United States District Court, S.D. Texas, Houston Division
MEMORANDUM OPINION AND ORDER
H. Miller, Senior United States District Judge.
before the court is a motion for decertification filed by
defendant MidCap Funding X Trust (“MidCap”) and
various other defendants who have since been dismissed. Dkt.
242. After considering the motion, response, reply, and
applicable law, the court is of the opinion that the motion
should be GRANTED.
lawsuit is about the plaintiffs, who were moving truck
drivers for entities associated with non-party Graebel
Companies, Inc.,  allegedly not being paid for their work.
Dkt. 142. MidCap was Graebel's secured lender during a
portion of the time period at issue, and the plaintiffs
contend that MidCap had complete control of Graebel and is
responsible for Graebel's failure to pay the plaintiffs.
court conditionally certified a Fair Labor Standards Act
(“FLSA”) class on July 25, 2018. Dkt. 114. The
parties have now completed discovery. Dkt. 242. There are
currently thirty-one named plaintiffs, and 120 or 128
individuals who were drivers for Graebel have opted in to the
conditionally certified class. Id. (motion); Dkt.
269 (response). MidCap nows moves for decertification of the
class, arguing that the putative class members are not
similarly situated. Dkt. 242. The motion is ripe for
in the Southern District of Texas follow the two-stage
Lusardi approach to FLSA collective action
certification. See Badgett v. Taco Cabana, L.P., No.
H-05-3624, 2006 WL 2934265, at *1-2 (S.D. Tex. Oct. 12, 2006)
(Miller, J.). This approach involves a “notice”
stage, during which the court considers whether to
preliminarily certify a class and allow notice to potential
class members, and a “decertification” stage,
which occurs after discovery is largely complete and includes
a consideration of whether the evidence obtained during
discovery supports continuing to consider the claims of the
plaintiffs and opt-in plaintiffs collectively. Id.
This case is currently at the decertification stage, and
MidCap has moved for decertification.
the decertification stage, the court must “make a
factual determination as to whether there are similarly
situated employees.” Maynor v. Dow Chem. Co.,
671 F.Supp.2d 902, 930 (S.D. Tex. 2009) (Rosenthal, J.). The
plaintiffs have the burden to prove the putative class
members are similarly situated, and the court's analysis
is “more searching than it was at the conditional
certification stage.” Id. at 931. Courts must
keep in mind that similarly situated is not the same as
identically situated. Id. In making the similarly
situated determination, courts consider the following three
factors: “‘(1) the disparate factual and
employment settings of the individual plaintiffs; (2) the
various defenses available to the defendant which appear to
be individual to each plaintiff; and (3) fairness and
procedural concerns.'” Id. (quoting
Proctor v. Allsups Convenience Stores, Inc. 250
F.R.D. 278, 280 (N.D. Tex. 2008)). “The three factors
are not mutually exclusive and there is generally overlap
among them.” Id. (citations and quotations
argues that the putative class members are not similarly
situated, and the plaintiffs argue that while they are not
identical, they are similar enough to proceed collectively,
especially in light of the remedial purposes of the FLSA.
Dkts. 242, 269. The court will consider what evidence
discovery has revealed relating to each of the three factors
in the similarly situated analysis and then weigh the factors
to determine if the putative class is similar enough to
proceed collectively or if the court should instead decertify
Disparate Factual and Employment Settings of Individual
plaintiffs argue that the pay policy at issue here is uniform
for all plaintiffs because the drivers received no pay for
moving jobs they performed from the end of October 2016 until
Graebel closed in mid-March 2017. Dkt. 269 at 9. The
plaintiffs contend the drivers only received disbursements
for their estimated expenses under a formula called the Labor
Per Formula. Id. The Labor Per Formula was intended
to cover the labor expense for people hired to help with the
move and did not include any compensation for the driver.
Id. at 9-11 (citing testimony from Graebel
executives); see, e.g., Dkt. 269, Ex. G (Etchison
Dep.) (“[W]hat they were receiving, that wasn't
necessarily their pay; that was an advance for work to be
done, you know, so they could hire labor.”).
points out that some of the drivers testified that they
received more than the Labor Per Formula during the relevant
time period, and it cites various deposition testimony
indicating that some drivers received payments that were not
advances during this time period, and others received no
advances or pay. Dkt. 242 at 10-11. The plaintiffs argue that
the executives themselves admit that the plaintiffs were all
subjected to the same nationwide pay practice and that the
defendants have rebutted this point with “deposition
testimony from a handful of Plaintiffs that Defendants have
cherry-picked out of context.” Dkt. 269 at 12. By way
of example, the plaintiffs note that one of the plaintiffs
who testified that she was paid $6, 000 during the relevant
time period later clarified that the money was for other jobs
and not the jobs for which she is now seeking payment.
Id. (citing Dkt. 269, Ex. E at 79 (Earley Dep.)).
argues in reply that the “so-called ‘policy'
Plaintiffs allege-a ‘failure to pay'-is
inapposite” to the common policies or plans that have
been held to violate the FLSA. Dkt. 284 at 2. It asserts that
Graebel's policy prior to November 2016 was to pay
pursuant to a rate schedule and that after November 2016
Graebel was unable to determine pay for drivers beyond the
Labor Per Formula because of an information technology
(“IT”) system failure that caused Graebel not to
be able to make settlement statements, and the failure to pay
was a consequence of this IT failure, not a systematic
policy. Id. MidCap additionally argues that even if
the court considered this failure to be a “policy,
” more than a “handful” of plaintiffs
testified that they received more than the Labor Per Formula.
Id. at 3. According to MidCap, thirteen drivers were
deposed who took advances under the formula, and seven of
them said they received more than the Labor Per Formula.
Id. (citing Dkt. 242 at 10-11).
testimony cited by the plaintiffs indicates that from
Graebel's perspective, the drivers were only receiving
the Labor Per Formula after the IT failure and not the pay
they would have received if Graebel could still make
settlement statements. Dkt. 269 at 9-11. However, the
testimony and exhibits offered by MidCap present a more
muddled story. The drivers' testimony indicates that some
of the drivers believed they were compensated beyond the
formula, some drivers believe they only received Labor Per
Formula, and some indicated they were not paid at all.
Melissa Earley testified that she did not receive advances
and was paid around $6, 000 from January to April
2017. Dkt. 242, Ex. 5 at App. 300-301. David
Anderson testified that in 2017 he only received advances for
expenses (Dkt. 242, Ex. 1 at App. 38), and then he testified
that it was possible that his income for the first quarter of
2017 was $30, 000 (Dkt. 242, Ex. 1 at App. 61-63). William
Gibbs testified that he believed he did not receive
“the full amount of compensation for all - all
services” during the relevant time period. Dkt. 242,
Ex. 12 at App. 699. Eric Guynup testified that he was not
getting paid in full during the relevant time period and that
Graebel was paying him “whatever they wanted to pay
me.” Dkt. 243, Ex. 13 at App. 749. Eugene Kaale
submitted a claim for revenue owed that indicates he received
some cash advances. Dkt. 243, Ex. 14A at App. 819. Gabriel
Strasser testified that he received payment from Graebel for
approximately $24, 000 during the relevant time period. Dkt.
243, Ex. 17 at App. 1036. He agreed that he received some
money during the time period but that it was “way less
than what they owed.” Id. at App. 1037. He
said that the amount paid was for
“miscellaneous.” Id. at App. 1038. When
asked if the amounts paid during the relevant time period
were in addition to advances to pay his crews, he responded
that “once you had a positive balance with the company,
there is no such a thing as advance. Advance is when you have
no money and you are actually borrowing money. And once you
have a positive balance, that's my money. So whatever I
request of them, it was my money, whether it was for labor,
personal, whatever. Once you have a positive balance, there
is no loan. Advance is a loan.” Id. Albert
Foks testified that he received advances and then Graebel
paid him another amount of money, but not the total amount he
was owed. Dkt. 243, Ex. 9 at App. 560. Jose Garcia testified
that he did not receive any advances, though he acknowledged
that some employees did. Dkt. 243, Ex. 11 at App. 664-65.
John Ford did not take advances. Dkt. 243, Ex. 10 at App.
points out that Brian Etchinson, who is one of the deponents
the plaintiffs cite for the proposition that drivers were
only paid the Labor Per Formula and not paid their own wages
during the relevant time period (see Dkt. 269 at 10
(citing Etchison Dep. at 65-66)), testified that “home
funding” meant the total amount a driver was owed under
the formula in the independent contractor agreement. Dkt.
243, Ex. 7 at App. 353-54. He wrote an email to managers on
March 7, 2017, indicating that home funding would be
“in the afternoon and funding [would] be based on
availability.” Dkt. 243, Ex. 7A at App. 368.
“Funding for home” was the revenue that drivers
had due-their final payment. Dkt. 243, Ex. 7 at App. 358-59.
He testified that this was an attempt to “empower the
general managers” because they knew their drivers and
who needed to be paid; he asked them to identify priority
funding by highlighting contractor funding requests in purple
and “left it to their discretion to determine who gets
highlighted in purple.” Dkt. 243, Ex. 7 at App. 353-54.
He also testified, when asked about the “ransom tactic,
” that he recalled a time where a driver got paid when
he finished a move because he wanted to be paid before he
turned in the trailer, and he said that he recalled
“paying a lot of drivers when they completed their
assignments.” Id. at App. 355-56.
evidence presented by both parties demonstrates that while
perhaps the intention when the IT failure occurred was to
only pay Labor Per Formula for some time period, in reality
drivers were getting paid in different ways. These
differences weigh against continued certification.
the biggest issues in this case with regard to the FLSA
claims is whether the drivers were independent contractors or
employees. If the drivers are not employees, the FLSA does
not apply, and there will be no collective action. Thus, the
extent to which the drivers are similarly situated with
regard to the factors considered in making the independent
contractor/employee determination is paramount to determining
the practicality of proceeding as a collective action.
than relying on the contractual designation of a worker as an
independent contractor, courts consider various factors that
elucidate the economic realities of the relationship between
the alleged employee and employer. Thibault v. Bellsouth
Telecomms., Inc., 612 F.3d 843, 845-46 (5th Cir. 2010).
Courts “focus on whether, as a matter of economic
reality, the worker is economically dependent upon the
alleged employer or is instead in business for himself [or
herself].” Hopkins v. Cornerstone Am., 545
F.3d 338, 343 (5th Cir. 2008). The five non-exclusive factors
are: “(a) the permanency of the relationship; (b) the
degree of control exercised by the alleged employer; (c) the
skill and initiative required to perform the job; (d) the
extent of the relative investments of the worker and the
alleged employer; and (e) the degree to which the
worker's opportunity for profit and loss is determined by
the alleged employer.” Thibault, 612 F.3d at
846; see also Hopkins, 545 F.3d at 343. Sometimes
courts in the Fifth Circuit refer to the test as
“whether the putative employer: (1) possessed the power
to hire and fire the employees, (2) supervised and controlled
employee work schedules or conditions of employment, (3)
determined the rate and method of payment, and (4) maintained
employment records.” Williams v. Henagan, 595 F.3d
610, 620 (5th Cir. 2010); see also Gray v.
Powers, 673 F.3d 352, 355 (5th Cir. 2012). “No
single factor is determinative”; “[r]ather, each
factor is a tool used to gauge the economic
dependence of the alleged employee, and each must be
applied with this ultimate concept in mind.”
Hopkins, 545 F.3d at 343.
Graebel's Control Over the Drivers
argues that the plaintiffs are not similarly situated because
Graebel exercised a different degree of control over each
plaintiff, and the plaintiffs argue that Graebel controlled
all meaningful aspects of their employment. Dkts 242, 269.
With regard to the economic realities test,
“‘[c]ontrol is only significant when it shows an
individual exerts such a control over a meaningful part of
the business that she stands as a separate economic
entity.'” Brock v. Mr. W Fireworks, Inc.,
814 F.2d 1042, 1049 (5th Cir. 1987) (quoting Usery v.
Pilgrim Equip. Co., 527 F.2d 1308, 1312-13 (5th Cir.)).
“‘[M]inor regular tasks cannot be bootstrapped
into an appearance of real independence.'”
Id. (quoting Pilgrim Equip., 527 F.2d at