Tsouris v. Environmental Systems Corporation et al
Filing
89
MEMORANDUM AND ORDER; defendant's objection 88 to the Report and Recommendation is OVERRULED. The Report and Recommendation 87 is AFFIRMED, with plaintiff AWARDED a total of $6,916.20 in damages, such amount representing the overtime compensation owed to plaintiff, plus prejudgment interest. Signed by District Judge Thomas A Varlan on 3/28/12. (ADA)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF TENNESSEE
AT KNOXVILLE
WARREN GRANT,
Plaintiff,
v.
SHAW ENVIRONMENTAL, INC.,
Defendant.
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No.:
3:08-CV-350
(VARLAN/SHIRLEY)
MEMORANDUM AND ORDER
This civil action is before the Court on the Report and Recommendation (the “R&R”)
[Doc. 87], entered by United States Magistrate Judge C. Clifford Shirley on March 1, 2012.
In the R&R, Magistrate Judge Shirley found that plaintiff, Warren Grant, had demonstrated
his entitlement to a total of $6,916.20 in damages, an amount representing $5,550.46 in
overtime compensation, plus $1,365.74 in prejudgment interest at a rate of 5.01%,
compounded. Defendant, Shaw Environmental, Inc., has filed an objection [Doc. 88] to the
R&R.
For the reasons that follow, defendant’s objection [Doc. 88] will be OVERRULED,
the R&R [Doc. 87] will be AFFIRMED, and plaintiff AWARDED a total of $6,916.20 in
damages.
I.
Standard of Review
The Court conducts a de novo review of the portions of the magistrate judge’s report
and recommendation to which a party objects unless the objections are frivolous, conclusive,
or general. See 28 U.S.C. § 636(b)(1); Fed. R. Civ. P. 72(b)(3); Smith v. Detroit Fed’n of
Teachers, Local 231, 829 F.2d 1370, 1373 (6th Cir. 1987); Mira v. Marshall, 806 F.2d 636,
637 (6th Cir. 1986). The Court “may accept, reject, or modify, in whole or in part, the
findings or recommendations” made by the magistrate judge. 28 U.S.C. § 636(b)(1).
II.
Relevant Background
This action involves plaintiff’s claims for unlawful violations of § 216(b) of the Fair
Labor Standards Act, 29 U.S.C. §§ 201, et seq. (the “FLSA”). A bench trial was conducted
before the undersigned on August 8, 2011. On January 17, 2012, the Court issued a
memorandum opinion and order, dismissing plaintiff’s claims against defendant, The Shaw
Group, Inc., entering judgment in favor of plaintiff and against defendant for unpaid
compensation under the FLSA for the two years prior to the filing of plaintiff’s complaint,
and finding that plaintiff is not entitled to liquidated damages. The Court also directed the
parties to submit their respective computation of damages in accordance with the Court’s
decision so that an appropriate judgment could be entered [Id., pp. 33-34]. Plaintiff
submitted his damages computation [Doc. 82], defendant submitted a memorandum in
opposition [Doc. 83], and plaintiff submitted a reply [Doc. 84]. The Court referred the matter
to the magistrate judge [Doc. 85], who held a hearing on February 23, 2012 [Doc. 86]. On
March 1, 2012, Magistrate Judge Shirley issued the R&R [Doc. 87]. On March 15, 2012,
defendant submitted a timely objection [Doc. 88].
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III.
Analysis
As noted above, the R&R recommends that plaintiff be awarded $6,916.20 in
damages, representing overtime compensation plus prejudgment interest. Defendant objects
to this finding and damages calculation. Defendant asserts that plaintiff is not entitled to
prejudgment interest because he failed to comply with Federal Rule of Civil Procedure
26(a)(1). Defendant also objects to the R&R’s findings that defendant was not prejudiced
by plaintiff’s lack of disclosure and that prejudgment interest would be calculated for the
period of time in which this case was stayed. Last, defendant argues that plaintiff is not
entitled to any damages at all.
A.
Prejudgment Interest
In McClanahan v. Mathews, 440 F.2d 320 (6th Cir. 1971), the United States Court of
Appeals for the Sixth Circuit found that if a court determines that a plaintiff is not entitled
to liquidated damages under the FLSA, the court “then . . . must award interest on back pay
from the date the claims accrued.” Id. at 326. See Schneider v. City of Springfield, No. C-396-62, 2000 WL 988279, at *3 n.7 (S.D. Ohio Mar. 30, 2000). Following the bench trial of
this case, the Court determined that because defendant had met its burden of proving that its
conduct was in good faith, plaintiff was not entitled to an award of liquidated damages [Doc.
81, ¶ 40]. Defendant now contends that plaintiff failed to comply with the requirement of
Rule 26(a)(1)(A)(iii) that a party provide “a computation of each category of damages
claimed” to the other parties, Fed. R. Civ. P. Rule 26(a)(1)(A)(iii), and that under Rule
37(c)(1), plaintiff should not be permitted to recover prejudgment interest. Fed. R. Civ. P.
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37(c)(1) (stating that, “[i]f a party fails to provide information or identify a witness as
required by Rule 26(a) or (e), the party is not allowed to use that information or witness to
supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially
justified or is harmless”).
While the magistrate judge noted plaintiff’s failure to make the proper Rule
26(a)(1)(A)(iii) disclosure, Judge Shirley found the failure to be harmless and that plaintiff
should not be denied prejudgment interest as a Rule 37(c)(1) sanction because defendant was
on notice that plaintiff was seeking prejudgment interest, as indicated by plaintiff’s inclusion
in his complaint of a prayer for relief in the form of “liquidated damages and/or prejudgment
interest” [Doc. 1, pp. 7-8], and because plaintiff had disclosed a damages computation to
defendant on June 22, 2011. Judge Shirley also found that defendant had not demonstrated
the existence of prejudice flowing from plaintiff’s failure to disclose. In objecting to the
R&R, defendant submits that while plaintiff did disclose a damages computation on June 22,
2011, that disclosure made no mention of prejudgment interest or a method for determining
prejudgment interest [see Doc. 88-1].
The Court has reviewed defendant’s submission regarding plaintiff’s June 22, 2011
disclosure and defendant’s assertion that plaintiff intentionally misled the Court by putting
the following in his reply brief:
In fact, on June 22, 2011, based on Defendant’s own records, Plaintiff
provided Defendant the same calculations it provided to the Court
in its January 24, 2012 calculations submission. The June 22, 2011
calculations also included damage calculations based on a finding of
willfulness and liquidated damages. While [the damage calculation]
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did not include calculations for prejudgment interest, such calculations
in any case are based on the amount of time that has elapsed between
the date in which Plaintiff was initially entitled to be paid overtime and
the date of the Court’s decision (which Plaintiff could not possibly
known in advance) and thus they are constantly changing, making it
impossible to provide in advance.
[Doc. 84, p. 2 (emphasis and italics in original)]. While the Court has noted the emphasized
statements in plaintiff’s reply and the June 22, 2011 email from plaintiff’s counsel containing
the damages calculation [Doc. 88-1], the Court declines to view plaintiff’s statements as
statements made with the intent to misled the Court, noting that plaintiff did qualify, however
inartfully, his emphasized statements by noting that his damages calculation “did not include
calculations for prejudgment interest” [Doc. 84, p. 2]. Thus, while the Court agrees with
defendant that plaintiff’s June 22, 2011 disclosure neither mentions prejudgment interest nor
provides a computation for how such interest should be determined, the Court is in agreement
with the magistrate judge that plaintiff’s complaint [Doc. 1, pp. 7-8], and the Sixth Circuit’s
statement in McClanahan directing district courts to award either prejudgment interest or
liquidated damages, put defendant on notice to consider the effects of an award of
prejudgment interest in connection with defendant’s pretrial evaluations of the case,
including settlement negotiations and offers of judgment [see Doc. 87, p. 7]. The Court also
notes that an important part of plaintiff’s case in the trial of this matter was that he was
seeking liquidated damages, an amount plaintiff did include in his June 22, 2011 damages
calculation.
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Thus, the Court finds this is not a case where plaintiff completely failed to plead
prejudgment interest or surprised defendant with a request for prejudgment interest.1 While
defendant has submitted several cases in which district courts imposed various sanctions for
failure to comply with Rule 26(a) disclosures, the Court has not been presented with a FLSA
case in which prejudgment interest was totally disallowed because of a failure to comply with
a Rule 26(a) disclosure. The Court also finds that Jordan v. City of Cleveland, No. 1:02 CV
1280, 2004 WL 5499506 (N.D. Ohio Feb. 3, 2004), does not demand the relief defendant
seeks. In Jordan, which addresses a motion for reconsideration of a motion in limine in a
Title VII retaliation case, the district court noted that while the plaintiff had argued that the
defendant should have known about the plaintiff’s various theories of recovery, the plaintiff
had never specified the basis for his theory of recovering economic damages, and that
allowing the plaintiff to recover for such damages would defeat the purpose of Rule
26(a)(1)(C), thus surprising the defendant at trial. Id. at *3. In this case, however, plaintiff
stated in his complaint that he was seeking prejudgment interest and defendant has not shown
that it was “surprised” by plaintiff’s request.
Furthermore, as noted by Judge Shirley, the discovery period in this case progressed
by way of a unique procedural posture with no scheduling order setting forth a discovery
deadline. While this does not excuse compliance with Rule 26(a) disclosures, the Court
agrees with the magistrate judge that this circumstance weighs against a Rule 37(c)(1)
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Plaintiff pled prejudgment interest in his complaint [Doc. 1]. This request was repeated in
plaintiff’s amended complaint [Doc. 39] and in plaintiff’s second amended complaint [Doc. 69].
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sanction against plaintiff. Finally, the Court disagrees with defendant’s assertion that
plaintiff should not receive prejudgment interest for the time period in which this case was
stayed. While defendant asserts that this case was stayed upon plaintiff’s request, the Court
notes that the stipulation [see Docs. 18, 19], entered into the record of this case provides that
the stay was pursuant to a joint agreement by the parties. Thus, for this reason and the
reasons given in the R&R, the Court declines to use the joint agreed-to stay of this case as
a reason to disallow an award of prejudgment interest.
In sum, the Court declines to deny plaintiff’s request for prejudgment interest in light
of the foregoing reasons and the Sixth Circuit’s discussion in McClanahan of the
“compelling reasons why pre-judgment interest should be recoverable where, in its
discretion, the district court has awarded less than the maximum amount of liquidated
damages.” Id., 440 F.2d at 326. Accordingly, defendant’s objection to prejudgment interest
will be OVERRULED.
B.
Damages
Defendant also “reasserts” its position that plaintiff is not entitled to any damages
because the proper overtime rate of pay in a fixed salary situation is 50% of the employer’s
rate of pay, which is approximately half of what plaintiff has already been paid for overtime
[Doc. 88, pp. 5-6]. While defendant argues that it does not intend this argument to be a
request for reconsideration of the Court’s January 17, 2009 opinion [Doc. 81], and the Court
does not treat it as such, defendant’s objection to this portion of the R&R will also be
OVERRULED given the Court’s previous finding that defendant did not met its “burden of
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demonstrating a clear mutual understanding between the parties that plaintiff was to be paid
a fixed weekly salary regardless of the number of hours he worked per week.” [Id., ¶ 25].
Defendant has not presented the Court with a reason to conclude otherwise, or a reason to
find that the fluctuating workweek method of compensation applies regardless of whether
the employer has met his burden of demonstrating that the parties had a “clear mutual
understanding.” See Cowan v. Treetop Enterprises, 163 F. Supp. 2d 930, 941 (M.D. Tenn.
2001) (citation omitted); see also 29 C.F.R. § 778.114(a).
IV.
Conclusion
For the reasons stated herein and after careful review of the matter, defendant’s
objection [Doc. 88] to the R&R is OVERRULED. The R&R [Doc. 87] is AFFIRMED,
with plaintiff AWARDED a total of $6,916.20 in damages, such amount representing the
overtime compensation owed to plaintiff, plus prejudgment interest.
IT IS SO ORDERED.
s/ Thomas A. Varlan
UNITED STATES DISTRICT JUDGE
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