United States District Court, W.D. Louisiana
MICHAEL D. CLAY, ET AL.
NEW TECH GLOBAL VENTURES, LLC
RULING AND ORDER
JOHN W. deGRAVELLES UNITED STATES DISTRICT COURT MIDDLE
DISTRICT OF LOUISIANA
matter comes before the Court on the following motions filed
by Defendant New Tech Global Ventures, LLC (“New
(1) Motion to Enforce Stipulated Class Definition by Striking
and/or Severing Claims Asserted by Opt-In Plaintiff Holbrook
(2) Motion for Partial Summary Judgment (Doc. 89);
(3) Motion for Decertification and to Sever Named
Plaintiffs' Claims (Doc. 90); and
(4) Motion for Summary Judgment as to Opt-In Plaintiff Gene
Holbrook (Doc. 94).
before the Court is the Motion for Summary Judgment as to
Employee Status, Liability/Backwages, and New Tech's Good
Faith Defense (Doc. 91) filed by Plaintiffs Michael D. Clay,
Larre Butler, Clayton Shamsie, Joshua Warren, Joseph
Anderson, John Harvey, and Gene Holbrook (collectively, the
the motions are interrelated and include overlapping factual
and legal issues. Accordingly, the Court consolidates their
disposition into this single Ruling and Order after hearing
oral argument on February 6, 2019.
FACTUAL AND PROCEDURAL BACKGROUND
Michael Clay, Larre Butler, and Clayton Shamsie
(collectively, the “original plaintiffs” or
“named plaintiffs”) filed this lawsuit on March
3, 2016. (Doc. 1). They allege that New Tech improperly
classified them as independent contractors and failed to pay
them overtime as required by the Fair Labor Standards Act
(“FLSA”). On September 28, 2016, the Magistrate
Judge granted the parties' Stipulation and Agreed Motion
for Conditional Certification and Court-Authorized Notice
(Doc. 17), conditionally certifying a class of “[a]ll
current and former workers of [New Tech] retained as
‘Rig Clerks' during the period of March 3, 2013, to
March 3, 2016.” (Doc. 19 at 1). Eligible class members
were given 60 days to opt in to the litigation. (Id.
at 2). By December 20, 2016, six additional plaintiffs had
opted in: Joshua William Warren, Joseph LaVelle Anderson,
Albert Deckard, Gene Lee Holbrook, Brett Allen Baker,
John Robertson Harvey (collectively, the “opt-in
plaintiffs”) (See Docs. 20-25). After New Tech
answered the complaint, the case then proceeded to discovery.
August 14, 2018, before the completion of discovery, the
first of the case's several pending motions was filed.
(See Doc. 68). Thereafter, the parties engaged in an
extensive course of motions practice, culminating in the
several motions for which the Court heard oral argument on
February 6, 2019. On February 20, 2019, the Court granted New
Tech's motion to dismiss Deckard's claims with
prejudice (Doc. 68) during a telephonic status conference.
(See Doc. 153).
Tech is a staffing company which provides project management
and consultancy services to independent oil and gas companies
operating drilling rigs. (Doc. 90-2 at 2). New Tech provides
workers to these independent operators who have experience in
the various different drilling practices in which the
operators engage. (Id. at 1-2). The workers New
Tech provides use their oil rig experience to help
independent operators compete with larger competitors in the
industry. (Id.). Due to these operators' size,
they are unable to directly employ the number of employees
with experience in different drilling practices they need to
compete with larger producers. (Id. at 1). Thus,
they contract with New Tech to acquire these workers.
Butler, and Shamshie are “rig clerks”--workers
who support logistical operations and “cost
tracking” for both onshore and offshore drilling rigs.
(Doc. 90-2 at 3; see also Doc. 90-11 at 16; Doc.
90-12 at 11-12 & 16; Doc. 90-13 at 6). Rig clerks perform
a variety of duties, including: ensuring that a rig's
staffing and equipment needs are met, keeping track of daily
costs on the rig, coordinating onshore supplies and
transportation, handling customs and border issues, creating
manifests for supply boats and helicopters, and the
preparation of daily reports. (Doc. 90-2 at 3). New Tech
states that it classifies its rig clerks as independent
contractors based on industry standards, the advice of legal
counsel, and the results of an Internal Revenue Service
(“IRS”) audit. (Doc. 89-3 at 3-9). It maintains
that it has no “role in day-to-day job duties or
assignments for rig clerks that it matches with
operators.” (Id. at 3).
to New Tech CEO Larry Cress, rig clerks work on a
“project-to-project basis with no guarantee of future
work.” (Doc. 103-14 at 2). He asserts that rig clerks
are “not supervised by any New Tech employees nor are
they subject to discipline from New Tech employees.”
(Id.). He maintains that rig clerks are permitted to
turn down job assignments from New Tech and that there is
“no penalty to any rig clerk for turning down any job
offered.” (Id. at 3). New Tech pays rig clerks
“only . . . when they are performing services through
New Tech.” (Id.). New Tech “does not pay
a salary or any other form of regular compensation to rig
clerks” because it considers them to be independent
contractors. (Id.). Rig clerks are “free to
contract directly with operators . . . pursuant to the terms
of their consultant agreements.” (Id.).
plaintiffs maintain that they qualify as employees and should
have been paid overtime by New Tech under the Fair Labor
Standards Act. (See generally Doc. 91-1). They
generally assert that New Tech had significant control over
their job duties, and that it classified rig clerks as
independent contractors to avoid its duty to comply with the
requirements of the FLSA. (Id.).
New Tech's Motion to Sever (Doc. 71)
Tech argues that opt-in Plaintiff Gene Holbrook's claim
should be stricken and/or severed because he was not a rig
clerk and does not fall within the defined scope of the
collective. (See generally Doc. 71-1). The
plaintiffs respond that under the FLSA, Holbrook needs only
to be “similarly situated” to the members of the
collective and that this requirement is more flexible than
the requirements for joinder of parties under Federal Rule of
Civil Procedure 20. (Doc. 77 at 2). They assert that because
New Tech has purportedly misclassified employees as
independent contractors, the fact that Holbrook was a gate
guard instead of a rig clerk is not
dispositive. (Id. at 2-3).
216(b) of the FLSA permits a collective action against an
employer for unpaid overtime compensation “by any one
or more employees for and in behalf of himself or themselves
and other employees similarly situated.” 29 U.S.C.
§ 216(b). No. extensive analysis is warranted here,
however, because the Magistrate Judge conditionally certified
a class of “[a]ll current and former workers of
Defendant retained as ‘Rig Clerks' during the
period of March 3, 2013, to March 3, 2016.” (Doc. 19 at
1). This, of course, came in an order granting the
parties' joint motion for conditional certification in
which the parties “agreed and stipulate to conditional
certification of” all current and former New Tech rig
clerks employed from Mach 3, 2013, to March 3, 2016. (Doc. 17
at 2). The “effect of a conditional certification is
that a court-approved written notice may then be sent to
similarly situated putative class members.” Nieddu
v. Lifetime Fitness, Inc., 977 F.Supp.2d 686, 690 (S.D.
plaintiffs conceded that Holbrook is a gate guard, not a rig
clerk, and it is clear from the record that there are
objectively substantial differences between the two
positions. Regardless of whether gate guards can be
considered “similarly situated” for FLSA
conditional certification purposes, the parties are expressly
bound by their stipulation and the Court's September 28,
2016 Order (Doc. 19). Accordingly, New Tech's motion to
sever Holbrook's claims (Doc. 71) is granted, and
Holbrook's claims are dismissed without
New Tech's Motion for Partial Summary Judgment (Doc.
New Tech moves for partial summary judgment on the issues of
liquidated damages and the statute-of-limitations period.
(See generally Doc. 89-1). The plaintiffs oppose the
motion primarily on the grounds that it is premature.
(See generally Doc. 106).
Tech CEO Larry Cress submitted a declaration in which he
asserts that other third-party staffing companies in the oil
and gas industry employed rig clerks as independent
contractors and not full-time employees. (Doc. 89-3 at 3).
Realizing the legal significance of the classification of
individuals as independent contractors instead of employees,
Cress also sought the advice of four attorneys: Roy Keezel,
New Tech's in-house counsel from 2005 to 2011; Ken
Boiarsky, outside tax counsel; Bruce Williams, personal
injury attorney; and Charles Conrad, also a personal injury
attorney. (Id. at 4). Cress believed Keezel was
specifically knowledgeable about classification issues based
on his legal experience counseling employers on
classification of their workers. (Id.). Keezel had
previously litigated for the IRS, which included
investigating employers' classification decisions.
(Id.). Keezel also had knowledge of the typical
practices of other businesses in the oil industry.
(Id.). On several occasions, Keezel advised Cress
and New Tech's board that rig clerks were properly
classified as independent contractors under federal law,
Texas law, and workers' compensation exclusivity
provisions, confirming that “this classification was
consistent with the predominant and longstanding industry
practice with which both Mr. Cress and Mr. Keezel were
familiar.” (Id. at 4-5).
is a personal injury defense attorney. (Doc. 89-3 at 6). In
April 2015, he provided New Tech with an analysis explaining
his opinion that New Tech's workers were independent
contractors and not employees. (Id.). Williams'
analysis was based in part on personal injury lawsuits
against New Tech which included allegations that its workers
were employees and not independent contractors.
(Id.). Similarly, Conrad is a personal injury
defense attorney who, in March 2015, provided New Tech with
an analysis concluding that New Tech properly classified its
workers as independent contractors. (Id.).
Conrad's analysis was also based on lawsuits he had
defended on behalf of New Tech. (Id. at 6-7).
reliance on this advice, Cress instructed New Tech employees
to treat rig clerks as independent contractors by refraining
from: supervising them, expressing opinions regarding their
schedules, commenting on their job duties, and offering
supplies or equipment or reimbursement if they purchased
their own. (Doc. 89-3 at 7). He also instructed New Tech
employees to negotiate with rig clerks regarding their rate
of pay, and allow them to accept or reject job assignments or
work for competitors. (Id.). Finally, he instructed
his employees to tell rig clerks that they were free to bring
work to New Tech through their own independent business
2015, the IRS conducted an audit into New Tech's
classification of its workers. (Doc. 89-3 at 8). New Tech
hired Boiarsky to represent it in the audit. (Id.).
On April 6, 2015, the IRS concluded its audit by determining
that New Tech had properly classified its workers as
independent contractors instead of employees. (Id.).
testified that he has not at any time “received any
notice, complaint or allegation that New Tech's
classification of rig clerks as independent contractors is,
or may potentially be, incorrect or in violation of the
FLSA.” (Doc. 89-3 at 9). Cress concluded his
declaration by declaring that New Tech's decision to
classify its workers as independent contractors is based on
his “knowledge of the industry, the IRS determination
finding New Tech rig clerks are independent contractors, and
consistent advice from both internal counsel and external
Tech maintains that liquidated damages are not proper under
FLSA because it has acted reasonably and in good faith. (Doc.
89-1 at 13-17). Specifically, New Tech argues that it has
acted in good faith because it relied on industry standards,
the advice of counsel, and IRS investigations in its decision
to classify rig clerks as independent contractors.
(Id.). New Tech additionally urges that the
FLSA's statute-of-limitations period extends to three
years only in the event of a willful violation, and that the
plaintiffs cannot demonstrate a willful violation because New
Tech acted in good faith. (Id. at 17-20).
Nevertheless, according to New Tech, even if it had not
produced evidence of good faith, the plaintiffs cannot
establish that it either committed a knowing FLSA violation
or acted in reckless disregard. (Id. at 20-28).
to the plaintiffs, the issues of good faith and willfulness
cannot be decided before liability is determined. (Doc. 106
at 8-12). Specifically, issues of credibility and New
Tech's state of mind in classifying rig clerks as
independent contractors are to be decided at trial, not at
the summary judgment stage. (Id. at 10-12). The
plaintiffs then take issue with the substance of New
Tech's argument that it acted in good faith, asserting
that following industry standards is not evidence of good
faith in a FLSA case. (Id. at 12-14). The plaintiffs
also claim that because New Tech made the decision to
classify rig clerks as independent contractors in 2013, any
events it points to that occurred thereafter are irrelevant.
(Id. at 14-15). Finally, the plaintiffs argue that
New Tech's reliance on the advice of its counsel was
unreasonable. (Id. at 15).
judgment is appropriate “if the movant shows that there
is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). “Only disputes over facts that
might affect the outcome of the suit under the governing law
will properly preclude the entry of summary judgment.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248
(1986). A dispute of material fact is genuine if “the
evidence is such that a reasonable jury could return a
verdict for the nonmoving party.” Id.
moving party “always bears the initial responsibility
of informing the district court of the basis for its motion,
and identifying those portions of the pleadings, depositions,
answers to interrogatories, and admissions on file, together
with the affidavits, if any, which it believes demonstrate
the absence of a genuine [dispute] of material fact.”
Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)
(internal quotation marks omitted). In responding to a
properly supported motion for summary judgment, the nonmoving
party “must do more than simply show that there is some
metaphysical doubt as to the material fact.”
Matsushita Elec. Indus. Co., Ltd. v. Zenith
Radio Corp., 475 U.S. 574, 586 (1986). The nonmovant
must “go beyond the pleadings” and submit
competent evidence demonstrating “specific facts
showing that there is a genuine [dispute] for trial.”
Celotex, 477 U.S. at 324 (internal quotation marks
omitted). If the evidence is “merely colorable, or is
not significantly probative, summary judgment may be
granted.” Anderson, 477 U.S. at 249-50
Fifth Circuit has further explained:
In resolving the motion, the court may not undertake to
evaluate the credibility of the witnesses, weigh the
evidence, or resolve factual disputes; so long as the
evidence in the record is such that a reasonable jury drawing
all inferences in favor of the nonmoving party could arrive
at a verdict in that party's favor, the court must deny
Int'l Shortstop, Inc. v. Rally's, Inc., 939
F.2d 1257, 1263 (5th Cir. 1991).
260 of the FLSA provides:
[I]f the employer shows to the satisfaction of the court that
the act or omission giving rise to such action was in good
faith and that he had reasonable grounds for believing that
his act or omission was not a violation of the Fair Labor
Standards Act of 1938, as amended, the court may, in its
sound discretion, award no liquidated damages or award any
amount thereof not to exceed the amount specified in section
216 of this title.
29 U.S.C. § 260.
good faith defense is considered a matter for the court to
decide.” Lipnicki v. Meritage Homes
Corp., No. 3:10-cv-605, 2014 WL 923524, at *12 (S.D.
Tex. Feb. 13, 2014). “[A]n employer faces a substantial
burden of demonstrating good faith and a reasonable belief
that its actions did not violate the FLSA.” Singer
v. City of Waco, Tex., 324 F.3d 813, 823 (5th Cir. 2003)
(internal quotation marks omitted). Moreover, courts in this
and other circuits regularly defer ruling on liquidated
damages where liability has not been determined. See,
e.g., Randolph v. PowerComm Const., Inc., No.
GJH-13-cv-1696, 2014 WL 4981439, at *4 (D. Md. Oct. 1, 2014)
(“It would be hasty and unreflective for the Court to
take on the liquidated damages inquiry before deciding
whether the employer violated the FLSA. Thus, Defendants'
motion to limit damages is premature.”);
Lipnicki, 2014 WL 923524, at *12 (Because good faith
is decided by the court, “courts do not need to make a
good faith ruling until after the jury has rendered a verdict
finding violations.”); Brubach v. City of
Albuquerque, 893 F.Supp.2d 1216, 1237 (D.N.M. 2012)
(“[T]he Court notes that a ruling as a matter of law on
the question of liquidated damages is premature because there
has been no determination of underlying FLSA liability
against the [defendant].”); Bass v. City of
Jackson, Miss., 878 F.Supp.2d 701, 712 (S.D.Miss. 2011)
(“Because of the factual disputes and more importantly
because liability has not been established, the Court denies
Plaintiffs' motion for summary judgment on [their
liquidated damages claim.”); Robertson v. Bd. of
Cnty. Comm'rs of Cnty. of Morgan, 78 F.Supp.2d 1142,
1162 (D. Colo. 1999) (deferring ruling on liquidated damages
and limitations period until trial).
Court here will adopt the approach of other district courts
throughout the country and decline New Tech's invitation
to determine the issue of damages before a liability finding
is made. Moreover, the Court notes that on the record before
it, New Tech has very likely not met its heavy burden to
demonstrate as a matter of law that it acted in good faith
and on a reasonable belief that it was not violating the
FLSA. Combining the damages and statute-of-limitations
issues, New Tech cites to case law supporting the proposition
that a court can rule on willfulness at the summary judgment
stage before a liability finding is made. (See Doc.
109 at 2). But New Tech points to no case granting a
defendant's motion for summary judgment on liquidated
damages before a liability determination was made. In fact,
the case law New Tech cites arguably undercuts its position.
See, e.g., Mohnacky v. FTS Intern. Servs.,
LLC, No. SA-13-cv-246-XR, 2014 WL 4967097, at *8 (W.D.
Tex. Oct. 2, 2014) (denying a plaintiff's motion for
partial summary judgment on ...