McCarragher et al v. The Ryland Group, Inc. et al
Filing
46
MEMORANDUM AND OPINION granting in part denying in part 34 MOTION to Certify Class. Counsel for Plaintiffs and The Ryland Group, Inc. are ORDERED to confer and agree, if they can do so in good faith, upon the content of the Proposed Notice. Class member contact information and objections to Proposed Notice due by 10/22/12.(Signed by Judge Gregg Costa) Parties notified.(arrivera, )
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
GALVESTON DIVISION
MARGERY MCCARRAGHER, et al, §
§
§
Plaintiffs,
§ CIVIL ACTION NO. 3-11-55
VS.
§
THE RYLAND GROUP, INC., et al, §
§
Defendants.
§
MEMORANDUM OPINION AND ORDER
Thirteen current and former salespersons of new homes have filed suit
against their employer, The Ryland Group, Inc., and one of its Texas-based
subsidiaries, Ryland Homes of Texas, Inc (collectively, “Ryland”). They
allege that Ryland, by paying them only commissions, violated the minimum
wage and overtime provisions of the Fair Labor Standards Act (“FLSA”).
Ryland contends that Plaintiffs were properly classified as exempt
employees under the FLSA’s “Outside Sales Exemption.”
Plaintiffs now seek conditional certification so they can provide
nationwide notice of this lawsuit to “onsite” salespersons employed by
Ryland and its subsidiaries over the three years preceding the filing of this
lawsuit. This Court has considered the arguments of counsel, the applicable
authorities, and the record in this case, and now GRANTS IN PART and
DENIES IN PART Plaintiffs’ motion for conditional certification.
1
I.
BACKGROUND
Ryland is a major homebuilding company that builds and sells new
homes in many states nationwide.
It consists of a parent company,
Defendant The Ryland Group, Inc., and a large number of subsidiaries. One
of those subsidiaries is nonparty RH of Texas Limited Partnership, of which
another subsidiary, Defendant Ryland Homes of Texas, Inc., is the general
partner.
Ryland builds homes as part of planned communities that consist of a
large number of individual home plots as well as some community features
and neighborhood amenities. It employs salespersons, each of whom are
assigned to a particular Ryland home community. Salespersons are assigned
to work out of temporary sales offices located in the Ryland home
communities. These offices are typically housed within or adjacent to one of
the communities’ model homes. Salespersons work from the sales offices to
sell new homes to potential customers who visit their assigned community.
Plaintiffs allege that salespersons are also responsible for selling mortgages
provided by a Ryland affiliate.
As Ryland’s declarations and admissions show, its salespersons
generally have similar duties nationwide.
Salespersons are primarily
responsible for making sales by taking potential homebuyers on tours of the
2
model homes, vacant home sites, and neighborhood amenities of new
Ryland communities.
Salespersons also complete paperwork in the
temporary sales office, contact potential homebuyers from the office via
telephone and the internet, and perform a variety of miscellaneous duties.
Salespersons
occasionally
go
to
locations
outside
their
assigned
communities to network, distribute promotional materials, attend sales
meetings, or perform opposition research.
Plaintiffs allege that Ryland salespersons generally work in excess of
40 hours per week, and normally work weekends.
Ryland pays its
salespersons on a commission-only basis. Salespersons are paid a small
salary during the first several months of employment, but afterwards are
paid only commission, with no base salary or any set wages or overtime,
even if they fail to sell any homes. Instead of paying a minimum wage in
such circumstances, Ryland allegedly allows its salespersons to take a draw,
essentially a loan, against future commissions. Through its subsidiaries,
Ryland allegedly employs hundreds of these salespersons.
Plaintiffs are current and former employees of Ryland that work in the
vicinity of Houston, Texas. They filed this suit in January 2011. In August
2011, subsequent to Judge Hoyt’s dismissal of a similar FLSA case filed
against another large homebuilder, see Edwards v. KB Home, Civil Action
3
No. G-11-240, 2011 WL 3270250, at *4 (S.D. Tex. July 28, 2011), Ryland
filed a motion to dismiss pursuant to Federal Rule of Civil Procedure
12(b)(6). Ryland contended that two Department of Labor opinion letters
interpreting the Outside Sales Exemption to apply to new home salespersons
governed this case so that each individual Plaintiff was properly classified as
exempt from the FLSA’s minimum wage and overtime provisions. See
Docket Entry No. 23, at 4–6 (citing Wage & Hour Opinion Letter FLSA
2007-1 (Jan. 25, 2007); Wage & Hour Opinion Letter FLSA 2007-2 (Jan.
25, 2007)). However, Judge Hoyt reconsidered his order of dismissal in
Edwards and reinstated that case in November 2011. Edwards v. KB Home,
Civil Action No. G-11-240, 2011 WL 7982462, at *1 (S.D. Tex. Nov. 14,
2011). He then denied Ryland’s motion to dismiss in February 2012. The
case was reassigned to this Court in May 2012, and, in June 2012, Plaintiffs
moved to conditionally certify a nationwide collective action.
In support of their motion, Plaintiffs have submitted thirteen
essentially identical declarations, as well as public job postings advertising
onsite salesperson positions with Ryland in different states. Plaintiffs have
also submitted a number of other Ryland documents, including job
descriptions, lists of job expectations, salesperson compensation summaries,
performance evaluations, and a multiple-choice test used to evaluate
4
salesperson knowledge. In opposition, Ryland has produced a declaration
from Tom Jacobs, the President of RH of Texas Limited Partnership’s
Houston Division, as well as the declarations of 38 salespersons from
various Ryland divisions nationwide.
Ryland has also submitted
declarations made by five of the Plaintiffs.
II.
LEGAL STANDARD
Under the FLSA, nonexempt employees must be paid a legally
prescribed minimum hourly wage. 29 U.S.C. § 206(a)(1). In addition, those
that work more than 40 hours per regular workweek must be paid “time and
a half” overtime compensation. Id. § 207(a). The FLSA creates a private
right of action pursuant to which employees may sue their employers to
recover unpaid minimum wages and overtime. See id. § 216(b).
Employees who bring suit under the FLSA may do so individually or
as a collective action on “behalf of . . . themselves and other employees
similarly situated.” Id. Unlike traditional Rule 23 class actions, FLSA
collective actions operate on an “opt-in” basis in which potential class
members must give affirmative notice of their consent to join the suit. See
Mooney v. Aramco Servs. Co., 54 F.3d 1207, 1212 (5th Cir. 1995), overruled
on other grounds by Desert Palace, Inc. v. Costa, 539 U.S. 90 (2003). The
collective action tool allows plaintiffs “the advantage of lower individual
5
costs to vindicate rights by the pooling of resources.” Hoffman-La Roche
Inc. v. Sperling, 493 U.S. 165, 170 (1989).
Of course, because FLSA
collective actions are “opt-in,” these benefits are only available if
“employees receiv[e] accurate and timely notice concerning the pendency of
the collective action, so that they can make informed decisions about
whether to participate.” Id. Notice to putative class members, however, will
only issue if a collective action is conditionally certified by the district court.
McKnight v. D. Hous., Inc., 756 F. Supp. 2d 794, 800 (S.D. Tex. 2010).
District courts have discretion whether to certify proposed collective
actions because section 216(b) gives them “the requisite procedural authority
to manage the process of joining multiple parties in a manner that is
orderly[][and] sensible.”
Hoffman-LaRoche, 493 U.S. at 170.
District
courts in the Fifth Circuit generally exercise this discretion by following the
“two-step ad hoc method” commonly known as the Lusardi approach.
Falcon v. Starbucks Corp., 580 F. Supp. 2d 528, 534 (S.D. Tex. 2008)
(citing Mooney, 54 F.3d at 1213); see McKnight, 756 F. Supp. 2d at 800
(citing Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987)). The two
steps of the Lusardi approach are the “notice stage” and the “decertification
stage.” In re Wells Fargo Wage and Hour Emp’t Practices Litig. (No. III),
No. H-11-2266, 2012 WL 3308880, at *19 (S.D. Tex. Aug. 10, 2012). At
6
the notice stage, the district court must determine whether to conditionally
certify the class and issue notice to the putative class members. See Falcon,
580 F. Supp. 2d at 534; Richardson v. Wells Fargo Bank, N.A., No. 4:11-cv00738, 2012 WL 334038, at *1 (S.D. Tex. Feb. 2, 2012). Then, if a class is
conditionally certified, notice may issue and the action remains a collective
one throughout discovery. McKnight, 756 F. Supp. 2d at 802. At the
decertification stage, which usually takes place only after discovery is nearly
complete, the defendant may move to “decertify” the class. Id. District
courts do not decide the merits of the parties’ claims or defenses at either
stage. Id.
In deciding whether to permit notice to other potential plaintiffs, this
Court should consider only the pleadings and any other affidavits or related
evidence that has been submitted. Mooney, 54 F.3d at 1213–14. The named
plaintiffs must “make . . . a minimal showing that putative class members
are similarly situated to the plaintiff in relevant respects given the claims and
defenses asserted.” Richardson, 2012 WL 334038, at *2 (quotation marks
and citations omitted). This standard is “fairly lenient” and “typically results
in conditional certification of a representative class.” Mooney, 54 F.3d at
1214 (quotation marks omitted).
7
The “key consideration” in determining whether the plaintiffs have
satisfied this standard is that they must show “substantial allegations that
potential members were together the victims of a single decision, policy, or
plan.” Richardson, 2012 WL 334038, at *2 (quoting McKnight, 756 F.
Supp. 2d at 801) (quotation marks omitted). In making this determination,
the district court should consider whether there is evidence that the
individual plaintiffs had similar “factual and employment settings” and
whether there was a “common policy or plan” that affected the potential
plaintiffs. Id. (citing Hardemon v. H & R Block E. Enters., No. 11-20193CIV, 2011 WL 3704746, at *3 (S.D. Fla. Aug. 23, 2011); Russell v. Ill. Bell
Tel. Co., 575 F. Supp. 2d 930, 937 (N.D. Ill. 2008)). Even at the notice
stage, conditional certification “should be denied if the action arises from
circumstances purely personal to the plaintiff, and not from any generally
applicable rule, policy, or practice.”
Id. (citation and quotation marks
omitted). The fundamental inquiry is whether the plaintiffs show “some
identifiable facts or legal nexus that bind the claims so that hearing the cases
together promotes judicial efficiency.” McKnight, 756 F. Supp. 2d at 801
(quoting Barron v. Henry Cnty. Sch. Sys., 242 F. Supp. 2d 1096, 1103 (M.D.
Ala. 2003)) (brackets omitted).
8
Ryland advocates for the “more exacting level of scrutiny” that is
sometimes applied when extensive discovery has taken place prior to the
motion for conditional certification. Richardson, 2012 WL 334038, at *2
(citing Hardemon, 2011 WL 3704746, at *2).
However, under the
circumstances, the Court does not believe that Plaintiffs should be held to a
higher standard. Though Ryland correctly points out that Plaintiffs did not
file their motion for conditional certification until fourteen months after the
initial scheduling conference, that ignores the fact that discovery was
delayed while the Court considered Ryland’s motion to dismiss. Moreover,
discovery thus far has been limited to “written discovery requests,” and
neither party has submitted any deposition testimony. Docket Entry No. 43,
at ¶ 5; cf. Richardson, 2012 WL 334038, at *2 (declining to apply the
heightened standard even though deposition testimony and other evidence
had been placed in the record). Because the mere “fact that some discovery
has been conducted does not increase the plaintiffs’ burden at this first,
conditional certification stage,” McKnight, 756 F. Supp. 2d at 802, the Court
will analyze Plaintiffs’ motion using the ordinary Lusardi standard. 1
1
To the extent that Ryland argues that the Supreme Court’s decision in Wal-Mart Stores,
Inc. v. Dukes, 131 S. Ct. 2541 (2011), affects the standard used in the conditional
certification process, the majority of Courts addressing the issue have held that Dukes is
inapplicable to FLSA collective actions. See In re Wells Fargo, 2012 WL 3308880, at
*23 (citing cases). This Court noted reasons why Dukes does not affect FLSA cases in its
9
III.
DISCUSSION
Plaintiffs argue that the evidence they have presented satisfies their
burden under Lusardi to make a “minimal showing” that Ryland
salespersons have similar job duties and pay provisions nationwide. Ryland
primarily argues that collective action treatment is not appropriate because
individualized issues would determine whether each putative class member
qualified for the Outside Sales Exemption. Many of the issues and evidence
presented in this case parallel those discussed in this Court’s recent ruling in
Edwards, which authorized notice of a nationwide collective action of all
onsite salespersons employed by one of Ryland’s competitors, KB Home.
Edwards v. KB Home, No. 3:11-cv-240, Docket Entry No. 69 (S.D. Tex.
Sept. 25, 2012). Because much of the analysis in that ruling applies equally
here, the Court incorporates it in full and will only briefly review why notice
is warranted. However, Ryland does raise a separate argument not presented
to this Court in Edwards: that the propriety of certification for Plaintiffs’
overtime and minimum wage claims should be examined separately, and that
there are particular weaknesses with respect to their minimum wage claim.
The Court agrees that it should separately assess whether each of Plaintiffs’
claims meets the Lusardi standard, and thus will address each in turn. Cf.
opinion in Edwards. See Edwards v. KB Home, No. 3:11-cv-240, Docket Entry No. 69,
at 18 & n.6 (S.D. Tex. Sept. 25, 2012).
10
Romero v. H.B. Auto. Grp., Inc., No. 11 Civ. 386(CM), 2012 WL 1514810,
at *10–15 (S.D.N.Y. May 1, 2012) (examining a plaintiff’s request for
FLSA conditional certification of an overtime and minimum wage class on a
claim-by-claim basis).
A.
Plaintiffs’ Overtime Claim
A review of the declarations submitted by the parties makes clear that
Ryland’s salespersons have similar duties nationwide and thus are similarly
situated with respect to their claim for unpaid overtime. They sell homes
while working from temporary sales offices in Ryland communities. They
do this by showing homes, lots, and neighborhood amenities to potential
customers, by performing administrative work in the sales offices, and by
completing minor marketing and promotion tasks outside the communities.
And they are all paid on a commission-only basis even though they allegedly
work more than 40 hours per week. 2
Just as in Edwards, the minor differences between the salespersons’
methods of selling homes are not relevant to the Lusardi analysis. As this
Court noted, “[t]he distinctions among salespersons that [Ryland]
highlights—e.g., how much time they spend outside the sale office showing
2
Indeed, all of these facts other than the number of hours that salespersons work are
expressly admitted in Ryland’s response, in which it states that they are true with respect
to its various subsidiaries nationwide. See Docket Entry No. 38, at 3–15 & n.1.
11
homes, how often they engage in promotional activities, how many model
homes they show each potential buyer, and whether or not they highlight the
neighborhoods’ communal amenities to potential buyers—reflect the
unsurprising fact that salespersons use different sales tactics and have
varying levels of success, but those different tactics do not affect [Ryland’s]
classification that they all fall under the Outside Sales Exemption.”
Edwards, No. 3:11-cv-240, Docket Entry No. 69, at 16. Ryland treats its
salespersons as “one homogenous group for purposes of the FLSA,” and
that, along with the evidence and Ryland’s admissions, is sufficient to
demonstrate that the putative class members are similarly situated at the
notice stage.
Id. at 15 (quoting Delgado v. Ortho-McNeil, Inc., No.
SACV07-263CJCMLGX, 2007 WL 2847238, at *2–3 (C.D. Cal. Aug. 7,
2007)).
The argument Ryland made in its motion to dismiss supports this
conclusion. In that motion, in arguing that all Plaintiffs were exempt outside
salespersons, Ryland stated that “Plaintiffs’ job duties as Ryland sales
counselors were nearly identical to the duties specifically identified in the
[Department of Labor] opinion letters as those of an exempt employee.” See
Docket Entry No. 23, at 5. This statement acknowledges that Plaintiffs’
duties were similar enough that all Plaintiffs fell within the factual pattern
12
presented in the Department of Labor’s opinion letters. This admission of
similarity bolsters the conclusion that Ryland’s salespersons are similarly
situated. Of course, Ryland may be able to win on the merits at summary
judgment by arguing that the opinion letters control this case, but for now,
its admission of similarity bolsters the Plaintiffs’ case for notice.
B.
Plaintiffs’ Minimum Wage Claim
Ryland’s separate challenge to Plaintiffs’ ability to meet the
conditional certification standard for their minimum wage claims has more
force. Although Plaintiffs have provided a factual basis for their overtime
claim by submitting declarations uniformly stating that they “regularly
worked more than 40 hours per week, and [were] not paid any overtime
compensation,” Plaintiffs have not made any similar showing with respect to
their minimum wage claim. E.g., Docket Entry No. 34-1, at ¶ 12. Indeed,
Plaintiffs fail to show that they have similar minimum wage claims among
themselves, let alone that they are similarly situated with all other
nationwide onsite salespersons when it comes to such claims. Plaintiffs state
only that they were paid no “guaranteed minimum wage,” but not that their
commission payments fell below the minimum wage. Id.
The evidence before the Court provides no basis for estimating the
percentage of onsite salespersons that are likely to have claims that their
13
commissions fell below the minimum wage for the relevant pay periods.
Moreover, a nationwide class of all Ryland salespersons would likely
include some of the highest-performing salespersons (as they would have
higher damages if the overtime claims succeed), who are unlikely to have
strong minimum wage claims. Because there is nothing before the Court
that allows it to conclude that onsite salespersons are similarly situated with
respect to the minimum wage claim, the Court declines to authorize
nationwide notice on that claim. See Romero, 2012 WL 1514810, at *10–11
(denying a motion to conditionally certify a minimum wage class of auto
salespersons because there was only evidence that a single plaintiff had
failed to receive the minimum wage).
IV.
ORDER
For the foregoing reasons, IT IS ORDERED:
Plaintiffs’ Motion for FLSA Conditional Certification (Docket Entry
No. 34) is GRANTED IN PART and DENIED IN PART.
Accordingly,
the
following
collective
action
class
is
CONDITIONALLY CERTIFIED: all onsite salespersons employed in the
United States by Ryland or any of its subsidiaries from January 24, 2008
until the present and who did not receive overtime pay for any hours
worked in excess of 40 hours per workweek during that time period.
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Counsel for Plaintiffs and Ryland are ORDERED to confer and
agree, if they can do so in good faith, upon the content of the Proposed
Notice. The Proposed Notice should be modified to clearly reflect that the
class only includes “onsite” salespersons, that is, those salespersons that
were assigned to work out of temporary sales offices in Ryland’s home
communities.
Ryland must file any objections it may have to the Proposed Notice by
October 22, 2012, and, by that date, it must provide Plaintiffs with the
names, current or last-known physical and e-mail addresses, telephone
numbers, and dates of employment of the members of the collective action
class.
IT IS SO ORDERED.
SIGNED this 11th day of October, 2012.
______________________________
Gregg Costa
United States District Judge
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