Solis v. Patel et al

Filing 24

ORDER REASSIGNING TO DISTRICT JUDGE; REPORT AND RECOMMENDATION re 16 MOTION for Default Judgment by the Court as to Prakash Patel, Parul Patel, and Silverstar Hospitality, Inc. d/b/a Chaat Paradise filed by Hilda L. Solis. Signed by Judge Paul S. Grewal on November 2, 2012. (psglc2, COURT STAFF) (Filed on 11/2/2012)

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1 2 3 4 5 6 7 UNITED STATES DISTRICT COURT 8 NORTHERN DISTRICT OF CALIFORNIA 9 SAN JOSE DIVISION United States District Court For the Northern District of California 10 11 12 HILDA SOLIS, SECRETARY OF LABOR, UNITED STATES DEPARTMENT OF LABOR, 13 Plaintiff, v. 14 15 16 PRAKASH PATEL, an individual, PARUL PATEL, an individual, and SILVERSTAR HOSPITALITY, INC., d/b/a/ CHAAT PARADISE, 17 ORDER TO REASSIGN TO A U.S. DISTRICT JUDGE; REPORT AND RECOMMENDATION REGARDING PLAINTIFF’S MOTION FOR DEFAULT JUDGMENT (Re: Docket No. 16) Defendant. 18 19 Case No.: 12-CV-0249-PSG Plaintiff Hilda Solis, Secretary of Labor, United States Department of Labor (“Secretary”) moves for entry of a default judgment against Defendants Prakash Patel, Parul Patel, and Silverstar 20 Hospitality, Inc., d/b/a Chaat Paradise (collectively “Defendants”). Having reviewed the papers 21 22 23 and considered the arguments of counsel, the undersigned recommends that the Secretary’s motion for entry of default judgment be GRANTED. I. 24 25 26 27 A. BACKGROUND Procedural History On January 17, 2012, the Secretary filed a complaint against Defendants alleging violations of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201-219. On April 9, 2012, Defendants 28 Case No.: C- 12-0249 PSG ORDER 1 1 were served with a summons and complaint. 1 Defendants never answered or otherwise responded 2 to the complaint. On May 8, 2012, the Secretary moved for entry of default against Defendants. 2 3 On May 11, 2012, the Clerk of the Court entered default against Defendants. 3 On June 4, 2012, the 4 Secretary moved for default judgment against ACS and provided proof of service for both the 5 notice and motion for entry of default judgment. 4 6 B. Factual History 7 Defendants operate a restaurant under the name of Chaat Paradise in Mountain View, 8 9 California, and through that operation had employees “engaged in commerce” and an annual gross United States District Court For the Northern District of California 10 volume of sales of not less than $500,000. 5 From February 22, 2011 to November 1, 2011, Cecilia 11 Carrasco (“Carrasco”), a Wage and Hour Investigator at the San Jose office of the U.S. Department 12 of Labor, conducted an investigation of the wages, hours, and other conditions maintained by 13 Defendants. 6 Her investigation included “a review of Defendants’ records, including payroll 14 records, interviews with witnesses regarding hours worked and wages received, among other 15 16 matters.” 7 17 Carrasco determined that from on or about January 19, 2009 until January 22, 2011, 18 Defendants had their employees work longer than forty hours per week and failed to pay the 19 employees one-and-one-half-times their regular rate for the excess hours. 8 She found that 20 Defendants withheld overtime compensation due to fourteen of their employees amounting to 21 1 See Docket No. 11. 2 See Docket No. 12. 3 See Docket No. 13. 4 See Docket No. 16. 5 See Docket No. 1. 6 See Docket No. 16-2. 7 Id. 8 See id. 22 23 24 25 26 27 28 Case No.: C- 12-0249 PSG ORDER 2 1 2 $35,954.75. 9 She also discovered that Defendants failed to keep adequate and accurate records of their employees’ hours and wages as mandated under the statute. 10 II. 3 LEGAL STANDARDS 4 After entry of default, district courts are authorized to grant default judgment, so long as the 5 judgment does not “differ in kind from, or exceed in amount, what is demanded in the pleadings.” 11 6 Entry of default judgment is within the court’s discretion, and is governed by the following factors: 7 8 9 (1) the merits of plaintiff’s substantive claim; (2) the sufficiency of the complaint; (3) prejudice to plaintiff; (4) the sum of money at stake; (5) potential disputes concerning material facts; (6) United States District Court For the Northern District of California 10 whether default was due to excusable neglect; and (7) the Federal Rules of Civil Procedure’s strong 11 policy favoring decisions on the merits. 12 In considering the Eitel factors, all factual allegations in 12 the complaint are taken as true, except for those relating to damages. 13 13 14 Where a default judgment is deemed appropriate, the factual allegations of the complaint, except those relating to damages, are taken as true. 14 So long as the allegations in the complaint are 15 16 well-pleaded, liability is established as to those allegations by the default. 15 17 As to damages, when the damages claimed are not readily ascertainable from the pleadings 18 and the record, the court may (but is not required to) conduct a hearing to determine the amount of 19 damages. 16 20 21 22 23 24 25 26 9 See id. Ex. A. 10 See id. 11 Fed. R. Civ. P. 54(c); see also Fed. R. Civ. P. 55. 12 Aldabe v. Aldabe, 616 F.2d 1089, 1092 (9th Cir. 1980). 13 Eitel v. McCool, 782 F.2d 1470, 1471-72 (9th Cir. 1986). 14 TeleVideo Sys., Inc. v. Heidenthal, 826 F.2d 915, 917-918 (9th Cir. 1987). 27 15 28 See Geddes v. United Fin. Group, 559 F.2d 557, 560 (9th Cir. 1977) (internal citations omitted). Case No.: C- 12-0249 PSG ORDER 3 III. 1 2 A. DISCUSSION Default Judgment 3 The FLSA applies to employers whose employees are “engaged in commerce” or who is an 4 “enterprise engaged in commerce.” 17 It requires those employers to pay their employees “at a rate 5 not less than one and one-half times the regular rate” at which they are employed for “a workweek 6 longer than forty hours.” 18 Here, the Secretary alleges that Defendants’ employees engage in 7 8 9 United States District Court For the Northern District of California 10 commerce and that Defendants fail to pay them at the required rate for their work in excess of forty hours per week. 19 The allegations are sufficient to show substantive violations of the FLSA by Defendants and to satisfy the first two Eitel factors. 11 12 13 14 As to the remaining Eitel factors, they also weigh in favor of default judgment. Plaintiffs will not receive their earned but unpaid wages, which indicates prejudice if no default judgment is entered. The amount the Secretary seeks in damages, $71,909.50, while not insubstantial, is not excessive in light of the violations Defendant is alleged to have committed. 20 Because Defendants 15 16 have not answered, no potential disputes of material facts are apparent. And, having been served 17 with the summons, complaint, and application for default judgment, Defendants’ default was 18 unlikely due to excusable neglect. Finally, while the Federal Rules’ strong policy favors decisions 19 on the merits, Defendants have been aware of the pending action since January 17, 2012, but failed 20 to answer or otherwise respond to the complaint. It is therefore unlikely that a decision on the 21 22 23 16 See Fed. R. Civ. P. 55(b)(2). 17 29 U.S.C. §§ 207(a)(1). 18 Id. 19 See Docket No. 1. 24 25 26 27 20 28 Compare with Solis v. United Buffet, Inc., Case No. 11-cv-4194 RMW, 2012 WL 669867, at *4 (N.D. Cal. Feb. 29, 2012) (awarding $201,950.00 in backpay and $201,950.00 in liquidated damages). Case No.: C- 12-0249 PSG ORDER 4 1 merits is reasonably possible. 21 Notwithstanding courts’ general reluctance to enter default 2 judgment, the court recommends that it is appropriate here. 3 B. Relief Sought 4 The Secretary requests $35,954.75 in unpaid back wages, $35,954.75 in liquidated 5 damages, and an injunction preventing Defendants from committing future violations of the 6 FLSA. 22 7 1. 8 Unpaid Back Wages Pursuant to 29 U.S.C. § 216(c), employers who violate § 207 are liable to the affected 9 United States District Court For the Northern District of California 10 employees for the amount of “their unpaid overtime compensation . . . and in an additional equal 11 amount as liquidated damages.” “An employee seeking to recover unpaid minimum wages or 12 overtime under the FLSA has the burden of proving that he performed work for which he was not 13 properly compensated.” 23 “Where the employer’s records are inaccurate or inadequate, the 14 employee need only produce ‘sufficient evidence to show the amount and extent of that work as a 15 16 matter of a just and reasonable inference.’” 24 “The burden then shifts to the employer to show the 17 precise number of hours worked or to present evidence sufficient to negate the reasonableness of 18 the inference to be drawn from the employee’s evidence.” 25 19 20 The Secretary presented charts with each of the fourteen affected employees’ names and the amount in back wages owed to them. 26 The charts are the result of Carrasco’s investigation of 21 22 23 21 See Eitel, 782 F.2d at 1472. 22 See Docket No. 16. 23 Brock v. Seto, 790 F.2d 1446, 1447-48 (9th Cir. 1986). 24 Solis, 2012 WL 669867, at *4 (quoting Brock, 790 F.2d at 1448). 25 Id. 26 See Docket No. 16-1 Ex. A. 24 25 26 27 28 Case No.: C- 12-0249 PSG ORDER 5 1 Defendants’ records and interviews with the employees. 27 The evidence is sufficient to establish a 2 reasonable inference that the employees are owed the amount requested by the Secretary. 28 The 3 court therefore recommends that the Secretary’s request for $35,954.75 in unpaid compensation be 4 granted. 5 2. 6 Liquidated Damages Employers are subject to liquidated damages under the FLSA unless they establish “‘an 7 8 9 honest intention to ascertain and follow the dictates of the Act’ and . . . ‘reasonable grounds for believing that [their] conduct complie[d] with the Act.’” 29 Here, Defendants have not answered the United States District Court For the Northern District of California 10 complaint and so have not presented any evidence of a good faith intention to follow the FLSA’s 11 mandates. Their long-term violations – from January 2009 to January 2011 – further evince a lack 12 of “an honest intention to ascertain and follow the dictates of the Act.” 30 Accordingly, the court 13 recommends that the Secretary’s request for $35,954.75 in liquidated damages be granted. 14 3. Injunction 15 “The purpose of issuing an injunction against future violations of the FLSA is to effectuate 16 17 general compliance with the national policy to ‘abolish substandard labor conditions.’” 31 “In 18 deciding whether to grant injunctive relief, [the court] must weigh the finding of violations against 19 factors that indicate a reasonable likelihood that the violations will not recur. A dependable, bona 20 fide intent to comply, or good faith coupled with extraordinary efforts to prevent recurrence, are 21 22 23 27 24 28 25 See id. Cf. Solis, 2012 WL 669867, at *4 (finding Secretary’s charts supported by investigation to be sufficient evidence). 29 26 Local 246 Util. Workers Union of America v. S. Cal. Edison Co., 83 F.3d 292, 297 (9th Cir. 1996) (quoting Marshall v. Brunner, 668 F.2d 748, 753 (3d Cir. 1982)). 27 30 28 31 Id. Solis, 2012 WL 669867, at *4 (quoting Brock v. Big Bear Mkt. No. 3, 825 F.2d 1381, 1383 (9th Cir. 1987)). Case No.: C- 12-0249 PSG ORDER 6 1 2 such appropriate factors. An employer’s pattern of repetitive violations or a finding of bad faith are factors weighing heavily in favor of granting a prospective injunction.” 32 Defendants have presented no evidence showing an intent to comply with the FLSA or 3 4 “good faith coupled with extraordinary efforts to prevent recurrence.” Defendants, in fact, have 5 presented no evidence at all because they have failed to answer the Secretary’s complaint, which 6 suggests instead “a lack of concern regarding serious infractions of federal law.” 33 The court, 7 8 9 therefore, recommends that the Secretary’s request for an injunction to prevent future violations of the FLSA be granted. IV. United States District Court For the Northern District of California 10 11 12 13 CONCLUSION For the reasons provided above, the court recommends that the Secretary’s motion for entry of default judgment be granted against Defendants as follows: (1) unpaid wages totaling $35,954.75; (2) liquidated damages totaling $35,954.75; and (3) an injunction preventing 14 Defendants’ future violation of the FLSA. 15 16 IT IS SO RECOMMENDED. 17 18 2 Dated: November ____, 2012 19 _________________________________ PAUL S. GREWAL United States Magistrate Judge 20 21 22 23 24 25 26 27 32 Brock, 825 F.2d at 1383. 33 Solis, 2012 WL 669867, at *4. 28 Case No.: C- 12-0249 PSG ORDER 7

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