Alvarado et al v. Corporate Cleaning Service, Inc. et al

Filing 191

For the reasons stated below, Plaintiffs' motion in limine 134 and to quash 131 are granted(without sanctions), and CCS's motion to complete third-party discovery 182 is denied. Mailed notice(pm, )

Order Form (01/2005)

United States District Court, Northern District of Illinois
Name of Assigned Judge
or Magistrate Judge

Edmond E. Chang

CASE NUMBER

07 C 6361

CASE
TITLE

Sitting Judge if Other
than Assigned Judge

DATE

5/27/2011

Ramon Alvarado vs. Corporate Cleaning Service, Inc., et al

DOCKET ENTRY TEXT

For the reasons stated below, Plaintiffs’ motion in limine [134] and to quash [131] are granted
(without sanctions), and CCS’s motion to complete third-party discovery [182] is denied.

O[ For further details see text below.]

Docketing to mail notices.

STATEMENT
Before the Court are motions presenting the issue of the relevance of industry compensation
customs and practices that CCS proposes to use at trial. Plaintiffs filed a motion in limine to
exclude any evidence of industry custom, R. 134, and, relatedly, Plaintiffs filed a motion to
quash a subpoena served on a third-party for payroll records to use as evidence of industry
custom, R. 131. Furthermore, Plaintiffs seek sanctions against CCS for issuing the subpoena.
Id. CCS filed a motion to complete the requested third-party discovery. R. 184. On May 25,
2011, the Court granted Plaintiffs’ motion in limine and denied CCS’s motion to complete
third-party discovery for the reasons contained here. Correspondingly, the motion to quash is
granted, although without sanctions against CCS.
To prove that CCS pays Plaintiffs their compensation in the form of commissions, CCS
seeks to admit evidence of industry compensation customs. R. 134. CCS proposes to introduce
evidence from several sources: another company in the window-washing industry, Service One
Incorporated; Service One’s president, Tom Trinen; and, the company that handles Service
One’s payroll, ADP Incorporated. Id, Exh. A. Furthermore, CCS has identified three of its
foremen with knowledge of the compensation systems for window washers to testify about
compensation practices. R. 134 at 2-3.

Courtroom Deputy
Initials:

07C6361 Ramon Alvarado vs. Corporate Cleaning Service, Inc., et al

PAMF

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STATEMENT
Plaintiffs allege, and CCS does not dispute, that CCS never identified any expert
witnesses. R.134 at 5; R. 140. Federal Rule of Evidence 702 permits testimony based on
“scientific, technical, or other specialized knowledge” by an expert witness. But a party seeking
to use an expert witness must disclose the expert to opposing counsel. Indeed, Federal Rule of
Civil Procedure 26(a)(2)(A) speaks in mandatory terms and requires that a “party must disclose”
any expert witness. Rule 37(c)(1) establishes the penalty for failure to disclose: “the party is not
allowed to use that information or witness to supply evidence . . . at a trial, unless the failure
was substantially justified or is harmless.”
CCS does not dispute that it never identified any expert witnesses. R. 140. Moreover, CCS
does not argue that its failure to disclose was substantially justified or harmless. R. 140.
Instead, CCS argues that the evidence of the window washers and compensation by other
companies is lay testimony. R. 140, 10-12.
Plaintiffs disagree and argue that the testimony is based upon specialized knowledge. R.
134 at 4 (citing Sachs v. Reed Aquaria Design, Inc., 2007 WL 3223336 (N.D. Ill. 2007)). The
Court agrees. The testimony of the foremen and of executives from other companies that the
industry pays by the job, not by the hour, would be based on their specialized knowledge of the
industry. CCS argues that the foremen “are capable of possessing information concerning the
compensation scheme used by the window washing companies for whom they worked.” R. 140,
12. But that evidence is comparable to the expert testimony in Sachs. Just as the witness in
Sachs based his testimony on his experience (there, in the field of building aquaria), among
other things, the windows washers’ testimony is based on their experience working with window
washers and other companies. The same holds true for Service One and its officers; their
testimony would stem from their specialized experience in the industry. The testimony is expert
testimony.
CCS also argues that this type of testimony is explicitly labeled as lay testimony in the
advisory committee notes accompanying Federal Rule of Evidence 701. This argument also
misses the point. The notes to Rule 701 state that “most courts have permitted the owner or
officer of a business to testify to the value or projected profits of the business” without being an
expert. Fed. R. Evid. 701 (2000 amendment committee notes) (citing Lightning Lube v. Witco
Corp., 4 F.3d 1153 (3d Cir. 1993)). That situation is dissimilar to the present case because there
a business owner or officer is testifying solely about his or her own respective business for
purposes of a damages calculation, as evidenced by the citation to Lightning Lube. 4 F.3d at
1176 (permitting lay testimony of witness familiar with day-to-day affairs of the business to
calculate lost profits damages). The proffered testimony in this case is not being used to
calculate a company’s own damages, nor is the testimony coming from a CCS employee to
describe only CCS. On the contrary, CCS seeks to use this testimony to ascribe an attribute to
the entire industry.
Instead of supporting CCS’s position, the notes to Rule 701 counsel against labeling this as lay
testimony. The notes recognize “the risk” that Rule 702 [could be] evaded by “proffering an expert in lay
witness clothing.” And the advisory committee notes presciently identify the very issue here, as they note
that one of the reasons to be careful in distinguishing expert versus lay testimony is to “ensure[] that a
party will not evade the expert witness disclosure requirements set forth in Fed.R.Civ.P. 26 . . . .”
Because CCS has not disclosed any expert witnesses, Rule 37 prohibits the use of this testimony.

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STATEMENT
Additionally, even if CCS had disclosed expert witnesses, the challenged testimony would still
be irrelevant, and irrelevant evidence is inadmissible. Fed. R. Evid. 402. Evidence is “relevant”if
it has “any tendency to make the existence of any fact that is of consequence to the
determination of the action more probable or less probable.” Fed. R. Evid. 401. Although CCS
concedes that “an industry’s own characterization of the type of compensation paid to employees
is not relevant for purposes of the FLSA exemptions,” R. 140 at 8 (emphasis added), CSS argues
that Yi v. Sterling Collision Centers, 480 F.3d 505, 510 (7th Cir. 2007), found industry
compensation customs to be relevant. Id. CCS misunderstands Yi’s reference to industry
custom.
Yi merely noted in the opinion’s closing paragraph that a plausible reason for a
compensation plan that is “industry-wide, and of long standing,” but unchallenged by the
Department of Labor, is that the compensation plan falls within an FLSA exemption. 480 F.3d
at 510. But CCS takes Yi too far in light of the context. Yi’s recognition that the auto-repair
industry has a long-standing, unchallenged system of compensation comes at the very end of its
holding, after Yi engages in an extensive analysis of the actual nature and operation of the
compensation system, without reference to industry practice itself being relevant to the
analysis. (In fact, the word “industry” is only used once outside of the concluding paragraph, to
simply note that this compensation system is common in the auto-repair industry.) The only
point that Yi’s final paragraph made was that the industry-wide practice there had not alerted
the watchdog (the Labor Department), probably because the practice comprises a commission
system. Yi was not holding that because the compensation practice was industry-wide, then the
compensation was commission-based.
CCS argues that Wajcman v. Inv. Corp. of Palm Beach, 2009 WL 465071 (S.D. Fla. 2009),
supports the industry-practice argument. Wajcman is distinguishable for two reasons. First,
Wajcman held that the language of the statutory provision at issue there, which differs from the
provision here, suggested that industry custom is an important consideration. Id. at *4. CCS has
not argued that the language of 29 U.S.C. § 207(I) directs the Court to look at industry custom.
Second, Wajcman noted that the patron’s perspective is relevant. 2009 WL 465071, at *4 (also
placing an emphasis on the word “patron”). Here, the proposed testimony is not from the
patron’s perspective, but is instead from the company perspective–be it employee or officer.
Because the evidence of industry custom is inadmissible for any purpose, Plaintiffs’
motion in limine is granted and CCS’s motion to complete third-party discovery is denied.
Additionally, because the evidence sought by the ADT subpoena is evidence to establish the
industry’s compensation customs, the motion to quash is denied.
In addition to asking the Court to quash the ADT subpoena, Plaintiffs also ask for
sanctions against CCS. CCS’s response to the motion to quash indicates that CCS took
reasonable steps to limit any burden on subpoenaed non-parties. R. 140 at 2-4. Although
Plaintiffs and the third-parties disagree with the manner in which CCS pursued its subpoenas,
Plaintiffs do not dispute CCS’s representations in its response.

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STATEMENT
R. 140 at 2-4. Specifically, CCS made efforts to engage in a dialogue regarding limitations and
withdrawing the ADT subpoena. Although CCS and Plaintiffs go back and forth on who is to
blame for a lack of communication, their arguments are a wash. There are sufficient, undisputed
representations by CCS to establish that it took reasonable steps to avoid unduly burdening
ADT, Service One, and Trinen. Plaintiffs’ request for sanctions is denied.
For the reasons stated, Plaintiffs’ motion in limine [134] and to quash [131] are granted
(without sanctions), and CCS’s motion to complete third-party discovery [182] is denied.

07C6361 Ramon Alvarado vs. Corporate Cleaning Service, Inc., et al

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