Acosta, Secretary of Labor, United States Department of Labor v. Medical Staffing of America, LLC et al

Filing 408

MEMORANDUM OPINION AND ORDER. The Court's Show Cause Order (ECF No. 363 ) is DISMISSED. Signed by District Judge Raymond A. Jackson on 11/29/23. (jhie, )

NOV 2 9 2023

IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF VIRGINIA
Norfolk Division

CLERK, U.S. DISTRICT COURT
NORFOLK. VA

JULIE A. SU,
ACTING SECRETARY OF LABOR,
UNITED STATES DEPARTMENT OF LABOR,
PlaintilT.

Case No. 2:18-cv-226
Case No. 2:19-cv-475

V.

MEDICAL STAFI-ING OF AMERICA, LLC, d/b/a
STEADFAST MEDICAL STAFFING, and LISA
PITTS.

Defendants.

MEMORANDUM OPINION AND ORDER

Before the Court is its order for Medical Staffing of America d/b/a as Steadfast Medical

Staffing and business owner Lisa Pills (collectively. “Defendants'’) to Show Cause whether to
sanction them for allegedly continuing to violate the Court's January 14. 2022 Order. Delcndants
filed their Response to the December 22. 2022 “Show Cause’" Order.' Def s Resp. Show Cause,
ECF No. 364 (“Defs.’ Resp.”). The United States Department of Labor (“Plaintiff’ or “DOL”)

filed its Response to Defendants Response to the Court’s December 22. 2022 "Show Cause" Order.
Pl.’s Resp. Show Cause, ECF No. 365 (“Pl.’s Resp.'’). The Court held a Show Cause hearing on
March 2, 2023. Ilear'g Show Cause, ECF No. 370 (“Hear’g"). Having carefully reviewed the

parties’ briefs, the Court finds this matter ripe for judicial determination. For the reasons set forth
below, the Court’s Show Cause Order is DISMISSED.

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The Court’s order notes that Defendants were found liable for failing to pay overtime and maintain pay records
under the Fair Labor Standards Act ("FLSA")- LCF No. 363. Further, the Court enjoined Defendants from

committiniz further FLSA violations. Id.

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I.

PROCEDURAL AND FACTUAL HISTORY

On May 2, 2018, Plaintiff initiated an enforcement action against Defendants, alleging
several Fair Labor Standards Act (”FLSA“) violations. Compl.. ECF No. 1. On January 14, 2022,

following a bench trial, the Court entered judgment in favor of Plaintiff, finding Defendants liable

for violating the FLSA for failing to pay overtime and maintain records. ECF Nos. 324, 325. In its

Memorandum and Opinion, the Court enjoined Defendants from committing further FLSA
violations and accepted Plaintiffs back wage calculations and methodology, finding that
Defendants owed $3,619,716.49 for overtime violations from August 18. 2015 to June 27, 2021

and an equal number of liquidated damages, totaling $7,229,432.98. Court's Order, ECF No. 324
(the ''Court’s Order” or "Order”). In that same Order, the Court directed Plaintiff to provide an

updated calculation of additional back pay and liquidated damages from any continued FLSA
violations from June 27, 2021, to January 13, 2022. Id.

On March 11,2022. Plaintiff submitted updated back wage calculations for $9,075,285.66,
an amount that includes $1,835,852.68 in added back wages and liquidated damages. ECF No.
329. On March 13, 2022. Defendants filed a Motion for Relief in Connection with Plaintiff s Trial

Exhibit PX-21." and Opposition to Plaintiffs March 11 ‘'Updated Back Wage Computations.”
claiming that

Plaintiffs backpay

and liquidated

damage calculations

included several

computational errors. ECF No. 331. On March 14, 2022, Defendants fled a notice of appeal to
contest the final judgment. ECF No. 332. On April 8, 2022, the Court deferred ruling on

Defendant's Motion for Relief in the interest of judicial

economy.

5^3

ECF No. 340.

- Trial Exhibit PX-21 is a backpay table that includes approximately 10,000 entries the DOL created using data
taken from Defendants’ payroll, invoices, and worker timesheets, which were produced in discovery and are pait of
the trial record.

^ Defendants filed their reply on April 4, 2022.
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On July 14, 2022, Plaintiff filed a Motion for Entry of Updated Order, EOF Nos. 346, 347,
whieh Defendants opposed, EOF No. 350. On July 28, 2022. Plaintiff filed a Motion lor Bond
alleging that Defendants eontinue to violate the FLSA and the Court's Order. On December 20,
2022, the Court denied Plaintiffs Motion for Bond. ECF No. 362. On December 22, 2022, the

Court ordered Defendant to Show Cause within thirty days regarding whether to sanction them for

allegedly failing to comply with the Court's Order. ECF No. 363. On January 23,2023. Defendants
filed their response to the Court’s Show Cause Order. Dels.’ Resp. On February 6, 2023, Plaintiff
filed its response to Defendants' response to the Court's Show Cau.se Order. Pl.'s Resp. On March
2, 2023, the Court held a hearing on the Show Cause Order. Flear'g. During that hearing,
Defendants informed the Court they obtained an auditor on February 17.2023. and that they should
have shown Plaintiff the policy change and provided them the pa\- records during summer 2022.
See Show Cause Hearing Transcript 9: 12-13; 12: 11-12.

At the hearing, the Court made the following factual findings:
1. The Court issued its Final Judgment and Injunction on January 14, 2022, enjoining
Defendants from further violating the FLSA.

2.

Since that time. Defendants updated their payroll system and began paying their
workers overtime at a rate of 1.5x their regular rale for any hours over 40 hours worked
in a workweek on February 8, 2022.

3.

The DOL requested payroll records and interviewed Defendants' employees about their
compensation to monitor Defendants' compliance under the FLSA.

4.

On several occasions, the DOL learned that Defendants remained non-compliant under

the FLSA and failed to pay its workers overtime.
5.

On July 14, 2022, the DOL submitted its most recent request for payroll records to

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Defendants.

6. The DOL did not receive the requested records until Ndarch 1,2023, the evening before
the parties’ Show Cause Hearing.

7. Defendants hired an outside payroll auditor to review its payroll system on February 17,
2023

less than two weeks before the scheduled Show Cause Hearing.

8. The audit uncovered that Steadfast had failed to pay at least $175,000 to its workers in
violation of the FLSA since February 8, 2022.
II. LEGAL STANDARDS

A. Contempts - Civil vs. Criminal
It is well-established that federal courts possess an inherent power to punish for contempt
of court. Chambers v. MASCO, Inc., 501 U.S. 32, 44 (1991). This power reaches to contempts

that occur before the court (i.e.. "direct’* contempt) and to contempts that occur out of court (i.e.,

"indirect” contempt). See In! ’/ Union, United Mine Workers ofAm. v. Bagwell, 512 U.S. 821,
833 (1994). In this case, indirect contempt is at issue.
As an initial matter, the Court must determine whether the movant seeks to hold the

defendant in civil or criminal contempt. Major v. Orthopedic Ecpiip. Co., 496 F. Supp. 604, 611
(E.D.Va. 1980). This determination is important from the outset as it "may bear on the type of
notice required, the applicable standard of proof, and other issues.’* Bufifngton v, Baltimore Cnty,
M/.,913F.2d 113, 133 (4lh Cir. 1990) (citing 5m/7/7 v. .SW//vw7, 611 F.2d 1050, 1052 (5thCir.

1980)). “[CJriminal contempt [is] ‘a crime in the ordinary sense,”’ Young v. U.S. ex rel. Viiitton

et Fils S.A., 481 U.S. 787, 799 (quoting Bloom v. Ill, 391 U.S. 194, 201 (1968)), such that the
subject of the sanctions is “entitled to [the] full criminal process,’* Bagwell, 512 U.S. at 827,

including the use of an independent prosecutor. United States v. Neal, 101 F.3d 993, 997 (4th

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Cir. 1996). in contrast, civil contempt sanctions call for fewer procedural protections; notice and

an opportunity to be heard are required. Bagwell, 512 U.S. at 827. Unlike criminal contempt, the
finding of civil contempt must rest on proof by clear and convincing evidence; there is neither a
right to a jury trial nor proof beyond a reasonable doubt required. Cromer v. Krafl Foods N Am.,
Inc., 390 F.3d 812. 821 (4th Cir. 2004); Bagwell, 5\2 U.S. at 827.
In addition to the differences in the substance of the

proceedings, the distinction between

criminal and civil lies in "the character of the relief that the proceeding will afford.” Hicks on

Behalfof Feiock v. Feiock, 485 U.S. 624. 631 (1988). The contempt is civil if the purpose is
remedial and intended to either coerce compliance with the court order or to compensate the

plaintiff for losses sustained. Biiffinglon, 913 F.2d at 133. See also Consolidation Coal Co. v.
Local 1702, United Mineworkers ofAm.. 683 F.2d 827, 829 (4th Cir. 1982) (stating tines for

civil contempt "are designed primarily to coerce behavior”). If, however, the purpose is to
vindicate the court's authority by punishing the offending party for past disobedience, the
proceeding is criminal. Bufifngton, 913 F.2d at 133.
In the instant case. Plaintiffs response to the Court's Show Cause Order has two goals.
First, Plaintiff seeks compensation for losses amassed while Defendants failed to comply with

the Court’s Order. Pl.'s Resp. at 9. Second, Plaintiff seeks civil conllnement of Defendant Pitts
to coerce Defendants to comply with the Court’s Order. Id. at 11. Thus, Plaintiff is not seeking
any punitive sanctions against Defendant. For this reason, the Court finds that Plaintiff seeks to
hold Defendants in civil contempt.
B. Civil Contempt Standard

Civil contempt is appropriate w'hcre a party has violated an order of a court which ’"set[s]
forth in specific detail an unequivocal command' which a party has violated.” In re General

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Molars, 61 F.3d 256, 258 (4th Cir. 1995) (quoting Ferrell v. Pierce, 785 F.2d 1372, 1378 (7th
Cir. 1986)). The violation must be of an order that is ’‘clear and unambiguous.'’ Id. (quoting

Project B.A.S.l.C. v. Kemp, 947 F.2d 11. 16 (1st Cir.1991)). To establish civil contempt, Plaintiff
must show each of the following elements by clear and convincing evidence:
(1) the existence of a valid decree of which the alleged contemnor had actual or
constructive knowledge;
(2) that the decree was in the movant’s “favor’;

(3) that the alleged contemnor by its conduct violated the terms of the decree, and had
knowledge (at least constructive) of such violations; and
(4) that [the] movant suffered harm as a result.

Ashcraft v. Conoco, Inc., 218 F.3d 288, 301 (4th Cir.2000) (quoting Colonial Williamsburg
Found. V. The Kittinger Co., 792 F .Supp. 1397, 1405-06 (E.D.Va.l992), aff’d, 38 F.3d 133. 136
(4th Cir. 1994)).

A good faith attempt to comply, even if such attempt proves ineffective, is a defense to a
civil contempt order. Consolidation Coal Co., 683 F.2d at 832 (citing Consolidation Coal Co. v.
Int j Union, United Mine Workers ofAm., el al, 537 F.2d 1226 (4th Cir. 1976)). Other defenses
include substantial compliance or the inability to comply. Id. (citing Washington Metro. Area

Transit Auth. v. Amalgamated Transit Union, 531 F.2d 617 (D.C. Cir. 1976)).
If contempt is found, the trial court has broad discretion to fashion a remedy. In re
General Motors, 61 F.3d at 259. A coercive contempt sanction may involve imprisonment or a

fine. See Bagwell, 512 U.S. at 829. Regarding fines, the power to line is based on the power to
fashion injunctive relief; without the authority to levy fines, a court would have the power to
grant a remedy but no effective means of enforcement. Consolidation Coal Co., 683 F.2d at 829-

30. A contempt fine is considered civil when the fine is remedial (i.e., either paid to the

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complainant oi\ when payable to the court, avoidable by the contemnor by simply performing the
affirmative act required by the court's order). Biififngion, 913 f.2d at 133. See also Bagwell, 512
U.S. at 829 (if the fine is not intended to compensate, it is civil only if the contemnor has the

opportunity to purge the fine, i.e., reduce or avoid the fine through compliance). In other words,
a fine that is payable to the court but not conditioned on compliance with a court order is
punitive and therefore, not civil. Bufifngton, 913 F.2d at 134. As to the nature of the tine, a court
may impose "a per diem fine . . . for each day a contemnor lails to comply with an affirmative
order .... [S]uch fines exert a constant coercive pressure, and once the . . . command is obeyed,
the future, indefinite, daily lines are purged." Bagwell, 512 IJ.S. 821, 829.

Courts may also order the contemnor to reimburse the complainant for reasonable
attorney's fees. In re General Motors, 61 F.3d at 259 (citing United States v. Triidell, 563 F.2d

889, 891 (8th Cir.1977)). Although willfulness is not an clement of civil contempt. Id. at 258
(citing McComb v. Jacksonville Paper Co., 336 U.S. 187, 191 (1949)), district courts in this

Circuit have held that before awarding attorney's fees, a llnding oP'willful disobedience” wherebv the contemnor's conduct rises to the level of obstinance or recalcitrance

may be

required. Omega World Travel, Inc. v. Omega Travel, Inc., 710 F. Supp. 169, 172-73
(E.D.Va.l989), affd, 905 F.2d 1530 (4th Cir.1990) (unpublished), (citing Wright v. Jackson, 522

F.2d 955, 957-58 (4th Cir. 1975)). Mere negligence or carelessness is insufficient to support an
award of attorney's fees. Id.
III. DISCUSSION

A. Civil Contempt
Plaintiff argues that the Court should hold Defendants in civil contempt because

Defendants refuse to pay overtime in compliance with the Act and the Court's Order. PL’s Resp.

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at 4. Additionally. IMaintiff argues that the Court should impose sanctions and attorneys' fees
against Defendants for their noncompliance. However, Delendants argue against holding them in
civil contempt and imposing sanctions. Defs.' Resp. at 3^; ECF No. 375. The Court will
address each element of civil contempt below.
1. Knowledge of Valid Decree

Both parties do not dispute that Defendants had actual and constructive knowledge of the

January 14, 2022 Final Judgment and Injunction Order. Counsel for Defendants admitted that
Defendants were aware of the Order during the Show Cause hearing. See Show Cause Flearing
Transcript at 11. Additionally, the DOT and the Court repeatedly made Ms. Lisa Pitts aware of
her non-compliance with the FLSA before, during, and after trial. See Docket Sheet. The Order’s

terms were clear and unambiguous. The Order was also clear and unambiguous as to whom it

applied, namely Medical Staffing of America, LLC, d/b/a Steadfast Medical Stalfing, and Lisa
Pitts. Order at 30. Thus, Defendants had knowledge of a valid decree.
2.

Decree in Movant’s Favor

Both parties agree the Court's Order was in the Secretary's favor. The Order enjoined
Defendants from committing further violations of the FLSA. Order at 30. Thus, the Order was in
the Secretary’s favor.
3.

Violation of the Order

Albeit delayed, Defendants are now in compliance having begun to comply once the

Show Cause Order was issued. During the Show Cause Hearing, Defendants counsel stated that
Defendants had made efforts to comply with the FLSA. See Show Cause Hearing Transcript at
11-12. Defendants slated on February 8. 2022, that they began paying overtime as the law
required and informed Plaintiff on July 28, 2022, in their letter about their compliance. Defs.'

Resp. at 2. From January 14, 2022, through February 8, 2022, roughly three weeks. Defendants

were not in compliance with the FLSA. During this period. Defendants admitted to not paying
overtime to at least one of its employees. Ms. Brandy Hicks. ECF No. 350, Ex. 1.
In addition, Defendants relied on their recent decision to engage an outside auditor as a

good faith showing of their ability to comply with the Court's directives moving forward. See
Show Cause Hearing Transcript at 9. Defendants' auditor analyzed Defendants’ payroll records
showing Defendants' noncompliance represents 1% of the total compensation paid to the nurses.
See ECF No. 375, Ex. A at 13. Defendants* auditor stated, "[Defcndanls] payroll and

timekeeping systems are inherently complex based on these factors, but ultimately [Defendants]
data contains sufficient and necessary infonnation to properly calculate overtime for all nurses.
Id. at 14. The auditor’s report shows that Defendants attempted to comply with the Court's

Order, although there were some issues with the payroll and timekeeping records.
However, prior to the Show Cause Hearing, the Court ordered i-*laintiff to update the back

wages and liquidated damages calculation, but Defendants repeatedly refused to provide Plaintiff
with the requested payroll information to update those figures for the Court. See Show Cause
Hearing Transcript at 5. Defendants did not provide Plaintiff with their payroll records until
March 1,2023, one day before the Court held the Show Cause Hearing, even though Plaintiff
requested these records on July 14, 2022. See Show Cause Hearing Transcript at 8. Although the
Court notes Defendants delayed compliance throughout this litigation, the Court finds their

delayed compliance questionable. Consolidation Coal Co., 683 F.2d at 832 (stating good faith
efforts can be a defense even if ineffective).
4.

Movant Suffered Harm

Plaintiff has established that it has suffered harm because of Defendants’ failure to

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comply with the order. Defendants' failure to provide payroll records and pay overtime to its
employees seriously threatens Plaintiff ability to monitor employers and protect workers. Thus,
the Court finds that Plaintiff suffered harm.

Nevertheless, the Court finds the purpose of the Show Cause Order achieved.

Additionally, the Court finds it unnecessary to hold Defendants in civil contempt. Although the
Court finds Plaintiff arguments for civil contempt compelling, Defendants have now come into

compliance, thus rendering it unnecessary for the Court to address sanctions and attorneys' fees.
Further, Defendants provided a good-faith defense for delaying compliance with the Court’s
Order. Therefore, the Court does not find Defendants in civil contempt.
IV. CONCLUSION

For the reasons stated above, the Show Cause Order is DISMISSED. ECF No. 363. The

Court DIRECTS the Clerk to provide a copy of this Order to the parties.
IT IS SO ORDERED.

/s

Norfolk, Virginia

Raymond A. Jackson

November

United States District Judge

2023

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