Deschepper v. Midwest Wine & Spirits, Inc.
2015 U.S. Dist. LEXIS 38639
N.D. Ill.2015Background
- Plaintiffs are current/former sales workers for Midwest Wine & Spirits, Inc. (MWW) who were classified as independent contractors (many also called “employees” internally) and paid via a hybrid salary/commission plan; they allege extensive control by owner/CEO David Gargano (scheduling, training, uniforms, reporting) and lack of full expense reimbursement and overtime pay.
- After plaintiffs’ counsel sent a demand letter asserting FLSA claims, management announced MWW would close and Haus Wine & Spirits, Inc. (Haus) began operating out of MWW premises, using MWW delivery vans and employing former MWW staff; plaintiffs allege Haus acquired MWW assets below market and was created to evade liabilities.
- Other related entities: Direct Mail Resources, Inc. and KIG Properties, LLC (both owned/controlled by Gargano); plaintiffs allege commingling of assets, transfers among entities, and insolvency concerns.
- Plaintiffs’ operative pleading is a second amended complaint asserting: FLSA (overtime) (Count I), Illinois Minimum Wage Law (Count II), IWPCA wage/deduction claims (Count III), ERISA (withdrawn), unjust enrichment (Count V), successor liability against Haus (Count VI), veil-piercing against Direct Mail/KIG (Count VII), and several fraud/IUFTA counts against Haus and certain individuals (Counts VIII–X).
- Defendants (MWW, Garganos, Direct Mail, KIG) moved to dismiss under Rule 12(b)(6); the court accepted plaintiffs’ factual allegations as true for pleading-stage analysis and resolved which claims survive, which are preempted/dismissed, and which may be repleaded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether putative class are "employees" under FLSA or independent contractors | Plaintiffs allege economic-dependency on MWW (control, permanence, integral to business) supporting employee status | Defendants point to contractor labels and plaintiffs’ unreimbursed expenses as showing independent contractor status | Denied dismissal; allegations plausibly plead employee status under totality-of-circumstances Lauritzen factors |
| Whether outside-sales exemption applies to bar FLSA overtime claim | Plaintiffs say their role was product promotion and not necessarily exempt outside sales | Defendants assert primary duty was making sales/orders away from office, invoking 29 U.S.C. §213(a)(1) exemption | Denied dismissal; exemption is an affirmative defense and factual; premature to resolve on pleadings |
| Whether Gargano is individually liable under FLSA | Plaintiffs allege Gargano controlled hiring/firing, classification, pay, supervision | Defendants contest individual-employer status | Denied dismissal; pleaded facts suffice to plausibly allege Gargano acted as an employer |
| Whether unjust enrichment / state common-law wage claims survive given FLSA | Plaintiffs seek restitution for unreimbursed expenses/deductions under unjust enrichment/quantum meruit | Defendants argue state claims are preempted because they seek unpaid wages covered by FLSA | Granted dismissal with prejudice; unjust enrichment claim preempted to the extent it duplicates FLSA remedies |
| IWPCA claim viability | Plaintiffs allege a compensation agreement (hybrid salary/commission) and seek unpaid wages/deductions | Defendants argue absence of a written contract specifying disputed deductions | Denied dismissal; alleged compensation agreement and conduct sufficed to plead IWPCA claim |
| Successor liability / veil-piercing against Haus and individuals | Plaintiffs: Haus had notice and there was continuity of business; individuals used entities to shield liability | Defendants deny successor wrongdoing and challenge veil-piercing particulars | Denied dismissal for successor liability and veil-piercing as to Haus/individuals (sufficiently pleaded); veil-piercing against Direct Mail/KIG dismissed without prejudice to replead with greater particularity |
| Fraud / IUFTA claims against Haus and individuals (Rule 9(b)) | Plaintiffs allege fraudulent transfers and intent to hinder creditors/claimants | Defendants argue allegations are conclusory, shotgun-pleaded, rely improperly on "information and belief," and fail Rule 9(b) particularity | Fraud/IUFTA counts dismissed without prejudice and with leave to replead (failed Rule 9(b) and incoherent statutory citations) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard — plausibility required)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (heightened plausibility standard for complaints)
- Sec’y of Labor v. Lauritzen, 835 F.2d 1529 (Seventh Circuit six-factor test for employee vs. independent contractor under FLSA)
- Corning Glass Works v. Brennan, 417 U.S. 188 (employer bears burden to prove FLSA exemption)
- Schmidt v. Eagle Waste & Recycling, 599 F.3d 626 (outside-sales exemption analysis)
- EEOC v. G-K-G, Inc., 39 F.3d 740 (successor liability requirements for federal claims)