Sam Kholi Enterprises, Inc. et al v. Comsys Services, LLC et al
Filing
43
MEMORANDUM AND ORDER GRANTED 34 MOTION to Dismiss Second Claim of Plaintiff's Amended Complaint.(Signed by Judge Nancy F. Atlas) Parties notified.(sashabranner, )
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IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
SAM KHOLI ENTERPRISES, INC.,
et al.,
Plaintiffs,
v.
COMSYS SERVICES, LLC, et al.,
Defendants.
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CIVIL ACTION NO. H-11-3577
MEMORANDUM AND ORDER
This case is before the Court on the Motion to Dismiss Second Claim of
Plaintiffs’ Amended Complaint (“Motion”) [Doc. # 34] filed by Defendant Comsys
Services, LLC (“Comsys”), to which Plaintiffs Sam Kholi Enterprises, Inc. (“SKE”)
and Payrolling.com Corp. (“Payrolling”) filed a Response [Doc. # 36], and Comsys
filed a Reply [Doc. # 38].
Having reviewed the record and applicable legal
authorities, the Court grants the Motion and dismisses the Second Claim of Plaintiffs’
First Amended Complaint as against Comsys.
I.
BACKGROUND
SKE is a corporation that does business as Payrolling.com. SKE, through
Payrolling, provides payroll, human resources, recruiting and other personnel services.
Comsys is an information technology staffing company. Innovative Logistics Support
Services Corp. (“ILSS”) is identified in the First Amended Complaint (“Complaint”)
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[Doc. # 33] as “a third-party resource company that assists individuals, corporations,
and the government in lowering their break-even point and eliminating a large portion
of overhead.” See Complaint, ¶ 7.
Payrolling entered into a Supplier Participation Agreement (“Comsys
Agreement”) with Comsys. See Comsys Agreement, Exh. A to Complaint. Pursuant
to the Comsys Agreement, BMC Software, Inc. (“BMC”) would submit to Comsys
requisitions for temporary employees. Comsys would then submit work orders to
Payrolling for it to provide employees who would in turn be provided through Comsys
to perform work for BMC. Comsys would pay Payrolling on BMC’s behalf.
Subsequently, BMC entered into a contract with ILSS for ILSS to provide
“consulting, development, support and/or other employees or subcontractors” to
BMC.
See Master Services Agreement for Vendor-Provided Services (“ILSS
Agreement”), Exh. B to Complaint, ¶ 7.1. An Addendum to the ILSS Agreement
provided the BMC would use Comsys to administer the process of obtaining
temporary personnel. See Addendum, Exh. C to Complaint, ¶ 1.1. Payrolling had an
agreement with ILSS for Payrolling to provide payroll services for ILSS. See General
Payrolling Agreement, Exh. D to Complaint.
Plaintiffs allege in their First Claim that they provided employees for BMC
through Comsys and/or ILSS, and that Defendants failed to pay the amounts charged
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for those employees. Plaintiffs allege in the First Claim also that ILSS requested and
received refunds from SKE that were not justified.
As part of their Second Claim, Plaintiffs allege that Comsys mis-classified
BMC employees as independent contractors.
Comsys seeks dismissal of this
“misclassification” claim against it.1 The Motion has been fully briefed and is ripe for
decision.
II.
ANALYSIS
A.
Standard for Dismissal
A motion to dismiss under Rule 12(b)(6) of the Federal Rules of Civil
Procedure is viewed with disfavor and is rarely granted. Harrington v. State Farm
Fire & Cas. Co., 563 F.3d 141, 147 (5th Cir. 2009). The complaint must be liberally
construed in favor of the plaintiff, and all facts pleaded in the complaint must be taken
as true. Id. The complaint must, however, contain sufficient factual allegations, as
opposed to legal conclusions, to state a claim for relief that is “plausible on its face.”
1
In addition to the “misclassification” claim against Comsys, the Second Claim in the
Complaint includes a claim against ILSS. In the portion of the Second Claim relating
to ILSS, Plaintiffs allege that ILSS breached its contract with Plaintiffs by failing to
disclose that the employees would be engaged in travel and “therefore subject to a 3%
markup.” See Complaint, ¶ 42. ILSS filed a Joinder [Doc. # 35], joining in Comsys’s
Motion to Dismiss. In the Joinder, ILSS addresses only the “misclassification” aspect
of the Second Claim. As a result, the only issue before the Court is whether the
“misclassification” portion of the Complaint – asserted only against Comsys – should
be dismissed.
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See Ashcroft v. Iqbal, 556 U.S. 662, ___, 129 S. Ct. 1937, 1949 (2009). Regardless
of how well-pleaded the factual allegations may be, they must demonstrate that the
plaintiff is entitled to relief under a valid legal theory. See Neitzke v. Williams, 490
U.S. 319, 327 (1989); McCormick v. Stalder, 105 F.3d 1059, 1061 (5th Cir. 1997).
In considering a motion to dismiss, a court must ordinarily limit itself to the
contents of the pleadings and attachments thereto. Collins v. Morgan Stanley Dean
Witter, 224 F.3d 496, 498 (5th Cir. 2000) (citing FED. R. CIV. P. 12(b)(6)). These are
documents presumably whose authenticity no party questions.
B.
“Misclassification Claim” Against Comsys
In the relevant portion of the Second Claim, Plaintiffs allege that “Comsys misclassified BMC employees as independent contractors.” See Complaint, ¶ 30.
Comsys seeks dismissal of the Second Claim against it because the Comsys
Agreement, attached as an exhibit to the Complaint, provides that the employees
whom Payrolling provided to BMC through Comsys were “W-2 employees” of
Payrolling.
The Court agrees.
The Comsys Agreement provides clearly and
unambiguously that the personnel supplied by Payrolling were “W-2 employees of
Supplier [Payrolling].” See Comsys Agreement, ¶ 7(a).
Plaintiffs argue that Comsys was required under the Comsys Agreement to
provide accurate information “such that SKE could apply the appropriate
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classification” – either employee (entitled to W-2 for tax purposes) or independent
contractor (entitled to 1099 for tax purposes). The Comsys Agreement provides the
proper classification and none other is contemplated under the parties’ contract.
Because neither SKE nor Payrolling was required – or authorized – to classify the
employees in any manner other than as W-2 employees of Payrolling, Comsys was not
required under the Comsys Agreement to provide information on which Plaintiffs
could base an alternative classification.
Plaintiffs argue also that Comsys was required to provide additional information
because the Comsys Agreement provides that a purchase order for employees would
“be completed in accordance with Comsys’ instructions prior to the commencement
of [Payrolling’s] services.” See Response, p. 6 (quoting Comsys Agreement, ¶ 2).
This provision, setting forth the procedure for obtaining employees, does not require
Comsys to provide information on which Plaintiffs could base a decision whether to
classify those employees as W-2 entitled employees or independent contractors
receiving a 1099. This is clear because the Comsys Agreement provided specifically
that the employees would be classified as W-2 employees of Payrolling.
Plaintiffs’ “misclassification” claim against Comsys in the Second Claim of the
Complaint is refuted by the Comsys Agreement. As a result, the claim is subject to
dismissal and any attempt to replead would be futile.
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III.
CONCLUSION AND ORDER
The Agreement between Payrolling and Comsys, attached to Plaintiffs’
Complaint, forms the basis for the Second Claim. Paragraph 7(a) of the Comsys
Agreement provides clearly and unambiguously that the employees supplied by
Plaintiaffs are “W-2 employees” of Payrolling – no other classification of the
employees is contemplated under the Comsys Agreement. Accordingly, Plaintiffs’
breach of contract claim against Comsys based on the alleged failure of Comsys to
provide information on which they could properly make classification decisions is
refuted by the Comsys Agreement and is dismissed as against Comsys. Therefore, it
is hereby
ORDERED that the Motion to Dismiss [Doc. # 34] is GRANTED and
Plaintiffs’ Second Claim against Comsys is DISMISSED.
SIGNED at Houston, Texas, this 29th day of March, 2012.
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