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Zagaruyka and Associates v. Healthsmart Benefit Solutions Inc.

United States District Court, W.D. Oklahoma

October 25, 2019

ZAGARUYKA & ASSOCIATES, Plaintiff/Counterdefendant,
HEALTHSMART BENEFIT SOLUTIONS INC. d/b/a HEALTHSMART, Defendant/Counterplaintiff, CAROL PROCTOR, Counterdefendant.



         Now before the Court is Defendant HealthSmart Benefit Solutions Inc., 's (“HealthSmart”) Motion for Judgment on the Pleadings to Dismiss the Complaint (Doc. No. 29). Citing Federal Rule of Civil Procedure 12(c), Defendant moves for a judgment in its favor on all claims asserted in the First Amended Complaint for failure to state a plausible claim.[1] Plaintiff has not responded. For the reasons stated below, the Court finds Defendant's motion should be granted.


         Plaintiff Zagaruyka & Associates (“Zagaruyka”) is a sole proprietorship recruiting firm owned and operated by Ashley Zagaruyka. Compl. ¶ 1 (Doc. No. 1-2).[3] Plaintiff entered into a contract with HealthSmart to recruit qualified employee candidates for a nonrefundable retainer fee. Id. ¶¶ 1, 10, 11. The contract provided that the retainer fee would be nonrefundable if Plaintiff “presented at least two qualified candidates within 60 days following the date the search was begun, but [HealthSmart] fill[ed] the positions ‘through its own efforts or through another source.'” Id. ¶ 11 (quoting unidentified contract). The full retainer would be “due within ten (10) working days” if HealthSmart eliminated the employment position for which Plaintiff had commenced a search for candidates. Id. ¶ 12 (quoting unidentified contract). However, the contract provided a guarantee that if a candidate recruited by Plaintiff and hired by HealthSmart was “terminated for any reason within thirty (30) days [of] the date the candidate commen[ced]” employment, Plaintiff would replace the candidate at no additional charge. Id. ¶ 13 (quoting unidentified contract).

         Over the course of the contractual relationship, HealthSmart expanded Zagaruyka's role to include human-resource consulting, change-management training, and employee- reference verification, and “ask[ed] that Plaintiff put its requests for services before the requests” of Plaintiff's other clients. Id. ¶¶ 17, 18. Plaintiff states HealthSmart exerted “behavioral and financial control” over its operation in that: (1) HealthSmart employees had “supervisory responsibility over Plaintiff and directed her work in furtherance of [HealthSmart]'s business operations”; (2) “Plaintiff was required to comply with [HealthSmart]'s instructions in terms of written and unwritten policies, procedures, and directives”; and (3) HealthSmart had a “high degree of control over Plaintiff's work.” Id. ¶¶ 30. Plaintiff further asserts that HealthSmart “was significantly dependent on” its services and “prevented Plaintiff from providing services to others.” Id. ¶ 31. Finally, Plaintiff alleges it “was required to pay a portion of HealthSmart's operating expenses.” Id.

         As a result of HealthSmart's increased demands and “control over the terms and conditions of the employment arrangements, ” Plaintiff alleges Zagaruyka lost its other clients, “lost [its] status [as] an independent contractor, ” “and became an employee of [HealthSmart]” within the meaning of the Fair Labor Standards Act (“FLSA”) and the State of Oklahoma's Protection of Labor Act, Okla. Stat. tit. 40, §§ 165.1 et seq. Compl. ¶¶ 6, 19, 30, 32, 36. Plaintiff also states that during the course of Zagaruyka's relationship with HealthSmart, HealthSmart deviated from the payment terms of the contract and failed to pay for its services. Id. ¶ 20, 22, 27. HealthSmart terminated its relationship with Plaintiff in an email dated August 2, 2017. Id. ¶ 21.

         Plaintiff asserts claims for: (1) a declaratory judgment that Zagaruyka was an employee of HealthSmart and is entitled to the rights and benefits of employment pursuant to the laws of the United States and the State of Oklahoma; (2) violations of the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq., the Oklahoma Protection of Labor Act, Okla. Stat. tit. 40, §§ 160 et seq., and the Oklahoma Minimum Wage Act, id. tit. 40, §§ 197.1 et seq.; and (3) bad faith breach of contract. Compl. ¶¶ 39, 49, 54-55.

         HealthSmart moves for judgment on the pleadings on the following grounds: (1) Plaintiff relies on vague, generalized, and conclusory assertions to establish employee status; (2) Plaintiff fails to state facts indicating alleged overtime calculations; (3) there is no Oklahoma statute requiring that overtime compensation be paid to private employees; (4) as a business owner Zagaruyka is not entitled to the protections of the Oklahoma Labor Protection Act or Oklahoma Minimum Wage Act; and (5) there is no claim for bad faith breach of contract outside the context of insurance. See Def.'s Mot. ¶¶ 14, 15, 16, 18.


         Rule 12(c) provides that “[a]fter the pleadings are closed-but early enough not to delay trial-a party may move for judgment on the pleadings.” Fed.R.Civ.P. 12(c). Motions under Rule 12(c) and Rule 12(b)(6) are governed by the same standard. See Colony Ins. Co., 698 F.3d at 1228; Aspenwood Inv. Co. v. Martinez, 355 F.3d 1256, 1259 (10th Cir. 2004). Therefore, “[a] motion for judgment on the pleadings under Rule 12(c) is treated as a motion to dismiss under Rule 12(b)(6).” Atl. Richfield Co. v. Farm Credit Bank of Wichita, 226 F.3d 1138, 1160 (10th Cir. 2000).

         Plaintiff failed to respond to HealthSmart's Motion or to seek an extension of time to respond. Local Civil Rule 7.1(g) provides that “[a]ny motion that is not opposed within 21 days may, in the discretion of the court, be deemed confessed.” However, “a district court may not grant a motion to dismiss for failure to state a claim ‘merely because [a party] failed to file a response.'” Issa v. Comp USA, 354 F.3d 1174, 1178 (10th Cir. 2003) (alteration in original) (quoting Reed v. Bennett, 312 F.3d 1190, 1194 (10th Cir. 2002)). “[I]t is well established that a ‘complaint should not be dismissed for failure to state a claim unless it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'” Id. at 1177-78 (quoting Hall v. Bellmon, 935 F.2d 1106, 1109 (10th Cir. 1991)). Thus, the Court “must still examine the allegations in the plaintiff's complaint and determine whether the plaintiff has stated a claim upon which relief can be granted, ” despite Plaintiff's failure to respond to the Motion. Id. at 1178.

         Federal Rule of Civil Procedure 8(a)(2) provides that a pleading stating a claim for relief must contain “a short and plain statement of the claim showing that the pleader is entitled to relief.” 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.'” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)); see Robbins v. Oklahoma, 519 F.3d 1242, 1247 (10th Cir. 2008).[4] Under this standard, “the 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.” Robbins, 519 F.3d at 1247 (internal quotation marks omitted). “Factual allegations must be enough to raise a right to relief above the speculative level . . . .” Twombly, 550 U.S. at 555 (footnote and citation omitted). “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.

         “We accept all facts pleaded by the non-moving party as true and grant all reasonable inferences from the pleadings in favor of the same.” Colony Ins. Co., 698 F.3d at 1228 (alteration and internal quotation marks omitted); see also Sprint Nextel Corp. v. Middle Man, Inc., 822 F.3d 524, 530 (10th Cir. 2016); Sanders v. Mountain Am. Fed. Credit Union, 689 F.3d 1138, 1141 (10th Cir. 2012). Examining the factual allegations in this manner, a Rule 12(c) motion should be granted if “the moving party has clearly established that no material issue of fact remains to be resolved and the party is entitled to judgment as a matter of law.” Colony Ins. Co., 698 F.3d at 1228 (internal quotation marks omitted); Sprint Nextel Corp., 822 F.3d at 530; Sanders, 689 F.3d at 1141.

         “Determining whether a complaint states a plausible claim for relief will . . . be a context-specific task that requires the reviewing court to draw on its judicial experience and common sense.” Iqbal, 556 U.S. at 679; see Robbins, 519 F.3d at 1248 (stating that “the degree of specificity necessary to establish plausibility and fair notice, and therefore the need to include sufficient factual allegations, depends on context”). The Tenth Circuit has held that the Iqbal/Twombly pleading standard is “a middle ground between heightened fact pleading, which is expressly rejected, and allowing complaints that are no more than labels and conclusions or a formulaic recitation of the elements of a cause of action, which the Court stated will not do.” Khalik v. United Air Lines, 671 F.3d 1188, 1191 (10th Cir. 2012) (internal quotation marks omitted). “[S]pecific facts are not necessary”; the pleader's allegations need only provide the defendant “fair notice of what the claim is and the grounds upon which it rests.” Id. at 1192 (omission and internal quotation marks omitted). “Twombly and Iqbal do not require that the complaint include all facts necessary to carry the plaintiff's burden.” Id. (internal quotation marks omitted).


         I. Claims Based ...

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