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Molock v. Whole Foods Market, Inc.

United States District Court, District of Columbia

March 15, 2018

MICHAEL MOLOCK, et al., Plaintiffs,
v.
WHOLE FOODS MARKET, INC., et al., Defendants.

          MEMORANDUM OPINION AND ORDER I.INTRODUCTION

          Amit P. Mehta United States District Judge

         Plaintiffs Michael Molock, Randal Kuczor, Carl Bowens, Jose Fuentes, Christopher Milner, Jon Pace, and Sarah Strickland (collectively, “Plaintiffs”) are current and former employees of Whole Foods grocery stores in the District of Columbia, Georgia, Maryland, North Carolina, Oklahoma, and Virginia. On behalf of a putative class of similarly-situated past and present employees of Whole Foods, they bring this action against Defendants Whole Foods Market, Inc. (“WFMI”), and Whole Foods Market Group, Inc. (“WFM Group”), to recover all wages and damages owed to them as a result of the allegedly unlawful manner in which Whole Foods conducted its “Gainsharing” program, a bonus program designed to incentivize individual Whole Foods grocery store departments to operate under budget by sharing cost savings with employees.[1]

         Before the court is Defendants' Motion to Dismiss Plaintiffs' Second Amended Class Action Complaint. For the reasons herein, the court grants in part and denies in part Defendants' Motion to Dismiss.

         II. BACKGROUND

         A. Factual Background

         Each of the seven named Plaintiffs in this action are or were employed in Whole Foods grocery stores throughout the United States. Second Am. Compl., ECF No. 28 [hereinafter 2d Am. Compl.], ¶¶ 32-99. Beginning in 1986 and throughout Plaintiffs' employment, Whole Foods stores nationwide used a profit-sharing program-what Whole Foods referred to as its “Gainsharing” program-to incentivize department productivity and revenue. Id. ¶ 15. Under the program, as part of the employee compensation package, Whole Foods awarded bonuses to employees whose departments performed under budget by automatically distributing the surplus savings among the employees in that department. Id. During the hiring and orientation process for new Whole Foods stores employees, Defendants provided Plaintiffs with information about the Gainsharing program. See Id. ¶ 16 (Benefits Orientation Training illustrations). Plaintiffs assert that Whole Foods store managers, department team leaders, and human resources employees provided each of them with materials explaining Gainsharing bonuses and expressly represented during their interviews and throughout their employment that mandatory Gainsharing bonuses were part of the employee compensation package. See Id. ¶¶ 32-99. Plaintiffs also assert that throughout their employment, Defendants posted Gainsharing reports listing guaranteed wages for employees to view each month, at least once a month. See Id. Plaintiffs relied on these representations to accept offers of employment, and once employed, to work to increase the productivity of their departments in order to create a surplus. See id.

         Once Plaintiffs accepted employment and became Team Members-thereby vesting in the Gainsharing program-they worked to create a surplus in their departments and therefore were entitled to Gainsharing bonuses. See Id. However, each Plaintiff alleges that he or she was denied these bonuses throughout his or her entire employment at Whole Foods stores, because Defendants intentionally manipulated and undermined the Gainsharing program in two ways: (1) by imposing a nationwide scheme of “shifting” labor costs, and (2) by establishing “Fast Teams.” Id. ¶¶ 18-25. Under the practice of “shifting” labor costs, if a department came in over budget, Defendants instructed store leadership to “shift” the labor costs of that department to a department that had a budget surplus. Id. ¶¶ 18-31. Payroll/Benefits Specialists at each Whole Foods grocery store then effectuated labor cost shifting by manually altering employee time records otherwise automatically recorded in a Kronos computer system and then submitting the manipulated records to WFMI corporate headquarters for payroll processing. Id. ¶ 20. As a result of this practice, the Gainsharing bonuses owed to employees of departments that performed under budget-including Plaintiffs-were reduced by the costs unlawfully “shifted” to those departments. Id. ¶¶ 24-25. The decisio n to “shift ” labor costs was authorized, made, and ratified at the executive level by Defendants in order to steal bonuses earned by employees nationwide and pad company profits. Id. ¶ 21. Additionally, the use of “Fast Teams” allowed employees to float from one department to another, purportedly to help departments out as needed. Id. ¶ 22. According to Plaintiffs, however, Defendants used Fast Teams to shift labor costs among departments without properly accounting for their work, thereby failing to administer and pay the appropriate bonuses required by the Gainsharing program. Id.

         Defendants admitted to misconduct publicly, but claimed that manipulation of the Gainsharing program was an isolated problem, not one that plagued stores nationwide. In public statements, Defendants asserted that the malfeasance occurred in only nine of the 457 Whole Foods stores and was perpetrated by nine store managers who “engaged in a policy infraction that allowed the managers to benefit from a profit-sharing program at the expense of store employees.” Defs.' Mot. to Dismiss Second Am. Compl., ECF No. 30 [hereinafter Defs.' Mot.], Ex. A-1, ECF No. 30-3 [hereinafter AP Article]; see 2d Am. Compl. ¶¶ 26, 29; Pls.' Mem. in Opp'n to Defs.' Mot., ECF No. 32 [hereinafter Pls.' Opp'n], Ex., ECF No. 32-4 [hereinafter Washington Post Article]. Defendants terminated those nine store managers.

         Plaintiffs Molock, Kuczor, Milner, Bowens, Pace, and Fuentes each were employed in at least one of the nine Whole Foods grocery stores in which Defendants have admitted that employees were deprived of earned Gainsharing bonuses. 2d Am. Compl. ¶ 26. Defendants subsequently sent Whole Foods executives to the nine stores, where they spoke to store emplo yees-including Plaintiffs-and admitted to misconduct related to the Gainsharing program. Plaintiffs claim that Defendants attempted to pay small sums to employees at these nine stores to “buy peace.” Id. ¶¶ 27-28.

         B. Class Action Allegations

         Plaintiffs seek to bring this case on behalf of themselves and all other employees of Whole Foods who were employed by Whole Foods in the District of Columbia, Georgia, Maryland, North Carolina, Oklahoma, Virginia, and throughout the country. Id. ¶ 100. They seek to define the putative class as “past and present employees of Whole Foods who were not paid wages owed to them under the Gainsharing program.” Id. ¶ 101. Plaintiffs propose to include within the class the following subclasses:

a. Past and present employees of Whole Foods who were employed in the District of Columbia and did not receive all earned wages at least twice during each calendar month on regular paydays in violation of the District of Columbia Wage Payment and Collection Law.
b. Past employees of Whole Foods who were employed in the District of Columbia and were not paid all earned wages within 7 days after resignation or termination.
c. Past and present employees of Whole Foods who were employed in the State of Maryland and did not receive all earned wages at least once in every 2 weeks or twice in each month on regular paydays, in violation of MD Code, Labor and Employment, § 3-502.
d. Past employees of Whole Foods who were employed in the State of Maryland and were not paid all earned wages for work that the employee performed before the termination of employment, on or before the employee's next anticipated payday, in violation of MD Code, Labor and Employment, § 3-505.
e. Past and present employees of Whole Foods who were employed in the State of Maryland and were not at the time of their hiring provided full and accurate notice of their rates of pay, in violation of MD Code, Labor and Employment, § 3-504.
f. Past and present employees of Whole Foods who were employed in the State of Oklahoma and did not receive all earned wages at least twice each calendar month on regular paydays designated in advance by the employer, in violation of 40 Okl. St. § 165.2.
g. Past employees of Whole Foods who were employed in the State of Oklahoma and were not paid all earned wages, less offsets and less any amount over which a bona fide disagreement exists, at the employee's next anticipated payday, in violation of 40 Okl. St. § 165.3.

Id. ¶ 101(a)-(g).

         C. Procedural Background

         Plaintiffs filed this action on December 20, 2016. See Compl., ECF No. 1. After Plaintiffs amended their original Complaint, Defendants moved for dismissal, and the court heard oral argument on Defendants' motion on May 19, 2017. See Defs.' Mot. to Dismiss Am. Compl., ECF No. 15. Before the court ruled, Plaintiffs moved for leave to file a Second Amended Complaint, and over Defendants' objection, the court granted leave to amend. See Mem. Op. & Order, ECF No. 27.

         Now on the third iteration of the Complaint, Plaintiffs assert the following claims: (1) breach of contract and breach of the duty of good faith and fair dealing (Count I); (2) unjust enrichment (Count II); (3) failure to pay wages upon discharge in violation of D.C. Code § 32-1303 (Count III); (4) failure to pay wages in violation of D.C. Code § 32-1302 (Count IV); (5) failure to maintain accurate employment records in violation of D.C. Code § 32-1008 (Count V); (6) failure to pay wages upon discharge in violation of Md. Code § 3-504 (Count VI); (7) failure to pay wages in violation of Md. Code § 3-502 (Count VII); (8) failure to inform of wages in violation of Md. Code § 3-504 (Count VIII); (9) failure to pay wages upon discharge in violation of Okla. Stat. tit. 40, § 165.3 (Count IX); (10) failure to pay wages in violation of Okla. Stat. tit. 40, § 165.2 (Count X); and (11) fraud (Count XI). 2d Am. Compl. ¶¶ 107-70.

         Defendants moved to dismiss the Second Amended Complaint in its entirety on July 21, 2017, pursuant to Rules 12(b)(1), 12(b)(2), and 12(b)(6) of the Federal Rules of Civil Procedure. Defs.' Mot. Specifically, Defendants contend that: (1) all claims against WFMI and portions of the claims against WFM Group should be dismissed for lack of personal jurisdiction pursuant to Rule 12(b)(2); (2) all claims, including the nationwide class claims, should be dismissed for lack of Article III standing pursuant to Rule 12(b)(1); and (3) all claims should be dismissed for failure to state a claim pursuant to Rule 12(b)(6). Defs.' Mot., Defs.' Mem. of Points & Auth. in Supp. of Defs.' Mot., ECF No. 30-1 [hereinafter Defs.' Mem.], at 6. Plaintiffs opposed Defendants' Motion. See Pls.' Opp'n. Defendants' motion is now ripe for consideration.

         III. LEGAL STANDARD

         Upon a motion to dismiss under Rule 12(b)(2), the plaintiff bears the burden of establishing a factual basis for personal jurisdiction. Crane v. N.Y. Zoological Soc., 894 F.2d 454, 456 (D.C. Cir. 1990). A plaintiff can survive a motion to dismiss if she makes a “prima facie” showing of personal jurisdiction. Edmond v. U.S. Postal Serv. Gen. Counsel, 949 F.2d 415, 424 (D.C. Cir. 1991). “[T]o establish a prima facie case, plaintiffs are not limited to evidence that meets the standards of admissibility required by the district court. Rather, they may rest their argument on their pleadings, bolstered by such affidavits and other written materials as they can otherwise obtain.” Mwani v. bin Laden, 417 F.3d 1, 7 (D.C. Cir. 2005). The court resolves all factual discrepancies in the record in favor of the plaintiff. See Crane, 894 F.2d at 456.

         Under Rule 12(b)(1), the plaintiff bears the burden of establishing that the court has subject-matter jurisdiction. See Lujan v. Defs. of Wildlife, 504 U.S. 555, 561 (1992). In deciding a Rule 12(b)(1) motion, the court “may consider materials outside the pleadings, ” but “must still accept all of the factual allegations in the complaint as true.” Jerome Stevens Pharm., Inc. v. Food & Drug Admin., 402 F.3d 1249, 1253-54 (D.C. Cir. 2005) (citation and alteration omitted). “Because subject-matter jurisdiction focuses on the court's power to hear the plaintiff's claim, a Rule 12(b)(1) motion imposes on the court an affirmative obligation to ensure that it is acting within the scope of its jurisdictional authority.” Grand Lodge of Fraternal Order of Police v. Ashcroft, 185 F.Supp.2d 9, 13 (D.D.C. 2001). As such, “‘the plaintiff's factual allegations in the complaint will bear closer scrutiny in resolving a 12(b)(1) motion' than in resolving a 12(b)(6) motion for failure to state a claim.” Id. (quoting 5A Charles A. Wright & Arthur R. Miller, Fed. Prac. & Proc. Civ. 2d § 1350).

         When evaluating a motion under Rule 12(b)(6), the court “construe[s] the complaint ‘in favor of the plaintiff, who must be granted the benefit of all inferences that can be derived from the facts alleged.'” Hettinga v. United States, 677 F.3d 471, 476 (D.C. Cir. 2012) (quoting Schuler v. United States, 617 F.2d 605, 608 (D.C. Cir. 1979)). The court need not accept as true, however, “a legal conclusion couched as a factual allegation.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007)). To survive a motion to dismiss, the complaint “must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Id. (quoting Twombly, 550 U.S. at 570). A claim is plausible on its face “when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Id.

         IV. DISCUSSION

         A. Rule 12(b)(2) Personal Jurisdiction

         The court begins by determining whether it can exercise personal jurisdiction over WFMI and WFM Group. E.g., Forras v. Rauf, 812 F.3d 1102, 1105 (D.C. Cir. 2016); see Williams v. Romarm, SA, 756 F.3d 777, 781 n.1 (D.C. Cir. 2014) (approving district court's decision to address personal jurisdiction before deciding whether it had subject matter jurisdiction). Personal jurisdiction takes two forms: (1) “general or all-purpose jurisdiction” or (2) “specific or case-linked jurisdiction.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011). The court need not address general jurisdiction here because Plaintiffs only contend that the court has specific jurisdiction over Defendants. See Pls.' Opp'n at 5, 12 (asserting that Plaintiffs have established “specific personal jurisdiction” over WFMI and WFM Group). Specific jurisdiction is case-specific. “In contrast to general, all-purpose jurisdiction, specific jurisdiction is confined to adjudication of issues deriving from, or connected with, the very controversy that establishes jurisdiction.” Goodyear, 564 U.S. at 919 (citation omitted). Stated differently, specific jurisdiction exists if a claim is related to or arises out of the non-resident defendant's contacts with the forum. See Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 n.8 (1984).

         A plaintiff seeking to establish specific jurisdiction over a non-resident defendant must make two showings. She must “establish that specific jurisdiction comports with the forum's long-arm statute, D.C. Code § 13-423(a), and does not violate due process.” FC Inv. Group LC v. IFX Markets, Ltd., 529 F.3d 1087, 1094-95 (D.C. Cir. 2008). As pertinent to this case, the District of Co lumbia's long-arm statute ...


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