Hembree v. Mid-Continent Transport, Inc.

Filing 102

ORDER granting 83 motion for summary judgment in favor of defendant Frenzen. Signed on 11/21/11 by District Judge Howard F. Sachs. (Duer, Tina)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF MISSOURI
ST. JOSEPH DIVISION
DAVID HEMBREE, individually, and as
representative of all others similarly situated,
Plaintiff,
v.
MID-CONTINENT TRANSPORT, INC. and
JOHN W. SPENCER,

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Case No. 08-6094-CV-SJ-HFS

MEMORANDUM AND ORDER
Defendant Frenzen, part owner and accountant for the defendant company, seeks summary
judgment in this wage and hour case on the theory that he was essentially a hands-off partial owner
of the employing company, without sufficient managerial activity relating to employee work to be
classified as an additional employer for payment responsibility when there is a violation of the Fair
Labor Standards Act. The principal controlling case on which he relies is Wirtz v. Pure Ice
Company, 322 F.2d 259 (8th Cir. 1963) (majority stockholder who failed to exercise potential
managerial authority is not an additional “employer”). More recent appellate rulings of the same
nature are Alvarez Perez v. San-Orlando Kennel Club, Inc., 515 F.3d 1150 (11th Cir. 2008) (citing
Wirtz and an earlier pertinent 11th Cir. case, Patel v. Wargo, 803 F.2d 632, 637-8 (1986)). Those
cases require “ ‘operational control of significant aspects of ... day-to-day functions, including
compensation of employees or other matters in relation to an employee.’ ” (Alvarez Perez, citing
Patel). In other words, “unexercised authority is insufficient to establish liability as an employer.”

Alvarez Perez, at 1161.1 See also Copantitla v. Fiskardo Estiatorio, Inc., 788 F.Supp.2d 253, 309311 (S.D.N.Y. 2011); Gofron v. Picsel Technologies, Inc., 2011 WL 3053191 (N.D.Cal.).
Defendant’s 50% ownership interest is not irrelevant, but clearly not dispositive. Rather, it
is necessary to look to the record as to the substantiality of his actual participation in day-to-day
operations and his connection, if any, with employee management or compensation. I conclude that
the undisputed evidence shows that Frenzen, an outside “moonlighting” accountant and part owner,
was well informed but remote from day-to-day operations. There is insufficient evidence presented
by plaintiffs that he engaged in managerial activity regarding the plaintiff employees, their hiring
or firing, or their compensation. The one bit of evidence that comes nearest to creating a submissible
case against him is that he not only knew about “compensation policies” but “concurred in their
use.” Plaintiffs’ statement of uncontroverted facts, SUF 23, Doc. 90. This is a reference to Answer
to Interrog. No. 12 (Ex. 2) and to the Frenzen Deposition, p. 155 (Ex. 1), attached to Doc. 90.
Frenzen also asserted in those papers, and plaintiffs do not submit evidence to contest, that “he did
not propose or develop” the compensation policies for the plaintiff drivers. Id. He further stated in
his deposition, without contest, that defendant Spencer “would inform me what (the bonus amounts)
were.” Frenzen Deposition (Ex. 1) at page 58. Bonuses for employees were not “discussed;” Frenzen
was simply “informed” by Spencer. Id. There is no evidence that the subject of overtime was
discussed prior to 2007.
The corporate answers to Interrogatories were “derived from information provided by John
Spencer and Darold Frenzen” and included statements that “since at least 2000 Mr. Frenzen has had
no payroll responsibilities” (p.3). While some of the record is conclusory, plaintiffs offer no factual

1

I recognize that this concept is controversial, either as a matter of policy or statutory
construction. See the dissent of Judge Ridge in Wirtz, supra.

record showing “involvement” except as an accountant responsible for tax reporting and similar
duties. There are no specifics to show active participation in formulating or controlling employee
affairs.
Under Wirtz and similar cases it seems clear that defendant Frenzen has a compelling,
essentially undisputed, “silent partner” defense, with the special circumstance of being a well
informed but outside “accountant,” unless the acknowledged “concurrence” in “compensation
policies” overcomes the general story of non-participation in day-to-day operations. In context, I do
not believe the general depiction of his conduct changes.
If, however, Frenzen was part of a joint-agreement on “compensation policies” this might
well change the result, even though such an agreement might be a very minor act of participation,
viewing company operations as a whole. That is because that subject is the focus of this litigation.
I do not believe plaintiffs have presented adequate evidence on the narrow point in question,
and will therefore grant defendant’s motion. There is no showing that any approval of compensation
policies was expressed (rather than simply a thought of Frenzen’s) or that an expression was
anything more than spoken acquiescence in something already decided. Moreover, the timing of the
thought or comment is not enough to help establish a claim for recovery. If it were shown to have
occurred as part of an agreement between managing owners of the business before the period
covered by this claim it might be given continuing effect, absent some evidence of later disapproval.
If it was during the period, it would show participation from that date forward, but not during the
period when there was a complete absence of participation in the ongoing activities of the business.
Damages could not be established without some ability to date the pertinent conduct (if it was
conduct rather than a thought). If it was some sort of afterthought it would of course have no bearing

on the claim at all.2
On the facts presented by the parties I cannot accept plaintiffs’ theory of a sound claim
against defendant Frenzen that could be submitted to a fact-finder. There being no material facts in
dispute, the motion for summary judgment in favor of defendant Frenzen (Doc. 83) is hereby
GRANTED.
/s/ Howard F. Sachs
HOWARD F. SACHS
UNITED STATES DISTRICT JUDGE

November 21 , 2011
Kansas City, Missouri

2

Plaintiffs offered no evidence of discussion of the critical issue of overtime until after an
audit by the Department of Labor in 2007.