United States District Court, S.D. New York
MARIA GONZALEZ FERRO, ALEXANDRA CATTARUZZA, MARA OLIVA, SILVANA BONIL, CATALINA ANGEL, LUMA RIVERA, MARIA PAZ CUEVAS, MARCIA ZORRILLA, EULALIA PEREZ, DANIEL CRIADO, ERIC LOSADA, RICARDO VACCA, and HEYDI DE LA CRUZ on their own behalf and on behalf of a class similarly situated, Plaintiffs,
METROPOLITAN CENTER FOR MENTAL HEALTH, ANDREW PARDO, GENE YELLIN, DAVID BELGRAY, RUBY BENJAMIN, JOSEPHINE DIAZ, TERESA GOUDIE, YVETTE JANSSEN, HOWARD KATZ, BETH RABINOVE, SHARLENE BIRD and JUSTIN STERN, Defendants.
MEMORANDUM AND ORDER
P. KEVIN CASTEL, District Judge.
Plaintiffs Maria Gonzalez Ferro, Alexandra Cattaruzza, Mara Oliva, Silvana Bonil, Catalina Angel, Luma Rivera, Maria Paz Cuevas, Marcia Zorrilla, Eulalia Perez, Daniel Criado, Eric Losada, Ricardo Vacca, and Heydi de la Cruz bring this putative class action against defendants Metropolitan Center for Mental Health, its executive director, Andrew Pardo, and directors Gene Yellin, David Belgray, Ruby Benjamin, Josephine Diaz, Teresa Goudi, Yvette Janssen, Howard Katz, Beth Rabinove, Sharlene Bird, and Justin Stern (collectively, "MCMH") alleging claims under the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. § 1964(c), the Federal Insurance Contributions Act ("FICA"), 26 U.S.C. § 3111, and the Employee Retirement Income Security Act ("ERISA"), 29 U.S.C. § 1132(a)(1)(B).
Plaintiffs allege that MCMH has engaged in a pattern of employing foreign workers as full-time employees, but internally classifying them as independent contractors in order to avoid paying taxes and providing employee benefits. MCMH now moves to dismiss all claims for failure to state a claim pursuant to Rule 12(b)(6), Fed.R.Civ.P. (Docket # 13.)
The Court concludes that the First Amended Complaint (Docket # 10) fails to state a claim under RICO or FICA, but does state a claim under ERISA against the Metropolitan Center for Mental Health. For reasons further explained, MCMH's motion is granted with respect to plaintiffs' claims under RICO and FICA. MCMH's motion to dismiss is granted with respect to plaintiffs' claims under ERISA against defendants Pardo, Yellin, Belgray, Benjamin, Diaz, Goudie, Janssen, Katz, Rabinove, Bird, and Stern, and denied with respect to plaintiffs' claims under ERISA against defendant Metropolitan Center for Mental Health.
The following facts are taken from the First Amended Complaint (the "FAC"), and matters of which judicial notice may appropriately be taken. See Chambers v. Time Warner, Inc. , 282 F.3d 147, 152-53 (2d Cir. 2002). All facts are assumed to be true for the purpose of deciding defendants' motion to dismiss. All reasonable inferences are drawn in favor of the plaintiffs as non-movants. See In re Elevator Antitrust Litig. , 502 F.3d 47, 50-51 (2d Cir. 2007) (per curiam).
Plaintiffs are foreign-educated mental health therapists who are or were employed by MCMH between 1998 and 2012. (First Am. Compl. ("FAC") ¶ 9.) Defendant Metropolitan Center for Mental Health is a not-for-profit corporation incorporated in New York with its principal place of business in Manhattan. (Id. ¶ 4.) It functions as a licensed psychiatric clinic under the supervision of the New York State Department of Health. (Id.) At all relevant times, defendant Andrew Pardo was employed as its Executive Director, and the other named defendants were members of the Board of Directors. (Id. ¶¶ 5-6.)
In order to hire plaintiffs, MCMH sponsored their immigration and represented, by mail, to the United States Immigration and Naturalization Service (the "INS") that they would be hired as salaried employees. (Id. ¶¶ 3, 12.) After being hired, plaintiffs were treated no differently than other full-time employees. (Id. ¶ 9.) MCMH controlled most aspects of their work, including, inter alia, their hours, their clients, their offices, and their attire. (Id.)
Despite their treatment as full-time employees, plaintiffs were classified as "independent contractors" in MCMH's filings with the Internal Revenue Service (the "IRS"), the New York State Department of Labor, and the New York State Income Tax Department. (Id. ¶ 11.) As a consequence of this classification, plaintiffs were responsible for paying their own Social Security tax payments, were not given access to employee benefits plans maintained by MCMH, such as health and retirement, and were not provided other employee benefits described in MCMH's "Personnel Policies and Procedures Manual, " including overtime pay, vacation time, or sick leave. (Id. ¶¶ 10, 19.)
Plaintiffs allege that each mailing to the INS regarding a plaintiff's future employment with MCMH constituted an instance of mail fraud. (Id. ¶ 14.) Plaintiffs further allege that when all the mailings are taken as a whole, they constitute a pattern of racketeering activity causing the loss of plaintiffs' beneficial working conditions in violation of RICO, 18 U.S.C. § 1964(c). (Id. ¶ 15-17, ¶ 24.) Plaintiffs also allege that, due to their misclassification, they were required to pay the full Social Security tax on their earnings and MCMH did not pay the employer's share of taxes in violation of is duties under FICA, 26 U.S.C. § 3111. (Id. ¶¶ 18-19.) Finally, plaintiffs allege that, due to their misclassification, they did not receive employee benefits, or employee retirement benefits, which MCMH provided to other full-time employees and seek relief under ERISA, 29 U.S.C. § 1132(a)(1)(B). (Id. ¶¶ 20-23.)
This Court has jurisdiction because federal questions are presented. 28 U.S.C. § 1331.
To survive a motion to dismiss for failure to state a claim upon which relief can be granted, "a complaint must contain... sufficient factual matter, accepted as true, to state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal , 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly , 550 U.S. 544, 570 (2007)). In assessing a complaint, courts draw all reasonable inferences in favor of the non-movant. See Elevator Antitrust Litig. , 502 F.3d at 50. Legal conclusions, however, are not entitled to any presumption of truth, and a court assessing the sufficiency of a complaint disregards them. Iqbal , 556 U.S. at 678. Instead, the court must examine only the well-pleaded factual allegations, if any, "and then determine whether they plausibly give rise to an entitlement to relief." Id . at 679.
The Supreme Court has stated that "RICO is to be read broadly, " because of both "Congress's self-consciously expansive language and overall approach" and the statute's "express admonition that RICO is to be liberally construed to effectuate its remedial purposes." Sedima, S.P.R.L. v. Imrex Co., Inc. , 473 U.S. 479, 497-98 (1985) (internal citations and quotation marks omitted). Notwithstanding this interpretive directive, because the "mere assertion of a RICO claim... has an almost inevitable stigmatizing effect on those named as defendants... courts should strive to flush out frivolous RICO allegations at an early stage of the litigation." Katzman v. Victoria's Secret Catalogue , 167 F.R.D. 649, 655 (S.D.N.Y. 1996) (quoting Figueroa Ruiz v. Alegria , 896 F.2d 645, 650 (1st Cir. 1990)), aff'd sub nom. Katzman v. Victoria's Secret Catalogue, Div. of The Ltd., Inc. , 113 F.3d 1229 (2d Cir. 1997).
In addition to the pleading requirements of Rule 12(b)(6), a complaint alleging fraud must satisfy the heightened pleading requirements of Rule 9(b), Fed. R. Civ. P., that requires a party alleging fraud to "state with particularity the circumstances constituting fraud." Requiring particularity serves to give a defendant notice of the plaintiff's claim and safeguards a defendant's reputation from "improvident" charges. See ATSI Comm., Inc. v. Shaar Fund, Ltd. , 493 F.3d 87, 99 (2d Cir. 2007). To satisfy this pleading threshold, the complaint must "(1) specify the statements that the plaintiff contends were fraudulent, (2) identify the speaker, (3) state where and when the statements were made, and (4) ...