Garcia v. Peterson
319 F. Supp. 3d 863
S.D. Tex.2018Background
- 28 Graebel drivers (11 Texas, 17 out-of-state) sued MidCap entities and others alleging unpaid wages and related state-law claims after Graebel's 2014–2017 ownership changes and liquidation. Plaintiffs say MidCap financed Graebel, controlled funding decisions, and directed or benefited from conduct that left drivers unpaid.
- Plaintiffs assert MidCap is liable under FLSA (as an employer and via enterprise coverage), for failure to keep records, breach of contract, quantum meruit, fraud, conspiracy/aiding-and-abetting, and via veil-piercing/alter-ego/agency theories.
- MidCap moved to dismiss for improper venue, lack of personal jurisdiction, and failure to state claims (including Rule 9(b) challenges to fraud pleading). The court allowed jurisdictional discovery and briefing on an amended complaint.
- MidCap argued (inter alia) that (1) venue is improper for non-Texas plaintiffs and forum-selection clauses compel other fora; (2) Bristol-Myers requires each nonresident plaintiff to show jurisdictional contacts; (3) plaintiffs lack evidence to impute Graebel contacts to MidCap via alter-ego, agency, or conspiracy; and (4) FLSA coverage and fraud pleading are inadequate.
- The Court denied dismissal for improper venue (finding §1391(b)(3) fallback could apply), granted dismissal for lack of personal jurisdiction as to MidCap Trust (no prima facie contacts), but denied dismissal as to MidCap Funding (consent via receivership) and otherwise denied MidCap’s Rule 12(b)(6) and Rule 9(b) challenges.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Venue (proper district) | Southern District is proper; many misrepresentations occurred in Texas and §1391(b)(3) fallback applies because whole action cannot be brought elsewhere | Venue improper for non-Texas plaintiffs; forum-selection clauses govern some contracts | Denied dismissal for improper venue; court finds fallback §1391(b)(3) can support venue here |
| Applicability of Bristol-Myers to collective/FLSA claims | Bristol-Myers is state-jurisdiction case and should not bar federal FLSA collective jurisdiction | Bristol-Myers requires each plaintiff to show forum contacts | Court declines to extend Bristol-Myers to FLSA collective action jurisdictional analysis here |
| Personal jurisdiction via alter-ego/agency/conspiracy | MidCap controlled Graebel's funding, had on-site teams, and thus Graebel's Texas contacts and alleged wrongful acts are imputable to MidCap | MidCap was a lender protecting collateral; no stock ownership, no daily control, and no evidence MidCap directed nonpayment or fraud | PJ dismissed as to MidCap Trust (no prima facie contacts); PJ over MidCap Funding denied (consent by filing receivership in Dallas); PJ not established via alter-ego, agency, or conspiracy theories |
| Failure to state claims (FLSA coverage, fraud pleading, imputed liability) | Complaints plead FLSA individual or enterprise coverage and assert fraud/alter-ego/agency with particularity; putative collective identified | FLSA coverage not pleaded for individual plaintiffs; MidCap and Graebel are different businesses; fraud/veil-piercing not pleaded with Rule 9(b) specificity | Claim for FLSA sufficiently pleaded at pleading stage (enterprise plausible); conspiracy, aiding-and-abetting, veil-piercing, and agency theories survive pleadings review; Rule 9(b) considered satisfied as to imputed fraud/allegations for now |
Key Cases Cited
- Bristol-Myers Squibb Co. v. Superior Court, 137 S. Ct. 1773 (2017) (specific-jurisdiction requires connection between forum and the particular claim)
- Daimler AG v. Bauman, 571 U.S. 117 (2014) (general jurisdiction limited to forum where corporation is at home)
- Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915 (2011) (general jurisdiction due to continuous and systematic contacts)
- Twombly v. Bell Atlantic Corp., 550 U.S. 544 (2007) (plausibility standard for pleadings)
- Valdes v. Leisure Resource Group, Inc., 810 F.2d 1345 (5th Cir. 1987) (lender monitoring/control does not automatically establish alter-ego or liability)
- Hargrave v. Fibreboard Corp., 710 F.2d 1154 (5th Cir. 1983) (factors for alter-ego analysis)