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Espinoza v. Underwood Group LLC

United States District Court, S.D. Indiana, Indianapolis Division

July 20, 2015



RICHARD L. YOUNG, Chief District Judge.

Jose Espinoza, Angel Fonseca, and Roberto Ruiz (hereby referred to collectively as "Plaintiffs") brought action against Underwood Group LLC, Innovative Construction Services, Inc., and Debra Underwood (hereby referred to collectively as "Defendants"), claiming that Defendants violated the Fair Labor Standards Act ("FLSA") and the Indiana Wage Payment Statute, I.C. § 22-2-5. Defendants in turn filed a Counterclaim alleging Plaintiffs fraudulently misrepresented themselves to Defendants. Plaintiffs now bring this motion for judgment on the pleadings to dismiss Defendants' Counterclaim with prejudice pursuant to Federal Rules of Civil Procedure 12(c) and 9(b). For the reasons set forth below, Plaintiffs' motion is GRANTED.

I. Background

Defendant Underwood is owner and officer of the Underwood Group and Innovative Construction Services (Filing No. 20 ¶¶ 5, 12). Plaintiffs are all residents of Marion County, Indiana, who were employed by Defendants in the three years prior to bringing their initial action. ( Id. at ¶¶ 2-4). During their time working for Defendants, Plaintiffs claimed Defendants did not pay the FLSA-required premium for overtime hours, paid less than the FLSA-required minimum wage, and did not make timely payments of their earned wages required by Indiana state law. ( Id. at ¶¶ 17-19).

Plaintiffs filed their amended complaint on October 1, 2014, seeking unpaid back wages, liquidated damages, court costs, and attorney's fees. (Filing No. 20 at ECF p. 5). Defendants then brought a Counterclaim arguing that Plaintiffs fraudulently misrepresented their eligibility for employment by providing invalid social security cards and other documentation which Defendants relied on. (Filing No. 28 ¶¶ 32, 38[1]). In response, Plaintiffs have filed this motion for judgment on the pleadings to dismiss Defendants' Counterclaim.

II. Standard of Review

A party may make a Rule 12(c) motion for judgment on the pleadings after pleadings are closed but early enough not to delay trial. Fed.R.Civ.P. 12(c). Courts apply the same standard to 12(c) motions as they do to 12(b)(6) motions to dismiss, and therefore must assume the alleged facts as true while drawing all inferences in favor of the plaintiff. Pisciotta v. Old Nat. Bancorp, 499 F.3d 629, 633 (7th Cir. 2007). Federal Rule of Civil Procedure 12(b)(6) "authorizes dismissal of a complaint when it fails to set forth a claim upon which relief can be granted. Generally speaking, when considering a Rule 12(b)(6) motion to dismiss, courts must inquire whether the complaint satisfies the notice-pleading' standard." Kruse v. GS Pep Tech. Fund 2000 LP, 897 F.Supp.2d 769, 772 (N.D. Ind., Sept. 19, 2012) (quoting Indep. Tr. Corp. v. Steward Info. Servs. Corp., 665 F.3d 930, 934 (7th Cir. 2012)). Rule 8(a)(2) requires a "a short and plain statement of the claim showing that the pleader is entitled to relief, " Fed.R.Civ.P. 8(a)(2), with enough facts to raise a right to relief above speculative levels. Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007).

III. Discussion

Plaintiffs argue that the motion for judgment on the pleadings should be granted for multiple reasons. First, Plaintiffs argue the Defendants' Counterclaim is preempted by federal law. Next, Plaintiffs argue that Defendants' Counterclaim pleads information and documents that Defendants are not permitted to use under federal law as basis for their Counterclaim. Finally, Plaintiffs argue that Defendants have failed to plead fraud with the necessary particularity required under Federal Rule of Civil Procedure 9(b). The court will discuss Plaintiffs' arguments below in turn.

A. Does Federal Law Preempt Defendants' State Law Fraud Claims?

Defendants' Counterclaim argues that Plaintiffs are illegal aliens who submitted improper documents for employment, thereby committing state law fraud. (Filing No. 28 ¶¶ 32-39). Plaintiffs respond to this argument by asserting that federal laws overrule state laws on matters regarding the creation, possession, and use of fraudulent documents by unauthorized aliens. The Supreme Court has noted that "the Government of the United States has broad, undoubted power over the subject of immigration and the status of aliens.... The federal power to determine immigration policy is well settled." Arizona v. U.S., 132 S.Ct. 2492, 2498 (2012). In sum, Plaintiffs ask the court to find against Defendants on the Counterclaim for improperly seeking a state law remedy for a matter that is exclusively reserved for federal law.

Plaintiffs point to the Immigration Reform and Control Act of 1986 ("IRCA"), 8 U.S.C. § 1101, as being the governing federal law on immigration fraud. The Supreme Court summarized IRCA in Hoffman Plastic Compounds, Inc. v. N.L.R.B., 535 U.S. 137 (2002):

IRCA also makes it a crime for an unauthorized alien to subvert the employer verification system by tendering fraudulent documents. It thus prohibits aliens from using or attempting to use any forged, counterfeit, altered or falsely made document' or any document lawfully issued to or with respect to a person other than the possessor' for the purposes of obtaining employment in the United States. Aliens who use such documents are subject to fines and criminal prosecution.

Id. at 147-148. Plaintiffs argue that Defendants' state law fraud claims are essentially repackaging IRCA violations to impose ...

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