Faludi v. US Shale Solutions LLC

Filing 34

MEMORANDUM OPINION AND ORDER granting in part and denying in part 14 MOTION for Summary Judgment, denying 18 MOTION for Leave to File Amended Complaint, denying 19 MOTION for Partial Summary Judgment (Signed by Judge Sim Lake) Parties notified. (aboyd, 4)

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United States District Court Southern District of Texas ENTERED November 30, 2017 IN THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF TEXAS HOUSTON DIVISION JEFF FALUDI David J. Bradley, Clerk § § § § I Plaintiff, v. § § § § § US SHALE SOLUTIONS LLC, Defendant. CIVIL ACTION NO. H-16-3467 MEMORANDUM OPINION AND ORDER Plaintiff Jeff Faludi ("Faludi" or "Plaintiff") brought this action against defendant US Shale Solutions LLC "Defendant") asserting claims for violation provisions of the Fair Labor Standards Act of ("US Shale" or the overtime ( "FLSA") . 1 Pending before the court are Plaintiff's Motion for Leave to Amend His Complaint ("Plaintiff's Motion to Amend") (Docket Entry No. 18) , Defendant's Motion for Summary Judgment ("Defendant's MSJ") (Docket Entry No. 14), and Plaintiff's Motion for Partial Summary Judgment ("Plaintiff's MPSJ") (Docket Entry No. 19). For the reasons stated below, Plaintiff's Motion to Amend and Motion for Summary Judgment will be denied, and Defendant's Motion for Summary Judgment will be granted in part and denied in part. 1 See Plaintiff's Entry No. 1. Original Complaint ("Complaint") , Docket I. A. Factual and Procedural Background Factual Background Plaintiff Jeffrey Faludi received a Doctor of Jurisprudence in 1998. 2 After he graduated from law school, Faludi worked as an attorney for several years as an associate and partner at a law firm, and then as in-house counsel for oil and gas companies such as Willbros International. 3 Though Faludi was licensed to practice in Texas and Louisiana, his law licenses were suspended by August of 2014. 4 US Shale was established in August of 2014 in Houston, Texas, to provide strategic solutions to the oil and gas industry. 5 Faludi and the CEO of US Shale, Jerrit Coward, were colleagues at Willbros International. 6 In August of 2014 US Shale became the parent company of four subsidiaries that provide site planning, construction, and maintenance support operations. 7 Jerrit Coward 2 See Faludi CV, Exhibit B-3 to Defendant's MSJ, Docket Entry No. 14-3, pp. 83-90. Page citations throughout this Memorandum Opinion and Order are to the pagination imprinted by the federal court's electronic filing system at the top and right of the document. 3 Id. 4 See Oral and Videotaped Deposition of Jeff Faludi ("Faludi Deposition"), Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 4 line 16 - p. 5 line 5. 5 See Declaration of Joseph Rozelle ("Rozelle Declaration") , Exhibit C to Defendant's MSJ, Docket Entry No. 14-4. 6 See Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 21 line 22 - p. 22 line 7. 7 See Rozelle Declaration, Exhibit C to Defendant's MSJ, Docket Entry No. 14-4. -2- offered Faludi a consulting position to help US Shale integrate its health and risk benefits between US Shale and the four companies it had purchased. 8 contract Faludi agreed to work at US Shale and signed a entitled the Services Agreement Independent Contractor Master Consulting (the "Agreement") on November 6, 2014. 9 The Agreement stated that Faludi "has been engaged to provide services to US Shale benefits." 10 Solutions, Inc., in helping it obtain employee The Agreement also stated that US Shale would pay Faludi $1,000 for each day he performed services in Houston and $1,350 for each day he performed services outside of Houston. 11 US Shale provided Faludi with an office and reimbursed him for his computer, cell phone, and work-related travel expenses. 12 The Agreement required Faludi to provide US Shale with invoices that identified the hours or days he performed services. 13 Faludi 8 See Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 22 lines 7-21. 9 See id. at 23 line 6 - 24 line 20; Independent Contractor Master Consulting Services Agreement ("Agreement"), Exhibit B-4 to Defendant's MSJ, Docket Entry No. 14-3, pp. 92-105. 10 See Agreement, Exhibit B-4 to Defendant's MSJ, Docket Entry No. 14-3, p. 104 (US SHALE 000013). llid. 12 See Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 51 lines 12-16; Agreement, Exhibit B-4 tc Defendant's MSJ, Docket Entry No. 14-3, p. 105 (US SHALE 000014). 13 See Agreement, Exhibit B-4 to Defendant's MSJ, Docket Entry No. 14-3, p. 104 (US SHALE 000013). -3- usually worked in the office five days a week and testified that it would be unusual if he were absent . 14 Faludi submitted the required invoices --many of which listed amounts less than $1,000 per day depending on the amount of time Faludi worked that day. 15 performed various services corporate development, for US IT management, Shale, including Faludi work on administrative and human resource matters, and legal analyses of contracts and settlement negotiations. 16 Faludi represented himself as "General Counsel" of US Shale "multiple times. " 17 Faludi' s annualized compensation was approximately $260,000 during his engagement with US Shale. 18 January of 2016 Versa Capital Management, LLC ("Versa Capital") began providing management services to US Shale. 19 of 2016 a In In early March representative of Versa Capital spoke with Faludi to discuss the possibility of US Shale offering Faludi an executive 14 See Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 8 lines 7-10. 15 See id. at 43 line 9 44 line 11 and 45 lines 3-19; Invoices, Exhibit A-2 to Faludi Declaration, Docket Entry No. 19-1, pp. 28-52. 16 See Declaration of Jeffrey E. ("Jeff") Faludi, Jr. ( "Faludi Declaration"), Exhibit A to Plaintiff's MPSJ, pp. 1-3 ' ' 7, 14; Exhibits B-17 through B-21 and D-1 through D-9 to Defendant's MSJ, Docket Entry Nos. 14-3 and 14-5. 17 See Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 70 lines 9-14. 18 Id. at 33 lines 13-21. 19 See Rozelle Declaration, Exhibit C to Defendant's MSJ, Docket Entry No. 14-4. -4- position, but US Shale decided not to do so. 2 ° Faludi's relation- ship with US Shale ended on March 31, 2016. 21 B. Procedural History Faludi filed a Complaint seeking damages for unpaid overtime wages pursuant to the FLSA. 22 several affirmative In its answer US Shale asserted including defenses, that Faludi was an independent contractor, not an employee, and that if Faludi were an employee he was paid on a salary basis and qualified as a law professional or highly-compensated employee exempt from the FLSA overtime pay requirements. 23 against Texas, us for On January 31, 2017, Faludi filed suit Shale in the 334th District Court of Harris County, breach of contract and tortious interference with contract. filed their Original Answer, against Versa Capital for US Shale and Versa Capital Affirmative Defenses, and Counterclaims in state court on March 13, 2017. US Shale filed its Motion for Summary Judgment in this court on September 6, 2017. 24 Two days later Faludi filed his Motion to 20 See Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14, pp. 125:19-127:3, 129:1-21, 134:16-19. 21 See Declaration, Exhibit A to Plaintiff's MPSJ, p. 12, 22 See Complaint, Docket Entry No. 1, pp. 1, 4-5. 23 ~52. See Defendant's Answer and Affirmative Defenses ("Answer") , Docket Entry No. 4. at 6-7. 24 Defendant's MSJ, Docket Entry No. 14. -5- Amend and his Motion for Partial Summary Judgment. US Shale filed a Response in Opposition to Plaintiff's Motion for Leave to Amend His Complaint. 25 Both parties filed responses in opposition to the other party's summary judgment motions. 26 II. Plaintiff's Motion for Leave to Amend Plaintiff seeks leave to add a claim against us Shale for retaliation under the FLSA because US Shale filed counterclaims against him in state court. 27 Defendant urges the court to deny Plaintiff's Motion to Amend because of delay, the futility of the amendment, Plaintiff's unjustified and the undue prejudice Defendant would suffer if the Motion to Amend is granted. 28 A. Standard of Review If a scheduling order has been entered establishing a deadline for amendments to pleadings, Federal Rule of Civil Procedure 15(a) provides the standard for requests to amend that are filed before 25 Docket Entry No. 22. 26 See Plaintiff's Response to Defendant's Motion for Summary Judgment, Docket Entry No. 20; Defendant's Response to Plaintiff's Motion for Partial Summary Judgment ("Defendant's Response") , Docket Entry No. 21. 27 See Defendants Versa Capital Management, LLC's and US Shale Solutions, LLC's Original Answer, Affirmative Defenses, and Counterclaims, Defendants' Exhibit A to Plaintiff's Motion to Amend, Docket Entry No. 18-1, pp. 12-23. 28 See Defendant's Amended Response in Opposition to Plaintiff's Motion for Leave to Amend His Complaint, Docket Entry No. 23, p. 1. -6- the scheduling order's deadline has expired, and Federal Rule of Civil Procedure 16(b) provides the standard for requests to amend that are filed after the scheduling order's deadline has expired. Marathon Financial Insurance, Inc., RRG v. Ford Motor Co., 591 F.3d 458, 470 (5th Cir. 2009); Fahim v. Marriott Hotel Services, Inc., 551 F.3d 344, 348 (5th Cir. 2008). Plaintiff filed his Complaint on November 22, Entry No. 1); US (Docket Entry No. scheduling (Docket Shale filed 4) . The court held an initial pretrial and conference Control Order 2016 its Answer on December 23, on March 3, (Docket Entry No. 2017, 11). and entered a 2016 Docket The Docket Control Order contained the notation "None" on the lines provided for deadlines to file motions to amend the pleadings and motions to add new parties. The court wrote "None" because Plaintiff's counsel indicated at the pretrial conference that he would need no further amendments or additions to the pleadings. See Breaux v. Tri Star Freight Systems, Inc., Civil Action No. H-16-846, 2016 WL 6581929, at *2 (S.D. Tex. November 7, 2016) ("The 'N/A' notation next to the amendment deadlines on the Scheduling Order indicates that, at the Rule 16 conference, the parties indicated that they would not need to amend their pleadings, pleadings at Nevertheless, September 8, any time Plaintiff 2017. The not that the parties may amend their without filed seeking the court pending leave Motion can understand how -7- do to to so.") . Amend on Plaintiff's counsel would be confused by the entry of "None" and could conclude that the amended court meant that Neither pleadings. Defendant's responses Instead, standard. there consider under Rule to it were Plaintiff's addressed each analyzed the Because 15. no deadlines Motion the for to Amend applicable factors filing Rule nor 16 the court would neither party addressed the requirements under Rule 16 and because of the confusion caused by the "None" entry on the Docket Control Order, the court will apply the more liberal Rule 15 standard. B. Analysis Federal Rule of Civil Procedure 15(a) allows a party to amend its pleading once as a matter of course within 21 days after serving it or within 21 days after service of a responsive pleading or service of Rule 12 (b), 15(a) (1) (A) and (B) (e), or (f) motions. Fed. R. Civ. P. In all other cases Rule 15(a) requires the opposing party's written consent or leave of the court and states, "[t]he court should freely give leave when justice so requires." Id. at (2). Rule 15(a) provides "a strong presumption in favor of granting leave to amend." Financial Acquisition Partners LP v. Blackwell, 440 F.3d 278, 291 (5th Cir. 2006). "A decision to grant leave is within the discretion of the court, although if the court 'lacks a "substantial reason" to deny leave, its discretion "is not broad enough to permit denial."'" Mortgage Co., 50 F.3d 1298, State of Louisiana v. Litton 1302-03 -8- (5th Cir. 1995) (quoting Jamieson By and Through Jamieson v. Shaw, 772 F.2d 1205, 1208 (5th The Supreme Court has identified five factors to Cir. 1985)). consider in complaint: determining (1) whether undue delay, (2) to grant leave to amend a bad faith or dilatory motive, (3) repeated failure to cure deficiencies by previous amendments, (4) undue prejudice to the opposing party, and (5) futility of the amendment. United States ex rel. Steury v. Cardinal Health, Inc., 625 F.3d 262, 270 (5th Cir. 2010) (citing Foman v. Davis, 83 S. Ct. 2271 230 (1962)) • 1. Delay Rule 15(a) contains no time limit for permissive amendment but "' [a]t some point[,] time delay on the part of a plaintiff can be procedurally fatal.'" 831, 836 199, 203 (5th Cir. Whitaker v. City of Houston, Texas, 963 F.2d 1992) (5th Cir. 1981). (quoting Gregory v. Mitchell, 634 F.2d "In that situation the plaintiff must meet the burden of showing that the delay was due to oversight, inadvertence, or excusable neglect, a burden which properly shifts to the party seeking to amend where apparent lack of diligence exists." Gregory, 634 F.2d at 203 (internal citations omitted). Where, as here, the defendant has moved for summary judgment before the plaintiff moves for leave to amend, the Fifth Circuit is hesitant to approve an amendment. United States, the See Overseas Inns S.A. P.A. v. 911 F.2d 1146, 1151 (5th Cir. 1990). Fifth Circuit affirmed the district -9- In Overseas court's denial of the motion to amend, reasoning that since the defendant had already filed for summary judgment based on the current pleadings, grant [the plaintiff] "[t]o leave to amend is potentially to undermine the [defendant's] right to prevail on a motion that necessarily was prepared without reference to an unanticipated amended . A party should not, without adequate grounds, be complaint. permitted to avoid summary judgment by the expedient of amending its complaint" Id. The court further noted that one year before the plaintiff filed its motion to amend, summary judgment. Id. the plaintiff moved for "Accordingly, that motion represented 'that the case was fully at issue, that all theories of liability and all defenses had been presented, and that the case was ripe for summary judgment."' Id. quoting Pharo v. Smith, 621 F.2d 656, 664 (5th Cir), reh'g granted cause remanded on other grounds, 625 F.2d 1226 (1980). Although Faludi filed his Motion for Summary Judgment on the same day as his Motion to Amend, the same principles apply. Faludi did not move to amend his Complaint until after Defendant filed its Motion for Summary Judgment and nearly six months after Defendant filed its state-court counterclaim. Plaintiff offers no explana- tion for this delay. 2. Futility (a) Applicable Law "[L]eave to amend need not be granted when it would be futile to do so." F.D.I.C. v. Conner, 20 F.3d 1376, 1385 (5th Cir. 1994) -10- (citation omitted) . survive a Rule "An amendment is futile if it would fail to 12 (b) ( 6) motion." National Collegiate Athletic Ass'n, 2014). 'the Marucci Sports, 751 F.3d 368, 378 L.L.C. v. (5th Cir. "Therefore, we review the proposed amended complaint under same standard Rule 12(b) (6) .'" Id. of legal sufficiency as applies under (quoting Stripling v. Jordan Production Co., LLC, 234 F.3d 863, 873 (5th Cir. 2000). A motion to Procedure 12(b) (6) dismiss pursuant to Federal Rule of Civil for failure to state a claim for which relief may be granted tests the formal sufficiency of the pleadings and is "appropriate when a defendant attacks the complaint because it fails to state a legally cognizable claim." F.3d 158, 161 (5th Cir. 2001), Ramming v. United States, 2 81 cert. United States, 122 S. Ct. 2665 (2002). denied sub nom Cloud v. The court must accept the factual allegations of the complaint as true, view them in a light most favorable to the plaintiff, and draw all reasonable inferences in the plaintiff's favor. Id. "When a federal court reviews the sufficiency of a complaint, before the reception of any evidence either by affidavit or admissions, its task is necessarily a limited one. The issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims." Swierkiewicz v. Sorema N.A., Scheuer v. Rhodes, 94 S. 122 S. Ct. Ct. 1683, 992, 1686 997 (2002) (1974)). (quoting To avoid dismissal a plaintiff must allege "enough facts to state a claim to relief that is plausible on its face." -11- Bell Atlantic Corp. v. Twombly, 127 standard" S. Ct. requires 1955, "more 1974 than an unlawfully-harmed-me accusation." 1937, 1949 (2009) . "Where a This (2007). "plausibility the-defendant- unadorned, Ashcroft v. Iqbal, 129 S. Ct. complaint pleads facts that are 'merely consistent with' a defendant's liability, it 'stops short of the line between possibility and plausibility of "entitlement to relief."'" Id. considering a (quoting Twombly, motion to dismiss 127 S. Ct. district at 1966). courts are When able to consider documents that are attached to a motion to dismiss if they are "referred to in the plaintiff's complaint and are central to the plaintiff's claim." 533, 536 (5th Cir. Scanlan v. Texas A&M University, 343 F.3d 2003) (citing Collins v. Morgan Stanley Dean Witter, 224 F.3d 496, 498-99 (5th Cir. 2000)). (b) Analysis To establish a prima facie case for a Title VII retaliation claim Faludi must activity, (iii) (ii) show that: an adverse " ( i) he employment engaged in a action protected occurred, and there was a causal link between the protected activity and the adverse employment action." Inc., 670 F.3d 644, 657 Parcel Service, Inc., Hernandez v. Yellow Transportation, (5th Cir. 2012) 554 F. 3d 510, 523 (citing Taylor v. United (5th Cir. 2008)). An employment action is "materially adverse" if "it well might have dissuaded a reasonable worker from making or supporting a charge of discrimination." Burlington Northern and Santa Fe Railway Co. v. -12- White, s. Ct. 2405, 2415 126 (2006) (internal quotation marks omitted) . Faludi response alleges to a retaliation. " 29 that FLSA "[t] he lawsuit Although the filing is [] forms expanded beyond merely hiring, Fifth, have held that firing, an a counter-claim clearly actionable in as of actionable conduct have reassignment after Burlington Northern, the of failing to promote, some circuits, employer's and including post-termination counterclaim is not actionable as retaliation under Title VII. Hernandez v. Crawford Building Material Co., 321 F.3d 528, 529 (5th Cir. 2003). In Hernandez the plaintiff sued his employer under Title VII, and his employer brought a counterclaim for theft in its original answer. Id. at 529. complaint to The plaintiff then supplemented his original allege that the employer's counterclaim retaliatory employment action under Title VII. Id. was a The Fifth Circuit recognized that other circuits have allowed a counterclaim to support a retaliation lawsuit, but that "companies and citizens have a constitutional right to file lawsuits, tempered by the requirement that the suits have an arguable basis." Id. at 532 (quoting Scrivner v. Socorro Indep. Sch. Dist., 169 F.3d 969, 972 (5th Cir. 1999) (internal quotations omitted) . given its 29 strict interpretation of The court held that retaliation claims "an See Plaintiff's Motion to Amend, Docket Entry No. 18, p. 3. -13- employer's filing of a counterclaim cannot support a retaliation claim in the Fifth Circuit." Id. at 532-33. After Hernandez the Supreme Court broadened the standard for retaliation claims. But neither specifically the See Burlington Northern, 126 S. Ct. at 2415. Fifth Circuit addressed whether nor Supreme new the the standard Court has allows counterclaim to support a retaliation claim under Title VII. a This court recently held that Hernandez still applies in this circuit. See Madrigal v. WL 4611287, Kleberg County, *5-6 (S.D. Tex. Civil Action No. Sept. 06, 2016) 2:15-345, 2016 (explaining that "[b]ecause cases considering the question have treated Burlington Northern as holding, undermining Hernandez's rationale rather than its Hernandez's holding that filing a counterclaim is not an adverse employment action remains precedent this Court is bound to follow."). Because a counterclaim cannot otherwise support a retaliation claim, Plaintiff has not pled facts sufficient to support a claim for retaliation against US Shale. Plaintiff's proposed amendment would therefore be futile. 3. Prejudice The addition of a new claim for relief at this late date nearly ten months after the Complaint was filed - would needlessly extend the litigation and cause the defendants additional expense. Absent any reasonable explanation from Plaintiff for the cause of his delay or any reasonable basis for the court to conclude that -14- the proposed new retaliation claim would not be futile, the court concludes that allowing the proposed amendment would not only require the court to abandon long-established deadlines, but would also delay the trial and prejudice the defendant. 4. Conclusion Because of Plaintiff's delay, amendment, and the undue the futility of the proposed prejudice it would cause Defendant, Plaintiff's Motion to Amend His Complaint will be denied. 30 III. Motions for Summary Judgment Faludi argues that he was a non-exempt employee under the FLSA as a matter of law and that US Shale violated the FLSA by failing to pay him overtime. 31 us Shale argues that Faludi was an independent contractor not subject to the FLSA, or otherwise was an exempt employee under the FLSA. 32 Faludi and US Shale have both moved for summary judgment. A. Standard of Review Summary judgment is warranted if the movant establishes that there is no genuine dispute as to any material fact and that it is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). 30 Even assuming arguendo the Defendant's state court counterclaim could support Plaintiff's retaliation claim, the court would deny the Motion to Amend because of the Plaintiff's delay and the prejudice to Defendant of allowing an amendment at this late date. 31 See Complaint, Docket Entry No. 1. 32 See Defendant's MSJ, Docket Entry No. 14. -15- An examination material. (1986). of substantive law determines to a facts are Anderson v. Liberty Lobby, Inc., 106 S. Ct. 2505, 2510 Material facts are those facts that outcome of the suit under the governing law." as which material fact exists if the "might affect the Id. A genuine issue evidence is such that a reasonable trier of fact could resolve the dispute in the nonmoving party's favor. Id. at 2511. Where, as here, both parties have moved for summary judgment, both "motions must be considered separately, as each movant bears the burden of establishing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of law." Shaw Constructors v. ICF Kaiser Engineers, 538-39 (5th Cir. 2004). Inc., 395 F. 3d 533, The movant must inform the court of the basis for summary judgment and identify relevant excerpts from pleadings, depositions, answers to interrogatories, admissions, or affidavits that demonstrate there are no genuine Celotex Corp. v. Catrett, 106 S. Ct. 2548, 2553 fact issues. (1986); see also Wallace v. Texas Tech Univ., 80 F.3d 1042, 1046-47 (5th Cir. 1996). If a defendant moves affirmative defense, for summary judgment on the basis of an "it must establish beyond dispute all of the defense's essential elements." Bank of Louisiana v. Aetna U.S. Healthcare Inc., 468 F.3d 237, 241 (5th Cir. 2006). A defendant may also meet its initial burden by pointing out that the plaintiff has failed to make a showing adequate to establish the existence of an issue of material fact as to an essential element of plaintiff's -16- case. Celotex Corp., 106 S. Ct. at 2552. its initial burden, show by affidavits, If the movant satisfies the burden shifts to the nonmoving party to depositions, answers to interrogatories, admissions on file, or other evidence that summary judgment is not Celotex Corp., 106 warranted because genuine fact issues exist. S. Ct. at 2552. In reviewing the evidence "the court must draw all reasonable inferences in favor of the nonmoving party, credibility determinations or weigh the Sanderson Plumbing Products, and it may not make evidence." Reeves Inc., 120 S. Ct. 2097, 2110 v. (2000). But conclusory claims, unsubstantiated assertions, or insufficient evidence will not satisfy the nonmovant' s burden. at 1047. If the nonmovant fails to present specific evidence showing there is a genuine issue for trial, appropriate. Topalian v. Ehrman, Wallace, 8 0 F. 3d summary judgment is 954 F.2d 1125, 1132 (5th Cir. 1992) . B. Analysis The FLSA establishes a general rule that employers must pay overtime wages to employees who work in excess of forty hours during a seven-day workweek. 659, 666 (5th Cir. 2001) See Vela v. City of Houston, 276 F.3d (citing 29 U.S.C. § 207 (a) (1)). A plaintiff alleging a violation of the overtime requirement bears the burden of proving by a preponderance of the evidence that (1) he was in an employment relationship with the defendant, -17- (2) he was engaged in activities within the coverage of the FLSA, worked over forty hours within a workweek without (3) he overtime compensation, and (4) he is owed a definite amount of compensation. 29 U.S.C. § 207(a) (1); Zermeno v. Cantu, No. H-10-1792, 2011 WL 2532904, at *2 (S.D. Tex. June 24, 2011). 1. Employee or Independent Contractor Under the FLSA "the term employed by an employer." 'employee' u.s.c. 29 § means any individual To determine 203 (e) (1). whether a worker qualifies as an employee under the FLSA the court asks whether, as a matter of economic reality, the worker is economically dependent on the alleged employer or is instead in business for himself. Hopkins v. 338, 343 (5th Cir. 2008). exhaustive factors: Cornerstone America, 545 F.3d The court considers the following non- (1) the degree of control exercised by the alleged employer; (2) the extent of the relative investments of the worker and the worker's alleged alleged employer; opportunity employer; for (4) performing the job; and profit the (5) ( 3) or skill the loss and degree is to which the determined by initiative required the in the permanency of the relationship. Thibault v. Bellsouth Telecommunications, Inc., 612 F.3d 843, 846 (5th Cir. 2010); Hopkins, 545 F.3d at 343. determinative economic dependence each factor of the is alleged a tool "No single factor is used to gauge employee [on the the alleged employer] , and each must be applied with this ultimate concept in mind." Hopkins, 545 F.3d at 343 (citations omitted) -18- (emphasis in original) . The contractual designation of the worker independent contractor is not necessarily controlling. 612 as an Thibault, The ultimate determination of whether an F.3d at 845-46. individual is an employee within the meaning of the FLSA is a question of law. Brock v. Mr. W Fireworks, Inc., 814 F.2d 1042, 1045 (5th Cir. 1987). Defendant does not dispute that Plaintiff was not paid overtime compensation or that he was engaged in activities within the coverage of the FLSA, but instead argues that Plaintiff was an independent contractor based on facts supporting all five factors. Defendant argues that it did not control the manner in which and method by which Plaintiff provided services because Faludi worked independently and managed his own workload schedule. 33 and Defendant cites an email from US Shale's Chief Financial Officer and Treasurer to Faludi that lists tasks and writes, accept these missions let me know. " 34 Defendant "[i]f you argues that Plaintiff controlled his opportunity for profit and loss because he could choose to accept projects 35 and that Plaintiff made 33 See Defendant's MSJ, Docket Entry No. 14, p. 15 (citing Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 36 line 11 - p. 37 line 13 and p. 40 line 12 - p. 41 line14). 34 See Email, Exhibit B-5 No. 14-3, p. 107. to Defendant's MSJ, 35 Docket Entry See Defendant's MSJ, Docket Entry No. 14, p. 16 (citing Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 36 line 11 - p. 37 line 13 and p. 40 line 12 - p. 41 line14). -19- investments computer, in his paying business his own by providing continuing investing in home office equipment. 36 his own education phone and expenses, and As to the fourth factor, Defendant argues it gave Faludi certain projects, such as analyzing contracts and evaluating litigation exposure, precisely because of his legal education, experience, and unique skills he could apply to them. 37 Defendant argues that Faludi's job lacked permanency because he performed services for US Shale for about a year and a half and could terminate his employment relationship with 15 days' notice. 38 Defendant argues that Faludi was not economically dependent on US Shale because he was able to pursue other business opportunities while working for US Shale 39 and because he did not seek work after his engagement with US Shale ended. 40 36 See Defendant's MSJ, Docket Entry No. 14, p. 16 (citing Tax Records, Exhibit B-22 and B-23 to Defendant's MSJ, Docket Entry No. 14-3, pp. 161-173). 37 See Defendant's MSJ, Docket Entry No. 14, p. 17 (citing Exhibits D-1 through D-9 of Declaration of Brad Culberson, Exhibit D to Defendant's MSJ, Docket Entry No. 14-5, pp. 1-13; Exhibits B-17 through B-21 to Defendant's MSJ, Docket Entry No. 14-3, pp. 150-160). 38 See Defendant's MSJ, Docket Entry No. 14, p. 17; Agreement, Exhibit B-4 to Defendant's MSJ, Docket Entry No. 14-3, p. 94 (US SHALE 000003). 39 See Defendant's MSJ, Docket Entry No. 14, p. 18 (citing Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 18 lines 8-13). 40 See Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 7 lines 3-22. -20- Plaintiff responds that Defendant's MSJ should be denied and his own MPSJ on the same issue should be granted because the facts show that Faludi was an employee. 41 Faludi argues that he worked full-time under US Shale's controlled schedule; "he went to a US Shale office daily; he had no opportunity to 'lose' money; he was provided an office and reimbursed for his computer, cell phone and work-related travel; and he worked exclusively for US Shale during his tenure with no other source of income." 42 He points out that the Agreement's non-compete clause prohibited him from working for us Shale's competitors worldwide. 43 Although Faludi signed the "Agreement," which stated that "[t]he Consultant shall be an independent contractor • I n44 the contractual designation of a worker as an independent contractor is not necessarily controlling. contract was not reflective Thibault, 612 F.3d at 845-46. of the true relationship If the and the defendant exercised considerable control over the plaintiff, reasonable plaintiff jury was could an conclude employee. that in Because economic Faludi's reality a the Declaration, Plaintiff's MPSJ, Defendant's Exhibits, and Defendant's MSJ raise 41 See Plaintiff's Response to Defendant's Motion for Summary Judgment, Docket Entry No. 20; Plaintiff's MPSJ, Docket Entry No. 19. 42 See Plaintiff's MPSJ, Docket Entry No. 19, p. 6. 43Id. 44 See Agreement, Exhibit B-4 to Defendant's MSJ, Docket Entry No. 14-3, p. 93 (US SHALE 000002). -21- genuine issues of material fact with respect to the five factors the court is to consider in determining whether the plaintiff is an employee or an independent contractor under the economic reality analysis, neither party is entitled to summary judgment. 2. Exemptions Under the FLSA US Shale argues that even if Faludi were an employee, he was exempt as a matter of law under the highly-compensated professional exemption and the practice of law professional exemption. 45 An employee is entitled to overtime compensation unless the employer can prove that the employee falls within one of several statutory exemptions. 2001) . Vela v. City of Houston, 276 F.3d 659, 666 (5th Cir. "[T] he ultimate determination of whether an employe [e] qualifies for an exemption under the FLSA is a question of law." Singer v. City of Waco, Texas, 324 F.3d 813, 818 (5th Cir. 2003) (citing Lott v. Inc., Howard Wilson Chrysler-Plymouth, 326, 331 (5th Cir. 2000)). 203 F.3d "That ultimate determination, however, relies on many factual determinations that can be resolved by a jury." The inquiry into an employee's exempt "intensely factbound and case specific." F.2d 1220, 1226 (5th Cir. 1990). status is Dalheim v. KDFW-TV, 918 Exemptions from the FLSA' s general rule are narrowly construed against the employer, and the application of an exemption is an affirmative defense on which the employer bears the burden of proof. 45 See Allen v. Coil Tubing See Defendant's MSJ, Docket Entry No. 14, pp. 18-19. -22- Services, L.L.C., 755 F.3d 279, 283 (5th Cir. 2014) (citing Songer v. Dillon Resources, Inc., 618 F.3d 467, 471 (5th Cir. 2010)). Under the FLSA "any employee employed in a bona fide . (as such executive, administrative, or professional capacity terms are defined and delimited from time to time by regulations of the Secretary )" [of Labor] overtime pay requirements. are exempt 29 U.S.C. § from the 213 (a) (1). FLSA' s Some highly- compensated employees are also exempt from the FLSA requirements. 29 C.F.R § 541.601. "Job titles are not determinative. Rather, it is the employee's salary and primary duties that determine his or her qualification as 541.700(a) ." an exempt employee. 29 C.F.R. §§ 541.2, Ferrara v. 4JLJ, LLC, 150 F. Supp. 3d 813, 816 (S.D. Tex. Jan. 11, 2016) . (a) Highly-Compensated Professional Exemption (i) Applicable Law US Shale argues that Faludi's job duties "qualify him as a highly compensated exempt employee under professional or administrative exemptions." 46 either the learned To qualify for the "highly-compensated employee" exemption the employee must (1) make at least $100,000 in annual compensation, least (2) $455 per week paid on a which must include at salary "customarily and regularly perform[] or fee basis, and any one or more of the exempt duties or responsibilities of an executive, administrative 46 Id. at 23. -23- or professional 541.601(a), employee If 541.601(b) (1); 541.602; 29 see C.F.R. also §§ 541.600(a), Zannikos v. Oil Inspections (U.S.A.), Inc., 605 F. App'x 349, 359 (5th Cir. 2015). The $100,000 threshold can include commissions and certain bonuses. See id. 541.601 (b) (1). § The $100,000 requirement may be satisfied if the employee works less than the full year as long as he is paid a pro rata portion of the $100,000 based on the period of time he worked. See id. § 541.601 (b) (3). The court concludes that Faludi performed the duties of a learned professional. Duties of a learned professional include work requiring advanced knowledge in a field of science or learning customarily acquired by a prolonged intellectual instruction. 29 C.F.R Part Faludi III (B) (2) (b) knowledge, perform acquired services reviewing below, through for contracts US and 541.301(a). applied his his Shale § course education and strategic its of specialized As explained in specialized and experience, subsidiaries counseling legal on to such other as legal matters. (ii} An Salary-Basis employee is considered paid on a "salary basis" where the employee's regular, predetermined pay "is not subject to reduction because of variations performed." 29 C.F.R. in the § quality or quantity of 541.602 (a). the work An exempt employee "must receive the full salary for any week in which the employee performs -24- any work without regard to the number of days or hours worked. Exempt employees need not be paid for any workweek in which they Id. perform no work" An employee's compensation need not be calculated weekly: An exempt employee's earnings may be computed on an hourly, a daily or a shift basis, without losing the exemption or violating the salary basis requirement, if the employment arrangement also includes a guarantee of at least the minimum weekly required amount paid on a salary basis regardless of the number of hours, days or shifts worked, and a reasonable relationship exists between the guaranteed amount and the amount actually earned. The reasonable relationship test will be met if the weekly guarantee is roughly equivalent to the employee's usual earnings at the assigned hourly, daily or shift rate for the employee's normal scheduled workweek. Id. 541.604(b) (emphasis added). § apply "when employees are Although exempt status does not covered by a policy that permits disciplinary or other deductions in pay 'as a practical matter,'" Auer v. Robbins, 117 S. Ct. 905, 911 (1997), the regulations contain certain exceptions to the prohibition against deductions from pay. See id. § 541.602(b). For instance, the employer may make deductions from pay "when an exempt employee is absent from work for one or more full days for personal reasons, other than sickness or disability." Id. § 541. 602 (b) ( 1) . An employer who makes improper deductions may also lose the exemption "if the facts demonstrate that the employer did not intend to pay employees on a salary basis." Id. § 541.603(a). This intent is demonstrated if the employer has an "actual practice of making improper deductions" or -25- "an employment policy that creates a 'significant likelihood' of such deductions." 117 S. Ct. at 911. " [A] n improper Id.; Auer, deduction alone will necessarily render an employee non-exempt; intent is key." v. Patrick O'connor & Associates, L.P., not Fraser 2016 WL 4159753, Civil Action No. 4:11-03890, at *7 (S.D. Tex. Aug. 4, 2016). If an employer has a clearly communicated policy that prohibits the improper pay deductions . . . and includes a complaint mechanism, reimburses employees for any improper deductions and makes a good faith commitment to comply in the future, such employer will not lose the exemption for any employees unless the employer willfully violates the policy by continuing to make improper deductions after receiving employee complaints. 29 C.F.R. 541.603 (d). § The Agreement between Faludi and US Shale stated "Company shall pay Consultant the following amounts while working Company on the Project" and provides a table as follows: for 47 Domestic Hourly Rate Houston, TX Day Rate Day Rate for Work Outside of Houston, TX. *Signing Bonus **Retention Bonus N/A $1,000USD $1,350USD N/A N/A The Agreement also required Faludi to provide invoices which "shall clearly specify the hours or days worked, and any expenses incurred." 48 the Services provided, In his Motion for Partial Summary Judgment Faludi argues that his compensation records show that 47 See Agreement, Exhibit B-4 to Defendant's MSJ, Docket Entry No. 14-3, p. 104 (US SHALE 000013). 48 Id. ~ 4. -26- every invoice he submitted to US Shale contains at least one entry with a daily rate less than $1, 000. 49 explains why less than $1, 000 for one In his deposition Faludi day would appear on an invoice: Q. Okay. And I see a day and -- and I Tuesday, November there's $500. Why 1,000? there's, you know, a thousand dollars notice that if you look down there at 18th and Wednesday, November 19th would there be $500,000 -- $500, not A. You know, just -- that was probably a weekend. Could have been -- it could have been any day. Q. Well, it says Tuesday and Wednesday on A. Okay. Oh, yeah, it sure does. Right on the side. Q. Yeah. A. So in any event, it just means that I did not go to the office and work a full day. Okay. And I -- I didn't notice anything in your independent contractor agreement about partial days or anything like that. So where did this come from that you only submitted a bill for $500 in -- in that day and not Q. A. Just me being a nice guy and not billing them for a full day when I wasn't there but half a day or a quarter of a day or whatever that day was. Q. So then, like, on Thursday, November 11th and then - A. I wasn't even there, so I didn't bill that day. Q. Yeah. So Wednesday, Thursday, and Friday the next week, no nothing billed. So I assume that means you didn't work those days? A. That would be correct. 49 See Invoices, Exhibit A-2 to Faludi Declaration, Docket Entry No. 19-1, pp. 28-52. -27- Q. So if you look down there, this is June of 2015. It says June 13th, 2015, June 14th, 2015. That's a week those are weekend days? A. Yes, sir. Q. You would apply that same -- if you worked a morning, you•d put a half a day. If you worked, you know, into the afternoon, you'd put 750. If you worked just a couple hours or so, then you•d put 250? Is that kind of what you did? A. That's what I did, yes, sir; and I -- I tried to correspond the rates for the cost of the computer. So on I prorated those along with it. Q. And you never -- did anybody ever tell you to do that or did you ever tell anybody how you were doing it or somebody said, "Well, why did you only put down 750 for this Friday?" Did -- any discussions on that at all? A. Nobody ever asked. No discussions. 50 Faludi argues that because his daily pay was reduced based on the time he worked and because Defendant knew about and approved of the reductions, he was not paid on a salary basis. 51 Defendant responds that "it was Faludi who unilaterally and arbitrarily reduced the amounts he invoiced US Shale, contrary Independent Contractor Agreement." 52 $1, 000 daily amount guaranteed to the terms of his Defendant also argues that the under the Agreement therefore 50 See Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 43 line 9 - p. 44 line 11 and p. 45 lines 3-19. 51 See Plaintiff's MPSJ, Docket Entry No. 19, p. 9; Plaintiff's Reply, Docket Entry No. 25, p. 6; Email and Invoices, Exhibit A-3 (pp. 53-67) and A-4 (pp. 68-70) to Faludi Declaration, Docket Entry No. 19-1. 52 See Defendant's Response, Docket Entry No. 21, pp. 6, 18. -28- "guaranteed Faludi at least $1,000.00 for each week he performed any services, thus exceeding the $455.00 threshold. " 53 The summary judgment evidence establishes that US Shale actually paid Faludi at least the minimum guarantee for every week in which he performed services despite deductions on the invoices made by Faludi. 54 But "a claim that an employee actually was paid more than $455 each week is receive distinct that from a they were Keen amount." showing that Enterprises, v. DXP guaranteed to Inc., 2016 WL 3253895, Civil Action No. 5:15-137-0LG, at *5 (W.D. Tex. June 6, 2016) . The precise question raised by the whether the exemption as language long as of 29 C.F.R. § parties' 541.602(a) arguments allowing the employee's predetermined pay subject to reduction because of variations in the . is the "is not . quantity of the work performed" includes a voluntary reduction by the employee as opposed to a reduction by the employer. Neither party has cited any controlling authority on this issue. The court concludes that the prevent purpose of the regulation is to employers from promising a guaranteed amount of compensation and later reducing that amount to the detriment of the employee. is inconsistent with this purpose. protect employees from an Plaintiff's argument The regulation is designed to employer's power to make improper 53 See Defendant's MSJ, Docket Entry No. 14, pp. 22-23. 54 See Defendant's Response, Docket Entry No. 21, pp. 17-18. -29- deductions, not to give employees the ability to eliminate employer reliance on exemptions per the FLSA by reducing their own Even though Faludi reduced his own compensation, compensation. $1, 000 to day was guaranteed if he performed the agreed upon services. showed up for work and This satisfies the minimum guaranteed amount required to be paid on a salary basis. Because the court concludes that Faludi was paid on a salary basis and performed the duties of a learned professional, Defendant's Motion for Summary Judgment will be granted as to this exemption. (b) Practice of Law Professional Exemption For the professional exemption to apply persons employed in a professional capacity must satisfy certain work descriptions and be compensated on a salary or fee basis. 29 C.F.R. 541.300. § The term "employee employed in a bona fide professional capacity" also means " [a] ny employee who is the holder of a valid license or certificate permitting the practice of law . engaged in the practice thereof . . . " Id. . and is actually § 541.304 (a) (1). salary and primary duty requirements of 29 C.F.R. apply to employees covered under this exemption. The 541.300 do not § Id. § 541.304 (d). Thus, the relevant question is whether Faludi was "actually engaged in the practice" of law with a "valid license or certificate permitting the practice of law." The Texas Government Code defines the "practice of law" as "the giving of advice or the rendering of any service requiring the -30- use of legal skill or knowledge, such as preparing a will, contract, or other instrument, the legal effect of which under the facts and conclusions involved must be carefully determined." Tex. Gov't Code § 81.101(a). The evidence shows that Plaintiff engaged in the practice of law. Exhibits B-14 and B-17 through B-21 to Faludi's Deposition reflect that he analyzed case strategies and coordinated with law firms about settlement and other litigation matters. 55 Exhibits D-1 through D-9 to Defendant's MSJ show that Faludi revised or analyzed contracts like Master Service Agreements, Confidentiality and NonDisclosure Agreements, and other Compete and Project Agreements for US Shale. 56 He reviewed the contracts, made proposals or revisions, and pointed out strengths and weaknesses in them. 57 Faludi used his legal judgment and skill gained through his legal education and experiences to analyze contracts and assess legal risks during his time at us Shale. The court therefore concludes that Faludi was engaged in the practice of law while employed by US Shale. Faludi argues that he is nevertheless not exempt because he did not have a valid license as required by 29 C.P.R. 55 See Exhibits B-14, p. 146; B-17, p. 150; B-18, p. 155; B-19, pp. 156-158; B-20, p. 159; B-21, p. 160 to Defendant's MSJ, Docket Entry No. 14-3. 56 See Exhibits D-1 to D- 9 to Defendant's MSJ, No. 14-5. 57Id. -31- Docket Entry § 541.304(a) . 58 Faludi was licensed to practice in Louisiana and Texas, but his licenses were suspended during the time he worked for US Shale. 59 Although Faludi's licenses are technically valid, he is not eligible to practice law. The court therefore concludes that Plaintiff did not hold a valid license permitting the practice of law as the exemption requires. Defendant argues that Faludi is "estopped from denying his exempt status under the practice of law professional exemption by his own actions and repeated declarations to the IRS, US Shale, and others that relevant he was in time period. " 60 fact a practicing Plaintiff attorney responds that during the the estoppel doctrine does not apply because there is "no evidence in the record that US Shale hired Faludi to be a lawyer based on Faludi' s misrepresentation that he had a valid law license." 61 Faludi did not tell anyone at US Shale that his licenses were suspended but he reasoned "I don't think anybody ever asked me because no one hired me to be a lawyer. " 62 "It is unclear whether the equitable defenses of waiver, estoppel, unclean hands, and laches are available under the FLSA." 58 See Plaintiff's MPSJ, Docket Entry No. 19, p. 9. 59 See State Bar Letters, Exhibit A-5 Docket Entry No. 19-1, pp. 72-74. to Plaintiff's MPSJ, 60 See Defendant's MSJ, Docket Entry No. 14, p. 21. 61 See Plaintiff's Reply, Docket Entry No. 25, p. 8. 62 See Faludi Deposition, Exhibit B to Defendant's MSJ, Docket Entry No. 14-3, p. 70 lines 7-8. -32- See Tran v. Thai, Civil Action No. H-08-3650, 2010 WL 5232944, at *7 (S.D. Tex. Dec. 16, 2010) (applying the doctrine that estoppel is to generally plaintiff's inapplicable motion for FLSA partial claims summary and granting judgment as to the the defendant's affirmative defense of, inter alia, estoppel); see also Ayers v. Consolidated Construction Services of SW Florida, Inc., Civil Action No. 2:07-123-FtM-29DNF, 2007 WL 4181910, at *2 (M.D. Fla. Nov. 26, 2007) (granting motion to strike laches and estoppel affirmative defenses because of "the general rule that an employee cannot waive her rights under the FLSA without supervision by the Secretary of Labor or the Court") ; Perez-Nunez v. N. Broward Hospital District, Civil Action No. 08-61583-MOORE, 2009 WL 723873, at *2 (S.D. Fla. March 13, 2009) ("The doctrines of waiver, estoppel and laches are generally not applicable to FLSA claims.") . There is, however, at least one circumstance in which estoppel applies in an FLSA case. In Brumbelow v. Quality Mills, Inc., 462 F.2d 1324, 1327 (5th Cir. 1972), the Court found "[o]n the narrow facts of this [FLSA] case, the court correctly granted a directed verdict on the basis that the appellant was estopped and could not profit from her own wrong in furnishing false [reports of hours worked] (emphasis added) . to the employer" (citations omitted) District courts have refused to apply estoppel in FLSA claims based on Brumbelow's holding without similar facts. See, e.g., Cordero v. Voltaire, LLC, Civil Action No. A-13-CA-253-LY, 2013 WL 6415667, -33- at *10 n.14 (W.D. Tex. Dec. 6, 2013); Allen v. City of Texas City, Civil Action No. G-10-176, 2014 WL 2547763, at *5 (S.D. Tex. June 5, 2014); Howard v. John Moore, L.P., Civil Action No. H-131672, 2014 WL 5092469, at *1 (S.D. Tex. Oct. 9, 2014). The facts of this case are not similar to those in Brumbelow. Defendant has provided no case law, and the court is not aware of any, that would apply estoppel under the facts of this case. Even if estoppel were available in this case, estoppel is a fact issue for a jury to decide. The practice of law professional exemption does not apply because Faludi did not hold a valid license. The court will therefore deny Defendant's Motion for Summary Judgment on that issue. IV. Conclusions and Order For the reasons stated in Section II above, Plaintiff's Motion for Leave to Amend His Complaint (Docket Entry No. 18) is DENIED. For the Motion for reasons Partial stated in Section III Summary Judgment (Docket above, Plaintiff's Entry No. 19) is DENIED. For the reasons stated in Section I I I above, Motion for Summary Judgment PART and DENIED IN PART. matter of law that Faludi (Docket Entry No. 14) Defendant's is GRANTED IN Because the court has concluded as a was exempt from the FLSA overtime provision under the highly compensated professional exemption, the -34- court will enter a final judgment that Faludi take nothing from defendant and that this action be dismissed with prejudice. SIGNED at Houston, Texas, this 30th day of November, 2017. "'SSMLAKE UNITED STATES DISTRICT JUDGE -35-

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