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Aguirre v. Kreme

United States District Court, S.D. Texas, Houston Division

May 31, 2017

David Aguirre, Individually and on Behalf of Similarly Situated Individuals, Plaintiff,
Tastee Kreme #2, Inc. and Vahid Karami, Defendants.


          Gray H. Miller United States District Judge

         Pending before the court is a memorandum, recommendation, and order filed by Magistrate Judge Nancy Johnson (“M&R”). Dkt. 36. The M&R recommends granting plaintiff David Aguirre's motion to conditionally certify a Fair Labor Standards Act (“FLSA”) class. Id. Defendants Tastee Kreme #2, Inc. (“Tastee”) and Vahid Karami filed objections to the M&R. Dkt. 38. After considering the M&R, related documents, objections, and the applicable law, the court is of the opinion that the objections should be SUSTAINED IN PART and OVERRULED IN PART.

         I. Background

         This is an FLSA case. Aguirre claims that Tastee and Karami wrongfully classified him and other similarly situated employees as exempt from FLSA overtime requirements. Dkt. 36. Karami is the director of operations, owner, and manager of Tastee. Id. Tastee employs drivers to deliver ice cream to gas stations and convenience stores and perform various services related to Tastee's products at the delivery locations. Id. Aguirre contends that he was a driver for Tastee and that from the time period of July 26, 2013, through January 2016, Tastee did not provide overtime pay to him and other Tastee drivers who worked more than forty hours a week. Dkt. 14. According to Aguirre, Tastee wrongfully classified him and the other drivers as outside salesmen who were exempt from the FLSA overtime requirements even though he and the other drivers do not make “sales” within the meaning of the FLSA. Id. Aguirre filed a complaint against Tastee and Karami on behalf of himself and other similarly situated individuals on August 26, 2016. Dkts. 1, 36. Five other Tastee employees or previous employees have opted into this lawsuit. Dkts. 3-5, 35, 37.

         The court referred all pretrial management of this case to Magistrate Judge Nancy K. Johnson pursuant to 28 U.S.C. § 636(b)(1)(A) and (B). Dkt. 7. On December 20, 2016, Aguiree filed a motion for conditional certification of a collective action under the FLSA. Dkt. 22. Tastee and Karami filed a response and objections to Aguirre's proposed notice to potential collective action members, and Aguirre filed a reply. Dkts. 27, 28, 30. The Magistrate Judge filed an M&R on April 13, 2017. Dkt. 36. She recommends conditionally certifying the collective action and approving the proposed notice, with minor changes. See id.

         Tastee and Karami timely filed objections to the M&R. Dkt. 38. They contend that the Magistrate Judge erred in the following ways: (1) refusing to strike defective evidence submitted by Aguirre; (2) accepting Aguirre's claim that he is a delivery driver; (3) failing to require Aguirre to show other employees are similarly situated and want to join the lawsuit; (4) recommending that the court allow claims after the date Tastee started paying all drivers an hourly rate; (5) defining the class; (6) approving the notice and allowing a three-year notice period; (7) approving notice methods; and (8) allowing putative class members to use electronic signatures on opt-in notices. Id. Aguirre did not file a response to the objections, which are not ripe for disposition.

         II. Legal Standards

         A. Review of an M&R

         A party may file objections to a nondispositive motion within fourteen days of being served with a copy of a written order. Fed.R.Civ.P. 72(a). Upon the filing of timely objections, the court will “modify or set aside any part of the order that is clearly erroneous or is contrary to law.” Id.; see also 28 U.S.C. § 636(b)(1)(A). The court must review factual findings under a clearly erroneous standard and legal conclusions de novo. Moore v. Ford Motor Co., 755 F.3d 802, 806 (5th Cir. 2014).

         B. Conditional Certification

         Section 207(a) of the FLSA requires covered employers to compensate nonexempt employees at overtime rates for time worked in excess of statutorily defined maximum hours. 29 U.S.C. § 207(a). Section 216(b) creates a cause of action against employers who violate the overtime compensation requirements. 29 U.S.C. § 216(b). Section 216(b) also permits an employee to bring a collective action lawsuit against an employer on “behalf of himself . . . and other employees similarly situated.” 29 U.S.C. § 216(b). Employees who wish to participate in a § 216(b) collective action must affirmatively “opt in” by filing a written consent to become a party with the court . Id. The “opt-in” procedure of § 216(b) illustrates its “fundamental, irreconcilable difference” from a class action under Federal Rule of Civil Procedure 23(c); in a Rule 23 proceeding, persons within the class description are automatically considered class members and must “opt out” of the suit if they do not wish to participate. LaChapelle v. Owens-Illinois, Inc., 513 F.2d 286, 288 (5th Cir. 1975).

         The Fifth Circuit has declined to adopt a specific test to determine when a court should certify a class or grant notice in a § 216(b) action, but most federal courts (including this court) have adopted the Lusardi test. See Mooney, 54 F.3d at 1214 (discussing but declining to adopt the test applied in Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987)); Badgett v. Tex. Taco Cabana, L.P., No. H-05-3624, 2006 WL 2934265, at *1-2 (S.D. Tex. Oct. 12, 2006). Under the Lusardi test, a district court approaches the question of whether the potential plaintiffs are “similarly situated” through a two-stage analysis: the “notice stage” and the “decertification stage.” Mooney, 54 F.3d at 1213. At the notice stage, the court makes a decision, usually solely based on the pleadings and any submitted affidavits, whether to certify the class conditionally and give notice to potential class members. See Mooney, 54 F.3d at 1213. The decision is made using a “fairly lenient standard, ” because the court often has minimal evidence at this stage of the litigation. Id. at 1214. Courts, in fact, “appear to require nothing more than substantial allegations that the putative class members were together the victims of a single decision, policy or plan.” Id. (quoting Sperling, 118 F.R.D. at 407). Thus, the notice stage analysis typically results in conditional certification of a representative class. Badgett, 2006 WL 2934265, at *1. After conditional certification, the “putative class members are given notice and the opportunity to ‘opt-in'” and the case proceeds as a representative action. Mooney, 54 F.3d at 1214.

         The second stage of the Lusardi approach-the “decertification stage”-is typically precipitated by the defendant filing a motion to decertify after the opt-in period has concluded and discovery is largely complete. Id. “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.” Id. If the court finds the claimants are no longer made up of similarly situated persons, it decertifies the class and dismisses the opt-in plaintiffs without prejudice. Id. If the class is still similarly situated, the court allows the collective action to proceed. Id.

         A “decision to certify, even if subject to correction at the decertification stage, is not without consequences.” Lang v. DirecTV, Inc., No. No. 10-1085, 2011 WL 6934607, at *6 (E.D. La. Dec. 30, 2011) (citations omitted). “Too much leniency at the notice stage can lead to a ‘frivolous fishing expedition conducted by the plaintiff at the employer's expense'” and “extreme leniency at the notice stage can result in conditional certification that must later be revoked at the eve of trial . . . when it becomes obvious that manageability concerns make collective action impossible.” Id. For this reason, in cases in which parties have had the opportunity to conduct discovery prior to filing the motion for notice and conditional certification, some courts apply a more stringent inquiry. See, e.g., McKnight v. D. Hous., Inc., 756 F.Supp.2d 794, 802-03 (S.D. Tex. 2010) (Rosenthal, J.) (noting that courts may increase the plaintiffs' burden at the notice stage if discovery is largely complete); Basco v. Wal-Mart Stores, Inc., No. 00-3184, 2004 WL 1497709, at *4 (E.D. La. Jul. 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 this matter.”). If there has been extensive discovery, some courts collapse the Lusardi two-stage process and subject the plaintiffs to the more stringent second-stage burden. See, e.g., Harris v. FFE Transp. Servs., Inc., No. 3:05-CV-0077-P, 2006 U.S. Dist. Court LEXIS 51437, at *7 (N.D. Tex. May 15, 2006) (applying the second stage of the Lusardi approach after the court gave the parties seven months to conduct discovery related to the certification issue); Pfohl v. Farmers Ins. Grp., No. CV03-3080 DT (RCX), 2004 WL 554834, at *2-3 (C.D. Cal. Mar. 1, 2004). However, it is only appropriate to increase the plaintiffs' burden “after discovery is largely complete and the matter is ready for trial.” Mooney, 54 F.3d at 1214; McKnight, 756 F.Supp.2d at 802-03.

         III. Analysis

         The court will first address Tastee and Karami's evidentiary objections. It will then consider the objections related to the Magistrate Judge's recommendation to conditionally certify the collective action and the objections related to the proposed substance and logistics of issuing notice.

         A. Evidentiary Objections

         In their response to the motion to conditionally certify, Tastee and Karami objected to the declarations Aguirre submitted in favor of his motion as containing misstatements, being misleading, and not being based on personal knowledge. Dkt. 27. The Magistrate Judge overruled these objections, reasoning that the declarants had worked for Tastee long enough to base their declarations on personal knowledge, and that any disputes about the substantive issues raised in the declarations should be considered at later stages of the litigation. Dkt. 36. She noted that Tastee and Karami's objections related to whether the declarants were exempt from the FLSA, and exemptions are merits-based defenses and not typically considered at the notice stage. Id.

         First, the court notes that Tastee and Karami submit additional new evidence obtained during discovery to support their assertions regarding Aguirre's declaration. See Dkt. 38 & Exs. The court has discretion to consider the additional evidence even though it was not presented to the Magistrate Judge. See Freeman v. Cnty. of Bexar, 142 F.3d 848, 852 (5th Cir. 1998) (“[I]t is clear that the district court has wide discretion to consider and reconsider the magistrate judge's recommendation. In the course of performing its open-ended review, the district court need not reject newly-proffered evidence simply because it was not presented to the magistrate judge. Litigants may not, however, use the magistrate judge as a mere sounding-board for the sufficiency of the evidence.”). In this case, the additional evidence was not available during the original round of briefing. The court thus finds, in the interest of justice and judicial efficiency, that it makes sense under the facts of this case to exercise the court's discretion and consider the testimony.

         1.Objections to ...

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