Rains v. East Coast Towing and Storage, LLC et al
Filing
41
MEMORANDUM OPINION re 32 Motion for Summary Judgment. Signed by District Judge James C. Cacheris on 9/20/2011. (rban, )
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
KELLY V. RAINS,
)
)
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)
)
)
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Plaintiff,
v.
EAST COAST TOWING AND
STORAGE, LLC, et al.,
Defendants.
1:11cv189 (JCC/IDD)
M E M O R A N D U M
O P I N I O N
This matter comes before the Court on Defendants East
Coast Towing and Storage, LLC and Timothy Stiegelman’s
for Summary Judgment (MSJ).
[Dkt. 32.]
1
Motion
For the reasons stated
below, the Court will grant in part and deny in part Defendants’
Motion.
I.
Background
Plaintiff Kelly V. Rains worked as a tow truck driver
for East Coast Towing and Storage, LLC (East Coast Towing) from
approximately June 10, 2008 through January 28, 2011.
(Complaint [Dkt. 1] ¶ 5; MSJ at 2, 6).
East Coast Towing
operates a towing company that tows vehicles in the Commonwealth
of Virginia.
(Decl. of Timothy Stiegelman [Dkt. 33-1] ¶ 3;
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Plaintiff originally sued East Coast Towing, LLC and Timothy Stiegelman’s
wife, Amy Stiegelman, in addition to Defendants. (Compl. ¶ 1.) East Coast
Towing, LLC was dismissed from this action without prejudice on March 2, 2011
[Dkt. 3] and Amy Stiegelman was dismissed with prejudice on August 16, 2011
[Dkt. 25].
1
Compl. ¶ 2.)
Defendant Timothy Stiegelman, President of East
Coast Towing, hired Plaintiff to tow vehicles in Northern
Virginia.
(Stiegelman Decl. ¶¶ 2, 7.)
Plaintiff towed
impounded cars only within the state and did not conduct any
other business for East Coast Towing.
(Stiegelman Decl. ¶¶ 1,
8; Rains Dep. Tr. [Dkt. 33-7] 82:22 to 83:10.)
Plaintiff alleges that Defendants did not pay him all
of the commissions he earned and, therefore, his hourly pay
falls below the minimum pay required by the Federal Fair Labor
Standards Act of 1938 (FLSA), 29 U.S.C. § 201 et seq.
6.)
(Compl. ¶
He seeks to recover unpaid wages, liquidated damages, and
reasonable attorneys’ fees under the FLSA.
216(b).
See 29 U.S.C. §
(Compl. ¶ 11.)
Defendants filed their Motion for Summary Judgment on
August 26, 2011.
[Dkt. 33.]
Plaintiff filed a Memorandum in
Opposition (Opp.) on September 9, 2011.
[Dkt. 38.]
Defendants
filed a Reply to Plaintiff’s Memorandum in Opposition (Reply) on
August 14, 2011.
[Dkt. 39.]
Defendants’ motion is before this Court.
II.
Standard of Review
Summary judgment is appropriate only if the record
shows “no genuine dispute as to any material fact and that the
movant is entitled to a judgment as a matter of law.”
Fed. R.
Civ. P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477
2
U.S. 242, 247-48 (1986); Evans v. Techs. Apps. & Serv. Co., 80
F.3d 954, 958-59 (4th Cir. 1996) (citations omitted).
The party
seeking summary judgment has the initial burden of showing the
absence of a material fact.
317, 325 (1986).
Celotex Corp. v. Catrett, 477 U.S.
A genuine issue of material fact exists “if
the evidence is such that a reasonable jury could return a
verdict for the non-moving party.”
Anderson, 477 U.S. at 248.
Once a motion for summary judgment is properly made
and supported, the opposing party must come forward and show
that a genuine dispute exists.
See Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986).
The
party opposing summary judgment may not rest upon mere
allegations or denials.
Rather, the non-moving party “must set
forth specific facts showing that there is a genuine issue for
trial.”
Anderson, 477 U.S. at 250 (quotation omitted).
Unsupported speculation is not enough to withstand a
motion for summary judgment.
See Ash v. United Parcel Serv.,
Inc., 800 F.2d 409, 411-12 (4th Cir. 1986).
Summary judgment is
appropriate when, after discovery, a party has failed to make a
“showing sufficient to establish the existence of an element
essential to that party’s case, and on which that party will
bear the burden of proof at trial.”
Celotex, 477 U.S. at 322.
In reviewing the record on summary judgment, the court “must
draw any inferences in the light most favorable to the non-
3
movant” and “determine whether the record taken as a whole could
lead a reasonable trier of fact to find for the non-movant.”
Brock v. Entre Computer Ctrs., Inc., 933 F.2d 1253, 1259 (4th
Cir. 1991) (citations omitted).
III. Analysis
Defendants make three general arguments in support of
summary judgment: (1) that Plaintiff is not entitled to coverage
under the FLSA as an individual employee; (2) that East Coast
Towing is not covered by the FLSA because it does not qualify as
an “enterprise”; and (3) that a two year statute of limitations
applies to this case because Defendants did not commit a
“willful” violation of the FLSA.
(MSJ at 2.)
The Court will
consider each of these in turn.
A. Employee Engaged in Commerce
Section 7(a)(1) of the FLSA, 29 U.S.C. § 207(a)(1),
requires that “all covered employers compensate their employees
at the rate of one and one-half times their normal hourly rate
for all hours worked in excess of a forty-hour week.”
Purdham
v. Fairfax County Sch. Bd., 637 F.3d 421, 426-27 (4th Cir.
2011).
There are two general ways employers become covered.
One is that the employee requesting FLSA protection is himself
“engaged in commerce or in the production of goods for
commerce.”
29 U.S.C. § 207(a)(1).
2
2
The other is that the
29 U.S.C. § 207(a)(1) states in full: “Except as otherwise provided in this
section, no employer shall employ any of his employees who in any workweek is
4
employee “is employed in an enterprise engaged in commerce or in
the production of goods for commerce.”
Id.
Under either avenue
of coverage, individuals seeking compensation pursuant to the
FLSA “bear the initial burden of proving that an employeremployee relationship exists and that the activities in question
constitute employment for purposes of the Act.”
Benshoff v.
City of Virginia Beach, 180 F.3d 136, 140 (4th Cir. 1999).
Turning first to the question of whether Plaintiff was
engaged in commerce or in the production of goods for commerce,
the Supreme Court has recognized that the test for whether an
employee is “engaged in commerce” is relatively narrow.
“Congress, by excluding from the Act's coverage employees whose
activities merely ‘affect commerce,’ indicated its intent not to
make the scope of the Act coextensive with its power to regulate
commerce.”
Mitchell v. Lublin, 358 U.S. 207, 211 (1959).
“However, within the tests of coverage fashioned by Congress,
the Act has been construed liberally to apply to the furthest
reaches consistent with congressional direction.”
Id.
And,
“whether an employee is engaged ‘in commerce’ within the meaning
of the present Act is determined by practical considerations,
not by technical conceptions.”
Cook v. Nu-Tech Housing
Services, Inc., No. 91-1159, 1992 U.S. App. LEXIS 1443, at *6
engaged in commerce or in the production of goods for commerce, or is
employed in an enterprise engaged in commerce or in the production of goods
for commerce, for a workweek longer than forty hours unless such employee
receives compensation for his employment in excess of the hours above
specified at a rate not less than one and one-half times the regular rate at
which he is employed.”
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(4th Cir. Feb. 5, 1992) (citing Mitchell v. C.W. Vollner, 349
U.S. 427, 429 (1955)).
Finally, the Court has noted that
“[b]road coverage is essential to accomplish the goal of
outlawing from interstate commerce goods produced under
conditions that fall below minimum standards of decency.”
Tony
& Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290, 296
(1985).
The FLSA defines commerce as “trade, commerce,
transportation, transmission, or communication among the several
States or between any State and any place outside thereof.”
U.S.C. § 203(b).
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This extends to the movement of tangibles and
intangibles and covers interstate credit card transactions.
See
Shelton v. Inn at Trivium, No. 6:08cv00040, 2009 U.S. Dist.
LEXIS 38268, at *7-8 (W.D. Va. May 6, 2009); 29 C.F.R. § 776.9
(interpretive guidance).
The activities that constitute
commerce must be “regular and recurring,” as activities that are
“isolated, sporadic, or occasional” are insufficient to result
in coverage.
Id. at *6; 29 C.F.R. § 776.3 (interpretive
guidance).
When the activities are “related to interstate
instrumentalities or facilities,” a court must determine
“‘whether the work is so directly and vitally related to the
functioning of an instrumentality or facility of interstate
commerce as to be, in practical effect, a part of it, rather
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than isolated, local activity.’” Mitchell v. Lublin, 358 U.S. at
212 (quoting Mitchell v. C. W. Vollmer & Co., 349 U.S. 427, 428429 (1955)).
In Mitchell v. Lubin, the Supreme Court found that
draftsmen, fieldsmen, clerks, and stenographers who were working
intimately with the plans for the repair and construction of
various interstate instrumentalities, and who were necessary to
the ability of the instrumentality to function, were “engaged in
commerce.”
Id.
See also Overstreet v. North Shore Corp., 318
U.S. 125, 132 (1943) (holding that operators of a drawbridge on
a toll road used by vehicles traveling in interstate commerce
were engaged in commerce).
Similarly, the Fourth Circuit has
found that employees working for a wrecking business that also
towed vehicles from interstate highways were engaged in commerce
because they “helped to keep the interstate flow of traffic free
and unobstructed . . . .”
Crook v. Bryant, 265 F.2d 541, 543
(4th Cir. 1959); see also Gray v. Swanney-McDonald, Inc., 436
F.2d 652, 653 (9th Cir. 1971) (finding that towing and road
services for the national highway system is essential to the
free flow of traffic on that system).
In addition to considering whether the employee
“directly contributes to the repair or extension of facilities
of interstate commerce,” the Fourth Circuit has also considered
whether the employee “crosses state lines in connection with his
employment” and whether the employee “handles goods directly
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moving in the channels of interstate commerce.”
Wirtz v. Modern
Trashmoval, Inc., 323 F.2d 451, 457 (4th Cir.1963).
In Modern
Trashmoval, the employees were engaged in the collection and
disposal of trash in the City of Baltimore.
Id.
The Court
explained that the employees were not covered by the FLSA
because “[f]ar from feeding or supporting the interstate flow of
commerce, these employees deposited the materials handled at an
ultimate in-state destination.”
Id.; Russell v. Cont'l Rest.,
Inc., 430 F. Supp. 2d 521, 525 (D. Md. 2006) (finding that a
restaurant employee did not participate in the channels of
commerce when serving out of state customers).
In a separate case the Fourth Circuit found that
employees who mailed newsletters (among other things) to people
outside of the state in an “attempt to obtain out-of-state
customers” were engaged in commerce.
Wirtz v. Wardlaw, 339 F.2d
785, 787 (4th Cir. 1964); see also Shelton, 2009 U.S. Dist.
LEXIS 38268, at *6-8 (finding that a Virginia inn employee was
engaged in commerce when she started regularly handling
interstate phone calls and credit card transactions).
Plaintiff’s duties as a tow truck driver “consisted
primarily of towing vehicles that were illegally parked or
violated private parking rules from private lots in Arlington
County, Fairfax County, and Alexandria City.”
38-1] ¶ 3.)
(Rains Aff. [Dkt.
Plaintiff never towed any of those vehicles across
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state lines to Washington D.C. or Maryland.
82:22 to 83:10.)
(Rains Dep. Tr.
Thus, unlike individuals who cleared wrecked
vehicles from the interstate, Plaintiff was not regularly
engaged in helping “keep the interstate flow of traffic free and
unobstructed.”
Furthermore, Plaintiff does not allege that he handled
interstate phone calls or credit card transactions and it is
undisputed that Plaintiff did not cross state lines in
connection with his employment.
Plaintiff did handle some
objects that likely had crossed state lines and likely would do
so again, but there is no evidence that they were goods directly
moving in the channels of interstate commerce.
Plaintiff argues
that being towed constitutes transportation in the course of
interstate travels for those vehicle owners with out of state
plates.
(Opp. at 12.)
Yet, there is no evidence indicating the
vehicles were transporting goods across state lines, that the
vehicles themselves were being transported as goods, or that any
goods were directly moving in an identifiable stream of
commerce.
Although Plaintiff may have had an effect on a vehicle
moving in interstate commerce, it was not one that is “directly
and vitally related to the functioning of an instrumentality or
facility of interstate commerce.”
This Court finds that the
Plaintiff’s towing of vehicles between private lots within
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Virginia to other private lots within Virginia is a decidedly
local pursuit.
As a result, based on the evidence submitted,
this Court GRANTS Defendant’s motion for summary judgment on the
basis that Plaintiff is not entitled to coverage under the FLSA
as an individual employee.
B. “Enterprise”
Even if Plaintiff was not individually engaged in
commerce, he may still be covered by the FLSA's overtime
provisions if he was an employee in an “enterprise engaged in
commerce or in the production of goods for commerce.”
Here the
commerce inquiry is different because the FLSA defines such an
enterprise as one that:
(A) (i) has employees engaged in commerce or in the
production of goods for commerce, or that has employees
handling, selling, or otherwise working on goods or materials
that have been moved in or produced for commerce by any person;
and
(ii) is an enterprise whose annual gross volume of
sales made or business done is not less than $500,000 (exclusive
of excise taxes at the retail level that are separately stated).
29 U.S.C. § 203(s)(1) (emphasis added).
For the first part of the definition, “it is well
established that local business activities fall within the FLSA
when an enterprise employs workers who handle goods or materials
that have moved or have been produced in interstate commerce.”
Brock v. Hamad, 867 F.2d 804, 808 (4th Cir. 1989).
This
includes situations where an employer purchases goods which have
moved in interstate commerce and his employees use such goods in
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the course of their employment, even when the enterprise is the
ultimate consumer of those goods.
See id. at 807-8 (citing
Marshall v. Brunner, 668 F.2d 748, 751-52 (3d Cir. 1982)
(finding that employer who used trucks, truck bodies, tires,
batteries, and accessories, sixty-gallon containers, shovels,
brooms, oil and gas that had been manufactured out of state and
had moved in interstate commerce was subject to the FLSA)); see
also Dole v. Odd Fellows Home Endowment Bd., 912 F.2d 689, 695
(4th Cir. 1990) (finding that the use of food preparation and
cleaning supplies that had moved in interstate commerce was
sufficient).
An enterprise need not have the majority, or even
any significant number, of its employees handling such goods.
“The requisite connection to interstate commerce is shown where
an employer has at least one employee who regularly ordered,
received, and handled goods . . . that originated outside the
[state].”
Martin v. Deiriggi, 985 F.2d 129, 133 n.2 (4th Cir.
1992).
Plaintiff has produced specific evidence suggesting
that East Coast Towing had employees handling and working on
goods or materials that had been moved in or produced for
commerce.
First, in order to tow the vehicles, Plaintiff
submits that he used a truck that had been manufactured outside
of the Commonwealth of Virginia.
(Rains Aff. ¶ 8.)
Second,
East Coast Towing accepted credit card payments, which required
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use of out of state communication lines.
¶ 5.)
(Cox Aff. [Dkt. 38-2]
And finally, Plaintiff towed vehicles, approximately half
of which had out of state license plates.
(Rains Aff. ¶ 7.)
Although this is not sufficient to make Plaintiff “engaged in
commerce,” it does meet the broader test of “moved in or
produced for commerce.”
Thus, Plaintiff has produced evidence
that taken together suggests that East Coast Towing has the
requisite connection to interstate commerce to bring it within
the purview of the statute as an enterprise engaged in commerce.
For the second part of the definition, Defendants
assert that East Coast Towing’s annual gross volume of sales
made or business done was less than $500,000 in 2008, 2009, and
2010.
(Memorandum in Support of Defendant’s Motion for Summary
Judgment [Dkt. 33] (“Mem.”) at 16-20.)
Defendants produced East
Coast Towing’s Form 1120S U.S. Income Tax Return for 2008 and
2009 suggesting that gross receipts were approximately $201,322
and $387,669 respectively.
[Dkts. 33-3, 33-4.]
And they
produced a Statement of Revenue and Expenses for 2010 that
indicates gross receipts were approximately $428,176.
6.]
[Dkt. 33-
Finally, Defendants produced an affidavit from Mr.
Stiegelman stating that East Coast Towing has never made in
excess of $500,000 in any year since it began operations. [Dkt.
33-1.]
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Plaintiff, however, has rebutted Defendant’s
production with testimony from two former East Coast Towing
employees, along with his own testimony, stating that on average
the company towed at least 15-24 vehicles per day.
(Rains Aff.
¶ 9; Cox Aff. ¶ 12; Thompson Aff. [Dkt. 38-3] ¶ 12.)
Plaintiff
has also produced affidavits from those employees stating that
the amount paid per vehicle towed averaged between $125.00 and
$140.00. (Cox Aff. ¶ 13; Thompson Aff. ¶ 13.)
Plaintiff submits
that using the smallest figures (15 vehicles per day at
$125.00), the annual revenue of East Coast Towing would have
been $684,375.
(Opp. ¶ 3.)
This Court finds that the affidavit of one of those
employees, Mr. Thompson, would not be admissible as evidence
because he was not sufficiently identified before the close of
discovery.
(See Reply at 18; [Dkt. 24].)
Even so, Plaintiff
has submitted enough evidence on the question of whether East
Coast Towing exceeds $500,000 as to raise a genuine issue of
material fact.
Defendants assert that Rains could not possibly
have personal knowledge of how many vehicles Defendants towed
when he was not working.
(Reply at 6.)
Yet, Plaintiff asserts
that it is based on his “constant interaction with [East Coast
Towing] as a small company, and one of only three nighttime
staff.” (Rains Aff. ¶ 9.)
Defendants also assert that the other
employee, Ozaro Cox, did not have knowledge about the business
13
to accurately state the amount customers paid per car towed.
(Reply at 8.)
Yet, Cox’s affidavit states “[i]n accepting
payments from drivers we accepted cash and credit cards,
although Tim Stiegelman encouraged me to accept payments in
cash.”
(Cox. Aff. ¶ 5.)
And, Defendants point to tow logs and
the maximum allowable local rates to suggest that the
Plaintiff’s estimates are inaccurate.
(Reply at 8-9.)
Yet,
neither of these points of evidence is conclusive as currently
presented to the total actual number of cars towed or rates
charged.
Especially since computation of annual gross volume of
sales is not limited to any particular twelve month period (see
29 C.F.R. § 779.266), this Court finds that Plaintiff has
alleged sufficient evidence to create a genuine issue of
material fact as to whether East Coast Towing meets the $500,000
threshold.
Therefore, this Court DENIES Defendants’ motion for
summary judgment on the basis that East Coast Towing does
qualify as an “enterprise” under the FLSA.
C. Willful Violation
“FLSA provides two potential limitations periods.
For
non-willful FLSA violations, a two-year statute of limitations
applies.
When the violation is willful, a three-year statute of
limitations applies.”
Desmond v. PNGI Charles Town Gaming,
L.L.C., 630 F.3d 351, 357 (4th Cir. 2011) (citing 29 U.S.C. §
14
255(a)) (internal citations omitted).
The Supreme Court has
clarified that only those employers who “either knew or showed
reckless disregard for the matter of whether its conduct was
prohibited by the [FLSA]” have willfully violated the statute.
McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988)
(rejecting a test of willfulness that was simply whether the
employer knew the FLSA was “in the picture”).
conduct is insufficient to show willfulness.
Thus, negligent
Id. at 135.
The
Fourth Circuit has stated that recklessness requires “notice,
actual or constructive -- of the existence and general
requirements of the FLSA.”
Chao v. Self Pride, Inc., 232 F.
App’x. 280, 287 (4th Cir. 2007).
The employee bears the burden
of proof when alleging a violation is willful.
See id.
Defendants argue that they did not commit a willful
violation of the FLSA because Mr. Stiegelman had never heard of
the FLSA until he received the complaint in this case.
(Stiegelman Aff. ¶ 25; Mem. at 25-26.)
The only evidence
Plaintiff submits on this count is an affidavit from Mr.
Thompson stating that he complained to Mr. Stiegelman he should
have been receiving overtime for any work over 40 hours per
week.
(Thompson Aff. ¶ 17.)
Even if this were sufficient to
raise a question as to whether Mr. Stiegelman was on notice, as
discussed above, Mr. Thompson’s affidavit is inadmissible.
Therefore, this Court concludes that there is no genuine issue
15
of material fact pertaining to Plaintiff’s claim that Defendants
willfully violated the statute.
Thus, this Court GRANTS
Defendants’ motion for summary judgment on this basis and a two
year statute of limitations under the FLSA applies.
IV.
Conclusion
For these reasons, the Court will GRANT in part
and DENY in part Defendants’ Motion.
An appropriate Order will issue.
September 20, 2011
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
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