, 8, 14 Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 5 of 21 PageID 111 1 Comes now, Defendant Camp Gladiator, Inc. (“CG” or “Defendant”) and respectfully requests this Court dismiss all claims asserted against CG in Plaintiff’s Complaint with prejudice pursuant to Rules 8(a)(2) and 12(b)(6) of the Federal Rules of Civil Procedure. 1 I. INTRODUCTION AND SUMMARY This is a collective action filed under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (“FLSA”). Named Plaintiff Shannon Schoellhorn (“Plaintiff”) contends that she, and others similarly situated, are misclassified as independent contractors and are therefore entitled to unpaid wages and overtime from CG. Additionally, Plaintiff asserts a claim under the Texas Deceptive Trade Practices Act, TEX. BUS. & COM. CODE § 17.001 et seq. (“DTPA”). However, Plaintiff fails to plead sufficient facts to support plausible claims for relief. First, Plaintiff makes no allegation that CG is a covered entity under the FLSA. Second, Plaintiff fails to adequately allege a personal and collective right to relief under the FLSA. Third, Plaintiff does not plead with sufficient particularity a cognizable cause of action under the DTPA. These deficiencies render Plaintiff’s Complaint insufficient to state a plausible claim for relief; therefore, dismissal is warranted. II. FACTUAL AND PROCEDURAL BACKGROUND CG is a Texas corporation that facilitates the operation of “boot camp” style outdoor fitness classes for large groups of individuals, who are called “campers.” Dkt. No. 1 (“Complaint”), ¶ 8. Each “camp” consists of a location (e.g., Victory Park) and a meeting time (e.g., Tuesdays and Thursdays at 9:00 a.m.). Id. 1 CG files this Motion to Dismiss and Brief in Support subject to and without waiving its right to challenge venue of this case in the Northern District of Texas. CG is concurrently filing a convenience-based motion to transfer venue to the Western District of Texas, Austin Division. Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 6 of 21 PageID 112 2 Campers can purchase a single four-week pass, which allows them to attend as many camps as desired during that four-week period. Id. ¶ 9. Alternatively, campers can purchase long-term memberships with the same type of access at a lower price. Id. To run each camp, CG contracts with certified trainers as independent contractors. Id. ¶¶ 10, 24. These certified trainers are referred to as “Primary Trainers.” Id. Primary Trainers are responsible for implementing full body functional workout programs at each camp, and are able to use their own equipment and tailor the workout as they see fit. Id. ¶ 25. Each camper pays CG using the Primary Trainer’s CG iPad app. Id. ¶ 27. Pursuant to the Independent Contractor Agreement, Primary Trainers are paid at stated intervals (ten times per year) based on a share of profits derived from the amount of camps worked and the number of campers who attend. Id. ¶ 25. Plaintiff is a Primary Trainer at CG. Id. ¶ 6. On July 7, 2016, Plaintiff filed this lawsuit alleging violations of the FLSA and DTPA. According to Plaintiff, Primary Trainers are misclassified as independent contractors and therefore entitled to overtime and minimum wage. Id. ¶¶ 2, 3. Alternatively, Plaintiff contends that CG violated the DTPA based on “multiple ommissions [sic] and misrepresentations to trainers regarding the nature of the service it offers.” Id. ¶ 3. For the reasons set forth herein, CG respectfully requests the Court dismiss Plaintiff’s claims because they fail to meet the pleading requirements under the federal rules. See FED. R. CIV. P. 8(a)(2), 9(b), 12(b)(6). III. STANDARD OF REVIEW Rule 8(a)(2) of the Federal Rules of Civil Procedure provides that: “A pleading that states a claim for relief must contain . . . a short and plain statement of the claim showing that the pleader is entitled to relief.” FED. R. CIV. P. 8(a)(2). A complaint that fails to comply with this Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 7 of 21 PageID 113 3 requirement is subject to dismissal under Rule 12(b)(6) of the Federal Rules of Civil Procedure for failure to state a claim upon which relief can be granted. See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555-56 (2007). As the United States Supreme Court has made clear: [T]he pleading standard Rule 8 announces does not require ‘detailed factual allegations,’ but it demands more than an unadorned, the-defendant-unlawfully-harmed-me accusation. . . . A pleading that offers ‘labels and conclusions’ or ‘a formulaic recitation of the elements of a cause of action will not do.’ . . . Nor does a complaint suffice if it tenders ‘naked assertion[s]’ devoid of ‘further factual enhancement.’ To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.’ Threadbare recitals of the elements of a cause of action, supported by mere conclusory statements, do not suffice. Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Twombly, 550 U.S. at 555 & 557). Indeed, “[t]he ultimate question in a Rule 12(b)(6) motion is whether the complaint states a valid claim when all well-pleaded facts are assumed true and are viewed in the light most favorable to the plaintiff.” Shandong Yinguang Chem. Indus. Joint Stock Co., Ltd. v. Potter, 607 F.3d 1029, 1032 (5th Cir. 2010); see also Twombly, 550 U.S. at 555. To survive a motion to dismiss, plaintiffs must allege actual facts that “nudge[] their claims across the line from conceivable to plausible.” Twombly, 550 U.S. at 570. However, “where the well-pleaded facts do not permit the court to infer more than the mere possibility of misconduct, the complaint has alleged-but it has not shown-that the pleader is entitled to relief,” and the complaint should be dismissed. Id. Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 8 of 21 PageID 114 4 IV. ARGUMENTS AND AUTHORITIES A. Plaintiff Fails to Plead Sufficient Facts to Establish FLSA Coverage. Plaintiff’s Complaint should be dismissed because Plaintiff failed completely to plead any facts establishing FLSA coverage. The FLSA applies only to employees 2 “engaged in commerce or in the production of goods for commerce [individual coverage] or . . . employed in an enterprise engaged in commerce or in the production of goods for commerce [enterprise coverage].” 29 U.S.C. § 207(a)(1). The test in the Fifth Circuit for individual coverage is “whether the work is so directly and vitally related to the functioning or an instrumentality or facility of interstate commerce as to be, in practical effect, a part of it rather than an isolated activity.” See Williams v. Henagan, 595 F.3d 610, 621 (5th Cir. 2010) (quoting Sobrinio v. Med. Ctr. Visitor’s Lodge, Inc., 474 F.3d 828, 829 (5th Cir. 2007)). “Work that is purely local in nature does not meet the FLSA’s requirements, but ‘[a]ny regular contact with commerce, no matter how small, will result in coverage.’” Id. For enterprise coverage, the enterprise’s “annual gross volume of sales made or business done [must not be] less than $500,000 . . . .” 29 U.S.C. § 203(s)(1)(A)(ii). If the enterprise passes the dollar-volume test, it must then satisfy a commerce standard similar to that used when analyzing individual coverage. This standard requires having “employees engaged in commerce or in the production of goods for commerce, or [having] employees handling, selling, or otherwise working on goods or materials that have been moved in or produced for commerce by any person.” 29 U.S.C. § 203(s)(1)(A)(i). Plaintiff fails to make any allegations whatsoever establishing either enterprise or individual coverage. Not only does Plaintiff fail to plead any factual support for enterprise or 2 While CG vehemently denies the allegation that its Primary Trainers are improperly characterized as independent contractors as opposed to employees, CG is not addressing that issue in this Motion to Dismiss. CG is only addressing the sufficiency of allegations related to the scope of FLSA coverage. Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 9 of 21 PageID 115 5 individual coverage, but Plaintiff fails to even specify under which theory of coverage she filed this lawsuit. Instead, Plaintiff merely cites statutory language of the FLSA, stating, “Jurisdiction is conferred on this Court by 29 U.S.C. § 216.” Complaint, ¶ 4. This statement is entirely insufficient to establish FLSA coverage, and Plaintiff’s Complaint should be dismissed. See Kidwell v. Digital Intelligence Sys., LLC, No. 3:13-CV-4064-B, 2014 U.S. Dist. LEXIS 132992, *1819 (N.D. Tex. Sept. 22, 2014) (Boyle J.) (“[B]ecause Kidwell has failed to plead sufficient facts that, if taken as true, would establish coverage under the FLSA, he has failed to state a claim upon which relief can be granted.”); Reyes v. Rite-Way Janitorial Serv., No. H-15-0847, 2015 U.S. Dist. LEXIS 125404, at *3 (S.D. Tex. Sept. 21, 2015) (granting motion to dismiss when “Plaintiffs fail to allege any factual basis for their being ‘engaged in commerce’ as defined in the Fifth Circuit.”). B. Plaintiff Fails to State a Claim for Violation of the FLSA. Even assuming Plaintiff properly alleged coverage under the FLSA, which she did not, her allegations in support of such claim remain deficient. Plaintiff filed this lawsuit on behalf of herself and others similarly situated. However, Plaintiff’s FLSA allegations related to both fall well short of the established pleading standards. 1. Plaintiff’s Individual Claim District courts within the Fifth Circuit have consistently found an FLSA pleading sufficient where it “put[s] Defendant on notice as to the relevant date range, as well as the approximate number of hours for which Plaintiff claims [s]he was under-compensated[;] . . . the ‘FLSA does not require more.’” Ecoquij-Tzep v. Hawaiian Grill, No. 3-16-cv-625, 2016 U.S. Dist. LEXIS 90513, 2016 WL 3745685, at *3 (N.D. Tex. July 12, 2016) (quoting Mejia v. Bros. Petroleum, LLC, No. 12-2842, 2015 U.S. Dist. LEXIS 74339, 2015 WL 3619894, at *6 (E.D. La. June 9, 2015) (finding that plaintiff stated a claim under the FLSA where he alleged that he Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 10 of 21 PageID 116 6 was not paid overtime pay for an average amount of hours within a specified date range)). However, Plaintiff’s allegations fail to meet even this limited pleading requirement. For example, Plaintiff entirely fails to plead any facts personal or particular to her engagement with CG. The only allegation specific to Plaintiff (and not the proposed class as a whole) is found at the beginning of the Complaint, wherein Plaintiff alleges she “is a current, non-supervisory employee of Defendant . . . in the position of ‘Primary Trainer.’” Complaint, ¶ 6. Plaintiff does not allege that she underwent the internship program. Plaintiff does not allege the relevant date range for which she is allegedly entitled to overtime. Moreover, Plaintiff does not put CG on notice as to the approximate number of hours for which Plaintiff claims she was under-compensated. Indeed, Plaintiff’s allegations in this regard serve as a perfect example of a vague and deficient pleading: Trainers do not always work 40 or more hours per week. Sometimes they work fewer than 40 hours per week, and other times they work more than 40 hours per week. Their schedules vary . . . . Some trainers will have a significant number of overtime weeks in a year, while others will have fewer weeks like this. Almost all Trainers, however, will have at least a few workweeks throughout the year in which they put in over 40 hours of work for CG. See Complaint, ¶¶ 30-31. Courts have previously held that such allegations are insufficient to state a plausible claim under the FLSA. In Flores v. Act Event Services, Inc., 55 F. Supp. 3d 928, 93940 (N.D. Tex. 2014), the named plaintiffs alleged “[d]efendants required [n]amed [p]laintiffs ... to work at events for over forty (40) hours a week [and failed] to pay them minimum wage or overtime for work done over forty (40) hours a week.” Id. at 939. The court held that “[t]hese are ‘formulaic recitations of the elements of a cause of action,’ and thus are ‘not entitled to the assumption of Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 11 of 21 PageID 117 7 truth.’” Id. Accordingly, the Flores court held that certain named plaintiffs failed to plead sufficient facts to support claims against the company for violations of the FLSA. Id. Similarly, in Whitlock v. That Toe Company, LLC, No. 3:14-CV-2298-L, 2015 WL 1914606, at *3 (N.D. Tex. April 28, 2015), the court held that plaintiff failed to state a plausible cause of action under the FLSA when he alleged that he worked with “[d]efendants from February 2014 to April 2014 and that he worked in excess of forty hours for one or more weeks.” Id. The allegations in Whitlock-which the Court dismissed-are more detailed than those offered by Plaintiff; as such, Plaintiff’s meager and vague allegations are not enough to state a plausible claim and should be dismissed. Two additional cases affirming dismissals when plaintiffs fail to plead sufficient evidence are the following: Sobrinio v. Med. Ctr. Visitor’s Lodge, Inc., 474 F.3d 828, 830 (5th Cir. 2007) (affirming dismissal of FLSA claim when plaintiff “fails to satisfy his burden of showing that he was engaged in interstate commerce.”); and Martinez v. Petrenko, 792 F.3d 173, 179 (1 st Cir. 2015) (affirming dismissal of FLSA claim when plaintiff’s complaint “gave even less notice than a ‘merely’ conclusory complaint would have given that [his] individual activities would provide grounds upon which coverage depended.”). 2. Plaintiff’s Collective Action Claim While a collective action is conditionally certified pursuant to a motion, and the analysis of such an action is conducted separately from the motion to dismiss phase, “a 12(b)(6) analysis of class allegations is appropriate, even when the plaintiff has not yet filed a motion for conditional class certification.” Huchingson v. Rao, No. 5:14-cv-1118-DAE, 2015 U.S. Dist. LEXIS 48674, 2015 WL 1655113, at *3 (W.D. Tex. Apr. 14, 2015). Accordingly, “Rule 12(b)(6) requires that a plaintiff give the defendant fair notice of the putative class.” Id. Plaintiff defines the putative classes as “[a]ll individuals who have performed any amount of unpaid work Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 12 of 21 PageID 118 8 as an ‘intern’ for Camp Gladiator during the Class Period” and “[a]ll individuals who, during the Class Period, have on at least one occasion performed over 40 hours of work in a single workweek as a Primary Trainer for Camp Gladiator, and who were not paid any overtime premium for the work done in excess of 40 hours.” Complaint, ¶¶ 53, 61. This does not give CG sufficient notice of the putative classes. First, simply stating that the putative class has a common job title and that it is similarly situated to the plaintiff is insufficient to meet the Rule 12(b)(6) standard. See Huchingson, 2015 U.S. Dist. LEXIS 48674 at *4 (“finding that a class of “sales representatives” who were “similarly situated to” the plaintiff was insufficient to meet the 12(b)(6) standard because the “complaint contained no factual basis to plausibly assert that the plaintiff and other employees were in fact similarly situated”) (citing Pickering v. Lorillard Tobacco Co., No. 2:10-CV-633- WKW, 2011 WL 111730, at *23 (M.D. Ala. January 13, 2011)). Moreover, there is no information regarding geographic location of these alleged employees or interns. See Jones v. Warren Unilube, Inc., No. 5:16-CV-264, 2016 U.S. Dist. LEXIS 117983, at *7 (W.D. Tex. Sept. 1, 2016) (granting motion to dismiss collective FLSA action because, in part, “Plaintiff’s Amended Complaint does not include any information regarding the geographic location of these employees.”). In addition, Plaintiff’s definition of the putative class provides something far from “fair notice” when viewed in light of her other, conflicting class allegations. For example, although Plaintiff purports to identify a class of individuals who are similarly situated, Plaintiff admits the existence of “individual differences among the putative class” involving “subjective, individual inquiries of coverage.” Complaint ¶¶ 55, 63. Then, Plaintiff wholly fails to explain or describe what those “individual differences” are or how the “subjective” inquires of coverage impact the Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 13 of 21 PageID 119 9 class definition. For these reasons, Plaintiff’s class allegations must be dismissed for failing to give fair notice of the putative classes. C. Plaintiff Fails to State a Claim for Violation of the DTPA. In Count III, Plaintiff asserts that CG violated the DTPA on two theories: (1) by making “multiple ommissions [sic] and misrepresentations to trainers regarding the nature of the service it offers; and (2) based on its failure to comply with a tie-in statute, namely, the Texas Business Opportunity Act (‘BOA') (TEX. BUS. & COM. CODE § 41.302).” 3 Complaint, ¶ 3. This claim should be dismissed in its entirety for three reasons. First, Plaintiff failed to plead with sufficient particularity the allegations of DTPA fraud. Additionally, Plaintiff is not a “consumer” under the statute and has no standing to assert a DTPA claim. Finally, Plaintiff’s claims are barred by the applicable statute of limitations. 1. Plaintiff’s DTPA claim lacks adequate factual support and violates Rule 9(b). Plaintiff’s DTPA claim is subject to the heightened pleading requirements in Rule 9(b). See Berry v. Indianapolis Life Ins. Co., 608 F. Supp. 2d 785, 800 (N.D. Tex. 2009) (“It is well- established that “[c]laims alleging violations of the DTPA are subject to the requirements of Rule 9(b)”) (internal citations omitted). Therefore, Plaintiff is required to plead the “who, what, when, where, and how of the events at issue.” Dorsey v. Portfolio Equities, Inc., 540 F.3d 333, 339 (5th Cir. 2008). At a minimum, Rule 9(b) requires allegations of the particulars of time, place, and contents of the false representations, as well as the identity of the person making the misrepresentation and what he obtained thereby.” Turner v. AmericaHomeKey Inc., 2011 U.S. Dist. LEXIS 91173, 2011 WL 3606688, at *2 (N.D. Tex. Aug. 16, 2011) (citing Benchmark 3 Plaintiff pled her DTPA cause of action as an individual (as opposed to class) cause of action. See Complaint, ¶ 3 (noting that “she seeks to recover economic, actual, and treble damages” and “she further seeks an injunction”) (emphasis added); ¶ 70 (“CG’s actions and ommissions [sic] were a producing cause of Plaintiff’s damages.”) (emphasis added); ¶ 71 (“Plaintiff seeks to recover her economic damages”) (emphasis added). Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 14 of 21 PageID 120 10 Elecs., Inc. v. J.M. Huber Corp., 343 F.3d 719, 724 (5th Cir. 2003)). Although scienter may be alleged generally, “simple allegations that defendants possess fraudulent intent will not satisfy Rule 9(b).” Id. (citation and internal quotation marks omitted). First, Plaintiff has failed to allege specific factual details surrounding this claim. For example, Plaintiff quotes numerous phrases as examples of allegedly false statements, yet fails to specify who made the statements, where the statements were made, how the statements were communicated, and why the statements were made. See, e.g., Complaint, ¶ 35. Plaintiff sets forth a laundry list of allegedly misleading statements, but again fails to allege anything with sufficient particularity, instead asserting that the statements appear on “several other sites” or “multiple other online websites.” See Complaint, ¶ 39. Plaintiff alleges that some statements occurred at “CG information sessions,” but completely omits relevant details such as when the information sessions occurred, who made the statements, and to whom the statements were made. When Plaintiff does actually identify where these statements allegedly appear (e.g., “nationalpti.com” or Facebook), Plaintiff fails to allege when these statements were communicated, who from CG made the statements, and what CG obtained thereby. Moreover, Plaintiff wholly fails to assert how the alleged misrepresentations were a producing cause of Plaintiff’s alleged injuries. To support a DTPA claim, a plaintiff must show that the DTPA laundry-list violation or unconscionable action was a producing cause of the plaintiff’s injury. See Windle v. Synthes USA Prods., LLC, No. 3:11-CV-2591, 2012 U.S. Dist. LEXIS 52397, 2012 WL 1252550, at *4 (N.D. Tex. Apr. 13, 2012) (citing Amstadt v. U.S. Brass Corp., 919 S.W.2d 644, 649 (Tex. 1995)). Here, the Complaint is completely devoid of any allegations specific to Plaintiff. Plaintiff generally makes reference to loss of “compensable time,” “actual cash,” and “income potential,” but provides no specific detail relative to her own Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 15 of 21 PageID 121 11 injuries. Accordingly, Plaintiff fails to plead with sufficient particularity the allegations of DTPA misconduct, and this claim should be dismissed. 2. Plaintiff is not a “consumer” under the DTPA. To proceed under the DTPA, a plaintiff must plead sufficient facts to establish standing to bring suit as a consumer. Biggers v. BAC Home Loans Servicing, LP, 767 F. Supp. 2d 725, 733 (N.D. Tex. 2011). To qualify as a consumer under the DTPA, (1) the plaintiff must have sought or acquired goods or services by purchase or lease, and (2) the goods or services purchased or leased must form the basis of the complaint. TEX. BUS. & COM. CODE § 17.45(4); Cameron v. Terrell & Garrett, Inc., 618 S.W.2d 535, 539 (Tex. 1981). The DTPA defines “goods” as “tangible chattels or real property purchased for use,” and it defines “services” as “work, labor, or service purchased or leased for use, including services furnished in connection with the sale or repair of goods.” Id. § 17.45(1)(2). Notably, the DTPA excludes those transactions that convey wholly intangible property rights. Texas Cookie Co. v. Hendricks & Peralta, 747 S.W.2d 873, 876 (Tex. App.-Corpus Christi 1988, writ denied); see also Meineke Discount Muffler v. Jaynes, 999 F.2d 120, 125 (5th Cir. 1993). Whether a person qualifies as a consumer under the DTPA is a question of law for the court to decide. Olufemi-Jones v. Bank of America, N.A., No. 3:12-CV-3428-L, 2013 U.S. Dist. LEXIS 51464, 2013 WL 1482544, at *2 (N.D. Tex. Apr. 10, 2013) (citing Bohls v. Oakes, 75 S.W.3d 473, 479 (Tex. App.-San Antonio 2002, pet. denied)). Plaintiff is not a consumer under the DTPA because (1) she did not acquire “goods or services” by “purchase or lease;” (2) any goods or services acquired were not an important objective of the transaction; and (3) any goods or services acquired do not form the basis of the Complaint. Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 16 of 21 PageID 122 12 Plaintiff’s DTPA claim is pled in the alternative, contingent upon a finding that Plaintiff (and the proposed class) are independent contractors. See Complaint, ¶ 33. However, courts have made clear that independent contractors are not “consumers” under the DTPA because they do not acquire goods or services by purchase or lease. For example, in Fisher Controls International, Inc. v. Gibbons, the court held that the plaintiff independent contractor “purchased an intangible property right, to wit, the right to act as [the defendant’s] sales representative under the ‘Representative Agreement.’” 911 S.W.2d 135, 139 (Tex. App.-Houston [1st Dist.] 1995, no pet.). According to the Houston Court of Appeals, the “purchaser of such an intangible business right is usually not a ‘consumer’ under the DTPA.” Id. Here, Plaintiff purchased the intangible property right to operate as a Primary Trainer through an Independent Contractor Agreement. See Complaint, ¶ 24. The right to act as a Primary Trainer is not a good or a service, and it certainly was not acquired through purchase or lease. Although Plaintiff contends that she and other trainers had to purchase a “Starter Kit” to become a trainer, that transaction is merely incidental to the overall relationship between the parties and does not form the central basis for Plaintiff’s DTPA claim. According to the Complaint, the Starter Kit includes promotional and marketing material containing “a CG Email Address, CG Business Cards and a CG Business Card Holder, a few items of CG logo clothing, and CG logo items to use at their bootcamp classes (a CG flag, table cover, and fliers).” See Complaint, ¶ 17. The objective of the independent contractor relationship between CG and its Primary Trainers is to provide intangible rights and privileges as a Primary Trainer, not to provide Plaintiff with business cards, fliers, and clothing items. The provision of these items is merely incidental to the overall relationship, rather than being the objective of the relationship. Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 17 of 21 PageID 123 13 See Mary Kay, Inc. v. Dunlap, No. 3:12-CV-0029-D, 2012 U.S. Dist. LEXIS 86499, at *1012 (N.D. Tex. June 21, 2012) (dismissing DTPA claim based on independent contractor’s purchase of “promotional items and materials,” “specialized education,” “access [to] customer reports and information,” and “copyrighted materials” because the acquisition of those goods and services were “merely incidental to the transaction.”). Moreover, even if the items or services in the Starter Kit were part of the objective of the Independent Contractor Agreement with CG, they do not form the basis of Plaintiff’s non-BOA DTPA allegations. According to Plaintiff, CG “misrepresent[s] the character of service they offer to potential CG trainers . . . and represents that its service has characteristics which it does not have.” Id. ¶ 39. For instance, Plaintiff alleges that CG misrepresented certain aspects of the business opportunity such as income potential (Complaint, ¶ 35), freedom of operation (Complaint, ¶ 39), ownership rights (Complaint, ¶ 39), and time commitment (Complaint, ¶ 46). These allegations do not relate to the purchase or acquisition of “a CG Email Address, CG Business Cards and a CG Business Card Holder, a few items of CG logo clothing, and CG logo items to use at their bootcamp classes (a CG flag, table cover, and fliers).” To be a DTPA consumer, the DTPA claim must be based on the good or services acquired. See Mary Kay, 2012 U.S. Dist. LEXIS 86499, at *13. Because Plaintiff’s DTPA claim arises not based on misrepresentations related to the actual goods and services sold, but rather the nature of the business opportunity presented, Plaintiff’s DTPA claim must be dismissed. Id. (dismissing DTPA claim because the goods and services purchased did not relate to plaintiff’s DTPA claim “based on Mary Kay’s repeated representations to her that her status as an NSD “afford[ed] [her] complete ownership of [her] own business’”). Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 18 of 21 PageID 124 14 3. Plaintiff’s DTPA claim based on the BOA is barred by the statute of limitations. Even if Plaintiff alleged sufficient factual detail to support her DTPA claim, and even if she has “consumer” status under the statute (neither of which she did), her claims are still barred by the statute of limitations. DTPA claims are subject to a two-year statute of limitations. TEX. BUS. & COM. CODE § 17.565. A statute of limitations may support dismissal pursuant to Rule 12(b)(6) when it is evident from a party’s pleadings that the action is time-barred and the pleadings fail to set forth or raise some basis for tolling the statute. Jones v. Alcoa, Inc., 339 F.3d 359, 366 (5th Cir. 2003). Plaintiff bases her DTPA claim, in part, on the allegation that CG violated the BOA. See Complaint, ¶¶ 37-38. The BOA applies to any “business opportunity” involving the sale or lease for an initial consideration of more than $500 of products, equipment, supplies, or services that will be used by or for the purchaser to begin a business.” TEX. BUS. & COM. CODE § 51.003. According to Plaintiff, “Trainers, including Plaintiff . . . are individuals who have sought to purchase the ‘business platform’ service offered by CG.” Noticeably absent from the Complaint is any allegation as to when Plaintiff actually purchased the “business opportunity” that forms the basis of this claim. Complaint, ¶ 68. However, the purchase agreement 4 shows that Plaintiff purchased the “Starter Kit” on August 8, 2013, over two years prior to the filing of this lawsuit. 5 Accordingly, Plaintiff’s DTPA claim based on the BOA is barred by the statute of limitations and should be dismissed with prejudice. See Yumilicious Franchise, L.L.C. v. Barrie, No. 3:13- 4 A true and correct copy of the Starter Kit purchase agreement is provided within the Appendix. The Court may consider documents attached to a motion to dismiss if they are referred to in the complaint and central to the claim. See Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 49899 (5th Cir. 2000). The agreement to purchase a “Starter Kit” is both referred to in the Complaint (see Complaint, ¶ 42) and central to Plaintiff’s DTPA claim (see Complaint, ¶ 68-69). 5 Even assuming Plaintiff is entitled to an additional 180 days added to the limitations period (as alleged in paragraph 51), Plaintiff’s purchase of the Starter Kit occurred outside the extended limitations period. Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 19 of 21 PageID 125 15 CV-48141, 2014 U.S. Dist. LEXIS 113049, *8-10 (N.D. Tex. Aug. 14, 2014) (dismissing DTPA claim based on the BOA because the franchise agreement, which was not attached to the complaint but still considered by the court, was signed over two years prior to the filing of the lawsuit). V. CONCLUSION In light of the aforementioned pleading defects, the Court should dismiss Plaintiff’s lawsuit. WHEREFORE, PREMISES CONSIDERED, Defendant Camp Gladiator, Inc. respectfully requests the Court to do the following: (a) grant this motion in its entirety; (b) dismiss Plaintiff’s claims under the FLSA and DTPA; (c) deny any motion for leave to re-plead; and (d) grant Defendant such other and further relief to which it may be entitled. DATED: September 15, 2016 Respectfully submitted, JACKSON WALKER L.L.P. 100 Congress Avenue, Suite 1100 Austin, Texas 78701 (512) 236-2000 (512) 236-2002 - Fax By: /s/ Monte F. James Monte F. James State Bar No. 10547520 mjames@jw.com Scott W. Weatherford State Bar No. 24079554 sweatherford@jw.com ATTORNEYS FOR DEFENDANT CAMP GLADIATOR, INC. Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 20 of 21 PageID 126 16 CERTIFICATE OF SERVICE The undersigned hereby certifies that on this 15th day of September 2016, the foregoing document was forwarded via DCECF to following counsel of record: Ashley Tremain Carmen Artaza TREMAIN ARTAZA, PLLC 4925 Greenville Ave., Ste. 200 Dallas, Texas 75206 carmen@tremainartaza.com ashley@tremainartaza.com /s/ Monte F. James Monte F. James 16956575v.3 Case 3:16-cv-02064-B Document 10 Filed 09/15/16 Page 21 of 21 PageID 127 1 17001541v.1 UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF TEXAS DALLAS DIVISION SHANNON SCHOELLHORN, on behalf of herself and others similarly situated § § § Plaintiff § § vs. § CAUSE NO. 3:16-CV-02064-B § CAMP GLADIATOR, INC. § Defendant § APPENDIX IN SUPPORT OF DEFENDANT’S MOTION TO DISMISS AND BRIEF IN SUPPORT Pursuant to Local Rule 7.1, Defendant submits the following in support of its Motion to Dismiss and Brief in Support: Exhibit No. Description of Exhibit Date Page Range 1 Starter Kit purchase agreement 8/8/2013 01-02 Respectfully submitted, JACKSON WALKER L.L.P. 100 Congress Avenue, Suite 1100 Austin, Texas 78701 (512) 236-2000 (512) 236-2002 - Fax By: /s/ Monte F. James Monte F. James State Bar No. 10547520 mjames@jw.com Scott W. Weatherford State Bar No. 24079554 sweatherford@jw.com ATTORNEYS FOR DEFENDANT CAMP GLADIATOR, INC. Case 3:16-cv-02064-B Document 10-1 Filed 09/15/16 Page 1 of 4 PageID 128 2 17001541v.1 CERTIFICATE OF SERVICE The undersigned hereby certifies that on this 15th day of September 2016, the foregoing document was forwarded via DCECF to following counsel of record: Ashley Tremain Carmen Artaza TREMAIN ARTAZA, PLLC 4925 Greenville Ave., Ste. 200 Dallas, Texas 75206 carmen@tremainartaza.com ashley@tremainartaza.com /s/ Monte F. James Monte F. James Case 3:16-cv-02064-B Document 10-1 Filed 09/15/16 Page 2 of 4 PageID 129 Camp Gladiator. Inc Agreement for Investment m Trainer /\ I, 1C.1\1Y1) 1 • ' Q \.1,i ( •{.I h' the undersigned contractor ("Trainer") , desire to be engaged by Camp Gladiator. Inc. ("Company') and have agreed fully and voluntarily to purchase a 'Starter Kit' to begin as a Trainer for the Company The contents of the packet are agreed to be reasonably necessary to provide services under the Camp Gladiator Inc name and method and lhe value is agreed to be appropnate and reasonable for the following products Products including, but not limited to a Business cards b General region flyers c CG Flag d CG Outdoor Fitness Mat e Company approved email address 2 Agreed value $500.00, of which $250 is available for financing through Camp Gladiator If the trainer meets the following standards within the end of three camps they are eligible to receive reimbursement. If the trainer partners with another trainer at a location the campers will be split based upon the same percentage as the revenue share a 30 paying campers (minimum price paid is $25 each) then $250 will be reimbursed to the trainer b 50 paying campers (minimum price paid is $25 each) then the trainer will be reimbursed the entire $500.00 If the standards are not met. any finance balance owed will be deducted from the trainer's paycheck over the neX1 3 camps. 3 If the trainer fa.its for any reason to reach the goals above, any balance owed will be deducted during the Contractor's 4th camp until paid in full. If the Contractor resigns prior to payment of this fee, then the final paycheck shall be charged for the t:nlire remaining balance for services and products provided. Amount provided with this apphcat1on· $--'S-W _ __ _ Name on Credit Card 31 f\N n ); \'\ 'f \ \ \·Vn'l Expiration Date. Secunty Code _ _ 81ll1ng Address Authonzed CG Signature----------- ___________ Date: ______ _ CAMPGlADlAT{J r\ .COM Page 8 of 8 Initial_ en "' co co ... en "' ... "° ... "° CD O> < w c ,. ..... Cl) :c u oc ct ... .... oc "' "" ... "" Appx. 01EXHIBIT 1 Case 3:16-cv-02064-B Document 10-1 Filed 09/15/16 Page 3 of 4 PageID 130 Transaction Receipt https ://accoun I .authorize. net/U I/themes/anet/T ransact ion IT rans act io ... I of I I Merchant CG Nation LLC 9185 Reasearch Blvd Austin, TX 78758 us Order Information Description: Order Number: Customer ID: Agreement for Investment (512) 494-6966 l P.O. Number: Invoice Number: BOOTDFWCG50 Billing Information Shannon Schoellhorn CGDFW Shipping Information Datemme: Transaction ID: Transaction Status: Authorization Code: Payment Method: 21-Aug-2013 14:40:51 CDT 5477524011 Captured/Pending Settlement 986922 Shipping: 0.00 Tax: 0.00 Total: USO 500.00 8/21 /2013 2:4 1 PM Appx. 02 Case 3:16-cv-02064-B Document 10-1 Filed 09/15/16 Page 4 of 4 PageID 131