     12-1453-cv
     Lundy v. Catholic Health System of Long Island Inc.

 1                       UNITED STATES COURT OF APPEALS
 2
 3                           FOR THE SECOND CIRCUIT
 4
 5                              August Term, 2012
 6
 7
 8      (Argued: October 25, 2012                Decided: March 1, 2013)
 9
10                              Docket No. 12-1453
11
12   - - - - - - - - - - - - - - - - - - - -x
13
14   DENNIS LUNDY, on behalf of themselves and all other
15   employees similarly situated, PATRICIA WOLMAN, KELLY
16   IWASIUK,
17
18                     Plaintiffs-Appellants,
19
20   DAISY RICKS, on behalf of herself and all other employees
21   similarly situated,
22
23                     Plaintiff,
24
25               - v.-
26
27   CATHOLIC HEALTH SYSTEM OF LONG ISLAND INCORPORATED, DBA
28   Catholic Health Services of Long Island, GOOD SAMARITAN
29   HOSPITAL MEDICAL CENTER, MERCY MEDICAL CENTER, NEW ISLAND
30   HOSPITAL, AKA St. Joseph Hospital, ST. CATHERINE OF SIENA
31   MEDICAL CENTER, ST. CHARLES HOSPITAL AND REHABILITATION
32   CENTER, ST. FRANCIS HOSPITAL, Roslyn, New York, OUR LADY OF
33   CONSOLATION GERIATRIC CARE CENTER, NURSING SISTERS HOME
34   CARE, DBA Catholic Care Home, JAMES HARDEN,
35
36                     Defendants-Appellees,
37
38   LONG ISLAND HEALTH NETWORK, INCORPORATED, BROOKHAVEN
39   MEMORIAL HOSPITAL MEDICAL CENTER INCORPORATED, AKA
40   Brookhaven Memorial Hospital Medical Center, JOHN T. MATHER
41   MEMORIAL HOSPITAL OF PORT JEFFERSON, NEW YORK, INCORPORATED,
42   AKA John T. Mather Memorial Hospital, SOUTH NASSAU
43   COMMUNITIES HOSPITAL, WINTHROP-UNIVERSITY HOSPITAL, TERRY
44   HARGADON, BRIAN CURRIE, KATHLEEN MASIULIS,
45
46                     Defendants.
47
48   - - - - - - - - - - - - - - - - - - - -x
1        Before:       JACOBS, Chief Judge, WALKER, Circuit
2                      Judge, and O’CONNOR, Associate Justice
3                      (retired).*

4        Plaintiffs, on behalf of a purported class of similarly

5    situated employees, appeal from the orders of the District

6    Court for the Eastern District of New York (Seybert, J.),

7    dismissing their claims under the Fair Labor Standards Act,

8    the Racketeer Influenced and Corrupt Organizations Act, and

9    New York Labor Law.   For the following reasons, the judgment

10   is affirmed in part, and in part vacated and remanded.

11
12                               MICHAEL J. LINGLE, Thomas &
13                               Solomon LLP, Rochester, New York
14                               (J. Nelson Thomas, Guy A. Talia,
15                               Jessica L. Witenko, on the
16                               brief), for Appellants.
17
18                               JAMES E. MCGRATH, III, Putney,
19                               Twombly, Hall & Hirson LLP, New
20                               York, New York (Daniel F.
21                               Murphy, Jr., Michael T. McGrath,
22                               Randi B. Feldheim, Adriana S.
23                               Kosovych, Putney, Twombly, Hall
24                               & Hirson LLP, New York, New
25                               York, on the brief; Stephen J.
26                               Jones, Todd R. Shinaman, Joseph
27                               A. Carello, Nixon Peabody LLP,
28                               Rochester, New York, on the
29                               brief), for Appellees.
30
31
32

          *
             The Honorable Sandra Day O’Connor, Associate Justice
     (retired) of the United States Supreme Court, sitting by
     designation.
                                   2
1    DENNIS JACOBS, Chief Judge:

2        Plaintiffs, a respiratory therapist and two nurses,

3    allege that the Catholic Health System of Long Island Inc.,

4    a collection of hospitals, healthcare providers, and related

5    entities (collectively, “CHS”), failed to compensate them

6    adequately for time worked during meal breaks, before and

7    after scheduled shifts, and during required training

8    sessions.   They sued on behalf of a purported class of

9    similarly situated employees (collectively, “the

10   Plaintiffs”) and take this appeal from orders of the United

11   States District Court for the Eastern District of New York

12   (Seybert, J.), dismissing the claims asserted under the Fair

13   Labor Standards Act (“FLSA”), the Racketeer Influenced and

14   Corrupt Organizations Act (“RICO”), and the New York Labor

15   Law (“NYLL”).

16       We affirm the dismissal of the FLSA and RICO claims for

17   failure to state a claim.   We also affirm the dismissal of

18   Plaintiffs’ NYLL overtime claims, which have the same

19   deficiencies as the FLSA overtime claims.   However, because

20   the district court did not explain why Plaintiffs’ NYLL gap-

21   time claims were dismissed with prejudice, we vacate that

22   aspect of the judgment and remand for further consideration

23   of the NYLL gap-time claims.

                                    3
1                              BACKGROUND

2        The original complaint, alleging violations of FLSA and

3    RICO, was filed in March 2010 by Daisy Ricks, a healthcare

4    employee, on behalf of similarly situated employees, against

5    the Long Island Health Network, Inc., Catholic Health

6    Services of Long Island, and various related entities.1    The

7    First Amended Complaint, filed in June 2010, substituted

8    Dennis Lundy, Patricia Wolman, and Kelly Iwasiuk as lead

9    plaintiffs, dropped some defendants, and added claims under

10   NYLL and state common law.   The twelve causes of action

11   pleaded were FLSA, RICO, NYLL, implied contract, express

12   contract, implied covenants, quantum meruit, unjust

13   enrichment, fraud, negligent misrepresentation, conversion,

14   and estoppel.   This case is one of many similar class


          1
             The complicated facts and procedural history of this
     case are recounted in detail in five orders issued by the
     district court. See Mem. & Order, Wolman v. Catholic Health
     System of Long Island, Inc., No. 10-CV-1326 (E.D.N.Y. Dec.
     30, 2010) (Special App. 1-19); Mem. & Order, Wolman v.
     Catholic Health System of Long Island, Inc., No. 10-CV-1326
     (E.D.N.Y. May 5, 2011) (Special App. 20-32); Mem. & Order,
     Wolman v. Catholic Health System of Long Island, Inc., No.
     10-CV-1326 (E.D.N.Y. May 24, 2011) (Special App. 33-37);
     Mem. & Order, Wolman v. Catholic Health System of Long
     Island, Inc., No. 10-CV-1326 (E.D.N.Y. Feb. 16, 2012)
     (Special App. 38-74); Mem. & Order, Wolman v. Catholic
     Health System of Long Island, Inc., No. 10-CV-1326 (E.D.N.Y.
     Mar. 12, 2012) (Special App. 75-77). We recount only those
     that bear on the resolution of this appeal.
                                   4
1    actions brought by the same law firm, Thomas & Solomon LLP,

2    against numerous healthcare entities in the region.   A dozen

3    of them are currently on appeal before this Court.2

4        The FLSA claims focused on alleged unpaid overtime.      In

5    relevant part, FLSA’s overtime provision states that “no

6    employer shall employ any of his employees . . . for a

7    workweek longer than forty hours unless such employee

8    receives compensation for his employment in excess of the

9    hours above specified at a rate not less than one and

10   one-half times the regular rate at which he is employed.”

11   29 U.S.C. § 207(a)(1).3

12       It is alleged that CHS used an automatic timekeeping

13   system that deducted time from paychecks for meals and other

14   breaks even though employees frequently were required to

          2
             See Yarus v. N.Y.C. Health & Hosps. Corp., No. 11-
     710; Megginson v. Westchester Cnty. Health Care Corp., No.
     11-713; Megginson v. Westchester Med. Ctr., No. 12-4084;
     Alamu v. Bronx-Lebanon Hosp. Ctr., No. 11-728; Alamu v.
     Bronx-Lebanon Hosp. Ctr., No. 12-4085; Nakahata v. N.Y.-
     Presbyterian HealthCare Sys., No. 11-734; Nakahata v. N.Y.
     Presbyterian HealthCare Sys., No. 12-4128; Hinterberger v.
     Catholic Health Sys., No. 12-630; Hinterberger v. Catholic
     Health Sys., No. 12-918; Gordon v. Kaleida Health, No. 12-
     654; Gordon v. Kaleida Health, No. 12-670; Lundy v. Catholic
     Health Sys. of Long Island Inc., No. 12-1453.
          3
             In addition to FLSA’s overtime provisions, Section
     206 of FLSA requires that employers pay a minimum wage.
     Plaintiffs have not brought minimum wage claims in this
     case.
                                  5
1    work through their breaks, and that CHS failed to pay for

2    time spent working before and after scheduled shifts, and

3    for time spent attending training programs.4

4        The procedural history of this case was prolonged by

5    four attempts to amend the complaint, and various orders

6    dismissing the claims, as recounted below.

7        A Second Amended Complaint, filed in August 2010,

8    replaced some of the defendants that had been sued in error.

9    On motion, the district court dismissed most of the claims,

10   without prejudice.   The FLSA overtime claims were dismissed

11   for failure to approximate the number of uncompensated

12   overtime hours.   The FLSA claim for “gap-time” pay (i.e.,

13   for unpaid hours below the 40-hour overtime threshold) was

14   dismissed--with prejudice--on the ground that FLSA does not

15   permit gap-time claims when the employment contract

16   explicitly provides compensation for gap time worked.    The

17   RICO claims were dismissed--with prejudice--for insufficient

18   allegations of any pattern of racketeering activity.    Once

19   the federal claims were dismissed, the state law claims were

20   dismissed without prejudice.


          4
             Since Plaintiffs were not subject to a collective
     bargaining agreement while they were employed by CHS, the
     Labor Management Relations Act is not at issue in this case.
                                    6
1        The district court granted leave to replead the FLSA

2    overtime claims that were dismissed without prejudice, but

3    cautioned that any future complaint “should contain

4    significantly more factual detail concerning who the named

5    Plaintiffs are, where they worked, in what capacity they

6    worked, the types of schedules they typically or

7    periodically worked, and any collective bargaining

8    agreements they may have been subject to.”     Special App. 18.

9    The district court said that it would “not be impressed if

10   the Third Amended Complaint prattle[d] on for another 217

11   paragraphs, solely for the sake of repeating various

12   conclusory allegations many times over.”     Id. at 19.

13       The Third Amended Complaint, filed in January 2011, was

14   largely identical to the Second (with the addition of

15   approximately ten paragraphs).      When CHS moved to dismiss,

16   the court issued an order sua sponte urging supplemental

17   briefing and a more definite statement.     Observing that

18   Plaintiffs had again failed to achieve sufficient

19   specificity, the court added:

20       [T]he Court does not believe that it would serve
21       anyone’s interest to enter another dismissal without
22       prejudice, which would be followed almost assuredly by
23       another amended complaint and then a full round of Rule
24       12(b)(6) briefing. Instead, the Court considers it
25       more appropriate to sua sponte direct Plaintiffs to

                                     7
1        file a more definite statement, which it will then use
2        to judge the sufficiency of the [Third Amended
3        Complaint].
4
5    Special App. 26.    The court expressed concern with the

6    vagueness of the pleading, directed Plaintiffs to stop

7    “hiding the ball,” id. at 27, and listed specific

8    information needed for a more definite statement.

9        Plaintiffs failed to issue a more definite statement

10   and instead filed a Fourth Amended Complaint (hereinafter,

11   “the Complaint”) in May 2011.       The RICO and estoppel claims

12   were dropped, and the remaining causes of action were

13   pleaded as before, supplemented with some more facts.

14       CHS’s renewed motion to dismiss was largely granted in

15   February 2012, on the following grounds:

16            1.   Plaintiffs insufficiently pled the requisite

17       employer-employee relationship as to each named

18       defendant, because Lundy, Wolman, and Iwasiuk worked

19       only at Good Samaritan Hospital, and because the

20       “economic realities” of the relationships among

21       defendants did not constitute a single employment

22       organization.    The FLSA claims against all defendants

23       other than Good Samaritan were dismissed with




                                     8
1        prejudice.5

2             2.   The FLSA claims against Defendant James Harden

3        (the CEO, President, and Director of CHS) were

4        dismissed with prejudice because the economic reality

5        of his relationship with Lundy, Wolman, and Iwasiuk did

6        not amount to an employer-employee relationship.

7             3.   As to the claim that the automatic timekeeping

8        deductions allegedly violated FLSA as applied to

9        Plaintiffs (even though they were not per se illegal),

10       the Plaintiffs failed to show that they were personally

11       denied overtime by this system.

12            4.   As to their FLSA overtime allegations against

13       Good Samaritan, Plaintiffs were required to plead that

14       they worked (1) compensable hours (2) in excess of 40

15       hours per week, and (3) that CHS knew that Plaintiffs

16       were working overtime.   Only some of the categories of

17       purportedly unpaid work--meal breaks, time before and

18       after scheduled shifts, and training--constituted

19       “compensable” hours.


          5
             The court also rejected arguments that all of the
     named defendants operated as a single enterprise, or that
     they were all liable under theories of agency and alter-ego.
     Even though the district court dismissed the FLSA claims
     against CHS, we use the term “CHS” in this opinion to refer
     to Defendants generally.
                                   9
1        Work during meal breaks is compensable under FLSA

2    if “predominantly” for the employer’s benefit.    Special

3    App. 62.   Although Plaintiffs alleged that their meal

4    breaks were “typically” missed or interrupted, the

5    Complaint “is void of any facts regarding the nature

6    and frequency of these interruptions during the

7    relevant time period or how often meal breaks were

8    missed altogether as opposed to just interrupted.”

9    Id. at 63.   Absent such specificity, there is no claim

10   for compensable time.

11       Time spent working before and after scheduled

12   shifts is compensable if it is “integral and

13   indispensable” to performance of the job and not de

14   minimis.   Id. at 64.   Vague assertions that Wolman and

15   Iwasiuk spent fifteen to thirty minutes before their

16   shifts “preparing” their assignments did not state a

17   claim for compensable time.    Id. at 64-65.   On the

18   other hand, Lundy’s allegation--that he had to arrive

19   early to receive his assignment from the nurse working

20   the prior shift and leave late to hand off assignments

21   to the nurse taking over--could be compensable.

22       Time spent at training is not compensable if it is

23   outside regular hours, if attendance is voluntary, if

                               10
1        the training is not directly related to the job, and if

2        the employee does not perform productive work during

3        the training.    See id. at 66.   Wolman and Lundy’s

4        allegations regarding monthly, mandatory staff meetings

5        stated claims for compensable time.    (Iwasiuk made no

6        allegation of uncompensated trainings.)

7             5.    The potentially valid allegations of

8        compensable time nevertheless did not allege that the

9        compensable time exceeded 40 hours, as required for a

10       FLSA overtime claim.    Wolman and Iwasiuk’s sparse

11       allegations could not support a claim for time in

12       excess of 40 hours.    And Plaintiffs conceded that Lundy

13       never actually worked more than 40 hours in one week.

14       The FLSA claims against Good Samaritan were therefore

15       dismissed without prejudice.

16            6.    Once the federal claims were dismissed,

17       discretion was exercised against taking jurisdiction

18       over the state law claims, thereby also dismissing them

19       without prejudice.

20   Having done all this, the district court granted Plaintiffs

21   limited leave to file a further complaint alleging only

22   those claims that had been dismissed without prejudice, and

23   again gave specific guidance as to the “contours” of such a

24   complaint.    Special App. 70-72.

                                    11
1        In response to Plaintiffs’ inquiry, the district court

2    issued another order a month later, clarifying the scope of

3    the February 2012 order dismissing the Complaint.    The court

4    explained that it dismissed all claims against all

5    defendants, except Good Samaritan, and that the FLSA and

6    NYLL claims were dismissed with prejudice, while the

7    remaining state law claims were not.    See id. at 76.

8        Plaintiffs mercifully elected to forgo another amended

9    complaint, and instead filed their Notice of Appeal on April

10   11, 2012, indicating their intent to appeal the district

11   court’s December 2010 Order dismissing the Second Amended

12   Complaint, the May 2011 sua sponte Order requesting

13   supplemental briefing, the February 2012 Order dismissing

14   the Fourth Amended Complaint, and the March 2012 Order

15   clarifying the scope of the dismissal.

16

17                              DISCUSSION

18       On appeal, Plaintiffs challenge the dismissal of [1]

19   the overtime claims under FLSA; [2] the gap-time claims

20   under FLSA (and NYLL); [3] the NYLL claims with prejudice;

21   and [4] the RICO claims.

22


                                    12
1                                  I

2        We review de novo dismissal of a complaint for failure

3    to state a claim upon which relief can be granted,

4    “accepting all factual allegations in the complaint as true,

5    and drawing all reasonable inferences in the plaintiff’s

6    favor.”   Holmes v. Grubman, 568 F.3d 329, 335 (2d Cir. 2009)

7    (internal quotation marks omitted).   “To survive a motion to

8    dismiss, a complaint must contain sufficient factual matter,

9    accepted as true, to state a claim to relief that is

10   plausible on its face.”   Ashcroft v. Iqbal, 556 U.S. 662,

11   678 (2009) (internal quotation marks omitted).

12       Nevertheless, “the tenet that a court must accept as

13   true all of the allegations contained in a complaint is

14   inapplicable to legal conclusions.”   Id.   “Threadbare

15   recitals of the elements of a cause of action, supported by

16   mere conclusory statements, do not suffice.”   Id.   Pleadings

17   that “are no more than conclusions . . . are not entitled to

18   the assumption of truth.”   Id. at 679.

19

20                                 II

21       As to the overtime claims under FLSA, Plaintiffs argue

22   that they sufficiently alleged [i] compensable work that was


                                   13
1    unpaid, [ii] uncompensated work in excess of 40 hours in a

2    given week, and [iii] status as “employees” of all the

3    Defendants.    Although the district court held Plaintiffs’

4    complaint lacking on all three grounds, we affirm on the

5    second ground--the failure to allege uncompensated work in

6    excess of 40 hours in a given week--because it entirely

7    disposes of the FLSA overtime claims.

8          Section 207(a)(1) of FLSA requires that, “for a

9    workweek longer than forty hours,” an employee who works “in

10   excess of” forty hours shall be compensated for that excess

11   work “at a rate not less than one and one-half times the

12   regular rate at which he is employed” (i.e., time and a

13   half).    29 U.S.C. § 207(a)(1).6   So, to survive a motion to

14   dismiss, Plaintiffs must allege sufficient factual matter to

15   state a plausible claim that they worked compensable

           6
               In its entirety, Section 207(a)(1) provides:

           Except as otherwise provided in this section, no
           employer shall employ any of his employees who in any
           workweek is engaged in commerce or in the production of
           goods for commerce, or is employed in an enterprise
           engaged in commerce or in the production of goods for
           commerce, for a workweek longer than forty hours unless
           such employee receives compensation for his employment
           in excess of the hours above specified at a rate not
           less than one and one-half times the regular rate at
           which he is employed.

     Id.
                                    14
1    overtime in a workweek longer than 40 hours.   Under Federal

2    Rule of Civil Procedure 8(a)(2), a “plausible” claim

3    contains “factual content that allows the court to draw the

4    reasonable inference that the defendant is liable for the

5    misconduct alleged.”   Iqbal, 556 U.S. at 678; see also Bell

6    Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007) (“Factual

7    allegations must be enough to raise a right to relief above

8    the speculative level . . . on the assumption that all the

9    allegations in the complaint are true (even if doubtful in

10   fact).” (internal citation omitted)).

11       We have not previously considered the degree of

12   specificity needed to state an overtime claim under FLSA.

13   Federal courts have diverged somewhat on the question.   See

14   Butler v. DirectSat USA, LLC, 800 F. Supp. 2d 662, 667 (D.

15   Md. 2011) (recognizing that “courts across the country have

16   expressed differing views as to the level of factual detail

17   necessary to plead a claim for overtime compensation under

18   FLSA”).   Within this Circuit, some courts have required an

19   approximation of the total uncompensated hours worked during

20   a given workweek in excess of 40 hours.   See, e.g., Nichols

21   v. Mahoney, 608 F. Supp. 2d 526, 547 (S.D.N.Y. 2009); Zhong

22   v. August August Corp., 498 F. Supp. 2d 625, 628 (S.D.N.Y.



                                   15
1    2007).     Courts elsewhere have done without an estimate of

2    overtime, and deemed sufficient an allegation that plaintiff

3    worked some amount in excess of 40 hours without

4    compensation.     See, e.g., Butler, 800 F. Supp. 2d at 668

5    (collecting cases).

6        We conclude that in order to state a plausible FLSA

7    overtime claim, a plaintiff must sufficiently allege 40

8    hours of work in a given workweek as well as some

9    uncompensated time in excess of the 40 hours.     See 29 U.S.C.

10   § 207(a)(1) (requiring that, “for a workweek longer than

11   forty hours,” an employee who works “in excess of” forty

12   hours shall be compensated time and a half for the excess

13   hours).

14            Determining whether a plausible claim has been pled is

15   “a context-specific task that requires the reviewing court

16   to draw on its judicial experience and common sense.”7

17   Iqbal, 556 U.S. at 679.     Reviewing Plaintiffs’ allegations,

18   as the district court thoroughly did, we find no plausible

19   claim that FLSA was violated, because Plaintiffs have not

20   alleged a single workweek in which they worked at least 40


          7
             Under a case-specific approach, some courts may find
     that an approximation of overtime hours worked may help draw
     a plaintiff’s claim closer to plausibility.
                                     16
1    hours and also worked uncompensated time in excess of 40

2    hours.

3        1.    Wolman was “typically” scheduled to work three

4    shifts per week, totaling 37.5 hours.   J.A. 1797.    She

5    “occasionally” worked an additional 12.5-hour shift or

6    worked a slightly longer shift, id., but how occasionally or

7    how long, she does not say; nor does she say that she was

8    denied overtime pay in any such particular week.     She

9    alleges three types of uncompensated work: (1) 30-minute

10   meal breaks which were “typically” missed or interrupted;

11   (2) uncompensated time before and after her scheduled

12   shifts, “typically” resulting in an additional 15 minutes

13   per shift; and (3) trainings “such as” a monthly staff

14   meeting, “typically” lasting 30 minutes, and respiratory

15   therapy training consisting of, “on average,” 10 hours per

16   year.    Id.

17       She has not alleged that she ever completely missed all

18   three meal breaks in a week, or that she also worked a full

19   15 minutes of uncompensated time around every shift; but

20   even if she did, she would have alleged a total 39 hours and

21   45 minutes worked.   A monthly 30-minute staff meeting, an

22   installment of the ten yearly hours of training, or an


                                   17
1    additional or longer shift could theoretically put her over

2    the 40-hour mark in one or another unspecified week (or

3    weeks); but her allegations supply nothing but low-octane

4    fuel for speculation, not the plausible claim that is

5    required.

6          2.   Iwasiuk “typically” worked four shifts per week,

7    totaling 30 hours.     J.A. 1799.     She claims that

8    “approximately twice a month,” she worked “five to six

9    shifts” instead of four shifts, totaling between 37.5 and 45

10   hours.     Id.   Like Wolman, Iwasiuk does not allege that she

11   was denied overtime pay in a week where she worked these

12   additional shifts.     By way of uncompensated work, she

13   alleges that her 30-minute meal breaks were “typically”

14   missed or interrupted and that she worked uncompensated time

15   before her scheduled shifts, “typically” 30 minutes, and

16   after her scheduled shifts, “often” an additional two hours.

17   Id.   Maybe she missed all of her meal breaks, and always

18   worked an additional 30 minutes before and two hours after

19   her shifts, and maybe some of these labors were performed in

20   a week when she worked more than her four shifts.       But this

21   invited speculation does not amount to a plausible claim

22   under FLSA.


                                      18
1        3.   Lundy worked between 22.5 and 30 hours per week,

2    J.A. 1800, and Plaintiffs conceded below--and do not dispute

3    on appeal--that he never worked over 40 hours in any given

4    week.

5        We therefore affirm the dismissal of Plaintiffs’ FLSA

6    overtime claims.    We need not consider alternative grounds

7    that were conscientiously explored by the district court,

8    such as the lack of an employer-employee relationship

9    between the named Plaintiffs and many of the Defendants, and

10   the insufficient allegations that additional minutes, such

11   as meal breaks, were “compensable” as a matter of law.

12

13                                 III

14       A gap-time claim is one in which an employee has not

15   worked 40 hours in a given week but seeks recovery of unpaid

16   time worked, or in which an employee has worked over 40

17   hours in a given week but seeks recovery for unpaid work

18   under 40 hours.    An employee who has not worked overtime has

19   no claim under FLSA for hours worked below the 40-hour

20   overtime threshold, unless the average hourly wage falls

21   below the federal minimum wage.     See United States v.

22   Klinghoffer Bros. Realty Corp., 285 F.2d 487, 494 (2d Cir.


                                    19
1    1960) (denying petitions for rehearing); Monahan v. Cnty. of

2    Chesterfield, 95 F.3d 1263, 1280 (4th Cir. 1996)

3    (“Logically, in pay periods without overtime, there can be

4    no violation of section 207 which regulates overtime

5    payment.”).

6        Notwithstanding that Plaintiffs have failed to

7    sufficiently allege any week in which they worked

8    uncompensated time in excess of 40 hours, Plaintiffs invoke

9    FLSA to seek gap-time wages for weeks in which they claim to

10   have worked over 40 hours.    The viability of such a claim

11   has not yet been settled in this Circuit, but we now hold

12   that FLSA does not provide for a gap-time claim even when an

13   employee has worked overtime.

14       As the district court explained, the text of FLSA

15   requires only payment of minimum wages and overtime wages.

16   See 29 U.S.C. §§ 201-19.     It simply does not consider or

17   afford a recovery for gap-time hours.     Our reasoning in

18   Klinghoffer confirms this view: “[T]he agreement to work

19   certain additional hours for nothing was in essence an

20   agreement to accept a reduction in pay.     So long as the

21   reduced rate still exceeds [the minimum wage], an agreement

22   to accept reduced pay is valid . . . .”     285 F.2d at 494.



                                     20
1    Plaintiffs here have not alleged that they were paid below

2    minimum wage.

3        So long as an employee is being paid the minimum wage

4    or more, FLSA does not provide recourse for unpaid hours

5    below the 40-hour threshold, even if the employee also works

6    overtime hours the same week.        See id.   In this way federal

7    law supplements the hourly employment arrangement with

8    features that may not be guaranteed by state laws, without

9    creating a federal remedy for all wage disputes--of which

10   the garden variety would be for payment of hours worked in a

11   40-hour work week.   For such claims there seems to be no

12   lack of a state remedy, including a basic contract action.

13   See, e.g., Point IV (discussing the New York Labor Law).

14       As the district court observed, some courts may allow

15   such claims to a limited extent.        Special App. 13 (citing

16   Monahan, 95 F.3d at 1279, and other cases).        Among them is

17   the Fourth Circuit in Monahan, which relied on interpretive

18   guidance provided by the Department of Labor.        See 29 C.F.R.

19   §§ 778.315, .317, .322.   “Unlike regulations,” however,

20   “interpretations are not binding and do not have the force

21   of law.”   Freeman v. Nat’l Broad. Co., 80 F.3d 78, 83 (2d

22   Cir. 1996) (analyzing deference owed to Department of Labor



                                     21
1    interpretation of FLSA).   “Thus, although they are entitled

2    to some deference, the weight accorded a particular

3    interpretation under the FLSA depends upon ‘the thoroughness

4    evident in its consideration, the validity of its reasoning,

5    its consistency with earlier and later pronouncements, and

6    all those factors which give it power to persuade.’” Id.

7    (quoting Skidmore v. Swift & Co., 323 U.S. 134, 140 (1944)).

8        The interpretive guidance on which Monahan relied,

9    insofar as it might be read to recognize gap-time claims

10   under FLSA, is owed deference only to the extent it is

11   persuasive: it is not.8

12


          8
             The district court identified deficiencies in the
     Fourth Circuit’s view and expressed “serious concerns” about
     allowing gap-time claims under FLSA. Special App. 15. One
     judge within the Fourth Circuit has acknowledged the force
     of the competing view:

         While I follow the direction of Monahan and the
         Department of Labor regulations in this opinion, I note
         that one could, in the alternative, take the approach
         that compensation for FLSA overtime hours is the sole
         recovery available under the FLSA maximum hour
         provision. This approach would leave the contractual
         interpretation and determination of straight time
         compensation to state courts, which are better
         positioned to address these issues.

     Koelker v. Mayor & City Council of Cumberland, 599 F. Supp.
     2d 624, 635 n.11 (D. Md. 2009) (Motz, J.) (emphasis in
     original).
                                   22
1        Section 778.315 of the guidance, which considers the

2    FLSA requirement for time-and-a-half pay, offers the

3    following clarification: “This extra compensation for the

4    excess hours of overtime work under the Act cannot be said

5    to have been paid to an employee unless all the straight

6    time compensation due him for the nonovertime hours under

7    his contract (express or implied) . . . has been paid.”     29

8    C.F.R. § 778.315.   This interpretation suggests that an

9    employer could violate FLSA by failing to compensate an

10   employee for gap time worked when the employee also works

11   overtime; but the Department of Labor provides no statutory

12   support or reasoned explanation for this interpretation.9

13       The Department of Labor adds, also without explanation,

14   that “[a]n agreement not to compensate employees for certain

15   nonovertime hours stands on no better footing since it would

16   have the same effect of diminishing the employee’s total

17   overtime compensation.”   29 C.F.R. § 778.317.   This guidance

18   seems to rely on nothing more than other (unreasoned)

          9
             Section 778.322 appears to merely build from this
     flawed interpretation: “[O]vertime compensation cannot be
     said to have been paid until all straight time compensation
     due the employee under the statute or his employment
     contract has been paid.” 29 C.F.R. § 778.322. Again, the
     Department of Labor’s interpretation is not grounded in the
     statute and provides no reasoned explanation for this
     conclusion.
                                   23
1    guidance, and directly conflicts with Klinghoffer, which

2    ruled that such an agreement would not violate the limited

3    protections of the FLSA.   285 F.2d at 494.

4        Accordingly, we therefore affirm the dismissal of

5    Plaintiffs’ FLSA gap-time claims.10

6

7                                    IV

8        The claims under the NYLL were dismissed with

9    prejudice.   Plaintiffs argue that the district court lacked

10   jurisdiction to dismiss Plaintiffs’ NYLL claims because it

11   declined to exercise supplemental jurisdiction once it

12   dismissed the federal claims.

13       In the welter of amended complaints, motions to

14   dismiss, and orders that rule and clarify, the record is

15   somewhat confusing on this point.     The state law claims were

16   considered generally in the February 2012 order, in which


          10
             Even if we were to assume that an employee who has
     worked overtime may also seek gap-time pay under FLSA, such
     a claim would not be viable if the employment agreement
     provided that the employee would be compensated for all non-
     overtime hours worked. See Monahan, 95 F.3d at 1272. Here,
     Plaintiffs allege “binding, express oral contracts” that
     include an “explicit promise to compensate Plaintiffs and
     Class Members for ‘all hours worked.’” J.A. 1819. Of
     course in that event a contractual remedy may be available;
     but the district court dismissed the breach of contract
     claims and Plaintiffs have not appealed on that ground.
                                     24
1    the district court “decline[d] to exercise supplemental

2    jurisdiction over Plaintiff’s state law claims,” thereby

3    dismissing them without prejudice.   Special App. 69.     But at

4    the same time, the district court stated that Plaintiffs’

5    FLSA and NYLL claims are examined under the same legal

6    standards, and that the analysis dismissing Plaintiffs’ FLSA

7    claims “applies with equal force to Plaintiffs’ NYLL

8    claims.”   Id. at 47 n.4; see also id. at 61 n.8.   In

9    response to Plaintiffs’ motion for partial reconsideration

10   and clarification, the March 2012 order explained that the

11   “NYLL claims against these Defendants were dismissed WITH

12   PREJUDICE.”   Id. at 76.

13       The exercise of supplemental jurisdiction is within the

14   sound discretion of the district court.    See Carnegie-Mellon

15   Univ. v. Cohill, 484 U.S. 343, 349-50 (1988).    Courts

16   “consider and weigh in each case, and at every stage of the

17   litigation, the values of judicial economy, convenience,

18   fairness, and comity in order to decide whether to exercise”

19   supplemental jurisdiction.   Id. at 350.   Once all federal

20   claims have been dismissed, the balance of factors will

21   “usual[ly]” point toward a declination.    Id. at 350 n.7.

22


                                   25
1        “We review the district court’s decision for abuse of

2    discretion, and depending on the precise circumstances of a

3    case, have variously approved and disapproved the exercise

4    of supplemental jurisdiction where all federal-law claims

5    have been dismissed.”     Kolari v. N.Y.-Presbyterian Hosp.,

6    455 F.3d 118, 122 (2d Cir. 2006) (internal citations

7    omitted).     The dismissal of state law claims has been upheld

8    after dismissal of the federal claims, particularly where

9    the state law claim implicated federal interests such as

10   preemption, or where the dismissal of the federal claims was

11   late in the litigation, or where the state law claims

12   involved only settled principles rather than novel issues.

13   Valencia ex rel. Franco v. Lee, 316 F.3d 299, 305-06 (2d

14   Cir. 2003).     And we have upheld the exercise of supplemental

15   jurisdiction in situations when as here the “state law

16   claims are analytically identical” to federal claims.       Benn

17   v. City of New York, 482 F. App’x 637, 639 (2d Cir. 2012);

18   see also Petrosino v. Bell Atl., 385 F.3d 210, 220 n.11 (2d

19   Cir. 2004).

20       In dismissing the NYLL claims with prejudice, the

21   district court relied on the fact that the same standard

22   applied to the FLSA and NYLL claims.     That exercise of



                                     26
1    supplemental jurisdiction was entirely consistent with this

2    Court’s precedent.11   Reviewing the district court’s

3    determination for an abuse of discretion, we largely affirm

4    the district court’s dismissal of the NYLL claims with

5    prejudice.

6        However, Plaintiffs point out that the district court

7    order was arguably inconsistent in dismissing Plaintiffs’

8    NYLL claims with prejudice notwithstanding its observation

9    that Plaintiffs may have a valid gap-time claim under NYLL.

10       According to the district court: “the NYLL does

11   recognize Gap Time Claims and provides for full recovery of

12   all unpaid straight-time wages owed.”   Special App. 61 n.9

13   (internal quotations and citations omitted).   “Thus, to the

14   extent that the . . . Plaintiffs have adequately pled that

15   they worked compensable time for which they were not

16   properly paid, Plaintiffs have a statutory right under the

17   NYLL to recover straight-time wages for those hours.”    Id.


          11
             In any event, the district court’s dismissal of
     Plaintiffs’ NYLL claims was proper under the Cohill factors:
     judicial economy, convenience, fairness, and comity. See
     484 U.S. at 350. Judicial economy and convenience are
     served by dismissing Plaintiffs’ NYLL claims with prejudice.
     And considering that Plaintiffs amended their complaint at
     least four times with express guidance from the district
     court, they cannot argue now that it is unfair to dismiss
     their inadequately pleaded NYLL claims.
                                   27
1    This observation appears consistent with NYLL, which

2    provides that “[i]f any employee is paid by his or her

3    employer less than the wage to which he or she is

4    entitled . . . he or she shall recover in a civil action the

5    amount of any such underpayments . . . .”     NYLL § 663(1)

6    (emphasis added).

7        We express no view as to the merits of NYLL gap-time

8    claims, or as to the adequacy of Plaintiffs’ pleading.        But

9    because New York law may recognize Plaintiffs’ NYLL gap-time

10   claims, the district court erred in dismissing them with

11   prejudice based solely on its dismissal of Plaintiffs’ FLSA

12   claims.     We therefore affirm the dismissal of Plaintiffs’

13   NYLL overtime claims, but vacate the dismissal of

14   Plaintiffs’ NYLL gap-time claims and remand for further

15   consideration in that narrow respect.

16

17                                   V

18       Finally, Plaintiffs challenge the dismissal of their

19   RICO claims, which alleged that CHS used the mails to

20   defraud Plaintiffs by sending them their payroll checks.

21   The district court dismissed the RICO claims, holding that

22   Plaintiffs had not alleged any pattern of racketeering

23   activity.

                                     28
1        To establish a civil RICO claim, a plaintiff must

2    allege “(1) conduct, (2) of an enterprise, (3) through a

3    pattern (4) of racketeering activity,” as well as “injury to

4    business or property as a result of the RICO violation.”

5    Anatian v. Coutts Bank (Switz.) Ltd., 193 F.3d 85, 88 (2d

6    Cir. 1999) (internal quotation marks omitted).    The pattern

7    of racketeering activity must consist of two or more

8    predicate acts of racketeering.    18 U.S.C. § 1961(5).

9        The Third Amended Complaint cites the mailing of

10   “misleading payroll checks” to show mail fraud as a RICO

11   predicate act, J.A. 1779, on the theory that the mailings

12   “deliberately concealed from its employees that they did not

13   receive compensation for all compensable work that they

14   performed and misled them into believing that they were

15   being paid properly.”   Id. at 1764-65; see also id. at 1765-

16   67 (describing the mailing of checks).12

17       “To prove a violation of the mail fraud statute,

18   plaintiffs must establish the existence of a fraudulent

19   scheme and a mailing in furtherance of the scheme.”


          12
             Federal courts are properly wary of transforming
     any civil FLSA violation into a RICO case. See, e.g.,
     Vandermark v. City of New York, 615 F. Supp. 2d 196, 209-10
     (S.D.N.Y. 2009) (Scheindlin, J.) (“Racketeering is far more
     than simple illegality. Alleged civil violations of the
     FLSA do not amount to racketeering.”).
                                   29
1    McLaughlin v. Anderson, 962 F.2d 187, 190-91 (2d Cir. 1992).

2    On a motion to dismiss a RICO claim, Plaintiffs’ allegations

3    must also satisfy the requirement that, “[i]n alleging fraud

4    or mistake, a party must state with particularity the

5    circumstances constituting fraud or mistake.”    Fed. R. Civ.

6    P. 9(b); see McLaughlin, 962 F.2d at 191.    So Plaintiffs

7    must plead the alleged mail fraud with particularity, and

8    establish that the mailings were in furtherance of a

9    fraudulent scheme.   Id.   Plaintiffs’ allegations fail on

10   both accounts.

11       As to particularity, the “complaint must adequately

12   specify the statements it claims were false or misleading,

13   give particulars as to the respect in which plaintiff

14   contends the statements were fraudulent, state when and

15   where the statements were made, and identify those

16   responsible for the statements.”    Cosmas v. Hassett, 886

17   F.2d 8, 11 (2d Cir. 1989).   Plaintiffs here have not alleged

18   what any particular Defendant did to advance the RICO

19   scheme.   Nor have they otherwise pled particular details

20   regarding the alleged fraudulent mailings.   Bare-bones

21   allegations do not satisfy Rule 9(b).

22



                                    30
1        Almost more fundamentally, Plaintiffs have not

2    established that the mailings were “in furtherance” of any

3    fraudulent scheme.   As the district court observed, the

4    mailing of pay stubs cannot further the fraudulent scheme

5    because the pay stubs would have revealed (not concealed)

6    that Plaintiffs were not being paid for all of their alleged

7    compensable overtime.   See Special App. 16-17.   Mailings

8    that thus “increase[] the probability that [the mailer]

9    would be detected and apprehended” do not constitute mail

10   fraud.   United States v. Maze, 414 U.S. 395, 403 (1974); see

11   also Cavallaro v. UMass Mem’l Health Care Inc., No.

12   09-40152, 2010 WL 3609535, at *3 (D. Mass. July 2, 2010)

13   (examining very similar claim of mail fraud based on

14   paychecks and ruling that the mailings “made the scheme’s

15   discovery more likely”).   We therefore affirm the dismissal

16   of Plaintiffs’ RICO claims.

17

18                              CONCLUSION

19       For the foregoing reasons, we affirm the dismissal of

20   Plaintiffs’ claims under FLSA, their NYLL overtime claims,

21   and their RICO claims, but we vacate the dismissal with

22   prejudice of Plaintiffs’ gap-time claims under the NYLL, and

23   remand for further consideration in that limited respect.

                                    31
