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Wright v. Waste Pro USA Inc.

United States District Court, D. South Carolina, Charleston Division

July 25, 2019

Anthony Wright, Daniel Hansen, and Kenneth Privette, all individually and on behalf of all others similarly situated Plaintiffs,
v.
Waste Pro USA Inc., Waste Pro of Florida, Inc., Waste Pro of South Carolina, Inc., Waste Pro of North Carolina, Inc., Defendants.

          ORDER

          DAVID C. NORTON UNITED STATES DISTRICT JUDGE

         This matter comes before the court on defendants Waste Pro USA and Waste Pro of Florida's (“Waste Pro FL”) motions to dismiss for lack of personal jurisdiction, lack of subject-matter jurisdiction, failure to state a claim, and preemption, ECF Nos. 37, 38; on Waste Pro of South Carolina's (“Waste Pro SC”) and Waste Pro of North Carolina's (“Waste Pro NC”) motions to dismiss for lack of subject-matter jurisdiction, failure to state a claim, and preemption, ECF Nos. 39 and 40; and on plaintiffs Anthony Wright (“Wright”), Daniel Hansen (“Hansen”), and Kenneth Privette's (“Privette”) (collectively, “plaintiffs”) motion to sever and transfer, ECF No. 129. For the reasons set forth below, the court GRANTS Waste Pro USA and Waste Pro FL's motions to dismiss and DISMISSES them as defendants from this case. The court also DISMISSES all plaintiffs who are not employees of Waste Pro S.C. or Waste Pro NC. The court GRANTS Waste Pro NC and Waste Pro SC's motion to dismiss plaintiffs' North Carolina Wage and Hour Act (“NCWHA”) claim. The court finds that the remaining North and South Carolina plaintiffs do not have standing to sue both Waste Pro NC and Waste Pro S.C. and orders plaintiffs to file an amended complaint pursuant to the instructions given in this order. The court finds MOOT defendants remaining arguments, but defendants may re-file their motions regarding standing and failure to state a claim if plaintiffs do not properly re-plead their complaint. This order also renders MOOT plaintiffs' motion to sever and transfer.

         I. BACKGROUND

         Plaintiffs brought this action against defendants individually on a collective and class wide basis. Plaintiffs are waste disposal drivers for defendants. They claim that, due to the defendants' company-wide policies, they were deprived of wages for hours actually worked. According to plaintiffs, defendants did this in the following ways: (1) erroneously calculating their prevailing hourly rate; (2) only paying plaintiffs “half-time” for all hours worked over forty hours in a given workweek; (3) requiring them to perform pre-shift and post-shift duties while not clocked in; and (4) automatically deducting thirty minutes for lunch breaks that defendants knew plaintiffs worked through. Plaintiffs bring this action on behalf of all other similarly situated non-exempt waste disposal drivers who were paid a day rate and who have been employed by Waste Pro entities throughout the United States, at any time from September 29, 2014 through the final disposition of this matter. Plaintiffs all filed consent forms to join this collective action lawsuit against Waste Pro USA only. ECF Nos. 30-3, 30-4, 30-5. However, each plaintiff specifies that they work or worked for a particular Waste Pro facility-Wright worked at Waste Pro's facility in Florida, Hansen in South Carolina, and Privette in North Carolina.

         Plaintiffs filed suit in this court on October 2, 2017, and filed their second amended complaint on December 5, 2017, bringing the following causes of action: (1) violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201, et seq.; (2) violation of the South Carolina Payment of Wages Act (“SCPWA”), South Carolina Code §§ 41-10-10, et seq.; and (3) violation of the NCWHA, North Carolina General Statutes §§ 95-25.1, et seq.. ECF No. 30-2. On December 20, 2017, Waste Pro USA and Waste Pro FL filed a motion to dismiss for lack of subject matter jurisdiction, lack of personal jurisdiction, and failure to state a claim, and also seeking the dismissal of plaintiffs' North Carolina claim based on preemption grounds. ECF Nos. 37 and 38. The other defendants filed nearly identical motions that same day, with Waste Pro S.C. and Waste Pro NC declining to bring a motion to dismiss for lack of personal jurisdiction. ECF Nos. 39 and 40. On January 16, 2018, plaintiffs filed virtually identical responses to all of the motions. ECF Nos. 46, 47, 48, and 49. On February 2, 2018, defendants filed a joint reply to those responses. ECF No. 54. Pursuant to the court's order to conduct jurisdictional discovery, WP USA and WP FL filed their supplemental briefing on the personal jurisdiction issue on November 30, 2018, ECF No. 124, and plaintiffs filed their supplemental briefing on February 15, 2019, ECF No. 141, and filed a reply to plaintiffs' brief on February 25, 2019, ECF No. 143.

         The matters have been fully briefed and are now ripe for the court's review.

         II. STANDARDS

         A. Motion to Dismiss for Lack of Personal Jurisdiction

          When the defendant challenges personal jurisdiction, the plaintiff has the burden of showing that jurisdiction exists. See In re Celotex Corp., 124 F.3d 619, 628 (4th Cir. 1997). When the court decides a personal jurisdiction challenge without an evidentiary hearing, the plaintiff must prove a prima facie case of personal jurisdiction. See Mylan Labs, Inc. v. Akzo, N.V., 2 F.3d 56, 60 (4th Cir. 1993). “In considering the challenge on such a record, the court must construe all relevant pleading allegations in the light most favorable to the plaintiff, assume credibility, and draw the most favorable inferences for the existence of jurisdiction.” In re Celotex Corp., 234 F.3d at 628 (quoting Combs v. Bakker, 886 F.2d 673, 676 (4th Cir. 1989)). However, the court need not “credit conclusory allegations or draw farfetched inferences.” Masselli & Lane, PC v. Miller & Schuh, PA, 215 F.3d 1320 (4th Cir. 2000).

         B. Motion to Dismiss for Lack of Subject Matter Jurisdiction

         Defendants' standing argument implicates this court's subject matter jurisdiction and is governed by Rule 12(b)(1). Crumbling v. Miyabi Murrells Inlet, LLC, 192 F.Supp.3d 640, 643 (D.S.C. 2016). The determination of subject matter jurisdiction must be made at the outset before any determination on the merits. Steel Co. v. Citizens for a Better Environment, 523 U.S. 83 (1998). “The plaintiff bears the burden of persuasion if subject matter jurisdiction is challenged under Rule 12(b)(1).” Williams v. United States, 50 F.3d 299, 304 (4th Cir. 1995). If the plaintiff cannot overcome this burden, then the claim must be dismissed. Welch v. United States, 409 F.3d 646, 651 (4th Cir. 2005). When a party contends that “the complaint [] fails to allege facts upon which subject matter jurisdiction can be based[, ] . . . all the facts alleged in the complaint are assumed to be true.” Luna-Reyes v. RFI Const., LLC, 57 F.Supp.3d 495, 499 (M.D. N.C. 2014) (quoting Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982)). “[A] trial court should dismiss under Rule 12(b)(1) only when the jurisdictional allegations are ‘clearly . . .immaterial, made solely for the purpose of obtaining jurisdiction or where such a claim is wholly unsubstantial and frivolous.'” Kerns v. United States, 585 F.3d 187, 193 (4th Cir. 2009) (quoting Bell v. Hood, 327 U.S. 678, 682 (1946)).

         C. Motion to Dismiss for Failure to State a Claim

         Under Federal Rule of Civil Procedure 12(b)(6), a party may move to dismiss for “failure to state a claim upon which relief can be granted.” When considering a Rule 12(b)(6) motion to dismiss, the court must accept the plaintiff's factual allegations as true and draw all reasonable inferences in the plaintiff's favor. See E.I. du Pont de Nemours & Co. v. Kolon Indus., 637 F.3d 435, 440 (4th Cir. 2011). But “the tenet that a court must accept as true all of the allegations contained in a complaint is inapplicable to legal conclusions.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). On a motion to dismiss, the court's task is limited to determining whether the complaint states a “plausible claim for relief.” Id. at 679. Although Rule 8(a)(2) requires only a “short and plain statement of the claim showing that the pleader is entitled to relief, ” “a formulaic recitation of the elements of a cause of action will not do.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). The “complaint must contain sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible on its face.'” Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 570).

         III. DISCUSSION

         A. Motion to Dismiss for Lack of Personal Jurisdiction

         Defendants Waste Pro USA and Waste Pro FL seek dismissal of plaintiffs' second amended complaint for lack of personal jurisdiction, pursuant to Federal Rule of Civil Procedure 12(b)(2).[1] ECF No. 37 at 4. The court has considered whether it may exercise jurisdiction over these entities under various legal grounds-general personal jurisdiction, specific personal jurisdiction, joint employer / single integrated enterprise theory (“JE/SIE theory”), [2] and agency theory. The court has analyzed the evidence the parties have put forth in their supplemental briefings and finds that plaintiffs have not demonstrated that the court should exercise personal jurisdiction over Waste Pro USA or Waste Pro FL under any of these legal grounds.

         1. Background Law on Personal Jurisdiction

         In evaluating a challenge to personal jurisdiction under a state's long-arm statute, the court engages in a two-step analysis. Ellicott Mach. Corp. v. John Holland Party Ltd., 995 F.2d 474, 477 (4th Cir. 1993). First, the long-arm statute must authorize the exercise of jurisdiction under the facts presented. Id. Second, if the statute does authorize jurisdiction, then the court must determine if the statutory assertion of personal jurisdiction is consistent with due process. Id. South Carolina's long-arm statute extends to the outer limits allowed by the Due Process Clause. Foster v. Arletty 3 Sarl, 278 F.3d 409, 414 (4th Cir. 2002). Consequently, the only question before the court is whether the exercise of personal jurisdiction would violate due process. ESAB Grp., Inc. v. Centricut, LLC, 34 F.Supp.2d 323, 328 (D.S.C. 1999).

         The due process test for personal jurisdiction involves two components: minimum contacts and fairness. See World-Wide Volkswagen Corp. v. Woodson, 444 U.S. 286 (1980). Under the minimum contacts test, a nonresident defendant must have certain minimum contacts such that the suit does not offend “traditional notions of fair play and substantial justice.” Int'l Shoe Co. v. State of Wash., Office of Unemployment Compensation and Placement, 326 U.S. 310, 316 (1945). Due process is satisfied if the court asserts personal jurisdiction over a defendant who “purposefully avails itself of the privilege of conducting activities within the forum state, ” Hanson v. Denckla, 357 U.S. 235, 253 (1958), such that it “should reasonably anticipate being haled into court there, ” World-Wide Volkswagen, 444 U.S. at 297. After a showing of the defendant's purposeful availment, the reasonableness inquiry balances any burden on the defendant against countervailing concerns such as the plaintiff's interest in obtaining relief and the forum state's interest in the controversy. See id. at 292.

         A party may be subject to the court's power either through general personal jurisdiction or specific personal jurisdiction. A court has general personal jurisdiction over a foreign corporation when its contacts within the forum state “are so ‘continuous and systematic' as to render them essentially at home.” Goodyear Dunlop Tires Operations, S.A. v. Brown, 564 U.S. 915, 919 (2011) (quotes omitted). “[T]he paradigm forum for the exercise of general jurisdiction is the individual's domicile” and for a corporation, it is the corporation's place of incorporation and principal place of business. Daimler AG v. Bauman, 571 U.S. 117, 137 (2014). While this is the general rule, there may be “an exceptional case” in which “a corporate defendant's operations in another forum ‘may be so substantial and of such a nature as to render the corporation at home in that State.'” BNSF Ry. Co. v. Tyrrell, 137 S.Ct. 1549, 1558 (2017) (quoting Daimler, 571 U.S. at 139 n.19). For example, the Supreme Court found a Philippine Island corporation to be essentially at home in Ohio because it was forced to set up a temporary principal place of business in Ohio while activities in the Philippines were ceased during World War II. Perkins v. Benguet Consol. Mining Co., 342 U.S. 437, 447-48 (1952).

         Specific personal jurisdiction arises when a cause of action is related to the defendant's activities within the forum state. See S.C. Code Ann. § 36-2-803; Helicopteros Nacionales de Colombia, S.A. v. Hall, 466 U.S. 408, 414 (1984). The Fourth Circuit has established a three-part test for evaluating the propriety of exercising specific jurisdiction: (1) whether and to what extent the defendant purposely availed itself of the privileges of conducting activities in the forum state, and thus invoked the benefits and protections of its laws; (2) whether the plaintiff's claims arise out of those forum-related activities; and (3) whether the exercise of jurisdiction is constitutionally “reasonable.” Christian Sci. Bd. of Dirs. of the First Church of Christ v. Nolan, 259 F.3d 209, 215-216 (4th Cir. 2001) (citing Helicopteros, 466 U.S. at 414-16; Burger King v. Rudzewicz, 471 U.S. 462, 472, 476-77 (1985)).

         2. No. General Personal Jurisdiction over Waste Pro USA

         Plaintiffs have not demonstrated that Waste Pro USA should be subject to the court's general or specific personal jurisdiction. Courts can exercise general personal jurisdiction over foreign (out of state) corporations in two ways: (1) if the corporation's contacts within the forum state “are so ‘continuous and systematic' as to render them essentially at home, ” Goodyear, 564 U.S. at 919; and (2) if the foreign corporation is a parent company with a subsidiary that is subject to the court's general personal jurisdiction and if “the subsidiary functions as the agent or mere department of the parent” in a manner that justifies treating it as an alter ego and/or piercing the corporate veil, Builder Mart of Am., Inc. v. First Union Corp., 563 S.E.2d 352, 358 (S.C. Ct. App. 2002), overruled on other grounds by Farmer v. Monsanto Corp., 579 S.E.2d 325 (S.C. 2003).

         “A court can assert general jurisdiction over business entities only when the ‘continuous corporate operation within a state is thought so substantial and of such a nature as to justify suit against it on causes of action arising from dealings entirely distinct from those activities.'” Afa Polytek (N. Am.) Inc. v. Clorox Co., 2014 WL 12608562, at *4 (D.S.C. Jan. 17, 2014) (quoting Nichols v. G.D. Searle & Co., 991 F.2d 1195, 1199 (4th Cir. 1993)). “With respect to a corporation, the place of incorporation and principal place of business are ‘paradig[m] . . . bases for general jurisdiction.'” Daimler, 571 U.S. at 137. Although the standard for exercising general personal jurisdiction over an out-of-state corporate defendant “is a stringent one, it is the consequence of the problems inherent in attempting to sue a foreign corporation that has carefully structured its business so as to separate itself from the operation of its wholly-owned subsidiaries-as it may properly do.” Builder Mart, 563 S.E.2d at 358. Furthermore, “the mere fact that a subsidiary has minimum contacts with a forum is not enough to confer personal jurisdiction over the parent company.” Afa Polytek, 2014 WL 12608562 at *5; accord Jazini by Jazini v. Nissan Motor Co., 148 F.3d 181, 184 (2d Cir. 1998) (“[T]he presence of the subsidiary alone does not establish the parent's presence in the state.”). Such a model would “approve the exercise of general jurisdiction in every State in which a corporation engages in a substantial, continuous, and systematic course of business, ” which is a formulation that the Supreme Court has held to be “unacceptably grasping.” Daimler, 571 U.S. at 138.

         Plaintiffs have not demonstrated that Waste Pro USA's contacts with South Carolina are so “continuous and systematic” that this state could be considered the corporation's home. Waste Pro USA's state of incorporation and principal place of business is Florida. ECF No. 37-2 ¶ 3. It is a holding company that does not provide goods or services in South Carolina or elsewhere, nor is it authorized to conduct business in South Carolina. Id. ¶ 4-5. It does not own any real property, have any bank accounts, or pay taxes in this state. Id. ¶ 7, 9-10. Finally, Waste Pro USA does not have any direct employees in South Carolina or maintain an agent for service of process here. Id. ¶¶ 6, 8. Plaintiffs have provided certain evidence to the court of Waste Pro USA's limited involvement in South Carolina through its subsidiary, Waste Pro SC, which will be discussed in greater detail in the sections on alter ego and piercing the corporate veil. However, none of this evidence or any of plaintiffs' allegations about Waste Pro USA show that Waste Pro USA operates so continuously and systematically in South Carolina as to render this state its “home.”

         While the mere presence of a subsidiary within the court's personal jurisdiction does not subject a foreign corporation to the court's reach, courts may rely on agency principles to exercise personal jurisdiction over a parent corporation through its subsidiary if the parent company exercises a certain level of control and supervision over its subsidiary. South Carolina courts recognize two tests that will subject a parent corporation to the court's personal jurisdiction through its subsidiary-alter ego and piercing the corporate veil. See, e.g., Builder Mart, 563 S.E.2d at 358; Afa Polytek, 2014 WL 12608562, at *6; ScanSource, Inc. v. Mitel Networks Corp., 2011 WL 2550719, at *6 (D.S.C. June 24, 2011); see also Mendez v. Pure Foods Mgmt. Grp., Inc., 2016 WL 183473, at *1-7 (D. Conn. Jan. 14, 2016) (“Under the agency test, the court may attribute the subsidiary's actions to the parent if the parent exerts considerable control over the activities of the subsidiary.”); Wm. Passalacqua Builders, Inc. v. Resnick Developers S., Inc., 933 F.2d 131, 142-43 (2d Cir. 1991) (observing that when parties are actually alter egos of one another, a “jurisdictional objection evaporates” because “the alter egos are treated as one entity”).

         i. Alter-Ego / Agency

         In determining whether to exercise jurisdiction based on the alter-ego theory, the court must find the following factors: (1) common ownership; (2) financial independence; (3) degree of selection of executive personnel and failure to observe corporate formalities; and (4) the degree of control over marketing and operational policies. Builder Mart, 564 S.E.2d at 358. “For the courts to have personal jurisdiction” under this theory, the plaintiff “must show that the subsidiary functions as the agent or mere department of the parent-that is, that the subsidiary does all the business which the parent corporation could do if here on its own.” Id. “It is essential that all four factors be present with sufficient factual specificity to confer jurisdiction on [ ] courts.” Id.

         Plaintiffs attached multiple exhibits to their supplemental briefing reflecting the evidence they collected during jurisdictional discovery which they claim shows that Waste Pro USA and Waste Pro S.C. were operating as mere alter-egos of each other, such that the court should exercise personal jurisdiction over Waste Pro USA because it has general personal jurisdiction over Waste Pro SC. First, plaintiffs' supplemental briefing does not include any evidence of common ownership, although it does show that all four defendants have the same CEO and CFO. However, this alone does not create personal jurisdiction via an alter ego theory. See ScanSource, Inc., 2011 WL 2550719, at *5 (“[T]he fact that [the parent and subsidiary], like many companies, share executives does not establish that [the parent] controls the selection of the executives.”); Weiss v. La Suisse, 69 F.Supp.2d 449, 458 (S.D.N.Y.1999) (“[T]he overlap of directors and officers between parent and subsidiary alone does not render the subsidiary a ‘mere department' for jurisdictional purposes.”). It is also worth noting that each ...


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