Fuchs v. SpecialtyCare, Inc.

IN THE UNITED STATES DISTRICT COURT FOR THE

MIDDLE DISTRICT OF TENNESSEE

NASHVILLE DIVISION

NATHAN FUCHS et al., )

)

)

Plaintiffs,

)

)

v. ) Case No. 3:23-cv-00892

) CHIEF JUDGE CAMPBELL

SPECIALTYCARE, INC., ) MAGISTRATE JUDGE HOLMES

)

)

Defendant. )

MEMORANDUM

Pending before the Court is Defendant SpecialtyCare, Inc.’s (“SpecialtyCare”) Partial

Motion to Dismiss (“Motion”) (Doc. No. 134). Plaintiffs Nathan Fuchs (“Fuchs”) and Caitlin

Bailey (“Bailey,” collectively “Plaintiffs”) filed a response in opposition (“Opposition”) (Doc. No.

140).1 For the reasons set forth below, the Motion is GRANTED in part and DENIED in part.

I. FACTUAL AND PROCEDURAL BACKGROUND

SpecialtyCare employs surgical neurophysiologists (“SNs”) to provide intraoperative

neuromonitoring services, which involve observing patients during surgery and alerting doctors to

symptoms of abnormal brain and nerve functioning. (Doc. No. 122 ¶¶ 1–2). Named Plaintiffs

Fuchs and Bailey are former SpecialtyCare employees who bring this collective and putative class

action against SpecialtyCare on behalf of themselves and other SNs employed by SpecialtyCare.

(Id. ¶¶ 13–14, 135–45). Plaintiffs bring claims against SpecialtyCare for kickback of wages in

violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 216 (Count I), wages not paid

1 SpecialtyCare did not file a reply.

free and clear in violation of the FLSA (Count II), violation of the Truth in Lending Act (“TILA”),

15 U.S.C. § 1601, et seq. (Count III, in the alternative to Counts I and II), unlawful restraint of

trade (Count IV), and unlawful liquidated-damages provision (Count V).

Plaintiffs allege that entry-level SNs join SpecialtyCare through a year-long training

program which includes in-person and online coursework, laboratory practicums, and practical

training in the operating room. (Id. ¶¶ 3, 32). Plaintiffs also allege that, in exchange for the training,

SNs are required to sign a Training Repayment Agreement (“the Repayment Agreement”)

promising to reimburse SpecialtyCare for the cost of their training if they leave their jobs within

three years. (Id. ¶¶ 5, 62). Plaintiffs state that although the training is completed within one year,

the Repayment Agreement debt continues to grow for two more years and “amounts to an interest

rate of approximately 25% on the principal cost of the training for an employee who resigns within

one to two years of starting work” and “an interest rate of approximately 50% for an employee

who resigns within two to three years of starting work.” (Id. 40 ¶ 65). Plaintiffs state that the debt

is forgiven after 3 years of employment with SpecialtyCare. (Id.¶ 66).

Plaintiffs allege that Fuchs was employed as an SN at SpecialtyCare from September 2020

until February 2022 and that, after Fuchs resigned, SpecialtyCare informed him that he owed

$25,000 for his SN training, which is more than the $1,347.50 he received for 40 hours of work

during his final work week. (Id. ¶¶ 107, 123–24, 134–35). Fuchs hired a lawyer, who negotiated

with SpecialtyCare a $15,000 repayment for the debt in exchange for a release from any claims

related to his employment. (Id. ¶¶ 130–31).

Plaintiffs further allege that Bailey was employed by SpecialtyCare as SN from August

2022 to March 2024 and that, after Bailey resigned, SpecialtyCare sent her a letter requesting

repayment of $30,145.59 for the training she received and relocation expenses,2 which is more

than the $1,273.05 SpecialtyCare paid her for 40 hours of work during her final pay period. (Id. ¶¶

14, 78, 101–105). Plaintiffs allege that Bailey has not received additional communications from

SpecialtyCare about the debt. (Id. ¶ 106).

On March 20, 2023, SpecialtyCare filed a motion to dismiss Plaintiffs’ Amended

Complaint (“FAC”) (Doc. No. 40), which the Court granted in part and denied in part. (See

generally Doc. No. 68). Specifically, the Court dismissed the FMLA claim as to Fuchs for failure

to allege that he was paid less than minimum wage. (See Doc. No. 68 at 6). The Court also

dismissed the TILA claim as time barred. (See id. at 9). The court denied the motion to dismiss in

all other aspects. (See generally id.). On August 1, 2024, Plaintiffs filed a Second Amended

Complaint (“SAC”).3 (Doc. No. 98). On November 22, 2024, Plaintiffs filed their Third Amended

Complaint (“TAC”), which substitutes a former plaintiff with Bailey but is otherwise nearly

identical to the SAC. (See generally Doc. No. 122; see also Doc. No. 119-3 (redline comparing

the SAC and the TAC)). On December 6, 2024, Plaintiffs filed their Motion under Federal Rules

of Civil Procedure 12(b)(1) and 12(b)(6). (See generally Doc. No. 134).

2 The alleged breakdown is $25,000 for the training and $5,145.59 for relocation expenses.

(See id. ¶ 102).

3 The SAC essentially added allegations regarding wages (see Doc. No. 98 ¶¶ 102–05; 134–

35), that the Repayment Agreement is an education loan (see id. ¶ 167), and that SpecialtyCare is

a lender (see id. ¶ 168).

II. STANDARD OF REVIEW

A. Fed. R. Civ. P. 12(b)(1)

Whether a court has subject-matter jurisdiction is a “threshold determination” in any action.

Am. Telecom Co. v. Republic of Lebanon, 501 F.3d 534, 537 (6th Cir. 2007). This reflects the

fundamental principle that “[j]urisdiction is power to declare the law, and when it ceases to exist,

the only function remaining to the court is that of announcing the fact and dismissing the cause.”

Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 94 (1998) (quoting Ex parte McCardle, 74

U.S. (7 Wall.) 506, 514 (1868)). The party asserting subject-matter jurisdiction bears the burden

of establishing that it exists. Ammons v. Ally Fin., Inc., 305 F. Supp. 3d 818, 820 (M.D. Tenn.

2018).

A motion to dismiss under Rule 12(b)(1) for lack of subject-matter jurisdiction “can

challenge the sufficiency of the pleading itself (facial attack) or the factual existence of subject

matter jurisdiction (factual attack).” Cartwright v. Garner, 751 F.3d 759 (6th Cir. 2014) (internal

citation omitted). A facial attack challenges the sufficiency of the pleading and, like a motion under

Rule 12(b)(6), requires the Court to take all factual allegations in the pleading as true. Wayside

Church v. Van Buren Cty., 847 F.3d 812, 816-17 (6th Cir. 2017) (citing Gentek Bldg. Prods., Inc.

v. Sherwin-Williams Co., 491 F.3d 320, 330 (6th Cir. 2007)).

A factual attack challenges the allegations supporting jurisdiction, raising “a factual

controversy requiring the district court to ‘weigh the conflicting evidence to arrive at the factual

predicate that subject matter does or does not exist.’” Id. at 817 (quoting Gentek, 491 F.3d at 330).

When analyzing a factual attack as to standing, the court may undertake “a factual inquiry

regarding the complaint’s allegations only when the facts necessary to sustain jurisdiction do not

implicate the merits of the plaintiff's claim.” Gentek, 491 F.3d at 330. District courts reviewing

factual attacks have “wide discretion to allow affidavits, documents and even a limited evidentiary

hearing to resolve disputed jurisdictional facts.” Ohio Nat’l Life Ins. Co. v. United States, 922 F.3d

320, 325 (6th Cir. 1990).

B. Fed. R. Civ. P. 12(b)(6)

Federal Rule of Civil Procedure 12(b)(6) permits dismissal of a complaint for failure to

state a claim upon which relief can be granted. For purposes of a motion to dismiss, a court must

take all of the factual allegations in the complaint as true. Ashcroft v. Iqbal, 556 U.S. 662 (2009).

To survive a motion to dismiss, a complaint must contain sufficient factual allegations, accepted

as true, to state a claim for relief that is plausible on its face. Id. at 678. A claim has facial

plausibility when the plaintiff pleads facts that allow the court to draw the reasonable inference

that the defendant is liable for the misconduct alleged. Id. In reviewing a motion to dismiss, the

Court construes the complaint in the light most favorable to the plaintiff, accepts its allegations as

true, and draws all reasonable inferences in favor of the plaintiff. Directv, Inc. v. Treesh, 487 F.3d

471, 476 (6th Cir. 2007). Thus, dismissal is appropriate only if “it appears beyond doubt that the

plaintiff can prove no set of facts in support of his claim which would entitle him to relief.”

Guzman v. U.S. Dep’t of Children’s Servs., 679 F.3d 425, 429 (6th Cir. 2012).4

4 Generally, a court cannot consider matters outside the pleadings in a Rule 12(b)(6) motion.

However, “courts may consider documents attached to a Rule 12(b)(6) or 12(c) motion without converting

either into a summary judgment motion if the attached materials are: (i) ‘referred to in the plaintiff’s

complaint and are central to [the] claims’ or (ii) ‘matters of public record.’” Kassam v. Ocwen Loan

Servicing, LLC, 704 F. App’x 429, 432 (6th Cir. 2017) (internal citations omitted). Here, the Repayment

Agreement (Doc. No. 135-2) is central to the claims at issue. Accordingly, the Court considers the

Repayment Agreement in its ruling on SpecialtyCare’s Motion.

III. ANALYSIS

A. FLSA (Counts I and II)

1. Bailey

SpecialtyCare argues that the Court should dismiss Bailey’s FLSA claim for lack of subject

matter jurisdiction under Rule 12(b)(1) and failure to state a claim under Rule 12(b)(6). (See Doc.

No. 135 at 9–15). The Court is “bound to consider the 12(b)(1) motion first, since the Rule 12(b)(6)

challenge becomes moot if this court lacks subject matter jurisdiction.” Moir v. Greater Cleveland

Reg’l Transit Auth., 895 F.2d 266, 269 (6th Cir. 1990) (citing Bell v. Hood, 327 U.S. 678, 681

(1946)); see Damnjanovic v. United States Dep’t of Air Force, 135 F. Supp. 3d 601, 604 (E.D.

Mich. 2015); Wright & Miller, 5 Federal Practice and Procedure § 1350 at 548 (1969).

SpecialtyCare’s jurisdictional argument is based on ripeness. (See Doc. No. 135 at 9–12).

“The jurisdiction of federal courts is limited by Article III of the Constitution to ‘Cases’

and ‘Controversies.’ U.S. Const. art. III, § 2. The standing doctrine delineates the boundary

between justiciable cases and controversies and those disputes that are not appropriately

resolved through judicial process. Although ‘the core component of standing is an essential

and unchanging part of the case-or-controversy requirement of Article III,’ the Supreme

Court has recognized that ‘some of [the standing doctrine’s] elements express merely

prudential considerations that are part of judicial self-government.’ Lujan v. Defenders of

Wildlife, 504 U.S. 555, 560 (1992). The ripeness doctrine is one of several justiciability

doctrines ‘drawn both from Article III limitations on judicial power and from prudential

reasons for refusing to exercise jurisdiction.’ Reno v. Catholic Soc. Servs., Inc., 509 U.S.

43, 57 n. 18 (1993). The ‘basic rationale’ of ripeness doctrine ‘is to prevent the courts,

through avoidance of premature adjudication, from entangling themselves in abstract

disagreements . . . and also to protect . . . from judicial interference until a[ ] . . . decision

has been formalized and its effects felt in a concrete way by the challenging parties.’ Abbott

Labs. v. Gardner, 387 U.S. 136, 148–49 (1967). In addition, ‘[a] claim is not ripe for

adjudication if it rests upon contingent future events that may not occur as anticipated, or

indeed may not occur at all.’ Texas v. United States, 523 U.S. 296, 300 (1998) (internal

quotation marks omitted).

[. . . ]

A plaintiff must demonstrate that he has standing to pursue his claim in federal court by

showing three elements: (1) that he has suffered an “injury in fact,” (2) that there is a

“causal connection between the injury and the conduct complained of,” and (3) that it is

“likely, as opposed to merely speculative, that the injury will be redressed by a favorable

decision.” Lujan, 504 U.S. at 560–61 (internal citations and quotation marks omitted).

[. . .]

A plaintiff suffers an ‘injury in fact’ when his legally protected interest has been invaded

and the injury is both ‘concrete and particularized’ and ‘actual or imminent, not

‘conjectural’ or ‘hypothetical.’’ Lujan, 504 U.S. at 560 (citations omitted)

Kiser v. Reitz, 765 F.3d 601, 607 (6th Cir. 2014).

Here, SpecialtyCare argues Bailey’s claim is not ripe because SpecialtyCare did not collect

money from her, did not threated litigation, and did not refer her to collections. (See Doc. No. 135

at 9–12). Persuasive authority supports SpecialtyCare’s argument, inasmuch as courts have found

that plaintiffs suffered no injury in fact under similar circumstances. See, e.g., O’Brien v.

Smoothstack, Inc., No. 1:23-CV-491 (RDA/LRV), 2025 WL 1921433, at *7 (E.D. Va. July 11,

2025) (in a factually analogous FLSA case, no injury in fact where the plaintiffs “never actually

returned any wages, made any payment to Defendant, or had any wages deducted upon leaving his

employment”); Byron v. Avant Healthcare Pros., LLC, No. 6:23-CV-1645-JSS-LHP, 2024 WL

3738488, at *8 (M.D. Fla. Aug. 9, 2024) (“Plaintiffs do not allege that Defendant actually collected

any money damages from Plaintiffs, just that Defendant threatened to do so by enforcing the

damages provision of its form contract [. . . .] Because Plaintiffs’ FLSA claims depend upon

Defendant's enforcement of the damages provision against Plaintiffs, which involves contingent

future events that may not occur as anticipated, or indeed may not occur at all, the FLSA claims

are not ripe.” (quotation marks omitted)); Bland v. Edward D. Jones & Co., L.P., 375 F. Supp. 3d

962, 974 (N.D. Ill. 2019) (allegations that the defendants sent letters demanding payment pursuant

to a similar contract were insufficient to establish an injury in fact, including for declaratory relief,

where “Plaintiffs have not alleged any facts suggesting that Defendants have (1) taken any steps

to bring litigation against them, (2) ever actually collected money from individuals pursuant to the

TCR Provision, or (3) even expressly threatened to file suit.”); Bland v. Edward D. Jones & Co.,

L.P., No. 18-CV-1832, 2020 WL 1503574, at *6 (N.D. Ill. Mar. 30, 2020) (same); cf. Ketner v.

Branch Banking & Tr. Co., 143 F. Supp. 3d 370, 383 (M.D.N.C. 2015) (finding an injury in fact

where, among other things, the employer hired a law firm that sent multiple collection letters to

the plaintiff and threatened legal action, and where the employer recovered money from other

employees).

In response, Plaintiffs rely on a case in which the Sixth Circuit found that a written policy

requiring alleged kickbacks to the employer upon termination violated the plaintiffs’ FLSA rights,

despite the absence of actual attempts to collect by the employer, because the policy subjected

them to liability. See Stein v. HHGREGG, Inc., 873 F.3d 523 at 535–36 (6th Cir. 2017). As a

rebuttal of the dissent’s argument that the employer did not violate the plaintiff’s rights under the

FLSA because “the company never actually collected . . . after an employee was terminated,” the

majority noted:

Even if defendants never demanded repayment in practice, an employee may believe he

owes a debt to the company for which he could be made responsible at a later date.

Incurring a debt, or even believing that one has incurred a debt, has far-reaching practical

implications for individuals. It could affect the way an individual saves money or applies

for loans. An individual might feel obligated to report that debt when filling out job

applications, credit applications, court documents, or other financial records that require

self-reporting of existing liabilities. We therefore believe that focusing on the actual written

policy in this case is more practical and realistic than considering only how the policy

assertedly is implemented. Plaintiffs have alleged sufficient facts to support a claim that

defendants’ policy, as written, violates the FLSA by continuing to hold employees liable

for draw payments [i.e., wages advanced to employees when their commission fell below

minimum wage] even after termination.

Id. at 535 (quotation marks omitted) (emphasis added).

SpecialtyCare distinguishes Stein on the basis that the opinion was decided under Rule

12(b)(6), meaning that it “contains no analysis of or even references to subject matter jurisdiction,

Rule 12(b)(1), standing, or ripeness.” (Doc. No. 135 at 12). At least one other court has found that

Stein’s reasoning does not establish an injury in fact for standing purposes. See O’Brien, 2025 WL

1921433 at *8. The Court agrees that Stein is not controlling because it does not address

jurisdiction but rather the failure to state a claim under Rule 12(b)(6). The Sixth Circuit’s use of

the verbs “may,” “could” and “might” supports the argument that it did not intend this rationale

apply to jurisdictional inquiries.

The Court finds that Bailey did not suffer an injury in fact. Indeed, SpecialtyCare never

collected from him; nor does the TAC allege that it threated litigation or took other steps towards

collection other than sending a single letter to Bailey after she resigned “confirming receipt of her

resignation and informing her that she owed the company $25,000 for failure to complete the

[training] and an additional $5,145.59 in relocation assistance.” (Doc. No. 122 ¶ 102). In the

absence of further actions by SpecialtyCare, Bailey’s claim is speculative and conjectural, insofar

as it is based on a fear that SpecialtyCare may seek to collect, which may or may not occur. As

such, Bailey’s claim is not ripe.

Accordingly, the Court will grant SpecialtyCare’s Motion on Bailey’s FLSA claims.

2. Fuchs

The FLSA requires that employers pay employees hourly minimum wage. In re:

Amazon.Com, Inc. Fulfillment Ctr. Fair Lab. Standards Act (FLSA) and Wage and Hour Litig.,

905 F.3d 387, 405 (6th Cir. 2018) (internal citation omitted). To prevail on a FLSA claim, a

plaintiff must prove that an employer-employee relationship existed, the employee’s acts are

within the coverage of the FLSA, and the employer failed to pay minimum wage for the acts.

Simpson v. Baskin, No. 3:17-CV-01077, 2018 WL 1070897, at *4 (M.D. Tenn. Feb. 26, 2018).

Here, Plaintiffs claim that SpecialtyCare engaged in an “illegal kickback” and failed to pay

wages “free and clear” in violation of the FLSA. (See Doc. No. 135 ¶¶ 21–23). Plaintiffs’ rely on

a Department of Labor regulation that requires wages to be paid “free and clear,” which may not

occur if an employee “‘kicks-back’ directly or indirectly to the employer or to another person for

the employer’s benefit the whole or part of the wage delivered to the employee” such that the

employee receives less than the minimum wage during a workweek. 29 C.F.R. § 531.35. To

succeed under this theory, Plaintiffs must allege a minimum wage violation. See Stein, 873 F.3d

at 530–34; see also Teoba v. Trugreen Landcare LLC, 769 F. Supp. 2d 175, 180 (W.D.N.Y. 2011)

(“minimum wage must be paid free and clear of any deductions or kickbacks to the employer”

(emphasis added)).

In its Memorandum Opinion on the Motion to Dismiss the FAC, the Court found that

Plaintiffs failed to allege that Fuchs was paid less than minimum wage during his employment

with SpecialtyCare and therefore dismissed the FMLA claims as to him. (See Doc. No. 68 at 6).

Plaintiffs have since added allegations that Fuchs “was paid $1,347.50 for 40 hours worked”

during his final work week, which was less than the repayment amount SpecialtyCare demanded.

(Doc. No. 122 ¶¶ 133–134). Plaintiffs argue that they only need to identify one work week during

which they were paid below minimum wage. (See Doc. No. 140 at 10–11). The Court agrees that

identifying one work week is enough. See In re: Amazon.Com, Inc., 905 F.3d at 394 (“under federal

law, Plaintiffs would be required to identify a particular workweek in which, taking the average

rate, they received less than the minimum wage per hour”); see also Bland, 375 F. Supp. 3d at 979

(a plaintiff must allege facts showing that the “hourly wages fell below the statutory minimum

wage for at least one period”).

However, Plaintiffs’ new allegations are insufficient to cure the FAC’s deficiencies

because the TAC does still not plausibly allege that Fuchs received less than the minimum wage

for a specific work week. Indeed, in a conclusory manner, Plaintiffs attempt to tie the agreed-upon

payment of $15,000 to SpecialtyCare in 2023 to Fuchs’ final pay period in February of 2022. (See

Doc. No. 122 ¶¶ 123–134). However, the release resulting from that payment expressly described

in the TAC connects Fuchs’ payment of $15,000 to his “alleged obligation to reimburse

[SpecialtyCare] for training expenses pursuant to the Associate Repayment Agreement between

Fuchs and [SpecialtyCare] entered into effective September 29, 2020.” (Doc. No. 187-1).5 The

release cited by Plaintiffs contradicts Plaintiffs’ attempt to tie the $15,000 paid by Fuchs to his last

work week because that payment was for “training expenses” over the approximately 18 months

he worked for SpecialtyCare. Indeed, Plaintiffs argue only by inference concerning the last work

week position because the TAC does not expressly allege that the $15,000 was tied only to the last

work week. This is probably due to the fact that Fuchs’ release contradicts the suggestion—and

only a suggestion—in the TAC concerning how the $15,000 should be applied.

The TAC also expressly alleges that the $15,000 were a reimbursement for Fuchs’ training,

which lasted from November 9, 2020, to February 2022. (See Doc. No. 122 ¶¶ 111, 123, 124–131).

Assuming that the $15,000 payment was a kickback, it flows from logic that none of Fuchs’ wages

were “free and clear” before the end of his third year of employment. (See Id. ¶ 6 (the amount to

be repaid increases until a SN’s third year and is discharged at the end of that year); see generally

Doc. No. 135-2 (Repayment Agreement)). Because Fuchs worked for SpecialtyCare for less than

5 The Court may consider the release without converting the Motion into a motion summary

judgment. See Bassett v. Nat’l Collegiate Athletic Ass’n, 528 F.3d 426, 430 (6th Cir.2008) (citing Amini v.

Oberlin Coll., 259 F.3d 493, 502 (6th Cir.2001) (“When a court is presented with a Rule 12(b)(6) motion,

it may consider the Complaint and any exhibits attached thereto, public records, items appearing in the

record of the case and exhibits attached to defendant's motion to dismiss so long as they are referred to in

the Complaint and are central to the claims contained therein.”); Hall v. Meisner, 565 F. Supp. 3d 953, 965

(E.D. Mich. 2021), aff’d, 51 F.4th 185 (6th Cir. 2022) (“In ruling on a motion to dismiss, the Court may

consider the complaint as well as: (1) documents that are referenced in the plaintiff’s complaint and that

are central to plaintiff's claims; (2) matters of which a court may take judicial notice; (3) documents that

are a matter of public record [. . . .]” (citing Thomas v. Noder-Love, 621 F. App’x 825, 829 (6th Cir. 2015));

Com. Money Ctr., Inc. v. Illinois Union Ins. Co., 508 F.3d 327, 335 (6th Cir. 2007). Moreover, the contents

of the release trump conflicting allegations in the TAC. See QQC, Inc. v. Hewlett-Packard Co., 258 F.

Supp. 2d 718, 721 (E.D. Mich. 2003) (where the claims rely on the existence of a written agreement, the

defendant may introduce such agreement, which is then considered part of the pleadings.); Perkins v.

Hininger, No. 3:21-CV-00901, 2023 WL 4687196, at *6 (M.D. Tenn. July 21, 2023) (the contents of such

written agreement trump the complaint’s allegations) (citing Creelgroup, Inc. v. NGS Am., Inc., 518 F.

App’x 343, 347 (6th Cir. 2013)).

three years, the $15,000 payment was tied to all the wages he received during his employment as

described in the release. In other words, because all wages Fuchs received were subject to the

alleged kickback, his total weekly compensation amounted to his wages for that week, minus a

prorated amount of the $15,000. See In re: Amazon.Com, 905 F.3d at 406 (“the minimum wage

requirement is generally met when an employee’s total compensation for the week divided by the

total number of hours worked equals or exceeds the required hourly minimum wage” (quoting

Stein, 873 F.3d at 537)).6 As such, Plaintiffs cannot selectively deduct the $15,000 from his final

paycheck rather than prorate this amount to account for all the paychecks that Fuchs received.7

The TAC alleges that Fuchs was paid well over minimum wage during his final work week

(see id. ¶ 133). There are also no allegations from which the Court could infer that, without

deducting $15,000 from one specific paycheck, his income ever dipped below minimum wage.

Accordingly, the Court finds that the TAC still fails to state a FLSA claim.

For the above reasons, the FLSA claims will be dismissed under Rule 12(b)(6).

B. TILA (Count III)

In its Memorandum Opinion on the Motion to Dismiss the FAC, the Court dismissed

Plaintiffs’ TILA claims as time-barred because the FAC presented those claims as involving

“consumer credits,” meaning that TILA’s one-year statute of limitations applied. (See Doc. No. 68

6 The Repayment Agreement contains incremental increases, meaning that the portion of Fuchs’

paychecks allegedly subject to kickbacks changed over time. (See Doc. No. ¶ 6). But because Fuchs

subsequently negotiated a flat payment of $15,000 as satisfaction for the entire debt, prorating this amount

is the appropriate calculation method.

7 Plaintiffs cite two cases in which the court appears to have simply deducted the alleged kickbacks

from the plaintiffs’ last paycheck. See Carmen v. Health Carousel, LLC, No. 1:20-CV-313, 2023 WL

5104066, at *15 (S.D. Ohio Aug. 9, 2023); Fredericks v. Ameriflight, LLC, No. 3:23-CV-1757-X, 2024

WL 1183075, at *5 (N.D. Tex. Mar. 19, 2024). These cases are not binding on the Court, and the Court

finds them unpersuasive and factually distinguishable.

at 8–9). SpecialtyCare argues that the TAC’s TILA claim remains time-barred if it is a consumer

claim. (See Doc. No. 135 at 22–24). The Court agrees. For reasons explained in Memorandum

Opinion on the Motion to Dismiss the FAC, any claim based on a consumer theory is time-barred.

However, the TAC sets forth an alternative TILA theory based on “private education

loans”:

If the training and TRAP debt were primarily for Plaintiff Bailey’s benefit, the

reimbursement obligation loan included in the Associate Repayment Agreement is a

private education loan within the meaning of 15 U.S.C. § 1650(a)(8) and Regulation Z §

1026.46(b)(5), because it is issued expressly for the postsecondary educational expenses

incurred from SpecialtyCare’s postsecondary training program; is not made, insured, or

guaranteed under title IV of the Higher Education Act of 1965; does not include open-end

credit or any loan secured by a property or dwelling; and has a term of more than 90 days.

If the training and TRAP debt were primarily for Plaintiff Bailey’s benefit, SpecialtyCare

is a private educational lender under 15 U.S.C. § 1650(a)(7) because it is engaged in the

business of soliciting, making, or extending private education loans. A private education

loan is a type of consumer credit.

(Doc. No. 122 ¶¶ 166–67).

SpecialtyCare argues that this alternative TILA claim fails as a matter of law because the

TAC’s allegations are “conflicting, conclusory, and only masquerading as factual.” (See Doc. No.

135 at 17). Specifically, SpecialtyCare argues that the TAC does not allege “facts sufficient to

satisfy the applicable definitions for a TILA claim based on a private education loan.” (Id.).

SpecialtyCare also argues that the TAC fails to allege that SpecialtyCare is a creditor under TILA.

(See id. at 24–25). The Court will address these arguments in turn.

1. Plaintiffs May Plead Inconsistent Claims in the Alternative

SpecialtyCare does not explain why the TILA allegations are “conflicting.” (See generally

Doc. No. 135). As the Court understands it, SpecialtyCare’s implied argument is that the TILA

claim conflicts with the FLSA claims and/or with allegations pertaining to “consumer credits.”

However, Plaintiffs are allowed to plead in the alternative. See Fed. R. Civ. P. 8; see Kolstad v.

Leehar Distributors, LLC, No. 3:18-CV-00060, 2018 WL 6832086, at *8 (M.D. Tenn. Dec. 28,

2018) (“there is no basis to require Plaintiff to choose between conflicting theories at [the pleading]

stage”); see also Indep. Enters. Inc. v. Pittsburgh Water & Sewer Auth., 103 F.3d 1165, 1175 (3d

Cir. 1997) (Rule 8 “permits inconsistency in both legal and factual allegations”). The TAC

expressly states that it pleads the TILA claim in the alternative to the FLSA claims and that the

private-education-loan theory is an alternative to the consumer-credit theory. As such, the Court

will not dismiss the TILA claim on the basis that it is conflicting.

2. The TAC’s Allegations Meet TILA’s and Regulation Z’s Definitions

SpecialtyCare argues that the TAC’s allegations are insufficient to meet various definitions

under TILA a Regulation Z. Specifically, SpecialtyCare argues that the allegations are insufficient

to show that the Repayment Agreement is a “private education loan” from a “covered educational

institution” that pertains to a “cost of attendance.” (See Doc. No. 135 at 17–22). For the reasons

below, the Court disagrees.

a. TILA

In relevant part, TILA defines “covered educational institution as “any educational

institution that offers a postsecondary educational degree, certificate, or program of study

(including any institution of higher education).” 15 U.S.C. § 1650(a)(2). TILA further defines a

“private education loan” as “a loan provided by a private educational lender that [. . .] is issued

expressly for postsecondary educational expenses to a borrower [. . . .].” 15 U.S.C. § 1650(a)(8).

“[T]he term ‘private educational lender’ means,” [among other things] “any . . . person engaged in

the business of soliciting, making, or extending private education loans.” 15 U.S.C. § 1650(a)(7)

“[T]he term ‘postsecondary educational expenses’ means any of the expenses that are included as

part of the cost of attendance of a student[.]” 15 U.S.C. § 1650(a)(5). “’[C]ost of attendance’ means

[among other things] tuition and fees [. . .] books, course materials, supplies, and equipment [. . .]

transportation, personal [and living] expenses, [and] for a student in a program requiring

professional licensure, certification, or a first professional credential, the cost of obtaining the

license, certification, or a first professional credential.” 20 U.S.C. § 1087ll(a).

Based on the above definitions, SpecialtyCare argues that Bailey’s TILA claim is deficient

because the TAC does not allege that she was a “student,” that SpecialtyCare engages in making

private education loans, or that the Repayment Agreement was for “cost[s] of attendance.” (See

Doc. No. 135 at 9). The Court disagrees. Indeed, taking the allegations in the TAC as true and

drawing all reasonable inferences in Plaintiffs’ favor, the Court finds that Plaintiffs plausibly allege

that Bailey was both a student and an employee of SpecialtyCare, that SpecialtyCare engages in

extending loans to SNs such as Bailey, and that these loans are for post-secondary private

education, i.e., training to become a SN. See Heder v. City of Two Rivers, Wisconsin, 295 F.3d

777, 782 (7th Cir. 2002) (equating the cost of training to a loan because the training benefitted the

employee); Gordon v. City of Oakland, 627 F.3d 1092, 1096 (9th Cir. 2010) (same); Milford v.

Roehl Transp., Inc, No. 22-CV-0879-BHL, 2023 WL 2503495, at *4 (E.D. Wis. Mar. 14, 2023)

(same); Bland v. Edward D. Jones & Co., L.P., 375 F. Supp. 3d 962, 978 (N.D. Ill. 2019) (same).

b. Regulation Z

SpecialtyCare also argues that the TAC does not allege sufficient facts to meet Regulation

Z’s definition of “private education loan” because SpecialtyCare does not fall within one of three

statutory categories of “covered educational institution[s].” (See Doc. No. 135 at 20–22). In

response, Plaintiffs argue that the TAC pleads facts sufficient to show that SpecialtyCare is a

“proprietary institution of higher education,” which is a “covered educational institution.” (See

Doc. No. 17–19). The Court agrees with Plaintiffs.

Regulation Z provides that a “private education loan” is “for postsecondary educational

expenses.” 12 C.F.R. § 1026.46(b)(5). “Postsecondary educational expenses means any of the

expenses that are listed as part of the cost of attendance [. . .] of a student at a covered educational

institution.” 12 C.F.R. § 1026.46(b)(3). “Institution of higher education has the same meaning as

in [the Higher Education Act of 1965 (“HEA”)]. 12 C.F.R. § 1026.46(b)(2). The HEA’s definitions

of “institution of higher education” include “a proprietary institution of higher education.” 20

U.S.C. § 1002(a)(1)(A). In relevant part, a “proprietary institution of higher education” means a

school that (i) “provides an eligible program of training to prepare students for gainful employment

in a recognized occupation”; (ii) “admits as regular students only persons having a certificate of

graduation from a school providing secondary education, or the recognized equivalent of such a

certificate [plus exceptions]”; (iii) is legally authorized within [a state] to provide a program of

education beyond secondary education”; and (iv) “has been in existence for at least 2 years.” 20

U.S.C. §§ 1001(a)(1)–(2), 1002 (b)(1).8

Here, the TAC alleges that SpecialtyCare trains incoming SNs in a “job-training program”

called “SpecialtyCare University.” (Doc. No. 122 ¶ 3). The TAC also at least implies that

SpecialtyCare operates its training program for profit because as it alleges that the Repayment

Agreement’s liquidated damages exceed the value of the training. (See, e.g. id. ¶¶ 7–9). The TAC

further describes the training program as “postsecondary,” thereby implying that SNs must have

completed secondary education prior to starting the program. (See id. ¶ 166). Furthermore, the

TAC alleges that SNs can receive a Certification in Neurophysiologic Intraoperative Monitoring

from the American Board of Registration of Electroencephalographic and Evoked Potential

Technologists for their training through SpecialtyCare, which leads to the inference that being a

8 Accreditation is not a requirement. See 12 C.F.R. § 1026.46 (b)(1)(i).

SN is a recognized occupation. (See id. ¶¶ 27–61). The Court also easily infers that SpecialtyCare

has been in existence for more than two years because the TAC uses the present tense when

referring to SpecialtyCare’s training program—as of November 22, 2024, the filing date—and

alleges that Bailey and Fuchs started the program over two years prior. (See id. ¶¶ 32–61, 78, 166).

Finally, while the TAC does not allege that SpecialtyCare University is authorized by State law to

provide post-secondary education, Tennessee law expressly forbids the operation of such program

without State authorization. (See Tenn. Code Ann. § 49-7-2007). The TAC alleges that

SpecialtyCare operates a training facility in Nashville, Tennessee. (See Doc. No. 166 ¶ 41). For

purposes of ruling on the present Motion, the Court finds it reasonable to infer that SpecialtyCare’s

training is authorized by the State because it would otherwise be operating in violation of

Tennessee law. Should discovery show otherwise, SpecialtyCare can move for summary

judgment.

For these reasons, the Court rejects SpecialtyCare’s argument that the TAC does not allege

sufficient facts to meet Regulation Z’s definition of “private education loan.”

3. The TAC Alleges SpecialtyCare Is a Creditor Under TILA

SpecialtyCare argues that the TAC “does not sufficiently allege that SPecialtyCare is a

creditor under TILA” because it “does not allege any facts supporting a plausible inference that

the Repayment Agreement contained a finance charge.” (Doc. No. 135 at 24). Specifically,

SpecialtyCare argues that the TAC does not allege that “SpecialtyCare charged [Bailey] a higher

reimbursement cost for the privilege of extending the reimbursement payment over time” or that

the parties agreed “to a different price for Bailey’s right to defer payment.” (Id. at 25). Plaintiffs

counter that the Repayment Agreement contains a finance charge because the amount owed to

SpecialtyCare “continues to grow after the education for which it purports to reimburse

SpecialtyCare is complete.” (Doc. No. 140 at 20). The Court agrees with Plaintiffs.

In relevant part, TILA defines a creditor as:

a person who both (1) regularly extends [. . .] consumer credit which is payable by

agreement in more than four installments or for which the payment of a finance charge is

or may be required, and (2) is the person to whom the debt arising from the consumer credit

transaction is initially payable on the face of the evidence of the indebtedness [. . . .]

15 U.S.C. § 1602. The TILA further defines a “finance charge” as “the sum of all charges, payable

directly or indirectly by the person to whom the credit is extended, and imposed directly or

indirectly by the creditor as an incident to the extension of credit.” 15 U.S.C. § 1605(a). The statute

expressly states that a “time price differential, and any amount payable under a point, discount, or

other system of additional charges“ is a “finance charge.” (/d.)

Here, the TAC alleges that the Repayment Agreement subjects Bailey to a debt which

incrementally increases over time. (See Doc. No. 122 §f 6). It further alleges that “interest . . .

accrues at a rate of nearly 30% annually even after the training is complete”. (/d. § 9). The Court

finds that this is enough to meet the above statutory definition of a “finance charge.” As such, the

Court rejects SpecialtyCare’s argument.

IV. CONCLUSION

For the reasons stated, SpecialtyCare’s Partial Motion to Dismiss (Doc. No. 134) will be

GRANTED in part and DENIED in part. The Motion will be GANTED on Counts I and II and

DENIED on Count III.

An appropriate Order shall enter.

Mle

CHIEF UNITED STATES DISTRICT JUDGE

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