Thomas E. PEREZ, Secretary, United States Department of Labor v. LORRAINE ENTERPRISES, INC., d/b/a Piccolo E Posto, et al.
No. 13-1685
United States Court of Appeals, First Circuit
Oct. 1, 2014
Instead, we understand Dan‘s City to ensure that FAAAA preemption does not apply when a state statute concerns motor carriers in matters unrelated to the transportation of property. In Dan‘s City, the Court acknowledged that a tow truck qualifies as a motor carrier, but stressed that the statute did not affect the operation of tow trucks. 133 S.Ct. at 1776 n. 1, 1779. Instead, the statute regulated the disposal of vehicles after their transportation by towing had ended. Id. at 1779. The Court stated “it is not sufficient that a state law relates to the ‘price, route, or service’ of a motor carrier in any capacity; the law must also concern a motor carrier‘s ‘transportation of property.‘” Id. at 1778-79 (emphasis added).
This interpretation of the second phrase limits the scope of FAAAA preemption, as noted by the Court in Dan‘s City. The second phrase excludes from FAAAA preemption any state law that affects a motor carrier‘s prices, routes, or services outside the context of the transportation of property. The scope of FAAAA preemption would be far broader if it encompassed state statutes that affected motor carriers in any capacity. Instead, the FAAAA is carefully tailored to preempt only those statutes that affect a motor carrier‘s transportation of property. This excludes, for example, statutes that affect a motor carrier‘s transportation of passengers, statutes that affect a motor carrier‘s transportation of garbage, or, like in Dan‘s City, statutes that relate to motor carriers after the transportation of property has ended.
The facts of this case are a far cry from Dan‘s City. Section 148B governs the classification of the couriers for delivery services. It potentially impacts the services the delivery company provides, the prices charged for the delivery of property, and the routes taken during this delivery. The law clearly concerns a motor carrier‘s “transportation of property.” The district court must address on remand whether this effect on delivery companies’ prices, routes, and services rises to the requisite level for FAAAA preemption.
IV. Conclusion
The FAAAA preempts state laws that “relate to” the prices, routes, or services of a motor carrier “with respect to the transportation of property.” We reverse and remand to the district court to determine, consistent with the principles elucidated in this opinion, whether Section 148B satisfies the broad preemption test based on a review of the full record.
So ordered.
Jose A.B. Nolla-Mayoral, Jorge W. Perdomo and Nolla, Palou & Casellas, LLC on brief for appellants.
M. Patricia Smith, Solicitor of Labor, Jennifer S. Brand, Associate Solicitor, Paul L. Frieden, Counsel for Appellate Litigation, Maria Van Buren, Senior Attorney, and Steven W. Gardiner, Attorney, on brief for appellee.
Before LYNCH, Chief Judge, RIPPLE* and SELYA, Circuit Judges.
Among a host of other beneficial provisions, the Fair Labor Standards Act (FLSA),
I. BACKGROUND
We rehearse the facts as they appear in the summary judgment record, drawing all reasonable inferences in favor of the parties opposing summary judgment (here, the defendants). See Bisbano v. Strine Printing Co., 737 F.3d 104, 106 (1st Cir. 2013).
At the center of this case is a popular restaurant in Guaynabo, Puerto Rico: Piccolo e Posto. The proprietor is Lorraine Enterprises, Inc., a closely held corporation owned by defendant Lorraine Lago and her husband, Joseph Rao (now deceased).
When the couple opened the restaurant in 2004, Rao directed its operations. He fell ill in 2006 and the restaurant‘s general manager, defendant Pedro Gonzalez, assumed more responsibility for its day-to-day operations. Upon Rao‘s death two years later, Lago was left to run the restaurant with Gonzalez‘s help.
In 2008, the Wage and Hour Division of the United States Department of Labor (the Department) commenced an investigation into the restaurant‘s payroll practices. This probe began with an audit of the restaurant‘s payroll summaries and time records for the period March 2006 through March 2008. The investigator concluded that certain deductions taken from waiters’ pay violated the FLSA‘s minimum wage provisions. Specifically, the restaurant deducted what it termed a “spillage fee,” which the investigator concluded frequently reduced waiters’ weekly pay below the minimum wage. Although the restaurant maintained that waiters earned much more in tips than the payroll summaries indicated, it produced no probative evidence of actual tip income.
The investigator also determined that certain employees had been misclassified as exempt from overtime pay requirements and that proper records of the hours worked by those employees had not been maintained. This determination grounded a conclusion that the restaurant was not in compliance with the FLSA‘s recordkeeping and overtime pay requirements. See
Against this backdrop, the Secretary sued the restaurant, Lago, and Gonzalez, alleging that each defendant, qua employer, was liable for violating the FLSA‘s minimum wage, overtime, and recordkeeping requirements. Following discovery, the Secretary moved for partial summary judgment on the minimum wage claims, arguing that the spillage fee constituted an impermissible deduction from the employees’ wages and that the defendants had failed to provide sufficient notice to employees to enable the defendants to offset their minimum wage obligations. The defendants cross-moved for summary judgment on all of the Secretary‘s claims. The motions were referred to a magistrate judge. See
The defendants seasonably moved to alter or amend the judgment. See
II. ANALYSIS
We divide our analysis into four segments. We start with an overview of the FLSA‘s provisions vis-à-vis tipped employees. The remaining segments correspond to the claims of error advanced on appeal.
A. The Statutory Scheme.
The FLSA requires employers to pay a prevailing minimum wage and makes failure to do so unlawful. See
This exception is available to an employer only if certain conditions are met. See
There are, of course, other conditions for tip-credit eligibility. Of particular pertinence for present purposes, the employer must inform the employee in advance that it intends to count a portion of the employee‘s tips toward the required minimum wage. See
It is the employer‘s burden to show that it has satisfied all the requirements for tip-credit eligibility. See Barcellona v. Tiffany English Pub, Inc., 597 F.2d 464, 467-68 (5th Cir. 1979). A failure to satisfy any of these requirements exposes the employer to liability for wages owed as well as liquidated damages. See
B. The Due Process Claim.
The first assignment of error implicates the district court‘s determination that the
The initial barrier that impedes the defendants’ path is procedural. The defendants did not mount any due process argument until after the district court had adopted the magistrate judge‘s recommendation and entered summary judgment against them. A
Here, however, we need not rest on waiver. The denial of a
To be sure, a defendant has an “inalienable right to know in advance the nature of the cause of action being asserted against him.” Rodriguez v. Doral Mortg. Corp., 57 F.3d 1168, 1171 (1st Cir. 1995). But no infringement of that right occurred here. From the very beginning of the case, the Secretary consistently alleged that the defendants had violated section 206 of the FLSA, which requires an employer to pay an employee the minimum wage set by the statute. See
Even if the Secretary‘s complaint alone was not sufficient to alert the defendants that employee notice would be relevant to the determination of their liability, the course of the investigation and litigation should have alerted the defendants that their eligibility for the tip credit was a central issue. The defendants’ right to claim the tip credit was disputed through-
After litigation commenced, the Secretary vigorously pursued the putative unavailability of the tip credit throughout discovery, inquiring during the depositions of both Lago and Gonzalez whether employees had been informed in advance that the defendants used the tip credit to offset minimum wages. Moreover, the Secretary specifically referred to lack of notice in answers to interrogatories as a basis for disallowing the tip credit.
On this record, it cannot be said that the Secretary “ambushed” the defendants with respect to the notice issue. Where, as here, a party is not waylaid by the opposing party but, rather, turns a blind eye to an issue that is plainly in the case, due process is not offended.2 Accordingly, the district court did not err in determining that no infringement of the defendants’ due process rights had occurred.
C. The Minimum Wage Violation.
The Secretary moved for summary judgment on the minimum wage claim asserting, inter alia, that the defendants were ineligible for the tip credit. The Secretary posited both that the waiters had not received proper notice of the restaurant‘s intent to credit their tips against the minimum wage and that, in any event, deductions taken from waiters’ pay were invalid for FLSA purposes. The district court granted the motion. See Lorraine Enters., 907 F.Supp.2d at 192.
Because the district court supportably found the notice point dispositive, we start and stop there. The Secretary‘s assertion of lack of notice was based in part on the deposition testimony of Gonzalez. Gonzalez testified that when he was first hired as a waiter at the restaurant, he was not told that any portion of his tips would count toward the minimum wage. He further testified that, after he became general manager in 2006, newly hired waiters were not informed that any portion of their tips would count toward their wages. Finding this testimony undisputed, the district court concluded that no notice had been given and that, therefore, paying the waiters at a rate below the minimum wage violated the statute. See id. at 191-92.
The defendants maintain that the district court blundered because a genuine issue of material fact existed with respect to notice. This claim of error engenders de novo review. See Tropigas de P.R., Inc. v. Certain Underwriters at Lloyd‘s of London, 637 F.3d 53, 56 (1st Cir. 2011).
We begin with bedrock: a court may grant summary judgment only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. See
In the case at hand, the defendants fault the court‘s reliance on Gonzalez‘s testimony because the Secretary did not show that Gonzalez was present for the hiring of each of the waiters whom the Secretary alleged were underpaid. But this evidentiary void does not aid the defendants. At the summary judgment stage, the absence of evidence on an issue redounds to the detriment of the party who bears the burden of proof on that issue. See McCarthy, 56 F.3d at 315. On the issue of notice, the defendants bore the burden of proof. See
The defendants resist this conclusion. Their best effort to identify such evidence involves Lago‘s testimony that her husband informed waiters, prior to hiring them, that a portion of their tips would be counted as wages. Lago added that when the restaurant first opened, a written notice “went out” to some (unspecified) employees that dealt (in some unspecified manner) with tips.3
This testimony is not sufficient to constitute definite, competent evidence establishing the existence of a genuine issue of material fact. To block summary judgment, the defendants had to identify evidence in the record from which a jury could reasonably resolve the dispute at issue in their favor. See Anderson, 477 U.S. at 252; Davric Me. Corp. v. Rancourt, 216 F.3d 143, 147 (1st Cir. 2000). Lago, however, never laid a proper basis for these assertions and, thus, such assertions lack sufficient force to influence the summary judgment calculus. See Squibb v. Mem‘l Med. Ctr., 497 F.3d 775, 784 (7th Cir. 2007).
Perhaps most important, the record is devoid of any evidence that Lago had any personal knowledge of her husband‘s actions. She was not involved in management when the restaurant first opened. She did not say—and there is no evidence to support a finding—that she was present when her husband either hired waiters or distributed written notices to them. She did not say—and there is no evidence to support a finding—that she at any time participated directly in the hiring process. While it is true that Lago testified that she was generally familiar with the restaurant‘s payroll practices, she offered no testimony suggesting that she had personal knowledge regarding whether her husband had informed employees about the tip credit. For aught that appears, her testimony was based upon out-of-court statements that her late husband (or others) made to her and, as such, was not admissi-
The defendants have a fallback position. They say that the record contains evidence adequate to show that the waiters had actual or constructive knowledge of the restaurant‘s intention to claim the tip credit and that this knowledge sufficed to pave the way for the minimum wage exception. The waiters’ pay stubs, the defendants aver, should have served to put the waitstaff on notice that the restaurant was claiming a tip credit against minimum wage because those stubs reflected a wage lower than the statutory minimum and tip amounts sufficient to bring the waiters’ wages up to the minimum. Furthermore, the waiters reported their credit card tips to the restaurant at the end of every shift and then “cashed out.”4 Consequently, they either knew or should have known that their tips were meant to serve as part of their wages.
This argument is unconvincing. The FLSA requires that employees be informed by their employer that the employer intends to treat tips as satisfying a portion of the minimum wage. See
D. Individual Liability.
The last leg of our journey involves the plaint that the district court erred in entering summary judgment against the individual defendants, Lago and Gonzalez, and that, to cure this error, the court should have granted their motion to alter or amend the judgment. In support, the defendants complain that Lago and Gonzalez are not persons who, within the purview of the FLSA, may be held personally liable for the undercompensation of employees. See
The defendants are foraging in an empty cupboard. To begin, Lago and Gonzalez admitted in their answer to the complaint that each of them had “active control and management of [the] corporation, regulated the employment of persons employed by [the] corporation, [and] acted directly and indirectly in the interest of [the] corporation in relation to the employees.” These admissions were replicated in the statement of undisputed material facts that accompanied the Secretary‘s summary
The facts admitted would have been difficult to overcome, and Lago and Gonzalez (perhaps recognizing as much) did not seek to challenge the imposition of individual liability as a matter of law. Given the state of the record, it is hard either to fault the Secretary for not offering more detailed proof of the individual defendants’ control over the business or to question the district court‘s imposition of individual liability. After all, litigation adversaries and inquiring courts alike are entitled to take a party‘s admissions at face value. See Harrington v. City of Nashua, 610 F.3d 24, 31 (1st Cir. 2010); Schott Motorcycle Supply, Inc. v. Am. Honda Motor Co., 976 F.2d 58, 61 (1st Cir. 1992).
To cinch matters, Lago and Gonzalez never questioned the Secretary‘s claim that they were personally liable before the magistrate judge, nor did they spell out such a plaint in their objections to the magistrate judge‘s recommended decision. These kinds of omissions are generally regarded as fatal. See Paterson-Leitch Co. v. Mass. Mun. Wholesale Elec. Co., 840 F.2d 985, 990-91 (1st Cir. 1988) (holding categorically that party is not entitled as of right to district judge‘s de novo review of matter never raised before magistrate judge); Sch. Union No. 37, 617 F.3d at 564 (explaining that only issues raised in party‘s objections to magistrate judge‘s report are subject to review—all others are waived).
There is no need to tarry. Rule 59(e) is an extraordinary remedy, to be used sparingly. See Palmer v. Champion Mortg., 465 F.3d 24, 30 (1st Cir. 2006). It does not permit a party to turn back the clock, erase the record, and try to reinvent its case after an adverse judgment has entered. See Aybar, 118 F.3d at 16; Vasapolli, 39 F.3d at 36.
In this instance, the defendants admitted a string of material facts strongly suggestive of individual liability. They made no effort either to withdraw those admissions or to pursue a developed argument against individual liability until after both the magistrate judge and the district judge had ruled against them. This was too little and too late. See Aybar, 118 F.3d at 16. Given the chronology of this case, it is transparently clear that the district court did not abuse its discretion in refusing to vacate the judgment as to the individual defendants.
III. CONCLUSION
We need go no further. For the reasons elucidated above, we affirm both the district court‘s entry of summary judgment in favor of the Secretary and its denial of the defendants’ motion to alter or amend that judgment.
Affirmed.
Leiticia CASTAÑEDA, Petitioner, Appellee,
v.
Steve SOUZA, Superintendent, Bristol County House of Corrections, in his official capacity and his successors and assigns, Respondent, Appellant,