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Creech v. P.J. Wichita LLC

United States District Court, D. Kansas

March 8, 2017

TRINA CREECH, individually and on behalf of similarly situated persons, Plaintiff,



         This matter is before the Court on Defendants Houston Pizza Venture, LP and HPV-C, LLC's (collectively Defendants) Motion to Dismiss (Doc. 27) for lack of personal jurisdiction. The motion is fully briefed and the Court is prepared to rule. For the reasons explained in detail below, the Court grants Defendants' motion to dismiss for lack of personal jurisdiction.

         I. Standard

         Plaintiff has the burden of establishing personal jurisdiction over Defendant.[1] In the absence of an evidentiary hearing, as in this case, the plaintiff must make only a prima facie showing of jurisdiction to defeat a motion to dismiss.[2] “The plaintiff may make this prima facie showing by demonstrating, via affidavit or other written materials, facts that if true would support jurisdiction over the defendant.”[3] Allegations in a complaint are accepted as true if they are plausible, non-conclusory, and non-speculative, to the extent that they are not controverted by submitted affidavits.[4] At the same time, the Court does not have to accept as true conclusory allegations, nor incompetent evidence. When a defendant has produced evidence to support a challenge to personal jurisdiction, a plaintiff has a duty to come forward with competent proof in support of the jurisdictional allegations of the complaint.[5] The court resolves all factual disputes in favor of the plaintiff.[6] Conflicting affidavits are also resolved in the plaintiff's favor, and “the plaintiff's prima facie showing is sufficient notwithstanding the contrary presentation by the moving party.”[7] “In order to defeat a plaintiff's prima facie showing of jurisdiction, a defendant must present a compelling case demonstrating ‘that the presence of some other considerations would render jurisdiction unreasonable.'”[8]

         II. Factual Background

         Drawing all reasonable inferences in favor of Plaintiff, the following relevant facts are taken from the Complaint, and the exhibits attached to the parties' briefs. The Court does not consider any general or conclusory allegations unsupported by affidavits or other evidence.

         Plaintiff Tina Creech worked as a delivery driver at a Papa John's restaurant located at 2530 South Seneca, Wichita, Kansas, 67217, from approximately May 2014 to August 2015. Plaintiff alleges in the First Amended Complaint that the various corporate and individual Defendants have “together owned and operated approximately 133 Papa John's franchise stores, including stores located in Kansas, Arizona, California, Hawaii, Missouri and Texas, ” and that together Defendants used the “same flawed method to determine reimbursement rates” to reimburse delivery drivers for the costs of the business use of their vehicles, thereby causing their wages to fall below the federal minimum wage.[9] Based on these alleged facts, Plaintiff asserts a collective action under the Fair Labor Standards Act (“FLSA”) on behalf of herself and other similarly situated delivery drivers employed by Defendants at their Papa John's stores.[10]

         Defendant Houston Pizza Venture, LP (“Houston Pizza”), is a Texas Limited Partnership and has its principal place of business in Houston, Texas. Defendant HPV-C, LLC (“HPV”) is a Texas limited liability company with its principal place of business in Houston, Texas. HPV is the general partner of Houston Pizza.[11]

         Houston Pizza and HPV operate Papa John's restaurants in the Houston, Texas area. They do not have an office in Kansas, nor do they own any interest in P.J. Wichita, LLC. Houston Pizza and HPV did not employ Plaintiff or have business dealings in Kansas during Plaintiff's employment, and they did not share in the ownership of the Papa John's store that employed Plaintiff.

         According to the P.J. Wichita Annual Report filed with the Kansas Secretary of State in 2013, Frank Carney and Terry Newman each owned more than 5% capital in P.J. Wichita.[12]According to HPV's Texas filings, Carney is a manager of HPV.[13] Carney was also the manager and president of Houston Pizza Venture, LLC prior to its conversion to Houston Pizza Venture, LP in 2000.[14]

         III. Discussion

         “In a federal question case where a defendant resides outside the forum state, a federal court applies the forum state's personal jurisdiction rules.”[15] To establish personal jurisdiction over a defendant, plaintiff must show that jurisdiction is proper under the laws of the forum state and that the exercise of jurisdiction would not offend due process.[16] The Kansas long-arm statute is construed liberally so as to allow jurisdiction to the full extent permitted by due process, therefore the Court proceeds directly to the constitutional analysis.[17]

         The due process analysis is comprised of two steps. First, the court must consider whether the defendant has such minimum contacts with the forum state “that he should reasonably anticipate being haled into court there.”[18] If the requisite minimum contacts are found, the Court will proceed to the second step in the due process analysis-ensuring that the exercise of jurisdiction “does not offend ‘traditional notions of fair play and substantial justice.'”[19]

         “Minimum contacts” can be established in one of two ways, either generally or specifically for lawsuits based on the forum-related activities:

General jurisdiction is based on an out-of-state defendant's “continuous and systematic” contacts with the forum state, and does not require that the claim be related to those contacts. Specific jurisdiction, on the other hand, is premised on something of a quid pro quo: in exchange for “benefitting” from some purposive conduct directed at the forum state, a party is deemed to consent to the exercise of jurisdiction for claims related to those contacts.[20]

         Specific jurisdiction exists over a nonresident defendant “if the defendant has ‘purposefully directed' his activities at residents of the forum, and the litigation results from alleged injuries that ‘arise out of or relate to' those activities.”[21] For jurisdictional purposes, the court must evaluate “[e]ach defendant's contacts with the forum State . . . individually.”[22]

         A. Whether “Joint Employer” and “Single Integrated Enterprise” Theories Apply to Determine Personal Jurisdiction

         The Kansas long-arm statute applies to a non-resident company if it is an alter ego of a Kansas resident company.[23] Plaintiff argues that this rule extends to non-resident companies that are “joint employers, ” or part of a “single integrated enterprise” or a “single employer” with a Kansas resident company. There is no binding authority in the Tenth Circuit that personal jurisdiction can extend to a nonresident company under either theory.[24] Courts outside of the Tenth Circuit are split on whether a joint employer or single integrated enterprise theory of liability under the FLSA applies to the personal jurisdiction inquiry. Some courts treat personal jurisdiction and liability as separate issues; others apply these tests to both personal jurisdiction and liability.[25] The Court is most persuaded by those cases which treat personal jurisdiction and liability as distinct issues and follows that line of authority.

         The courts applying an employer liability test to determine personal jurisdiction have largely done so without analysis. In Hajela v. ING Groep, N.V., [26] for example, the United States District Court for the District of Connecticut held that a former employee made a prima facie showing of joint employment by an out-of-state corporation. Noting the test used to establish a joint employer relationship was “for the purposes of assigning liability, ” the court nonetheless found that the plaintiff made a prima facie showing of personal jurisdiction where that liability test was met.[27] Similarly, in Berry v. Lee, [28] the Northern District of Texas found the plaintiff demonstrated a prima facie case of personal jurisdiction over out-of-state defendants using theories of liability; the court further noted that this is a “less stringent” standard than the plaintiff needs at trial.[29]

         The Court is more persuaded by the cases where personal jurisdiction and liability remained distinct inquiries because they include robust analysis about the important distinctions between liability and personal jurisdiction standards. While personal jurisdiction derives from a constitutional inquiry of due process, liability theories arise from federal or state statutes.[30] The Seventh Circuit explained this distinction in the context of the Multiemployer Pension Plan Amendments Act of 1980 to ERISA.[31] An analysis of personal jurisdiction ends when a court finds a defendant does not have sufficient minimum contacts with the forum state “without examining the plaintiff's causes of action.”[32] The substantive law that applies to a plaintiff's claims, and thus to the employer liability theories, are irrelevant to the personal jurisdiction analysis “because a state or federal statute cannot transmogrify insufficient minimum contacts into a basis for personal jurisdiction by making these contacts elements of a cause of action.”[33]Moreover, legislatures may enact different standards for what constitutes an employer or integrated enterprise for the purpose of liability, which would result in inconsistent determinations of personal jurisdiction if the Court were to find personal jurisdiction arising from employer liability theories.[34] Personal jurisdiction, on the other hand, is a consistent standard that does not change based on the law a case hinges on.[35] This Court is persuaded by the many decisions holding, consistent with the Seventh Circuit, that the personal jurisdiction analysis should not be augmented by statutory liability standards that may apply to out-of-state defendants.[36] Accordingly, this Court will not apply either the “joint employer” or “single integrated enterprise” theory to determine whether there is personal jurisdiction over the out-of-state Defendants in this matter.

         B. Whether Plaintiff has Made a Prima Facie Showing of Personal Jurisdiction

         Courts that have rejected employer liability theories to establish personal jurisdiction instead apply a more generic “‘agency test' to determine whether to impute the jurisdictional contacts of the subsidiary to the parent defendant.”[37] This is akin to the veil-piercing theory used to disregard the corporate entity in situations where corporations are only facially separate identities, which is essentially Plaintiff's theory in this case.[38] Kansas courts have used such an alter ego theory to establish personal jurisdiction over a defendant.[39] Under the alter ego theory, “the corporate entity is disregarded and liability fastened on an individual who uses the corporation merely as an instrumentality to conduct his own personal business.”[40] Disregarding the corporate entity is justified “if separation of the two entities has not been maintained and injustice would occur to third parties if the separate entity were recognized.”[41]

         The following ten factors are used to evaluate whether to disregard a corporate entity:

(1) whether the parent corporation owns all or a majority of the capital stock of the subsidiary; (2) whether the corporations have common directors or officers; (3) whether the parent finances the subsidiary; (4) whether the parent corporation subscribed to all the capital stock of the subsidiary or otherwise causes its incorporation; (5) whether the subsidiary has grossly inadequate capital; (6) whether the parent corporation pays the salaries or expenses or losses of the subsidiary; (7) whether the subsidiary has substantially no business except with the parent corporation or no assets except those conveyed to it by the parent corporation; (8) whether in the papers of the parent corporation, and in the statements of its officers, the subsidiary is referred to as such or as a department or division; (9) whether the directors or executives of the subsidiary do not act independently in the interest of the subsidiary but take direction from the parent corporation; and (10) whether the formal legal requirements of the subsidiary as a separate and independent corporation are not observed.[42]

         Plaintiff has failed to demonstrate a prima facie case of personal jurisdiction over Defendants under an alter ego theory. Defendants challenged personal jurisdiction and produced a declaration from the Vice President for Houston Pizza, Mr. Billy Robinett, stating that HPV does not have an office in Kansas, own any interest in P.J. Wichita, L.L.C., did not employ Plaintiff or have business dealings in Kansas during Plaintiff's employment, and did not share in ownership of the Wichita, Kansas store where Plaintiff worked with P.J. Wichita.[43] In response to this declaration, Plaintiff submits Secretary of State filings pertaining to P.J. Wichita, HPV, and Houston Pizza, [44] and a website page stating that Carney operates a franchise of Papa John's under umbrella companies including P.J. Wichita and Houston Pizza.[45]

         Although no single factor or combination of factors is required to apply the alter ego doctrine, [46] Plaintiff's factual allegations and evidence fails to demonstrate that any of these factors are present in this case, particularly in light of Robinett's unrebutted declaration. Robinett's declaration asserts that the relationship between P.J. Wichita and Defendants does not meet any of the requisite factors considered to disregard the corporate entity under the alter ego theory. Moreover, Plaintiff's evidence merely demonstrates that Carney owns P.J. Wichita, L.L.C., Houston Pizza, and HPV. But common ownership alone is insufficient to show that these corporate entities should be disregarded. In light of Robinett's declaration denying the involvement of Houston Pizza and HPV in the operations of P.J. Wichita, L.L.C., Plaintiff's evidence does not serve as competent proof that the Court can exercise personal jurisdiction under an alter ego theory. Therefore, Plaintiff fails to establish a prima facie case of personal jurisdiction over these Defendants, and the Court grants their motion to dismiss on this basis.

         Assuming arguendo that Plaintiff could establish personal jurisdiction under a “joint employer” or “single integrated enterprise” theory of liability, the Court finds Plaintiff would fail to meet the burden of providing competent proof to establish personal jurisdiction. Although the Court found Plaintiff sufficiently pled the joint employer and single integrated enterprise theories of liability for purposes of amending the complaint, [47] it does not necessarily follow that the same factual allegations can sustain a motion to dismiss for lack of personal jurisdiction. The Court determined Plaintiff alleged sufficient facts that, assumed to be true, could support a plausible claim for relief under the FLSA against these Defendants.[48] To establish personal jurisdiction, however, Plaintiff must provide competent proof of minimum contacts because Defendants submitted a declaration directly challenging Plaintiff's allegations of personal jurisdiction.

         Under the FLSA, an “employer” subject to the Act is defined as “any person acting directly or indirectly in the interest of an employer in relation to an employee.”[49] Under a Department of Labor (“DOL”) regulation interpreting the FLSA, joint employers exist “where the employee performs work which simultaneously benefits two or more employers.”[50] A joint employment relationship generally exists in situations: (1) where employers arrange to share the employee's service; (2) where one employer acts in the interest of the other employer in relation to the employee; or (3) where employers are not entirely dissociated with respect to a particular employee and may share control of the employee, either directly or indirectly, because of the fact that one employer is controlled by or under common control with the other employer.[51] To determine the existence of joint employers, courts generally look to whether the alleged joint employers “exercise[d] significant control over the same employees.”[52] Courts recognize independent entities as joint employers if the entities “share or co-determine those matters governing the essential terms and conditions of employment.”[53]

         Robinett attests in his declaration that Pizza Venture and HPV are not joint employers with P.J. Wichita. He specifically denies that these Defendants own an interest in either P.J. Wichita or the Wichita Papa John's where Plaintiff worked. Robinett also denies that these Defendants employed Plaintiff and that Defendants had business dealings in Kansas during Plaintiff's employment. These statements demonstrate a lack of control over Plaintiff's employment. Plaintiff has not provided any conflicting declaration that would require the Court to resolve a factual dispute in Plaintiff's favor on this point. Because Defendants produced evidence contradicting Plaintiff's allegations that Defendants exercised control over employees and benefited from employees' work, Plaintiff must come forward with competent proof supporting her jurisdictional allegation. Plaintiff's evidence in the form of filings with the Kansas and Texas Secretary of States, and the encyclopedic website describing Carney's franchises, does not amount to competent proof that would establish a prima facie case of joint employment. This evidence provides no information concerning the relationship between Defendants and P.J. Wichita, it does not demonstrate that Defendants made employment decisions regarding Plaintiff, and it lacks any information suggesting that Defendants benefitted from Plaintiff's employment.

         Under the integrated enterprise test, [54] the Court considers the following four factors: (1) interrelation of operations, (2) centralized control of labor relations, (3) common management, and (4) common ownership or financial control.[55] Evidence of interrelated operations includes intermingling of payroll and finances; common employees, headquarters, and advertising; and shared services, equipment and office space.[56] Again, Plaintiff's allegation that Houston Pizza and HPV operated and maintained their principal places of business in the same office in Wichita, Kansas is directly contradicted by Robinett's declaration. Plaintiff submits business filings to show that Carney has an ownership interest in P.J. Wichita, and is the “Manager and President of HPV-C, LLC, ” and an on-line biography stating that he operates a franchise of Papa John's outlets “under the umbrella of four different companies” ...

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