United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION AND ORDER
LAKE UNITED STATES DISTRICT JUDGE
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"). 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.
Factual and Procedural Background
Jeffrey Faludi received a Doctor of Jurisprudence in
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. Though Faludi was licensed to practice in
Texas and Louisiana, his law licenses were suspended by
August of 2014. U.S. Shale was established in August of
2014 in Houston, Texas, to provide strategic solutions to the
oil and gas industry.Faludi and the CEO of U.S. Shale, Jerrit
Coward, were colleagues at Willbros
International. In August of 2014 U.S. Shale became the
parent company of four subsidiaries that provide site
planning, construction, and maintenance support
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
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,
Agreement stated that Faludi "has been engaged to
provide services to U.S. Shale Solutions, Inc., in helping it
obtain employee benefits." 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. U.S. Shale provided Faludi with an
office and reimbursed him for his computer, cell phone, and
work-related travel expenses. The Agreement required Faludi to provide
U.S. Shale with invoices that identified the hours or days he
performed services. Faludi usually worked in the office five
days a week and testified that it would be unusual if he were
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. 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. Faludi represented himself as
"General Counsel" of U.S. Shale "multiple
times." Faludi's annualized compensation was
approximately $260, 000 during his engagement with U.S.
January of 2016 Versa Capital Management, LLC ("Versa
Capital") began providing management services to U.S.
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
Faludi's relationship with U.S. Shale ended on March 31,
filed a Complaint seeking damages for unpaid overtime wages
pursuant to the FLSA. 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. 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.
Shale filed its Motion for Summary Judgment in this court on
September 6, 2017. 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. Both parties filed
responses in opposition to the other party's summary
Plaintiff's Motion for Leave to
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. 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.
Standard of Review
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).
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.
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)).
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).
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).
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.
"[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) .
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.
"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
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)).
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
alleges that "[t]he filing of a counter-claim in
response to a FLSA lawsuit is  clearly actionable as
retaliation." 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
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.
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.").
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.
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.
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
Motions for Summary Judgment
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. U.S. Shale argues that Faludi was an
independent contractor not subject to the FLSA, or otherwise
was an exempt employee under the FLSA. Faludi and U.S. Shale
have both moved for summary j udgment.
Standard of Review
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).
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.
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.
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) .
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).
Employee or Independent Contractor
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) .
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.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." Defendant argues that Plaintiff
controlled his opportunity for profit and loss because he
could choose to accept projects 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. 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. 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'
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 and because he did not
seek work after his engagement with U.S. Shale
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. 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