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Garcia v. Vasilia

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

August 29, 2019

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

          MEMORANDUM OPINION AND ORDER

          GRAY H. MILLER SENIOR UNITED STATES DISTRICT JUDGE

         Pending before the court are (1) a motion for summary judgment that was filed by defendant MidCap Funding X Trust (“MidCap”) (Dkt. 173); and (2) a motion to strike evidence relied upon by the plaintiffs filed by MidCap (Dkt. 216). After considering the motion, response, reply, and applicable law, the court is of the opinion the motion to strike (Dkt. 216) should be GRANTED IN PART AND DENIED IN PART, and the motion for summary judgment (Dkt. 173) should be GRANTED.

         I. Background

         The plaintiffs, who are individuals who drove moving trucks for entities associated with Graebel Van Lines LLC (“Graebel”), brought this lawsuit relating to allegedly not getting paid for their services against Graebel, affiliated entities, and Graebel's secured lender, MidCap. Dkt. 164. The Graebel entities dissolved in March 2017. Id. The plaintiffs have settled their claims against Graebel, and MidCap is the only remaining defendant. Dkts. 297, 298. The court has also dismissed the FLSA overtime claim, and it dismissed the opt-in plaintiffs after decertifying a conditionally certified FLSA collective action. Dkts.292, 293. The only remaining claims are (1) an FLSA claim that the drivers were not paid for their work from October 2016 through March 2017; (2) an FLSA claim that the defendants did not keep adequate records of the drivers' work hours and pay; (3) breach of contract; (4) quantum meruit; (5) fraud; and (6) conspiracy and aider and abettor liability for fraud. Dkt. 114. The plaintiffs seek to impose liability on MidCap for many of these claims under an alter ego or agency theory of liability. Id.

         MidCap moves for summary judgment on all the claims, arguing that the law in the Fifth Circuit is “clear and well established that being a lender to a borrower, even when the lender holds substantial rights over the borrower, does not create a basis under any theory of liability for acts of the borrower.” Dkt. 174 at 1. It argues that (1) the plaintiffs cannot make a strong showing of total control and domination that is required to hold a lender liable for the acts or omissions of its borrower; (2) MidCap is not liable for breach of contract or fraud under an alter ego theory or agency theory; (3) the drivers cannot prove conspiracy between MidCap and Graebel because there was no agreement to defraud, intent to defraud, or unlawful, overt act towards a conspiracy; (4) the drivers' aiding and abetting claim fails because the cause of action has not been recognized by Texas state courts; (5) the drivers cannot recover under quantum meruit because the drivers had contracts and because MidCap did not directly benefit from the drivers' services; and (6) the FLSA claims fail because MidCap is not the drivers' employer or joint employer. Id.

         The plaintiffs respond first and foremost that MidCap was the drivers' employer under the FLSA because it controlled the decision to pay or not to pay and also injected discretionary capital into the Graebel entities. Dkt. 210 at 24. The plaintiffs argue next that MidCap conspired with Graebel not to pay the drivers and to induce them to continue driving for free. Id. They contend that MidCap “knew where the money it was sweeping [from a lockbox account each night] was coming from, it made the conscious decision not to pay the drivers knowing it, and it was the sole beneficiary of [Graebel's] fraud.” Id. With regard to the aiding and abetting claim, the plaintiffs argue, without addressing MidCap's argument regarding Texas's failure to recognize the claim, that there is a question of material fact with regard to their aider and abettor claim. Id. And, they contend that there is at least a question of material fact as to whether they can pierce the corporate veil to hold MidCap accountable for Graebel's actions under Delaware law, which it contends applies to the alter ego claim in this case. Id.

         In reply, MidCap does not dispute that Delaware law applies to the plaintiffs' alter ego theory of liability. Dkt. 215. Instead, it contends that Delaware law is essentially the same as Texas law in this area and that the plaintiffs cannot show that MidCap and Graebel operated as a single economic entity. Id. It also argues that the drivers failed to provide any evidence that MidCap agreed to defraud drivers and asserts that Graebel made all the decisions regarding what to pay with MidCap's loan advances. Id. Finally, MidCap urges the court to grant judgment in its favor on the following issues, which it contends the plaintiffs did not address in their response: (1) MidCap did not direct Graebel to make any misrepresentations or decide to pay or not pay certain people under an agency theory; (2) the plaintiffs' contractor agreements preclude recovery under quantum meruit; (3) the plaintiffs cannot establish the elements of quantum meruit; (4) aiding and abetting is not a cognizable Texas claim; and (5) the plaintiffs' vicarious liability theories are mutually exclusive. Id.

         MidCap has also filed a motion to strike evidence that the plaintiffs attached to their response to the motion for summary judgment. Dkt. 216. It argues that (1) the court should strike all evidence that the plaintiffs attached that the plaintiffs do not cite in their response; (2) the court should strike certain statements contained in Greg Cutlip, Jr.'s declaration as not based on personal knowledge, speculative, hearsay, and lacking proper foundation; (3) the court should strike certain deposition testimony because it is speculative, the deponent lacks personal knowledge, or it is hearsay; and (4) the court should strike certain exhibits that are printouts of email correspondence because they are hearsay, lack completeness, are irrelevant, or because the emails do not support the propositions for which the plaintiffs cite them. Id. The plaintiffs contend that the uncited exhibits they attached are not voluminous and corroborate other evidence cited in the summary judgment record, and they urge the court to consider them as part of the summary judgment record. Dkt. 248. With regard to the objections that witnesses lacked personal knowledge, the plaintiffs argue that the witnesses testified based on what they knew and any attacks on the basis of that knowledge go to the veracity of the testimony, not its admissibility. Id. They argue that to the extent MidCap argues statements of MidCap or Graebel representatives are hearsay, they are admissions of a party opponent and thus not hearsay. Id. They then respond to each individual objection. Id.

         The court will first consider the evidentiary objections and then turn to the motion for summary judgment.

         II. Evidentiary Objections

         A. Material Attached But Not Referenced

         MidCap objects to Exhibits D-27, H-45, M-45, Q, Q-1, U, W, EE, and GG, because the plaintiff attached these exhibits to their summary judgment response but did not cite them. Dkt. 216. The plaintiffs argue that they provided pin cites for “virtually all factual statements in the summary judgment response” and that the additional attached material is “not voluminous and in fact corroborate[s] other evidence cited in the summary judgment record.” Dkt. 248. They thus urge the court to consider all of the attached exhibits as part of the summary judgment record. Id.

         While the court agrees that the uncited exhibits are not overly voluminous, [1] it is the plaintiffs' responsibility to go through the exhibits and cite the exhibits or portions of exhibits that support each of their specific arguments. It is not the court's burden to “comb through the evidence and pinpoint exhibits that demonstrate that a genuine dispute of material fact exists.” Ureteknologia De Mexico S.A. de C.V. v. Uretek (USA), Inc., No. H-16-2762, 2018 WL 4680603, at *9 (S.D. Tex. Sept. 28, 2018). Accordingly, the court agrees with MidCap that the exhibits that the plaintiffs have not cited in their briefing should not be considered as part of the summary judgment record. MidCap's motion to strike as it relates to Exhibits D-27, H-45, Q, Q-1, U, EE, and GG is GRANTED. MidCap's motion to strike Exhibit M-45 is DENIED because Exhibit M-45 is not attached to the plaintiffs' response. MidCap's motion to strike Exhibit W is DENIED AS MOOT as the plaintiffs withdrew this exhibit. See Dkt. 248 at 3.

         B. Declarations

         MidCap objects to two sentences in paragraph 2 of Greg Cutlip, Jr.'s declaration. Dkt. 216. First, MidCap objects to the first sentence in paragraph 2, which states that Cutlip “believe[d] that the Graebel Drivers were deceived” because (1) it is not based on personal knowledge and is mere speculation; and (2) it lacks proper foundation. Id. The plaintiffs argue globally that the declarant stated what he knew and attacks on the basis of that knowledge go to veracity, not admissibility. Dkt. 248 at 2. The plaintiffs cite Heinsohn v. Carabin & Shaw, P.C., 832 F.3d 224, 234 (5th Cir. 2016), in which the Fifth Circuit noted that it is an error for a court to consider the veracity of a document rather than its admissibility in making a decision to strike evidence. In that case, a magistrate judge struck deposition testimony that was refuted by other evidence in the record. See 832 F.3d at 234. Here, the issue is not the veracity of Cutlip's testimony, it is whether it is proper to introduce his belief. Under Federal Rule of Evidence 701, opinion testimony is limited to opinions “rationally based on the witness's perception” that are “helpful to clearly understanding the witness's testimony or to determining a fact in issue” and “not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.” Fed.R.Evid. 701. In the context of the remainder of Cutlip's declaration, it appears that the testimony to which MidCap objects is based on Cutlip's perception and could be helpful to a jury. The motion to strike the first sentence of paragraph 2 of the Cutlip declaration is therefore DENIED.

         Next, MidCap objects to the second sentence in paragraph 2 of Cultip's declaration which states that Graebel instructed him to tell the drivers to keep driving, asserting that it is inadmissible hearsay. Dkt. 216. The plaintiffs argue that all of the hearsay arguments are admissible as admissions of a party opponent. Dkt. 248. MidCap points out that Cutlip's admission may be an admission of Graebel, since he was a Graebel employee, but it is not an admission of MidCap. Dkt. 251. The court agrees with MidCap. The statement is hearsay and not an admission of MidCap, so it not admissible against MidCap. Thus, the motion to strike the first portion of the second sentence of paragraph 2 of Cutlip's declaration is GRANTED.

         Next, MidCap objects to the second half of the second sentence in paragraph 2, which indicates that Graebel made the instruction in the first half of the paragraph after it knew it was not collecting anything and was going to shut down. Dkt. 216. MidCap objects to this portion of the sentence as lacking proper foundation and not being based on personal knowledge. Id. Cutlip was Chief Executive Officer of Graebel, [2] and the court finds this was a sufficient position to know what the company knew. Thus, to the extent this portion of the sentence is relevant without the hearsay statement contained in the first half of the sentence, the motion to strike is DENIED. .

         C. Depositions and Emails

         MidCap objects to the admission of cited testimony in the depositions of Ormando Gomez, Julie Eggebrecht, Craig Boucher, and Greg Cutlip, Sr. as well as various email printouts that were presented as exhibits I-65, I-66, J-131, K-141, O-149, Z, and 29-3. Dkt. 216. The court need not rule on these objections because even if the objected to testimony and emails were included in the record, summary judgment is appropriate. See Part IV, infra. Accordingly, the motion to strike with regard to the depositions of Ormando Gomez, Julie Eggebrecht, Craig Boucher, and Greg Cutlip, Sr. and the emails at exhibits I-65, I-66, J-131, K-141, O-149, Z, and 29-3 is DENIED AS MOOT.

         III. Summary Judgment Legal Standard

         A court shall grant summary judgment when a “movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a). “[A] fact is genuinely in dispute only if a reasonable jury could return a verdict for the nonmoving party.” Fordoche, Inc. v. Texaco, Inc., 463 F.3d 388, 392 (5th Cir. 2006). The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548 (1986). If the moving party meets its burden, the burden shifts to the non-moving party to set forth specific facts showing a genuine issue for trial. Fed.R.Civ.P. 56(e). The court must view the evidence in the light most favorable to the non-movant and draw all justifiable inferences in favor of the non-movant. Envtl. Conservation Org. v. City of Dallas, 529 F.3d 519, 524 (5th Cir. 2008).

         IV. Analysis

         A.FLSA Employer or Joint Employer

         The plaintiffs contend that MidCap is liable for alleged FLSA violations because it was their joint employer. Dkt. 164. MidCap argues that it was Graebel's lender and that a lender is not a joint employer under the FLSA. Dkt. 174. It notes that whether a party is a “joint employer” under the FLSA is determined pursuant to the economic realities test, and all of the economic realities factors weigh against it being a joint employer. Id. The plaintiffs argue that MidCap was their joint employer under the FLSA because MidCap's decision to pay or not pay the drivers coupled with its decision to inject discretionary capital into Graebel makes MidCap their joint employer. Dkt. 210. In ...


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