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Copeland v. C.A.A.I.R., Inc.

United States District Court, N.D. Oklahoma

September 11, 2019

ARTHUR COPELAND, individually and on behalf of all others similarly situated; BRANDON SPURGIN, individually and on behalf of all others similarly situated; and BRAD McGAHEY, individually and on behalf of all others similarly situated, et al., Plaintiff,



         Before the Court are (1) Simmons Foods, Inc.'s and Simmons Pet Food, Inc.'s (collectively, “Simmons”) Motion to Dismiss (Doc. 49) and (2) Simmons's Motion to Strike Fraud Allegations (Doc. 67). For the reasons discussed below, Simmons's Motion to Dismiss is GRANTED IN PART AND DENIED IN PART. Simmons's Motion to Strike is DENIED.

         I. Factual Background[1]

         Defendant Christian Alcoholics & Addicts in Recovery, Inc. (“C.A.A.I.R.”) is a long-term residential drug and alcohol recovery program headquartered in Jay, Oklahoma. (Doc. 42, pg. 8, 11.) It was founded by Defendant Janet Wilkerson (“Wilkerson”), current C.E.O., Defendant Don Wilkerson, current Vice President of Operations, Defendant Louise Dunham, an HR specialist and current Vice President of Finance, and Rodney Dunham. (Doc. 42, pg. 9, 21.)

         Plaintiffs are residents of C.A.A.I.R. Like many residents, the three Plaintiffs for whom Plaintiffs have provided specific factual allegations, Plaintiffs Arthur Copeland, Brandon Spurgin, and Brad McGahey, entered the C.A.A.I.R. program through Oklahoma's drug court. (Doc. 42, pg. 4-7, 12.) All three thought that the program was a drug and alcohol program offered through the drug court, and agreed to enter the C.A.A.I.R. program for at least a year as a condition of probation and in lieu of serving prison time. (Doc. 42, pg. 4-7.) Once there, however, they were provided no rehabilitation services, but were required to work in excess of 40 hours a week for Simmons. This work was done under “constant threat of incarceration”-staff of both C.A.A.I.R. and Simmons routinely threatened to send Plaintiffs to prison if their work was deemed unsatisfactory, or if they were unable to work due to injuries. (Doc. 42, pg. 4-7, 13). Plaintiffs also allege that if Plaintiff McGahey got hurt or worked too slowly, “his bosses threatened him with prison.” (Doc. 42, pg. 6.) Plaintiffs were not paid for their work at Simmons. (Doc. 42, pg. 4-7.) However, C.A.A.I.R. did provide them with “daily bologna sandwiches and a bunk-bed in a cramped, unsanitary dorm room.” (Doc. 42, pg. 3.)

         While residents of C.A.A.I.R., Plaintiffs were not provided with appropriate safety or medical care. For example, Plaintiff Spurgin was injured when a metal door crashed down on his head, causing spine damage and chronic pain. (Doc. 42, pg. 5.) Similarly, Plaintiff McGahey's hand got stuck in a conveyor belt, causing “severe crush injury.” When this happened, “[o]ne of C.A.A.I.R.'s top managers” picked Plaintiff McGahey up at Simmons's plant and took him to the hospital. After returning to C.A.A.I.R., however, Plaintiff McGahey was required to work, in contravention of his doctor's orders. C.A.A.I.R. representatives also told him that if he did not work at Simmons, he would be required to work on the C.A.A.I.R. campus, but that the time would not count towards his one-year sentence. (Doc. 42, pg. 6-7.) Plaintiffs also allege that other named Plaintiffs were “ordered to work while injured” and suffered “numerous, serious injuries, including head, knee, and back injuries, acid burns, and other injuries for which they were not provided appropriate medical care.” (Doc. 42, pg. 8, 13.)

         Further, while C.A.A.I.R. holds itself out as a long-term residential drug and alcohol recovery program, it is not certified as a treatment provider and provides no meaningful treatment for its residents, including rehabilitative and psychiatric treatment. (Doc. 42, pg. 2, 8, 11 and 12.) Plaintiff Copeland was not provided with any drug and rehabilitation services, which caused him to relapse in his drug addiction. (Doc. 42, pg. 4-5.) In addition to failing to provide rehabilitation services, C.A.A.I.R. would not allow those in its program to take prescribed psychotropic medicines. One resident who was denied his medication became emotionally unstable and was dismissed from the program-and C.A.A.I.R.'s rural property-at night, during a rainstorm. (Doc. 42, pg. 8.) C.A.A.I.R. also “pressured” one Plaintiff to return to work two days after his two-month-old son died, but before the viewing and funeral had taken place. (Doc. 42, pg. 8.)

         Finally, Defendants Janet Wilkerson, Ron Wilkerson, and Louise Dunham, and Rodney Dunham, founded C.A.A.I.R. with the purpose of providing income to C.A.A.I.R. and themselves, and cheap labor to third-party agricultural interests affiliated with C.A.A.I.R. (Doc. 42, pg. 21.) C.A.A.I.R.'s founders had no background in drug and alcohol treatment, but one or both of Defendants Janet and Ron Wilkerson, as well as Rodney Dunham, were former executives at Peterson Farms, a chicken processing company later acquired by Simmons in 2008. (Doc. 42, pg. 12.) To secure residents for C.A.A.I.R. and workers for Simmons, C.A.A.I.R. often sent Vice President of Program Management Jim Lovell and other employees on recruiting trips to jails across Oklahoma. (Doc. 42, pg. 8-9.) Further, C.A.A.I.R. admits to filing for workers compensation on behalf of its injured residents, including Plaintiff Spurgin, and keeping the resulting payments. (Doc. 42, pg. 5, 13.) Finally, Plaintiffs allege that Wilkerson, in her capacity as C.E.O., is responsible for devising and implementing C.A.A.I.R. policy, a fundamental and essential component of which is involuntary servitude, and conspired with C.A.A.I.R. and Simmons for the provision of involuntary labor. (Doc. 42, pg. 13-14, 22.) Wilkerson and C.A.A.I.R. also transported labor across state lines. (Doc. 42, pg. 13.)

         As an affiliated agricultural interest, Simmons contracted with C.A.A.I.R. to purchase Plaintiffs' labor in exchange for donations and/or payment for the labor at a discounted rate. (Doc. 42, pg. 12.) At the time of Plaintiffs' residence at C.A.A.I.R., all Defendants were joint and co-employers of Plaintiffs and all C.A.A.I.R. residents, as all Defendants directed, controlled, and supervised the work performed by these workers. For example, Plaintiff Copeland was initially assigned to the “live hang line” where he was expected to hang 60-62 chickens per minute, and was eventually promoted to the position of sharpening the knives and scissors of other workers who slaughtered chickens. (Doc. 42, pg. 4.) Plaintiff Spurgin was assigned to work at the chicken processing plant at night. (Doc. 42, pg. 5.) Finally, Plaintiff McGahey was first assigned to work in evisceration, suctioning guts and blood out of slaughtered chickens, and then later was assigned to work as a grader, arranging raw breasts, thighs, and legs into orderly piles. (Doc. 42, pg. 6.) However, Simmons told Plaintiffs that they were “contract labor” and that it was C.A.A.I.R.'s responsibility to provide treatment for their work-related injuries. (Doc. 42, pg. 8, 13.) Finally, Plaintiffs allege that Simmons conspired with Wilkerson by executing explicit agreements and contracts for the provision of involuntary labor, among other things. (Doc. 42, pg. 13-14.)

         Plaintiffs filed their Second Amended Complaint (“SAC”) on December 6, 2017, bringing federal and state wage claims, Racketeer Influenced and Corrupt Organizations (“RICO”) Act claims, a Missouri common law claim, an Oklahoma state human trafficking claim, and several claims under the Trafficking Victims Protection Act (“TVPRA”). (Doc. 42.) On January 15, 2018, Defendants C.A.A.I.R., Jim Lovell, Don Wilkerson, and Janet Wilkerson filed an answer (Doc. 48) and Simmons filed a Motion to Dismiss (Doc. 49).

         II. Rule 12(b)(6) standard

         To survive a motion to dismiss under Federal Rule of Civil Procedure (“Rule”) 12(b)(6) “a complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). “[T]he mere metaphysical possibility that some plaintiff could prove some set of facts in support of the pleaded claims is insufficient; the complaint must give the court reason to believe that this plaintiff has a reasonable likelihood of mustering factual support for these claims.” Ridge at Red Hawk, LLC v. Schneider, 493 F.3d 1174, 1177 (10th Cir. 2007) (emphasis in original).

         The Tenth Circuit has interpreted “plausibility” to “refer to the scope of the allegations in a complaint” rather than to mean “likely to be true.” Robbins v. Okla. ex rel. Okla. Dep't of Human Servs., 519 F.3d 1242, 1247 (10th Cir. 2008). Thus, “if [allegations] are so general that they encompass a wide swath of conduct, much of it innocent, then the plaintiffs have not nudged their claims across the line from conceivable to plausible.” Id. (internal quotations omitted). “The allegations must be enough that, if assumed to be true, the plaintiff plausibly (not just speculatively) has a claim for relief.” Id. “This requirement of plausibility serves not only to weed out claims that do not (in the absence of additional allegations) have a reasonable prospect of success, but also to inform the defendants of the actual grounds of the claim against them.” Id. at 1248. In considering a motion to dismiss under Rule 12(b)(6), the Court generally may not consider facts outside of those alleged in the complaint.

         III. FLSA and State Wage Claims (Claims 1, 2, 6, 7, 8, 9, and 11)

         A. Background and Underlying Policies

         Plaintiffs have brought several claims for failure to pay minimum wage and overtime pay, pursuant to both the Fair Labor Standards Act (“FLSA”) and various state laws. Simmons contends that Plaintiffs were not its employees during their time at C.A.A.I.R., under either the FLSA or relevant state laws. However, as the Parties agree that the relevant state laws use the FLSA's definition of “employee, ” the Court need only determine if Plaintiffs are employees under the FLSA. (Doc. 49, pg. 32; Doc. 54, pg. 19.)

         Under the FLSA, employees of covered employers are afforded minimum wage and overtime protections. See 29 U.S.C. §§ 206(a); 207(a). The FLSA defines an “employee” as “any individual employed by an employer.” Id. at § 203(e)(1). It also defines “employ” as “to suffer or permit to work.” Id. at § 203(g). Consistent with the breadth of these definitions, Courts look to the economic realities of an individual's working relationship with the employer, rather than labels or structure to determine whether the individual is an employee under the FLSA. See Acosta v. Jani-King of Okla., Inc., 905 F.3d 1156, 1159-60 (10th Cir. 2018). Additionally, despite any contract or agreement between the parties, an employee may not waive their employee status. Id.

         B. The Bonnette factors weigh in favor of finding Plaintiffs to be employees

         Rather than alleging that Plaintiffs failed to state a claim that they were not paid minimum wage or overtime pay, Simmons argues that Plaintiffs were not employees under the FLSA. To determine whether a person meets the definition of “employee” under the FLSA, the Tenth Circuit has applied an “economic realities” test. Acosta, 905 F.3d at 1159-60. However, the test outlined in Acosta is one designed to distinguish an employee from an independent contractor, and is not directly applicable to the instant case. In cases where a plaintiff is in the rehabilitative custody of an institution and in cases where a plaintiff has alleged joint employment-both the case here- courts have looked to factors set out in Bonnette v. Cal. Health & Welfare Agency. These factors are whether the alleged employer: (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, or (4) maintained employment records. 704 F.2d 1465, 1470 (9th Cir. 1983); see, e.g., Fuentes v. Compadres, Inc., No. 17-cv-01180-CMA-MEH; 2017 U.S. Dist. LEXIS 204128, *34-36 (D. Colo. Dec. 12, 2017) (using the Bonnette factors to evaluate whether employers are joint employers); Zevallos v. Stamatakis, No. 17-cv-253-DN, 2017 U.S. Dist. LEXIS 201961, *10 (D. Utah Dec. 6, 2017) (same); Zachary v. Rescare Okla., Inc., 471 F.Supp.2d 1175, 1179 (N.D. Okla. Nov. 29, 2006) (same); Hale v. Arizona, 967 F.2d 1356, 1362 (9th Cir. 1992) (using Bonnette factors to determine if an inmate was an employee); Gilbreath v. Cutter Biological, Inc., 931 F.2d 1320 (9th Cir. 1991) (same); Watson v. Graves, 909 F.2d 1549, 1552-53 (5th Cir. 1990) (same); Carter v. Dutchess Community College, 735 F.2d 8 (2d Cir. 1984) (same). Accordingly, in this case, the Court looks to the Bonnette factors to determine whether Simmons has sufficient control over Plaintiffs for Plaintiffs to be employees and to serve the policy goals of the FLSA. However, these four factors are not exhaustive, and the Court must consider the totality of the circumstances when weighing these and any other relevant factors. See Zachary, 471 F.Supp.2d at 1179, citing Bonnette, 704 F.2d at 1470.

         In this case, the Bonnette factors weigh in favor of finding that the Plaintiffs are employees of Simmons. Though Plaintiffs have failed to allege any facts regarding the fourth Bonnette factor-maintenance of employment records-all remaining factors support the Court finding that Plaintiffs were employees of Simmons for the purposes of FLSA coverage. For example, Plaintiffs' allegations that Simmons threatened them with prison if their work was unsatisfactory, or if they were unable to work, suggest that Simmons had the power to hire and fire Plaintiffs. Simmons also exercised control over Plaintiffs' work schedules and conditions of employment by maintaining the Simmons facility in which Plaintiffs worked, and moving Plaintiffs between different positions in the facility, each with specific requirements.

         Finally, Simmons “determin[es] the rate and method of payment.” While Plaintiffs allege that C.A.A.I.R. set their rate of pay-which was zero-Plaintiffs also allege that Simmons made donations to C.A.A.I.R. in return for free labor and/or paid C.A.A.I.R. a discounted rate for the work performed. This indicates that Simmons understood itself to be receiving labor for less than the required minimum wage and overtime pay. Based on the requirement that the Court consider the economic realities of a relationship, the third factor is also satisfied.

         Finally, Simmons's statements to Plaintiffs, as alleged in the SAC, do not contradict this analysis. Though Plaintiffs have alleged some facts indicating that Simmons considered Plaintiffs contract labor-such as describing Plaintiffs as contract labor, paying for Plaintiffs' work directly to C.A.A.I.R., and failing to provide Plaintiffs with medical care-these facts are not sufficient to undermine the weight of Plaintiffs' allegations. In light of the four Bonnette factors, the economic realities of the situation, and the policies behind the FLSA, the Court finds that Plaintiffs have pled a claim that they were employees of Simmons for the purposes of FLSA coverage.

         C. The Policies Underlying the FLSA support finding Plaintiffs to be employees

         When enacting the FLSA, Congress outlined several policies underlying the law. Congress sought to prevent the spread and continuation of labor conditions “detrimental to the maintenance of the minimum standard of living necessary for health, efficiency, and general well-being of workers” and to prevent “unfair method[s] of competition in commerce” stemming from such labor conditions. See 29 U.S.C. § 202(a). The allegations in this case present an example of both such situations. For example, while Plaintiffs have not alleged that being paid would have allowed them to improve their conditions while in the custody of C.A.A.I.R., requiring Simmons to pay minimum wage or overtime pay may still further the policy of ensuring health, efficiency, and general well-being of workers. Though Plaintiffs have alleged that C.A.A.I.R. provided for their basic needs, such as food and lodging, allowing Plaintiffs to retain and save their wages would likely further Plaintiffs' health, efficiency, and well-being once they are released from C.A.A.I.R.'s custody. Moreover, these allegations fall squarely within the unfair methods of competition that the FLSA was enacted to prevent, as Simmons's access to this source of labor at below-market costs would have artificially reduced its costs. Requiring that Plaintiffs be paid minimum wage and overtime pay would prevent Simmons from developing an unfair advantage over its competitors, and would therefore prevent unfair competition. See Vanskike v. Peters, 974 F.2d 806, 811 (7th Cir. 1992); Hale v. Arizona, 967 F.2d 1356, 1363 (9th Cir. 1992). Accordingly, the instant case falls well within the policy aims of the FLSA.

         D. Plaintiffs' rehabilitative relationship with C.A.A.I.R. is not prohibitive

         Simmons argues that Plaintiffs are not employees under FLSA because they performed work for Simmons without promise or expectation of compensation, but solely for personal purposes. While it is true that the FLSA does not reach workers who carry out activities without the promise or expectation of compensation, but only for their own personal pleasure or profit, alleged employers cannot use this principle to shield all otherwise-covered work in which workers obtain more than just a financial benefit. See Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290, 295-301 (1985). In Alamo, the Supreme Court held that despite the workers' own insistence that they were merely volunteering for the institution that rehabilitated them, the fact that the workers were completely dependent on the Foundation for long periods meant that the workers must have expected to receive in-kind benefits in exchange for their services. Id. The Court accordingly held that exempting these employees from the FLSA would exert downward pressure on wages in competing businesses, undermining the FLSA's goal of preventing labor conditions detrimental to worker well-being. Id.

         Similarly, in this case, though Plaintiffs started working for Simmons through their association with a rehabilitation facility that cared for their basic needs, they have alleged they worked in excess of full time for Simmons, and that Simmons purchased their labor either at a discounted rate or with a donation to C.A.A.I.R. These allegations plausibly allege that construing Plaintiffs as volunteers and exempting them from the FLSA would artificially lower Simmons's costs and undermine the FLSA's goal of preventing unfair competition. Further, though Simmons has correctly pointed out factual distinctions between this case and Alamo, these distinctions are not relevant to the question of whether exempting Plaintiffs from the FLSA would undermine one of ...

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