Contracts with VA entity establishes jurisdiction

Where out-of-state companies contracted with a Virginia-based corporation to implement uniform practices, including the practices that resulted in the alleged Fair Labor Standard Act violations at issue in this suit, the court could exercise jurisdiction over the foreign defendants.

Background

Defendants operate a chain of Mexican restaurants throughout the United States. Plaintiff alleges that, under the direction of and with oversight from Ruben Leon and others, every Plaza Restaurant maintained a policy or practice of paying a predetermined pay amount to back-of-the-house employees, resulting in violations for overtime and, in some cases, minimum wage, under the Fair Labor Standards Act, or FLSA. Defendants move to dismiss plaintiff’s complaint.

Personal jurisdiction

Defendants do not contest the court’s personal jurisdiction over Leon, but do contest its jurisdiction over defendants Jose R. Flores and Juan P. Gonzalez. The complaint is devoid of any information regarding where Flores and Gonzalez are domiciled, let alone any connections they have to Virginia. The court has no information from which it can analyze the relationship between these two defendants, this forum and the instant litigation. Accordingly they are dismissed from this suit.

Out of the 47 corporate defendants, all doing business as Plaza Azteca, there are 21 non-resident corporate defendants, or NRCDs, that are located outside of Virginia. Defendants move to dismiss plaintiff’s complaint against the NRCDs for lack of personal jurisdiction. Plaintiff offers four ways that these defendants purposefully availed themselves of the laws of Virginia: (1) collaborating with a Virginia resident; (2) contracting with a Virginia corporation; (3) utilizing a Virginia payroll service company and (4) operating under agency principles that connect them to Virginia.

At best, the support offered for plaintiff’s collaboration theory demonstrates that these defendants operated under the direction of Leon, a Virginia resident, and created and maintained common policies at his direction. A mere association with a forum state resident without more, is insufficient to establish that these defendants purposefully availed themselves.

Second, plaintiff argue “Defendants’ [sic] contracted with PA Global, a Virginia corporation with an office in Virginia, to implement uniform practices across the Plaza Restaurants, including practices that resulted in the FLSA violations at issue here.” Defendants acknowledge that these 12 NRCDs entered into a contract with a Virginia corporation, but maintain that they “never reached into Virginia to transact business or directed their activities at Virginia” and the contract only provided “generalize[d] services that would take effect” outside of Virginia.

This challenge is unpersuasive because, as the record demonstrates, it is not the act of entering into the contract alone that establishes personal jurisdiction here; rather, “there is additional contact between the party and the forum state.” The court finds that plaintiff has established by a preponderance of the evidence that the contracting NRCDs purposefully availed themselves of the privileges of conducting business under the laws of Virginia by entering into an indefinite, continuous contractual relationship governed by Virginia law with a Virginia corporation.

Third, plaintiff focuses on the fact that “Defendant Plaza Restaurants utilized a Virginia payroll service provider, Gerencia Virtual.” While their use of a forum state service provider may serve to bolster plaintiff’s purposeful availment argument when considered alongside other factors, it is insufficient to establish such on its own.

Fourth and finally, plaintiff argues that the court “may rely on agency principles to exercise specific personal jurisdiction.” According to plaintiff’s own allegations, however, the NRCDs do not exercise the requisite level of control to be haled into court on account of the actions that Leon took on their behalf.

Thus, the court finds that only the contracting NRCDs have purposefully availed themselves of the laws of Virginia and continues its specific personal jurisdiction analysis with respect to them, only. The court lacks specific personal jurisdiction over the other nine NRCDs, who are hereby dismissed.

“The second prong of the test for specific jurisdiction-that the plaintiff’s claims arise out of the activities directed at the forum-requires that the defendant’s contacts with the forum state form the basis of the suit.” The court finds that plaintiff’s claims arise out the contracting NRCDs’ contacts with Virginia.

Finally, the court finds that exercising personal jurisdiction over the contracting NRCDs would not be “so gravely difficult and inconvenient as to place [them] at a severe disadvantage” in this litigation. Accordingly, the court finds that it has specific personal jurisdiction over the 12 contracting NRCDs.

Sufficiency of allegations

Defendants move to dismiss the complaint against the Virginia resident defendants because they argue that the complaint only alleges “generalized and conclusory allegations against all ‘Defendants,’” rather than “particularized factual allegations against the Virginia Defendants.” Defendants misrepresent the level of detail provided in the allegations and improperly hold plaintiff to a heightened pleading standard. This portion of the motion to dismiss is denied.

Defendants’ motion to dismiss granted in part, denied in part.

Walsh v. Leon, Case No. 2:21-cv-531, Aug. 10, 2022. EDVA at Norfolk (Jackson). VLW 022-3-348. 28 pp.