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UNITED STATES DISTRICT COURT

FOR THE DISTRICT OF NEW JERSEY

IN RE MORGAN STANLEY SMITH 

BARNEY LLC WAGE AND HOUR 

LITIGATION

MDL 2280

Civ. No. 2:11-03121 (WJM)

OPINION

WILLIAM J. MARTINI, U.S.D.J.:

In this multidistrict litigation (“MDL”) wage and hour case, Plaintiffs Jimmy 

Kuhn, Robert Gibson, Nick Pontilena, Gregg Vanasse, Howard Rosenblatt, and 

Denise Otten allege that Defendant Morgan Stanley Smith Barney (“Morgan 

Stanley”) failed to pay overtime and impermissibly deducted money from their 

paychecks. Plaintiffs argue that Morgan Stanley violated state and federal law in 

four ways. First, Morgan Stanley failed to provide overtime to financial advisors 

who were paid on commission. Second, it made impermissible deductions from 

advisors’ pay. Third, it compelled advisors to pay business expenses. And fourth, 

it charged advisors for losses that the advisors were allegedly responsible for. 

Plaintiffs bring one federal claim for overtime, four state claims for overtime, four 

state claims for impermissible wage deductions, and one state claim for failure to 

maintain records. Morgan Stanley seeks to dismiss one state overtime claim, all of 

the impermissible deduction claims, and the lone claim for failure to maintain 

records. There was no oral argument. Fed. R. Civ. P. 78(b). For the reasons set 

forth below, the motion to dismiss is GRANTED. The motion to strike the class 

and collective allegations is GRANTED in part and DENIED in part.

I. BACKGROUND

The named Plaintiffs in this case worked as financial advisors for Morgan 

Stanley, which paid them on commission. Am. Consolidated Compl. 

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(“Complaint”) ¶¶ 36, 28. Despite regularly working more than 40 hours per week, 

Plaintiffs did not receive overtime. Id. ¶¶ 38, 43. Plaintiffs had to pay their own

overheard expenses, and they were not reimbursed for business-related meals. Id.

¶¶ 38, 40, 49. 

In 2011, Plaintiffs filed five cases against Morgan Stanley in four different 

states: Connecticut, New Jersey, New York, and Rhode Island. After the Judicial 

Panel on Multidistrict Litigation transferred the cases to this Court for pre-trial 

purposes, Plaintiffs filed a consolidated class and collective action complaint (“the 

Complaint”). The Complaint asserts wage and hour claims under state law as well 

as the federal Fair Labor Standards Act (“FLSA”). 

II. LEGAL STANDARD

Federal Rule of Civil Procedure 12(b)(6) provides for the dismissal of a 

complaint, in whole or in part, if the plaintiff fails to state a claim upon which 

relief can be granted. The moving party bears the burden of showing that no claim 

has been stated. Hedges v. United States, 404 F.3d 744, 750 (3d Cir. 2005). In 

deciding a motion to dismiss under Rule 12(b)(6), a court must take all allegations 

in the complaint as true and view them in the light most favorable to the plaintiff. 

See Warth v. Seldin, 422 U.S. 490, 501 (1975).

A complaint’s factual allegations must be sufficient to raise a plaintiff’s 

entitlement to relief above a speculative level, such that the entitlement is 

“plausible on its face.” See Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007); 

see also Umland v. PLANCO Fin. Serv., Inc., 542 F.3d 59, 64 (3d Cir. 2008). 

Claims have “facial plausibility when the plaintiff pleads factual content that 

allows a court to draw the reasonable inference that the defendant is liable for the 

misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (citing Twombly, 

550 U.S. at 556). While “[t]he plausibility standard is not akin to a ‘probability 

requirement’ . . . it asks for more than a sheer possibility.” Id.

“In evaluating motions to dismiss, courts consider ‘allegations in the 

complaint, exhibits attached to the complaint, matters of public record, and 

documents that form the basis of a claim.’” Banco Popular v. Ghandi, 184 N.J. 

161 (2003) (citing Lum v. Bank of Am., 361 F.3d 217, 222 n.3 (3d Cir.), cert. 

denied, 543 U.S. 918, (2004)). This includes legislative history, see Territory of 

Alaska v. Am. Can Co., 358 U.S. 224, 226-27 (1959), which both parties ask this 

Court to consider. See Def.’s Request for Judicial Notice, Exs. C & D, ECF No. 

19-2; Pl.’s Br. 34-35, ECF No. 26. As is made clear below, the Court reaches its 

decision without recourse to legislative history. Furthermore, Defendant asks the 

Court to take judicial notice of a motion to dismiss and an unpublished order from 

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other cases. Request for Judicial Notice 1-3. The Court need not, and does not, 

rely on these materials in reaching its decision. 

Federal Rule of Civil Procedure 12(f) provides that a court “may strike from 

a pleading an insufficient defense or any redundant, immaterial, impertinent, or 

scandalous matter.” “The district court’s decision whether to grant a motion to 

strike under Rule 12(f) is discretionary.” Coles v. Carlini, No. 10-632, 2012 WL 

1079446, at *15 (D.N.J. Mar. 29, 2012). When a Rule 12(f) motion “attack[s] the 

sufficiency of the allegations contained in a pleading, it is appropriate to convert 

that motion into one pursuant to Rule 12(b)(6).” Giles v. Phelan, Hallinan & 

Schmieg, L.L.P., No. 11-6239, 2012 WL 4506294, at *20 (D.N.J. Sept. 28, 2012) 

(internal citation and quotation omitted).

III. DISCUSSION

Plaintiffs filed a ten count Complaint. One count alleges failure to pay 

overtime under the FLSA (Count I). Four counts allege failure to pay overtime 

under state law: Count II (New York); Count IV (New Jersey); Count VII (Rhode 

Island); and Count IX (Connecticut). Four counts allege impermissible deduction 

from wages under state law: Count III (New York); Count V (New Jersey); Count 

VIII (Rhode Island); and Count X (Connecticut). A final count alleges a failure to 

maintain records under New Jersey law (Count VI). 

Morgan Stanley does not move to dismiss the FLSA overtime claim (Count 

I). Instead, it moves to dismiss a single state law overtime claim, Count VII, which 

sounds in Rhode Island law, as well as the impermissible wage deduction claims 

(Counts III, V, VIII, and X), and the failure to maintain records claim (Count VI). 

The motion to dismiss these six counts is GRANTED. The motion to strike the 

collective and class allegations is GRANTED in part and DENIED in part.

A. MOTION TO DISMISS

i. Overtime (Count VII)

Morgan Stanley moves to dismiss Count VII, an overtime claim sounding in

Rhode Island law. Morgan Stanley argues that the Rhode Island Minimum Wage 

Act did not contain a private right of action at the time these suits were brought. 

The Court agrees. Since the cases encompassed in this MDL were filed in 2011, 

Rhode Island has explicitly adopted a private right of action for overtime claims

under the Minimum Wage Act. See R.I. Gen. Laws § 28-14-19.2(a). Morgan 

Stanley maintains that the new law is not retroactive; Plaintiffs appear to agree. 

Because pre-existing law did not recognize a private right of action, the Court will 

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DISMISS Count VII WITH PREJUDICE. See Hauser v. Rhode Island Dept. of 

Correction, 640 F. Supp. 2d 143, 145-47 (D.R.I. 2009). 

ii. Wage Deductions (Counts III, V, VIII, and X)

In Counts III, V, VIII, and X (“the Wage Deduction Counts”), Plaintiffs 

allege that Morgan Stanley impermissibly deducted items such as overhead from 

their paychecks. Contrary to Morgan Stanley’s argument, Plaintiffs have standing 

to bring these claims because they allege injury-in fact, causation, and 

redressability. See Compl. ¶¶ 92, 96-97, 119-120, 140-141, 159-60; see also

Taliaferro v. Darby Tp. Zoning Bd., 458 F.3d 181, 188 (3d Cir. 2006).

Morgan Stanley moves to dismiss the Wage Deduction Counts. It also 

moves to strike Complaint paragraphs 40 and 50, which allege a failure to provide 

reimbursements. In support of its motion to strike, Morgan Stanley argues that 

“Plaintiffs have not and cannot state a claim for failure to reimburse . . . .” Def’s. 

Br. 20, ECF No. 19-1. The motion to strike is an independent attack on the merits 

of the Wage Deduction Counts. Accordingly, the Court will convert it into a 

motion to dismiss. See Giles, 2012 WL 4506294, at *20. As set forth below, the 

Wage Deduction Counts are all subject to dismissal, both under an impermissible

deduction theory and a reimbursement theory. 

1. New York Law (Count III)

Count III is a claim for impermissible wage deductions under New York 

law. This Count is deficient for two reasons: to the extent it alleges impermissible 

deductions, it is conclusory, and to the extent it alleges a failure to reimburse, it 

does not aver a violation of New York law.

New York Labor Law Section 193 (“Section 193”) provides that, absent 

certain exceptions, “no employer shall make any deduction from the wages of an 

employee.” Plaintiffs argues that Count III survives a motion to dismiss because 

the Complaint alleges “the particular deductions from compensation that violate 

[Section] 193” and because it alleges “that [Plaintiffs] never authorized such 

deductions.” Pls.’ Br. 18 (emphasis in original). To state a claim under Section 

193, a plaintiff must not just plead deductions but “deductions from . . . wages.” 

Section 193 (emphasis added). A commission becomes a wage for purposes of 

Section 193 when an express or implied contract deems that commission “earned.” 

Pachter v. Bernard Hodes Group, Inc., 10 N.Y.3d 609, 612, 617 (N.Y. 2008). 

Since Plaintiffs say absolutely nothing about the terms of their employment 

contract, they cannot establish when their commissions were earned. Accordingly, 

their pleading of the wages element of the cause of action is entirely conclusory. 

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Because of that, it is conceivable that Morgan Stanley violated Section 193 by 

deducting money from commissions before the commissions were earned. But a

conceivable claim is no claim at all. Iqbal, 556 U.S. at 680. 

Plaintiffs allege that Morgan Stanley violated Section 193 when it failed to 

reimburse money spent on messenger services, overnight mail delivery, and 

lunches with clients. Compl. ¶¶ 40, 50. In support of their argument, Plaintiffs

cite legislative history indicating that Section 193, as it stood at the time these suits 

were filed, was designed to prevent employers from making employees reimburse 

them for losses that the employees caused. Pls.’ Br. 20. Here, Plaintiffs are not 

alleging that messenger services, mail delivery, and business meals were losses 

they caused Morgan Stanley. 

At bottom, Plaintiffs believe that if employees are paid on commission, 

Section 193 prohibits employers from making those employees responsible for 

their own expenses. Even if Plaintiffs are correct, they have still failed to state a 

claim upon which relief can be granted. For present purposes, Section 193 has two 

sections. Section 193(1) refers to “deductions from the wages of an employee.” 

Plaintiffs cannot state a reimbursement claim under Section 193(1) because they 

have failed to plead the wages element in a non-conclusory fashion. Section 

193(2) “prohibits wage deductions by indirect means where direct deduction would 

violate Section 193(1).” Angello v. Labor Ready, Inc., 7 N.Y.3d 579, 585 (N.Y. 

2006). Plaintiffs maintain that when Morgan Stanley made them pay their own 

expenses, Morgan Stanley was effectively deducting the expenses from Plaintiffs’

paychecks—that Morgan Stanley was making “deduction[s] by indirect means.” 

Id. But if the Court is to decide whether the indirect deduction is impermissible, it 

must decide whether the direct deduction would be impermissible. As explained 

above, it cannot decide that because Plaintiffs conveniently omit any description of 

their wages from their Complaint. The Court will DISMISS Count III 

WITHOUT PREJUDUCE. 

2. New Jersey Law (Count V)

Count IV is a claim for impermissible wage deductions under New Jersey 

law. The Court will dismiss this claim because it is conclusory. 

With exceptions not applicable here, New Jersey State Wage and Hour Law 

§ 34:11-4.4(a) provides as follows: “No employer may withhold or divert any 

portion of an employee’s wages unless: [t]he employer is required or empowered 

to do so by New Jersey or United States law.” “Wages” encompasses commissionbased compensation. N.J.S.A. § 34:11-4.1(c).

Plaintiffs maintain that “the Complaint . . . specifically alleges that the 

unauthorized ‘deductions from the commissions were deducted from employees’

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wages.’” Pl.’s Br. 23 (quoting Compl. ¶ 49) (emphasis in original). As with their 

New York wage deduction claim, Plaintiffs plead wages in an utterly conclusory 

fashion. It is not enough to simply declare that compensation qualifies as a wage

for purposes of § 34:11-4.4(a). See Carita v. Mon Cheri Bridals, LLC, No. 10-

2517, 2012 WL 2401985, at *11 (D.N.J. June 25, 2012) (“[Even if] an employer 

and an employee may refer to certain payments as a ‘commission,’ this is not 

dispositive.”). Plaintiffs must provide sufficient information so the Court can

determine whether compensation counts as a wage. The Court will DISMISS this 

Count WITHOUT PREJUDICE.

Finally, by ignoring Morgan Stanley’s argument that New Jersey law does 

not recognize a wage deduction claim based on a failure to reimburse, Plaintiffs 

signal that they are not seeking relief under a failure to reimburse theory. The 

Court will hold Plaintiffs to this implicit representation.

3. Rhode Island Law (Count VIII)

Count VIII is a claim for impermissible wage deductions under Rhode Island 

law. The Court will dismiss this claim based on the absence of a private right of 

action. 

Plaintiffs do not disagree that at the time this action was filed, R.I. Gen. 

Laws Section 28-14 (“Section 28-14”) provided a private right of action in just two 

sections. The first section, Section 28-14-3.1, is not applicable here. The second 

section, Section 28-14-18, applies only to whistleblower claims. See Hauser, 640 

F. Supp. 2d. at 146 (“Section 28-14-18.2 was not intended to apply to wage 

payment violations; a private right of action is available ‘only for violations of the 

whistleblowing protection set forth in the immediately preceding and following 

sections.’”) (quoting Trs. of the Local Union No. 17 Sheet Metal Workers’

Apprenticeship Fund v. May Eng’g Co., 951 F. Supp. 346, 350-51 (D.R.I. 1997)). 

Rhode Island adopted a private right of action for wage deduction claims in June of 

2012, see R.I. Gen. Laws § 28-14-19.2 (a), but Plaintiffs do not argue that the new 

law should be applied retroactively. Accordingly, the Court will DISMISS this 

Count WITH PREJUDICE. 

4. Connecticut Law (Count X)

Count X is a claim for impermissible wage deductions under Connecticut

law. Like the other wage deduction claims, it does not survive the motion to 

dismiss. 

“Connecticut’s wage statutes, including Conn. Gen. Stat. § 31–72, do not 

create substantive obligations regarding the payment of employees; ‘rather, they 

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provide remedial protections for those cases in which the employer-employee 

wage agreement is violated.’” Karavish v. Ceridian Corp., No. 9-935, 2011 WL 

3924182, at *15 (D. Conn. Sept. 7, 2011) (quoting Mytech v. May Dep’t Stores 

Co., 260 Conn. 152, 162 (2002)). “Thus, a claim under Conn. Gen. Stat. § 31–72 

requires an employee to show that the employer breached an obligation to pay 

wages that arises from an employer-employee agreement.” Id. 

Plaintiffs maintain that Morgan Stanley “impermissibly and unlawfully 

deducted from employees’ wages compensation for . . . salary and other overhead 

associated with the broker’s assistant, trading errors, [etc.] . . . .” Compl. ¶ 49. 

Under Connecticut law, deductions are not “impermissible” in the abstract. 

Instead, deductions are impermissible relative to a given agreement. See Izzo v. 

Moore Wallace North America, Inc., No. 8-163, 2011 WL 1874963, at *4 (D. 

Conn. May 17, 2011) (“Thus, an employee may proceed against an employer that 

withholds or diverts commission-based compensation due, but only if the 

employer’s withholding or diversion also violates an existing agreement with 

respect to the employee’s compensation.”). The Complaint does not so much as 

quote a single provision of Plaintiffs’ contract. Accordingly, any claim that 

Morgan Stanley “impermissibly” deducted money from Plaintiffs’ wages is 

entirely conclusory. The Court will DISMISS this Count WITHOUT 

PREJUDICE. 

As with the New Jersey claim, Plaintiffs ignore Morgan Stanley’s argument 

that Connecticut law does not recognize an impermissible wage deduction claim 

based on a failure to reimburse. As with the New Jersey claim, the Court will hold 

Plaintiffs to their implicit representation. 

iii. Failure to Maintain Records (Count VI)

Count VI is a claim for failure to maintain records under N.J.S.A. § 34:11-

4.6 (“Section 34”), which requires employers to “[m]ake such records as to the 

persons employed by him, including wage and hour records . . . .” N.J.S.A. § 

34:11-4.6(e). The Court will dismiss this claim because it is duplicative.

Morgan Stanley argues that “because the NJWPL does not provide for any 

statutory or punitive damages additional to those remedies under the FLSA and 

New Jersey wage and hour law, Plaintiffs claim for failure to maintain records is 

entirely redundant . . . .” Def.’s Br. 21. The Court agrees. Plaintiffs do not argue 

that Section 34 entitles them to anything more than compensatory damages. Even 

if additional damages were available, Plaintiffs have waived them. Compl. ¶ 

Prayer 9. Ultimately, if Plaintiffs are to recover compensatory damages under 

Count VI, they will have to demonstrate that Morgan Stanley shorted them on 

compensation. But demonstrating that Morgan Stanley shorted them on 

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compensation is exactly what Plaintiffs attempt to do with their other claims. 

Accordingly, the failure to maintain records claim is duplicative. Since Plaintiffs 

cannot amend their Complaint to state a claim for failure to maintain records under 

New Jersey law, the Court will DISMISS this Count WITH PREJUDICE. 

B. MOTION TO STRIKE CLASS AND COLLECTIVE ACTION 

ALLEGATIONS

Plaintiffs move to strike the class and collective action allegations. The 

Court will GRANT the motion in part and DENY it in part. Plaintiffs seek to 

bring (1) a collective action under the FLSA for failure to pay overtime, and (2) 

class actions under the laws of Connecticut, New Jersey, New York, and Rhode 

Island both for failure to pay overtime and for impermissible deductions. They 

seek to represent current and former financial advisors and financial advisor 

trainees. Since Plaintiffs have not alleged that trainees were subject to 

impermissible deductions, see Compl. ¶ 49, the Court will STRIKE trainees from 

the putative impermissible deductions classes. If this defect can be corrected, 

Plaintiffs may remedy it in an amended pleading. Furthermore, while the Court 

harbors doubts about the certifiability of a class or collective action for overtime 

pay that includes both advisors who worked on commission and trainees who did 

not, it believes it is premature to strike overtime class allegations at this time. Cf.

Landsman & Funk PC v. Skinder-Strauss Associates, 640 F.3d 72, 93 (3d Cir. 

2011) (“[Only in a] rare [case does] the complaint itself demonstrate[] that the 

requirements for maintaining a class action have not been met.”). 

 

IV. CONCLUSION

For the foregoing reasons, the Court will GRANT the motion to dismiss. 

Counts VI, VII, and VIII are dismissed WITH PREJUDICE. Counts III, V, X are 

dismissed WITHOUT PREJUDICE. The Court will GRANT in part and DENY 

in part the motion to strike the class and collective allegations. It will STRIKE

trainees from the class definitions of the putative impermissible deduction classes. 

The Court will provide Plaintiffs with 30 days in which to file a second amended 

complaint consistent with this opinion. An appropriate order follows.

 /s/ William J. Martini 

 WILLIAM J. MARTINI, U.S.D.J.

 

Date: December 14, 2012

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