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Merrill v. Pathway Leasing LLC

United States District Court, D. Colorado

May 14, 2018

FRANKLIN MERRILL, et al., Plaintiffs,
PATHWAY LEASING LLC, a Colorado limited liability company, MATTHEW HARRIS, an individual, Defendants.



         This matter is before the Court on Plaintiffs' Motion for Partial Summary Judgment [#183][1] (the “Motion”), [2] and on Defendants' Cross-Motion for Partial Summary Judgment [#196] (the “Cross-Motion”). The parties filed Responses [#195, #209] and Replies [#202, #213]. The Court has reviewed the Motions, Responses, Replies, the entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, the Motion [#183] is DENIED and the Cross-Motion [#196] is DENIED in part and GRANTED in part.[3]

         I. Background[4]

         Plaintiffs initiated this collective action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq. See Fourth Am. Compl. [#82] at 1-2. Plaintiffs are truck drivers, and many were allegedly employed as “company drivers” by former Defendants XPO Logistics Truckload, Inc., TransForce, Inc., and Con-Way Truckload, Inc. (collectively “XPO”). Cross-Motion [#196] at 3; Response [#209] at 2. Plaintiffs allegedly each entered into “Contractor Hauling Agreements” with XPO in order to become “owner operators.” Motion [#198-1] at 2; Response [#195] at 3. Defendants Pathway Leasing LLC (“Pathway”) and Matthew Harris (“Harris”) leased trucks to Plaintiffs who then used the trucks to perform services for carriers including, but not limited to, XPO. Fourth Am. Compl. [#82] at 2; Answer [#95] at 2; Motion [#198-1] at 7; Response [#195] at 2.

         On May 13, 2013, Defendants and XPO executed a “Carrier Agreement.”[5] Motion [#198-1] at 3; Response [#195] at 11. The Carrier Agreement included the following terms:

(1) “Pathway and Carrier [Former XPO Defendants] agree to develop and implement a leasing and service program (the “Program”) customized to the extent reasonably necessary to meet the interests of Carrier.”
(2) “Pathway will perform the following services: (i) Make available current information for each Vehicle available for lease in Pathway's inventory; (ii) Negotiation of lease financing arrangements for Vehicles, preparation of appropriate lease financing documentation, and closing of lease financing transactions; (iii) Administer the Program, including billing and collecting . . . .”
(3) “Carrier [Former XPO Defendants] agrees to the following obligations: (i) Assist in closing the lease financing arrangement between Pathway and the Operators [Plaintiffs]; (ii) Simultaneously with Pathway's entering into a lease financing arrangement with an Operator for a Vehicle, Carrier shall enter into an independent contractor agreement (an “Independent Contractor Agreement”) with such Operator pursuant to which the Operator shall provide transportation services for Carrier in accordance with applicable federal and state laws and regulations; and (iii) With respect to each Operator participating in the Program, and with the Operator's written consent, to remit such Operator's settlement compensation and other amounts owed Operator under the Independent Contractor Agreement, (excluding Carrier's authorized deductions under the Independent Contractor Agreement), directly to Pathway into an account designated by Pathway.”

Motion [#198-1] at 3-4; Response [#195] at 11.

         Further, Defendants agreed to “consider the reasonable preferences” of XPO as to which types of trucks would be leased; Defendants agreed to hold open any “proposed lease financing” for “thirty (30) days from the date on which Pathway notifies Carrier of such approval;” XPO agreed to notify Defendants of any requests by any Plaintiffs to “change from a solo to a team operation or vice-versa, ” whether any Plaintiffs' insurance coverage changed or lapsed, whether any Plaintiff declared bankruptcy, and whether any Plaintiff terminated his Independent Contractor Agreement; and if any Plaintiff was “in default on payments due Pathway under the lease financing arrangement or in the event of an early termination, ” XPO agreed to “use [its] reasonable best efforts to assist Pathway in locating the Vehicle . . . .” Motion [#198-1] at 4-5; Response [#195] at 11. Defendants retained discretion over which carrier company any given Plaintiff could drive for; in other words, Defendants have similar arrangements with carrier companies other than just XPO. Motion [#198-1] at 7; Response [#195] at 13. Defendants and XPO regularly worked on solutions to problems together, such as whether certain drivers could “get OCC/ACC rather than have to get WC insurance.”[6] Motion [#198-1] at 9; Response [#195] at 15.

         Plaintiffs have asserted five claims in this case: (1) failure to pay minimum wage in violation of the FLSA, (2) recision or voiding of lease agreements, warranties and promissory notes, and restitution, (3) unjust enrichment and restitution, (4) quantum meruit, and (5) unlawful retaliation in violation of the FLSA. Second Am. Compl. [#54] ¶¶ 59-86. In the Motion, Plaintiffs seek partial summary judgment on one issue: “whether Pathway Defendants and Former XPO Defendants are joint employers within the meaning of the FLSA.” [#198-1] at 1. In the Cross-Motion, Defendants seek partial summary judgment on both FLSA claims because, they argue: (1) Defendants are not, as a matter of law, “joint employers” with XPO, (2) Plaintiffs are “independent contractors, ” not “employees” under the FLSA, and (3) Plaintiffs have not provided evidence to support their FLSA retaliation claims. [#196] at 1.

         II. Legal Standard

         The purpose of a motion for summary judgment pursuant to Fed.R.Civ.P. 56 is to assess whether trial is necessary. See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Pursuant to Fed.R.Civ.P. 56(a), summary judgment should enter if the pleadings, the discovery and disclosure materials on file, and any affidavits show “that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” An issue is genuine if the evidence is such that a reasonable fact-finder could resolve the issue in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A fact is material if it might affect the outcome of the case under the governing substantive law. Id.

         The burden is on the movant to show the absence of a genuine issue of material fact. Adler v. Wal-Mart Stores, Inc., 144 F.3d 664, 670-71 (10th Cir. 1998) (citing Celotex, 477 U.S. at 323). When the movant does not bear the ultimate burden of persuasion at trial, the “movant may make its prima facie demonstration [of the absence of a genuine issue of material fact] simply by pointing out to the [C]ourt a lack of evidence for the nonmovant on an essential element of the nonmovant's claim.” Id. at 671. If the movant carries the initial burden of making a prima facie showing of a lack of evidence, the burden shifts to the nonmovant to put forth sufficient evidence for each essential element of his claim such that a reasonable fact-finder could find in his favor. See Anderson, 477 U.S. at 248; Simms v. Okla. ex rel. Dep't of Mental Health & Substance Abuse Servs., 165 F.3d 1321, 1326 (10th Cir. 1999). The nonmovant must go beyond the allegations and denials of his pleadings and provide admissible evidence, which the Court views in the light most favorable to him. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157 (1970); Panis v. Mission Hills Bank, N.A., 60 F.3d 1486, 1490 (10th Cir. 1995) (citing Celotex, 477 U.S. at 324). Conclusory statements based merely on conjecture, speculation, or subjective belief are not competent summary judgment evidence. Bones v. Honeywell Int'l, Inc., 366 F.3d 869, 875 (10th Cir. 2004). The nonmoving party's evidence must be more than “mere reargument of [his] case or a denial of an opponent's allegation” or it will be disregarded. See 10B Charles Alan Wright, et al., Federal Practice and Procedure § 2738 at 356 (3d ed. 1998).

         III. Analysis

         A. Count I: Failure to Pay Minimum Wage in Violation of the FLSA

         1. Joint Employer Test

         The parties agree that determining whether Defendants are collectively “joint employers” with XPO is a “threshold question in this case.” Response [#195] at 17; Reply [#202] at 5. The parties also agree that the Tenth Circuit Court of Appeals has not yet articulated the appropriate test to use in making that determination in the FLSA context. Motion [#198-1] at 11 n.1; Response [#195] at 17. The parties' agreement stops there, however.

         The Department of Labor's regulations implementing the FLSA recognize that an individual may enter into an employment relationship with two or more persons or entities. 29 C.F.R. § 791.2(a). Employment by two entities can be “separate and distinct” or “joint, ” and the determination of which relationship exists “depends upon the facts in the particular case.” Id. Joint employment is found to exist if “employment by one employer is not completely disassociated from employment by the other employer(s).” Id. However, in making the determination of whether two entities are joint employers under the FLSA, courts have utilized a variety of tests.

         Plaintiffs advocate in favor of the test enunciated by the Fourth Circuit Court of Appeals in two decisions issued on the same day: Hall v. DIRECTV, LLC, 846 F.3d 757 (4th Cir. 2017) and Salinas v. Commercial Interiors, Inc., 848 F.3d 125, 132 (4th Cir. 2017). Motion [#198-1] at 12. Using the Hall-Salinas test, the Fourth Circuit held that under the FLSA a court “must determine whether the defendants and one or more additional entities shared, agreed to allocate responsibility for, or otherwise codetermined the key terms and conditions of the plaintiff's work” by examining six nonexhaustive factors:

(1) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the ability to direct, control, or supervise the worker, whether by direct or indirect means;
(2) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate the power to-directly or indirectly-hire or fire the worker or modify the terms and conditions of the worker's employment;
(3) The degree of permanency and duration of the relationship between the putative joint employers;
(4) Whether through shared management or a direct or indirect ownership interest, one putative joint employer controls, is controlled by, or is under common control with the other putative joint employer;
(5) Whether the work is performed on premises owned or controlled by one or more of the putative joint employers, independently or in connection with one another; and
(6) Whether, formally or as a matter of practice, the putative joint employers jointly determine, share, or allocate responsibility over the functions ordinarily carried out by an employer, such as handling payroll; providing workers' compensation insurance; paying payroll taxes; or providing the facilities, equipment, tools, or materials necessary to complete the work.

Hall, 846 F.3d at 769-70. However, the analysis is “highly fact-dependent, ” and therefore, the “absence of a single factor-or even a majority of factors-is not determinative of whether joint employment does or does not exist.” Id. at 770 (internal citation omitted).

         Defendants advocate in favor of the “economic realities” test, a test which has been used by the Tenth Circuit Court of Appeals in related, but not identical, situations, such as to determine whether an entity qualifies as an employer under the FLSA or whether an individual is an employee or an independent contractor. Response [#195] at 17. The “economic realities” test requires the Court to examine four factors: (1) authority to hire and fire employees; (2) authority to supervise and control work schedules or employment conditions; (3) authority to determine the rate and method of payment; and (4) maintenance of employment records.[7] Baker v. Flint Eng'g & Constr. Co., 137 F.3d 1436, 1440 (10th Cir. 1998).

         The parties cite to an array of cases from the Tenth Circuit Court of Appeals which have used the economic realities test in a variety of related contexts. In both Baker v. Flint Engineering and Construction Company, 137 F.3d at 1440, and Henderson v. Inter-Chem Coal Co., Inc., 41 F.3d 567, 570 (10th Cir. 1994), the Tenth Circuit applied the “economic realities” test to determine whether an individual was an employee or an independent contractor of the alleged employer under the FLSA. See also Dole v. Snell, 875 F.2d 802, 804-05 (10th Cir. 1989) (using the economic realities test to determine whether workers were employees or independent contractors under the FLSA). Unlike the present circumstances, the question of whether a “joint employer relationship” existed between two entities was not at issue in either Baker or Henderson.

         In Beltran v. InterExchange, Inc., 176 F.Supp.3d 1066, 1071, 1079 (D. Colo. 2016), the Court utilized the economic realities test at the motion-to-dismiss stage to determine whether “so-called ‘Sponsor' organizations (Sponsors), a mix of for-profit and non-profit organizations . . . formally designated by the U.S. Department of State (DOS) as the exclusive entities permitted to recruit and place au pairs with host families in the United States under the J-1 Visa program, ” could be deemed employers for purposes of the FLSA. In Fuentes v. Compadres, Inc., No. 17-cv-01180-CMA-MEH, 2018 WL 1444209, at *5-7 (D. Colo. Mar. 23, 2018), the Court applied the economic realities test but was focused on determining whether each of the defendants was an employer of the plaintiff under the FLSA, rather than whether the entities were joint employers.

         In Carpenter v. DIRECTV, LLC, No. 14-cv-02854-MJW, 2017 WL 4225797, at *4 (D. Colo. May 16, 2017), the Court acknowledged that the Tenth Circuit has not yet articulated a test for determining whether two entities are joint employers, but noted that the “weight of authority guides this Court to apply the economic realities test to determine whether [the d]efendant [was] a joint employer” of the plaintiffs under the FLSA. The Court concluded that the numerous disputed factual issues “prohibit[ed] the Court from determining the employment relationship of the parties.” Id. at *5. However, there is no indication in Carpenter that the Fourth Circuit decisions were argued or considered, and, in fact, briefing on the motion in Carpenter was completed before the Hall-Salinas decisions were issued.

         In contrast, the Court in Coldwell v. Ritecorp Environmental Property Solutions applied a combination of the factors enunciated by the Ninth Circuit in Bonnette v. California Health and Water Agency, 704 F.2d 1465 (9th Cir. 1983), and the Tenth Circuit in Baker, which were proposed by the parties in order to determine whether the defendants were joint employers. No. 16-cv-01998-NYW, 2017 WL 1737715, at *5-8 (D. Colo. May 4, 2017) (explaining that the focus of the Court's analysis was “on the employee, and not the legal relationship between the employers” and considering control over the plaintiffs, oversight and/or supervision of work, hiring and termination decisions, payment of wages, employment records, payroll, and control of equipment and facilities). Similar to Carpenter, there is no indication in Coldwell that the Fourth Circuit decisions were argued or considered, and the briefing on the motion in Coldwell was completed before the Hall-Salinas decisions were issued.

         Support for the Fourth Circuit's test exists in the Tenth Circuit, although no Court here has yet been called on to explicitly decide this issue. In Zevallos v. Stamatakis, No. 2:17-cv-00253-DN, 2017 WL 6060623, at *3 (D. Utah Dec. 6, 2017), the plaintiffs argued for the use of the Hall-Salinas test at the motion-to-dismiss stage. The District Court for the District of Utah outlined the Hall-Salinas factors and explained that the plaintiffs had sufficiently alleged that the defendants were “joint employers under the broad Fourth Circuit test.” Id. at *4. However, because the plaintiffs had sufficiently alleged that the two entities were joint employers under both the Fourth Circuit test and the Ninth Circuit test articulated in Bonnette, the Court analyzed the plaintiffs' claims “using the narrower” factors set forth in Bonnette. Id. at *3-4.

         Additionally, in Sanchez v. Simply Right, Inc., No. 15-cv-00974-RM-MEH, 2017 WL 2222601, at *6 (D. Colo. May 22, 2017), the Magistrate Judge issuing a Recommendation on motions for summary judgment looked to two different tests advocated by the parties and analyzed “a number of factors that could ‘reasonably apply' to the circumstances, ” which included the four-factor test set forth in Bonnette, 704 F.2d 1465, and “many other factors” drawn from other circuits' case law. The District Judge adopted the Recommendation, but in doing so he noted that the Fourth Circuit's Hall-Salinas test “looks at whether the putative joint employers allocate the power to direct such things as controlling a worker.” Sanchez, 2017 WL 2222601, at *7 n.17 (emphasis in original). He stated:

If the Court were writing on a clean slate, it would likely not adopt either test advocated by the parties. Instead, the Court likely would be persuaded to adopt the test recently pronounced by the Fourth Circuit Court of Appeals in Salinas v. Commercial Interiors, Inc., 848 F.3d 125 (4th Cir. 2017). The Court is inclined to do so because it agrees with the Fourth Circuit that the test set forth in Salinas focuses upon the relevant relationship-“the relationship between the putative joint employers”-as opposed to the relationship between the employee and the putative employers. Salinas, 848 F.3d at 142. As the Fourth Circuit explained, the latter relationship is still part of the inquiry, but it is distinct from the former and addressed separately. Id. at 142-43. However, the Court chooses not to take this approach in this case, not least because Salinas was decided after [the defendant's] motion for summary judgment was filed. Moreover, although plaintiffs cite to Salinas in their response to [the defendant's] objections, they persist in advocating for their self-made “modern test of joint employment”, which ignores the test established in Salinas. As such, the Court has received no argument as to how the facts of this case mesh with the Salinas test. Moreover, the way the parties have presented their facts and arguments is within the framework of [the defendant's] relationship with the non-stayed plaintiffs, rather than [the defendant's] relationship with [the other purported joint employer]. The Court would, thus, be writing on a blank slate, which it does not believe would be appropriate, and will not do on this occasion. In addition, adoption of Salinas may very likely alter the Court's assessment of whether facts can be considered collectively, at least for purposes of the joint-employer analysis, because the Salinas test appears to find relevant all of the circumstances between putative employers, even if they only occurred on one occasion or applied to only certain plaintiffs. See Salinas, 848 F.3d at 145-47. Plaintiffs, though, do not make that argument, and, as noted, frame their arguments in terms of the relationship between an employee and the putative employer. . . .

Id. at n.13 (internal citations to the record omitted).

         Having carefully considered the parties' arguments and related case law on this issue, and in the absence of binding precedent in this Circuit, the Court agrees with Plaintiffs and with the dicta in Sanchez that the test enunciated by the Fourth Circuit in Hall and Salinas is appropriate and should be used here. The Hall-Salinas test properly determines whether more than one person or entity are putative joint employers based on the relationship between them, and the relationship between the putative employee and the putative employers is addressed as a distinct, separate inquiry, unlike the economic realities test advocated by Defendants, which combines these inquiries. The Court therefore utilizes the Hall-Salinas test below in determining whether Defendants are joint employers with XPO.

         2. Application of the Joint Employer Test

         As an initial matter, Defendants argue that “the 15 XPO emails and attachments on which Plaintiffs rely . . . are inadmissible hearsay and are not admissions by a party opponent under Fed.R.Evid. 801.” Response [#195] at 11 n.5 (citing Email Exs. [#183-3, -9 to -22]). As Plaintiffs point out, Defendants raise this argument in a single sentence within a single footnote and do not explain why the language in any given e-mail may constitute inadmissible hearsay. See Reply [#202] at 2 n.1. However, Defendants are correct that statements contained in emails offered to prove the truth of the matter asserted in those statements constitute inadmissible hearsay. Llewellyn v. Allstate Home Loans, Inc., 711 F.3d 1173, 1181 (10th Cir. 2013) (citing Fed.R.Evid. 801(c), 802). Defendants' assertion that these exhibits are “15 XPO emails and attachments” is misleading, though. Response [#195] at 11 n.5 (emphasis added). Many of these documents are email chains, and nearly all are written in whole or in part by Defendant Matthew Harris. See Email Exs. [#183-3, -9 to -22]. Thus, in the absence of further argument by Defendants, the Court finds pursuant to Fed.R.Evid. 801(d)(2) that the portions of those emails written by Defendant Matthew Harris are admissions by a party opponent (regardless of whether they are statements by Defendant Harris in his individual capacity or as an agent of Pathway Leasing) and thus are not inadmissible hearsay. Regarding the portions of the emails not written by Defendant Matthew Harris, the Court does not consider them in connection with adjudication of the Motion and Cross-Motion to the extent that the statements in the emails are offered to prove the truth of the matters asserted in them. See Fed. R. Civ. P. 801(c).

         Regarding the determination of whether Defendants and XPO were joint employers, there are genuine issues of material fact precluding entry of summary judgment in either party's favor, as demonstrated below. See Knitter v. Corvias Military Living, LLC, 758 F.3d 1214, 1228-29 (10th Cir. 2014) (holding that determination of joint employer status is a question of fact for the fact-finder); Johnso ...

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