United States Department of Labor v. R.M. International, Inc. et al

Filing 105

Findings of Fact and Conclusions of Law. Signed on 03/16/2012 by Judge Anna J. Brown. (bb)

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF OREGON
PORTLAND DIVISION

HILDA L. SOLIS, SECRETARY OF
LABOR, UNITED STATES DEPARTMENT
OF LABOR,
Plaintiff,

v.
R.M. INTERNATIONAL, INC., and
JAMES KEYES,
Defendants.

KATHY ALEJANDRO
Acting Regional Solicitor
BRUCE L. BROWN
Associate Regional Solicitor
EVAN H. NORDBY
United States Department of Labor
Office of the Solicitor
300 Fifth Avenue, Suite 1120
Seattle, WA 98104
[phone]
Attorneys for Plaintiff

1

- FINDINGS OF FACT AND CONCLUSIONS OF LAW

3:09-CV-863-BR
FINDINGS OF FACT AND
CONCLUSIONS OF LAW

RICHARD N. VAN CLEAVE

VanCleave & Cobra in LLC
16135 S.W. Railroad Street
Sherwood, OR 97140
[phone]
TODD A.

HACKETT

Stoel Rives LLP
900 S.W. Fifth Avenue, Suite 2600
Portland, OR 97204
[phone]
Attorneys for Defendants

BROWN, Judge.

This action concerns the parties' dispute over the
application of an exemption to the Fair Labor Standards Act of
1938 known as the Motor Carrier Act Exemption under 29 U.S.C.
§

213(b) (1).

The matter was tried to the Court on November 14

and 16, 2011.
The Court has weighed, evaluated, and considered the
evidence presented at trial and makes Findings of Fact and
Conclusions of Law herein pursuant to Federal Rule of Civil
Procedure 52(a).

BACKGROUND

Plaintiff Secretary of Labor alleges Defendants R.M.
International, Inc.

(RMI) and James Keyes violated the overtime

provisions of the Fair Labor Standards Act, 29 U.S.C. §§ 201, et

seq.,
2

(FLSA) by failing to pay overtime compensation due their

- FINDINGS OF FACT AND CONCLUSIONS OF LAW

employees.

Plaintiff is seeking back wages and liquidated

damages equal to the unpaid overtime violations under

§

16(c) of

FLSA, or in the event that liquidated damages are not awarded,
pre-judgment interest computed on the unpaid wages due and,
pursuant to

§

17 of FLSA, the entry of a Judgment restraining the

Defendants from withholding payment of unpaid minimum wages and
overtime compensation due to Defendants' employees.
Defendants assert their drivers are exempt from the FLSA by
virtue of an exemption under the Motor Carrier Act ("MCA"), 41
U.S.C.

§

31502, et seq., for which Defendants bear the burden of

proof as to each of their drivers.
The parties agreed to try the matter to the Court.

In the

course of the two-day bench trial, there were ten witnesses:
Gary Alan Zeek, Thomas W. Hammond, Danny Threadgill, Denora Lee
Harnden, Michael C. Ryan, Danny Adams, Richard Reese, Raymond L.
Montee, Emerson Lyle Tiedemann and Daniel Clarence Heath.

The

parties also presented the Deposition testimony of Alan Pearson,
Chief Engineer of DTNA's engine-testing program.

The Court

weighed and evaluated their testimony and all of the exhibits
received in the case in the same manner it would instruct a jury
to do.

FINDINGS OF FACT

Pursuant to Federal Rule of Civil Procedure 52(a), the Court

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- FINDINGS OF FACT AND CONCLUSIONS OF LAW

finds the following facts by a preponderance of the evidence:

A.

Stipulated Facts.
1.

Defendant RMI was, at all times relevant to this
action, a corporation with a facility in Portland,
Oregon.

2.

Defendant James Keyes was, at all times relevant to
this action, President and owner of RMI.

3.

During the period relevant to this lawsuit Defendants
operated a transportation and truck testing business
based in Oregon.

Their sole client was Daimler Trucks

North America ("DTNA") and its subsidiaries,
Freightliner Trucks, Western Star Trucks, and Detroit
Diesel Corporation.
4.

The majority of Defendants' business was test driving
trucks for Freightliner, Western Star, and Detroit
Diesel as part of DTNA's Reliability Growth program.
All Detroit Diesel engines are built in Michigan;

RMI

also tests motors manufactured by Cummins, Inc.
Cummins engines are manufactured in Indiana.
5.

Defendants' records show that 56% of their drivers
never worked outside of Oregon.

At least 72% of all of

the drivers' total work days during the relevant period
were spent driving solely within the State of Oregon.
6.

4

Defendants' drivers drove trucks outside the State of

- FINDINGS OF FACT AND CONCLUSIONS OF LAW

Oregon for a variety of reasons including:

delivery of

trucks to another state, transporting trucks for
maintenance purposes, and test driving the trucks under
differing driving conditions.
7.

When Defendants' drivers traveled out-of-state for the
sole purpose of collecting test data, the trucks did
not carry any goods or materials for delivery.

8.

Drivers operating on routes solely within the State of
Oregon did not carry any goods or materials for
delivery.

9.

Drivers sometimes worked in excess of 40 hours in a
workweek, and when they did so Defendants did not pay
overtime rates for hours worked in excess of 40 hours.

10.

Defendants' drivers were required to pass DOT-mandated
drug tests, driving tests, and physicals and were
required to maintain DOT-mandated driving logs.

11.

On or about November 29, 2009, the Department of
Transportation performed a compliance review of DTNA
and RMI.

12.

The parties filed a Stipulation (#95) as to Damages
that sets out the possible damage awards based on back
pay potentially owed to dozens of drivers if the Court
finds in favor of Plaintiff.

5

- FINDINGS OF FACT AND CONCLUSIONS OF LAW

B.

Facts Established at Trial:
1.

The engines Defendants tested for DTNA and its
subsidiaries as a part of the Reliability Growth
program were shipped to Portland, Oregon, where they
would be installed in an empty truck chasis (referred
to as "gliders").

After the testing was complete, a

tested engine was removed from that chasis.

Several

drivers saw engines not installed in truck bodies and
truck bodies without engines at the RMI facility.
Almost all engines tested by Defendants are returned to
their out-of-state manufacturer after testing is
completed.

Defendants dissembled very few engines in

Portland and only to assess engine failures or for
training purposes.
2.

The length of road testing for any engine varied from
50,000 to 800,000 miles per engine.

3.

Defendants' trucks in the testing program were commonly
fitted with "data loggers" that recorded and stored
information about the engine's performance during the
test drives.

Defendants treated the data from test

drives as proprietary information and protected the
data as trade secrets in many of its employment
agreements with its drivers.
4.

6

DTNA engineers work onsite at the RMI facility.

- FINDINGS OF FACT AND CONCLUSIONS OF LAW

DTNA

engineers occasionally rode with drivers on their testdrives.

When the trucks returned to the RMI facility,

DTNA engineers downloaded the information from the data
loggers to laptop computers for analysis, and the data
was also made a part of a database that is available to
out-of-state engineers.

In addition, Defendants'

drivers made handwritten records known as "RG Sheets"
in which they noted any problems with or relevant
observations of their trucks during test drives.
5.

DTNA engineers made adjustments to the trucks and
engines based on the data produced during test drives
or on the basis of driver observations.

DTNA engineers

could require maintenance or repair by mechanics at the
RMI facility.
6.

DTNA engineers (Portland, Oregon), Detroit Diesel
engineers (Michigan), and Daimler engineers (Stuttgart,
Germany) relied on the data provided by the test
program in the design, production, and manufacturing of
the engines being tested by Defendants.

7.

Defendants' drivers typically drove routes within
Oregon of 400 to 500 miles per shift, which was roughly
11 hours.

8.

On occasion, Defendants randomly assigned drivers to
drive trucks without trailers (a "bobtail")

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- FINDINGS OF FACT AND CONCLUSIONS OF LAW

approximately 20 miles to Ridgefield, Washington for
testing on a "dynamometer," for maintenance, or to
obtain biofeul.

Drivers testified at trial these trips

were assigned approximately one to four times per year.
9.

Other than occasional trips to Ridgefield, Washington,
almost all routes outside the State of Oregon were
accepted on a volunteer basis.

Although Michael C.

Ryan was assigned a single test route in Washington for
one two-to-three-week period, the evidence otherwise
reflects Defendants did not force drivers to take
interstate routes and did not punish any driver who did
not volunteer for such routes.
10.

Although the testing program with DTNA and its
subsidiaries constituted the majority of Defendants'
work, Defendants also transported engines and parts
between Portland and Detroit, delivered trucks to
customers across the country, and performed "break in"
tests by road-testing new trucks for 5,000 miles for
customers who had purchased them.

CONCLUSIONS OF LAW
Based on the foregoing Findings of Fact and the legal
standards that follow, the Court makes the following Conclusions
of Law pursuant to Rule 52 (a) (1) :

8

- FINDINGS OF FACT AND CONCLUSIONS OF LAW

A.

Stipulated Conclusions of Law.
1.

Defendant RMI was, at all times relevant to this
action, an enterprise engaged in commerce within the
meaning of FLSA.

2.

Defendant James Keyes was, at all times relevant to
this action, President and owner of RMI and an employer
within the meaning of FLSA.

B.

Conclusions of Law established through Trial.
1.

Subject to certain exemptions, under the authority of
the Department of Labor, FLSA requires employers to pay
overtime compensation to employees for hours worked in
excess of 40 per week.

See 29 U.S.C.

§

207 (a) (1).

Exemptions to FLSA's overtime rules are to be narrowly
construed against employers, who bear the burden to
prove an exemption applies.

Solis v. Washington,

F.3d 1079, 1083 (9 th Cir. 2011)

656

(exemptions to be

granted only to persons "plainly and unmistakably"
falling within an exemption).

Unless otherwise

exempted, the Court concludes Defendants are subject to
FLSA's requirements to compensate drivers working more
than 40 hours a week with overtime pay.
2.

To meet the Motor Carrier Exemption under 29 U.S.C. §
213(b) (1), Defendants must first show they are subject
to the jurisdiction of the Department of

9

- FINDINGS OF FACT AND CONCLUSIONS OF LAW

Transportation.

The MCA provides regulatory authority

to the Department of Transportation to prescribe
requirements for

~qualifications

and maximum hours of

service of employees of, and standards of equipment of,
a motor private carrier, when needed to promote safety
of operation.

49 U.S.C.

§

31502(b).

A

carrier H is defined in the statute as

~a

~motor

private

person, other

than a motor carrier, transporting property by motor
vehicle when-(A) the transportation is [in interstate
commerce);

(B)

the person is the owner, lessee, or

bailee of the property being transported; and (C) the
property is being transported for sale, lease, rent, or
bailment or to further a commercial purpose. H
U.S.C.

3.

§

49

13102(15).

The Court concludes Defendants are a
carrier H under

§

31502(15).

~motor

private

There is not any dispute

that some of Defendants' drivers drove interstate
routes during the relevant period.

The parties dispute

only whether Defendants transported

~propertyH

in

interstate commerce within the meaning of the Motor
Carrier Act when they transported:
being tested,
loads,

(1) the engines

(2) the trailers carrying non-commercial

(3) the data-logging equipment, and (4) the

intangible electronic data generated during test

10 - FINDINGS OF FACT AND CONCLUSIONS OF LAW

drives.

The Court concludes the evidence at trial

established Defendants' drivers engaged in interstate
commerce during the relevant period, at a minimum, when
they transported crated engines in trailers between
Oregon and Michigan for purposes of facilitating the
testing program.

In addition, Defendants' drivers also

engaged in interstate commerce when they test-drove
trucks with trailers across state lines for the purpose
of gathering data for Defendants' testing program.
Court's conclusion is consistent with the

The

u.s.

Department of Transportation Federal Motor Carrier
Safety Administration's interpretation of 49 C.F.R.

§§

390.3 and 390.5 (implementing regulations for the Motor
Carrier Act) in which the FMCSA found that drivers who
operate a commercial motor vehicle across state lines
for the purposes of "road testing" the vehicle are
subject to the Federal Motor Carrier Safety regulations
by virtue of their involvement in interstate commerce.
62 Fed. Reg. 16370-01, at 16404 (April 4, 1997).

In

that regulatory guidance, the FMCSA also concluded an
empty trailer constitutes "property" for purposes of
transportation in interstate commerce under the Motor
Carrier Act.

Id. at 16406.

The Court must give due

deference to the FMCSA's interpretation of its

11 - FINDINGS OF FACT AND CONCLUSIONS OF LAW

regulations.

See Reich, 33 F.3d at 1156, n.4

(deference due to Secretary of Transportation's
interpretation in opinion letters of extent of
regulatory jurisdiction); Solis,

656 F.3d at 1085

(gives controlling deference to Department of Labor's
interpretation of its own regulations).
4.

Although the statute does not define "property,N courts
have broadly defined property in this context to
include the tools and equipment transported by drivers
that are necessary to the performance of the service
provided.

See Anderson v. Timber Prods. Inspection,

Inc., 334 F. Supp. 2d 1258, 1261-62 (D. Or. September

13, 2004) (assessing numerous judicial opinions and
concluding the plain meaning of the term "propertyN in
this context includes, inter alia, the tools and
equipment carried by the defendant).

The Court,

therefore, also concludes the data-loggers, which were
owned by the various manufacturers for which Defendants
were performing engine tests, are equipment that
constitutes property for these purposes because the
data loggers were necessary to the performance of
Defendants' role in gathering data for their clients to
use in the development of new engine platforms.

In

addition, under a plain meaning of the term property,

12 - FINDINGS OF FACT AND CONCLUSIONS OF LAW

the intangible electronic d?ta generated by those
machines during test drives also constitute "propertyU
for purposes of the Court's assessment of the
application of the definition of a "motor private
carrier. U

On this record, the Court concludes such

property was transported "to further a commercial
purpose.
5.

u

A private motor carrier's employees are subject either
to the jurisdiction of the Department of Labor (and the
FLSA overtime requirements) or the Department of
Transportation (and the requirements of the Federal
Motor Carrier Safety Act), but not both.

Reich v. Am.

Driver Serv., Inc., 33 F.3d 1153, 1155-56 (9 th Cir.
1994) ("Although many motor carriers engage in both
interstate and intrastate commerce, a motor carrier
cannot be subject to the jurisdiction of both the
Secretary of Labor and the Secretary of
Transportation. U) .

"[AJny employee with respect to

whom the Secretary of Transportation has power to
establish qualifications and maximum hours of service
pursuant to the provisions of section 31502 of Title
49" is exempt from FLSA's overtime provisions contained
in § 207.

29 U.S.C. § 213(b) (1) (known and referred to

as the "Motor Carrier Exemption U).

13 - FINDINGS OF FACT AND CONCLUSIONS OF LAW

As this Court ruled

at summary judgment, the application of the Motor
Carrier Exemption is determined on an employee-byemployee basis with Defendants bearing the burden to
demonstrate the exemption's application to any or all
of its employees.
6.

Defendants maintain the safety audit by the Department
of Transportation in November 2009 in which the DOT
cited "some" of Defendants' intrastate-only drivers
establishes that all of Defendants' drivers are exempt
from FLSA because it demonstrates the DOT exercised
jurisdiction over Defendants' drivers.

That fact,

however, does not control the Court's analysis as to
whether, in fact,

Defendants have carried their burden

to show each of their drivers meets the Motor Carrier
Exemption.

See Dole v. Circle "AN Constr., Inc., 738

F. Supp. 1313, 1317-18, 1320-21 (D. Id. June 1,
1990) (concluding that two safety audits by the DOT in
which six drivers were found to be subject to the
FMCSRs was insufficient to meet the defendant's burden
as to the Motor Carrier Exemption).

Here the parties'

Stipulation reflects Defendants have roughly 130
drivers who drove only intrastate routes, and it is
unclear on what basis the DOT reached its conclusion as
to its jurisdiction over a small number of those

14 - FINDINGS OF FACT AND CONCLUSIONS OF LAW

drivers.

Accordingly, the Court concludes the DOT

safety audit is insufficient to meet the Defendants'
burden to prove the Motor Carrier Exemption applies as
to those drivers.
7.

Defendants did not meet their burden to prove their
drivers who only drove intrastate routes "plainly and
unmistakably" fit the Motor Carrier Exemption.

Solis v. Washington, 656 F.3d at 1083.

See

A private motor

carrier's driver meets the Motor Carrier Exemption if
he either drives more than a de minim us amount in
interstate commerce or if he reasonably expects to do
so.

Reich, 33 F.3d at 1156-57; Anderson, 334 F. Supp.

2d at 1261.

Because the overwhelming evidence at trial

proved that Defendants' policy was only to seek
volunteers for trips made in interstate commerce, the
Court concludes the possibility of being required to
drive in interstate commerce was so remote that
Defendants' drivers did not have a reasonable
expectation that they would be required to do so.

To

the extent that drivers were required to drive on rare
occasions to Ridgefield, Washington, the Court
concludes such trips were not made in interstate
commerce because they were not for the purpose of testdriving the vehicle and were made without a trailer.

15 - FINDINGS OF FACT AND CONCLUSIONS OF LAW

Even if such trips were considered to be made in
interstate commerce, the roughly 40-mile round trip
made a few times in a year constitutes far less than 1%
of that driver's annual travel (40

~iles

is, for

example, 2% of the low-average (400 miles a day for
five days) drivers' total miles driven in a single
week).

Accordingly, the Court concludes such trips

would constitute a de minimus amount of involvement in
interstate commerce.

Thus, in light of the Court's

duty to construe any exemption from FLSA's overtime-pay
requirements narrowly, the Court concludes Defendants
have not carried their burden on this record to show
that their drivers who only drove within Oregon (with
an occasional trip to Ridgefield, Washington) meet the
Motor Carrier Exception.
8.

With respect to Defendants' drivers who, by
volunteering, drove interstate routes, Defendants have
not provided the Court with any available metric to
determine whether each of those drivers' interstate
routes were more than a de minimus involvement in
interstate commerce.
filed a

As noted, however, the parties

Stipulation (#95) as to Damages with respect

to each of Defendants' drivers (which classifies
Defendants' drivers based on intrastate and interstate

16 - FINDINGS OF FACT AND CONCLUSIONS OF LAW

routes) during the relevant period based on the
possible variations of verdicts the Court could issue.
The Parties, however, did not address this issue
specifically at trial or in their briefs, and the Court
cannot discern from the Stipulation whether the parties
have agreed that the Motor Carrier Exemption applies to
each of the drivers in the ftinterstate drivers· class
of the Stipulation.

Thus, the Court cannot presently

determine whether it must also assess whether
Defendants met their burden to prove each of their
drivers who drove interstate routes drove more than a
de minimus amount in interstate commerce.

CONCLUSION

For these reasons, the Court concludes as follows:
1.

Defendants are a ftprivate motor carrier· under the
Motor Carrier Act, 49 U.S.C. §§ 31502(b), 13102(14);
and

2.

Defendants did not carry their burden to prove their
drivers who drove exclusively intrastate routes in
Oregon (with the exception of trips to Ridgefield,
Washington) meet the Motor Carrier Act exemption to the
Fair Labor Standards Act under 29 U.S.C. § 213(b) (1).

The Court directs the parties to file a joint statement no

17 - FINDINGS OF FACT AND CONCLUSIONS OF LAW

later than April 6, 2012, to clarify the scope of the Stipulation

(#95) as to Damages with respect to Defendants' interstate
drivers in accordance with these Findings of Fact and Conclusions
of Law and, to the extent possible, to set out the damages amount
to which Plaintiff is entitled according to the Stipulation (#95)
of the parties and in light of these Findings of Fact and
Conclusions of Law.

Accordingly, the Court reserves the

authority to make additional findings of fact and conclusions of
law and defers resolution of the remaining damages issues,
including the applicability of liquidated damages under FLSA,
pending the supplemental submission of the parties.

After

consideration of that submission, the Court will issue a verdict.
IT IS SO ORDERED.
DATED this 16 th day of March, 2012.

ANNA J. BROWN
United States District Judge

18 - FINDINGS OF FACT AND CONCLUSIONS OF LAW