PUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
DAVID C. ANDERSON; SAMUEL
PULLEN, on behalf of themselves and
all others similarly situated,
Plaintiffs-Appellants,
v.
SARA LEE CORPORATION, No. 05-1091
Defendant-Appellee,
and
DOES 1-100, Inclusive,
Defendants.
Appeal from the United States District Court
for the Eastern District of North Carolina, at New Bern.
Malcolm J. Howard, Senior District Judge.
(CA-03-31-H)
Argued: February 1, 2007
Decided: November 19, 2007
Before NIEMEYER and KING, Circuit Judges, and
WILKINS, Senior Circuit Judge.
Affirmed in part, vacated in part, and remanded with instructions by
published opinion. Judge King wrote the opinion, in which Judge Nie-
meyer and Senior Judge Wilkins joined.
COUNSEL
ARGUED: Alvin Leonard Pittman, Los Angeles, California, for
Appellants. William Randolph Loftis, Jr., CONSTANGY, BROOKS
2 ANDERSON v. SARA LEE CORP.
& SMITH, L.L.C., Winston-Salem, North Carolina, for Appellee. ON
BRIEF: Robin E. Shea, CONSTANGY, BROOKS & SMITH,
L.L.C., Winston-Salem, North Carolina, for Appellee.
OPINION
KING, Circuit Judge:
This appeal arises from a pay dispute between the defendant, Sara
Lee Corporation, and the named plaintiffs, David C. Anderson and
Samuel Pullen, as representatives of a class that includes approxi-
mately 1600 hourly production workers employed at Sara Lee’s bak-
ery in Tarboro, North Carolina (the "Class Members"). The Class
Action Complaint alleges five claims under North Carolina law — for
breach of contract, negligence, fraud, conversion, and unfair trade
practices — each relating to Sara Lee’s failure to compensate the
Class Members for time spent complying with a mandatory uniform
policy.
Early in the district court proceedings, Sara Lee sought dismissal
of all five claims on the ground that they are preempted by the Fair
Labor Standards Act of 1938, 29 U.S.C. §§ 201-219 (the "FLSA")
(creating enforceable federal rights to minimum wage and overtime
compensation). The court rejected Sara Lee’s preemption contention,
but dismissed with prejudice three of the five claims — the fraud,
conversion, and unfair trade practices claims — under Federal Rule
of Civil Procedure 12(b)(6) for failure to state a claim upon which
relief can be granted. See Anderson v. Sara Lee Corp., No. CA-03-31-
H (E.D.N.C. Apr. 14, 2003) (the "Dismissal Order"). Following dis-
covery, the court awarded summary judgment to Sara Lee under Rule
56(c) on the remaining contract and negligence claims. See Anderson
v. Sara Lee Corp., No. CA-03-31-H (E.D.N.C. Dec. 7, 2004) (the
"Summary Judgment Order"). On appeal, the Class Members chal-
lenge the propriety of both the Dismissal Order and the Summary
Judgment Order, which Sara Lee defends on various grounds, includ-
ing FLSA preemption.
As explained below, we affirm the district court’s dismissal with
prejudice of the conversion and unfair trade practices claims. We con-
ANDERSON v. SARA LEE CORP. 3
clude, however, that the court should have dismissed the contract,
negligence, and fraud claims as preempted by the FLSA. Accord-
ingly, we vacate the court’s alternative dispositions of those claims —
the dismissal with prejudice of the fraud claim and the summary judg-
ment awards on the contract and negligence claims — and remand
with instructions to dismiss the claims without prejudice, giving the
Class Members an opportunity to pursue any FLSA claims they may
possess.
I.
A.
It is undisputed that, until early April 2003, Sara Lee enforced a so-
called "Dress and Undress Rule" for hourly production workers at its
Tarboro bakery, which makes cheesecakes, layer cakes, pastries, muf-
fins, and other perishable goods. During the time period relevant to
this civil action, the total number of Tarboro production workers at
a given time varied between approximately 950 (the average number
in 2000) and 650 (the average in the first part of 2003). These workers
were divided into two shifts. Under the Dress and Undress Rule, they
were required to wear a uniform consisting of the following: a shirt
and pants (with a worker-provided belt), or an optional dress for
women; a set of earplugs; a hairnet; and a pair of safety shoes. The
shirts and dresses were personalized with the workers’ names, and the
uniforms, except the shoes, were washed and then sorted by employee
number on a rotating conveyor in an on-site laundry room. The shoes
were stored in personal lockers in men’s and women’s locker rooms.
To comply with the Dress and Undress Rule, production workers
were to arrive at the bakery in street clothes, pass through security,
walk to the laundry room, wait in line with their shiftmates, obtain
their uniforms at the laundry room window from the lone attendant
on duty (or occasionally retrieve their uniforms themselves), walk to
the appropriate locker room, wait for space to change clothes, change
into their uniforms, place their street clothes in their lockers, walk to
a hand washing and foot bath area, wash and sanitize their hands and
shoes, and walk to the time clock inside the production area — all
before clocking in and taking their places on the production line. At
the end of the shift, the workers clocked out, then walked back to the
4 ANDERSON v. SARA LEE CORP.
locker room, changed into their street clothes, walked to the laundry
room, and deposited their soiled uniforms into a bin before leaving
the bakery.
While the Dress and Undress Rule was in effect, the production
workers had to worry about committing two types of infractions.
First, workers who failed to comply with the Dress and Undress Rule
were prohibited from working the shift. Second, workers who clocked
in late because of delays in the clothes-changing process were deemed
tardy; those who accumulated twenty citations for tardiness in a
twelve-month period were discharged. The Dress and Undress Rule
was revised in early April 2003 to allow workers to don their uni-
forms (except their safety shoes) at home.
B.
The Class Action Complaint was filed in January 2003 in the Supe-
rior Court of Edgecombe County, North Carolina, on behalf of current
and former hourly production workers at the Tarboro bakery who
were subject to the Dress and Undress Rule and entitled to FLSA protec-
tions.1 It alleges that, by failing to compensate workers for time spent
complying with the Dress and Undress Rule, Sara Lee violated the
"applicable wage and hour law," i.e., the FLSA. See Class Action
Complaint ¶ 48. The Complaint does not, however, plead claims
directly under the FLSA. Rather, it pleads five separate claims under
North Carolina law for breach of contract, negligence, fraud, conver-
sion, and unfair trade practices in contravention of the North Carolina
Unfair and Deceptive Trade Practices Act, N.C. Gen. Stat. § 75-1.1
(the "UDTPA"). The Complaint seeks recovery of, inter alia: compen-
satory damages, including back pay; penalties and interest; punitive
damages; and, with respect to the unfair trade practices claim, treble
damages and attorneys’ fees pursuant to the UDTPA. The Class
Members maintain that they are entitled to damages for the period
from January 27, 2000, through April 1, 2003 (when the Dress and
Undress Policy was revised).
1
The Class Action Complaint is found at J.A. 13-28. (Our citations to
"J.A. ___" refer to the contents of the Joint Appendix filed by the parties
in this appeal.)
ANDERSON v. SARA LEE CORP. 5
On February 26, 2003, Sara Lee removed this action, under 28
U.S.C. § 1441, to the Eastern District of North Carolina.2 Shortly
thereafter, on March 3, 2003, Sara Lee made its motion, under Fed-
eral Rule of Civil Procedure 12(b)(6), to dismiss the Class Action
Complaint for failure to state a claim upon which relief can be
granted. In support of the Rule 12(b)(6) motion, Sara Lee maintained
that the FLSA preempted each of the Class Members’ state claims
and that, apart from being preempted, the claims were not cognizable.
By its Dismissal Order of April 14, 2003, the district court rejected
Sara Lee’s preemption contention.3 The court agreed, however, that
the Complaint fails to state colorable claims for fraud, conversion,
and unfair trade practices, and it therefore dismissed those three
claims with prejudice. Finally, the court refused to dismiss the con-
tract and negligence claims, based on its determination that those two
claims were sufficiently pleaded in the Complaint. Significantly, the
court recognized that the contract and negligence claims were predi-
cated on violations of the FLSA, and that their ultimate success thus
depended on a showing that the FLSA required Sara Lee to compen-
sate its workers for time spent complying with the Dress and Undress
Rule.
Thereafter, the parties engaged in discovery and stipulated to the
certification of a class on the contract and negligence claims. On June
2
In removing this action, Sara Lee invoked alternative grounds for sub-
ject matter jurisdiction, including diversity jurisdiction under 28 U.S.C.
§ 1332. Sara Lee alleged that diversity jurisdiction existed because it was
a Maryland corporation with its principal place of business in Illinois, the
named plaintiffs were citizens of North Carolina, and the amount in con-
troversy exceeded $75,000. The Class Members did not challenge the
removal, and we are satisfied that the district court properly exercised
jurisdiction, in that it possessed diversity jurisdiction pursuant to § 1332
(as that statute existed in 2003) over at least one of the named plaintiff’s
claims. See 28 U.S.C. § 1332 (2000) (conferring jurisdiction over civil
actions between citizens of different states where matter in controversy
exceeds $75,000); Rosmer v. Pfizer, Inc., 263 F.3d 110, 114 (4th Cir.
2001) (recognizing that, in class action, so long as one named plaintiff
satisfies requirements for diversity jurisdiction, district court may exer-
cise supplemental jurisdiction under 28 U.S.C. § 1367 over other class
members’ claims).
3
The Dismissal Order is found at J.A. 62-75.
6 ANDERSON v. SARA LEE CORP.
1, 2004, Sara Lee filed its motion, under Federal Rule of Civil Proce-
dure 56, for summary judgment. In its supporting memorandum, Sara
Lee reiterated its position that the contract and negligence claims are
preempted by the FLSA. Additionally, Sara Lee contended that those
claims must nonetheless fail, because the FLSA (on which they were
predicated) did not require paying workers for compliance with the
Dress and Undress Rule. Specifically, Sara Lee asserted that time
spent complying with the Rule was noncompensable, pursuant to the
Portal-to-Portal Act, 29 U.S.C. §§ 251-262 (excluding from FLSA
compensability, in § 254(a), certain functions that are "preliminary"
or "postliminary" to employees’ "principal" work activities). Alterna-
tively, Sara Lee recognized that, generally speaking, time spent by
employees on the isolated act of changing clothes might be compen-
sable under the FLSA, but that the time spent by the Class Members
changing clothes was yet noncompensable because it was "de
minimis."
On its de minimis point, Sara Lee acknowledged that the Class
Members had forecast evidence, by way of the deposition testimony
of the named plaintiffs, showing that "a single clothes change took as
much as 20 minutes," J.A. 102, and that workers thus spent a total of
"30-40 minutes a day on clothes-changing time alone," id. at 112. In
discussing the Class Members’ evidence, Sara Lee referred to
excerpts from the named plaintiffs’ deposition transcripts, which Sara
Lee had attached to its summary judgment memorandum. See id. at
165-66 (testimony of David C. Anderson that it took him about fifteen
minutes for pre-shift clothing change and fifteen minutes for all post-
shift activities, including clothing change); id. at 181-83 (testimony
of Samuel Pullen that pre- and post-shift clothing changes each took
him fourteen to twenty minutes). Sara Lee characterized this testi-
mony as "grossly exaggerated" and "patently outrageous," but con-
ceded that it had to be accepted as true at the summary judgment
stage of the proceedings. Id. at 102, 112.
Nevertheless, Sara Lee urged the court, in considering the de
minimis issue, to ignore the actual time it took workers to change
clothes (as established by the named plaintiffs’ testimony) and to
instead look at "the time that should reasonably have been required
for changing clothes." J.A. 103. In this regard, Sara Lee presented a
study conducted by its expert, who measured and averaged the time
ANDERSON v. SARA LEE CORP. 7
taken by nine management employees — playing the part of hourly
production workers — to engage in the clothes-changing process dur-
ing a Saturday production shutdown. The time study concluded that
the pre- and post-shift clothing changes for workers assigned the
more-complicated pants uniform (with its shirt, pants, and belt) took
an average of 3.12 minutes. The study further indicated that these
workers needed just 7.33 minutes to complete pre-shift activities from
donning their uniforms to clocking in, as well as post-shift activities
from clocking out through changing back into their street clothes. The
study did not address the time spent on activities occurring before and
after the clothing changes, including standing in line at the laundry
room window, obtaining uniforms from the attendant on duty, and
depositing soiled uniforms into the laundry bin.
The Class Members filed a memorandum in opposition to the sum-
mary judgment motion, in which they contended that they were enti-
tled to compensation for time spent on all of the activities
encompassed in the Dress and Undress Rule. In support of their asser-
tion that this time amounted to as much as sixty minutes per day
(including forty-five minutes for pre-shift activities), they attached
affidavits executed by sixty-seven separate hourly production work-
ers. These affidavits used the same fill-in-the-blank form, and had not
previously been provided to Sara Lee in discovery. The Class Mem-
bers also attached excerpts of certain deposition transcripts, but not
the excerpts from the named plaintiffs’ deposition transcripts already
discussed and submitted to the court by Sara Lee. The Class Members
explained in their opposition memorandum that, because 200 to 300
employees sometimes arrived at the bakery within fifteen minutes of
each other, there were often long waits at the laundry room window,
in the locker rooms, at the hand washing and foot bath area, and at
the time clock. Moreover, in anticipation of possible gridlock during
the clothes-changing process, workers were compelled to arrive at the
bakery as much as forty-five minutes before the start of their sched-
uled shifts in order to avoid tardiness citations.
As part of their opposition memorandum, the Class Members
requested the court to exclude, pursuant to Federal Rule of Evidence
702, the time study prepared by Sara Lee’s expert. The Class Mem-
bers contended that the study — which reached its conclusions by
measuring and averaging the time taken by nine management employ-
8 ANDERSON v. SARA LEE CORP.
ees to go through the clothes-changing process during a Saturday pro-
duction shutdown — failed to "adequately replicate[ ] the situation
facing the [hourly production workers] when they are required to
comply with [the Dress and Undress Rule] in the real work-a-day
world." J.A. 256.
In reply to the Class Members’ opposition memorandum, Sara Lee
moved to strike the Class Members’ sixty-seven worker affidavits on
various grounds, including the failure to produce the affidavits during
discovery. The Class Members did not respond to Sara Lee’s motion
to strike.
By its Summary Judgment Order of December 7, 2004, the district
court granted Sara Lee’s motion to strike the sixty-seven worker affi-
davits, limited the admissibility of its expert time study, and granted
its motion for summary judgment on the contract and negligence
claims.4 With respect to the sixty-seven worker affidavits, the court
concluded that exclusion of the affidavits was an appropriate sanction
for the Class Members’ noncompliance with discovery deadlines. As
for Sara Lee’s expert time study, the court expressed agreement with
the Class Members that the study failed to replicate the conditions
that sometimes protracted the clothes-changing process. Even so, the
court declined to wholly exclude the study, instead admitting it on a
limited basis, apparently for the purpose of estimating the time
needed by workers for the isolated acts of changing clothes and wash-
ing and sanitizing their hands and safety shoes (the "changing-and-
washing activities").
Finally, with respect to the contract and negligence claims, the
court again recognized that their viability depended on establishing
that Sara Lee was mandated by the FLSA to compensate the hourly
production workers for time spent complying with the Dress and
Undress Rule. The court determined that the Portal-to-Portal Act
excluded from FLSA compensability all Rule-related activities,
except perhaps the changing-and-washing activities. The court further
decided that those activities could not be compensable, however, if it
took a de minimis amount of time to perform them. See Summary
Judgment Order 26 (recognizing "general rule . . . that ten minutes or
4
The Summary Judgment Order is found at J.A. 710-41.
ANDERSON v. SARA LEE CORP. 9
less of uncompensated time will be de minimis as a matter of law").
And, the court adopted Sara Lee’s reasonableness standard for the de
minimis inquiry, ruling that the pertinent question was "how much
time employees would reasonably spend donning and doffing their
uniforms and walking through the footbath." Id. at 28 (emphasis
added).
The evidence before the court on this issue was the named plain-
tiffs’ deposition testimony and Sara Lee’s expert time study. The
court noted that, because the Class Members were entitled to have the
evidence viewed in their favor, it gave the time study "minimal, if
any, weight." Summary Judgment Order 29. Nonetheless, the court
ignored the named plaintiffs’ deposition testimony — relevant
excerpts of which were attached to and discussed in Sara Lee’s sum-
mary judgment memorandum — establishing that clothes-changing
time alone was as much as thirty to forty minutes per day. And,
because the Class Members had focused their arguments and evidence
on the amount of time it took to fully comply with the Dress and
Undress Rule, the court was left with no evidence showing that the
particular time spent on the changing-and-washing activities was
more than de minimis. Accordingly, the court awarded summary
judgment to Sara Lee on the contract and negligence claims. The
court then entered its final judgment on that same day (December 7,
2004).
On December 21, 2004, the Class Members filed a post-judgment
motion, under Federal Rules of Civil Procedure 59(e) and 60(b), for
reconsideration of the Summary Judgment Order. By its Order of
February 8, 2005, the court denied the Class Members’ motion for
reconsideration.
C.
The Class Members have timely appealed from both the final judg-
ment and the denial of reconsideration, and we possess jurisdiction
pursuant to 28 U.S.C. § 1291.5 On appeal, the Class Members chal-
5
Prior to oral argument, we held this matter in abeyance for IBP, Inc.
v. Alvarez, 546 U.S. 21 (2005) (assessing coverage of FLSA, as amended
by Portal-to-Portal Act, with respect to activities of employees who must
don protective clothing on employer’s premises). We then directed the
parties to file supplemental briefs addressing the effect of the Alvarez
decision on the issues raised herein.
10 ANDERSON v. SARA LEE CORP.
lenge the dismissal of their fraud, conversion, and unfair trade prac-
tices claims; the exclusion of the sixty-seven worker affidavits; the
admission of Sara Lee’s expert time study; and the award of summary
judgment against them on their contract and negligence claims. In
response, Sara Lee defends the district court’s dismissal, evidentiary,
and summary judgment rulings, but also asserts that the court should
have deemed all of the Class Members’ claims to be preempted by the
FLSA.
We first address the dismissal with prejudice of the Class Mem-
bers’ fraud, conversion, and unfair trade practices claims. Although
we agree with the district court’s conclusion that the Class Members
failed to state claims for conversion and unfair trade practices upon
which relief can be granted, we disagree with its determination that
the fraud claim is similarly deficient. We then turn to the issue of
whether the remaining claims — for fraud, as well as breach of con-
tract and negligence — are preempted by the FLSA. We conclude that
they are so preempted. Accordingly, we affirm the dismissal with
prejudice of the conversion and unfair trade practices claims, vacate
the dismissal with prejudice of the fraud claim and the summary judg-
ment awards on the contract and negligence claims, and remand with
instructions to dismiss without prejudice the contract, negligence, and
fraud claims as preempted by the FLSA.6
II.
We first consider whether the district court properly dismissed,
pursuant to Federal Rule of Civil Procedure 12(b)(6), the Class Mem-
bers’ fraud, conversion, and unfair trade practices claims for failure
to state a claim upon which relief can be granted. When a district
court grants a Rule 12(b)(6) motion, we review its decision de novo.
See Bominflot, Inc. v. The M/V Henrich S, 465 F.3d 144, 145 (4th Cir.
2006). In conducting this review, we "must accept as true all of the
factual allegations contained in the complaint." Erickson v. Pardus,
127 S. Ct. 2197, 2200 (2007) (citing Bell Atl. Corp. v. Twombly, 127
6
In these circumstances, we find it unnecessary to resolve the Class
Members’ appellate contentions — however compelling — on the merits
of the district court’s evidentiary and summary judgment rulings. The
district court may deem it appropriate to revisit these rulings on remand.
ANDERSON v. SARA LEE CORP. 11
S. Ct. 1955, 1965 (2007)). Federal Rule of Civil Procedure 8(a)(2)
requires "a short and plain statement of the claim showing that the
pleader is entitled to relief." This "statement need only give the defen-
dant fair notice of what the claim is and the grounds upon which it
rests." Erickson, 127 S. Ct. at 2200 (citing Twombly, 127 S. Ct. at
1964; Conley v. Gibson, 355 U.S. 41, 47 (1957)) (internal quotation
marks and alteration omitted). Rule 9(b), however, imposes a height-
ened pleading standard for fraud claims, requiring that "[i]n all aver-
ments of fraud . . . , the circumstances constituting fraud . . . shall be
stated with particularity"; the Rule allows that "[m]alice, intent,
knowledge, and other condition of mind of a person may be averred
generally."7
In assessing the sufficiency of the claims alleged in the Class
Action Complaint, the district court characterized "[t]he predicate act
at issue in this litigation" — Sara Lee’s failure to compensate produc-
tion workers for time spent complying with the Dress and Undress
Rule — as one "based on an interpretation or misinterpretation of" the
FLSA. Dismissal Order 12. The court concluded that any misinterpre-
tation of the FLSA was necessarily negligent, and not intentional.
Accordingly, the court dismissed the fraud and conversion claims,
7
Notably, in its recent decision in Twombly, the Supreme Court
assessed the Rule 8(a)(2) sufficiency of a complaint brought under § 1
of the Sherman Act, 15 U.S.C. § 1. See 127 S. Ct. at 1961. In so doing,
the Court utilized a "plausibility standard," id. at 1968, under which a
complaint must contain "enough facts to state a claim to relief that is
plausible on its face," id. at 1974. The Court also observed that the "no
set of facts" language in its 1957 Conley decision — i.e., the oft-quoted
statement of "the accepted rule that a complaint should not be dismissed
for failure to state a claim unless it appears beyond doubt that the plain-
tiff can prove no set of facts in support of his claim which would entitle
him to relief," Conley, 355 U.S. at 45-46 — has been subject to an unin-
tended literal reading and, thus, "has earned its retirement." Twombly,
127 S. Ct. at 1969. In the wake of Twombly, courts and commentators
have been grappling with the decision’s meaning and reach. See, e.g.,
Iqbal v. Hasty, 490 F.3d 143, 155 (2d Cir. 2007) (recognizing that
"[c]onsiderable uncertainty concerning the standard for assessing the
adequacy of pleadings has recently been created by" Twombly). In dis-
posing of this appeal, there is no need for us to delve into or resolve any
such issues.
12 ANDERSON v. SARA LEE CORP.
because they each require a showing of wrongful intent. See id. at 10-
11 (ruling that Complaint fails to allege intent to deceive, one element
of fraud claim under North Carolina law); id. at 11-12 (concluding
that Complaint fails to allege requisite intentional act in support of
state law conversion claim). The court also dismissed the unfair trade
practices claim, based on its determination that an intentional breach
of contract — had one been alleged in the Complaint — "does not rise
to the level of a deceptive or unfair business practice." Id. at 14.
A.
We disagree with the district court’s ruling on the fraud claim.
Under North Carolina law, the elements of actual fraud are "(1)
[f]alse representation or concealment of a material fact, (2) reasonably
calculated to deceive, (3) made with intent to deceive, (4) which does
in fact deceive, (5) resulting in damage to the injured party." Forbis
v. Neal, 649 S.E.2d 382, 387 (N.C. 2007) (internal quotation marks
omitted). "Additionally, any reliance on the allegedly false represen-
tations must be reasonable." Id. The Class Action Complaint alleges
that Sara Lee falsely promised the Class Members, at the time they
were hired, to pay them for all time compensable under the FLSA —
then and thereafter concealing the compensability of the time spent
adhering to the Dress and Undress Rule. See, e.g., Class Action Com-
plaint ¶¶ 16, 21, 46. The Complaint further asserts that Sara Lee’s
false representations were reasonably calculated to deceive and, con-
trary to the ruling of the district court, were made with the intent to
deceive. Indeed, the Complaint asserts that Sara Lee intentionally,
consciously, and willfully refused to pay the Class Members for time
spent on the pre- and post-shift clothing changes, despite being man-
dated by the FLSA to do so. See id. ¶ 48 ("Sara Lee had no intentions
of keeping its promise [to pay the Class Members for all time com-
pensable under the FLSA]."); id. ¶ 50 ("In conscious disregard of its
promises, Sara Lee intended to require and receive from [the Class
Members] services that are compensable under [the FLSA], without
making payment of compensation to [them]."); id. ¶ 51 ("Sara Lee
willfully failed and refused to pay . . . the Class Members for compen-
sable time that they were required to work daily to conform to Sara
Lee’s dress requirements at the start and end of shifts."). The Com-
plaint alleges that the Class Members were in fact deceived by Sara
Lee’s false representations, in that they complied with the Dress and
ANDERSON v. SARA LEE CORP. 13
Undress Rule without compensation, and that they were thereby dam-
aged, in that they sustained economic losses. See id. ¶¶ 21, 47, 53.
Finally, the Complaint asserts that the "Class Members did not know
and could not have reasonably discovered that they were entitled to
compensation that was not being paid to them because of the compar-
ative difference in power and knowledge between them and Sara
Lee," and that they "reasonably relied on Sara Lee’s promise to pay
agreed upon hourly compensation." Id. ¶¶ 21, 47.
Simply put, the allegations of the Class Action Complaint are suffi-
cient to state a claim for fraud under North Carolina law, even under
the heightened pleading standard for fraud claims imposed by Rule
9(b). Moreover, although the evidence may ultimately show that any
violation of the FLSA by Sara Lee was unintentional, we cannot agree
with the district court’s determination, at the Rule 12(b)(6) stage of
the proceedings, that this was necessarily so. Cf. IntraComm, Inc. v.
Bajaj, 492 F.3d 285, 296 n.9 (4th Cir. 2007) (affirming district court’s
conclusion, at summary judgment stage, that employer’s misclassifi-
cation of employee as FLSA-exempt "was done in good faith" in view
of ambiguity in applicable regulation). We therefore vacate the
court’s dismissal with prejudice of the Class Members’ fraud claim.8
B.
We nonetheless affirm the district court’s dismissal of the conver-
sion and unfair trade practices claims. As Sara Lee correctly asserts,
the Supreme Court of North Carolina has not recognized causes of
action for conversion or unfair trade practices in employer-employee
8
Tellingly, in defending the district court’s dismissal of the fraud
claim, Sara Lee does not rely (as the court did) on the proposition that
the Class Action Complaint fails to allege the intent to deceive. Rather,
Sara Lee maintains that the Complaint fatally omits an allegation of "det-
rimental reliance." Br. of Appellee 20-21 (citing, inter alia, Briggs v.
Mid-State Oil Co., 280 S.E.2d 501 (N.C. Ct. App. 1981); Moore v.
Wachovia Bank & Trust Co., 226 S.E.2d 833 (N.C. Ct. App. 1976)). As
discussed above, however, the Complaint specifically asserts that the
Class Members went unpaid for their compliance with the Dress and
Undress Rule in reliance on Sara Lee’s false representations that their
time was not compensable under the FLSA.
14 ANDERSON v. SARA LEE CORP.
disputes over unpaid wages such as this one, and there is no basis for
concluding that it would do so if given the opportunity, including any
decisions of the state’s intermediate appellate court that might be per-
suasive. See Food Lion, Inc. v. Capital Cities/ABC, Inc., 194 F.3d
505, 512 (4th Cir. 1999) (acknowledging that federal court sitting in
diversity must, in absence of controlling state authority, offer its best
judgment about how state’s highest court would rule on plaintiff’s
claims, giving appropriate weight to any opinions of state’s intermedi-
ate appellate courts). This is not a circumstance in which the claims
could have survived a Rule 12(b)(6) challenge but for the plaintiff’s
failure to plead sufficient facts to satisfy the requirements of Rule
8(a)(2) or Rule 9(b). Rather, the facts alleged — despite the arguably
thorough manner in which they were pleaded — simply do not give
rise to conversion or unfair trade practices claims under North Caro-
lina law.
The Class Members essentially concede on appeal that the facts
alleged do not constitute conversion, which has long been defined by
the Supreme Court of North Carolina as "an unauthorized assumption
and exercise of the right of ownership over goods or personal chattels
belonging to another, to the alteration of their condition or the exclu-
sion of an owner’s rights." Peed v. Burleson’s, Inc., 94 S.E.2d 351,
353 (N.C. 1956) (internal quotation marks omitted). And, although
the Class Members make some attempt to establish the viability of
their unfair trade practices claim, Sara Lee argues convincingly to the
contrary. Under the UDTPA, it is unlawful to engage in "[u]nfair
methods of competition in or affecting commerce, and unfair or
deceptive acts or practices in or affecting commerce." N.C. Gen. Stat.
§ 75-1.1(a). The UDTPA "was intended to benefit consumers, but its
protections extend to businesses in appropriate situations." Dalton v.
Camp, 548 S.E.2d 704, 710 (N.C. 2001) (internal citation omitted).
As Sara Lee emphasizes, the UDTPA "does not normally extend to
run-of-the-mill employment disputes." Id.; see also HAJMM Co. v.
House of Raeford Farms, Inc., 403 S.E.2d 483, 492 (N.C. 1991)
(observing that UDTPA "does not cover employer-employee rela-
tions" (citing Buie v. Daniel Int’l Corp., 289 S.E.2d 118 (N.C. Ct.
App. 1982) (holding that action based on employee’s discharge for
seeking workers’ compensation benefits did not fall within scope of
UDTPA))); Durling v. King, 554 S.E.2d 1, 4-5 (N.C. Ct. App. 2001)
(concluding that UDTPA did not apply in employees’ suit to recover
ANDERSON v. SARA LEE CORP. 15
unpaid sales commissions). When the Supreme Court of North Caro-
lina has allowed UDTPA claims in employer-employee disputes, it
has been in circumstances not present in this case: for example,
claims brought by employers against employees who engaged in con-
duct falling squarely within the UDTPA’s intended reach. See Sara
Lee Corp. v. Carter, 519 S.E.2d 308, 311-12 (N.C. 1999) (authorizing
UDTPA claim based on self-dealing against purchasing agent who
sold computer parts and services to employer at inflated prices);
United Labs., Inc. v. Kuykendall, 370 S.E.2d 375, 388-89 (N.C. 1988)
(recognizing that UDTPA may have been contravened with respect to
former employee’s violation of covenant not to compete). Accord-
ingly, we affirm the district court’s dismissal with prejudice of the
Class Members’ unfair trade practices claim, as well as of their con-
version claim.9
III.
We turn now to the issue of whether the Class Members’ remaining
claims — for breach of contract, negligence, and fraud — are pre-
empted by the FLSA. The district court decided that those three
claims are not so preempted. This issue constitutes a question of law
that we review de novo. See Cox v. Shalala, 112 F.3d 151, 153 (4th
Cir. 1997).
A.
We are guided by longstanding principles of preemption in our
assessment of whether the FLSA invalidates the Class Members’
remaining claims. The Supremacy Clause of the Constitution renders
federal law "the supreme Law of the Land . . . any Thing in the Con-
stitution or Laws of any State to the Contrary notwithstanding." U.S.
Const. art. VI, cl. 2. "As a result, federal statutes and regulations
9
In addition to defending the district court’s dismissals of the Class
Members’ fraud, conversion, and unfair trade practices claims, Sara Lee
contends on appeal that the court could have dismissed the claims for
breach of contract and negligence under Rule 12(b)(6), rather than wait-
ing to render its Rule 56 summary judgment award on those two claims.
We agree with the district court, however, that the Class Action Com-
plaint sufficiently pleads the contract and negligence claims.
16 ANDERSON v. SARA LEE CORP.
properly enacted and promulgated can nullify conflicting state or
local actions." College Loan Corp. v. SLM Corp., 396 F.3d 588, 595
(4th Cir. 2005) (internal quotation marks omitted). Federal law may
preempt state law under the Supremacy Clause in three ways — by
"express preemption," by "field preemption," or by "conflict preemp-
tion." See Pinney v. Nokia, Inc., 402 F.3d 430, 453 (4th Cir. 2005)
(citing Cipollone v. Liggett Group, Inc., 505 U.S. 504, 516 (1992);
Hillsborough County v. Automated Med. Labs., Inc., 471 U.S. 707,
713 (1985); S. Blasting Servs., Inc. v. Wilkes County, 288 F.3d 584,
590 (4th Cir. 2002)); see also College Loan, 396 F.3d at 595-96. For
its contention that the FLSA preempts the Class Members’ claims,
Sara Lee invokes conflict preemption, which occurs when a state law
"‘actually conflicts with federal law.’" S. Blasting, 288 F.3d at 590
(quoting Hillsborough, 471 U.S. at 713).10
In assessing whether an actual conflict exists between state and
federal law, "we resolve the more specific inquiries of whether ‘it is
impossible to comply with both state and federal law’ or ‘whether the
state law stands as an obstacle to the accomplishment of the full pur-
poses and objectives’ of federal law." Worm v. Am. Cyanamid Co.,
970 F.2d 1301, 1305 (4th Cir. 1992) (quoting Silkwood v. Kerr-
McGee Corp., 464 U.S. 238, 248 (1984)). It is the existence of the lat-
ter circumstance, which we term "obstacle preemption," that Sara Lee
asserts here.
Of course, our preemption inquiry must "‘start[ ] with the basic
assumption that Congress did not intend to displace state law.’" S.
Blasting, 288 F.3d at 589 (quoting Maryland v. Louisiana, 451 U.S.
725, 746 (1981)); see also Cipollone, 505 U.S. at 516 ("Consideration
of issues arising under the Supremacy Clause starts with the assump-
tion that the historic police powers of the States are not to be super-
seded by Federal Act unless that is the clear and manifest purpose of
10
In contrast to conflict preemption, express preemption takes place
when "Congress expressly declares its intent to preempt state law," Pin-
ney, 402 F.3d at 453, and field preemption occurs when Congress "‘oc-
cup[ies] the field’ by regulating so pervasively that there is no room left
for the states to supplement federal law," Cox, 112 F.3d at 154. There is
no question that express preemption and field preemption are inapposite
to this dispute.
ANDERSON v. SARA LEE CORP. 17
Congress." (internal quotation marks and alterations omitted)). The
purpose of Congress is therefore the "ultimate touchstone" of a pre-
emption analysis. Cipollone, 505 U.S. at 516 (internal quotation
marks omitted). As a general proposition, the presumption that Con-
gress did not intend to preempt state law is especially strong when it
has legislated "‘in a field which the States have traditionally occu-
pied,’" such as "protecting the health and safety of their citizens." S.
Blasting, 288 F.3d at 590 (quoting Medtronic, Inc. v. Lohr, 518 U.S.
470, 485 (1996) (internal quotation marks omitted)); see also Abbot
v. Am. Cyanamid Co., 844 F.2d 1108, 1112 (4th Cir. 1988). And, the
presumption is stronger still "against preemption of state remedies,
like tort recoveries, when no federal remedy exists." Abbot, 844 F.2d
at 1112 (citing Silkwood, 464 U.S. at 251).
B.
With the above-stated legal principles in mind, we proceed with
our assessment of Sara Lee’s contention, under a theory of conflict
preemption (or, more specifically, obstacle preemption), that the
FLSA displaces the Class Members’ contract, negligence, and fraud
claims. Of significance to our inquiry, Congress enacted the FLSA to
eliminate "labor conditions detrimental to the maintenance of the
minimum standard of living necessary for health, efficiency, and gen-
eral well-being of workers." 29 U.S.C. § 202(a). The FLSA mandates
that covered workers be paid a minimum wage, see id. § 206, and that
they receive overtime compensation, see id. § 207.
As we have recognized, "the FLSA provides an unusually elaborate
enforcement scheme." Kendall v. City of Chesapeake, 174 F.3d 437,
443 (4th Cir. 1999) (internal quotation marks omitted). With respect
to the minimum wage and overtime compensation requirements, the
FLSA’s enforcement scheme includes the provision of criminal penal-
ties for willful violations; the empowerment of the Secretary of Labor
to supervise payment of unpaid wages due and to bring actions for
unpaid wages, liquidated damages, and injunctive relief; and the
authorization for workers to file private actions, in state or federal
court, to recover unpaid wages, liquidated damages, and costs and
attorney’s fees. See 29 U.S.C. §§ 215-217. Pursuant to the Portal-to-
Portal Act, an FLSA claim for minimum wages or overtime compen-
sation is subject to a two-year limitations period, unless the claim
18 ANDERSON v. SARA LEE CORP.
arises from "a willful violation," in which case a three-year limitations
period applies. See id. § 255(a).
By contrast, the Class Members’ claims for breach of contract, neg-
ligence, and fraud come with remedies that, in some respects, are
more generous than those provided in the FLSA enforcement scheme.
For example, the contract claim (even without proof of a willful fail-
ure to pay wages due) is arguably subject to a three-year limitations
period, see N.C. Gen. Stat. § 1-52(1), and punitive damages may be
awarded in North Carolina upon proof of fraud, malice, or willful or
wanton conduct, see id. § 1D-15(a). Crucially, though, the Class
Members’ state claims all depend on establishing that Sara Lee vio-
lated the FLSA, either in good faith or willfully. See, e.g., Class
Action Complaint ¶ 31 (alleging, as part of negligence claim, that
Sara Lee "carelessly" failed to pay Class Members wages due under
FLSA); id. ¶¶ 38, 41 (asserting, as part of contract claim, that Sara
Lee breached promise to pay FLSA-mandated wages); id. ¶ 51 (alleg-
ing, as part of fraud claim, that Sara Lee "willfully failed and refused
to pay . . . Class Members for compensable time" under FLSA). With-
out doubt, these state claims essentially require the same proof as
claims asserted under the FLSA itself.11
The issue before us is whether, in these circumstances, the Class
Members’ FLSA-based state claims "stand[ ] as an obstacle to the
accomplishment of the full purposes and objectives of" the FLSA.
Worm, 970 F.2d at 1305 (internal quotation marks omitted). There is
a strong presumption that Congress, in enacting the FLSA for the ben-
efit of workers, did not intend to override the States’ traditional role
in protecting the health and safety of their citizens. See S. Blasting,
288 F.3d at 590. And indeed, the FLSA contains a "savings clause"
that expressly allows states to provide workers with more beneficial
minimum wages and maximum workweeks than those mandated by
the FLSA itself. See 29 U.S.C. § 218(a) ("No provision of this chapter
or of any order thereunder shall excuse noncompliance with any . . .
11
The Class Members have attempted to distinguish their contract
claim from an FLSA claim on the ground that the contract claim arises
from an affirmative promise to pay all wages due under the FLSA. This
point is unavailing, since Sara Lee was required to comply with the
FLSA whether it promised to or not.
ANDERSON v. SARA LEE CORP. 19
State law or municipal ordinance establishing a minimum wage
higher than the minimum wage established under this chapter or a
maximum workweek lower than the maximum workweek established
under this chapter . . . ."); see also Pettis Moving Co. v. Roberts, 784
F.2d 439, 441 (2d Cir. 1986) ("Section 218(a) of the FLSA explicitly
permits states to set more stringent overtime provisions than the
FLSA." (internal citation omitted)).
The Class Members do not contend, however, that any North Caro-
lina law entitles them to unpaid wages. Rather, as discussed above,
they rely on the FLSA for their rights, and they invoke state law only
as the source of remedies for the alleged FLSA violations. Impor-
tantly, the FLSA does not explicitly authorize states to create alterna-
tive remedies for FLSA violations. And, in view of the FLSA’s
unusually elaborate enforcement scheme, there cannot be the excep-
tionally strong presumption against preemption of such state remedies
that would be warranted if the FLSA did not provide federal reme-
dies. See Abbot, 844 F.2d at 1112. Nevertheless, in assessing whether
the FLSA enforcement scheme preempts state remedies for FLSA
violations, we must heed the Supreme Court’s admonishment that
"the mere existence of a federal regulatory or enforcement scheme"
— even if the scheme is an appreciably detailed one — "does not by
itself imply pre-emption of state remedies." English v. Gen. Elec. Co.,
496 U.S. 72, 87 (1990). And we must look for "‘special features war-
ranting pre-emption,’" id. (quoting Hillsborough, 471 U.S. at 719),
such as the provision of exclusive remedies for enforcing rights
expressly guaranteed by the federal statute, see Ingersoll-Rand Co. v.
McClendon, 498 U.S. 133, 144 (1990).
Whether the FLSA provides exclusive remedies for the enforce-
ment of its own provisions is a question that need not occupy us for
long, because we already answered it in Kendall. There, we were cal-
led on to decide whether the plaintiffs could use 42 U.S.C. § 1983 to
enforce their rights to overtime compensation under the FLSA. Ken-
dall, 174 F.3d at 439. We recognized that the employer, as the party
advocating preclusion of the plaintiffs’ § 1983 claim, was required to
"‘make the difficult showing that allowing § 1983 actions to go for-
ward would be inconsistent with Congress’s carefully tailored
scheme.’" Id. at 442 (quoting Blessing v. Freestone, 520 U.S. 329,
346 (1997)). Still, we agreed with the employer that the plaintiffs
20 ANDERSON v. SARA LEE CORP.
could not enforce their FLSA rights by way of a § 1983 action, con-
cluding, in relevant part, that "in the FLSA Congress manifested a
desire to exclusively define the private remedies available to redress
violations of the statute’s terms." Id. at 443. We explained that Con-
gress’s intention to create exclusive remedies was clear in that "the
FLSA mandates that the commencement of an action by the Secretary
of Labor terminates an employee’s own right of action" — a special
feature of the FLSA’s enforcement scheme, found in 29 U.S.C.
§ 216(b) and (c), that would be rendered superfluous if workers were
able to circumvent that scheme while pursuing their FLSA rights. Id.
In accordance with our ruling in Kendall, we must hold today that
Congress prescribed exclusive remedies in the FLSA for violations of
its mandates. And we note that we are not alone in so concluding. See
Roman v. Maietta Constr., Inc., 147 F.3d 71, 76 (1st Cir. 1998) (citing
Tombrello v. USX Corp., 763 F. Supp. 541, 544-45 (N.D. Ala. 1991));
Westfall v. Kendle Int’l, CPU, No. 1:05-cv-00118, 2007 WL 486606,
at *16 (N.D. W. Va. Feb. 15, 2007); Lerwill v. Inflight Motion Pic-
tures, Inc., 343 F. Supp. 1027, 1028-29 (N.D. Cal. 1972).
Because the FLSA’s enforcement scheme is an exclusive one, we
further conclude that the Class Members’ FLSA-based contract, neg-
ligence, and fraud claims are precluded under a theory of obstacle
preemption. Our conclusion is consistent with the rulings of several
district courts deeming state claims to be preempted by the FLSA
where those claims have merely duplicated FLSA claims. See, e.g.,
Choimbol v. Fairfield Resorts, Inc., No. 2:05cv463, 2006 WL
2631791, at *4-6 (E.D. Va. Sept. 11, 2006); Moeck v. Gray Supply
Corp., No. 03-1950, 2006 WL 42368, at *2 (D.N.J. Jan. 6, 2006);
Chen v. St. Beat Sportswear, Inc., 364 F. Supp. 2d 269, 292-93
(E.D.N.Y. 2005); Morrow v. Green Tree Servicing, L.L.C., 360 F.
Supp. 2d 1246, 1252-53 (M.D. Ala. 2005); Sorensen v. CHT Corp.,
No. 03 C 1609(L), 2004 WL 442638, at *5-7 (N.D. Ill. Mar. 9, 2004);
Johnston v. Davis Sec., Inc., 217 F. Supp. 2d 1224, 1227-28 (D. Utah
2002); Alexander v. Vesta Ins. Group, Inc., 147 F. Supp. 2d 1223,
1240-41 (N.D. Ala. 2001); see also Roble v. Celestica Corp., No. 06-
2934, 2006 WL 3858396, at *3 (D. Minn. Dec. 29, 2006) (suggesting
that court would later deem state common law claims to be super-
seded by FLSA if discovery revealed that state claims were duplica-
tive of FLSA claims); Nettles v. Techplan Corp., 704 F. Supp. 95, 100
ANDERSON v. SARA LEE CORP. 21
(D.S.C. 1988) (awarding summary judgment to employer on negli-
gence claim as duplicative of FLSA claim, thereby implicitly ruling
that negligence claim was FLSA-preempted). But see Avery v. City of
Talladega, 24 F.3d 1337, 1348 (11th Cir. 1994) (allowing claim for
breach of contract coterminous with FLSA claim); Paukstis v. Ken-
wood Golf & Country Club, Inc., 241 F. Supp. 2d 551, 559-60 (D.
Md. 2003) (concluding that state negligence claim did "not necessar-
ily conflict with the purpose of the FLSA’s remedial scheme, at least
where a plaintiff seeks identical damages under both federal and state
law").12
Finally, although Sara Lee presents FLSA preemption as a ground
for affirming the final judgment rendered by the district court in its
favor, we deem it more appropriate to remand the contract, negli-
gence, and fraud claims for dismissal without prejudice as preempted
by the FLSA. This will give the Class Members an opportunity to
pursue any FLSA claims they may possess. Cf. Pueschel v. United
States, 369 F.3d 345, 353 (4th Cir. 2004) (affirming dismissal without
prejudice of Federal Tort Claims Act suit as preempted by Title VII);
Makar v. Health Care Corp. of the Mid-Atlantic (CareFirst), 872 F.2d
80, 81-82 (4th Cir. 1989) (vacating judgment for defendants on state
common law claims preempted by Employee Retirement Income
Security Act ("ERISA"), and remanding with directions to dismiss
case without prejudice to any future ERISA action).
12
The Ninth Circuit has suggested, without deciding, that "[c]laims that
are directly covered by the FLSA (such as overtime and retaliation dis-
putes) must be brought under the FLSA." Williamson v. Gen. Dynamics
Corp., 208 F.3d 1144, 1154 (9th Cir. 2000). In the wake of Williamson,
district courts in the Ninth Circuit have split over whether the FLSA pre-
empts duplicative state law claims. Compare Takacs v. A.G. Edwards &
Sons, Inc., 444 F. Supp. 2d 1100, 1116-18 (S.D. Cal. 2006) (concluding
that state claim was not preempted by FLSA), and Bahramipour v. Citi-
group Global Mkts., Inc., No. C 04-4440, 2006 WL 449132, at *4-7
(N.D. Cal. Feb. 22, 2006) (same), with Flores v. Albertson’s Inc., No.
CV 01-00515, 2003 WL 24216269, at *5-6 (C.D. Cal. Dec. 9, 2003)
(deeming state claims to be preempted by FLSA).
22 ANDERSON v. SARA LEE CORP.
IV.
Pursuant to the foregoing, we affirm the Rule 12(b)(6) dismissals
with prejudice of the conversion and unfair trade practices claims. We
vacate the Rule 12(b)(6) dismissal with prejudice of the fraud claim,
as well as the Rule 56 summary judgment awards on the contract and
negligence claims, and remand with instructions to dismiss without
prejudice those three claims as preempted by the FLSA.
AFFIRMED IN PART, VACATED IN PART,
AND REMANDED WITH INSTRUCTIONS