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Acosta v. Mica Contracting, LLC

United States District Court, S.D. Ohio, Western Division

June 28, 2019

R. ALEXANDER ACOSTA, Secretary of Labor, United States Department of Labor, Plaintiff,
v.
MICA CONTRACTING, LLC, et al., Defendants.

          DLOTT, J.

          REPORT AND RECOMMENDATION

          Karen L. Litkovitz O United States Magistrate Judge.

         Plaintiff R. Alexander Acosta, Secretary of Labor ("Secretary''/''plaintiff"), brings this action to enjoin and restrain defendants MICA Contracting LLC ("MICA"), J&E Builders LLC ("J&E"), Sarah Elaine Thompson, Timothy Thompson, and John Wayne House from violating Sections 6, 7, 11, and 15 of the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. § 201 et. seq., pursuant to Section 17 of the FLSA, and to recover unpaid minimum wage and overtime compensation owed pursuant to Section 16(c) of the FLSA. (Doc. 1). This matter is before the Court on defendant Sarah Elaine Thompson's motion to dismiss (Doc. 18) and plaintiffs response in opposition (Doc. 19). Defendant Thompson did not file a reply brief in support of her motion to dismiss.

         I. Factual Background

         The Secretary filed its complaint against defendants on August 21, 2018. (Doc. 1). Plaintiff alleges, in relevant part, the following facts: defendant Sarah Elaine Thompson[1] was an employer within the meaning of Section 3(d) of the FLSA, 29 U.S.C. § 203(d), with respect to both MICA and J&E. (Doc. 1 at 3). Ms. Thompson was the sole owner of MICA at all relevant times. (Id.). Plaintiff alleges that Ms. Thompson "actively supervised the day-to-day operations and management of both MICA and J&E[2] in relation to their respective employees, including but not limited to determining employees' compensation." (Id.). Plaintiff alleges that Ms. Thompson violated the FLSA between January 4, 2016 and February 27, 2017 in her role with MICA and between November 28, 2016 and approximately November 4, 2017 in her role with J&E. (Id. at 7-8). Plaintiff further alleges that Ms. Thompson, in her role as an employer, failed to pay minimum wage and overtime payments to employees, as well as properly keep records. (Id. at 7-9).

         Plaintiff acknowledges in the complaint that Ms. Thompson filed for personal bankruptcy on April 20, 2017 in the U.S. Bankruptcy Court for the Southern District of Ohio, No. 17-11433. (Doc. 1 at 3 n.1). Plaintiff alleges that the "Secretary's efforts to enforce any monetary portion of any judgment obtained against Defendants will be consistent with the Bankruptcy Code." (Id.). As relief, plaintiff seeks (1) an injunction as to Ms. Thompson and the other defendants to prospectively comply with the FLSA ("compliance injunction"); (2) monetary judgment for back wages and liquidated damages ("monetary judgment"), or (3) in the event liquidated damages are not awarded, an injunction prohibiting Ms. Thompson and the other defendants from withholding payment of back wages and prejudgment interest ("monetary injunction"); (4) costs of this action; (5) such other and further relief as may be necessary and appropriate. (Id. at 9-10).

         II. Defendant Thompson's Motion to Dismiss (Doc. 18)

         Defendant Sarah Elaine Thompson moves to dismiss plaintiffs claims against her on the basis that she received a discharge in her Chapter 7 bankruptcy action, and plaintiff was included in the bankruptcy petition as a creditor. (Doc. 18 at 1). Ms. Thompson argues that the U.S. Department of Labor, Wage, and Hour Division was "scheduled as a creditor in the petition and acknowledged notice of the filing." (Id. at 2). Ms. Thompson alleges that she received a bankruptcy discharge order on August 15, 2017. (Id.). Ms. Thompson argues that plaintiffs actions "violate the provisions of [her] discharge and she is in the process of seeking damages and fees in the bankruptcy court for their willful violation of Federal Bankruptcy laws.'' (Id.).

         In response, plaintiff contends that it seeks a compliance injunction based on plaintiffs actions as a § 3(d) employer under the FLSA, which is not a claim subject to discharge under the Bankruptcy Code. (Doc. 19 at 3-4). Plaintiff further argues that its complaint also seeks a monetary judgment and injunction against Ms. Thompson for her role as an employer from April 20, 2017 through November 4, 2017, a period after the bankruptcy filing, and these claims for relief are therefore not discharged by the bankruptcy petition. (Id. at 5-6).

         III. Resolution

         In this case, plaintiffs request for a compliance injunction under the FLSA is not a claim discharged by defendant Thompson's bankruptcy petition. A Chapter 7 Bankruptcy "discharges every prepetition debt, without regard to whether a proof of claim has been filed, unless that debt is specifically excepted from discharge. . . ." In re Madaj, 149 F.3d 467, 469 (6th Cir. 1998) (citing 11 U.S.C. § 727). The United States Bankruptcy Code defines "debt" as a "liability on a claim." 11 U.S.C. § 101(12). A "claim" is (1) a right to payment, or (2) a right to an equitable remedy for breach of performance if such breach gives rise to a right to payment. 11 U.S.C. § 101(5)(A)-(B). The Sixth Circuit has held that "equitable relief constitutes a claim only if it is an alternative to a right to payment or if compliance with the equitable order will itself require the payment of money." Kennedy v. Medicap Pharmacies, Inc., 267 F.3d 493, 497 (6th Cir. 2001) (holding an injunction to comply with non-compete in the future was not dischargeable by bankruptcy). See also United States v. Whizco, Inc., 841 F.2d 147, 151 (6th Cir. 1988) ("To the extent that the defendant can comply with the Secretary's orders without spending money, his bankruptcy did not discharge his obligation to comply with the orders."). As plaintiff suggests, and Ms. Thompson does not contest, the injunctive relief that the Secretary seeks in this action only requires compliance with the law- that Ms. Thompson "prospectively abide by the FLSA." (Doc. 19 at 4). Indeed, the Secretary's complaint seeks as one form of relief "an Order pursuant to Section 17 of the Act, permanently enjoining and restraining Defendants [including Ms. Thompson] ... from prospectively violating the Act." (Doc. 1 at 10). As plaintiff suggests, this injunctive relief neither requires an expenditure of money by Ms. Thompson nor requires an alternative right to payment by the Secretary in lieu of compliance. (Doc. 19 at 4). Therefore, plaintiffs request for a compliance injunction is not a claim discharged in Ms. Thompson's bankruptcy.

         To the extent plaintiff also seeks a monetary judgment and injunction against Ms. Thompson for the period after her bankruptcy filing, such relief is likewise not discharged by Ms. Thompson's bankruptcy petition. Under Chapter § 727 of the United States Bankruptcy Code, a debtor is discharged "from all debts that arose before the date of the order for relief." 11 U.S.C. § 727(b) (emphasis added). "The commencement of a voluntary case under a chapter of [the Bankruptcy Code] constitutes an order for relief. ..." 11 U.S.C. § 301(b). Ms. Thompson commenced her voluntary Chapter 7 bankruptcy petition on April 20, 2017. (Doc. 18 at 2). Consistent with the above, Ms. Thompson's bankruptcy filing on that date does not discharge any claims-either for a potential monetary judgment or an injunction-originating after April 20, 2017. Therefore, as plaintiff asserts, the discharge that Ms. Thompson obtained in her bankruptcy proceeding did not discharge her from any potential monetary judgment and injunction for back wages and liquidated damages or prejudgment interest that the Secretary's complaint seeks against Ms. Thompson from April 20, 2017 through November 4, 2017. (See Doc 19 at 4; 11 U.S.C. § 727(b)). Therefore, plaintiffs claims for a potential monetary judgment or monetary injunction are not claims discharged in Ms. Thompson's bankruptcy.

         Consistent with the foregoing, it is RECOMMENDED that defendant Sarah Elaine Thompson's motion ...


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