ERIN WILDER-DOOMES, Magistrate Judge.
Before the court is a Motion to Dismiss Under FRCP Rule 12(b)(2) and 12(b)(6) (the "Motion to Dismiss"), filed by defendants, Primary Care Solutions, Inc. ("PCS"), William Bullock ("Bullock"), Monica Lewis ("Lewis"), and Kim Roundtree ("Roundtree") (collectively PCS, Bullock, Lewis and Roundtree are "Defendants").
Tammy Cooper ("Cooper"), Cross Over Therapy, LLC ("COT"), and Kendall Brown ("Brown") (collectively Cooper, COT and Brown are "Plaintiffs"), filed their original Complaint on April 22, 2016, alleging violations of the Federal Trade Commission Act, 15 U.S.C. § 41, et seq. (the "FTCA"), and the Fair Labor Standards Act, 29 U.S.C. § 216(b) (the "FLSA"), as well as Louisiana state law claims for unfair and deceptive trade practices, violations of Louisiana securities law, breach of contract, interference with contracts, conversion and unjust enrichment. Plaintiffs allege Bullock, Lewis and Roundtree (the "Individual Defendants") are alter egos of PCS and that Defendants collectively induced Plaintiffs to enter into a franchise investment scheme. Plaintiffs seek to recover lost profits, attorney's fees and costs, treble damages, damages for lost investment opportunities, return of any and all investments, wages, and loss of property value.
The case arises from contractual relationships between Cooper and PCS and Brown and PCS. Specifically, in April 2014, Cooper executed a Site Director Consultant Agreement with PCS whereby Cooper was to serve as a Site Director in Donaldsonville, Louisiana.
In response to the Complaint, Defendants filed the instant Motion to Dismiss, which seeks dismissal of the claims against the Individual Defendants for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2), and seeks dismissal of certain causes of action set forth in the Complaint for failure to state a claim upon which relief can be granted pursuant to Fed. R. Civ. P. 12(b)(6).
Fed. R. Civ. P. 12(b)(2) authorizes dismissal of an action where the court lacks personal jurisdiction over a defendant. "Where a defendant challenges personal jurisdiction, the party seeking to invoke the power of the court bears the burden of proving that jurisdiction exists." Luv N' Care, Ltd. v. Insta-Mix, Inc., 438 F.3d 465, 469 (5th Cir. 2006) (citing Wyatt v. Laplan, 686 F.2d 276, 280 (5th Cir. 1982)). When, as in this case, a court rules on a motion to dismiss for lack of personal jurisdiction without holding an evidentiary hearing, the plaintiff need only make a prima facie showing of personal jurisdiction. Johnston v. Multidata Systems Intern. Corp., 523 F.3d 602, 609 (5th Cir. 2008) (quoting Buillion v. Gillepsie, 895 F.2d 213, 217 (5th Cir. 1990) (citations omitted)). "Moreover, on a motion to dismiss for lack of jurisdiction, uncontroverted allegations in the plaintiff's complaint must be taken as true, and conflicts between the facts contained in the parties' affidavits must be resolved in the plaintiff's favor for purposes of determining whether a prima facie case for personal jurisdiction exists." Id. ("Proof by preponderance of the evidence is not required."). However, in assessing whether the plaintiff has presented a prima facie case of personal jurisdiction, the court "will not `credit conclusory allegations, even if uncontroverted.'" Sealed Appellant 1 v. Sealed Appellee 1, 625 Fed. Appx. 628, 631 (5th Cir. 2015) (quoting Panda Brandywine Corp. v. Potomac Elec. Power Co., 253 F.3d 865, 869 (5th Cir. 2001)). The court may consider "affidavits, interrogatories, depositions, oral testimony, or any combination of the recognized methods of discovery." Revell v. Lidov, 317 F.3d 467, 469 (5th Cir. 2002) (quoting Stuart v. Spademan, 772 F.2d 1185, 1192 (5th Cir. 1985)).
"A nonresident defendant's contacts may support either specific or general jurisdiction." Service Steel Warehouse, Co. L.P. v. Eakin, 2011 WL 3439132, at * 2 (M.D. La. Aug. 5, 2011). "Specific jurisdiction over a nonresident defendant is present where the `suit arises out of or [is] related to the defendant's contacts with the forum. . . .'" Id. (citing Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984); Clemens v. McNamee, 615 F.3d 374, 378-379 (5th Cir. 2010) (stating that "[s]pecific jurisdiction . . . requires a sufficient nexus between the nonresident's contacts with the forum and the cause of action"). "Alternatively, general jurisdiction exists `when a nonresident defendant's contacts with the forum are substantial, continuous, and systematic.'" Id. (citing Johnston v. Multidata Systems Intern. Corp., 523 F.3d 602, 609 (5th Cir. 2008)). Here, Plaintiffs do not argue that the Individual Defendants are subject to general personal jurisdiction in Louisiana.
The Fifth Circuit has set forth a three-step analysis for specific personal jurisdiction, whereby the court considers:
Nuovo Pignone, SpA v. Storman Asia M/V, 310 F.3d 374, 378 (5th Cir. 2002) (citing Burger King Corp. v. Rudzewicz, 471 U.S. 462, 474 (1985)). "A defendant has minimum contacts with a forum state if `the defendant's conduct and connection with the forum state are such that he should reasonably anticipate being haled into court there." Burger King, 471 U.S. at 474. "Even where a defendant has no physical presence in the forum state, a single purposeful contact is sufficient to confer personal jurisdiction if the cause of action arises from the contact." Nuovo Pignone, 310 F.3d at 379. "Once a plaintiff establishes minimum contacts between the defendant and the forum state, the burden of proof shifts to the defendant to show that the assertion of jurisdiction is unfair and unreasonable." Id. (citing Wien Air Alaska, Inc. v. Brandt, 195 F.3d 208, 215 (5th Cir.1999)).
In their Complaint, Plaintiffs allege that the Individual Defendants are the "alter egos" of PCS.
In opposition to the Motion to Dismiss for lack of personal jurisdiction, Plaintiffs provide affidavits from Cooper and Brown.
Plaintiffs argue that "a court which has jurisdiction over a corporation has jurisdiction over its alter egos."
"[T]he general rule is that jurisdiction over an individual cannot be predicated upon jurisdiction over a corporation. . . ." Stuart v. Spademan, 772 F.2d 1185, 1197 (5th Cir. 1985). As explained by the Spademan court, "the fiduciary-shield doctrine — which holds that an individual's transaction of business within the state solely as a corporate officer does not create personal jurisdiction over that individual though the state has in personam jurisdiction over the corporation." Id. See also, FloQuip, Inc. v Chem Rock Technologies, 2016 WL 4574436, at * 12 (W.D. La. June 20, 2016) ("The fiduciary shield doctrine holds that an individual's transaction of business within a state solely as a corporate officer does not create personal jurisdiction over that individual, though the state may have personal jurisdiction over the corporation."); Service Steel Warehouse, Co., L.P. v. Eakin, 2011 WL 3439132, at * 2 (M.D. La. Aug. 5, 2011) ("The Court notes that the cause of action is based on alleged representations made by the defendant in his role as the corporate representative of a Louisiana corporation. The Fiduciary Shield Doctrine, however, provides that `an individual's transaction of business within a state solely as a corporate officer does not create personal jurisdiction over that individual though the state has in personam jurisdiction over the corporation.'") (citing Spademan).
"Although the general rule is that jurisdiction over a corporate officer cannot be predicated upon jurisdiction over a corporation, two exceptions to the fiduciary shield doctrine have been recognized. First, courts may disregard the corporate form and exercise jurisdiction over an individual officer if the corporation is the `alter ego' of the officer." FloQuip, Inc. v Chem Rock Technologies, 2016 WL 4574436, at * 12 (W.D. La. June 20, 2016) (citing Spademan, 772 F.2d at 1197) ("courts have recognized an exception to this rule when the corporation is the alter ego of the individual."). "Second, the court may exercise personal jurisdiction over an officer who allegedly committed an intentional tort directed at the forum state." Id. See also, General Retail Services, Inc. v. Wireless Toyz Franchise, LLC, 255 Fed. Appx. 775, 795 (5th Cir. 2007) ("So while the fiduciary-shield could prohibit this court from ascribing acts of Wireless Toyz to Simtob, it does not prohibit Simtob from being held personally liable for his own tortious conduct simply because he is an officer of a corporation."); Dykes v. Maverick Motion Picture Group, LLC, 2011 WL 900276, at * 5 (M.D. La. March 14, 2011) ("for a court to exercise jurisdiction over a corporate representative, the individual must have personally engaged in activities within the forum state which would bring him within the state's long-arm statute, for instance, by committing a tort, such as fraud, in the forum state.") (internal citations omitted); Sheriff's Office of St. Tammany Parish v. Nathan, 2015 WL 3651343, at * 5 (E.D. La. June 11, 2015) ("The exception provides that the fiduciary shield doctrine will not defeat personal jurisdiction where a non-resident corporate agent commits a tort within the forum state which would subject him to personal liability under the laws of that state."); Southeast Wireless Network, Inc. v. U.S. Telemetry Corp., 954 So.2d 120, 128 (La. 2007) ("The court in [Escoto v. U.S. Lending Corp., 675 So.2d 741 (La. App. 4 Cir. 1996)] went on to recognize an exception to the fiduciary shield doctrine, which provides that the fiduciary shield doctrine will not defeat personal jurisdiction where a non-resident corporate agent commits a tort within a forum state which would subject him to personal liability under the laws of that state.").
The court notes at the outset that although Plaintiffs' allegations and the relevant Affidavits indicate that the Individual Defendants negotiated contracts with Plaintiffs and communicated thereafter with Plaintiffs on behalf of PCS, Plaintiffs have not alleged that the Individual Defendants had any personal contacts with Plaintiffs outside of the Individual Defendants' capacities as representatives of PCS. See, Ostrowiecki v. Aggressor Fleet, Ltd., 2008 WL 2313140, at * 6 (E.D. La. May 30, 2008) ("[D]ue to the fiduciary shield doctrine, Chinchilla's individual and personal contacts with Louisiana must be assessed. The negotiation of the franchise agreement and these communications between Chinchilla and AFFI in Louisiana were on AMO's behalf. . ."); Downs v. Red River Shipping Corp., 1994 WL 148729, at * 3 (E.D. La. April 18, 1994) ("[T]he Court notes that the plaintiff does not allege any contacts by Gregory other than those made while acting in his corporate capacity on behalf of Red River. . . . Thus, even if the Court were to find that it had personal jurisdiction over Red River, Mr. Gregory's contacts with Louisiana on behalf of Red River, without more, would not subject him to personal jurisdiction of this Court. Because Gregory has no contacts with Louisiana other than those growing out of his work for Red River, the Court cannot exercise personal jurisdiction over him and this action must be dismissed as to Rodney Gregory.").
Plaintiffs assert throughout their Complaint that the Individual Defendants are the "alter egos" of PCS, but they have provided no basis to support such a finding. In his Declaration, William Bullock asserts that "[a]t all applicable times, Primary Care Solutions maintained a separate legal existence. For example Primary Care Solutions filed Articles of Incorporation with the North Carolina Secretary of State, filed annual reports, appointed an agent, maintained its own separate bank accounts, and observed other corporate formalities."
Further, Plaintiffs have not asserted that the Individual Defendants committed intentional torts that would subject the Individual Defendants to personal liability. While "[f]raud, of course, is an intentional tort," Frees, Inc. v. McMillian, 2007 WL 2701200, at * 3 (W.D. La. June 25, 2007) (citing In re Mercer, 246 F.3d 391, 421 (5th Cir. 2001)), as discussed below with respect to Plaintiffs' claim under the LUTPA, although Plaintiffs generally allege that they were "coerced" into signing the contracts with PCS, they have not alleged any specific fraud, misrepresentation, deception, or unethical conduct in the negotiation of their contracts with PCS. Moreover, while the court recognizes that Plaintiffs have alleged that the Individual Defendants are "liable jointly and severally" for violations of Louisiana securities law,
Because Plaintiffs have provided no basis upon which this court can apply an exception to the fiduciary shield doctrine, the court GRANTS Defendants' Motion to Dismiss Plaintiffs' claims against the Individual Defendants for lack of personal jurisdiction pursuant to Fed. R. Civ. P. 12(b)(2).
In addition to asserting that Plaintiffs' claims against the Individual Defendants should be dismissed for lack of personal jurisdiction, Defendants also assert that certain of Plaintiffs' claims should be dismissed pursuant to Rule 12(b)(6) for failure to state a claim.
LUTPA prohibits "[u]nfair methods of competition and unfair or deceptive acts or practices in the conduct of any trade or commerce. . . ." La. R.S. § 51:1405(A). "Louisiana has left the determination of what is an `unfair trade practice' largely to the courts to decide on a case-by-case basis." Turner v. Purina Mills, Inc., 989 F.2d 1419, 1422 (5th Cir. 1993). See also, Cheramie Services, Inc. v. Shell Deepwater Production, Inc., 35 So.3d 1053, 1059 (La. 2010) ("It has been left to the courts to decide, on a case-by-case basis, what conduct falls within the statute's prohibition.") (citing Dufau v. Creole Engineering, Inc., 465 So.2d 752, 758 (La. App. 5 Cir. 1985) (In order to recover under LUTPA a plaintiff must prove "some element of fraud, misrepresentation, deception, or other unethical conduct" on the part of the defendant.)). "The courts have repeatedly held that, under this statute, the plaintiff must show the alleged conduct `offends established public policy and . . . is immoral, unethical, oppressive, unscrupulous, or substantially injurious.'" Cheramie, 35 So. 3d at 1059 (citations omitted). The Louisiana Supreme Court has explained that "the range of prohibited practices under LUTPA is extremely narrow." Cheramie, 35 So. 3d at 1060. Further, the Fifth Circuit has held that "the statute does not provide an alternate remedy for simple breaches of contract. There is a great deal of daylight between a breach of contract claim and the egregious behavior the statute proscribes." Turner, 989 F. 2d at 1422. See also, Innovative Sales, LLC v. Northwood Mfg., Inc., 2008 WL 3244114, at * 6 (5th Cir. 2008) ("Innovative argues that the same actions taken by Northwood that support a breach of contract claim also support a LUTPA claim. This argument, however, is foreclosed by Turner v. Purina Mills, Inc., wherein this court expressly acknowledged that LUTPA `does not provide an alternate remedy for simple breaches of contract,' noting that `[t]here is a great deal of daylight between a breach of contract claim and the egregious behavior the statute proscribes.'").
Defendants argue that "Plaintiffs are attempting to obtain an alternative remedy for simple breach of contract."
To the extent Plaintiffs rely on the alleged failure to provide franchise disclosure documents as a basis for their LUTPA claim, the only Louisiana court to consider this issue has found that "the failure to comply with the FTC disclosure regulations did not constitute an unfair trade practice" where there was "no element of fraud, misrepresentation, deception or unethical conduct in the confection of the franchise agreement." Leblanc v. Belt Center Inc., 509 So.2d 134, 137 (La. App. 1 Cir. 1987). See also, Brill v. Catfish Shaks of America, Inc., 727 F.Supp. 1035, 1041 n. 12 (E.D. La. 1989) (noting that although Federal Trade Commission regulations provide that it is an unfair or deceptive act or practice for a franchisor to fail to provide the franchisee with a disclosure document, the court would be "bound to follow" the holding of Leblanc "that the failure to provide a disclosure document is not per se violative of Louisiana's UTPA because an unfair trade practice requires a showing of fraud, misrepresentation, deception, or unethical conduct" if plaintiffs' LUTPA claim was not otherwise time barred). Plaintiffs have not outlined in their Complaint how they contend they were "coerced" into signing the contracts with PCS, and, as discussed below, have not alleged any specific fraud, misrepresentation, deception, or unethical conduct in the negotiation of their contracts with PCS.
The Fifth Circuit has instructed that "Rule 9(b) applies by its plain language to all averments of fraud, whether they are part of a claim of fraud or not." Lone Star Ladies Inv. Club v. Schlotzsky's, Inc., 238 F.3d 363, 368 (5th Cir. 2001). See also, Alford v. Anadarko E&P Onshore, LLC, 2014 WL 1612454, at * 8 (E.D. La. April 22, 2014) (same). "Fraud can be averred by specifically alleging fraud, or by alleging facts that necessarily constitute fraud even if the term `fraud' is not used." Wagoner v. Exxon Mobil Corp., 2010 WL 3168382, at * 2 (E.D. La. Aug. 9, 2010) (citing In re Hollander, 2009 WL 2707445, at * 4 (E.D. La. Aug. 25, 2009)).
Plaintiffs' allegations are more akin to a breach of contract claim than the sort of "egregious" behavior contemplated by LUTPA. Under such circumstances, dismissal of Plaintiffs' claim under LUTPA is appropriate. See, Nussli US, LLC v. Nola Motorsports Host Committee, Inc., 2016 WL 4064011, at *11 (E.D. La. July 29, 2016) (granting motion to dismiss LUTPA claim against particular defendant where plaintiff did not plead "any false or misleading statements allegedly made by" the defendant and the "core" of plaintiff's allegations was "a claim that [defendant] failed to pay it the amount it was due under its contract . . . . [T]he law is clear that LUTPA does not provide an alternate remedy for simple breaches of contract. [Plaintiff's] bare assertions of deceptive conduct on the part of [defendant] are insufficient to constitute deception, unethical conduct, or egregious behavior that would constitute a claim pursuant to LUTPA."); Nola Fine Art, Inc. v. Ducks Unlimited, Inc., 88 F.Supp.2d 602, 613 (E.D. La. 2015) (granting summary judgment on plaintiffs' LUTPA claim because claim was "`more similar to a breach of contract claim than to a claim for the egregious behavior covered under LUTPA'" and noting that "Plaintiffs cannot manufacture a LUTPA violation by simply adding the words `deceit' and `misrepresentation' to their contract claim.") (quoting Target Constr., Inc. v. Baker Pile Driving & Site Work, LLC, 2012 WL 5878855, at * 4 (E.D. La. Nov. 20, 2012)); Guillory v. Broussard, 194 So.3d 764, 778 (La. App. 3 Cir. 2016) ("Defendant's failure to abide by his contractual agreement with Plaintiff regarding distribution of profits sufficient for Plaintiff to pay her taxes annually in exchange for her agreement to convert SBT to an S Corporation, presents a general breach of contract claim. It does not meet the criteria for finding a special LUTPA violation."). See also, Shaw Industries, Inc. v. Brett, 884 F.Supp. 1054, 1058 (M.D. La. 1994) ("since the Fifth Circuit has explicitly stated that LUTPA does not provide an alternate remedy for breach of contract, summary judgment is proper.").
Defendants assert that even assuming arguendo that the parties' agreements meet the federal definition of a franchise, "the FTCA does not provide for private causes of action"
The court agrees with Defendants that Plaintiffs' FTCA claim must be dismissed. "The Federal Trade Commission Act (FTC Act) does not provide for private causes of action." Yumilicious Franchise, LLC v. Barrie, 819 F.3d 170, 176 (5th Cir. 2016). See also, Norman v. Torch, Inc., 1993 WL 149658, at * 2 (E.D. La. May 4, 1993) ("the FTCA does not provide a private right of action.") (citing Fulton v. Hecht, 580 F.2d 1242, 1249 (5th Cir. 1978) ("there is no private cause of action for violation of the FTC Act.")); Brill v. Catfish Shaks of America, Inc., 727 F.Supp. 1035, 1041 (E.D. La. 1989) ("there is no private right of action for violation of the FTC's franchise disclosure rules."). Accordingly, the court GRANTS Defendants' Motion to Dismiss Plaintiffs' cause of action under the FTCA.
La. R.S. § 702(15)(a) defines a "security" as:
Plaintiffs allege that Defendants solicited them to "invest in a purported franchise/stock investment scheme" which falls within the scope of Louisiana securities laws.
"The provisions of the Louisiana Securities Law, (formerly known as Louisiana Blue Sky Law) are analogous to the provisions of the federal Securities Act of 1933. Our courts therefore look to the federal law and jurisprudence interpreting the securities law for guidance in interpreting the Louisiana provisions." State v. Powdrill, 684 So.2d 350, 353 (La. 1996) (internal citations omitted). See also, Macareno v. Karon, 2010 WL 743564, at * 5 (W.D. La. Feb. 10, 2010) ("because the jurisprudence of Louisiana's securities law is relatively undeveloped, courts routinely turn to federal decisions in this area for guidance as the Louisiana law was modeled after the federal system.").
"An investment contract is a contract, transaction or scheme whereby (1) a person invests his money, (2) in a common enterprise, and (3) is led to expect profits solely from the efforts of the promoter or a third party." Nunez v. Robin, 415 Fed. Appx. 586, 587 (5th Cir. 2011). The Fifth Circuit has explained that with respect to the third element, "the critical inquiry is `whether the efforts made by those other than the investor are the undeniably significant ones, those essential managerial efforts which affect the failure or success of the enterprise.'" SEC v. Koscot Interplanetary, Inc., 497 F.2d 473, 483 (5th Cir. 1974) (citing SEC v. Glen W. Turner Enterprises, Inc., 474 F.2d 476, 482 (9th Cir. 1973)). See also, Dufour v. U.S. Home Corp., 581 So.2d 765, 768 (La. App. 4 Cir. 1991) (affirming trial court's grant of exception of no cause of action because purchase of condominium units did not fit within the scope of a security under La. R.S. § 51:702 and explaining that to be an investment contract "[t]he profits expected from the investment must be achieved primarily from the efforts of the promoter or third party.").
In Martin v. T.V. Tempo, Inc., 628 F.2d 887 (5th Cir. 1980), the Fifth Circuit considered whether a franchise agreement was a security. The court considered the standard set forth in Koscot and reasoned that because "plaintiffs had immediate control over the essential managerial conduct of the enterprise and defendants exercised merely remote control" and because "[t]he efforts of plaintiffs were the undeniably significant ones in determining profit and loss," the agreements at issue "were not securities." Id. at 891. Compare, Koscot, 497 F.2d at 484 (finding investment contract existed where "promoters retain[ed] immediate control over the essential managerial conduct of an enterprise and where the investor's realization of profits [was] inextricably tied to the success of the promotional scheme" and "acknowledg[ing] that a conventional franchise arrangement, wherein the promoter exercises merely remote control over an enterprise and the investor operates largely unfettered by promoter mandates presents a different question . . . .").
Here, Plaintiffs own allegations are contrary to a finding that the agreements at issue constitute investment contracts. Plaintiffs allege that they were each required to make a "$25,000.00 sweat equity investment" to "start their own satellite offices"
Defendants seek dismissal of Plaintiffs' breach of contract claim against the Individual Defendants based on Defendants' assertion that "Plaintiffs have not alleged any facts that would support a finding of alter ego status."
Per their Complaint, Plaintiffs seek to bring a cause of action for interference with contract against the Individual Defendants.
"Louisiana recognizes only a limited cause of action for intentional interference with contractual relations." Bollinger v. Tanner Companies, LP, 2003 WL 1824836, at * 2 (E.D. La. April 7, 2003) (citing 9 to 5 Fashions, Inc. v. Spurney, 538 So.2d 228, 231-234 (La. 1989)). "Under Spurney, a tortious interference claim may lie against [defendant] if she acted beyond the scope of her corporate authority or knowingly committed acts adverse to [corporation's] interests. If she acted within the scope of her corporate authority, then the proper vehicle for relief is a breach of contract claim against the corporation itself." Bollinger, 2003 WL 1824836, at * 2 (citing Technical Control Systems, Inc. v. Green, 809 So.2d 1204, 1208 (La. App. 3 Cir. 2002) ("In an ordinary case, for example, where an officer breaches a contract for the benefit of his corporation and acts within his authority, the corporation, the party with whom the plaintiff has contracted, would be liable in contract, not tort. We believe that tort actions against corporate entity defendants should be curtailed when a more appropriate breach of contract action is available.")). Plaintiffs do not allege that any of the individual Defendants exceeded their authority or committed acts adverse to PCS. Because the court has found it lacks personal jurisdiction over the Individual Defendants, the court also GRANTS Defendants' Motion to Dismiss Plaintiffs' interference with contract claim against the Individual Defendants.
In their Complaint, Plaintiffs assert a cause of action for conversion relative to the purchase of furniture and equipment by Cooper and/or COT for the Donaldsonville office.
"`A conversion consists of an act in derogation of the plaintiff's possessory rights, and any wrongful exercise or assumption of authority over another's goods depriving him of the possession, permanently or for an indefinite time, is a conversion.'" U.S. v. Hibernia Nat. Bank, 882 F.2d 961, 964 (5th Cir. 1989). In Jarreau v. Quakenbush, 687 F.Supp.2d 606, 612 (M.D. La. 2010), this court explained that:
Plaintiffs assert a cause of action for conversion based on the contract between Seaside and PCS which allegedly included the sale of all furniture and equipment in the Donaldsonville office.
The court is unpersuaded that a cause of action may not lie under the facts as presented in Plaintiffs' Complaint. Defendants rely on New Orleans Jazz and Heritage Foundation, Inc. v. Kirksey, 40 So.3d 394 (La. App. 4 Cir. 2010) for their position that Plaintiffs' claim of conversion should be dismissed as merely a restatement of their claim for breach of contract. In Kirksey, plaintiff sought to be paid additional money under the parties' agreement and at the same time asserted that the failure to pay such monies constituted a conversion. Under such circumstances, the court found that plaintiff had not alleged sufficient facts to support a finding that defendants "wrongfully converted" the rebates allegedly owed pursuant to the contract. Id. at 406. Here, in contrast, Plaintiffs allege that Defendants "breached the contracts with [Plaintiffs] when they failed to pay profits in accordance with the contract [sic], and then, sold the Donaldsonville and St. Francisville offices to Seaside. . . ."
Defendants further assert that, as to the Individual Defendants, "[a]bsent fraud, shareholders, directors, and officers are not personally liable for the debts of the corporation, especially when they deal with other corporations."
Pursuant to the FLSA, "no employer shall employ any of his employees who in any workweek . . . is employed in an enterprise engaged in commerce or in the production of goods for commerce, for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed." 29 U.S.C. § 207(a)(1). In their Complaint, Plaintiffs allege that in the event this court determines that "the sweat equity investment was not an investment, then, plaintiffs are entitled to recover an hourly rate plus overtime for the unpaid hours of labor worked in the Donaldsonville and St. Francisville offices respectively."
Defendants move to dismiss Plaintiffs' FLSA claims, arguing that "Plaintiffs have simply referenced a complex federal statute with virtually no factual context or support."
Under the FLSA, an employer is "any person acting directly or indirectly in the interest of an employer in relation to an employee." 29 U.S.C. § 203(d). The "remedial purposes of the FLSA require the courts to define `employer' more broadly than the term would be interpreted in traditional common law applications." Orozco v. Plackis, 757 F.3d 445, 448 (5th Cir. 2012) (quoting McLaughlin v. Seafood, Inc., 867 F.2d 875, 877 (5th Cir. 1989) (per curium)). "We rely on the economic reality test when determining a party's status as an employer under the FLSA." Id. Under this test, a court evaluates: "`whether the alleged employer: (1) possessed 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, and (4) maintained employment records.' However, a party need not establish each element in every case." Id. (citing Gray v. Powers, 673 F.3d 352, 354 (5th Cir. 2012). The Fifth Circuit has suggested that, in appropriate circumstances, a franchisor may "qualify as the FLSA employer for a franchisee's employees." Id. at 452 ("We do not suggest that franchisors can never qualify as the FLSA employer for a franchisee's employees; rather, we hold that [plaintiff] failed to produce legally sufficient evidence to satisfy the economic reality test and thus failed to prove that [defendant] was his employer under the FLSA."). Further, "[t]he contractual designation of the worker as an independent contractor is not necessarily controlling." Thibault v. Bellsouth Telecommunications, Inc., 612 F.3d 843, 845-846 (5th Cir. 2010). "[T]he touchstone of `economic reality' in analyzing a possible employee/employer relationship for purposes of the FLSA is dependency." Mendoza v. Essential Quality Constr., Inc., 691 F.Supp.2d 680, 685 (E.D. La. 2010).
As the undersigned reads the allegations of Plaintiffs' Complaint, Plaintiffs apparently worked relatively independently in setting up the offices at issue. For example, Plaintiffs allege that Cooper herself leased space for the Donaldsonville office and "was instructed to purchase all of the office furniture, pay rent, and utilities out of her pocket. . . .
Article 2298 of the Louisiana Civil Code provides that "[a] person who has been enriched without cause at the expense of another person is bound to compensate that person. The term `without cause' is used in this context to exclude cases in which the enrichment results from a valid juridical act or the law. The remedy declared here is subsidiary and shall not be available if the law provides another remedy for the impoverishment or declares a contrary rule." "The unjust enrichment remedy is `only available to fill a gap in the law where no express remedy is provided.'" Walters v. MedSouth Record Management, LLC, 38 So.3d 241, 242 (La. 2010). See also, Carriere v. Bank of Louisiana, 702 So.2d 648, 672 (La. 1996) ("The existence of a `remedy' which precludes application of unjust enrichment does not connote the ability to recoup your impoverishment. . . . It merely connotes the ability to bring the action or seek the remedy."); AMEC Construction Management, Inc. v. Fireman's Fund Ins. Co., 2014 WL 5462810, at * 3 (M.D. La. Oct. 28, 2014) ("Unjust enrichment is an available remedy only when a gap in the law exists that prevents a plaintiff from pursuing a remedy for their alleged injury.").
Since Plaintiffs have alleged a breach of contract claim, it would appear that Plaintiffs are barred from also pleading unjust enrichment. However, this court has taken the position that "the liberality of Federal Rule of Civil Procedure 8 allows for pleading in the alternative even if the pleadings are inconsistent." AMEC Construction Management, Inc. v. Fireman's Fund Ins. Co., 2014 WL 5462810, at * 3 (M.D. La. Oct. 28, 2014) (explaining that "[s]ince ACMI has alleged various other claims in its complaint, it would appear that ACMI may be barred from pleading unjust enrichment" but ultimately denying defendants' motion to dismiss plaintiff's unjust enrichment claim based on Fed. R. Civ. P. 8 and noting that "ACMI is allowed to plead unjust enrichment in the alternative."). As this court has previously explained, "[t]his Court has rejected the `blanket proposition that no plaintiff may ever plead an unjust enrichment claim alongside a claim which would grant a remedy at law.' This Court has held that the law does not compel `an election of remedies between a contractual theory and an unjust enrichment theory prior to filing a complaint.'" U.S. ex rel. Sun Coast Contracting Services, LLC v. DQSI, LLC, 2014 WL 7246936, at * 5 (M.D. La. Dec. 17, 2014) (quoting Property One, Inc. v. USAgencies, LLC, 830 F.Supp.2d 170, 181 (M.D. La. 2011) & citing Cent. Facilities Operating Co. v. Cinemark USA, Inc., 2014 WL 3866086, at * 5 (M.D. La. Aug. 6, 2014;)). See also, Property One, Inc. v. USAgencies, LLC, 830 F.Supp.2d 170, 181 (M.D. La. 2011) ("Nothing in [Carrier v. Bank of La., 702 So.2d 648 (La. 1996)] compels an election of remedies between a contractual theory and an unjust enrichment theory prior to filing a complaint."); Hall v. Habul, 2014 WL 2441177, at * 5 (M.D. La. May 30, 2014) (denying defendant's motion to dismiss plaintiff's unjust enrichment claim and explaining that "[a]lthough the Court is aware that several federal district courts in Louisiana have ruled on both sides of this issue, under the facts of this case, the Court does not find that dismissal of Plaintiff's alternative claim of unjust enrichment is appropriate at this time.").
Because Plaintiffs have asserted their cause of action for unjust enrichment in the alternative, and based on this court's previous rulings allowing such alternative pleading, the court DENIES Defendants' Motion to Dismiss Plaintiffs' cause of action for unjust enrichment.
Per their Complaint, Plaintiffs allege that this court has diversity subject matter jurisdiction pursuant to 28 U.S.C. § 1332 and also has federal question subject matter jurisdiction pursuant to 28 U.S.C. § 1331 "as there are matters that arise under federal laws of the United States, Federal Trade Commission Act . . . and alternatively, the Fair Labor Standards Act. . . ."
A federal court has the "duty to raise the issue of subject matter jurisdiction sua sponte." H&D Tire and Automotive-Hardware, Inc. v. Pitney Bowes, Inc., 227 F.3d 326, 328 (5th Cir. 2000). Because the court finds that Plaintiffs have failed to state federal claims supporting subject matter jurisdiction pursuant to 28 U.S.C. § 1331, the court must consider whether Plaintiffs' alternative basis for federal jurisdiction, 28 U.S.C. § 1332, exists. "When jurisdiction is based on diversity, we adhere strictly to the rule that citizenship of the parties must be `distinctly and affirmatively alleged.'" Mullins v. Testamerica, Inc., 300 Fed. Appx. 259, 259 (5th Cir. 2008) (quoting Getty Oil, Div. of Texaco v. Ins. Co. of North America, 841 F.2d 1254, 1259 (5th Cir. 1988)). Pursuant to 28 U.S.C. § 1653, "[d]efective allegations of jurisdiction may be amended, upon terms, in the trial or appellate courts."
With regard to Plaintiffs' assertion that this court has subject matter jurisdiction based on diversity, the Complaint does not adequately allege the citizenship of the Plaintiffs. Plaintiffs allege that Cooper and Brown are "residents" of the State of Louisiana.
With regard to COT, the allegations of citizenship set forth in the Complaint are also insufficient. For purposes of diversity, the citizenship of a limited liability company is determined by considering the citizenship of all its members. Harvey v. Grey Wolf Drilling Co., 542 F.3d 1077, 1080 (5th Cir. 2008). To properly allege the citizenship of a limited liability company, a party must identify each of the members of the limited liability company and the citizenship of each member in accordance with the requirements of § 1332(a) and (c). The same requirement applies to any member of a limited liability company which is also a limited liability company. See, Turner Bros. Crane and Rigging, LLC v. Kingboard Chemical Holding Ltd., 2007 WL 2848154, at *4-5 (M.D. La. Sept. 24, 2007) ("when partners or members are themselves entities or associations, the citizenship must be traced through however many layers of members or partners there may be, and failure to do [sic] can result in dismissal for want of jurisdiction.") (quotation and citation omitted).
Here, although the citizenship of the parties has not been adequately alleged, it appears that the parties may be diverse. Under such circumstances, the court finds it appropriate to allow Plaintiffs an opportunity to properly allege this court's subject matter jurisdiction pursuant to 28 U.S.C. § 1332. See, e.g., Rice v. Scudder Kemper Investments, Inc., 2003 WL 1846934, at * 3 (S.D.N.Y. April 8, 2003) (explaining that while dismissal of plaintiff's federal claim would normally require dismissal of the state law claims over which the court asserted supplemental jurisdiction, because it appeared that the parties may be diverse, leave to amend the complaint was appropriate).
Plaintiffs have not sought leave to amend their Complaint. Instead, in response to Defendants' Motion to Dismiss, Plaintiffs have relied on the sufficiency of their allegations as set forth in the Complaint. Under such circumstances, this court is not required to automatically provide Plaintiffs an opportunity to amend. See, Cinel v. Connick, 15 F.3d 1338, 1346 (5th Cir. 1994) ("Appellant argues that the district court erred in dismissing his complaint without leave to amend. Although leave to amend should be freely given, this is not a case in which the district court denied Appellant's request to amend. Appellant did not ask the district court for leave to amend; his brief to this Court is his first such request. Moreover, Appellant has failed to indicate specifically how he would amend his complaint to overcome the 12(b)(6) dismissal. Therefore, we have no basis on which to find an abuse of discretion by the district court."); Rosenblatt v. United Way of Greater Houston, 607 F.3d 413, 419 (5th Cir. 2010) ("throughout the pendency of the motions to dismiss his case, Rosenblatt urged the sufficiency of his complaint and did not seek leave to amend, despite awareness of its potential deficiencies. . . . Rosenblatt's request now to amend, after his case has been dismissed on his now-abandoned conversion claim theory, `rings hollow in light of h[is] failure to amend h[is] complaint as a matter of right and h[is] failure to furnish the district court with a proposed amendment' while the motions to dismiss were pending.") (citations omitted).
However, the Fifth Circuit has also instructed that "a plaintiff's failure to meet the specific pleading requirements should not automatically or inflexibility [sic] result in dismissal of the complaint with prejudice to re-filing." Hart v. Bayer Corp., 199 F.3d 239, 247 n. 6 (5th Cir. 2000) (citing Cates v. International Telephone and Telegraph Corp., 756 F.2d 1161, 1180 (5th Cir. 1985) ("But such deficiencies do not normally justify dismissal of the suit on the merits and without leave to amend, at least not in the absence of special circumstances."). "Although a court may dismiss the claim, it should not do so without granting leave to amend, unless the defect is simply incurable or the plaintiff has failed to plead with particularity after being afforded repeated opportunities to do so." Id. (citing O'Brien v. National Property Analysts Partners, 936 F.2d 674, 675-76 (2d Cir. 1991)). Moreover, "[i]n view of the consequences of dismissal on the complaint alone, and the pull to decide cases on the merits rather than on the sufficiency of pleadings, district courts often afford plaintiffs at least one opportunity to cure pleading deficiencies before dismissing a case, unless it is clear that the defects are incurable or the plaintiffs advise the court that they are unwilling or unable to amend in a manner that will avoid dismissal." Great Plains Trust Co. v. Morgan Stanley Dean Witter & Co., 313 F.3d 305, 329 (5th Cir. 2002).
The decision to allow amendment of a party's pleadings is within the sound discretion of the district court. Foman v. Davis, 371 U.S. 178, 182, 83 S.Ct. 227, 9 L.Ed.2d 222 (1962); Norman v. Apache Corp., 19 F.3d 1017, 1021 (5th Cir. 1994) (citation omitted). In determining whether to allow an amendment of the pleadings, a court considers the following: "undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [and] futility of amendment." Foman, 371 U.S. at 182; Schiller v. Physicians Res. Grp. Inc., 342 F.3d 563, 566 (5th Cir. 2003) (citation omitted). As discussed above, there is no private cause of action under the FTCA, and Plaintiffs' own allegations are contrary to a finding that Louisiana securities law or the FLSA applies. Moreover, the undersigned has significant doubts regarding Plaintiffs' ability to state a claim under the LUTPA. However, in light of the fact that Plaintiffs have not previously been granted leave to amend their Complaint, and despite Plaintiffs' failure to seek such leave, the court will allow Plaintiffs an opportunity to amend their Complaint, if possible, to address the deficiencies addressed herein.
Because this court must determine whether it has subject matter jurisdiction, the court ORDERS Plaintiffs to file an Amended Complaint, within twenty-one (21) days of this Ruling setting forth: (1) the domicile of the individual plaintiffs; and (2) the citizenship of each of the member(s) of Cross Over Therapy, LLC in accordance with the requirements of § 1332(a) and (c). To the extent Plaintiffs believe the deficiencies discussed above with regard to the court's rulings pursuant to Fed. R. Civ. P. 12(b)(6) and 12(b)(2) can be remedied, Plaintiffs may also amend the substantive allegations set forth in their Complaint.
For the reasons set forth herein, the court
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