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De Leon v. Grade A Construction Inc.

United States District Court, W.D. Wisconsin

November 28, 2016

GABRIEL DE LEON, RAMON PENA, and JOSE LUIS RAMIREZ, Plaintiffs,
v.
GRADE A CONSTRUCTION INC., Defendant.

          OPINION & ORDER

          JAMES D. PETERSON District Judge

         Plaintiffs Gabriel De Leon, Ramon Pena, and Jose Luis Ramirez accuse their former employer, defendant Grade A Construction, Inc., of failing to pay overtime, in violation of the Fair Labor Standards Act (FLSA) and Wisconsin law, and of failing to pay the prevailing wage, in violation of Wisconsin law. Plaintiffs seek to represent an FLSA collective action and a class action under Wisconsin wage and hour laws.

         Now Grade A moves to sever plaintiffs De Leon and Pena's claims from plaintiff Ramirez's, Dkt. 19, and to dismiss or transfer those claims for improper venue, Dkt. 9. The court will deny Grade A's motions.

         BACKGROUND

         When evaluating a motion to dismiss for improper venue, the court considers the complaint's allegations and information submitted via affidavit. Cont'l Cas. Co. v. Am. Nat'l Ins. Co., 417 F.3d 727, 733 (7th Cir. 2005). The court will accept as true the allegations in the complaint unless information submitted by affidavit contradicts them. Faulkenberg v. CB Tax Franchise Sys., LP, 637 F.3d 801, 809-10 (7th Cir. 2011). The court resolves all factual disputes and draws all reasonable inferences in plaintiffs' favor. Id. at 806. Motions to sever, on the other hand, are not subject to a strict standard of review. See Bailey v. N. Tr. Co., 196 F.R.D. 513, 515 (N.D. Ill. 2000) (“In ascertaining whether a particular factual situation constitutes a single transaction or occurrence for purposes of Rule 20, a case-by-case approach is generally pursued because no hard and fast rules have been established.”). Here, the facts relevant to the joinder and venue analyses are largely undisputed.

         Grade A is a drywall, insulation, and painting contractor, with its principal place of business in Delafield, Wisconsin, located in the Eastern District of Wisconsin. Dkt. 11. Grade A hires two types of employees: people hired directly by Grade A, or “official Grade A employees”; and people hired by Grade A through a staffing agency, considered “borrowed” workers. Grade A pays its official employees by the hour, including one paid half-hour lunchbreak per workday, but it does not count the lunchbreaks towards the 40 hours per week required to initiate overtime pay (i.e., a standard week runs 42.5 hours). Grade A “banks” official employees' hours worked in excess of 42.5 in a given week, meaning the hours are withheld from that week's paycheck. With Grade A's permission, the employee can tap these hours to supplement paychecks for weeks when the employee does not work 42.5 hours. Borrowed workers, on the other hand, are paid on a piece-rate basis. A piece-rate compensation scheme pays employees according to the number of measurable units, or pieces, they complete. Grade A pays its borrowed workers at the regular piece rate and nothing more, regardless of the number of hours worked per week.

         Grade A hired De Leon and Pena as borrowed workers. (Though they later became official employees, their allegations pertain to their work as borrowed workers.) The two worked exclusively on a prevailing wage project located in the Eastern District of Wisconsin. In their proposed FLSA collective action, De Leon and Pena seek to represent “[a]ll piece rate compensated employees of Grade A whom . . . was [sic] paid at a rate lower than 1.5 times the average wage rate they earned during the first 40 hours of the workweek, for their hours worked over 40 each week.” Dkt. 1, ¶ 32.

         Ramirez, on the other hand, was an “official Grade A employee” and thus paid by the hour. Ramirez performed worked on prevailing wage projects located in the Western District of Wisconsin. Dkt. 13. For his part in the proposed FLSA collective action, Ramirez seeks to represent “[a]ll employees of Grade A whom . . . lost overtime pay because their hours worked over 42.5 per week were banked, rather than paid in cash.” Dkt. 1, ¶ 31.

         The court has subject matter jurisdiction over the FLSA claims pursuant to 28 U.S.C. § 1331 because they arise under federal law, and the court may exercise supplemental jurisdiction over the remaining state law claims pursuant to 28 U.S.C. § 1367, because the state law claims form part of the same case or controversy.

         ANALYSIS

         Plaintiffs' complaint sets forth only some of the facts relevant to plaintiffs' claims. Grade A moved to dismiss for improper venue on the grounds that the complaint did not describe any events that occurred in the Western District of Wisconsin. Dkt. 9. Plaintiffs, in response, offered new facts (via affidavit) that indicate that plaintiff Ramirez's claims arguably arise from events that took place in this district. This new information prompted Grade A to change course, and in lieu of a reply brief, it moved to sever plaintiffs De Leon and Pena's claims from Ramirez's. Dkt. 19. Once severed, Grade A contends, the court will need to dismiss or transfer De Leon and Pena's claims for improper venue.

         The court will address Grade A's motion to sever first, followed by whatever venue issues remain.

         A. Motion to sever

         Multiple people may join in one action as plaintiffs if “they assert any right to relief . . . arising out of the same transaction, occurrence, or series of transactions or occurrences; and any question of law or fact common to all plaintiffs will arise in the action.” Fed.R.Civ.P. 20(a)(1). Permissive joinder under Rule 20 can create efficiencies, if employed prudently. If joinder is not proper, “[o]n motion or on its own, the court may at any time, on just terms, add or drop a party. The court may also sever any claim against a party.” Fed.R.Civ.P. 21. Under Rule 21, the court may sever De Leon and Pena's claims from Ramirez's if their claims are “discrete and separate.” Gaffney v. Riverboat Servs. of Ind., Inc., 451 F.3d 424, 442 ...


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