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Parker v. Silverleaf Resorts Inc.

United States District Court, N.D. Texas, Dallas Division

May 1, 2017

JAMES PARKER, CAITLIN COLLINS, TAYLOR JACKSON, and ZACHARY OWENS, on behalf of themselves and others similarly situated, Plaintiffs,



         Before the Court is Plaintiffs' Motion for FLSA Conditional Certification. Doc. 116. Also before the Court is Defendants' Opposed Motion to Strike Declarations File in Support of Plaintiffs' Motion for FLSA Conditional Certification. Doc. 122. For the following reasons, the Court GRANTS Plaintiffs' Motion (Doc. 116) but limits Plaintiffs' proposed class definition as described below. And the Court DENIES Defendants' Motion (Doc. 122).

         I. BACKGROUND

         A. Factual Background[1]

         This is a Fair Labor Standards Act (FLSA) case brought by four former employees of Silverleaf Resorts, Inc. (Silverleaf) who allege that they were wrongfully denied overtime compensation and minimum wages. Doc. 91, Pls.' 3d Am. Compl. ¶¶ 3, 5-6, 8-9. Silverleaf is in the business of developing, marketing, and operating timeshare resorts in various markets nationwide.[2]Id. ¶ 19. Before May 2011, Silverleaf operated as a stand-alone company. See Id. ¶ 20. In May 2011, however, it was acquired by SL Resort Holdings, Inc. (SL Holdings), a wholly-owned subsidiary of Cerberus Capital Management L.P. (Cerberus). Id. For four years, Silverleaf operated directly under SL Holdings and Cerberus, but in May 2015, Silverleaf was acquired by Orange Lake Country Club, Inc., a wholly-owned subsidiary of Orange Lake Holdings, LLLP (collectively Orange Lake). Id. ¶ 22.

         While working as employees of Silverleaf, Plaintiffs assert they held similar jobs to one another and had job titles including “sales representative” and “closer.” Id. ¶¶ 5-6, 8-9. Plaintiffs say that they were paid on a commission only basis and worked more than forty hours in a work week without being paid overtime compensation. Id. Plaintiffs contend that Defendants violated the FLSA by failing to pay Plaintiffs' wages and overtime compensation. Id. ¶ 93. Plaintiffs further allege that Defendants violated the FLSA by failing to maintain accurate employee pay records. Id. ¶ 95.

         Defendants explain that sales employees were non-exempt employees who were paid weekly on a draw versus commission basis. Doc. 120, Defs.' Resp. 6. The draw amount was an hourly rate intended to cover an employee's minimum wage plus overtime for all hours worked. Id. If a sales employee's commission exceeded the amount of his or her draw, he or she would be paid only the commission amount for the week. Id. If the employee's commission did not exceed the amount of his or her draw, then he or she would earn the amount of commission plus an additional amount of draw depending on the number of hours worked. Id. at 6-7.

         Plaintiffs stopped working at Silverleaf before Orange Lake acquired it. In order to connect their case to Orange Lake, Plaintiffs argue that upon acquisition of Silverleaf, Orange Lake acquired all of Silverleaf s debts and liabilities under the successor liability doctrine. Doc. 91, Pls.' 3d Am. Compl. ¶ 47.

         B. Procedural Background

         Plaintiffs originally filed their lawsuit against only Cerberus and Silverleaf on March 13, 2014, with the intent that it would eventually be certified as a collective action. Doc. 1, Pls.' Orig. Compl. Plaintiffs then filed their First Amended Complaint and added SL Holdings as a defendant. Doc. 12, Pls.' 1st Am. Compl. In October 2015, Plaintiffs filed a Motion for FLSA Conditional Certification and Notice to Collective Action Members (First Motion for Certification). Doc. 74. In February 2016, Plaintiffs filed a Third Amended Complaint that asserted almost identical allegations against two new Defendants, Orange Lake Country Club and Orange Lake Holdings. Doc. 91, Pls.' 3d Am. Compl. When Plaintiffs first filed suit in 2014, it would have been impossible to have included Orange Lake as defendants because they did not acquire Silverleaf until May 2015. Id. ¶ 22.

         In April 2016, the case was reassigned to a different judge for all further proceedings. Doc. 97, Special Order No. 3-304. In May 2016, the parties jointly moved to continue the deadlines in their Scheduling Order because the Court had not yet ruled on Plaintiffs' First Motion for Certification. Doc. 99, Joint Mot. to Continue. The Court granted the continuance and extended, among others, the deadline for discovery from May 2016 to November 2016. Doc. 101, Order. The Court also denied without prejudice Plaintiffs' First Motion for Certification as Plaintiffs' Third Amended Complaint-adding Orange Lake as defendants-was filed several months after Plaintiffs filed their First Motion for Certification. Doc. 100, Order.

         After the Court granted in part and denied in part Orange Lake's Motion to Dismiss Plaintiffs' Third Amended Complaint, Plaintiffs refiled their Motion for FLSA Conditional Certification (Second Motion for Certification) in October 2016. Doc. 116. Defendants filed a Response (Doc. 120), and Plaintiffs filed a Reply (Doc. 125). Therefore the Second Motion for Certification is ripe for the Court's review.


         Section 216(b) of the FLSA “authorizes a plaintiff to bring a collective action on behalf of similarly situated persons, provided that any person who desires to become a part of the collective action files a written consent in the court.” Valcho v. Dall. Cty. Hosp. Dist., 574 F.Supp.2d 618, 621 (N.D. Tex. 2008) (citing 29 U.S.C. § 216(b)). When a plaintiff seeks to bring a collective action, district courts have the discretion to implement § 216(b) by facilitating notice to potential plaintiffs. Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165, 169 (1989).

         While the FLSA authorizes a plaintiff to bring an action on behalf of similarly situated persons, the term “similarly situated” is not defined. See 29 U.S.C. § 216(b). And the Fifth Circuit has declined to adopt any specific test to determine when plaintiffs are similarly situated. Acevedo v. Allsup's Convenience Stores, Inc., 600 F.3d 516, 519, 519 n.1 (5th Cir. 2010); Mooney v. Aramco Servs. Co., 54 F.3d 1207, 1216 (5th Cir. 1995) (“[W]e specifically do not endorse the methodology employed by the district court, and do not sanction any particular methodology.”), overruled on other grounds by Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003). The prevailing test used among courts in the Northern District of Texas, however, is the two-step approach outlined in Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987), consisting of: (1) a notice stage; and (2) a decertification stage.[3] See, e.g., Oliver v. Aegis Commc'ns Grp., Inc., No. 3:08- cv-828-K, 2008 WL 7483891, at *2, 3 (N.D. Tex. Oct. 30, 2008) (collecting cases).

         Under the Lusardi approach, the first step-the notice stage-requires a preliminary determination, usually based only on the pleadings and submitted affidavits, of whether potential class members are similarly situated to named plaintiffs. Mooney, 54 F.3d at 1213-14. If they are similarly situated, then the court can conditionally certify the action and authorize notice to potential plaintiffs to opt in, and the suit “proceeds as a representative action throughout discovery.” Id. at 1214. After discovery is largely complete, the defendant may move for decertification, at which point the court proceeds to the second step-the decertification stage-and again considers again whether plaintiffs are similarly situated. Id. If the court finds that the plaintiffs who opted in are not similarly situated, then the class is decertified, the opt-in plaintiffs are dismissed without prejudice, and the original named plaintiffs proceed to trial on their individual claims. Id. at 1213-14.

         Courts use different standards to determine whether plaintiffs are similarly situated depending on whether the case is at the notice or decertification stage. At the notice stage, the court usually has minimal evidence, so “the determination is made using a fairly lenient standard and typically results in conditional certification of a representative class.” Jones v. SuperMedia Inc., 281 F.R.D. 282, 287 (N.D. Tex. 2012); see also Mooney, 54 F.3d at 1214.

         At this stage, courts generally “require nothing more than substantial allegations that the putative class members were together victims of a single decision, policy, or plan.” Mooney, 54 F.3d at 1214 n.8. A factual basis, however, must exist and a plaintiff must show some “identifiable facts or legal nexus that binds the claims so that hearing the cases together promotes judicial efficiency.” Jones, 281 F.R.D. at 287 (quoting Tolentino v. C & J Spec-Rent Servs. Inc., 716 F.Supp.2d 642, 647 (S.D. Tex. 2010)). In conducting its analysis, the court has “a responsibility to avoid the ‘stirring up' of litigation through unwarranted solicitation.” Valcho, 574 F.Supp.2d at 622 (quoting D'Anna v. M/A-COM, Inc., 903 F.Supp. 889, 894 (D. Md. 1995)).

         Courts do not often engage in the second step-the decertification process-until after “discovery is largely complete and the matter is ready for trial. At this stage, the court has much more information on which to base its decision, and makes a factual determination on the similarly situated question.” Mooney, 54 F.3d at 1214.

         But there are circumstances where courts will skip the first, lenient analysis. Where parties have already conducted discovery on the certification issue, courts have less cause for leniency during the “notice” phase and may choose to apply a more stringent standard. Valcho, 574 F.Supp.2d at 622; Basco v. Wal-Mart Stores, Inc., No. Civ.A. 00-3184, 2004 WL 1497709, at *4 (E.D. La. July 2, 2004) (“[I]n light of the substantial discovery that has occurred in this matter, the Court will consider the criteria for both the first and second steps in deciding whether it should certify [the] matter.”); Pfohl v. Farmers Ins. Grp., No. CV03-3080 DT (RCX), 2004 WL 554834, at *3 (C.D. Cal. Mar. 1, 2004) (proceeding directly to the decertification stage of the analysis because discovery on the issue of certification was complete).

         III. ANALYSIS

         Plaintiffs seek to certify the following class: “all current and former non-exempt ‘sales employees' of Defendants, who worked onsite at Defendants' resort properties.” Doc. 116, Pls.' Mot. for Certification 2 (footnote omitted). Plaintiffs assert that the term “sales employees” encompasses a variety of titles[4] all dealing with the sale of Defendants' resort timeshares. Id. at 1, 2 n.9. Plaintiffs appear to assert that the class should include sales employees who worked at every one of Defendants' resort properties nationwide. See Id. at 4. The named Plaintiffs stated in their declarations that they worked at the following six of Defendants' resorts: (1) Apple Mountain Resort; (2) Fox River Resort; (3) Lake O' The Woods Resort; (4) Piney Shores Resort; (5) The Villages Resort; and (6) Seaside Resort.[5]

         A. Conditional Certification Standard

         Before conducting its analysis of whether potential opt-in plaintiffs are similarly situated to named Plaintiffs, the Court first must address Defendants' argument that a more stringent standard, rather than the usual lenient one, should be used. Defendants argue that substantial discovery occurred prior to Plaintiffs moving for conditional certification, and therefore, the Court should skip right to the more stringent standard in its similarly situated inquiry. Doc. 120, Defs.' Resp. 15-16. Defendants support their argument by noting that discovery has been ongoing for 28 months and has included responses to interrogatories, requests for admission, 175 requests for production of documents-involving the production of over 6, 000 documents-and depositions of the four named Plaintiffs. Id. at 12-13, 16, 16 n.19. Defendants point out that Plaintiffs had the opportunity to depose the Defendants' corporate representatives-and indeed were ordered to schedule those depositions in Dallas by October 21, 2016-but chose not to do so. Id. at 13. Furthermore, Defendants note that the discovery period was set to expire on November 21, 2016, [6] only weeks after Plaintiffs filed their Second Motion for Certification. Id. at 16.

         Plaintiffs disagree and argue that Defendants fail to accurately characterize the amount of discovery that has occurred in the case. Doc. 125, Pls.' Reply 7. They posit that Defendants make it appear that discovery is nearly complete, but Plaintiffs have not deposed a single witness. Id. Plaintiffs say that while some discovery has occurred, it is far from complete and in no way ready for trial. Id. at 8. Plaintiffs point to the fact that Defendants were only recently ordered to produce the names of Defendants' corporate representatives after Defendants refused to produce them for deposition in Dallas, Texas. Id. Therefore, according to Plaintiffs, the case is actually in the early stages of discovery, regardless of time, and the Court should apply a more lenient standard. See Id. at 7-8.

         The correct standard to apply in this case is not immediately clear because the amount of discovery and the kind of discovery that has been completed falls somewhere between that of the cases applying the lenient standard[7] and that of the cases applying the stringent standard.[8] There is certainly more discovery than in Hernandez, where six months remained in the discovery period and no depositions had been taken, or in Williams, where no discovery had taken place. Hernandez, 191 F.Supp.3d at 682; Williams, 2015 WL 12533010, at *1. But it appears that there is less discovery than in Blake, where both parties had an opportunity to take a deposition, the plaintiffs having taken four, or in Pfohl, where the parties agreed that discovery on certification was complete. Blake, 2013 WL 3753965, at *5; Pfohl, 2004 WL 554834, at *3. Several other cases, though, address situations that are not as clear cut.

         In Valcho the district court discussed the rationale for using different evidentiary standards. Valcho, 574 F.Supp. 2d. at 622. When plaintiffs have not conducted discovery, they cannot marshal their best evidence, so courts should give them some leniency. But that rationale disappears if they have conducted discovery because then the plaintiff should be required to support his or her claim with evidence in order to avoid a “frivolous fishing expedition.” Id. (quoting D'Anna, 903 F.Supp. at 894).

         Here, Plaintiffs have engaged in a significant amount of discovery. Plaintiffs' emphasis of the fact that they have not taken a single deposition and only just recently received the names of corporate representatives concerns the Court. Doc. 125, Pls.' Reply 8. The parties were ordered to set the depositions of those corporate representatives on or before October 21, 2016, but Plaintiffs chose not to. See Doc. 110, Order. Plaintiffs have had the opportunity to depose those corporate representatives, and they have also received a significant amount of discovery from Defendants. Therefore, it appears that the rationale explained in Valcho-where a plaintiff who has been able to conduct discovery should be expected to better support his or her claim-applies here, and the Court should apply a more stringent standard to its analysis.

         But even with that rationale in mind, other courts have applied a lenient standard in the face of a substantial amount of discovery. In McKnight v. D. Houston, Inc., the district court determined that a lenient standard was appropriate, even though the parties had deposed the plaintiffs and one individual connected with the defendants, because significant additional discovery had to be completed, “including discovery into the nature and extent of the relationships among the defendants.” 756 F.Supp.2d 794, 802 (S.D. Tex. 2010). Here, Plaintiffs' depositions have been taken but, according to Plaintiffs, there remains a significant amount of discovery because they have not had a chance to depose any witness. Therefore, discovery remains concerning the nature and extent of the relationships among Defendants. As discussed above, though, Plaintiffs chose not to set those depositions and have offered no explanation for doing so.

         In Lang v. DirecTV, the district court applied a lenient standard, even though the defendants had produced thousands of records over the course of twenty months. No. 10-1085 “G” (1), 2011 WL 6934607, at *7 (E.D. La. Dec. 30, 2011). The court did so for two reasons: (1) the court had earlier indicated that it would use the lenient standard, so there was an issue of fairness, and (2) the court also noted that it was “leery” to apply any heightened standard because the Fifth Circuit has not yet indicated that discovery warrants a heightened standard. No. 10-1085 “G” (1), 2011 WL 6934607, at *7 (E.D. La. Dec. 30, 2011). Despite 20 months of discovery, other considerations compelled the court to apply a more lenient standard.

         Here, there have been 28 months of discovery, a substantial amount of time. Doc. 120, Defs.' Resp. 16. The Court notes, however, that circumstances outside the parties' control contributed to at least some of the length of their discovery period. Plaintiffs originally filed their First Motion for Certification in October 2015-several months before the discovery deadline. But after the case was reassigned to a different judge, the Court denied the First Motion for Certification without prejudice because Plaintiffs had filed their Third Amended Complaint adding the Orange Lake defendants after they acquired Silverleaf. Furthermore, the live pleading was not settled as such until September 2016 when the Court ruled on Orange Lake's Motion to Dismiss it. While the Court's denial of the First Motion for Certification, by itself, does not compel the Court to conduct its analysis using the lenient standard, it does indicate that the sheer length of the discovery period should not be given as much weight as Defendants propose.

         Ultimately the Court agrees with Defendants and finds that it is appropriate to conduct its analysis using the more stringent standard. Plaintiffs have received a substantial amount of discovery from Defendants, including thousands of pages of documents. This is not a scenario where the case was recently filed and Plaintiffs have been able to produce only their own declarations. This case was rapidly approaching its trial date. And while the Court dismissed Plaintiffs First Motion for Certification, causing some delay, there had been almost two years of discovery prior to that.

         At this point in the case, Plaintiffs should be able to better support their claims. And with the significant amount of discovery in front of the Court, the Court concludes that it can “make an educated decision” as to whether certifying the matter as a collective action would survive the decertification process. See Basco, 2004 WL 1497709, at *4. Thus, the Court will apply a more stringent standard to its similarly situated analysis below.

         B. Defendants' Motion to Strike Plaintiffs' Declarations

         Before turning to its similarly situated analysis, the Court must first address Defendants' Motion to Strike Declarations Filed in Support of Plaintiffs' Motion for Certification. Doc. 122. Defendants argue that Plaintiffs' declarations should be totally stricken, or in the alternative, certain portions should be stricken because they are “identical, boilerplate, rubber-stamped documents that directly contradict Plaintiffs' sworn deposition testimony.” Doc. 122, Defs.' Mot. to Strike 1. Defendants also argue that large portions are unsupported by the “declarants' personal knowledge; are vague, speculative, and conclusory; lack foundation or personal knowledge; present improper opinion testimony; or are based on hearsay statements.” Id. at 1-2.

         Plaintiffs respond by arguing that Defendants' objections are predicated on an incomplete reading of Plaintiffs' depositions and that the objections are not proper for the certification stage of litigation. Doc. 127, Pls.' Resp. 1. Plaintiffs then provide Plaintiffs' deposition ...

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