Smith et al v. Ideal Towing, LLC et al
Filing
87
ORDER GRANTING IN PART AND DENYING IN PART 66 Motion for Summary Judgment. Signed by Judge Thomas W. Thrash, Jr on 11/13/17. (jkl)
Case 1:16-cv-01359-TWT Document 87 Filed 11/13/17 Page 1 of 26
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
JAWANZA SMITH, et al.,
Plaintiffs,
v.
CIVIL ACTION FILE
NO. 1:16-CV-1359-TWT
IDEAL TOWING, LLC, et al.,
Defendants.
OPINION AND ORDER
This is an FLSA overtime action. It is before the Court on the Defendants’
Motion for Partial Summary Judgment [Doc. 66]. For the reasons set forth below, the
Defendants’ Motion for Partial Summary Judgment [Doc. 66] is GRANTED in part
and DENIED in part.
I. Background
The Plaintiffs in this case are former tow truck drivers for the Defendant Ideal
Towing, LLC, which was owned and operated by the Defendant Michael James. The
Defendants also include Tishja James, Michael James’s wife, who is also alleged to
have been a co-owner of Ideal Towing with managerial duties in the company, and ITow & Transport LLC, which is alleged to be a successor to Ideal Towing. The
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Plaintiffs allege that the Defendants misclassified them as independent contractors,
and consequently violated the minimum wage and overtime requirements of the Fair
Labor Standards Act (“FLSA”).1 The Plaintiffs also claim that the Defendants violated
26 U.S.C. § 7434 by fraudulently classifying the Plaintiffs as independent contractors
on forms filed with the IRS.2
The Defendants now move for partial summary judgment on five issues. First,
the Defendants argue that Tishja James cannot be held liable as an “employer” under
the FLSA. Second, they argue that the Plaintiffs’ waiting time is not compensable
under the FLSA. Third, they contend that I-Tow cannot be held liable as a successor
to Ideal Towing. Fourth, they argue that the Plaintiffs are not entitled to liquidated
damages under the FLSA because the Defendants acted with good faith. Finally, they
move for summary judgment on the Plaintiffs’ claim for fraudulent filing of tax
information under 26 U.S.C. § 7434.
II. Legal Standard
Summary judgment is appropriate only when the pleadings, depositions, and
affidavits submitted by the parties show no genuine issue of material fact exists and
1
Am. Compl. ¶ 1.
2
Id. ¶¶ 144-49.
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that the movant is entitled to judgment as a matter of law.3 The court should view the
evidence and any inferences that may be drawn in the light most favorable to the
nonmovant.4 The party seeking summary judgment must first identify grounds to show
the absence of a genuine issue of material fact.5 The burden then shifts to the nonmovant, who must go beyond the pleadings and present affirmative evidence to show
that a genuine issue of material fact exists.6 “A mere ‘scintilla’ of evidence supporting
the opposing party’s position will not suffice; there must be a sufficient showing that
the jury could reasonably find for that party.”7
III. Discussion
A. Tishja James
The Plaintiffs claim that Tishja James, the wife of Michael James, should be
held individually responsible because she is an “employer” within the meaning of the
FLSA. The Defendants move for summary judgment on this issue, arguing that Tishja
3
FED. R. CIV. P. 56(a).
4
Adickes v. S.H. Kress & Co., 398 U.S. 144, 158-59 (1970).
5
Celotex Corp. v. Catrett, 477 U.S. 317, 323-24 (1986).
6
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986).
7
Walker v. Darby, 911 F.2d 1573, 1577 (11th Cir. 1990).
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James did not have the type of role in the company necessary to be considered an
“employer” under the FLSA.8
A company officer “cannot be held individually liable for violating the . . .
[provisions] of the FLSA unless he is an ‘employer’ within the meaning of the Act.”9
To be considered an “employer” under the FLSA, “an officer must either be involved
in the day-to-day operation or have some direct responsibility for the supervision of
the employee.”10 For example, in Patel v. Wargo, the Eleventh Circuit concluded that
the defendant, who was the company’s president, director, and principal stockholder,
was not an employer under the FLSA.11 This was because he “did not have operational
control of significant aspects of [the company’s] day-to-day functions, including
compensation of employees or other matters in relation to an employee.”12
The Defendants argue that Tishja James is not an “employer” within the
meaning of the statute because she was not involved in the day-to-day operation of
Ideal Towing and did not have direct supervisory authority. They argue that, instead,
8
Defs.’ Mot. for Partial Summ. J., at 3-5.
9
Alvarez Perez v. Sanford-Orlando Kennel Club, Inc., 515 F.3d 1150,
1160 (11th Cir. 2008).
10
Patel v. Wargo, 803 F.2d 632, 638 (11th Cir. 1986).
11
Id. at 637-638.
12
Id. at 638.
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Michael James was the sole owner of Ideal Towing who made all of the managerial
decisions.13 The Defendants contend that Tishja only assisted Michael in a clerical
capacity,14 and that she had no authority over many aspects of the business, such as
“compensation, rate, method of payment, hiring, firing, work schedules, conditions
of employment, or supervisory matters.”15 They further argue that “Michael James,
not Tishja, signed all checks, maintained personnel records, and supplied the company
equipment and facilities.”16
However, the Plaintiffs have provided enough evidence to allow a reasonable
jury to infer that Tishja James was involved in the day-to-day operations of the
company and that she had some direct responsibility for supervision of the employees.
The Plaintiffs have offered evidence showing that Ms. James shared part of the
ultimate decisionmaking authority in the company.17 They have also produced
evidence that she signed the paychecks,18 mediated employee conflicts,19 reduced
13
Defs.’ Mot. for Partial Summ. J., at 3-4.
14
Id. at 4.
15
Id.
16
Id. at 4-5.
17
Burney Dep. at 59; Lewis Dep. at 78.
18
Lewis Dep. at 78.
19
Wynn Dep. Vol. II at 37, 43.
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employee pay for damage to the vehicles,20 and made payroll,21 scheduling,22 and
disciplinary decisions.23 Furthermore, Ms. James represented to some of the drivers
that she was a “co-owner” of Ideal Towing along with Mr. James,24 and some
documents also referred to her as a “supervisor” and as a “manager.”25 From this
evidence, a reasonable jury could conclude that Ms. James was involved in the day-today operations of the company and maintained a supervisory role over the employees.
Therefore, a genuine issue of material fact exists as to Ms. James’s role in the
company.
The Defendants argue that the Plaintiffs “rely upon their own deposition
testimony” and that the evidence produced is “insufficient to establish actual
involvement.”26 However, these are disputes of fact that the jury should resolve. Given
this evidence, a reasonable jury could find that Ms. James was involved in the day-today operations of the business, and that she had a supervisory role in the company.
20
Id. at 37.
21
Id. at 36-37.
22
Id.
23
Michael James Dep. at 89-90.
24
Burney Dep. at 59.
25
Michael James Dep. at 89-90.
26
Reply Br. in Supp. of Defs.’ Mot. for Partial Summ. J., at 3.
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Accordingly, the Defendants are not entitled to summary judgment as to the question
of Tishja James’s status as an “employer” under the FLSA.
B. Waiting Time
Next, the Defendants argue that the Plaintiffs’ waiting time is not compensable
under the FLSA. First, the Defendants argue that the Plaintiffs were “waiting to be
engaged,” which is not compensable under the FLSA.27 Second, the Defendants argue
that the “homeworkers’ exception” applies here, which precludes the Plaintiffs’
waiting time from being compensable.28 The Court holds that the Defendants are not
entitled to summary judgment on this issue.
First, the Defendants argue that the Plaintiffs’ waiting time is not compensable
because the Plaintiffs were “waiting to be engaged,” as opposed to being “engaged to
wait,” which is not compensable under the FLSA.29 The Court finds that summary
judgment is not appropriate. Based on the evidence provided, a reasonable jury could
conclude that the Plaintiffs’ waiting time is compensable.
27
Defs.’ Mot. for Partial Summ. J., at 5.
28
Id. at 8.
29
Id. at 5-6.
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Time employees spend waiting to be called to duty by an employer can be
compensable under the FLSA.30 The key distinction between compensable and noncompensable waiting time is whether the employee is “engaged to be waiting” or
“waiting to be engaged.”31 “When employees are engaged to wait for the employer's
call to duty, this time may be compensable under the FLSA.”32 “The question of
whether the employees are working during this time for purposes of the FLSA
depends on the degree to which the employee may use the time for personal
activities.”33 If the time is spent predominately for the benefit of the employer, then
it is compensable under the FLSA.34 Whether waiting time constitutes compensable
working time within the meaning of the FLSA is a question of fact and dependent
upon all of the circumstances of the case.35
30
See Skidmore v. Swift & Co., 323 U.S. 134, 136 (1944).
31
Preston v. Settle Down Enters., 90 F. Supp. 2d 1267, 1278 (N.D. Ga.
2000).
32
Birdwell v. City of Gadsen, Ala., 970 F.2d 802, 807 (11th Cir. 1992)
(citing Skidmore, 323 U.S. at 136).
33
Id.
34
Id. at 807 (citing Armour & Co. v. Wantock, 323 U.S. 126, 133 (1944)).
35
Skidmore, 323 U.S. at 136-37.
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An employee’s use of time must be severely restricted to be considered spent
predominately for the benefit employer. “The FLSA requires employers to
compensate an employee for on-call time only where the employee’s on-call duties
severely restrict the employee’s use of his or her personal time.”36 “The ‘severely
restricted’ standard is a stringent one and employees are not entitled to on-call pay
under the FLSA absent unusually onerous on-call duties.”37 The Eleventh Circuit has
noted that “undesirable and perhaps oppressive” on-call requirements do not
necessarily reach this level.38 “When deciding whether on-call time is covered by the
FLSA, the court should examine ‘the agreements between the particular parties,
appraisal of their practical construction of the working agreement by conduct,
consideration of the nature of the service, and its relation to the waiting time, and all
of the surrounding circumstances.’”39
In Birdwell, the Eleventh Circuit applied the predominant benefit test to
determine that on-call time for the city’s police detectives was not compensable. The
36
Burnette v. Northside Hosp., 342 F. Supp. 2d 1128, 1135 (N.D. Ga. 2004)
(citing Birdwell v. City of Gadsen, Ala., 970 F.2d 802, 810 (11th Cir. 1992)).
37
Id.
38
Birdwell, 970 F.2d at 809 (citing Bright v. Houston Nw. Med. Ctr.
Survivor, Inc., 934 F.2d 671 (5th Cir. 1991)).
39
Id. at 808 (quoting Skidmore, 323 U.S. at 137).
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detectives were not required to stay at the police station, but they also could not leave
town, participate in outdoor activities, go on vacation, or take compensatory time
off.40 They could not drink alcohol, and must have been able to respond promptly and
sober when called.41 However, the detectives usually worked second jobs during this
time.42 They could use their time at home as they pleased, and they could leave home
whenever they desired as long as they left a forwarding number or carried a beeper.43
The Eleventh Circuit reversed a jury verdict finding that the plaintiffs were entitled
to compensation for their on-call time, and concluded that the plaintiffs’ on-call time
was not compensable as a matter of law.44 The court noted that an employee’s time
must be “severely restricted,” and that the detectives there could use the time how they
wanted as long as they arrived promptly and sober when called to work.45
40
Id.
41
Id. at 810.
42
Id. at 808.
43
Id.
44
Id.
45
Id.
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However, the court in Birdwell also distinguished a Tenth Circuit case, Renfro
v. City of Emporia.46 In Renfro, the Tenth Circuit concluded that city firefighters’ oncall time was compensable.47 Although not required to stay at the fire station, the
firefighters were required to wear their pagers at all times, and report within twenty
minutes of being paged.48 Importantly, the firefighters were called upon frequently –
they received on average three to five calls during the on-call time, and could receive
as many as thirteen calls.49 The court found that this high number of calls was the
determinative factor that distinguished this from other cases. Since the firefighters
were called upon so regularly, they could not use the on-call time for their own
benefit.50 In distinguishing Renfro, the court in Birdwell noted that the on-call
detectives’ “off-time was not so restricted that it was not used predominately for their
benefit. They could do anything they normally did so long as they were able to
46
Id. at 810-11 (citing Renfro v. City of Emporia, 948 F.2d 1529 (10th Cir.
1991)).
47
Renfro, 948 F.2d at 1537-38.
48
Id. at 1531.
49
Id. at 1532.
50
Id. at 1538.
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respond to a call promptly and sober. Unlike the firefighters in Renfro, the detectives
were never called, and they never had reason to expect to be called.”51
The Defendants contend that the Plaintiffs’ waiting time is not compensable
because they were free to do “anything they normally did as long as they were able
to respond to a call promptly and sober.”52 The Defendants argue that the Plaintiffs
could leave Ideal Towing’s premises, work other jobs, visit friends, watch television,
sleep, and more.53 Therefore, according to the Defendants, the Plaintiffs used their
waiting time predominately for their own benefit. However, the Court disagrees.
Based on the evidence produced, a reasonable jury could find that the Plaintiffs’
waiting time was spent predominately for the Defendants’ benefit.
The Plaintiffs here are more analogous to the firefighters in Renfro than the
detectives in Birdwell. The Plaintiffs produced evidence that they could be assigned
as many as twelve to fifteen tows in a day.54 Like the firefighters in Renfro, they could
not actually use this waiting time for their own benefit because they could expect to
be assigned a job at any time due to the frequency of these calls. They did not have
51
Birdwell, 970 F.2d at 810.
52
Defs.’ Mot. for Partial Summ. J., at 7.
53
Id.
54
Burney Dep. at 40-41.
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long portions of uninterrupted free time, like the detectives had in Birdwell. In
Birdwell and other similar cases, the employees had strict rules about their on-call
time, such as not leaving the city, but they could still nonetheless use most of that time
for their own pleasure.55 Unlike the Plaintiffs here, they were rarely called to action
by their employers, and thus, they could still expect to have long periods of free time
for their own use.56 In contrast, the Plaintiffs produced evidence that they responded
to so many calls throughout the day, as many as twelve to fifteen a day, that they
could not actually use this time for their own benefit. Thus, a jury could conclude
from this evidence that the Plaintiffs did not use this time predominately for their own
benefit. For this reason, the Defendants are not entitled to summary judgment.
The Defendants next argue that the “homeworker’s exception,” codified in 29
C.F.R. § 785.23, applies to this case. 29 C.F.R. § 785.23 addresses the difficulty of
55
See, e.g., Birdwell, 970 F.2d at 810; Bright v. Houston Nw. Med. Ctr.
Survivor, Inc., 934 F.2d 671, 674-79 (5th Cir. 1991) (concluding that on-call time, in
which the plaintiff could not drink, must always be available by beeper, and must be
able to arrive at work within twenty minutes, was not compensable because plaintiff
was only called two or three times each week); Jackson v. City Council of Augusta,
Ga., 841 F. Supp. 1214, 1219 (S.D. Ga. 1993) (“Although Plaintiffs are constantly
‘on-call’ when off duty inasmuch as they must respond to a general alarm, their use
of their off-duty time is not restricted in any way. Plaintiffs are at their leisure when
off duty; they can and do enjoy full personal use of this time, in spite of the
potentiality of a general alarm.”).
56
Birdwell, 970 F.2d at 810.
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determining the number of hours worked by employees who also reside at their
employer’s premises. It allows these employers and employees to enter into a
“reasonable agreement” regarding the amount of compensation to be provided. The
Court concludes that this exception does not apply here.
Specifically, 29 C.F.R. § 785.23 provides that:
An employee who resides on his employer's premises on a permanent
basis or for extended periods of time is not considered as working all the
time he is on the premises. Ordinarily, he may engage in normal private
pursuits and thus have enough time for eating, sleeping, entertaining, and
other periods of complete freedom from all duties when he may leave the
premises for purposes of his own. It is, of course, difficult to determine
the exact hours worked under these circumstances and any reasonable
agreement of the parties which takes into consideration all of the
pertinent facts will be accepted. This rule would apply, for example, to
the pumper of a stripper well who resides on the premises of his
employer and also to a telephone operator who has the switchboard in
her own home.57
This regulation also applies to an on-call employee who is required by an employer
to remain at home to receive telephone calls from customers.58 “Where an employee
performs services for his employer at home and yet has long periods of uninterrupted
leisure during which he can engage in the normal activities of living, the Department
57
29 C.F.R. § 785.23.
58
Halferty v. Pulse Drug Co., 864 F.2d 1185, 1190 (5th Cir. 1989) (quoting
U.S. Dep’t of Labor, Wage & Hour Div., Opinion Letter (March 18, 1968)).
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of Labor will accept any reasonable agreement of the parties for determining the
number of hours worked.”59
However, this exception does not apply to the case at hand. The Plaintiffs did
not reside at the Defendants’ premises, nor were the Plaintiffs required to work from
home with long periods of uninterrupted personal time. They were not “homeworkers”
in this sense. As discussed above, the Plaintiffs could be assigned as many as twelve
to fifteen towing jobs each day, and consequently spent a significant portion of their
day on the road towing cars. The purpose of this exception, addressing the difficulty
of determining working time and leisure time when an employee works at home, is not
present in this case. The Plaintiffs did not have long amounts of personal time at their
home that would make it difficult to determine how much they worked. Therefore, this
exception does not apply here.
The Defendants repeatedly cite Halferty v. Pulse Drug Co.60 However, Halferty
is distinguishable from this case. In Halferty, the plaintiff worked as a telephone
dispatcher for a company.61 She was required to work from home, and she needed to
59
Id.
60
864 F.2d 1185 (5th Cir. 1989).
61
Id. at 1187.
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be available to answer a small number of phone calls each night.62 However, she
otherwise could spend this time as she pleased.63 The court concluded that the
plaintiff’s compensation agreement with her employer was reasonable under 29 C.F.R.
§ 785.23, and thus she was not entitled to compensation under the FLSA.64 Unlike the
plaintiff in Halferty, the Plaintiffs here did not work from home, and did not have long
portions of uninterrupted leisure time. Therefore, Halferty is distinguishable.
C. Successor Liability
Next, the Defendants move for summary judgment as to I-Tow & Transport
LLC’s liability. They argue that I-Tow cannot be held liable for the obligations of
Ideal Towing under a theory of successor liability.65 The Defendants contend that ITow did not buy any of the assets of Ideal Towing, was created before this lawsuit
was even filed, and was for the purpose of seeking a different source of revenue
outside of AAA.66 The Court concludes that the Defendants are not entitled to
summary judgment on this issue.
62
Id.
63
Id.
64
Id. at 1190.
65
Reply Br. in Supp. of Defs.’ Mot. for Partial Summ. J., at 9.
66
Id. at 9-10.
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Normally, successor liability is limited to situations in which a merger or
transfer of assets has occurred.67 And, in the case of a transfer of assets, a buyer
ordinarily must expressly or implicitly assumes the seller’s liabilities when it
purchases the predecessor’s assets to be considered a successor.68 “But when liability
is based on a violation of a federal statute relating to labor relations or employment,
a federal common law standard of successor liability is applied that is more favorable
to plaintiffs than most state-law standards to which the court might otherwise look.”69
In Hatfield v. A+ Nursetemps, Inc., the Eleventh Circuit, relying heavily upon the
Seventh Circuit’s decision in Teed v. Thomas & Betts Power Solutions, L.L.C., applied
this liberal approach to successor liability in a case involving an FLSA claim.70
The federal successor liability standard for FLSA cases applied in Hatfield
considers whether: (1) the successor had notice of the pending action; (2) the
predecessor would have been able to provide the relief sought in the action before the
sale; (3) the predecessor could have provided the relief after the sale; (4) the successor
67
Glausier v. A+ Nursetemps, Inc., No. 5:11-cv-Oc-416-10PRL, 2015 WL
2020332, at *4 (M.D. Fla. May 1, 2015).
68
Teed v. Thomas & Betts Power Sols., L.L.C., 711 F.3d 763, 764 (7th Cir.
2013).
69
Id.
70
Hatfield v. A+ Nursetemps, Inc., 651 F. App’x 901, 908 (11th Cir. 2016).
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can provide the relief sought in the action; and (5) there is continuity between the
operations and work force of the predecessor and the successor.71 “These
considerations do not represent a rigid or mechanical test but, rather, should be applied
flexibly with an understanding that ‘successor liability is appropriate in suits to
enforce federal labor or employment laws . . . unless there are good reasons to
withhold such liability.’”72
The first factor asks whether the successor had notice of the pending action. A
genuine issue of material fact exists as to whether the successor here, I-Tow, had
notice of the Plaintiffs’ lawsuit. The Defendants argue that I-Tow could not have had
notice of the pending action because it was incorporated a year before the Plaintiffs
filed this lawsuit.73 The Defendants also argue that Ideal Towing ceased operations
because it lost its contract with AAA, which was its primary source of business.74
However, Mr. James did not dissolve Ideal Towing until May 12, 2016, only a month
after the Plaintiffs filed this suit.75 Furthermore, the Plaintiffs have offered evidence
71
Id. at 907 (quoting Teed, 711 F.3d at 765-66).
72
Kerns v. Lamot Indus. LLC, No. 3:16cv76-RV/EMT, 2017 WL 2903348,
at *4 (N.D. Fla. June 1, 2017) (quoting Teed, 711 F.3d at 766).
73
Reply Br. in Supp. of Defs.’ Mot. for Partial Summ. J., at 9.
74
Id.
75
Michael James Dep. at 26.
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that some time passed after I-Tow was incorporated and before it actually began
operations.76 And, Mr. James testified that he formed I-Tow in part because he did not
want the “stress” and “liability” of having a big company, including lawsuits like this
one.77 Therefore, a reasonable jury could conclude that Mr. James had notice of the
pending action when terminating Ideal Towing and beginning the operations of I-Tow,
and was motivated in part to change these business operations to avoid potential
liability from this lawsuit.
As to the second, third, and fourth factors, neither party has produced evidence
as to whether the predecessor could have provided relief before and after the “sale.”78
However, these factors “are not determinative” in deciding whether successor liability
applies, and the Eleventh Circuit has noted that successor liability can exist despite
these factors favoring an opposite conclusion.79 Therefore, given the fact that these
factors have not been determinative in other cases, and the flexible nature of successor
76
Ideal Towing Dep. at 28-29.
77
Michael James Dep. at 39-41.
78
The Court acknowledges that no actual “sale” of assets occurred.
However, under the federal successor liability common law, the sale of assets is not
required to impose successor liability. See Teed, 711 F.3d at 765-66.
79
See Hatfield v. A+ Nursetemps, Inc., 651 F. App’x 901, 908 (11th Cir.
2016) (“For the second and third factors, it appears from the record that A+
Nursetemps would not have had the resources to satisfy the judgment before or after
the transition. Those factors, as the district court concluded, are not determinative.”).
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liability in federal labor and employment law,80 the Court finds that the lack of
evidence as to these factors does not preclude successor liability.
Finally, the fifth factor asks whether there is continuity between the operations
and work force of the predecessor and the successor. The Court finds that a genuine
dispute of material fact exists as to this inquiry. In Hatfield, the Eleventh Circuit found
that there was a continuity of business when the successor performed the same
services, had many of the same clients, used the same location, and employed many
of the same workers as the predecessors.81 The Defendants argue that there was no
continuity here because the two companies operated at different locations, used a
different telephone number, and never shared Ideal Towing’s “principle and
80
See Kerns v. Lamot Indus. LLC, No. 3:16cv76-RV/EMT, 2017 WL
2903348, at *4 (N.D. Fla. June 1, 2017) (“Thus, it appears that successor liability may
be presumed in labor and employment cases insofar as there must be ‘good reasons’
to withhold it.”).
81
Hatfield, 651 F. App’x at 908; see also Kerns, 2017 WL 2903348, at *4
(“Mr. Lamot changed the name of his business and moved a short distance away, but
it is undisputed that there is no ‘real difference between the business being carried out
by Lamot and RBL.’ He remained sole owner and president; he kept the plaintiff on
staff doing exactly the same job; he retained the same accounting procedures, product
line, and prices; and he kept a company vehicle along with at least some of the same
furniture, computers running the same software, and inventory.”). But see EEOC v.
Labor Sols. of Ala. LLC, 242 F. Supp. 3d 1267, 1282 (N.D. Ala. 2017) (“[T]he two
entities share the same managing officers, principal office address, and company email
accounts. However, these facts are not enough to demonstrate continuity when one
considers the break in time between when East Coast ceased operations and LSA
began.”).
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irreplaceable asset, its AAA contract.”82 However, the Plaintiffs have provided enough
evidence to create a dispute of material fact as to the continuity of business. First,
Michael James is the owner of both of these companies, and both are in the business
of towing.83 I-Tow also uses some of the same trucks as Ideal Towing.84 Furthermore,
Michael James also testified that Ideal Towing and I-Tow had their “base of
operations” at addresses next door to each other on the same road.85 And, as discussed
above, there was no significant lapse of time between the operations of the two
companies. Finally, the Plaintiffs offered evidence that Michael James referred to the
creation of I-Tow as simply a “name change” from Ideal Towing.86 The Plaintiffs have
offered enough evidence to create a dispute of material fact as to the continuity of
business. Therefore, the Court holds that summary judgment is not appropriate as to
this issue.
82
Reply Br. in Supp. of Defs.’ Mot. for Partial Summ. J., at 10.
83
Ideal Towing Dep. at 41, 93.
84
Specifically, Michael James testified that Ideal Towing (which has
purportedly been dissolved) leases trucks to I-Tow. However, I-Tow does not make
payments on this lease, but instead paid for repairs of the trucks. Ideal Towing Dep.
at 39-41. A reasonable jury could infer from this unusual lease arrangement that there
is a continuity of business.
85
Ideal Towing Dep. at 29-30.
86
Smith Dep. at. 128.
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D. Good Faith
Next, the Defendants argue the Plaintiffs are not entitled to liquidated damages
because the Defendants exercised good faith in attempting to comply with the FLSA.87
The Court concludes that the Defendants are not entitled to summary judgment on this
issue.88 Parties “who prevail under the FLSA are entitled to recover liquidated
damages unless the employer makes an affirmative showing that it acted in good
faith.”89 To “establish its good faith, [an employer] must prove both that it acted with
a good faith belief that its procedures did not violate the law [subjective component]
87
Defs.’ Mot. for Partial Summ. J., at 21-22.
88
The parties also discuss whether the Defendants acted “willfully.”
Ordinarily, the statute of limitations for FLSA cases is two years after the cause of
action accrues. However, causes of action arising out of willful violations can be
commenced within three years after the cause of action accrued. See 29 U.S.C. §
255(a). A violation is "willful" if “the employer either knew or showed reckless
disregard for the matter of whether its conduct was prohibited by the [FLSA].”
McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988). The plaintiff bears the
burden of proving willfulness. See id. In assessing both of these issues – willfulness
and good faith – the Court is “answer[ing] what is essentially the same question for
two different purposes.” Alvarez Perez v. Sanford-Orlando Kennel Club, Inc., 515
F.3d 1150, 1162 (11th Cir. 2008). Although the parties have discussed the
Defendants’ willfulness, the Court declines to address this issue. Since the Defendants
have only moved for summary judgment as to the issue of liquidated damages, the
Court will limit its inquiry to the Defendants’ good faith.
89
Ojeda-Sanchez v. Bland Farms, LLC, 499 F. App’x 897, 902 (11th Cir.
2012); see also 29 U.S.C. § 260.
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and that it had reasonable grounds for believing this [objective component].”90 The
employer “bears the burden of establishing both the subjective and objective
components of that good faith defense against liquidated damages.”91 “If the employer
fails to prove that he acted with both subjective and objective good faith, ‘liquidated
damages are mandatory.’”92
The Defendants bear the burden of proof on the issue of good faith. Therefore,
to succeed on a motion for summary judgment on the issue, they must show that no
reasonable trier of fact could find that they acted without good faith.93 The Defendants
fall far short of meeting this burden. Generally, “[t]o satisfy the subjective ‘good faith’
component, the [employer has the burden of proving] that [it] had an honest intention
to ascertain what [the FLSA] requires and to act in accordance with it.”94 On the other
90
Ojeda-Sanchez, 499 F. App’x at 903; see also 29 U.S.C. § 260.
91
Alvarez Perez v. Sanford-Orlando Kennel Club, Inc., 515 F.3d 1150,
1163 (11th Cir. 2008).
92
Davila v. Menendez, 717 F.3d 1179, 1186 (11th Cir. 2013) (quoting
Dybach v. State of Fla. Dep’t of Corr., 942 F.2d 1562, 1567 (11th Cir. 1991).
93
One 2007 Toyota FJ Cruiser, VIN JTEBU11F670023522, 824 F. Supp.
2d 1369, 1376 (N.D. Ga. 2011) (“But where the moving party has the burden—the
plaintiff on a claim for relief or the defendant on an affirmative defense—his showing
must be sufficient for the court to hold that no reasonable trier of fact could find other
than for the moving party.”).
94
Dybach v. State of Fla. Dep’t of Corr., 942 F.2d 1562, 1566 (11th Cir.
1991) (internal quotation marks omitted).
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hand “[o]bjective good faith means the employer had reasonable grounds for believing
its conduct comported with the FLSA.”95
The Defendants fail to meet their burden as to both the objective and subjective
components of this test. The only argument that the Defendants offer in support of
summary judgment on this issue is that Mr. James “consult[ed] and rel[ied] upon the
advice of a lawyer who Michael James believed was knowledgeable of the industry
standard and Department of Labor or FLSA requirements.”96 And, the only evidence
the Defendant offers in support of this contention is Mr. James’s own declaration that
“[a]t the time I made the decision to classify my truck drivers as independent
contractors, I relied on the advice of a lawyer who I believed was knowledgeable of
the industry standard and Department of Labor or FLSA requirements.”97 To establish
good faith, the Defendants needs to show both that they acted with an honest intention
to comply with the FLSA, and that they had an objectively reasonable basis for
believing that they were in compliance. This single assertion by Mr. James is not
proof of good faith. The Defendants do not provide any other information about the
content or nature of this consultation, which would be important in determining
95
Friedman v. South Fla. Psychiatric Assocs., Inc., 139 F. App’x 183, 18586 (11th Cir. 2005).
96
Defs.’ Mot. for Partial Summ. J., at 22.
97
Michael James Decl. ¶ 3.
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whether reliance on this advice was both honest and reasonable.98 This single
statement by Mr. James that he consulted an attorney fails to provide such evidence
that no reasonable trier of fact could conclude that he acted without good faith. Given
this evidence, a reasonable jury could still conclude that the Defendants did not
subjectively and objectively act with good faith. Therefore, the Defendants are not
entitled to summary judgment on this issue.
Furthermore, a genuine dispute of fact exists as to whether Mr. James actually
consulted an attorney concerning his obligations under the FLSA. When questioned
about this very issue in a deposition, Mr. James stated that he did not remember
whether his decision to use independent contractors was based upon legal advice, and
that he did not have a lawyer at the time he made this decision.99 Thus, since Mr.
James cannot even remember if this decision was based upon legal advice, a
98
In the deposition of Ideal Towing, Mr. James refused to elaborate upon
the good faith defense because it “touches on attorney-client communication.” Ideal
Towing Dep. at 79-80. The Plaintiffs respond that “privilege cannot be used as a
sword and a shield.” Pls.’ Resp. to Defs. Statement of Material Facts ¶ 47 (citing
United States v. Bilzerian, 926 F.2d 1285, 1292 (2d Cir. 1991)). However, putting this
evidentiary issue aside, Mr. James’s single statement that he saw an attorney simply
does not satisfy the Defendants’ burden in showing that they are entitled to summary
judgment. The Defendants would need to show that, based upon this consultation, Mr.
James honestly intended to comply with the FLSA, and that he had an objectively
reasonable basis for believing that he was in compliance. The Defendants have failed
to do so with this single piece of testimony.
99
Michael James Dep. at 24.
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reasonable jury could conclude that he did not actually consult an attorney concerning
his FLSA obligations.
E. 26 U.S.C. § 7434
Finally, the Defendants move for summary judgment as to the Plaintiffs’ claim
under 26 U.S.C. § 7434 for fraudulent filing of tax information. The Plaintiffs concede
that they “do not oppose summary judgment as to issue 4 (violation of 26 U.S.C. §
7434) and abandon that claim.”100 Therefore, the Court deems this claim abandoned.
IV. Conclusion
For the reasons stated above, the Defendants’ Motion for Partial Summary
Judgment [Doc. 66] is GRANTED in part and DENIED in part.
SO ORDERED, this 13 day of November, 2017.
/s/Thomas W. Thrash
THOMAS W. THRASH, JR.
United States District Judge
100
Pls.’ Resp. Br in Opp’n to Defs.’ Mot. for Partial Summ. J. Dismiss, at
3.
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