Opinion
Case No. 2:19-cv-01642-APG-EJY
2022-08-30
Julie GOODWIN, an individual, Plaintiff, v. Mathew JOHN, an individual; Valley Inn Motel; MVJ Car Wash & Laundromat; MV John Corporation, a Nevada corporation; and Does 1-10, inclusive, Defendants.
Angela Jill Guingcangco, Daniel Bravo, Royi Moas, Bradley Scott Schrager, Wolf, Rifkin, Shapiro Schulman & Rabkin, LLP, Las Vegas, NV, for Plaintiff. Robert D. Sweetin, Davison Van Cleve, Mesquite, NV, for Defendants.
Angela Jill Guingcangco, Daniel Bravo, Royi Moas, Bradley Scott Schrager, Wolf, Rifkin, Shapiro Schulman & Rabkin, LLP, Las Vegas, NV, for Plaintiff. Robert D. Sweetin, Davison Van Cleve, Mesquite, NV, for Defendants.
ORDER
ELAYNA J. YOUCHAH, UNITED STATES MAGISTRATE JUDGE
Pending before the Court is Plaintiff's Motion for Clarification. ECF No. 130. No response to this Motion was filed by Defendants. Because the issue Plaintiff presents is one of first impression under Nevada law, the Court does not apply United States District Court for the District of Nevada Local Rule 7-2(d) to this Motion.
I. Summary Plaintiff's Motion
In her unopposed Motion for Clarification, Plaintiff states the Valley Inn Motel and the MVJ Car Wash & Laundromat "are business enterprises owned and operated by Defendant Mathew John under fictitious firm names, as opposed to separate identifiable business entities . . . ." ECF No. 130 at 2. Plaintiff contends that these fictitious names are representative of a sole proprietorship and that these businesses are "owned and operated by Mathew John." Id. Plaintiff states that "any final judgment entered against the common enterprise should provide judgment jointly and severally against" Mr. John doing business as Valley Inn Motel and MVJ Car Wash & Laundromat, as well as the MV John Corporation. Id. at 3-4.
The facts underlying Plaintiff's Motion include:
• Admitted trial exhibit 35 - the Certificate of Business: Fictitious Firm Name, filed by Mr. John on March 14, 2005. ECF No. 115. The Certificate states that Mr. John "is . . .
conducting business in Mesquite, Nevada, under the fictious name of Valley Inn Motel." Id.
• Admitted trial exhibit 36 - the Certificate of Business: Fictitious Firm Name, filed by Mr. John on November 23, 2005. Id. This Certificate states that Mr. John "is . . . conducting business in Mesquite, Nevada, under the fictious name of MVJ Car Wash & Laundromat."
• Trial exhibit 50 - the City of Mesquite business license for the MVJ Car Wash & Laundromat. Id.
• Trial exhibit 51 - the City of Mesquite business license for the Valley Inn Motel. Id.
• Trial exhibits 50 and 51 stating that Mr. John is the "owner/principal" of the respective business.
• Mr. John's July 13, 2020 deposition testimony in which he stated that he did not have an employer, that he owns businesses, and that these are "MV John Corp. and motels, car wash, MVJ Investments." ECF No. 115, Ex. 54 at 23-24. Explaining further, Mr. John stated that MV John Corp., MVJ Car Wash & Laundromat, and the Valley Inn Motel are "all one" and "all MVJ Investments." Id. at 24.
• Mr. John's trial testimony confirming he owns and operates the Valley Inn Motel "personally, in . . . [his] individual name." ECF No. 127 at 43. With respect to the car wash and laundromat, Mr. John confirmed that he owns and operates these businesses, and holds the business licenses for these entities in his name. Id. at 44-45.
II. The Court's Finding and Summary of Law
On July 15, 2022, the Court concluded a bench trial finding Plaintiff an employee of Defendant Valley Inn Motel, MVJ Car Wash & Laundromat, and the MV John Corporation. ECF No. 126 at 4. The decision was based on the application of the economic realities test, stipulated to trial exhibits, Plaintiff's testimony, and admissions made by Defendant Mathew John as confirmed during his testimony given in response to cross-examination by defense counsel. However, the Court found under Boucher v. Shaw, 124 Nev. 1164, 196 P.3d 959 (2008), that Mr. John was not individually liable for Plaintiff's unpaid wages. Boucher held that NRS 608.011 does not provide for individual liability for unpaid wages. Id. at 963. As stated in the case, under Nevada law, "a corporate officer is not considered the employer responsible for creating the contractual employment relationship and is not personally liable for a breach of that relationship." Id. (citation omitted). Thus, "[u]nder Nevada corporate law, individual liability does not extend to officers, directors, or stockholders of a corporation except as otherwise provide by specific statute." Id. (Emphasis in original; internal citation and quote marks omitted.)
In Greene v. Jacob Transportation Services, LLC, Case No. 2:09-cv-00466-GMN-CWH, 2017 WL 471565 (D. Nev. Feb. 3, 2017), the court applied the holding in Boucher to a claim against two individuals, Carol and James Jimmerson, "who were the sole officers and owners of" Jacob Transportation Services, LLC. Id. at *4. James Jimmerson was the owner and managing member of the limited liability company, while Carol Jimmerson was the Chief Executive Officer. Id. The court in Greene summarized Boucher as refusing to hold a CEO and CFO "personally liable as employers under NRS Chapter 608" despite the fact that the CEO and CFO "maintained a 100-percent ownership interest in the employer-entity as members of its parent company." Id. The court concluded that the decision in Boucher precluded holding the Jimmersons personally liable as employers under Nevada law. Id.
In Martz-Alvarado v. Truax, 462 P.3d 1237, 2020 WL 2571160 (Nev. Ct. App., May 20, 2020) (unpublished), the Nevada Court of Appeals considered, inter alia, whether different entity names on waiver forms created a question of fact precluding summary judgment. One defendant, an individual—Tomi-Traux—was the sole proprietor of the business being sued. Id. at *2. In ruling on the case, the court stated: "An individual doing business as a sole proprietor, even when the business is done under a different name, remains personally liable for all of the obligations of the sole proprietorship." Id. citing 18 C.J.S. Corporations § 4; Providence Washington Ins. Co. v. Valley Forge Ins. Co., 42 Cal. App.4th 1194, 50 Cal. Rptr. 2d 192, 194 (1996). The court explained that "[e]ven though the business names on the waivers are different, there is no dispute that Tomi [Traux] is the sole proprietor responsible for those businesses, and is subject to suit in her individual capacity." Id.
In addition to the above, the Nevada Secretary of State website holds: "Sole Proprietorships are not required to file formation documents with the Secretary of State's office. However, a Nevada State Business License or Notice of Exemption is required before conducting business in the state of Nevada." NRS 608.011 defines "Employers" as including "every person having control or custody of any employment, place of employment or any employee." Federal Rule of Civil Procedure 17(a) requires every civil action to be prosecuted in the name of the real party in interest. The "real party in interest principle" is a means by which federal courts determine whether a party possesses an enforceable right. 6A Charles A. Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure: Civil 2d § 1542 (1990). C.J.S. Corporation § 4 (August 2022 update), on which the Nevada Court of Appeals relied in Truax, states: "A 'sole proprietorship' is a form of business in which one person owns all assets of a business, in contrast to a corporation. A 'sole proprietor' refers to a single individual who owns a business, not to a sole shareholder of a corporation or to the corporate parent of a wholly owned subsidiary. A sole proprietorship has no separate legal existence or identity apart from the sole proprietor. Thus, in contrast to a corporation, a sole proprietorship has no separate existence. In other words, a 'proprietorship' is not a legal entity, but merely a name under which the owner, who is the real party in interest, does business. [Citing Jeroski v. Federal Mine Safety and Health Review Com'n, 697 F.3d 651, 652 (7th Cir. 2012).]" (Other citations omitted.)
Sole Proprietor & General Partnerships | Nevada Secretary of State (nvsos.gov)
III. Analysis
The decisions in Boucher v. Shaw and Greene v. Jacob Transportation Services suggest that despite Mr. John's 100 percent ownership of the unincorporated Valley Inn Motel and MVJ Car Wash & Laundromat—indeed, his sole proprietorship of these entities—he is not personally liable for unpaid wages to Plaintiff. According to Boucher, NRS 608.011 does not provide for individual liability for unpaid wages. That holding by the Nevada Supreme Court seems unequivocal. However, in Boucher, there was a legal entity employing plaintiff. 196 P.3d at 960 (plaintiff was an employee of The Castaways Hotel, Casino and Bowling Center). The defendants included the CFO, the Chairman and CEO, and a management employee who oversaw labor and employment for the business entity. Id. The CEO and CFO were members of the employer's parent company and maintained their 100 percent ownerships of the employer through that company. Id. As was true in Boucher, the plaintiff in Green was employed by a business entity; specifically, Jacob Transportation Services, a Limited Liability Company. 2017 WL 471565 at *1. While the Jimmersons were the sole officers and owners of Jacob Transportation, they were not the employer and, therefore, were not personally liable as employers. Id. at *4. Distinct from Boucher and Greene, the decision in Truax involved a sole proprietorship. 2020 WL 2571160, at *2. The Nevada Court of Appeals found the sole proprietor was subject to suit in her individual capacity and remained "personally liable for all of the obligations of the sole proprietorship." Id.
Here, unlike Boucher and Greene, there was no evidence presented suggesting a business entity employed Plaintiff. Indeed, the evidence supports only that the employing entities—the motel and car wash/laundromat—were fictitious names registered by Mr. John for purposes of conducting business. While Mr. John testified at deposition that these entities were part of MVJ Investments, the stipulated to and admitted trial exhibits belie this conclusion as the exhibits reflect these entities were operated as sole proprietorships. Moreover, at trial, Mr. John confirmed that he owns and operates the Valley Inn Motel "personally, in . . . [his] individual name"; and, owns and operates the car wash and laundromat, and holds the business licenses for these entities in his name. ECF No. 127 at 43-45.
It is undisputed there were no work or time records kept for Plaintiff, no paystubs issued to Plaintiff, and no evidence of business formalities maintained for the entities at issue other than the fictitious name filings and business licenses issued to Mr. John. There was no evidence in any form introduced at trial demonstrating MVJ Investments played any role in the ownership or operations of the motel and car wash/laundromat. The overwhelming evidence demonstrates the motel and car wash/laundromat were run as sole proprietorships. Defendants presented and currently offers nothing to the contrary.
The Nevada Supreme Court has not reached the issue of whether a sole proprietorship is an employer under Nevada law for purposes of enforcement of employment rights. When the Court is faced with an issue of first impression under Nevada law, the Court must use its best judgment to predict how the Nevada Supreme Court would resolve the question presented "using intermediate appellate court decisions, decisions from other jurisdictions, statutes, treatises, and restatements as guidance." Strother v. S. Cal. Permanente Med. Group, 79 F.3d 859, 865 (9th Cir. 1996). Based on the case law discussed above, the statutes at issue, the evidence submitted, and all other guidance the Court could find inside and outside of courts located in the Ninth Circuit, the Court finds that NRS 608.011, defining an employer as "having control or custody of any employment, place of employment or any employee," would capture within it an individual operating a sole proprietorship that controls and has custody of a place of employment and an employee such as Plaintiff.
In fact, unlike Boucher and Greene, absent this holding, there is no entity or person who would be responsible for unpaid wages to anyone employed at the Valley Inn Motel or MVJ Car Wash and Laundromat. The intent of NRS 608.011, while shielding individual employees irrespective of their titles or business interest in employer-entities from liability, cannot be to leave the employee without redress against a sole proprietor. There is no employer other than Mr. John with respect to the Valley Motor Inn and the MVJ Car Wash & Laundromat. There is no parent corporation, partnership or limited liability company to which Plaintiff could look for relief. There is no evidence of any formal business enterprise with investment in or otherwise operating the motel, car wash or laundromat. There is only Mr. John who, as the sole proprietor and owner and operator of these business propositions, can be sued for alleged wrongdoing. Mendez v. TNT Towing & Recovery, LLC, Case No. CV 15-1573 PSG (JCx), 2015 WL 13914820, at *1 (C.D. Cal. Sept. 10. 2015) ("the proper defendant appear to be Emad [an individual], a sole proprietor, who continues to do business using the dba . . . .")
The above analysis does not hold true for MV John Corporation, sued along with Mr. John individually, the Valley Motor Inn, and the MVJ Car Wash & Laundromat. To reach Mr. John's personal assets for satisfaction of a judgment entered against MV John Corporation, Plaintiff must prove she can pierce the corporate veil of this entity. Whether to pierce the corporate veil is a fact intensive inquiry. Under Nevada law, a party who seeks to "pierce the corporate veil" and reach an individual's assets must show: (1) the corporation was "influenced and governed by the person asserted to be its alter ego"; (2) there is "such unity of interest and ownership that one is inseparable from the other; and (3) . . . that adherence to the fiction of separate entity would, under the circumstances, sanction a fraud or promote injustice." Frank McCleary Cattle Co. v. Sewell, 73 Nev. 279, 317 P.2d 957, 959 (1957) (citation omitted), overruled on other grounds by Callie v. Bowling, 123 Nev. 181, 160 P.3d 878 (2007) (en banc); see also NRS 78.747(2). The party seeking to pierce the corporate veil bears the burden of establishing all three of the above factors by a preponderance of the evidence. See Ecklund v. Nev. Wholesale Lumber Co., 93 Nev. 196, 562 P.2d 479, 480 (1977). Plaintiff presented neither evidence nor argument to support piercing the MV John Corporation veil. Thus, the Court finds Mr. John's personal assets cannot be reached in an effort to collect a judgment against the MV John Corporation.
IV. Order
Accordingly, IT IS HEREBY ORDERED that Plaintiff's Motion for Clarification (ECF No. 130) is GRANTED.
IT IS FURTHER ORDERED that Mathew John, as sole proprietor of the Valley Motor Inn and MVJ Car Wash & Laundromat, is jointly and severally liable for the judgment entered in this case against these entities.
IT IS FURTHER ORDERED that the MV John Corporation is jointly and severally liable for the judgment in this case, but that Mathew John's personal assets may not be reached to satisfy the judgment against this entity.