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Faludi v. U.S. Shale Solutions LLC

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

November 30, 2017

JEFF FALUDI, Plaintiff,



         Plaintiff Jeff Faludi ("Faludi" or "Plaintiff") brought this action against defendant U.S. Shale Solutions LLC ("US Shale" or "Defendant") asserting claims for violation of the overtime provisions of the Fair Labor Standards Act ("FLSA").[1] Pending before the court are Plaintiff's Motion for Leave to Amend His Complaint ("Plaintiff's Motion to Amend") (Docket Entry No. 18), Defendant's Motion for Summary Judgment ("Defendant's MSJ") (Docket Entry No. 14), and Plaintiff's Motion for Partial Summary Judgment ("Plaintiff's MPSJ") (Docket Entry No. 19) . For the reasons stated below, Plaintiff's Motion to Amend and Motion for Summary Judgment will be denied, and Defendant's Motion for Summary Judgment will be granted in part and denied in part.

         I. Factual and Procedural Background

         A. Factual Background

         Plaintiff Jeffrey Faludi received a Doctor of Jurisprudence in 1998.[2] After he graduated from law school, Faludi worked as an attorney for several years as an associate and partner at a law firm, and then as in-house counsel for oil and gas companies such as Willbros International.[3] Though Faludi was licensed to practice in Texas and Louisiana, his law licenses were suspended by August of 2014.[4] U.S. Shale was established in August of 2014 in Houston, Texas, to provide strategic solutions to the oil and gas industry.[5]Faludi and the CEO of U.S. Shale, Jerrit Coward, were colleagues at Willbros International.[6] In August of 2014 U.S. Shale became the parent company of four subsidiaries that provide site planning, construction, and maintenance support operations.[7] Jerrit Coward offered Faludi a consulting position to help U.S. Shale integrate its health and risk benefits between U.S. Shale and the four companies it had purchased.[8] Faludi agreed to work at U.S. Shale and signed a contract entitled the Independent Contractor Master Consulting Services Agreement (the "Agreement") on November 6, 2014.[9] The Agreement stated that Faludi "has been engaged to provide services to U.S. Shale Solutions, Inc., in helping it obtain employee benefits."[10] The Agreement also stated that U.S. Shale would pay Faludi $1, 000 for each day he performed services in Houston and $1, 350 for each day he performed services outside of Houston.[11] U.S. Shale provided Faludi with an office and reimbursed him for his computer, cell phone, and work-related travel expenses.[12] The Agreement required Faludi to provide U.S. Shale with invoices that identified the hours or days he performed services.[13] Faludi usually worked in the office five days a week and testified that it would be unusual if he were absent.[14] Faludi submitted the required invoices -- many of which listed amounts less than $1, 000 per day depending on the amount of time Faludi worked that day.[15] Faludi performed various services for U.S. Shale, including work on corporate development, IT management, administrative and human resource matters, and legal analyses of contracts and settlement negotiations.[16] Faludi represented himself as "General Counsel" of U.S. Shale "multiple times."[17] Faludi's annualized compensation was approximately $260, 000 during his engagement with U.S. Shale.[18] In January of 2016 Versa Capital Management, LLC ("Versa Capital") began providing management services to U.S. Shale.[19] In early March of 2 016 a representative of Versa Capital spoke with Faludi to discuss the possibility of U.S. Shale offering Faludi an executive position, but U.S. Shale decided not to do so.[20] Faludi's relationship with U.S. Shale ended on March 31, 2016.[21]

         B. Procedural History

         Faludi filed a Complaint seeking damages for unpaid overtime wages pursuant to the FLSA.[22] In its answer U.S. Shale asserted several affirmative defenses, including that Faludi was an independent contractor, not an employee, and that if Faludi were an employee he was paid on a salary basis and qualified as a law professional or highly-compensated employee exempt from the FLSA overtime pay requirements.[23] On January 31, 2017, Faludi filed suit against U.S. Shale in the 334th District Court of Harris County, Texas, for breach of contract and against Versa Capital for tortious interference with contract. U.S. Shale and Versa Capital filed their Original Answer, Affirmative Defenses, and Counterclaims in state court on March 13, 2017.

         US Shale filed its Motion for Summary Judgment in this court on September 6, 2017.[24] Two days later Faludi filed his Motion to Amend and his Motion for Partial Summary Judgment. U.S. Shale filed a Response in Opposition to Plaintiff's Motion for Leave to Amend His Complaint.[25] Both parties filed responses in opposition to the other party's summary judgment motions.[26]

         II. Plaintiff's Motion for Leave to Amend

          Plaintiff seeks leave to add a claim against U.S. Shale for retaliation under the FLSA because U.S. Shale filed counterclaims against him in state court.[27] Defendant urges the court to deny Plaintiff's Motion to Amend because of Plaintiff's unjustified delay, the futility of the amendment, and the undue prejudice Defendant would suffer if the Motion to Amend is granted.[28]

         A. Standard of Review

          If a scheduling order has been entered establishing a deadline for amendments to pleadings, Federal Rule of Civil Procedure 15(a) provides the standard for requests to amend that are filed before the scheduling order's deadline has expired, and Federal Rule of Civil Procedure 16(b) provides the standard for requests to amend that are filed after the scheduling order's deadline has expired. Marathon Financial Insurance, Inc., RRG v. Ford Motor Co., 591 F.3d 458, 470 (5th Cir. 2009); Fahim v. Marriott Hotel Services, Inc., 551 F.3d 344, 348 (5th Cir. 2008).

         Plaintiff filed his Complaint on November 22, 2016 (Docket Entry No. 1); U.S. Shale filed its Answer on December 23, 2016 (Docket Entry No. 4). The court held an initial pretrial and scheduling conference on March 3, 2017, and entered a Docket Control Order (Docket Entry No. 11) . The Docket Control Order contained the notation "None" on the lines provided for deadlines to file motions to amend the pleadings and motions to add new parties. The court wrote "None" because Plaintiff's counsel indicated at the pretrial conference that he would need no further amendments or additions to the pleadings. See Breaux v. Tri Star Freight Systems, Inc., Civil Action No. H-16-846, 2016 WL 6581929, at *2 (S.D. Tex. November 7, 2016) ("The 'N/A' notation next to the amendment deadlines on the Scheduling Order indicates that, at the Rule 16 conference, the parties indicated that they would not need to amend their pleadings, not that the parties may amend their pleadings at any time without seeking leave to do so."). Nevertheless, Plaintiff filed the pending Motion to Amend on September 8, 2017. The court can understand how Plaintiff's counsel would be confused by the entry of "None" and could conclude that the court meant that there were no deadlines for filing amended pleadings. Neither Plaintiff's Motion to Amend nor Defendant's responses to it addressed the applicable Rule 16 standard. Instead, each analyzed the factors the court would consider under Rule 15. Because neither party addressed the requirements under Rule 16 and because of the confusion caused by the "None" entry on the Docket Control Order, the court will apply the more liberal Rule 15 standard.

         B. Analysis

         Federal Rule of Civil Procedure 15(a) allows a party to amend its pleading once as a matter of course within 21 days after serving it or within 21 days after service of a responsive pleading or service of Rule 12(b), (e), or (f) motions. Fed.R.Civ.P. 15(a) (1) (A) and (B) . In all other cases Rule 15(a) requires the opposing party's written consent or leave of the court and states, "[t]he court should freely give leave when justice so requires." Id. at (2). Rule 15(a) provides "a strong presumption in favor of granting leave to amend." Financial Acquisition Partners LP v. Blackwell, 440 F.3d 278, 291 (5th Cir. 2006). "A decision to grant leave is within the discretion of the court, although if the court 'lacks a "substantial reason" to deny leave, its discretion "is not broad enough to permit denial."'" State of Louisiana v. Litton Mortgage Co., 50 F.3d 1298, 1302-03 (5th Cir. 1995) (quoting Jamieson By and Through Jamieson v. Shaw, 772 F.2d 1205, 1208 (5th Cir. 1985)). The Supreme Court has identified five factors to consider in determining whether to grant leave to amend a complaint: (1) undue delay, (2) bad faith or dilatory motive, (3) repeated failure to cure deficiencies by previous amendments, (4) undue prejudice to the opposing party, and (5) futility of the amendment. United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 270 (5th Cir. 2010) (citing Foman v. Davis, 83 S.Ct. 227, 230 (1962)).

         1. Delay

         Rule 15(a) contains no time limit for permissive amendment but "' [a]t some point[, ] time delay on the part of a plaintiff can be procedurally fatal.'" Whitaker v. City of Houston, Texas, 963 F.2d 831, 836 (5th Cir. 1992) (quoting Gregory v. Mitchell, 634 F.2d 199, 203 (5th Cir. 1981). "In that situation the plaintiff must meet the burden of showing that the delay was due to oversight, inadvertence, or excusable neglect, a burden which properly shifts to the party seeking to amend where apparent lack of diligence exists." Gregory, 634 F.2d at 203 (internal citations omitted).

         Where, as here, the defendant has moved for summary judgment before the plaintiff moves for leave to amend, the Fifth Circuit is hesitant to approve an amendment. See Overseas Inns S.A. P.A. v. United States, 911 F.2d 1146, 1151 (5th Cir. 1990). In Overseas the Fifth Circuit affirmed the district court's denial of the motion to amend, reasoning that since the defendant had already-filed for summary judgment based on the current pleadings, "[t]o grant [the plaintiff] leave to amend is potentially to undermine the [defendant's] right to prevail on a motion that necessarily was prepared without reference to an unanticipated amended complaint. ... A party should not, without adequate grounds, be permitted to avoid summary judgment by the expedient of amending its complaint" Id. The court further noted that one year before the plaintiff filed its motion to amend, the plaintiff moved for summary judgment. Id. "Accordingly, that motion represented 'that the case was fully at issue, that all theories of liability and all defenses had been presented, and that the case was ripe for summary judgment.'" Id. quoting Pharo v. Smith, 621 F.2d 656, 664 (5th Cir), reh'g granted cause remanded on other grounds, 625 F.2d 1226 (1980).

         Although Faludi filed his Motion for Summary Judgment on the same day as his Motion to Amend, the same principles apply. Faludi did not move to amend his Complaint until after Defendant filed its Motion for Summary Judgment and nearly six months after Defendant filed its state-court counterclaim. Plaintiff offers no explanation for this delay.

         2. Futility

         (a) Applicable Law

          "[L]eave to amend need not be granted when it would be futile to do so." F.D.I.C. v. Conner, 20 F.3d 1376, 1385 (5th Cir. 1994) (citation omitted). "An amendment is futile if it would fail to survive a Rule 12(b)(6) motion." Marucci Sports, L.L.C. v. National Collegiate Athletic Ass'n, 751 F.3d 368, 378 (5th Cir. 2014) . "Therefore, we review the proposed amended complaint under 'the same standard of legal sufficiency as applies under Rule 12(b) (6) .'" Id. (quoting Stripling v. Jordan Production Co., LLC, 234 F.3d 863, 873 (5th Cir. 2000) .

         A motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6) for failure to state a claim for which relief may be granted tests the formal sufficiency of the pleadings and is "appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim." Ramming v. United States, 281 F.3d 158, 161 (5th Cir. 2001), cert, denied sub nom Cloud v. United States, 122 S.Ct. 2665 (2002). The court must accept the factual allegations of the complaint as true, view them in a light most favorable to the plaintiff, and draw all reasonable inferences in the plaintiff's favor. Id.

"When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims."

Swierkiewicz v. Sorema N.A., 122 S.Ct. 992, 997 (2002) (quoting Scheuer v. Rhodes. 94 S.Ct. 1683, 1686 (1974)). To avoid dismissal a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." Bell Atlantic Corp. v. Twomblv, 127 S.Ct. 1955, 1974 (2007) . This "plausibility standard" requires "more than an unadorned, the-defendant-unlawfully-harmed-me accusation." Ashcroft v. Iqbal, 12 9 S.Ct. 1937, 1949 (2009) . "Where a complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of "entitlement to relief."'" Id. (quoting Twombly, 127 S.Ct. at 1966). When considering a motion to dismiss district courts are able to consider documents that are attached to a motion to dismiss if they are "referred to in the plaintiff's complaint and are central to the plaintiff's claim." Scanlan v. Texas A&M University, 343 F.3d 533, 536 (5th Cir. 2003) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000)).

         (b) Analysis

          To establish a prima facie case for a Title VII retaliation claim Faludi must show that: "(i) he engaged in a protected activity, (ii) an adverse employment action occurred, and (iii) there was a causal link between the protected activity and the adverse employment action." Hernandez v. Yellow Transportation, Inc., 670 F.3d 644, 657 (5th Cir. 2012) (citing Taylor v. United Parcel Service, Inc., 554 F.3d 510, 523 (5th Cir. 2008)). An employment action is "materially adverse" if "it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination." Burlington Northern and Santa Fe Railway Co. v. White, 126 S.Ct. 2405, 2415 (2006) (internal quotation marks omitted).

         Faludi alleges that "[t]he filing of a counter-claim in response to a FLSA lawsuit is [] clearly actionable as retaliation."[29] Although the forms of actionable conduct have expanded beyond merely hiring, firing, failing to promote, and reassignment after Burlington Northern, some circuits, including the Fifth, have held that an employer's post-termination counterclaim is not actionable as retaliation under Title VII. Hernandez v. Crawford Building Material Co., 321 F.3d 528, 529 (5th Cir. 2003).

         In Hernandez the plaintiff sued his employer under Title VII, and his employer brought a counterclaim for theft in its original answer. Id. at 529. The plaintiff then supplemented his original complaint to allege that the employer's counterclaim was a retaliatory employment action under Title VII. Id. The Fifth Circuit recognized that other circuits have allowed a counterclaim to support a retaliation lawsuit, but that "companies and citizens have a constitutional right to file lawsuits, tempered by the requirement that the suits have an arguable basis." Id. at 532 (quoting Scrivner v. Socorro Indep. Sch. Dist., 169 F.3d 969, 972 (5th Cir. 1999) (internal quotations omitted) . The court held that given its strict interpretation of retaliation claims "an employer's filing of a counterclaim cannot support a retaliation claim in the Fifth Circuit." Id. at 532-33.

         After Hernandez the Supreme Court broadened the standard for retaliation claims. See Burlington Northern, 126 S.Ct. at 2415. But neither the Fifth Circuit nor the Supreme Court has specifically addressed whether the new standard allows a counterclaim to support a retaliation claim under Title VII. This court recently held that Hernandez still applies in this circuit. See Madrigal v. Kleberg County, Civil Action No. 2:15-345, 2016 WL 4611287, *5-6 (S.D. Tex. Sept. 06, 2016) (explaining that "[b]ecause cases considering the question have treated Burlington Northern as undermining Hernandez's rationale rather than its holding, . . . Hernandez's holding that filing a counterclaim is not an adverse employment action remains precedent this Court is bound to follow.").

         Because a counterclaim cannot otherwise support a retaliation claim, Plaintiff has not pled facts sufficient to support a claim for retaliation against U.S. Shale. Plaintiff's proposed amendment would therefore be futile.

         3. Prejudice

         The addition of a new claim for relief at this late date - nearly ten months after the Complaint was filed - would needlessly extend the litigation and cause the defendants additional expense. Absent any reasonable explanation from Plaintiff for the cause of his delay or any reasonable basis for the court to conclude that the proposed new retaliation claim would not be futile, the court concludes that allowing the proposed amendment would not only require the court to abandon long-established deadlines, but would also delay the trial and prejudice the defendant.

         4. Conclusion

         Because of Plaintiff's delay, the futility of the proposed amendment, and the undue prejudice it would cause Defendant, Plaintiff's Motion to Amend His Complaint will be denied.[30]

         III. Motions for Summary Judgment

         Faludi argues that he was a non-exempt employee under the FLSA as a matter of law and that U.S. Shale violated the FLSA by failing to pay him overtime.[31] U.S. Shale argues that Faludi was an independent contractor not subject to the FLSA, or otherwise was an exempt employee under the FLSA.[32] Faludi and U.S. Shale have both moved for summary j udgment.

         A. Standard of Review

         Summary judgment is warranted if the movant establishes that there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a).

         An examination of substantive law determines which facts are material. Anderson v. Liberty Lobby, Inc., 106 S.Ct. 2505, 2510 (1986). Material facts are those facts that "might affect the outcome of the suit under the governing law." Id. A genuine issue as to a material fact exists if the evidence is such that a reasonable trier of fact could resolve the dispute in the nonmoving party's favor. Id. at 2511.

         Where, as here, both parties have moved for summary judgment, both "motions must be considered separately, as each movant bears the burden of establishing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law." Shaw Constructors v. ICF Kaiser Engineers, Inc., 395 F.3d 533, 538-39 (5th Cir. 2004). The movant must inform the court of the basis for summary judgment and identify relevant excerpts from pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate there are no genuine fact issues. Celotex Corp. v. Catrett, 106 S.Ct. 2548, 2553 (1986); see also Wallace v. Texas Tech Univ., 80 F.3d 1042, 1046-47 (5th Cir. 1996). If a defendant moves for summary judgment on the basis of an affirmative defense, "it must establish beyond dispute all of the defense's essential elements." Bank of Louisiana v. Aetna U.S. Healthcare Inc., 468 F.3d 237, 241 (5th Cir. 2006). A defendant may also meet its initial burden by pointing out that the plaintiff has failed to make a showing adequate to establish the existence of an issue of material fact as to an essential element of plaintiff's case. Celotex Corp., 106 S.Ct. at 2552. If the movant satisfies its initial burden, the burden shifts to the nonraoving party to show by affidavits, depositions, answers to interrogatories, admissions on file, or other evidence that summary judgment is not warranted because genuine fact issues exist. Celotex Corp., 106 S.Ct. at 2552.

         In reviewing the evidence "the court must draw all reasonable inferences in favor of the nonmoving party, and it may not make credibility determinations or weigh the evidence." Reeves v. Sanderson Plumbing Products, Inc., 120 S.Ct. 2097, 2110 (2000). But conclusory claims, unsubstantiated assertions, or insufficient evidence will not satisfy the nonmovant's burden. Wallace, 8 0 F.3d at 1047. If the nonmovant fails to present specific evidence showing there is a genuine issue for trial, summary judgment is appropriate. Topalian v. Ehrman, 954 F.2d 1125, 1132 (5th Cir. 1992) .

         B. Analysis

         The FLSA establishes a general rule that employers must pay overtime wages to employees who work in excess of forty hours during a seven-day workweek. See Vela v. City of Houston, 276 F.3d 659, 666 (5th Cir. 2001) (citing 29 U.S.C. § 207(a)(1)). A plaintiff alleging a violation of the overtime requirement bears the burden of proving by a preponderance of the evidence that (1) he was in an employment relationship with the defendant, (2) he was engaged in activities within the coverage of the FLSA, (3) he worked over forty hours within a workweek without overtime compensation, and (4) he is owed a definite amount of compensation. 29 U.S.C. § 207(a)(1); Zermeno v. Cantu, No. H-10-1792, 2011 WL 2532904, at *2 (S.D. Tex. June 24, 2011).

         1. Employee or Independent Contractor

         Under the FLSA "the term 'employee' means any individual employed by an employer." 29 U.S.C. § 203(e)(1). To determine whether a worker qualifies as an employee under the FLSA the court asks whether, as a matter of economic reality, the worker is economically dependent on the alleged employer or is instead in business for himself. Hopkins v. Cornerstone America, 545 F.3d 338, 343 (5th Cir. 2008). The court considers the following non-exhaustive factors: (1) the degree of control exercised by the alleged employer; (2) the extent of the relative investments of the worker and the alleged employer; (3) the degree to which the worker's opportunity for profit or loss is determined by the alleged employer; (4) the skill and initiative required in performing the job; and (5) the permanency of the relationship. Thibault v. Bellsouth Telecommunications, Inc., 612 F.3d 843, 846 (5th Cir. 2010); Hopkins, 545 F.3d at 343. "No single factor is determinative . . . each factor is a tool used to gauge the economic dependence of the alleged employee [on the alleged employer], and each must be applied with this ultimate concept in mind." Hopkins, 545 F.3d at 343 (citations omitted) (emphasis in original). The contractual designation of the worker as an independent contractor is not necessarily controlling. Thibault, 612 F.3d at 845-46. The ultimate determination of whether an individual is an employee within the meaning of the FLSA is a question of law. Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1045 (5th Cir. 1987) .

         Defendant does not dispute that Plaintiff was not paid overtime compensation or that he was engaged in activities within the coverage of the FLSA, but instead argues that Plaintiff was an independent contractor based on facts supporting all five factors. Defendant argues that it did not control the manner in which and method by which Plaintiff provided services because Faludi worked independently and managed his own workload and schedule.[33]Defendant cites an email from U.S. Shale's Chief Financial Officer and Treasurer to Faludi that lists tasks and writes, " [i]f you accept these missions let me know."[34] Defendant argues that Plaintiff controlled his opportunity for profit and loss because he could choose to accept projects[35] and that Plaintiff made investments in his business by providing his own phone and computer, paying his own continuing education expenses, and investing in home office equipment.[36] As to the fourth factor, Defendant argues it gave Faludi certain projects, such as analyzing contracts and evaluating litigation exposure, precisely because of his legal education, experience, and unique skills he could apply to them.[37] Defendant argues that Faludi's job lacked permanency because he performed services for U.S. Shale for about a year and a half and could terminate his employment relationship with 15 days' notice.[38] Defendant argues that Faludi was not economically dependent on U.S. Shale because he was able to pursue other business opportunities while working for U.S. Shale[39] and because he did not seek work after his engagement with U.S. Shale ended.[40]

         Plaintiff responds that Defendant's MSJ should be denied and his own MPSJ on the same issue should be granted because the facts show that Faludi was an employee.[41] Faludi argues that he worked full-time under U.S. Shale's controlled schedule; "he went to a U.S. Shale office daily; he had no opportunity to 'lose' money; he was provided an office and reimbursed for his computer, cell phone and work-related travel; and he worked exclusively for U.S. Shale during his tenure with no other source of income."[42 ...

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