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Garcia v. Vasilia

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

August 5, 2019

Jose Garcia, et al., Plaintiffs,
Vasilia A/K/A “Vauna” Peterson, et al., Defendants.


          Gray H. Miller, Senior United States District Judge.

         Pending 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.

         I. Background

         This lawsuit is about the plaintiffs, who were moving truck drivers for entities associated with non-party Graebel Companies, Inc., [1] 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. Id.

         The 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 disposition.

         II. Legal Standard

         Courts 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.

         During 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 omitted).

         III. Analysis

         MidCap 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 the class.

         A. Disparate Factual and Employment Settings of Individual Plaintiffs

         1. Pay Policy

         The 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.”).

         MidCap 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.)).

         MidCap 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).

         The 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.[2] 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. 638.

         MidCap 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.

         The 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.

         2. Economic Realities

         One of 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.

         Rather 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.”[3] 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.

         a. Graebel's Control Over the Drivers

         MidCap 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 1312-13). ...

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