Burns et al v. Chesapeake Energy, Inc. et al
Filing
91
MEMORANDUM OPINION, The Court GRANTS 71 Opposed MOTION for Reconsideration re 69 Order, Report and Recommendations,, filed by Chesapeake Energy Corporation, Chesapeake Operating L.L.C... Signed by Judge Royce C. Lamberth. (wg)
FILED
UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
SAN ANTONIO DIVISION
SEP 2 8 2018
CLERK,
U.S.
DIS RICT CLERK
ST5NCTOFTES
)
DEPUTY
CHAD BURNS and DAVID TORRES
)
On Behalf of Themselves and All Others )
Similarly Situated,
)
)
Plaintiffs,
)
)
v.
Civil Action No. 5: 15-cv-01016-RCL
)
CHESAPEAKE ENERGY, INC., et al.,
)
)
Defendants.
)
MEMORANDUM OPINION
This matter comes before the Court on defendants' Motion for Partial Reconsideration of
the Magistrate Judge's Recommendation of class certification relating to plaintiffs' straight-time
wage claims under Texas law. Defendants claim that: (1) they failed to respond to plaintiffs'
Motion for Rule 23 Class Action Certification due to an administrative error by counsel; (2)
plaintiffs failed to meet the requirements of class certification under Federal Rule of Civil
Procedure 23 ("Rule 23"); and (3) plaintiffs failed to comply with Western District Local Rules
regarding the class action and settlement negotiations. Upon consideration ofthe motion, laintiffs'
opposition, defendants' reply, the Recommendation of the Magistrate Judge, the entire record
herein, and the applicable law, the Court finds that plaintiffs have not satisfied the requirements of
Rule 23 as to plaintiffs' straight-time wage claims. The Court will therefore GRANT defendants'
Motion for Partial Reconsideration and REJECT the Magistrate Judge's Recommendation as to
Certifying Class Action.
I. BACKGROUND
1
Plaintiffs, Chad Bums and David Tones, bring this action on behalf of themselves and all
others similarly situated against defendants, Chesapeake Energy Corporation and Chesapeake
Operating, L.L.C. (collectively "Chesapeake"), Wild Purge I, LLC ("Wild Purge"), and John Doe
Defendants I to 5 ("John Doe Defendants"). Plaintiffs seek unpaid overtime compensation
pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C.
§
0 1, et seq., and the federal Portal-
to-Portal Act, 29 U.S.C. § 25 1-262, as well as unpaid straight-time wages under the equitable
theory of quantum meruit under Texas law ("wage-theft claims").
Plaintiffs worked for Chesapeake as oilfield workers performing "pumper" and/or
"gauger" related duties in and around the Eagle Ford Shale area of South Texas. Am. Compi. [9]
¶j
1, 55.
Plaintiffs' typical duties included checking, maintaining, and repairing field equipment
and providing reports on the status of field equipment. Id. at ¶ 60.' Chesapeake used Wild Purge as
its third-party payor and workforce staffing company to provide workforce personnel and issue
paychecks to Chesapeake employees, including plaintiffs. Id. at
¶11
2, 56, Plaintiffs allege that
Chesapeake and Wild Purge acted as their joint employers. Id at ¶ 2.
At issue here, plaintiff Burns seeks the formation of a class for straight-time wage claims
pursuant to Rule 23 of the Federal Rules of Civil Procedure.1 Burns has asked the Court to certify
under Rule 23 the following class: "Plaintiffs and all affected employees of Chesapeake who
worked for Chesapeake, and were paid by Wild Purge in the Eagle Ford Shale of South Texas,
who have not received all straight time wages owed by Chesapeake and Wild Purge for work
completed for Chesapeake relative to Chesapeake's oilfield operations." Proposed Order [47-1] ¶
1.
The alleged injury against the putative class consists of defendants not paying plaintiffs for work
Plaintiff Tones does not allege wage-theft claims. Am. Compl. ¶ 16. Opt-in Plaintiff Oscar
Escalante filed a declaration in support of plaintiffs' Motion for Rule 23 Class Action
Certification, Pis.' Mot. for Rule 23 Class Action Cert. n. 1.
2
completed for Chesapeake, even though plaintiffs timely submitted invoices to Wild Purge. Am.
Compi. [9]
¶[ 116-26.
Plaintiffs moved for Conditional Certification of a Collective Action and Rule 23 Class
Action Certification on September 16, 2016. [45, 47]. Defendants responded to plaintiffs' Motion
for Conditional Certification on October 7, 2016, [51], but defendants failed to respond to
Plaintiffs' Motion for Rule 23 Class Action Certification. On March 14, 2017, the Court issued an
Amended Order Conditionally Certifying Collective Action and a Report and Recommendation of
the United States Magistrate Judge as to Certifying Class Action. [69].
On March 28, 2017, defendants moved for partial reconsideration of the order as to the
Magistrate Judge's Recommendation of Rule 23 class certification for p1aintiffs straight-time
wage claims. Defs.' Mot. for Partial Reconsideration [71]. Plaintiffs submitted their opposition
brief on April 11, 2017 [75], and defendants submitted a reply brief in support of their motion on
April 18, 2017, [78].
On July 9, 2018, plaintiffs filed a Request for Oral Argument Regarding Defendants'
Objections to Portions of the Magistrate's Order on Plaintiffs' Motion for Rule 23 Class
Certification. [85]. Defendants filed their opposition brief on July 13, [88], and plaintiffs submitted
a reply brief in support of their motion on July 16, 2018, [89].
Wild Purge failed to make an appearance, and Judge Pitman granted default judgment
against Wild Purge on March 29, 2017. Default Judgment [73].
The Court has subject-matter jurisdiction over this case based on federal-question
jurisdiction because plaintiffs base their claims on federal law, the FLSA.
See
28 U.S.C. § 1331.
The Court has supplemental jurisdiction over plaintiffs' state-law claims pursuant to 28 U.S.C.
3
§
1367, as the facts relative to those claims form part of the same case or controversy as the claims
arising under the FLSA.
Plaintiffs seek recovery under the equitable theory of quantum meruit under Texas law.
Quantum meruit allows for an equitable recovery "based upon the promise implied by law to pay
for beneficial services rendered and knowingly accepted." Purselley
v.
Lockheed Martin Corp.,
322 Fed. Appx. 399, 403 (5th Cir. 2009) (quoting In re Kellogg Brown & Root, Inc., 166 S.W.3d
732, 740 (Tex. 2005) (internal quotation marks omitted)). "Generally, a party may recover under
quantum meruit only when there is no express contract covering the services or materials
furnished." MetroplexCore, L.L,c.
v.
Parsons Transp., Inc., 743 F.3d 964, 975 (5th Cir. 2014)
(quoting Vortt Exploration Co., Inc. v. Chevron US.A., Inc., 787 S.W.2d 942, 944 (Tex. 1990)).
To reco"ier under quantum meruit, a plaintiff must establish that: "1) valuable services and/or
materials were furnished, 2) to the party sought to be charged, 3) which were accepted by the party
sought to be charged, and 4) under such circumstances as reasonably notified the recipient that the
plaintiff, in performing, expected to be paid by the recipient." Id.
This Court need not address defendants' argument as to why reconsideration of the
Magistrate Judge's Recommendation is proper because this Court reviews the Recommendation
de novo.
II. LEGAL STANDARD
Rule 23 of the Federal Rules of Civil Procedure governs class certification. Wal-Mart
Stores, Inc.
v.
Dukes, 564 U.s. 338 (2011). Before certifying a class, district courts must "conduct
a rigorous analysis of the Rule 23 prerequisites." Castano
v. Am.
Tobacco Co., 84 F.3d 734, 740
(5th Cir, 1996). A district court may look "beyond the pleadings" to "understand the claims,
defenses, relevant facts, and applicable substantive law in order to make a meaningful
4
determination" of whether Rule 23's requirements have been met. Id. at 744. Additionally, a
district court has broad discretion over its decision to certify a class but must exercise that
discretion within the framework of Rule 23. Id. at 740 (citing Gulf Oil Co.
v.
Bernard, 452 U.s.
89, 100 (1981)).
As the party seeking class certification, plaintiffs bear the burden of establishing that the
requirements set
forth
in Rule 23 have been satisfied. See,
e.g.,
Amchem
Prods. Inc.
v.
Windsor,
521 U.S. 591, 614 (1997); Gene & Gene LLC v. BioPáy LLC, 541 F.3d 318, 325 (5th Cir. 2008).
First, plaintiffs must show that all four prerequisites of Rule 23(a) are satisfied. These requirements
are: (1) the class is so numerous that joinder of all members is impracticable; (2) there are questions
of law or fact common to the class; (3) the claims or defenses of the representative parties are
typical of the claims or defenses of the class; and (4) the representati'e parties will fairly and
adequately protect the interests of the class. Fed. R. Civ. P. 23(a).
Plaintiffs must also show that the proposed class falls within at least one of the three
categories set forth in Rule 23(b). Gene & Gene, 541 F.3d at 325. In the instant case, plaintiffs
represent that the putative class satisfies subsection (b)(3) of Rule 23. To satisfy Rule 23 (b)(3), a
class must meet two conditions beyond Rule 23(a)'s requirements: (1) common questions must
"predominate over any questions affecting only individual members," and (2) class resolution must
be "superior to other available methods for the fair and efficient adjudication of the controversy."
Fed. R. Civ. P. 23(b)(3).
Further, Rule 23 carries with it an implied prerequisite that the class be adequately defined
and clearly ascertainable. John v.
2007) (citing DeBremaecker
v.
Nat'I Sec. Fire
&
Cas. Co.,
501 F.3d 443, 445 & n.3 (5th Cir.
Short, 433 F.2d 733, 734 (5th Cir. 1970)).
5
Defendants do not challenge the typicality or adequacy of representation requirements
under Rule 23 in their Motion for Partial Reconsideration. The Court will examine the remaining
Rule 23 requirements in turn.
III. ANALYSIS
Plaintiffs have not satisfied the numerosity requirement ofRule 23. Therefore, certification
of the proposed class is inappropriate, and the Court will grant defendants' Motion for Partial
Reconsideration.
A. Rule 23(a)
1. Existence of a Class
For a class action to be certified, "the class sought to be represented must be adequately
defined and clearly ascertaihable."
John, 501
F.3d at 445 n.3. "A precise class definition is
necessary to identify properly those entitled to relief, those bound by the judgment, and those
entitled to notice." In re Monumental Life Ins. Co., 365 F.3d 408, 413 (5th Cir. 2004) (citation and
internal quotation marks omitted). While "[d]istrict courts are permitted to limit or modify class
definitions to provide the necessary precision," Id, the plaintiff is "entitled to some leeway" in
defining "the proper parameters of his proposed class," FUrman
v. E. I.
duPont de Nemours & Co.,
552 F.2d 149, 150 (5th Cir. 1977).
The proposed class is as follows: "Plaintiffs and all affected employees of Chesapeake who
worked for Chesapeake, and were paid by Wild Purge in the Eagle Ford Shale of South Texas,
who have not received all straight time wages owed by Chesapeake and Wild Purge for work
completed for Chesapeake relative to Chesapeake's oilfield operations." Proposed Order [47-11
¶
Defendants argue that plaintiffs have failed to establish ascertainability because plaintiffs
have not offered a method of identifying which potential class members enumerated in their
evidence had not been paid. Defs.' Mot. for Partial Reconsideration [71] at 10.
Plaintiffs have provided three pieces of evidence to determine the potential class: (1) an
email from Ward Nohavitza regarding late payments (Bums D'cl. [46-1] at Exhibit 1); (2) a list
of approximately nine workers and their duties (including David Tones who does not assert wagetheft claims) (id. at Exhibit 2); and (3) a list ofjust over 100 Chesapeake employees paid by Wild
Purge (including Ward Nohavitza) (id. at Exhibit 3).
The Court agrees with defendants that plaintiffs have not provided evidence of which
potential class members listed have experienced wage theft and thus would fall within the proposed
class definition. Plaintiffs' evidence served to identify employees whb received late payments, .vho
worked in positions similar to those of plaintiffs, and who worked for Chesapeake and were paid
by Wild Purge. This evidence does not identify employees who failed to receive payment for
completed work. Yet this analysis applies to Rule 23's numerosity requirement, not to the
ascertainability requirement.
The Fifth Circuit does not require plaintiffs to present evidence of a methodology of
determining which potential class members fall within the class definition to meet the
aseertainability requirement. See In re Deepwater Horizon, 739 F.3d 790, 821(5th Cir. 2014)
(" [T]he possibility that some [claimants] may fail to prevail
on their individual claims will not
defeat class membership' on the basis ofthe ascertainability requirement."). Plaintiffs have defined
the proposed class based on objective criteria that establishes membership with definite
boundaries. See In re Petrobras Securities, 862 F.3d 250, 257 (2nd Cir. 2017); Bynum
v.
District
of Columbia, 214 F.R.D. 27, 3 1-32 (D.D.C. 2003) (finding an ascertainable class where "an
7
individual would be able to determine, simply by reading the [class] definition, whether he or she
was a member of the proposed class"). Accordingly, the Court finds that Plaintiffs have met the
ascertainability prerequisite of Rule 23.
2. Numerosity
To meet the numerosity requirement, a class must be "so numerous that joinder of all
members is impracticable." Fed. R. Civ. P. 23(a)(l). The Fifth Circuit has declared that "[a]
plaintiff must ordinarily demonstrate some evidence or reasonable estimate of the number of
purported class members." Pederson
v.
La. State Univ., 213 F.3d 858, 868 (5th Cir. 2000). A mere
allegation that the class is too numerous for joinder is insufficient. Id. at 868.
"There is no definite standard as to what class size satisfies Rule 23(a)(l)." In re TWL
Corp., 712 F.3d 886, 894 (5th Cir. 2013) (citing 7A CHARLES ALAN WRIGHT ET
PRACTICE AND PROCEDURE § 1762
AL.,
FEDERAL
(3d ed. 2005). Generally, a class of over forty members meets
the numerosity requirement, although some courts have certified classes consisting of twenty-five
to thirty members. See Stewart
v.
Abraham, 275 F.3d 220, 226-27 (3rd Cir. 2001); Zeidman
v.
Ray McDermott & Co., Inc., 651 F.2d 1030, 1038 (5th Cir. 1981). However, the number of
proposed class members is not determinative of whetherjoinder is impracticable, and other factors
may be relevant, including "the geographical dispersion of the class, the ease with which class
members may be identified, the nature of the action, and th size of each plaintiff's claim."
Zeidman v. Ray McDermott & Co., 651 F.2d 1030, 1038 (5th Cir. 1981).
Defendants claim that Plaintiffs have not established numerosity, Defs.' Mot. for Partial
Reconsideration [71] at 7-9. First, Defendants allege that only two individuals, Burns and
Escalanate, have offered evidence that they were underpaid. Id. at 7. Second, Defendants argue
that Plaintiffs have not provided an estimate of the size of the class, and that a class of two to three
8
individuals would not make joinder impracticable. Id. at 8. Further, Defendants assert that the
email sent by Ward Nohavitza is evidence of late payments, not evidence that Wild Purge "failed
to make payments altogether." Id. at 9.
As previously stated, plaintiffs' evidence identifies employees who received late payments,
who worked in positions similar to those of plaintiffs, and who worked for Chesapeake and were
paid by Wild Purge. Again, the Court agrees that plaintiffs have not provided evidence of which
potential class members enumerated in plaintiffs' evidence have experienced wage theft. Although
plaintiffs were able to meet the ascertainability requirement, Plaintiffs fail to meet the numerosity
requirement.
In his declaration, plaintiff Burns stated that he had "personal knowledge that many of
those [similarly situated] workers a10 experienced wage theft.S Burns Deci. [46-i] ¶ 33: Plaintiff
Escalante stated that "[biased on communications with my co-workers, I understand that many of
my co-workers who still worked for Chesapeake during the approximate time period of early to
mid-2015 experienced wage theft like me." Escalante Deci. [46-2] ¶ 32. However, these statements
do not provide a "reasonable estimate" of the number of potentil class members.
The Court notes that other factors to be considered weigh in plaintiffs' favor. First, class
members would likely assert relatively small individual claims and reside throughout the Eagle
Ford Shale region of South Texas. Id. Second, as the Magistrate Judge found, certain
circumstances would make the class difficult to identify. Am. Order & Rec. at 23-24. Plaintiffs
allege that Chesapeake and Wild Purge acted as their joint employers, Burns Deci. [46-11
¶11
19-
32; Am. Compi. [9] ¶ 2, and that "identifying the class members is easily accomplished by use of
defendant's records," Pis.' Mot. for Rule 23 Class Action Cert. [47] at 5. However, Chesapeake
claims that it did not employ plaintiffs and does not have adequate Wild Purge employee records.
Answer to Am. Compi. [13] at 2; Response to Pls.' Mot. for Cond'l. Cert. [51,] at 3, 7-8. Wild
Purge no longer works with Chesapeake, Id., and a default judgment has been entered against Wild
Purge, Default Judgment [73]. Moreover, plaintiff Escalante stated that Chesapeake's payroll
service company is now Raw Oil, which was founded by a forner Wild Purge employee, and that
Chesapeake and Raw Oil have threatened loss ofjobs for joining this lawsuit. Escalante Decl. [46-
2]at8.
However, without some evidence or a reasonable estimate that, in addition to plaintiffs
Burns and Escalante, other Chesapeake employees paid by Wild Purge in the Eagle Ford Shale
region of South Texas expenenced wage theftinstead of simply late paymentsthe Court cannot
find that plaintiffs have met Rule 23's numerosity requirement
3. Commonality
Rule 23(a)(2) requires that there be "questions of law ot fact common to the class." Class
members' claims must "depend upon a common contention" that "is capable of class wide
resolution," meaning that "the determination of its truth or falsity will resolve an issue that is
central to the validity of each one of the claims in one stroke." Wal-Mart Stores, Inc., 564 U.S. at
350. The threshold of commonality is not high. Jenkins v. Raymark Industries, Inc., 782 F.2d 468,
472 (5th Cir. 1986). It is not necessary that every issue of law or fact be the same for each class
member. Forbush
v.
J. C. Penney, Inc., 994 F.2d 1101, 1106 (5th Cir. 1993). "Rather, the
commonality test is met when there is 'at least one issue whose resolution will affect all or a
significant number of the putative class members." Id. at 1106 (quoting Stewart
v.
Winter, 669
F.2d 328, 335 (5th Cir. 1982)).
Defendants claim that Plaintiffs' wage-theft claims are "of unknown amounts and during
a widely varying timeframe." Defs.' Mot. for Partial Reconsideration at 11. Additionally,
10
defendants allege that plaintiffs have not provided evidence that "damages could be efficiently
measured on a class-wide basis." Id.
Plaintiffs assert that wage theft is common to all plaintiffs. Pls.' Opp'n at 10. Also,
Plaintiffs have identified issues common to the class as follows: "whether plaintiffs were common
law employees under Texas law; whether there was a contract of employment between plaintiffs
and Chesapeake; whether Plaintiffs rendered beneficial services to Chesapeake; whether
Chesapeake knowingly accepted these services; and whether plaintiffs had a reasonable
expectation to be paid by Chesapeake." Id. at 12. plaintiffs claim that the only difference among
Plaintiffs' claims is the difference in their pay rates. Id. at 5.
As the Magistrate Judge discussed in the Magistrate's Recommendation, "virtually all of
the fatual and legal issues raised by plaintiffs' statelas1¼ claims are common to tile class except
for the difference in each plaintiff's pay rate." Am. Order & Rec. at 24-25. Noting that the
commonality threshold is not high and that one common question of law or fact will suffice, the
Court finds that the commonality requirement is satisfied.
B. Rule 23(b)(3)
Under Rule 23(b)(3), a court must find that "questions of law or fact common
to class members predominate over any questions affecting orly individual members, and that
a class action is superior to other available methods for fairly and efficiently adjudicating the
controversy." Fed. R. Civ. P. 23(b)(3). Pertinent considerations include: (1) the class members'
interests in individually controlling the prosecution or defense of separate actions; (2) the extent
and nature of any litigation concerning the controversy already begun by or against class members;
(3) the desirability or undesirability of concentrating the litigation of the claims in the particular
11
forum; and (4) the likely difficulties in managing a class action. Id. The Court finds that the
predominance and superiority requirements of Rule 23(b)(3) are met.
1.
Predominance
The first requirement of Rule 23(b)(3) is that common factual and legal issues predominate
over any such issues that affect only individual class members. Fed. R. Civ. P. 23(b)(3).
Determining whether the predominance standard is met "entails identifying the substantive issues
that will control the outcome, assessing which issues will predominate, and then determining
whether the issues are common to the class, a process that ultimately prevents the class from
degenerating into
Corp.
v.
a
series of individual trials." Gene & Gene, 541 F.3d at 326 (quoting Bell Ati.
AT&T Corp., 339 F.3d 294, 302 (5th Cir. 2003)).
The Court has determined the eistence of at least one common question of factWhether
defendants failed to compensate plaintiffs for work performedand at least one common question
of lawwhether plaintiffs are entitled to damages or equitable relief under quantum meruit. A
resolution of these two questions, which are common to all of the class members' claims, would
dispose of the issue of whether defendants are liable to plaintiffs in this action. The only other
significant issue in the case is the issue of
remedythat
is, whether plaintiffs are entitled to
equitable or monetary relief if they succeed in establishing liability. Defendant has pointed out that
if plaintiffs succeed in establishing that they are entitled to damages, the award that each individual
class member is entitled to may vary. Nevertheless, even if accepted as true, this single fact would
not preclude a finding that common questions of law and fact predominate over individual
questions. See In re Deepwater Horizon, 739 F.3d 790, 815-16 (5th Cir. 2014) (quoting Bell
Atlantic Corp.
v.
AT&T Corp., 339 F.3d 294, 306 (5th Cir. 2003)) ('"Even wide disparity among
class members as to the amount of damages' does not preclude class certification 'and courts,
12
therefore, have certified classes even in light of the need for individualized calculations of
damages."); Steering Comm.
v.
Exxon Mobil Corp., 461 F.3d 598, 602 (5th Cir. 2006) (".
. .
the
necessity of calculating damages on an individual basis wilt not necessarily preclude class
certification.
. .
.
However, where individual damages cannot be determined by reference to a
mathematical or formulaic calculation, the damages issue may predominate over any common
issues shared by the class."). This Court agrees with the Magistrate Judge that "plaintiffs' damages
will be easily calculated based on the invoices they submitted to defendants summarizing the work
provided." Am. Order & Rec. at 13. Thus, the predominance requirement has been met.
2. Superiority
Additionally, a class action must be "superior to other available methods for fairly and
efficiently adjudicating the controversy." Fed, R. Civ. P. 23(b)(3). The superiority requirement is
"fact-specific and will vary depending on the circumstances of any given case." In re TWL Corp.,
712 F.3d 886, 896 (5th Cir. 2013) (quoting Robertson
v.
Monsanto Co., 287 Fed. Appx. 354, 361
(5th Cir. 2008)).
It has often been observed that class treatment is appropriate in situations such as the
present case, in which the individual claims of many of the putative class members are so small
that it would not be economically efficient for them to maintain individual suits. See Castano, 84
F.3d at 740 ("The most compelling rationale for finding superiority in a class action [is] the
existence of a negative value
suit.. .
."). Here, Burns seeks $14,000 in allegedly unpaid wages,
and Escalante seeks $18,000. Bums Decl. [48-1] ¶ 35. Similarly-situated plaintiffs would likely
seek comparable damages. Additionally, as the Magistrate Judge found in the Magistrate's
Recommendation, this case is not a multi-state class action, and this case does not involve legal or
13
factual differences that would complicate litigating this issue as a class. Am. Order & Rec. at 27.
Therefore, the Court is satisfied that the superiority requirement is met.
IV. CONCLUSION
The Court finds that plaintiffs have failed to satisfy all of the requirements
of Rule 23.
Therefore, the Court will GRANT defendants' Motion for Partial Reconsideration as it relates to
plaintiffs' straight-time wage claims. This ruling is subject to reconsideration, if needed, after
plaintiffs provide sufficient evidence of numerQsity.
A separate order shall issue this date.
SIGNED this
day of September, 2018.
C'
Royce C. Lamberth
United States District Judge
14
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