United States District Court, S.D. New York
DAVID LOLA, on behalf of himself and all others similarly situated, Plaintiffs,
SKADDEN, ARPS, SLATE, MEAGHER & FLOM LLP, et uno, Defendants.
D. Maimon Kirschenbaum, Denise A. Schulman, and Charles E. Joseph of Joseph, Herzfeld, Hester, & Kirschenbaum, New York, NY, for Plaintiffs.
Stephanie L. Aranyos, Brian Gershengorn, and Edward Cerasia, II of Ogletree, Deakins, Nash, Smoak & Stewart, P.C., New York, NY, for Defendants.
OPINION AND ORDER
RICHARD J. SULLIVAN, District Judge.
Plaintiff David Lola brings this putative collective action against Defendants Skadden, Arps, Slate, Meagher and Flom LLP ("Skadden") and Tower Legal Staffing, Inc. ("Tower") for violations of the overtime provision of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201 et seq., arising out of Lola's work as a contract attorney in North Carolina. Now before the Court is Defendants' motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) on the ground that Lola and other contract attorneys who performed the same work are exempt from the FLSA as licensed attorneys engaged in the practice of law. Skadden further argues that it should be dismissed because Lola has not adequately alleged that it acted as his employer. For the reasons discussed below, Defendants' motion is granted.
Lola worked for Defendants for approximately fifteen months starting in April 2012. (FAC ¶ 9.) During this period, he worked in North Carolina and reviewed documents for Skadden in connection with a multi-district litigation pending in the United States District Court for the Northern District of Ohio (the "MDL Litigation"). ( Id. ¶¶ 9, 30.) Although Lola is a licensed attorney, he is not admitted to practice law in either North Carolina or the Northern District of Ohio. ( Id. ) North Carolina permits attorneys licensed in other states to provide legal services in North Carolina under certain limited circumstances. See 27 N.C. Admin. Code 2.5 Rule 5.5(c).
Lola's work during this period was strictly supervised by Defendants, and his "entire responsibility... consisted of (a) looking at documents to see what search terms, if any, appeared in the documents, (b) marking those documents into the categories predetermined by Defendants, and (c) at times drawing black boxes to redact portions of certain documents based on specific protocols that Defendants provided." (FAC 24-28.) Defendants provided Lola with the documents he reviewed, the search terms he was to use in connection with those documents, and the procedures he was to follow if search terms appeared. ( Id. ) He was paid $25 per hour for this work and worked between forty-five and fifty-five hours per week. ( Id. Tit 32-33.) He was paid at the same rate for any hours he worked in excess of forty hours per week. ( Id. ¶ 34.) Other attorneys whom Defendants employed to work on the MDL Litigation performed similar work and were likewise paid hourly rates that remained the same for any hours worked in excess of forty hours per week. ¶¶ 16-17.)
During his employment, Lola was "explicitly informed by Tower that he was an employee of Tower for purposes of [the] project." (FAC ¶ 10.) Tower paid Lola and required him to comply with Tower's procedures. ( Id. ) However, Lola was also told that he needed to follow any procedures set by Skadden, and he worked under the supervision of Skadden attorneys. ( Id. ¶¶ 11-12.) Skadden had the authority to terminate Lola's work on the MDL Litigation. ( Id. ¶ 14.) A Skadden attorney also interviewed Lola for a "team lead position" on the MDL Litigation. ( Id. ¶ 14.)
B. Procedural History
Lola filed the Complaint on July 18, 2013, and the First Amended Complaint on October 3, 2013. (Doc. Nos. 1, 17.) The First Amended Complaint asserts a single claim against Defendants for failure to pay Lola and the other members of the putative collective action an overtime wage rate of one-and-a-half times the regular rate for hours worked in excess of forty per week. Following a pre-motion conference on October 31, 2013, Defendants filed the instant motion to dismiss. (Doc. No. 22.) The motion was fully briefed on January 24, 2014. (Doc. No. 28.)
II. LEGAL STANDARD
To survive a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure, a complaint must "provide the grounds upon which [the] claim rests." ATSI Commc'ns, Inc. v. Shaar Fund, Ltd., 493 F.3d 87, 98 (2d Cir. 2007). The plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007). "A claim has facial plausibility when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009). In reviewing a Rule 12(b)(6) motion to dismiss, a court must accept as true all factual allegations in the complaint and draw all reasonable inferences in favor of the plaintiff ATSI Commc'ns, 493 F.3d at 98. However, that tenet "is inapplicable to legal conclusions." Iqbal, 556 U.S. at 678. Thus, a pleading that only offers "labels and conclusions" or "a formulaic recitation of the elements of a cause of action will not do." Twombly, 550 U.S. at 555. If the plaintiff "ha[s] not nudged [his] claims across the line from conceivable to plausible, [his] complaint must be dismissed." Id. at 570.
Defendants move to dismiss the First Amended Complaint on two grounds. First, they argue that, taking the allegations of the First Amended Complaint to be true, Lola was exempt from the overtime provision of the FLSA as a licensed attorney engaged in the practice of law. Second, Skadden argues that Lola has failed to adequately plead that it was his employer. Because, as discussed below, the Court dismisses the First Amended Complaint on the first ground, it is unnecessary to consider the second.
The overtime provision of the FLSA requires employers to pay employees one and one-half times the regular rate of pay for any hours worked in excess of forty per week, 29 U.S.C. § 207(a)(1), but exempts from this requirement "any employee employed in a bona fide... professional capacity, " id. § 213(a)(1). The statute does not itself define the terms of the professional exemption, but delegates the authority to do so to the Secretary of the Department of Labor ("DOL"). Id. (providing that "terms [may be] defined and delimited from time to time by regulations of the Secretary"). Pursuant to this grant of authority, the DOL has promulgated a number of rules defining the scope of the professional exemption, including the following:
(a) The term "employee employed in a bona fide professional capacity" in section 13(a)(1) of the Act also shall mean:
(1) Any employee who is the holder of a valid license or certificate permitting the practice of law or medicine or any of their branches and is actually engaged in the practice thereof[.]
29 C.F.R. § 541.304.
The issue presented by Defendants' motion is whether, on the face of the First Amended Complaint, Lola is exempt from the FLSA overtime requirement by virtue of being "the holder of a valid license... permitting the practice of law... [who] is actually engaged in the practice thereof." The parties agree that Lola is a licensed attorney. (Mem. at 7; Opp. at 1.) They dispute, however, whether he was "actually engaged in the practice [of law]" during his employment. Defendants argue that even if, as the First Amended Complaint alleges, the work that Lola performed was neither "glamorous" nor "high-profile, " reviewing documents in connection with pending litigation is a "core attorney function performed by attorneys on a daily basis [that] requires attorneys to use their legal training." (Mem. at 1.) Lola responds that his work was not the practice of law because it was "mechanical" and "did not involve the use of any legal judgment or discretion." (Opp. at 9.)
Before turning to the substantive questions presented by Defendants' motion - what the term "practice of law" means and whether, taking the allegations in the First Amended Complaint to be true, Lola engaged in the practice of law so defined the Court addresses two preliminary issues: (1) whether, in interpreting 29 C.F.R. § 541.304, the Court should fashion an entirely new federal standard for the "practice of law" or adopt existing state standards, and (2) if the latter, which state's substantive law furnishes the relevant standard. For the reasons discussed below, the Court concludes that: (A) in applying 29 C.F.R. § 541.304, federal courts should adopt state law definitions of the "practice of law, " (B) the law of the state in which the employee performed the work - in this case, the law of North Carolina - should control, and (C) under North Carolina law, Lola engaged in the practice of law.
A. Incorporation of State Standards in Federal Common Law
In applying a federal regulation like 29 C.F.R. § 541.304, the Court would normally defer to an interpretation given by the promulgating agency, unless that interpretation was "plainly erroneous or inconsistent with the regulation." Auer v. Robbins, 519 U.S. 452, 461 (1997) (citations and internal quotation marks omitted). The Court cannot take that course here, since the parties have not cited - and the Court is unaware of - any DOL interpretive guidance about what it means for an employee to be "the holder of a valid license... permitting the practice of law... [who] is actually engaged in the practice thereof" Moreover, no United States Court of Appeals has yet addressed this question, which, so far as the Court is aware, has only been presented in two other federal cases, one of them in this District. See Henig v. Quinn Emanuel Urquhart & LLP, No. 13-cv-1432 (RA) (S.D.N.Y. Dec. 11, 2013); Oberc v. BP PLC, No. 13-cv-01382 (KMH), 2013 WL 6007211 (S.D. Tex. Nov. 13, 2013). In light of the absence of interpretive guidance from the DOL and controlling authority from the Second Circuit, the Court must determine how the regulation should be interpreted.
Although the interpretation of 29 C.F.R. § 541.304 is undoubtedly an issue of federal common law, "[i]t does not follow... that [its] content... must be wholly the product of a federal court's own devising." Kamen v. Kemper Fin. Servs., Inc., 500 U.S. 90, 98 (1991). The Supreme Court has instructed federal courts to "fill the interstices of federal remedial schemes with uniform federal rules only when the scheme in question evidences a distinct need for nationwide legal standards, or when express provisions in analogous statutory schemes embody congressional policy choices readily applicable to the matter at hand." Id. (emphasis added) (internal citations omitted). Where these circumstances are not present, "federal courts should incorporat[e] [state law] as the federal rule of decision, ' unless application of [the particular] state law [in question] would frustrate specific objectives of the federal programs.'" Id. (quoting United States v. Kimbell Foods, Inc., 440 U.S. 715, 728 (1979)) (alterations in original); see also Am. Elec. Power Co., Inc. v. Connecticut, 131 S.Ct. 2527, 2536 (2011) ("Recognition that a subject is meet for federal law governance... does not necessarily mean that federal courts should create the controlling law."); Kimbell, 440 U.S. at 727-28 ("Controversies directly affecting the ...