Edward Hugler v. La Piedad Corporation
894 F.3d 947
8th Cir.2018Background
- DOL’s Wage and Hour Division opened an FLSA investigation of La Piedad (El Mezcal) in Jan 2016 and served an administrative subpoena on June 1, 2016 seeking 22 categories of documents, including Request No. 2 (documents showing names/addresses of other businesses owned by La Piedad’s owners and ownership percentages).
- La Piedad initially failed to produce, prompting DOL to seek judicial enforcement; the district court enforced the subpoena in Oct 2016 and ordered compliance within 60 days.
- La Piedad produced some company records in Dec 2016 and additional payroll records in Jan 2017, but stated it had no documents responsive to Request No. 2 in its possession, custody, or control; some timecards had been destroyed.
- DOL moved to hold La Piedad in civil contempt for failing to produce documents responsive to Request No. 2; the district court found contempt without a hearing and ordered La Piedad to produce broad shareholder records (including tax records) and tolled the FLSA statute of limitations until full compliance.
- On appeal, the Eighth Circuit reversed the contempt and tolling orders, holding DOL failed to show by clear and convincing evidence that the requested shareholder documents were within La Piedad’s possession, custody, or control or that shareholders were La Piedad agents.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a subpoena enforcement order may compel a corporation to produce documents not in its possession, custody, or control | DOL: Agency may compel La Piedad to produce shareholder business documents to determine enterprise coverage | La Piedad: Cannot be held to produce documents it does not possess or control; shareholders are not agents | Reversed: contempt improper because DOL showed no clear and convincing evidence that La Piedad had custody or control of shareholder documents |
| Whether the district court properly found civil contempt without a hearing or proof of control | DOL: Contempt appropriate to enforce subpoena | La Piedad: Due process and contempt standards require proof and opportunity to be heard | Reversed: contempt power requires clear and convincing proof and cannot be imposed without addressing possession/control defense |
| Whether shareholders’ documents could be compelled as agency/affiliate documents of the corporation | DOL: Shareholder documents needed to assess unified enterprise and may be obtainable through La Piedad | La Piedad: Shareholders generally are not corporate agents; no factual basis for agency here | Reversed: no evidence of agency relationship; corporation typically lacks control over shareholder records |
| Whether tolling the FLSA statute of limitations until full compliance was proper | DOL: Tolling appropriate while subpoena enforcement unresolved | La Piedad: Tolling based on invalid contempt order was improper | Reversed: tolling premised on contempt vacated; court may still consider tolling for prior delay separately |
Key Cases Cited
- Donovan v. Shaw, 668 F.2d 985 (8th Cir.) (administrative subpoena enforcement is not forum to litigate FLSA coverage)
- Donovan v. Lone Steer, 464 U.S. 408 (1984) (subpoenaed party may challenge subpoena reasonableness in district court)
- Cudahy Packing Co. v. Holland, 315 U.S. 357 (1942) (contempt only after judicial enforcement order)
- United States v. Bryan, 339 U.S. 323 (1950) (inability to comply is a complete defense to contempt for failure to produce documents)
- United States v. Fleischman, 339 U.S. 349 (1950) (agents responsible for corporate affairs can be held to produce corporate documents)
- Oklahoma Press Publishing Co. v. Walling, 327 U.S. 186 (1946) (agency investigative powers analogous to court-issued discovery when issued lawfully)
- In re Grand Jury, 821 F.2d 946 (3d Cir.) (lack of possession or legal control is a defense to a subpoena)
- ASAT, Inc. v. U.S. Int'l Trade Comm'n, 411 F.3d 245 (D.C. Cir.) (affiliate control requires proof that party can access and obtain requested documents)
- Jake’s, Ltd., Inc. v. City of Coates, 356 F.3d 896 (8th Cir.) (burden of proof for civil contempt is clear and convincing evidence)