Rosinbaum, et al v. Flowers Foods, Inc., et alREPLY to Response to Motion regarding 303 MOTION for DecertificationE.D.N.C.March 11, 2019 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF NORTH CAROLINA SOUTHERN DIVISION BOBBY JO ROSINBAUM and ROBERT WILLIAM MORGAN, JR., individually and on behalf of all similarly situated individuals, Plaintiffs, v. FLOWERS FOODS, INC., and FRANKLIN BAKING CO., LLC, Defendants. Civ. A. No. 7:16-cv-00233-FL Oral Argument Requested DEFENDANTS’ REPLY IN SUPPORT OF MOTION FOR DECERTIFICATION1 1 All deposition excerpts are attached to the Declaration of Margaret Hanrahan filed as Exhibit 1 hereto and will be cited as MH Decl., Att.___. Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 1 of 18 1 Plaintiffs argue that they can meet the heightened standard applied at decertification because, they claim, they all perform the same “core functions” and share the “same economic reality.” The problem with Plaintiffs’ argument, of course, is that it is entirely unsupported when carefully analyzing all of the record evidence combined, as the Court is required to do at this decertification stage. At a minimum, when the Court compares Plaintiffs’ “evidence” to Defendants’ evidence (largely based on Plaintiffs’ own testimony) to the contrary, it becomes clear that the type of “representative” proof necessary to try this case as a collective action—and render a one-size-fits-all liability determination for all 94 together in a fair and just manner—simply does not exist. In fact, in Plaintiffs’ decertification opposition (the “Opposition”), they do not even mention their strikingly different testimony on matters central to this case let alone try to reconcile it to argue that representative proof nonetheless exists despite these differences. Further, while the Opposition is replete with what Defendants allegedly “have the ability,” “right,” “may” or “could do” to distributors if they violated various unsupported “policies,” all of these anecdotes are completely inapposite. This is because, under the economic realities test that governs these claims, it is what actually occurs in practice—not what could, may, or might happen—that governs.2 Plaintiffs have the burden of showing this matter should not be decertified based on actual evidence in this case under a “heightened, fact specific standard.” Cleary v. Tren Servs., 2012 WL 1189909, *3 (S.D.W.V. Apr. 9, 2012). They have not and cannot meet that burden here. This is because neither common classification, decisions by other courts involving different plaintiffs and different subsidiaries, or various alleged, unsupported hypothetical rights can erase the 2 Dole v. Snell, 875 F.2d 802, 808 (10th Cir. 1989) (quoting Brock v. Mr. M.W. Fireworks, Inc., 814 F.2d 1042, 1047 (5th Cir. 1987))(“[I]t is not what the [workers] could have done that counts, but as a matter of economic reality what they actually do that is dispositive.”); Harris v. Express Courier Int’l Inc., 2017 WL 5606751, *4 (W.D. Ark. Nov. 21, 2017)(rejecting plaintiffs’ decertification argument focusing on right to control because it “strain[ed] common sense” and ignored the divergent testimony about what actually occurred in practice). See also Doc. 304, p. 11 and fns. 9 and 11 on pp. 12-14 and cases cited therein. Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 2 of 18 2 fundamental differences by and between Plaintiffs—based on their own testimony—on the economic realities test factors governing whether they are or are not independent contractors (“ICs”). Nor can the argument that a collective action would be “more efficient” save their claims from decertification because any efficiencies quickly disappear when, after Plaintiffs proofer their “representative proof,” Defendants are forced to pick it apart witness by witness who will say the exact opposite. Decertification should be granted here accordingly. A. Plaintiffs’ “Common Evidence,” When Contrasted With Defendants’ Evidence To The Contrary, Establishes That “Representative Proof” Does Not Exist. Perhaps the strongest evidence supporting why decertification is appropriate here is the Opposition’s “Common Evidence” chart on pages 16-17. This is because, for every piece of “Common Evidence” Plaintiffs cite, Defendants can introduce significant other evidence to the contrary. In these circumstances, representative proof, quite simply, does not exist.3 Plaintiffs’ “Common Evidence” Defendants’ Controverting Evidence Degree of Control Actually Exercised Pursuant to their Distributor Agreements, all Plaintiffs must perform their jobs in accordance with “good industry practice.” See Doc. 336-17 §§ 2.6, 5.1 Defendants reserve right to discipline—and routinely exercise that right— Plaintiffs for essentially any reason under the subjective and discretionary service requirements. Doc. 336-5, p. 6; Doc. 336-19, pp. 9- 10; Doc. 336-26; Doc. 336-18. Even if the right to issue a breach letter for violation of “good industry practice” could be considered a right to “discipline” (which is denied), this right is not uniformly exercised in practice. Damron, Doc. 303-1, p. 87 (no breach letters); Moran 33:4-12 (no breach letter)(MH Decl., Att. A9)4; Singletary, Doc. 303-1, pp. 336-337 (no breach letter); Coniglio, Doc. 303-1, p. 83 (received a number of breach letters); Idries 53:23-55:11 (received 3 breach letters)(MH Decl., Att. A6); Joyner 61:10-18 (received 1 breach letter)(MH Decl., Att. A7); Ressegiue 67:11-21 (received 1 breach letter)(MH Decl., Att. A11). Defendants conduct market checks to assess Plaintiffs’ performance at No uniform policy on market checks exists. Many distributors have never seen a member of sales 3 Purdham v. Fairfax Cnty. Pub. Schs., 629 F. Supp. 2d 544, 549 (E.D. Va. 2009)(decertification is necessary if the claims “require substantial individualized determinations for each class member.”); Beauperthuy v. 24 Fitness USA, Inc., 772 F. Supp. 2d 1111, 1130-31 (N.D. Cal. 2011)(decertifying class where deposition testimony “show[ed] that for every manager who says one thing about his or her job duties and responsibilities, another says just the opposite.”); Doc. 304, p. 9, 13 & n. 11 (and cases cited therein). Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 3 of 18 3 different outlets and employ rehabilitation strategies with deficient Distributors.5 Doc. 336-3, pp. 5-6; Doc. 336-5, p. 3; Doc. 336- 19, pp. 11-19; see also Doc. 336-8, p. 5; Doc. 336-10, p. 13; Doc. 336-14, pp. 7, 10. management in their territories. Clemons, Doc. 303-1, pp. 38-39 (“very, very, very rarely” saw management in his territory); Coniglio, Doc. 303-1, p. 48 (testified he had not had a sales manager in over a year); LeSech 100:2-102:15 (saw his sales manager in his territory once)(MH Decl., Att. A8); D. Williams, Doc. 303-1, p. 410 (“never” saw Flowers). Plaintiffs can be and are reprimanded for exceeding stale percentages set by Defendants and not performing their jobs according to Defendants’ standards and customer service requirements. Doc. 336-19, pp. 33- 34; Doc. 336-25. Several distributors have never even been charged or “reprimanded” for “violating” stale percentages. Coniglio, Doc. 303-1, p. 83 (no stale cap); D. Williams 50:6-51:12 (excused from stales cap)(MH Decl., Att. A16). Several distributors do not comply with customer service requirements without consequence. Morgan, Doc. 303-1, pp. 202-203 (decides when he starts/sequence of his work); Hardison, Doc. 303-1, p. 111 (does not follow Walmart’s customer service requirements based on his relationship with them); C. Smith, Doc. 303-1, pp. 363-365 (does not follow customer service requirements and has never received a breach letter); R. Smith 37:23-38:16 (changed days of service without approval)(MH Decl. Att. A15.) Defendants may freely terminate Distributors for failing to meet Defendants’ standards. Doc. 336-5, p. 6; Doc. 336-19, p. 4. The Distributor Agreement, by its terms, cannot be terminated at will. See Exhibit 5, attached to Brown’s Decl., Doc. 303-2, Section 16.1.6 Opportunities for Profit and Loss7 Defendants’ national and regional sales managers by the nature of their Some distributors change prices, suggest new products and change shelf space and product 5 Many of the Oppositions “facts” are not supported by the record. For example, Plaintiffs allege “Defendants also track Plaintiffs’ activities in the field by generating ‘days of service reports…” (Doc. 334, 11), but there is no support for the statement days of service reports are used to track distributors. 6 Specifically, Paragraph 16.1 provides: “[E]xcept as set forth in Sections 3.1(b) and (c) and 15.1 above, or in this Article, COMPANY shall not terminate or cancel this Agreement, provided DISTRIBUTOR faithfully carries out the terms hereof. In the event DISTRIBUTOR fails to perform DISTRIBUTOR’S obligations under this Agreement, COMPANY may terminate this Agreement as set forth below.” 7 In the Opposition, Plaintiffs overemphasis the importance of the pricing and margin related to products. In affirming summary judgment decisions finding IC status, both the Fourth Circuit and the Eleventh Circuit have dismissed arguments emphasizing pricing. Chao v. Mid-Atlantic Installation Serv’s., Inc., 16 Fed. App’x 104, 107 (4th Cir. 2001) (affirming IC status, explaining that even though the installers did not set prices, they were “no less in control of their net profits as a result of these variables than typical independent contractors.”); Freund v. Hi-Tech Satellite, Inc., 185 Fed. App’x 782 (11th Cir. 2006) (agreeing with Chao). As reflected above, opportunity for profit or loss reaches well beyond pricing. See Parrish v. Premier Directional Drilling, --- F.3d ---, 2019 WL 973091, *9 (5th Cir. 2019) (“[I]t is important to determine how the workers’ profits [depend] on their ability to control … costs.”) (internal quotations omitted). Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 4 of 18 4 very positions exercise control over all entrepreneurial and profit- generating activities. More specifically, members of the National Accounts Team are the single point of contact and develop business connections, pitch pricing, products and promotions, and nurture existing relationships with Defendants’ customers. Doc. 336-30, pp. 3-6; Doc. 336-31, p. 3; Doc. 336-32, pp. 3-10; Doc. 336-33, pp. 3, 6; Doc. 336-47, pp. 3-4. Defendants determine the profit margins, between wholesale price to Plaintiffs and retail sale prices. Doc. 336-19, pp. 35-38; Doc. 336-35; Sales managers call on accounts, seek new accounts, maintain good relationships with store managers, solicit more shelf space, present product opportunities to customers, and handle store resets to try and secure the most opportune placement for products. Doc. 336-19, pp. 7-8; Doc. 336-33, p. 5; Plaintiffs cannot propose pricing or products to accounts, pitch promotions, or negotiate shelf space with national accounts. Doc. 336-5, p. 10; Doc. 336-19, pp. 39, 42; Doc. 336-33, pp. 4, 6-8; Doc. 336-34. facings at their discretion. Coniglio, Doc. 303-1, pp. 66-67 (raised prices for cash accounts to increase profits); Hardison, Doc. 303-1, pp. 119-120 (would make suggestions for new products); Clemons 129:17-130:18 (for cash accounts, Clemons could arrange products however he wanted)(MH Decl., Att. A2); Hardison 78:25-80:4 (had discretion to change product facings for his independent accounts)(MH Decl., Att. A5). 8 Some distributors solicit new accounts at their discretion. Clemons 35:24-37:9, 37:1-5 (solicits new accounts)(MH Decl., Att. A2); Coniglio, Doc. 303-1, pp. 58-60 (successfully obtained new business within his distribution area); Damron, Doc. 303-1, pp. 91-92 (offers his services to new business); LeSech, Doc. 303-1, pp. 171-174 (unsuccessfully pursued new accounts); Moran, Doc. 303-1, pp. 180-182 (successfully solicited new business because “[w]e’re the only game in town.”). Some distributors increase sales and space opportunities by obtaining displays at their discretion. Hardison, Doc. 303-1, pp. 118-119 (regularly obtains additional displays which boost his sales and profits); Idries, Doc. 303-1, pp. 133- 134 (Idries gets displays “all the time[.]”); Ressegiue, Doc. 303-1, pp. 233-237 (asks store managers for additional displays).9 Instead of a “miniscule impact” (Doc. 334, p. 15), many Plaintiffs described the significant impact of their individualized sales efforts on the value of their distributorship. (Doc. 304, pp. 22-24.) Plaintiffs cannot sell their distributorship without Defendants’ prior written approval. Doc. 336-17, pp. 7-8 § 14.1. Many distributors sold their distributorships without any issue from Defendants at prices the distributors set. Brown Decl., Doc. 303-2, ¶¶ 20, 21 (both Rosinbaum and Morgan sold their territories to 8 Further, Distributors do not service only national charge accounts. In fact, many service primarily or an equal number of cash accounts. See Clemons, Doc. 335-2, pp. 29-30 (primarily cash accounts); R. Smith 29:5-32:20 (6 cash and 6 charge accounts)(MH Decl., Att. A15); D. Williams 37:19-39:17 (10 of 23 accounts were cash accounts)(MH Decl., Att. A16). 9 Not all distributors do so, however, further illustrating the complete lack of “representative proof” on the opportunities for profit or loss. See R. Smith, Doc. 303-1, pp. 379-381, 383 (has never tried to get displays); Singletary, Doc. 303-1, pp. 317-318 (has never asked for displays at any of his stores). Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 5 of 18 5 third party buyers at prices they negotiated); Hardison, Doc. 303-1, pp. 109-112 (received $42,630 for the third-party sale of a portion of his territory); Joyner, Doc. 303-1, pp. 152-153 (received $23,200 for the third-party sale of a portion of his territory); Brown Decl., Doc. 335-1, ¶¶ 9, 10 (McNabb, Jr. sold his territory, valued by Franklin at $130,000, to a third-party for $225,000). Distributors sell portions of their territories when they believe it is profitable. Hardison 30:1-40:7 (stating that he sold 2 portions of his territories to other distributors when he deemed it profitable and a good “business decision.”)(MH Decl., Att. A5); LeSech, Doc. 303-1, p. 169 (sold part of his territory rather than hiring a helper because he didn’t feel hiring a helper “was a great business idea.”). Actual Investment in Equipment/Materials10 All Plaintiffs must purchase their own vehicles for delivering Defendants’ products; however, Flowers makes financing available to assist Plaintiffs with this purchase. Doc. 334, p. 16. Many distributors purchase their vehicles without financing them through Flowers, recommended source. Moran 60:19-62:17 (did not finance through Defendants)(MH Decl., Att. A9); Ressegiue, Doc. 303-1, pp. 236-237 (bought completely on his own three trucks “outright”; Roberts 114:24-115:8 (purchased his truck from a used car dealer and paid cash; Flowers did not finance it. (MH Decl., Att. A12). Defendants pay chain accounts for shelf space and promotional opportunities. The cost is approximately 20% of total sales. Doc. 336-31, pp. 4-5 Plaintiffs invested significantly different amounts of money purchasing their distribution rights. Idries 33:4-12 (paid $71,170)(MH Decl., Att. A6); LeSech 16:23-17:10 (paid $43,000)(MH Decl., Att. A8); C. Smith 34:18-22 (paid approximately $30,000)(MH Decl., Att. A14). Plaintiffs incur other significant business-related expenses. Damron 118:2-119:22 (in 2016, deducted twice for car and truck expenses and over $12,000 for other business expense)(MH Decl., Att. A4); Idries 95:1-96:10 (in 2015 and 2016, Idries deducted car and truck expenses, depreciation, insurance, a lease, repairs, and maintenance, supplies, travel, laundry 10 The Opposition cites to Flowers’ investment nationwide, not the investment of Franklin or the investment into the territory operated by the distributor. The Opposition also cites case law describing minimal investments by the workers. But here, several distributors invested nearly six-figure sums. Blair v. Transam Trucking, Inc., 309 F. Supp. 3d 977, 1007 (D. Kan. Mar. 28, 2018) (decertifying because when plaintiffs “have all made differing levels of investments into their businesses, it would not be possible to perform a uniform analysis on the entire class.”). Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 6 of 18 6 and uniforms, protective gear, his cellphone, and PBS shrink charges)(MH Decl., Att. A6); R. Smith 86:16- 87:23 ($47,441 in business expenses)(MH Decl., Att. A15). The IRS has ruled that Distributors’ investments in their distributorship do not qualify as “investment in facilities.” Doc. 336-41, pp.3-4; Doc. 336-42, p. 3. IRS enforcement position is not dispositive of whether distributors are ICs or employees under the five-factor economic realities test. (See footnote 21, infra). Defendants provide handheld computers and proprietary software, among other tools, which Plaintiffs need to perform their jobs. The cost of this system is at least $169 million from 2013-2017. Doc. 336-43. Distributors pay for the rights to use the handheld computer and proprietary software through the administrative fee. (Doc. 303-2, p. 113 ¶ 10.2)11 Actual Degree of Skill and Knowledge The job of a Distributor does not require advanced knowledge or skill. The qualification for all Distributors is the same—namely, a good attitude. There are no educational requirements, job experience, or specific skills required to become a Distributor. Doc. 336-4, p. 3. Some distributors receive training and training materials, but others do not. Coniglio 53:15-20 (received a handbook)(MH Decl., Att. A3); Clemons, Doc. 303-1, p. 29 (did not receive a handbook); Damron, Doc. 303-1, p. 64 (did not receive a handbook or policies); Coniglio, Doc. 303- 1, pp. 56-57 (no training whatsoever).12 Actual Dependency Between Plaintiffs and Defendants13 Sales managers and the staffing agency are coached to recruit Distributors based on the likelihood that they will form a long-term relationship with Defendants. Doc. 336-44, pp. 30-31. Sales managers are cautioned to avoid Distributor turnover because it reduces Defendants’ profitability. Doc. 336-44, p.31. Some distributors are only distributors for a short period. D.Williams, Doc. 303-1, p. 400 (less than 6 months); Brown Decl., Doc. 303-2, pp. 46–47 (David Jason Clark - ten months; Robert Lee Bennett Jr. - 11 months; Robert Demetric Brown - 4 months). Some distributors run outside businesses concurrently with their distributorships. Brunst, Doc. 303-1, pp. 7-9 (sold cheesecakes); Coniglio, Doc. 303-1, pp. 44-45 (owned the rights to deliver products for other companies); Ressegiue, Doc. 303- 1, pp. 220-222 (managed a crew remodeling 11 The Fifth Circuit recently held, the ability to make decisions regarding expenses evidences control over profits and losses to support IC status. Parrish, 2019 WL 973091, *18 (plaintiffs who had outside businesses and had to control expenses had enough control over profit and loss to support IC status). 12 The length of training, if any, also varies significantly. Compare Damron, Doc. 335-2, pp. 64-65 (5 to 6 weeks of training); with Hardison, Doc. 303-1, pp. 116-117 (1 month of training); Idries, Doc. 303-1, pp. 131-132 (3 months of training). 13 The Opposition emphasizes that distributors are integral to Defendants and the Distributor Agreement establishes a long-term relationship. This again ignores that Plaintiffs were not required to personally service their territories and could hold operate other businesses. Freund, 185 F. App’x at 784 (relationship was “not one with a significant degree of permanence” because plaintiff could work elsewhere). Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 7 of 18 7 Defendants rely exclusively on Distributors to deliver their products to retailers and restaurants. Doc. 336- 1, p.8 kitchens). See also evidence cited in Doc. 304, p. 19– 20. Some distributors hire helpers to assist or work for them while they work for other businesses. Brunst, Doc. 303-1, p. 12 (2 helpers, one to run each of his territories); Coniglio, Doc. 303-1, pp. 69-70, 76 (helper ran his entire distributorship and only spent 9-10 hours on it per week while he delivered products for another company).14 Defendants testified that the economic fate of Distributors and the companies are “tied together” Doc. 336-3, p. 3, and Plaintiff alleges Defendants’ business model and profitability would crumble without Distributors. Doc. 336-2, p. 3. Distributors are dependent on their own entrepreneurial initiatives, which they exercise in different ways. (See evidence above). And, the economic realities test (not “economic fate”) governs this inquiry. (Doc. 304, pp. 12-13.) Hours Actually Worked “[E]very Plaintiff in the collective testified or submitted interrogatory responses stating they have worked more than forty hours per week for Defendants.” (Doc. 334, p. 10).15 Plaintiffs who do not personally service their territories do not work 40 hours per week. See Coniglio Doc. 303-1, pp. 69-70, 76. For Plaintiffs who hired helpers, they rely on hours worked by their helpers or hours worked “managing” their helpers to reach 40 hours per week. See, e.g. Rosinbaum 60:20-63:6, 229:20- 232:4 (does paperwork and checks orders from home while the helper services the territory)(MH Decl., Att. A13); Morgan, Doc. 303-1, pp. 207, 210-211 (When Morgan has a helper, he “kind of chill[s]” at the warehouse in the morning. “I sit and have an extra cup of coffee.”); see also Doc. 304, p. 6-7 and evidence cited therein. B. Plaintiffs’ Purported Contention That The Class Only Includes “Full-Time Drivers” Creates Even More Individualized Inquiries. In an attempt to blunt the force of the fact that distributors aren’t required to do any work on their businesses personally—and can, and do, determine whether and when to personally 14 See also Morgan 82:18-19, 87:15-89:8 (hired multiple helpers to help him in various ways in his territory, and “for a while [Morgan’s] son was doing most of the route.”)(MH Decl., Att. A10); Rosinbaum, Doc. 335-2, pp. 230-234 (hired, trained, paid, and supported a helper who handled his small cash accounts while he focused on his major accounts). 15 The Opposition does not support this statement with evidence from “every Plaintiff in the collective,” and some Plaintiffs admit they did not always personally service their territory for forty hours per week. (See supra). Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 8 of 18 8 service their businesses if at all—Plaintiffs argue that distributors are only members of the collective action during workweeks in which they personally work more than 40 hours. (Doc. 334, n. 1.) But this “revised definition” complicates the inquiry even more. Plaintiffs admit they hire employees to work for them, at varying intervals (including on a full-time basis) and don’t keep records of it. (Doc. 304, p. 14-15; see also Brunst 37:2-41:20 (noting records regarding hours worked by helpers are not maintained)(MH Decl., Att. A1)). It is not simply absentee owners like Bryan Coniglio, as suggested by Plaintiffs; distributors like Named Plaintiff Robert Morgan, Jr. and opt-in Tim Ressegiue at times did not personally service their territories. (Supra, §A.) When Morgan personally serviced his territory, he admits he did not work over 40 hours per week (Morgan, Doc. 303-1, pp. 210-211), and this estimate includes hours that Defendants dispute constitute hours worked—such as when he had an extra cup of coffee at the warehouse while his helper loaded his truck. (Id. at p. 207). The revised definition would result in a revolving door of class members—some who were entitled to overtime for some weeks but not others in varying ways.16 And, the only way to determine who was in the class and when would hinge on individualized testimony.17 The individualized inquiries necessary to determine basic membership in the collective action would render the trial unmanageable in and of itself, and Plaintiffs offer no solutions to solve this. Hargrove v. Sleepy’s, LLC, 2018 WL 1092457, *8 (D.N.J. 2018)(denying class certification 16 This is not a mere damages issue. Whether Plaintiffs worked over 40 hours a week is a liability issue that cannot be established with common proof, particularly where (as here) many Plaintiffs admit they hired employees, including on a full-time basis, and did not keep records regarding when and for how long they worked. (See § A, supra). As the court in Blair recognized, “[Defendant] is still entitled to defend against each claim individually. . . . [Defendant] would have to offer ‘week-by-week, driver-by-driver’ evidence,” which cannot be offered on a class-wide basis, supporting decertification. 309 F. Supp. 3d at 1011. 17 When Plaintiffs hire employees to work for them, the helpers use Plaintiffs’ handheld computer, which is tied to a “Route Number.” (Rosinbaum, Doc. 303-1, pp. 303-305). The handheld is not a solution. Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 9 of 18 9 because identifying members of a class of “full-time drivers” would require “specific fact-finding as to each individual.”). Indeed, this use of helpers and employees makes calculating liability all the more difficult. Because the number of hours that Plaintiffs worked is not uniform, including whether they personally even worked over 40 hours in any given week, the Court must make the liability assessment of whether an FLSA overtime violation occurred Plaintiff by Plaintiff. Roberson v. Rest Delivery Developers, LLC, 320 F. Supp. 3d 1309, 1322 (M.D.Fla. Jun. 20, 2018)(“the variety of hours each driver may have worked increases the likelihood that opt-in Plaintiffs may be awarded damages for non-existent work hours or awarded a smaller amount of damages than they are truly owed.”). C. Neither Common Classification Nor the Cases Plaintiffs Cite Change the Result.18 1. Uniform Classification Cannot Trump Plaintiffs’ Irreconcilable Differences. While Plaintiffs seemingly contend that common classification is sufficient to glue their factually-disparate claims together,19 courts are justifiably skeptical of cases in which Plaintiffs seek to determine whether ICs are employees based on aggregate proof. Because the economic realities test is fact intensive and may require an individualized analysis, “a number of courts have determined that whether an individual is an independent contractor or an employee is not appropriate for determination on a class-wide basis.” 18 Indeed, despite numerous legal challenges surrounding legitimate IC relationships, federal appellate and district courts have repeatedly—and as recently as February 2019—ruled that IC relationships are valid business relationships. See Parrish, 2019 WL 973091, *54. Based on the facts described by the Parrish court, the company—Premier Directional Drilling—exercised more control over the IC than what is presented here. For example, ICs could not engage helpers, Premier provided ICs a computer and access to very expensive software, and Premier required ICs to follow a work schedule. Even with these facts, the Fifth Circuit reversed the district court’s summary judgment finding of employment status and rendered summary judgment in favor of Premier finding the plaintiffs were properly classified as ICs. 19 It is unquestionable that common classification, standing alone, cannot carry Plaintiffs’ certification burden. See fns. 2, 3, supra; see also the cases cited in Doc. 304, pp. 10, 11, n. 8; Blair, 309 F. Supp. 3d at 1002 (calling common classification “irrelevant”). Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 10 of 18 10 Goodly v. Check-6, Inc., 2018 WL 5724320, *2 (N.D. Okla. Nov. 1, 2018)(decertifying a collective action comprised of 18 ICs because “many of the relevant facts that must be considered under the economic realities test var[ied]between Plaintiffs.”); see also Anderson v. Cagle’s Inc., 488 F.3d 945, 953 (4th Cir. 2007)(“[L]ogically the more material distinctions revealed by the evidence, the more likely the district court is to decertify the collective action.”).20 That is precisely the case here. The material distinctions revealed by the evidence in Section A—the majority of which Plaintiffs simply ignore—prove a significant divergence of distributor testimony in several areas material to the IC determination. Based on these differences, it is impossible to fairly determine whether each Plaintiff is an IC or an employee on a collective-action basis.21 The majority of Plaintiffs’ other “evidence” opposing decertification is either: (1) directly contradicted by their own testimony; or (2) hinges solely on hypotheticals about what Defendants allegedly “could,” “may” or “had the ability” to do if Plaintiffs didn’t comply with certain unsupported “policies.” This, too, fails because it is what actually occurs in practice versus what could occur that governs the economic realities test inquiry. (See fn. 2 supra and cases cited therein). Indeed, the Opposition is replete with this “evidence: “Plaintiff could be breached” (Doc. 334, p. 16); “Defendants may freely terminate Distributors …” (Id. at 22); “Defendants’ sales managers … can take a variety of actions…” (Id. at 11); and “Defendants have the ability to circumvent the handheld…” (Id. at 13).22 All-in-all, Plaintiffs advocate these hypothetical “facts,” 20 See also Defendants’ Decertification Memorandum (Doc. 304), pp. 13-14 & fn. 11 and cases cited therein. Plaintiffs make no attempt to distinguish these cases cited in Defendants’ Memorandum. 21 Plaintiffs also appear to rely on “statutory employees” tax treatment as “representative,” common proof. But a “statutory employee” is a special tax provision applicable to IC distributors of baked goods, among other products, for whom a company has an obligation to withhold FICA/FUTA taxes. In fact, the tax code specifies that to be a “statutory employee,” one must first be a common law IC. 26 U.S.C. § 3121(d)(3) (defining “statutory employee” as any individual “other than an individual who is an employee” under [common law rules]). 22 Parrish, 2019 WL 973091, *6 (“It is not significant how one could have acted under the contract terms.”) (internal quotations omitted). Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 11 of 18 11 which Plaintiffs’ own testimony has established are not uniformly true, as “evidence” in their Opposition at least 18 times. And, for those times when Plaintiffs actually assert a fact without hedging, the fact is immediately contradicted by Plaintiffs’ own deposition testimony. (See § A above.) This is a far cry from meeting the stricter burden Plaintiffs have here to show they are “similarly situated.” Decertification is appropriate accordingly. 2. For every case cited by Plaintiffs denying decertification, there are several cases doing the exact opposite, which is exactly why collective treatment fails here. In another effort to minimize the inherent contradictions in their own testimony, Plaintiffs also urge this Court to abdicate its responsibility to apply a heightened, fact specific review of the record in this case because some courts in other jurisdictions, reviewing different records and applying different circuits’ laws, have denied motions to decertify collective actions brought against other Flowers entities. Rehberg v. Flowers Baking Co. of Jamestown, LLC, No. 3:12-cv- 00596, 2015 WL 1346125 (W.D.N.C. Mar. 23, 2015), and the cases that reflexively followed it, Richard v. Flowers Foods, Inc., No. 6:15-2557 (W.D. La. Aug. 13, 2018) (Report and Recommendation of Magistrate Judge Whitehurst);23 Noll v. Flowers’ Foods, Inc., 2019 WL 206084 (D. Me. Jan. 15, 2019), are not persuasive here. (See Doc. 304, p. 33.) In Rehberg, the facts were markedly different and in material ways: there were no distributors who owned multiple territories (like here), no distributors who owned outside food distributorship businesses (there are here), and only isolated examples of third-party sales (significant number here). These facts are material to this IC analysis. (Id. §III.C.4.) The other cases relied upon by Plaintiffs are similarly unhelpful. These cases generally fall into one of four 23 Defendants in Richard have filed timely objections to this Report and Recommendation. Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 12 of 18 12 buckets: (1) cases applying the right to control test instead of the economic realities test;24 (2) cases applying standards other than decertification;25 (3) decertification decisions relating to FLSA overtime exemptions or FLSA liability theories unrelated to IC misclassification;26 and (4) decertification decisions involving IC misclassification claims where the purported employer required personal service and/or approval of any helpers.27 Plaintiffs leave undisturbed and unaddressed the persuasive authority, such as Blair, Goodly, Roberson, and Adami, cited in its 24 See Slayman v. FedEx Ground Package Sys., Inc., 765 F.3d 1033 (9th Cir. 2014); In re FedEx Ground Pkg. Sys., Inc. Employment Pracs. Litig., 662 F. Supp. 2d 1069, 1107-08 (N.D. Ind. 2009) (MDL applying multiple states’ law). 25 See Brock v. Superior Care, Inc., 840 F.2d 1054 (2d Cir. 1988) (appeal of a bench trial judgment); Craig v. FedEx Package Sys., Inc., 686 F.3d 423 (7th Cir. 2012) (summary judgment on state-law claims); Slayman, 765 F.3d 1033 (summary judgment on state-law claims); Campos v. Zopounidis, 2011 WL 2971298 (D. Conn. 2011) (summary judgment); Acosta v. Senvoy, LLC, 2018 WL 3722210 (D. Or. July 31, 2018) (same); Baystate Alternative Staffing, Inc. v. Herman, 163 F.3d 668 (1st Cir. 1998) (same); Dixon v. Zabka, 2014 WL 6084351 (D. Conn. Nov. 13, 2014) (same); Gayle v. Harry’s Nurses Registry, Inc., 594 F. App’x 714 (2d Cir. 2014) (same); Scantland v. Jeffry Knight, Inc., 721 F.3d 1308 (11th Cir. 2013) (same); Jiminez-Orozco v. Baker Roofing, 2007 WL 4568972 (E.D.N.C. Dec. 21, 2007) (joint motion to certify class under Rule 23 and Section 216(b)); Kerce v. West Telemarketing Corp., 575 F.Supp.2d 1354 (S.D.Ga. 2008) (conditional certification); Martin v. Selker Bros., Inc., 949 F.2d 1286 (district court’s liability finding); Pizzarelli v. Cadillac Lounge, LLC, 2018 WL 2971114 (D.R.I. Apr. 13, 2018) (summary judgment and class certification);; Thomas v. Kellog Co., 2016 WL 7057218 (W.D. Wash. Dec. 5, 2016) (outside sales, summary judgment, and denying class certification). 26 The tests applied for the white-collar exemptions at issue in these cases are fundamentally different from the economic realities test. In Nerland, for example, the job description established that the class members were responsible for a significant amount of non-managerial tasks on its face, yet they were treated as exempt. That is not the case here where the Distributor Agreement explicitly creates an IC relationship, and Plaintiffs are arguing that, contrary to the language of the Distributor Agreement, Defendants exercised control in a manner suggesting employment status. See Nerland v. Caribou Coffee Co., 564 F. Supp. 2d 1010, 1012 (D. Minn. 2007); see also Kelly v. Healthcare Servs. Grp., Inc., 106 F. Supp. 3d 808 (E.D. Tex. 2015); LaFleur v. Dollar Tree Stores, Inc., 30 F. Supp.3d 463 (E.D.Va. 2014) (off the clock); Wilks v. Pep Boys, 2006 WL 2821700 (M.D.Tenn. Sept. 2006) (same); Butler v. DirectSat USA, LLC, 47 Supp. 3d 300 (D.Md. 2014) (same); McGlone v. Contract Callers, 49 F. Supp. 3d 364 (S.D.N.Y. 2014) (automatic meal break deductions); Rivet v. Office Depot, Inc., 207 F. Supp.3d 417 (D.N.J. 2016) (fluctuating work week). 27 See McFeeley v. Jackson St. Entm’t., LLC, 825 F.3d 235 (4th Cir. 2016); Slayman, 765 F.3d 1033; Craig v. FedEx Ground Package Sys. Inc., 335 P.3d 66 (Kan. 2014); Flores v. Velocity Express, LLC, 250 F. Supp. 3d 468 (N.D. Cal. 2017); Collinge v. Intelliquick Delivery, 2015 WL 1292444 (D.Ariz. Mar. 23, 2015); Pizzarelli, 2018 WL 2971114 (“She made money only when she performed.”); Randolph v. Powercomm. Const., Inc., 309 F.R.D. 349, 357 (D. Md. 2015) (“not permitted to hire assistants.”); Scovil v. FedEx Ground Package Sys., Inc., 886 F. Supp. 2d 45 (D. Me. 2012); Venegas v. Global Aircraft Serv., Inc., 159 F Supp. 3d 93 (D. Me. 2016); Young v. Fast Act Delivery of W.V., Inc., 2018 WL 989543 (S.D. W.Va. Feb. 20, 2018) (currently on appeal to the United States Court of Appeals for the Fourth Circuit). Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 13 of 18 13 Memorandum, that the Court should strongly consider here. These recent cases—addressing the same kinds of differences eliminating the possibility of “representative proof” decertifying classes—should be followed instead. D. The Opposition’s Attempts to Minimize the Individualized Inquiries Involved in Defendants’ Defenses By Pointing to Other Decisions Falls Flat. Plaintiffs do not address key differences in their testimony relating to Defendants’ defenses. Instead, they again rely on Richard and Rehberg to justify their position that the presence of individualized defenses is not enough to warrant decertification of the class. But, this misses the mark. Even applying the MCA test advocated by Plaintiffs, the Court will still need to determine whether Plaintiffs’ personal vehicle use was meaningful, which is an extremely fact- intensive inquiry that will vary among the Plaintiffs,28 when they were using the smaller vehicle, and whether it was to transport goods in interstate commerce. See Garcia v. W. Waste Servs., Inc., 969 F. Supp. 2d 1252, 1254-61 (D. Idaho).29 Distributors’ testimony on sales efforts is also all- over-the map (Doc. 304, p. 23) and additional individualized inquiries will be necessary to adjudicate the outside sales exemption.30 28 C. Smith, Doc. 303-1, pp. 352-362 (does not carry product in personal vehicle); Hardison, Id. at pp. 121- 122 (deliveries in personal vehicle on rare occasions); Joyner, Id. at pp. 154-163 (uses personal vehicle for deliveries, but he is not sure how often); Roberts, Id. at p. 282 (used to carry product “pretty much very day” in his personal vehicle). 29 The MCA exemption should apply so long as the time the employee spends operating a commercial vehicle is more than de minimus. (Doc. 304, p. 27); see also Buckner v. United Parcel Servs., Inc., 2012 WL 1596726, at *5 n. 3 (E.D.N.C. May 7, 2012), aff’d, 489 F. App’x 709 (4th Cir. 2012), cert. denied, 134 S. Ct. 70 (2013)(“even though plaintiff himself may have operated vehicles weighing 10,000 pounds or less . . . he . . . remains subject to the MCA exemption”). 30 Rehberg v. Flowers Baking Co. of Jamestown, LLC, 162 F. Supp. 3d 490, 513 (W.D.N.C. 2016) (denying summary judgment on MCA exemption where trial was necessary to determine whether plaintiffs used their personal vehicles to transport products in interstate commerce). In applying the MCA exemption, the Rehberg court and many other courts said FLSA exemptions must be narrowly construed. Rehberg, 162 F. Supp. 3d at 507. Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134 (2018) rejected this premise. Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 14 of 18 14 E. Fairness and Procedural Considerations Require Decertification. Finally, Plaintiffs argue that efficiency and cost savings support proceeding collectively in this action. But as the Blair court succinctly stated, “[a]vailable defenses and procedural fairness go hand-in-hand, as the efficiency gained by holding one trial as opposed to many cannot be obtained at the expense of a defendant’s due process rights.” Blair, 309 F. Supp. 3d at 1010 (quoting Scott v. Chipotle Mexican Grill, Inc., 2017 WL 1287512, at *9 (S.D.N.Y. Mar. 29, 2017)). Nor is efficiency dependent upon sustained certification. “Although decertification precludes the opt-in plaintiffs from trying this case in a single trial, they likely benefitted from the implementation of class-wide discovery on many of the issues relevant to their FLSA claims.” Goodly, at *7 (decertifying class of the named plaintiff and 14 opt-ins) (quotations omitted). Simply stated, a plaintiff who did not even service his own territory on a full-time basis, worked another full-time job and owned another business (Coniglio) is simply not representative of a Plaintiff who personally serviced his distributorship with no employees and claimed to be unaware he could operate other businesses (Damron). Using either Plaintiff’s testimony as “representative” of all Plaintiffs’ experiences would be fundamentally unfair. (See Doc. 304 §III.E. (and cases cited therein). Proceeding to a class-wide liability determination with this kind of varied testimony would require the parties to become “bogged down by the individual differences among class member.” If Defendants are prohibited from delving the differences, the result would inevitably violate due process rights. When determining whether to proceed collectively, the court needs to determine “whether it can coherently manage the class in a manner that will not prejudice any party” and whether the claims can be addressed ‘without becoming bogged down by individual differences…” Houston v. URS Corp., 591 F. Supp. 2d 827, 832 (E.D. Va. 2008). It cannot here. Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 15 of 18 15 The inconsistencies in Plaintiffs’ testimony in Section A above illustrate that the type of “representative proof” necessary to proceed collectively does not exist. For every Plaintiff who says one thing about alleged market checks, a stale policy, or the ability to solicit new accounts— the “common evidence” upon which Plaintiffs rely—another will say the exact opposite. These examples are not exhaustive. Johnson v. Big Lots Stores, Inc., 561 F. Supp. 2d 567, 586 (E.D. La. 2008) (“[W]hen there are significant differences in employment experiences … the procedural advantages of a collective action evaporate, and the [c]ourt’s confidence that a just verdict on the merits can be rendered is seriously undermined.”).31 When, as here, “representative proof”, simply does not exist, decertification is necessary. F. Conclusion. Plaintiffs’ own testimony shows that they each ran their businesses differently and no one Plaintiff is representative of another. Some operated other businesses, some ran their businesses completely or partially through employees they hired, some negotiated additional display space and different service times with their customers. No single Plaintiff, or group of Plaintiffs, can offer testimony fairly “representative” of the others as required to proceed collectively. The Court must decertify this case. 31 The Opposition tries to distinguish Johnson by describing it as involving “unusual circumstances”— although it is unclear what unusual circumstances allegedly existed—but then advances the very same argument the Johnson court encountered. Compare Doc. 334, n. 12 (“In the current case, by comparison, the class … is supervised by Defendants’ common framework of sales and marketing managers.”); with Johnson, 561 F.Supp.2d at 579 (“Even though plaintiffs pitched their case as involving a uniform policy or practice of misclassifying ASMs, they produced no direct evidence suggesting a conscious corporate intent to deny ASMs managerial responsibilities.”). What’s more, just like the Opposition’s argument that Coniglio has a “membership” issue in the collective because his actual experiences vary greatly from the narrative pitched by Plaintiffs (Doc. 334, n. 1), the Johnson court recognized that when plaintiffs start calling individuals who fall under the common job title that anchor the class as “unrepresentative,” it becomes apparent decertification is necessary. Johnson, 561 F.Supp.2d at 587. Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 16 of 18 16 Respectfully submitted this 11th day of March, 2019. OGLETREE, DEAKINS, NASH, SMOAK & STEWART, P.C. /s/Margaret S. Hanrahan Benjamin R. Holland (N.C. Bar No. 28580) Michael D. Ray (N.C. Bar No. 52947) Elizabeth R. Gift (N.C. Bar No. 44331) Margaret S. Hanrahan (S.C. Bar No. 72622) 201 South College Street, Suite 2300 Charlotte, N.C. 28244 Telephone: 704.342.2588 Facsimile: 704.342.4379 E-mail: ben.holland@ogletreedeakins.com E-mail: michael.ray@ogletree.com E-mail: liz.gift@ogletreedeakins.com E-mail: maggie.hanrahan@ogletreedeakins.com Attorneys for Defendants Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 17 of 18 CERTIFICATE OF SERVICE I hereby certify that on March 11, 2019, a copy of the foregoing was filed with the ECF system of the United States District Court for the Eastern District of North Carolina, which will give notice to the following counsel of record: Shawn J. Wanta, Esq. Christopher D. Jozwiak, Esq. BAILLON THOME JOZWIAK & WANTA LLP 100 South Fifth Street, Suite 1200 Minneapolis, Minnesota 55402 (612) 252-3570 sjwanta@baillonthome.com cdjozwiak@baillonthome.com Charles E. Schaffer, Esq. LEVIN, FISHBEIN, SEDRAN & BERMAN 510 Walnut Street, Suite 500 Philadelphia, PA 19106 (215) 592-1500 cschaffer@lfsblaw.com Susan E. Ellingstad, Esq. Rachel A. Kitze Collins, Esq. Brian D. Clark, Esq. LOCKRIDGE GRINDAL NAUEN P.L.L.P. 100 Washington Avenue South, Suite 2200 Minneapolis, Minnesota 55402 (612) 339-6900 seellingstad@locklaw.com rakitzecollins@locklaw.com bdclark@locklaw.com David M. Cialkowski, Esq. J. Gordon Rudd, Jr., Esq. Jason P. Johnston, Esq. ZIMMERMAN REED, LLP 1100 IDS Center, 80 South 8th Street Minneapolis, MN 55402 (612) 341-0400 gordon.rudd@zimmreed.com david.cialkowski@zimmreed.com jason.johnston@zimmreed.com Leto Copeley, Esq. COPELEY JOHNSON GRONINGER PLLC 300 Blackwell Street, Suite 101 Durham, NC 27701 (919) 240-4054 leto@cjglawfirm.com /s/Margaret S. Hanrahan Margaret S. Hanrahan (S.C. Bar No. 72622) Case 7:16-cv-00233-FL Document 358 Filed 03/11/19 Page 18 of 18
