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Mallory v. Lease Supervisors, LLC

United States District Court, N.D. Texas, Dallas Division

January 13, 2020

DALLA DON MALLORY and TY FARRELL, Individually and on Behalf of All Others Similarly Situated, Plaintiffs,



         This is a collective action seeking unpaid overtime pay pursuant to the Fair Labor Standards Act of 1938 (“FLSA”), 29 U.S.C. § 201 et seq., brought by plaintiffs Don Mallory (“Mallory”) and Ty Farrell (“Farrell”), individually, and on behalf of all others similarly situated under 29 U.S.C. § 216(b). The court must decide whether defendant Lease Supervisors, LLC (“Lease Supervisors”) or plaintiffs Mallory and Farrell are entitled to summary judgment on the question whether Mallory and Farrell were employees of Lease Supervisors. Concluding that genuine issues of material fact preclude summary judgment, the court denies Lease Supervisors' motion for summary judgment and denies Mallory and Farrell's cross-motion for summary judgment.


         Lease Supervisors is a closely held limited liability company whose members manage the day-to-day operations of oil wells and gas plants owned by O'Ryan Oil & Gas (“O'Ryan”).[1] Lease Supervisors invoices O'Ryan for the services its members provide, and O'Ryan pays Lease Supervisors for its members' work based on a rate negotiated between Lease Supervisors and O'Ryan. The revenue generated by the members' services to O'Ryan is distributed to the members as a “guaranteed payment.” Ps. Br. 9.

         Since its inception, Lease Supervisors has had 20 members or fewer, with membership interest equally distributed among its members. Mallory became a member of Lease Supervisors in 2007, and Farrell became a member in 2009.[2] As members, Mallory and Farrell owned an interest equal to the interest owned by all other members and had the right, under the Regulations of Lease Supervisors, LLC (“Regulations”), to participate in the management and control of the company's affairs and operations.[3]

         Mallory and Farrell, individually, and on behalf of all others similarly situated under 29 U.S.C. § 216(b), sue Lease Supervisors to recover unpaid overtime pay under the FLSA.

         Lease Supervisors moves for summary judgment, contending that Mallory and Farrell were not employees of Lease Supervisors but were, instead, members or partners in business for themselves. Mallory and Farrell oppose the motion and cross-move for summary judgment, [4]contending that the court should conclude as a matter of law that they were employees of Lease Supervisors.


         When a party moves for summary judgment on claims on which the opposing parties will bear the burden of proof at trial, the moving party can meet its summary judgment obligation by pointing the court to the absence of admissible evidence to support the nonmovants' claims. See Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). Once the moving party does so, the nonmovants must go beyond their pleadings and designate specific facts showing there is a genuine issue for trial. See Id. at 324; Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (en banc) (per curiam). An issue is genuine if the evidence is such that a reasonable jury could return a verdict in the nonmovants' favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The nonmovants' failure to produce proof as to any essential element of a claim renders all other facts immaterial. See TruGreen Landcare, L.L.C. v. Scott, 512 F.Supp.2d 613, 623 (N.D. Tex. 2007) (Fitzwater, J.). Summary judgment is mandatory if the nonmovants fail to meet this burden. Little, 37 F.3d at 1076.

         To be entitled to summary judgment on a claim or defense on which the moving parties will bear the burden of proof at trial, the movants “must establish ‘beyond peradventure all of the essential elements of the claim or defense.'” Bank One, Tex., N.A. v. Prudential Ins. Co. of Am., 878 F.Supp. 943, 962 (N.D. Tex. 1995) (Fitzwater, J.) (quoting Fontenot v. Upjohn Co., 780 F.2d 1190, 1194 (5th Cir. 1986)). This means that the movants must demonstrate that there are no genuine and material fact disputes and that they are entitled to summary judgment as a matter of law. See Martin v. Alamo Cmty. Coll. Dist., 353 F.3d 409, 412 (5th Cir. 2003). “The court has noted that the ‘beyond peradventure' standard is ‘heavy.'” Carolina Cas. Ins. Co. v. Sowell, 603 F.Supp.2d 914, 923-24 (N.D. Tex. 2009) (Fitzwater, C.J.) (quoting Cont'l Cas. Co. v. St. Paul Fire & Marine Ins. Co., 2007 WL 2403656, at *10 (N.D. Tex. Aug. 23, 2007) (Fitzwater, J.)).



         The FLSA provides that “no employer shall employ any of his employees . . . for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.” 29 U.S.C. § 207(a)(1). Employee status is based on the economic realities of the relationship; the subjective beliefs of the alleged employees or employers are irrelevant to a worker's status. See Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1049 (5th Cir. 1987). “The definition of employee under the FLSA is particularly broad, ” and the contractual designation of the worker as an independent contractor is not necessarily controlling. Hopkins v. Cornerstone Am., 545 F.3d 338, 343, 346 (5th Cir. 2008) (citing Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992) (noting that the FLSA “stretches the meaning of ‘employee' to cover some parties who might not qualify as such under a strict application of traditional agency law principles”)). Instead, to determine whether a worker qualifies as an employee under the FLSA, this court focuses on “whether the alleged employee so economically depends upon the business to which he renders his services, such that the individual, as a matter of economic reality, is not in business for himself.” Thibault v. BellSouth Telecomms., Inc., 612 F.3d 843, 845 (5th Cir. 2010) (citing Carrell v. Sunland Constr., Inc., 998 F.2d 330, 332 (5th Cir. 1993)).

         To aid in this inquiry, the court considers five 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. No single factor is determinative. Rather, 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 (citations omitted). The ultimate determination of whether an individual is an employee under the FLSA is a legal, not factual, one. Brock, 814 F.2d at 1045. But application of the five-factor test of economic dependence “will require a factual inquiry and a full record of the applicable facts.” Gate Guard Servs. L.P. v. Solis, 2011 WL 2784447, at *10 (S.D. Tex. July 12, 2011).

         Lease Supervisors relies heavily on the Regulations to argue that Mallory and Farrell, as members in the company, do not fit the FLSA definition of an employee. Employee status, however, is not determined by the parties' agreements, including the Regulations. “The touchstone for determining whether an individual is an ‘employee' under the FLSA is economic dependence.” Floridia v. DLT 3 Girls, Inc., 2013 WL 127448, at *4 (S.D. Tex. Jan. 9, 2013) (noting that “[i]f Defendants are correct that Plaintiff held a role such that he was essentially a partner or owner of the company, Plaintiff may not be able to recover under the FLSA, ” but reciting five-factor economic realities test and ultimately concluding that fact issue precluded summary judgment on question whether plaintiff was an investor/owner in the company). Although the rights of Mallory and Farrell under the Regulations may be relevant to the jury's determination of whether they were economically dependent on Lease Supervisors, see, e.g., Godoy v. Restaurant Opportunity Center of New York, 615 F.Supp.2d 186, 195 (S.D.N.Y. 2009) (weighing “economic realities” of partnership agreement in determining employee status under FLSA, including plaintiffs' assumption of risks of loss and liabilities, opportunity to share in profits upon success, capital contribution in the form of “sweat equity, ” and right to share in management of company), they do not alone dictate whether Mallory and Farrell are employees of Lease Supervisors.



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