DeArmond v. Alliance Energy Services, LLC

Filing 57

ORDER AND REASONS denying 48 Motion for Partial Summary Judgment. Signed by Judge Lance M Africk on 11/29/2017. (blg)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
DAVID DEARMOND

CIVIL ACTION

VERSUS

No. 17-2222

ALLIANCE ENERGY SERVICES, LLC

SECTION I

ORDER & REASONS
Before the Court is a motion for partial summary judgment filed by plaintiff
David DeArmond (“DeArmond”), on behalf of himself and all others similarly
situated, regarding the ability of defendant Alliance Energy Services, LLC
(“Alliance”) to rely on certain defenses. For the following reasons, the motion is
denied.
I.
This Fair Labor Standards Act (“FLSA”) case arises from Alliance’s failure to
pay its employees overtime compensation for attendance at mandatory safety
meetings. Acknowledging that it made “some unintentional payroll errors,”1 Alliance
contacted the United States Department of Labor (“DOL”).2 The DOL reviewed
Alliance’s report and opened an administrative proceeding.3 The DOL’s investigation
concluded that Alliance’s FLSA violations resulted in underpayment to 85 employees
totaling $43,382.38 covering the period from June 16, 2015 to April 27, 2017.4 “Under

R. Doc. No. 10. ¶ 46.
R. Doc. No. 19-1, at 1 ¶ 5.
3 Id. at ¶ 6
4 R. Doc. No. 48-4, at 130.
1
2

[DOL] supervision, Alliance [then] issued payment, at the overtime rate, to affected
current and former employees.”5
DeArmond estimates that Alliance paid approximately $13,000 to employees
participating in the present case, excluding DeArmond himself.6

Despite these

payments, DeArmond and a number of other Alliance employees continue to pursue
this collective action, arguing that they are entitled to additional liquidated damages
under the FLSA.
DeArmond now moves for judgment as a matter of law, arguing that Alliance
is precluded from asserting the defenses of waiver and good faith. Alliance opposes
the motion in part.
II.
Summary judgment is proper when, after reviewing the pleadings, the
discovery and disclosure materials on file, and any affidavits, the court determines
that there is no genuine dispute of material fact. See Fed. R. Civ. P. 56. “[A] party
seeking summary judgment always bears the initial responsibility of informing the
district court of the basis for its motion, and identifying those portions of [the record]
which it believes demonstrate the absence of a genuine issue of material fact.” Celotex
Corp. v. Catrett, 477 U.S. 317, 323 (1986). The party seeking summary judgment
need not produce evidence negating the existence of material fact, but need only point

5
6

R. Doc. No. 19-1 ¶ 6.
R. Doc. No. 48-1, at 1.
2

out the absence of evidence supporting the other party’s case. Id.; Fontenot v. Upjohn
Co., 780 F.2d 1190, 1195 (5th Cir. 1986).
Once the party seeking summary judgment carries its burden, the nonmoving
party must come forward with specific facts showing that there is a genuine dispute
of material fact for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986). The showing of a genuine issue is not satisfied by creating “‘some
metaphysical doubt as to the material facts,’ by ‘conclusory allegations,’ by
‘unsubstantiated assertions,’ or by only a ‘scintilla’ of evidence.” Little v. Liquid Air
Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted). Instead, a genuine issue
of material fact exists when the “evidence is such that a reasonable jury could return
a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
248 (1986). “Although the substance or content of the evidence submitted to support
or dispute a fact on summary judgment must be admissible . . ., the material may be
presented in a form that would not, in itself, be admissible at trial.” Lee v. Offshore
Logistical and Transp., LLC, 859 F.3d 353, 355 (5th Cir. 2017) (quotation omitted).
The party responding to the motion for summary judgment may not rest upon
the pleadings but must identify specific facts that establish a genuine issue.
Anderson, 477 U.S. at 248. The nonmoving party’s evidence, however, “is to be
believed, and all justifiable inferences are to be drawn in [the nonmoving party’s]
favor.” Id. at 255; see also Hunt v. Cromartie, 526 U.S. 541, 552 (1999).

3

III.
DeArmond argues that Alliance is precluded from asserting the defenses of
waiver and good faith. The Court considers each in turn.
A.
At the outset, Alliance concedes that—with one exception—the liquidated
damages claims asserted by DeArmond and his fellow plaintiffs have not been
waived.7 Of the 32 plaintiffs currently involved in this case, Alliance contends that
only the claims of Ronnie Bates (“Bates”) have been waived.8 The Court confines its
analysis accordingly.9
The FLSA provides that
The Secretary [of Labor] is authorized to supervise the
payment of the unpaid minimum wages or the unpaid
overtime compensation owing to any employee or
employees . . . and the agreement of any employee to accept
such payment shall upon payment in full constitute a
waiver by such employee of any right he may have . . . to
such unpaid minimum wages or unpaid overtime
compensation and an additional equal amount as
liquidated damages.
29 U.S.C. § 216(c). “For there to be a valid waiver[,] section 216(c) simply requires
(a) that the employee agree to accept the payment which the Secretary determines to

R. Doc. No. 51, at 3.
In the Court’s view, Alliance’s concession is itself a waiver of the waiver defense
with respect to all other plaintiffs.
9 In its reply, DeArmond does not respond to Alliance’s arguments regarding Bates’
alleged waiver, imprecisely declaring that “[n]ow that Defendant has conceded its
waiver defense, the only remaining issue . . . is whether Defendant has met its burden
to show subjective and objective good faith compliance with the dictates of the [FLSA]
such that it can avoid the imposition of liquidated damages.” R. Doc. No. 52-2, at 1.
7
8

4

be due and (b) that there be ‘payment in full.’” Sneed v. Sneed’s Shipbuilding, Inc.,
545 F.2d 537, 539 (5th Cir. 1977).
With respect to Section 216’s requirement that an employee agree to accept
payment, “‘agreement’ is more than the acceptance of funds, as it must exist
‘independent of payment.’” Dent v. Cox Commc’ns Las Vegas, Inc., 502 F.3d 1141,
1146 (9th Cir. 2007) (quoting Walton v. United Consumers Club, Inc., 786 F.2d 303,
305 (7th Cir. 1986)). “Typically an employee manifests assent by signing a receipt
(either a standard WH–58 or another form authorized by the DOL), which puts the
employee on notice of the resulting waiver.” Id. at 1147. But, in any case, “[t]o
constitute a waiver, the employee’s choice to waive his or her right to file private
claims—that is, the employee’s agreement to accept a settlement payment—must be
informed and meaningful.” Woods v. RHA/Tennessee Grp. Homes, Inc., 803 F. Supp.
2d 789, 800 (M.D. Tenn. 2011).
Alliance does not argue that Bates signed any kind of receipt or form
authorized by the DOL. Rather, it indicates that Bates had his attorney contact
counsel for Alliance to inquire as to the details of the payment Bates received.10 This
inquiry, Alliance maintains, demonstrates that Bates was “fully informed of the
nature of the overtime payment before he accepted it via legal counsel.” 11 Alliance
insists that Bates received payment and provided a knowledgeable acceptance of that
payment, thereby waiving any further claims he may have had.

10
11

R. Doc. No. 51, at 3–4.
Id. at 4.
5

Whether discussions between counsel for an employer and counsel for an
employee can serve as the basis for a valid waiver under Section 216 is a question the
Court need not pass upon here.

In any event, the record does not sufficiently

demonstrate that Bates made an informed and meaningful decision to waive his
rights against Alliance. The only support Alliance offers for its argument is an
affidavit from counsel, which states,
I received a call as counsel for [Alliance] from Mr. Bates’
lawyer in an environmental whistleblower case, Mr. Cayce
Peterson, of the Lambert Firm. Mr. Peterson inquired on
behalf of Mr. Bates about the nature of the payment and I
explained the basis for the overtime payment and directed
him to the above-captioned pending lawsuit. I do not know
if Mr. Bates had enrolled as an additional plaintiff or not
at that time but I did inform his then lawyer as to the
nature of the payment prior to his cashing the check.12
The Court does not doubt that Alliance’s counsel spoke with Bates’ counsel, but
even assuming such a conversation occurred, the affidavit of Alliance’s counsel has
little, if any, bearing on Bates’ alleged waiver of his rights. All the affidavit says is
that Alliance’s counsel explained to Bates’ counsel the basis for the overtime payment
Bates received, informed him as to the nature of the payment, and directed him to
the present lawsuit. It does not state that Alliance’s counsel informed Bates’ counsel
that acceptance of the payment would be treated as a waiver of Bates’ rights against
Alliance, nor does it state that Bates’ counsel actually informed Bates regarding the
issue of waiver or secured his agreement to waive his rights against Alliance. In
effect, all the affidavit does is memorialize a discussion between two lawyers.

12

R. Doc. 51-2 ¶ 3.
6

In short, there is nothing in the affidavit or anything else in the record at this
time that definitively establishes Bates’ intent to release Alliance from any claims he
may have had against it. See Victoria v. Alex Car, Inc., No. 11-cv-2904, 2012 WL
1068759, *4 (N.D. Ill. March 29, 2012) (“[T]he relevant inquiry in a FLSA waiver
situation is whether the plaintiffs intended to settle their claims.”).

The Court

concludes that Alliance has, at the very least, identified a genuine dispute of material
fact—namely, whether Bates was fully informed of the nature of the overtime
payment and knowingly released his other claims against Alliance.

Summary

judgment with respect to Bates’ potential waiver is, therefore, inappropriate.
B.
DeArmond next argues that Alliance cannot avoid paying liquidated damages
by relying on a good faith defense.
Employers who violate the FLSA are generally liable for the amount of unpaid
compensation, plus “an additional equal amount as liquidated damages.” 29 U.S.C.
§ 216(b). “In other words, if an employee proves that his employer violated the FLSA,
the liquidated damages award is ‘automatic.’” Monroe Firefighters Ass’n v. City of
Monroe, No. 06-cv-1092, 2009 WL 916272, at *8 (W.D. La. March 31, 2009) (James,
J.) (quoting Bernard v. IBP, Inc. of Nebraska, 154 F.3d 259, 267 (5th Cir. 1998)).
However,
if the employer shows to the satisfaction of the court that
the act or omission giving rise to such action was in good
faith and that he had reasonable grounds for believing that
his act or omission was not a violation of the [FLSA], as
amended, the court may, in its sound discretion, award no
liquidated damages.
7

29 U.S.C. § 260. Thus, where an FLSA violation is found, the Court has considerable
leeway in deciding whether to reduce the amount of liquidated damages or to award
none at all. Cf. Bernard, 154 F.3d at 267 (“Even if IBP acted in good faith based upon
a reasonable belief that it did not violate the FLSA, the district court still had
discretion to award liquidated damages.”). “The district court’s discretion to reduce
the liquidated damages ‘must be exercised consistently with the strong presumption
under the statute in favor of doubling.’” Nero v. Indus. Molding Corp., 167 F.3d 921,
929 (5th Cir. 1999) (quoting Shea v. Galaxie Lumber & Constr. Co., 152 F.3d 729, 733
(7th Cir.1998) (discussing the FLSA’s liquidated damages provision)). Under Fifth
Circuit precedent, “[a]n employer found liable under [the FLSA] has the ‘substantial
burden’ of proving to the satisfaction of the trial court that its acts giving rise to the
suit are both in good faith and reasonable.” Owens v. Marstek, LLC, 548 Fed. App’x
966, 972 (5th Cir. 2013) (quoting Mireles v. Frio Foods, Inc., 899 F.2d 1407, 1415 (5th
Cir. 1990)) (first emphasis added).
“Establishing good faith is a subjective inquiry.” Abbey v. United States, 106
Fed. Cl. 254, 265 (Ct. Fed. Cl. 2012). It requires a defendant to show that it “had an
honest intention to ascertain what the [FLSA] requires and to act in accordance with
it.” Dybach v. State of Fla. Dep’t of Corrections, 942 F.2d 1562, 1566 (11th Cir. 1991).
The reasonableness inquiry, on the other hand, “is an objective one.” Abbey, 106 Fed.
Cl. At 265. In this regard, “proof that the law is uncertain, ambiguous[,] or complex
may provide reasonable grounds for an employer’s belief that he is in conformity with
the [FLSA], even though his belief is erroneous.” Id. (internal quotations omitted).
8

“Good faith cannot be based on ignorance, but instead ‘requires some duty to
investigate potential liability under the FLSA.’” Johnson v. Big Lots Stores, Inc., 604
F. Supp. 2d 903, 926 (E.D. La. 2009) (Vance, J.) (quoting Barcellona v. Tiffany English
Pub, Inc., 597 F.2d 464, 469 (5th Cir. 1979)). “‘Good faith’ in this context . . . requires
that an employer first take active steps to ascertain the dictates of the FLSA and then
move to comply with them. That [an employer] did not purposefully violate the
provisions of the FLSA is not sufficient to establish that it acted in good faith.” Reich
v. S. New England Telecomm. Corp., 121 F.3d 58 (2nd Cir. 1997) (internal citations
omitted). Moreover, good faith is not “demonstrated by the absence of complaints on
the part of employees or simple conformity with industry-wide practice.” Id. Nor can
an employer satisfy its good faith burden “solely by suggesting that lower-level
employees are responsible for the violations.” LeCompte v. Chrysler Credit Corp., 780
F.2d 1260, 1263 (5th Cir. 1986).
As stated, an employer must also demonstrate that the actions giving rise to
the violations were “predicated upon such reasonable grounds that it would be unfair
to impose upon him more than a compensatory verdict.” Barcellona, 597 F.2d 464.
The employer may show, for example, “that the employer outrightly and candidly
engaged in the acts proven to be violations but did so under a mistaken, although
reasonable, belief that its acts were in conformity with the law.” Martinez v. Food
City, Inc., 658 F.2d 369, 376 (5th Cir. 1981).

9

DeArmond maintains that Alliance “has no evidence to meet this [good faith]
burden.”13 He contends, “[Alliance] can offer no explanation why it decided to not pay
for safety meetings. It can point to no investigation it conducted on these matters. It
can point to no advice of counsel. It can point to no interpretation of the FLSA . . .
that would support paying the way it did.”14

He further argues that Alliance has

“failed to identify any supervisor who conducted any research and concluded” that
the mandatory safety meetings at issue were not compensable.15
Alliance counters that the failure to pay for mandatory safety meetings “was
not a companywide policy, but a mistake made” in two of its divisions.16 According to
Alliance’s general counsel, the supervisors in those divisions “were under the belief
that pre-work safety meetings were an exception to pay or overtime requirements
and not essential to the work the employees were performing and thus exempt from”
compensation calculations.17

Those supervisors apparently “came from other

companies” and “relied on their experiences and what they believed to be industry
standard practices for paying pre-work meetings or what they thought was de
minimis time.”18

Alliance further argues that the decision of its supervisors to

exclude the safety meetings from compensation calculations was made in good faith
because the undercompensated employees may or may not be considered seamen,

R. Doc. No. 48-1, at 10.
Id. at 10–11.
15 R. Doc. No. 52-2, at 2.
16 R. Doc. No. 51-3 ¶ 3.
17 Id.
18 Id. ¶ 4.
13
14

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which are exempt from the FLSA.19 Notably, Alliance offers little, if any, evidence
that anyone at the company took the time to investigate the FLSA’s requirements
and attempt to put compliance measures in place.
Ultimately, the question of good faith is a matter for the court to decide. 29
U.S.C. § 260; see, e.g., King v. Univ. Healthcare Sys., L.C., 645 F.3d 713, 725 (5th Cir.
2011) (affirming an award of liquidated damages based on the district court’s own
credibility determinations); McConnell v. Thomson Newspapers, Inc., 802 F. Supp.
1484, 1506 (E.D. Tex. 1992) (noting that defendant may avoid liquidated damages if
it “shows the court—not the jury—that the act violating the FLSA was taken in good
faith, and that it had reasonable grounds for believing that the act was not a violation
of the FLSA”). However, “courts do not need to make a good faith ruling until after
the jury has rendered a verdict finding violations.” Lipnicki v. Meritage Homes Corp.,
No. 10-cv-605, 2014 WL 923524, at *12 (S.D. Tex. Feb. 13, 2014).
For its part, the Court remains deeply suspect of Alliance’s ability to prove that
it acted in good faith when it decided not to compensate its employees for mandatory
safety meetings. This is particularly true considering the strong presumption in favor
of liquidated damages and the Fifth Circuit case law describing Alliance’s substantial
burden in this context. Nevertheless, given the factually intensive issues involved in
establishing good faith and reasonableness, the Court concludes that stripping
Alliance of its defense at the summary judgment stage would be imprudent.

19

R. Doc. No. 51, at 8.
11

Accordingly, DeArmond’s motion will be denied.20 Alliance may, if it sees fit, argue
the good faith and reasonableness defense in a post-trial motion.
IV.
For the foregoing reasons,
IT IS ORDERED that DeArmond’s motion is DENIED.
New Orleans, Louisiana, November 29, 2017.

_______________________________________
LANCE M. AFRICK
UNITED STATES DISTRICT JUDGE

Given the manner in which the Court disposes of the motion, it need not reach the
merits of Alliance’s arguments regarding the Portal-to-Portal Act, de minimis time,
and the FLSA’s seaman exemption at this time.
20

12