19-517-cv
Vaughn v. Phoenix House New York, et al.




                                           In the
             United States Court of Appeals
                           for the Second Circuit

                                 AUGUST TERM 2019

                                     No. 19-517-cv

                                   MARK VAUGHN,
                                  Plaintiff-Appellant,

                                             v.

             PHOENIX HOUSE NEW YORK INC., PHOENIX HOUSE,
                         Defendants-Appellees,

  TERRANCE WARING, HOUSE MANAGER OF PHOENIX HOUSE LONG
    ISLAND CITY CAMPUS, ARTHUR WALLACE, SUBSTANCE ABUSE
  COUNSELOR, WILLIAM BROWN, HOUSE PROGRAMS OF NEW YORK,
 THOMAS JASPER, CHAIRMAN OF PHOENIX HOUSE PROGRAMS OF NEW
YORK, DENISE BUCKLEY, MANAGING DIRECTOR PHOENIX HOUSE L.I.C.,
 HERMAN LAZADA, MANAGING DIRECTOR, PHOENIX HOUSE CAREER
                 ACADEMY, HOWARD MEITINER,
                         Defendants.



              On Appeal from the United States District Court
                  for the Southern District of New York
                      SUBMITTED: APRIL 1, 2020
                      DECIDED: APRIL 22, 2020



Before: KEARSE, WALKER, and CABRANES, Circuit Judges.




      Plaintiff-Appellant Mark Vaughn appeals from a February 12,
2019 judgment entered in the United States District Court for the
Southern District of New York (Ronnie Abrams, Judge) dismissing his
case against Defendant-Appellee Phoenix House New York Inc. under
Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim
upon which relief can be granted.

      On de novo review, we conclude that Vaughn was not an
employee of Phoenix House such that he can state a claim under the
Fair Labor Standards Act, and that Vaughn’s arguments regarding his
claim brought under 42 U.S.C. § 1983 are barred by a prior appeal, and
thus AFFIRM the decision of the District Court.




                         Mark Vaughn, pro se, Brooklyn, NY.

                         Marie D. Howick, Rachel G. Skaistis, and
                         Justin Mungai, Cravath, Swaine & Moore
                         LLP, New York, NY, for Defendants-
                         Appellees.




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JOSÉ A. CABRANES, Circuit Judge:

       Plaintiff-Appellant Mark Vaughn (“Vaughn”)—proceeding pro
se on appeal but counseled before the District Court—sued Phoenix
House New York and Phoenix House Foundation (jointly, “Phoenix
House”), a drug treatment facility, under 42 U.S.C. § 1983, the Fair
Labor Standards Act (“FLSA”) and the New York Labor Law
(“NYLL”), alleging that he was not paid for work he performed while
a patient there. The District Court (Ronnie Abrams, Judge) dismissed
Vaughn’s complaint.

       In an earlier appeal, we affirmed the dismissal of the Section
1983 claim because it was untimely, but vacated the dismissal of the
FLSA and NYLL claims and remanded them to the District Court to
consider whether Vaughn stated an FLSA claim in light of Glatt v. Fox
Searchlight Pictures, Inc., 811 F.3d 528 (2d Cir. 2016). 1 On remand,
Vaughn was appointed pro bono counsel, who filed a third amended
complaint (the “TAC”). The District Court dismissed the TAC,
reasoning that Vaughn failed to allege sufficient facts to show that he
was an employee within the meaning of the FLSA, and declined to
exercise jurisdiction over Vaughn’s remaining NYLL claims. Vaughn
appeals, again proceeding pro se.




       1 See Vaughn v. Phoenix House New York Inc., 722 F. App’x 4 (2d Cir. 2018)
(summary order). Our summary order also dismissed Vaughn’s claims under the
federal anti-peonage statute, 42 U.S.C. § 1994.




                                       3
          Because we conclude that Vaughn was not an employee of
Phoenix House within the meaning of the FLSA, we AFFIRM the
February 12, 2019 judgment of the District Court.

                                     BACKGROUND

          I.        Factual Background

          As set out in the TAC, in July 2009 Vaughn entered a program
at the Phoenix House, a residential drug and alcohol treatment facility,
pursuant to his state-court-approved agreement to participation in a
rehabilitation program, in lieu of incarceration for existing criminal
charges. Vaughn completed the inpatient phase of the program and
then began an outpatient phase. In 2010, he violated a condition of his
agreement and was reassigned to an inpatient program at Phoenix
House beginning in February 2011. After Vaughn returned to Phoenix
House, he attended a 30-day orientation period but then refused to
complete work duties the program required of him. Vaughn alleged
that the state court judge supervising his case told him that if he was
removed from the Phoenix House program due to his non-compliance,
he would go to jail. 2 He began performing his work responsibilities at
Phoenix House in April 2011, and continued to do so until January
2012. 3




          2   See TAC ¶¶ 36-37.
          3   See id. at ¶¶ 45-50.




                                         4
       Vaughn alleges that during his stays at Phoenix House, he was
required to labor 8 hours a day, 6 days a week. 4 He states that,
although he complained about Phoenix House’s illegal work without
any effect on Phoenix House’s conduct.

       II.        Procedural History

       Vaughn filed suit against Phoenix House on May 12, 2014. After
Vaughn amended his complaint, Phoenix House moved to dismiss the
complaint for failure to state a claim upon which relief can be granted,
which the District Court granted on September 25, 2015, without
prejudice to the filing of an amended complaint. 5 Vaughn again
amended his complaint, which the District Court again dismissed, this
time with prejudice, on August 9, 2016. 6

       Vaughn appealed the dismissal on August 30, and by summary
order we affirmed the District Court’s judgment with respect to
Vaughn’s Section 1983 and 1994 claims, but vacated it with respect to
Vaughn’s FLSA and NYLL claims. 7 In remanding, we directed the
District Court to determine whether Vaughn, as an unpaid worker in
a rehabilitative program, qualifies as an “employee” under the FLSA

       4   See, e.g., id. at ¶¶ 32 and 45.

       See See Vaughn v. Phoenix House Programs of New York, No. 14-cv-3918 (RA),
       5

2015 WL 5671902, at *9 (S.D.N.Y. Sept. 25, 2015).

       See Vaughn v. Phoenix House Programs of New York, No. 14-cv-3918 (RA),
       6

2016 WL 4223748, at *1 (S.D.N.Y. Aug. 9, 2016).
       7   Vaughn, 722 F. App’x at 7. See note 1, ante.




                                             5
in light of our decision in Glatt v. Fox Searchlight Pictures, Inc. 8 We also
recommended that he be appointed pro bono counsel. 9

       Vaughn, accordingly represented by counsel, filed a third
amended complaint on April 30, 2018 (the “TAC”). Following
additional briefing, the District Court granted the motion of Phoenix
House to dismiss the TAC on February 12, 2019, concluding that
Vaughn’s “allegations do not make out a plausible claim that [he] was
Phoenix House’s employee and thus entitled to wages under the
FLSA” because “Vaughn was undoubtedly the primary beneficiary of
his treatment at Phoenix House’s facilities.” 10

       Vaughn timely appealed.

                                    DISCUSSION

       “We review de novo a district court’s dismissal of a complaint
pursuant to Rule 12(b)(6), construing the complaint liberally,
accepting all factual allegations in the complaint as true, and drawing
all reasonable inferences in the plaintiff’s favor.” 11 The complaint must
plead “enough facts to state a claim to relief that is plausible on its



       8   Id. at 6.
       9   Id. at 7.
       10 Vaughn v. Phoenix House Found., Inc., No. 14-cv-3918 (RA), 2019 WL 568012,
at *9 (S.D.N.Y. Feb. 12, 2019).
       11   Chambers v. Time Warner, Inc., 282 F.3d 147, 152 (2d Cir. 2002).




                                            6
face.” 12 Although a court must accept as true all the factual allegations
in the complaint, that requirement is “inapplicable to legal
conclusions.” 13

        I.         Vaughn’s FLSA Claims

        The District Court properly applied Glatt on remand in holding
that Vaughn was not an employee of Phoenix House for the purposes
of the FLSA. 14

        In Glatt, we addressed the question of whether an unpaid intern
qualifies as an employee entitled to compensation under the FLSA, 15
and we extend that analysis to the analogous circumstances presented
in this case. Assessing the nature of the relationship between an intern
and his employer, we concluded in Glatt that “the proper question is
whether the intern or the employer is the primary beneficiary of the
relationship.” 16 The “primary beneficiary test” has “three salient
features:” (1) its “focus[ ] on what the intern receives in exchange for
his work,” (2) its “flexibility to [permit] examin[antion] of the
economic reality” of the relationship, and (3) its acknowledgement

        12Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); see also Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009).
        13   Iqbal, 556 U.S. at 678.

        “The FLSA unhelpfully defines ‘employee’ as an ‘individual employed by
        14

an employer.’” Glatt, 811 F.3d at 534 (quoting 29 U.S.C. § 203(e)(1)).
        15   See id. at 535.
        16   Id. at 536.




                                            7
that   the        intern-employer   relationship   is   subject   to   unique
considerations in light of the intern’s expected “educational or
vocational benefits that are not necessarily expected with all forms of
employment.” 17 In performing this analysis, we ask the district courts
to evaluate a “non-exhaustive set of considerations,” which include:

       1. The extent to which the intern and the employer clearly
       understand that there is no expectation of compensation.
       Any promise of compensation, express or implied,
       suggests that the intern is an employee—and vice versa.

       2. The extent to which the internship provides training
       that would be similar to that which would be given in an
       educational environment, including the clinical and other
       hands-on training provided by educational institutions.

       3. The extent to which the internship is tied to the intern’s
       formal education program by integrated coursework or
       the receipt of academic credit.

       4. The extent to which the internship accommodates the
       intern’s academic commitments by corresponding to the
       academic calendar.

       5. The extent to which the internship’s duration is limited
       to the period in which the internship provides the intern
       with beneficial learning.


       17   Id.




                                       8
        6. The extent to which the intern’s work complements,
        rather than displaces, the work of paid employees while
        providing significant educational benefits to the intern.

        7. The extent to which the intern and the employer
        understand that the internship is conducted without
        entitlement to a paid job at the conclusion of the
        internship. 18

        We emphasized that “[n]o one factor is dispositive and every
factor need not point in the same direction for the court to conclude
that the intern is not an employee entitled to the minimum wage.” 19

        In carefully weighing each of these considerations in the context
presented by Vaughn’s circumstances—in which he is not an intern,
but a recipient of in-patient treatment in a court-approved
rehabilitation program—the District Court properly assumed that all
of Vaughn’s allegations were true 20 and correctly determined that
Factors One, Five, and Seven weigh “strongly” against finding that
Vaughn was an employee of Phoenix House; Factor Six weighs in

        18   Id. at 536–537.
        19   Id. at 537.
        20 See Vaughn v. Phoenix House Foundation, Inc., 2019 WL 568012, at *1 n.1
(S.D.N.Y. Feb. 12, 2019) (noting that the “facts are taken from the TAC and are
accepted as true for the purposes of this motion to dismiss”); see also Ashcroft v. Iqbal,
556 U.S. 662, 678 (2009) (“To survive a motion to dismiss, a complaint must contain
sufficient factual matter, accepted as true, to ‘state a claim to relief that is plausible
on its face.’” (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007))).




                                            9
Vaughn’s favor; and Factors Two, Three, and Four provide “mixed
guidance.” 21 As the District Court rightly noted, however, the
importance of Factor Six in the context of this case differs from that of
an unpaid intern. 22 And Vaughn received significant benefits from
staying at Phoenix House, in large part because he was permitted to
receive rehabilitation treatment there in lieu of a jail sentence, and was
“provided with food, a place to live, therapy, vocational training, and
jobs that kept him busy and off drugs.” 23 Inasmuch as we agree with
the District Court’s careful analysis of the Glatt factors in the context
of Vaughn’s stay at Phoenix House, we cannot conclude that, in these
circumstances, Vaughn was an employee of Phoenix House.
Accordingly, Vaughn cannot state a claim under the FLSA.

       Because the District Court properly dismissed Vaughn’s FLSA
claims, the only claims over which it had original jurisdiction, it did
not abuse its discretion by declining to exercise supplemental
jurisdiction over his NYLL claims. 24




       21   Id. at *8.
       22 See id. (“In contrast to Phoenix House’s treatment facilities, which operate
for the exclusive purpose of providing drug and alcohol addiction treatment …
places of employment that hire interns or vocational trainees most often operate for
some purpose other than to provide training to their unpaid interns.” (internal
citation and quotation marks omitted)).
       23   Id.
       24  See Kolari v. N.Y.-Presbyterian Hosp., 455 F.3d 118, 122 (2d Cir. 2006) (“A
district court may decline to exercise supplemental jurisdiction if it has dismissed




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        II.       Vaughn’s Section 1983 Claim

        In this appeal, Vaughn also seeks to renew his arguments
regarding our prior affirmance of the District Court’s dismissal of his
Section 1983 claim. 25 Those efforts are barred by the law-of-the-case
doctrine, which “commands that when a court has ruled on an issue,
that decision should generally be adhered to by that court in
subsequent stages in the same case unless cogent and compelling
reasons militate otherwise.” 26 Compelling reasons include “an
intervening change in law, availability of new evidence, or the need to
correct a clear error or prevent manifest injustice.” 27 Previously, we
concluded that Vaughn’s Section 1983 claim was untimely because the
most recent state action alleged by Vaughn—the state court’s ordering
his compliance with the rehabilitation program—took place in April
2011, which was outside the three-year statute of limitations for
Section 1983 claims. 28 The law-of-the-case doctrine therefore applies
here.

        Vaughn offers no compelling reason to disturb our prior
decision. He argues that he remained at Phoenix House after April

all claims over which it has original jurisdiction.” (internal quotation marks
omitted)).
        25   See Vaughn, 722 F. App’x at 6.
        26   Johnson v. Holder, 564 F.3d 95, 99 (2d Cir. 2009) (internal quotation marks
omitted).
        27   Id. at 99–100 (internal quotation marks omitted).
        28   Vaughn, 722 F. App’x at 6.




                                              11
2011 because a state court judge ordered him to do so, or else he would
be required to serve his lawfully-imposed state term of imprisonment.
But Vaughn cannot show that any state action occurred after April
2011. The fact that Vaughn remained at Phoenix House is insufficient
to state a Section 1983 claim because Phoenix House is a private entity
that cannot be said to have engaged in state action. To state a Section
1983 claim against a private entity, the plaintiff must show that: (1)
“the entity acts pursuant to the coercive power of the state or is
controlled by the state”; (2) “the state provides significant
encouragement to the entity,” and “the entity is [either] a willful
participant in joint activity with the state or the entity’s functions are
entwined with state policies”; or (3) “the entity has been delegated a
public function by the state.” 29 Vaughn cannot show that Phoenix
House engaged in state action under any of these three theories.

       A private actor is a willful participant in joint activity with the
state under Section 1983 if the two “share some common goal to violate
the plaintiff’s rights,” which Vaughn’s does not allege. 30 Although the
state judge required Vaughn to stay at Phoenix House after April 2011
and told him that he needed to complete the work requirements,
Vaughn had agreed to participate in treatment at Phoenix House in
lieu of being incarcerated. Because the program was ultimately
voluntary, the fact that the state judge informed Vaughn of the

       29 Sybalski v. Indep. Grp. Home Living Program, Inc., 546 F.3d 255, 257 (2d Cir.
2008) (internal quotation marks and alterations omitted).
       30   Betts v. Shearman, 751 F.3d 78, 85 (2d Cir. 2014).




                                            12
consequences of his decision not to work at Phoenix House does not
make Phoenix House a state actor. Further, the fact that Phoenix House
may be subject to regulation by the state 31 is not alone sufficient to
make it a state actor. 32 And treatment and care of the chemically
dependent, like care for the mentally ill and disabled (at issue in
Sybalski), 33 is not a function traditionally and exclusively reserved to
the state. 34 Therefore, the fact that Vaughn remained at Phoenix House
after April 2011 does not make his Section 1983 claims timely.

                                       CONCLUSION

       To summarize, we hold as follows:

       1. A recipient of in-patient treatment in a court-ordered drug or
             alcohol rehabilitation program who performs work for, or on
             behalf of, the program during the course of treatment, as in
             the circumstances presented here, is not an employee of the
             program for the purposes of the FLSA;


       31  At paragraphs 65–69 in the TAC, Vaughn alleges that various New York
State authorities have investigated Phoenix House for regulatory violations and
failure to provide proper care.
       32   See Sybalski, 546 F.3d at 258–59.
       33 See id. at 259–60 (concluding that the creation and maintenance of asylums
and institutional care were not traditionally exclusively public functions).
       34 See Mele v. Hill Health Center, 609 F. Supp. 2d 248, 254, 257-58 (D. Conn.
2009) (finding that “a federally funded program that provides transitional housing
… and behavioral health services for individuals with substance abuse and mental
health problems” was not a state actor).




                                            13
      2. Vaughn’s attempt to relitigate our previous dismissal of his
         Section 1983 claim fails in light of our prior decision and the
         law-of-the-case doctrine.

      For the foregoing reasons, we AFFIRM the February 12, 2019
judgment of the District Court.




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