Satterfield v. CFI Sales & Marketing, Inc. et al

Filing 196

ORDER granting in part and denying in part 152 Motion for Partial Summary Judgment; granting in part and denying in part 155 Motion for Summary Judgment. Signed by Judge John Antoon II on 2/28/2012. (EK)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
RAYMOND SATTERFIELD, AND
OTHERS SIMILARLY SITUATED,
Plaintiffs,
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Case No. 6:09-cv-1827-Orl-28DAB

CFI SALES & MARKETING, INC.,
CENTRAL FLORIDA INVESTMENTS,
INC., WESTGATE RESORTS, INC.,
Defendants.
______________________________________

ORDER
Plaintiffs1 bring this Fair Labor Standards Act (“FLSA”) case against Defendants
alleging that Defendants failed to pay Plaintiffs overtime wages as required by law. (Am.
Compl., Doc. 72). Defendants filed a counterclaim, (Doc. 99 at 5-10), alleging breach of
contract. This case is currently before the Court on Plaintiffs’ Motion for Partial Summary
Judgment (Doc. 152) and Defendants’ Omnibus Motion for Summary Judgment (Doc. 155).2
As discussed below, each motion shall be granted in part and denied in part.

1

The term “Plaintiffs” refers to all Plaintiffs except Johanna Cardile, Garciela Everest,
Jorge Perrira, and Andrew Sugrim; those Plaintiffs have settled with Defendants and their
claims have been dismissed with prejudice. (Doc. 170). Insofar as Plaintiffs’ motion seeks
to have Plaintiffs Cardile and Perrira dismissed from Defendants’ counterclaim, the motion
is denied as moot.
2

The relevant filings are: Plaintiffs’ Motion for Partial Summary Judgment (Doc. 152),
Defendants’ Response (Doc. 162), and Plaintiffs’ Reply (Doc. 167); and Defendants’
Omnibus Motion for Summary Judgment (Doc. 155), Plaintiffs’ Response (Doc. 157), and
Defendants’ Reply (Doc. 165).

I. Summary Judgment Standard
“The court shall grant summary judgment if the 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). When faced with a “properly supported motion for summary
judgment, [the nonmoving party] must come forward with specific factual evidence,
presenting more than mere allegations.” Gargiulo v. G.M. Sales, Inc., 131 F.3d 995, 999
(11th Cir. 1997). However, the failure to respond and create a factual dispute by the
nonmoving party “does not automatically authorize the entry of summary judgment for the
moving party.” Dixie Stevedores, Inc. v. Marinic Maritime, Ltd., 778 F.2d 670, 673 (11th Cir.
1985).
In ruling on a motion for summary judgment, the Court construes the facts and all
reasonable inferences therefrom in the light most favorable to the nonmoving party.
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). “[A]t the summary judgment
stage the judge’s function is not himself to weigh the evidence and determine the truth of the
matter but to determine whether there is a genuine issue for trial.” Id. at 249. Some degree
of factual dispute is expected, but to successfully counter a motion for summary judgment
the factual dispute must be material and genuine. That is, the factual evidence must “affect
the outcome of the suit” and must be “such that a reasonable jury could return a verdict for
the nonmoving party.” Id. at 248.
II. Background

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It is undisputed that Plaintiffs were employed by Defendants3 at various times since
1996 as closing officers for Defendants’ timeshare sales. Plaintiffs allege that they were not
paid the legally-required overtime wages when they worked as closing officers. In their
counterclaim, Defendants assert that even if this were true, any damages that Plaintiffs
would be entitled to under the FLSA should be off-set by Defendants’ damages from
Plaintiffs’ breach of contract.
The contracts at issue are the Independent Contractor Agreements that Plaintiffs
signed when they were hired by Defendants as timeshare sales representatives–not as
closing officers. Pursuant to these agreements, Plaintiffs were entitled to commissions on
timeshare sales that they made. Plaintiffs were paid those commissions, minus a ten
percent reserve, as soon as the sale closed even though the commission was not actually
earned until the purchaser had successfully placed ten percent down and made six timely,
consecutive payments.

The ten percent reserve was kept to off-set any unearned

commissions; if a purchaser failed to make the required payments, Plaintiffs’ commissions
would be “charged back” against the reserve. Additionally, the agreements provide:
In the event [Plaintiff] is no longer engaged by CFI, irrespective of the reason
for the termination of engagement, [Plaintiff] shall be charged back for all sales
upon which commission[s] have been paid in the event the purchaser(s)
has/have not made six (6) timely and consecutive monthly payments as well
as ten percent (10%) minimum down payment.

3

Defendants assert that Plaintiffs were only employed by Defendant CFI Sales &
Marketing, LLC. However, this distinction is not relevant for purposes of this Order.
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(See e.g., Satterfield Agreement,4 Ex. D to Doc. 155, at 7).
III. Analysis
Neither party is seeking summary judgment on the merits of Plaintiffs’ FLSA claims.
Rather, the parties are seeking a determination as to whether the FLSA limitations period
is two or three years. Additionally, Plaintiffs seek summary judgment on Defendants’
counterclaim for breach of contract, asserting that Defendants’ claim is barred by the statute
of limitations and that even if it were not, Defendants failed to prove damages. Defendants
argue, on the other hand, that Plaintiffs are not entitled to summary judgment on the breach
of contract claim because it is a compulsory counterclaim for recoupment and therefore not
time-barred and that they have at least established the existence of a genuine issue of
material fact as to whether or not they incurred damages.5
A. FLSA Limitations Period
“The statute of limitations for a claim seeking unpaid overtime wages under the FLSA
is generally two years. But if the claim is one ‘arising out of a willful violation,’ the statute of
limitations is extended to three years.” Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233,
1280 (11th Cir. 2008) (quoting 29 U.S.C. § 255(a)). “To establish that the violation of the
[FLSA] was willful in order to extend the limitations period, the employee must prove by a

4

The parties appear to agree that all of the timeshare sales representative
agreements contained the same language as the Satterfield Agreement.
5

In addition to these issues, Defendants argue that they are entitled to a ruling that
Plaintiffs’ FLSA claims are limited to the time when Plaintiffs were employed as closing
officers and that Plaintiff Bethzaida Caballero was not entitled to overtime under the FLSA
when she was employed as a trainer. Plaintiffs concede both of these issues, and
Defendants will be granted summary judgment accordingly.
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preponderance of the evidence that his employer either knew that its conduct was prohibited
by the statute or showed reckless disregard about whether it was.” Alvarez Perez v.
Sanford-Orlando Kennel Club, Inc., 515 F.3d 1150, 1162-63 (11th Cir. 2008). As defined in
the Code of Federal Regulations, “[r]eckless disregard . . . means failure to make adequate
inquiry into whether conduct is in compliance with the [FLSA].” 5 C.F.R. § 551.104. “The
determination of willfulness is a mixed question of law and fact,” Allen v. Bd. of Pub. Educ.
for Bibb Cnty., 495 F.3d 1306, 1324 (11th Cir. 2007) (quotation omitted).
Generally, a factual determination as to whether a defendant violated the FLSA must
be made prior to a determination of whether that violation was willful. However, for purposes
of these motions, the parties make arguments assuming that Defendants violated the FLSA.
Assuming Defendants violated the FLSA, Defendants have presented evidence that at least
creates a genuine issue of material fact as to whether they acted willfully in doing so. (Exs.
D, J, & N to Doc. 155). Accordingly, to the extent Plaintiffs’ motion seeks a ruling that the
FLSA limitations period is three years, the motion shall be denied.
B. Breach of Contract Claim–Statute of Limitations
It is undisputed that the applicable limitations period for a breach of contract claim is
five years, running from the time of the breach. § 95.11(2)(b), Fla. Stat. The parties
disagree, however, about the when the alleged breach occurred. Additionally, the parties
disagree over whether the statute of limitations even applies in this case; Defendants assert
that their breach of contract claim is a compulsory counterclaim for recoupment and
therefore the statute of limitations has been tolled, while Plaintiffs argue that Defendants’
claim is a permissive counterclaim for a set-off and, therefore, the statute of limitations
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applies.
“A ‘set-off’ is a legal term of art which refers to a counterclaim demand, arising out of
a transaction extrinsic to plaintiff’s cause of action. A recoupment, on the other hand, is a
claim arising out of the same transaction between the same parties.” S. Broad. Grp. v. Gem
Broad., Inc., 145 F. Supp. 2d 1316, 1331 n.9 (M.D. Fla. 2001); see also Howard Johnson,
Inc. of Fla. v. Tucker, 157 F.2d 959, 961 (5th Cir. 1946) (“Recoupment is the act of rebating
or recouping a part of a claim upon which one is sued by means of a legal or equitable right
resulting from a counterclaim arising out of the same transaction. It differs from a setoff, in
that [a] setoff is a counter demand which a defendant holds against a plaintiff arising out of
a transaction extrinsic of plaintiff’s cause of action.” (internal citation and quotation omitted)).
In other words, a recoupment claim is more akin to an affirmative defense and is a
compulsory counterclaim, while a set-off claim is a permissive counterclaim.
This distinction is important because “the defense of recoupment may be asserted
even though the underlying claim is barred by the applicable statute of limitations as an
independent cause of action,” Allie v. Ionata, 503 So. 2d 1237, 1239 (Fla. 1987), whereas
a “permissive counterclaim,” such as that for a set-off, “will be barred if it is filed beyond the
statute of limitations,” Smith v. Fla. Dep’t of Corr., 27 So. 3d 124, 127 (Fla. 1st DCA 2010);
Callaway Land & Cattle Co. v. Banyon Lakes C. Corp., 831 So. 2d 204, 207 (Fla. 4th DCA
2002).
Federal Rule of Civil Procedure 13(a) “defines a compulsory counterclaim as any
claim that ‘arises out of the transaction or occurrence that is the subject matter of the
opposing party’s claim.’” Republic Health Corp. v. Lifemark Hosps. of Fla., Inc., 755 F.2d
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1453, 1455 (11th Cir. 1985) (quoting Fed. R. Civ. P. 13(a)). To help with this determination,
the Eleventh Circuit employs the “logical relationship test.” Id. “Under this test, there is a
logical relationship when ‘the same operative facts serve as the basis of both claims or the
aggregate core of facts upon which the claim rests activates additional legal rights, otherwise
dormant, in the defendant.’” Id. (quoting Plant v. Blazer Fin. Servs., Inc., 598 F.2d 1357,
1361 (5th Cir.1979)).
Defendants’ counterclaim fails the logical relationship test. The operative facts and
the elements of proof for each of the claims are separate and distinct. Plaintiffs’ claims are
based on allegations that Defendants failed to pay proper overtime wages pursuant to the
FLSA while Plaintiffs were employed as closing officers. Defendants’ counterclaim, on the
other hand, is based on allegations that Plaintiffs breached their contracts while employed
as timeshare sales representatives. These claims involve different time periods, different
contracts, and different pay arrangements. The mere fact that both claims involve Plaintiffs’
“employment” and “wages” while working for Defendants is insufficient to make Defendants’
counterclaim compulsory. In fact, a very similar argument was rejected in Mercer v. Palm
Harbor Homes, Inc., No. 805CV1435T30TGW, 2005 WL 3019302, at *1 (M.D. Fla. Nov. 10,
2005).
The plaintiffs in Mercer filed a claim against their employer for violations of the FLSA,
and the employer filed a counterclaim against one of the plaintiffs–Mr. Kalishek–for
conversion. Id. The employer alleged that while Mr. Kalishek was working for it, he
“appropriated a 12 inch cut saw and blades,” and the employer requested that the court
offset its damages to Mr. Kalishek by the value of the property. Id. Mr. Kalishek countered
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that the employer’s counterclaim was permissive and that therefore the court did not have
jurisdiction over it. Id. The Mercer court agreed that the employer’s claim was permissive
because the facts underlying the claims and the elements of the claims were distinct, and
it reasoned that the mere fact that “the alleged conversion took place during Mr. Kalishek’s
employment . . . [was], by itself, insufficient to satisfy the ‘logical relationship’ test.” Id.
Accordingly, Defendants’ counterclaim for breach of contract is a permissive
counterclaim for a set-off–not a compulsory counterclaim for recoupment6–and therefore it
is subject to the five-year statute of limitations. This conclusion, however, does not end the
analysis; as mentioned previously, Plaintiffs and Defendants disagree about when the
alleged breach occurred.
Defendants assert that the breaches occurred after Plaintiffs left Defendants’ employ
when their individual reserve accounts were exhausted. Plaintiffs, however, assert that if any
breach occurred, it was when the purchasers of the timeshares failed to make the required
payments because that was the time that it was known to Defendants that Plaintiffs did not
earn the pre-paid commissions. Additionally, Plaintiffs assert that Defendants’ proposed
date of breach could be manipulated by Defendants because they are in possession and
control of Plaintiffs’ reserve accounts.

After considering the parties’ arguments and

examining the contractual language, it is clear that the latest time any breach could have
occurred was six months after Plaintiffs left Defendants’ employ.

6

As discussed in Mercer, this Court retains supplemental jurisdiction over Defendants’
counterclaim because Defendants only seek a set-off, they do not seek affirmative relief.
2005 WL 3019302, at *2 (citing Allapattah Servs., Inc. v. Exxon Corp., 157 F. Supp. 2d 1291,
1322 (S.D. Fla. 2001)).
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Plaintiffs’ contracts provide that “during the term that [Plaintiff] is engaged by CFI, no
sales originated by [Plaintiff] for which [Plaintiff] has been paid a commission will be subject
to charge back except as otherwise set forth herein.” (Satterfield Agreement at 8). The only
exception to this rule set forth in the contract is the “Reserve” provision; pursuant to this
provision, “[t]en percent (10%) of commission due on each sale will be retained by CFI,” id.,
and then any unearned commissions would be charged back against the reserve as long as
the individual was employed by Defendants, (Connie Sharp Dep., Doc. 155-13, at 15). In
practice, the reserve account was a revolving account that would at times have a positive
balance and at other times have a negative balance because money was constantly being
added and subtracted depending on the sales and the charge backs. While employed,
however, Defendants never directly charged Plaintiffs for the deficits in the reserve accounts,
(id. at 16); Defendants would simply continue to take ten percent from Plaintiffs’ subsequent
sales to replenish the reserve, (see id. at 20).
Once Plaintiffs left Defendants’ employ, the terms of the agreement required that
Plaintiffs and Defendants settle up. If–after all unearned commissions were charged back
against the reserve–the reserve balance was in the positive, the agreement required those
remaining funds to be reimbursed to Plaintiffs. Similarly, if at that point the reserve account
was in the negative, Plaintiffs would be required to pay the balance back to Defendants. At
the very latest, Defendants would be able to determine whether commissions were earned
or unearned six months after Plaintiffs left Defendants’ employ because by that time the
purchaser of a timeshare would have either made or not made his six timely, consecutive
payments. Whether the reserve was exhausted at that time would affect the amount of
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money to be paid, but the timing of the breach does not depend on the amount of the
damages.
In sum, if Plaintiffs breached their agreements with Defendants, such breaches
occurred at the latest six months after Plaintiffs left Defendants’ employ. However, there is
no evidence currently before the Court as to the dates that Plaintiffs left Defendants’ employ,
and therefore summary judgment cannot be granted regarding Plaintiffs’ statute-of-limitations
defense.
C. Breach of Contract–Damages
Finally, Plaintiffs assert that even if they did breach their contracts, Defendants did
not suffer any damages from the alleged breach because Defendants were limited to the
reserve account for the charge backs. The plain language of the agreements contradicts
Plaintiffs’ argument. As stated above, the agreements required Plaintiffs to repay all
unearned commissions upon leaving Defendants’ employ; no language restricts Defendants’
recovery to the reserve.
IV. Conclusion
In accordance with the foregoing, Defendants’ Omnibus Motion for Summary
Judgment (Doc. 155) is GRANTED in part and DENIED in part. Additionally, Plaintiffs’
Motion for Partial Summary Judgment (Doc. 152) is GRANTED in part and DENIED in part.
It is further ORDERED and ADJUDGED as follows:
1. Defendants’ motion is GRANTED insofar as it seeks a ruling that Plaintiffs’ FLSA
claims are limited to when Plaintiffs were employed by Defendants as closing officers;
2.

Defendants’ motion is GRANTED insofar as it seeks a ruling that Plaintiff
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Bethzaida Caballero was an exempt employee and not entitled to overtime wages under the
FLSA during the time that she worked as a trainer;
3. Defendants’ motion is DENIED in all other respects;
4. Plaintiffs’ motion is GRANTED insofar as it seeks a ruling that Defendants’ breach
of contract claim is a permissive counterclaim for a set-off and therefore subject to the
statute of limitations as set forth herein; and
5. Plaintiffs’ motion is DENIED in all other respects.
DONE and ORDERED in Orlando, Florida this 28th day of February, 2012.

Copies furnished to:
Counsel of Record
Unrepresented Party

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