DOLE v. LOMBARDI ENTERPRISES

Civ. No. H-83-464 (PCD)

761 F. Supp. 233 (1991) | Cited 0 times | D. Connecticut | April 16, 1991

RULING ON MOTION TO DISMISS

This is an action for civil contempt. Pursuant to a consentjudgment entered in 1984, defendants were enjoined from violatingthe Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, etseq., and ordered to comply prospectively with the FLSA bypayment of overtime, minimum wage, and record keeping.

In July 1988, after an investigation of Lombardi Enterprises,Inc. ("Lombardi"), the Department of Labor concluded that fromJuly 9, 1984 to April 22, 1988, Lombardi did not comply with theminimum and overtime wage requirements of FLSA. On August 15,1990, the Secretary of Labor petitioned for adjudication of civilcontempt based on the July 1988 investigation, Petition forAdjudication of Contempt at ¶ 5, alleging that Lombardi hasfailed and continues to refuse to comply with the injunctionagainst violating FLSA. On July 9, 1984, Judge Blumenfeld enteredjudgment by agreement of the parties, which permanently enjoinedand restrained defendants from violating FLSA. Petitionerrequests defendants be found in civil contempt and be ordered topay the wage underpayments, a compensatory fine equal to theexpenses, and the amount equal to the underpayments as liquidateddamages, pursuant to 29 U.S.C. § 216(c).

Six days prior to the hearing, defendants moved to dismiss: (1)due to the Secretary's unreasonable delay in bringing thispetition and resulting prejudice; (2) as a sanction under Rule 11of the Federal Rules of Civil Procedure; (3) to strike the demandfor liquidated damages as not within this court's remedial powersor for a jury trial of the liquidated damages claim; (4) theclaims predating the commencement of the action by three years asbarred by the statute of limitations contained in 29 U.S.C. § 255;(5) the claims against Ms. Barbara Estevens and Mr. WilliamA. Lombardi for failure to plead a factual basis for personalliability. Defendants' claims will be dealt with seriatim.

Discussion

1. Delay in Filing Contempt Petition

Lombardi contends that plaintiff's two year delay in filingafter completion of the investigation has resulted in substantialprejudice to it and dismissal is appropriate, citing OccidentalLife Ins. Co. v. EEOC, 432 U.S. 355, 373, 97 S.Ct. 2447, 2458, 53L.Ed.2d 402 (1977); Albermale Paper Co.v. Moody, 422 U.S. 405, 424-25, 95 S.Ct. 2362, 2374-75, 45L.Ed.2d 280 (1975); Emhart Indus. v. NLRB, 907 F.2d 372 (2d Cir1990); Donovan v. Breaker of America, Inc., 566 F. Supp. 1016(E.D.Ark. 1983); Brennan v. Sine, 495 F.2d 875, 876-77 (10th Cir.1984). However, those cases do not support its position. SeeOccidental Life, 432 U.S. at 373, 97 S.Ct. at 2458 (affirmedcourt of appeals reversal of district court dismissal of EEOCsuit due to four year delay in bringing suit, but noted thatcourts may provide relief in cases involving inordinate delays);Albermale, 422 U.S. at 423-24, 95 S.Ct. at 2374-75 (party soughtback pay five years after filing the complaint and havingpreviously disclaimed such relief); Brennan, 495 F.2d at 877(dismissal for failure to prosecute for eighteen months from thefiling of the complaint to prepare the case for trial).

The cases involving the FLSA, cited by Lombardi, are likewisedistinguishable. In Emhart, the Second Circuit declined toenforce an NLRB adjudicatory order, issued three and one halfyears after the dispute arose and after the parties entered intotwo intervening agreements, because the passage of time had soaltered the circumstances that enforcement would undermine morelabor policies than it would promote. 907 F.2d at 378-79; seealso Breaker of America, Inc., 566 F. Supp. at 1020 (six yeardelay in bringing an action under Section 17 of the FLSA heldinexcusable and prejudicial to defendants).

While the Secretary's unexplained two year delay is notcondoned, the delay does not warrant dismissal. Donovan v.Sureway Cleaners, 656 F.2d 1368, 1373 (9th Cir. 1981) (upholdingfinding of contempt of a 1971 injunction in a contempt proceedingfiled in 1975). Plaintiff notified defendants of the allegedcontinued violation of the injunction. Lombardi claims that itresponded to the investigation report by sending a letter to theSecretary of Labor indicating that it was complying with FLSA,but did not receive a reply from plaintiff. However, plaintiffcontends the unaddressed letters allegedly sent to plaintiff'scompliance officer were not received and plaintiff had noknowledge of them until October 26, 1990.

"Once a prospective injunction has been issued against anemployer, . . . the employer is put on notice that futureviolations will result in civil contempt proceedings to enforcethe injunction. Under these circumstances the employer would notincur any `wholly unexpected liabilities.'" Sureway Cleaners, 656F.2d at 1375. Having voluntarily entered into an agreement not toviolate FLSA, a prospective injunction, defendants should not besurprised that their activities may be subject to review and thatthey may be held liable for non-compliance. Id. Nor candefendants claim prejudice since they had notice of theallegations and received plaintiff's back wage data which formedthe basis of the claims. Defendants had information which wouldenable them to conduct discovery prior to the contempt hearingand yet failed to conduct any discovery until October 26, 1990,six days prior to the hearing. Under the circumstances, the delaydoes not warrant dismissal.

Defendants' motion to dismiss petition as a sanction forplaintiffs alleged rule 11 violation is also denied. Theallegations of continuing violations were adequately supported bythe 1988 investigation which revealed defendants' allegedcontinued illegal employment practices. If plaintiff'sallegations are later found to be unsupported in law or fact,Rule 11 sanctions may be imposed at that time.

2. Statute of Limitations

Defendants contend the petition is subject to the limitationsprovisions in 29 U.S.C. § 255(a), which provides that anyaction to enforce compliance with FLSA must be brought within twoyears after the cause of action arose or, in cases of willfulviolation, three years after the cause of action arose, citingWirtz v. Chase, 400 F.2d 665 (6th Cir. 1968). Plaintiff contends§ 255(a) does not apply to contempt proceedings.

Other circuit courts have disagreed with Chase and have heldthat § 255(a) does not apply to contempt actions. See SurewayCleaners, 656 F.2d at 1373; Wirtz v. Ocala Gas Co., 336 F.2d 236(5th Cir. 1964). In Sureway Cleaners, following Ocala, it washeld that a civil contempt is not a new action but a continuationof an existing cause of action. 656 F.2d at 1374 ("[Civilcontempt] merely remedies the disobedience of an injunctionalready entered by the court."). Because § 255(a) applies toactions commenced to enforce a cause of action, it cannot applyto contempt proceedings. 656 F.2d at 1375. Furthermore,application of § 255(a) "would also reward a wrongfulemployer who violated an injunction and escaped detection . . .for . . . two or three years [and] limit the effectiveness of aninjunction as a means of providing prospective relief." Id. TheFifth and Ninth Circuit's reasoning is compelling. The limitationof § 255(a) does not apply to this contempt proceeding.

3. Liquidated Damages

Defendants move to strike and/or dismiss plaintiff's claim forliquidated damages, pursuant to 29 U.S.C. § 216(b), on thebasis that this court does not have authority to issue liquidateddamages in a contempt proceeding. Plaintiff claims thatdefendants "seek to impose a Hobson's choice on theplaintiff, — file under § 216(c) and allow the defendants toescape the consequences of violating the court order or file forcontempt and deprive employees of liquidated damages."Plaintiff's Memorandum at 6. However, plaintiff has sought toattach a new cause of action under § 216(c) to a continuedaction, enforcement of injunction issued under § 217.

There are three distinct causes of action under the FLSA.First, employees may sue an employer, pursuant to 29 U.S.C. § 216(b),to recover unpaid overtime or minimum wages and an equalamount of liquidated damages. Second, under 29 U.S.C. § 216(c),the Secretary may sue, on behalf of employees, for unpaidovertime and minimum wages and an equal amount of liquidateddamages. Third, the Secretary may, pursuant to 29 U.S.C. § 217,bring an action for injunctive relief.

It is well settled that liquidated damages may only be awardedin suits under 29 U.S.C. § 216(b) and (c), where the employerhas a right to a jury trial on the back pay issue. Brock v.Superior Care, Inc., 840 F.2d 1054, 1063 (2d Cir. 1988) ("TheFLSA does not allow liquidated damages where, as here, theemployer has no right to a jury on the underlying issue of unpaidovertime compensation."); Dole v. Scott-Rice of Texas, Inc.,731 F. Supp. 776, 777 (N.D.Tex. 1990) (liquidated damages not awardedin a judicial trial). "If the Secretary is permitted to collectsection 16 liquidated damages in an action where the overtimewage issues are determined by the judge pursuant to section 17,then the employer is stripped of the protection that the Actprovides by limiting the amount of liquidated damages to theamount of the jury's back pay award." Brock, 840 F.2d at 1064(Secretary's claim seeking overtime wages was brought solelyunder Section 17 and Secretary could not seek liquidateddamages), citing, Marshall v. Hanioti Hotel Corp., 490 F. Supp. 1020,1024 (N.D.Ga. 1980).

Secretary's contempt petition is a continuation of theunderlying cause of action for injunctive relief, broughtpursuant to Section 17. Sureway Cleaners, 656 F.2d at 1375. Whilethe underlying suit included a claim for liquidated damages underSection 16(c), that claim was resolved by the consent decree. Theonly claim here presented is enforcement of the injunction. Sincethis court could not have awarded liquidated damages under theSecretary's Section 17 claim, it follows that similar reliefcannot be awarded in an action to enforce a judgment enteredpursuant to that claim.

The Secretary, however, is not precluded from seekingliquidated damages on behalf of employees. Liquidated damages maybe sought by a new and separate suit under Section 16(c). It isnot clear from the petition if the Secretary seeks liquidateddamages as a separate cause of action and not simply as relieffor violation of an injunction entered under Section 17. "Had theSecretary wanted to be sure he could get liquidated damages, heshould have amended his complaint to seek overtime wagesunder Section 16(c). Having elected to pursue overtime wages onlyunder Section 17, and gained what he apparently thought was theadvantage of avoiding a jury trial on that component of relief,the Secretary has no valid claim for liquidated damages." Brock,840 F.2d at 1064. Having elected to bring an action to enforcethe injunction, rather than a new suit under Section 16(c), theSecretary opted to forego liquidated damages. If, however, theSecretary wishes to join, pursuant to Fed.R.Civ.P. 18, a claimfor liquidated damages, she may amend her petition to add theclaim, but the back pay issue will be presented to a jury.

Accordingly, defendants' motion to strike the liquidateddamages claim is granted, without prejudice to plaintiff'srenewal of the claim in accordance with this ruling.

4. Failure to Maintain Time Cards

Defendants move to dismiss plaintiff's claim that thedefendants have failed to maintain time cards on the basis that29 C.F.R. § 216.6 only obligates employers to maintain timecards for two years. In view of plaintiff's clarification thatshe simply claims defendants failed to maintain accurate recordsduring the relevant period, the motion is denied as moot.

5. Claims Against Barbara Estevens and William Lombardi

Individual defendants move to dismiss the petition against themon the basis that FLSA applies to employers and Lombardi is theemployer in this case not the individual defendants. Thisargument lacks merit. The 1984 judgment enjoined violations bythe individual defendants as employers and, thus, they are boundby the injunction. Furthermore, individuals who control oroperate a business and act directly upon employees are employersunder the Act. Donovan v. Agnew, 712 F.2d 1509, 1510-14 (1st Cir.1983); Shultz v. Mack Farland & Sons Roofing, 413 F.2d 1296,1299-1301 (5th Cir. 1969). Thus, individual defendants have beenproperly named and brought into this action.

Conclusion

Accordingly, defendants' motion to dismiss is denied in partand granted in part.

SO ORDERED.

RULING ON MOTION TO DISMISS

This is an action for civil contempt. Pursuant to a consentjudgment entered in 1984, defendants were enjoined from violatingthe Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, etseq., and ordered to comply prospectively with the FLSA bypayment of overtime, minimum wage, and record keeping.

In July 1988, after an investigation of Lombardi Enterprises,Inc. ("Lombardi"), the Department of Labor concluded that fromJuly 9, 1984 to April 22, 1988, Lombardi did not comply with theminimum and overtime wage requirements of FLSA. On August 15,1990, the Secretary of Labor petitioned for adjudication of civilcontempt based on the July 1988 investigation, Petition forAdjudication of Contempt at ¶ 5, alleging that Lombardi hasfailed and continues to refuse to comply with the injunctionagainst violating FLSA. On July 9, 1984, Judge Blumenfeld enteredjudgment by agreement of the parties, which permanently enjoinedand restrained defendants from violating FLSA. Petitionerrequests defendants be found in civil contempt and be ordered topay the wage underpayments, a compensatory fine equal to theexpenses, and the amount equal to the underpayments as liquidateddamages, pursuant to 29 U.S.C. § 216(c).

Six days prior to the hearing, defendants moved to dismiss: (1)due to the Secretary's unreasonable delay in bringing thispetition and resulting prejudice; (2) as a sanction under Rule 11of the Federal Rules of Civil Procedure; (3) to strike the demandfor liquidated damages as not within this court's remedial powersor for a jury trial of the liquidated damages claim; (4) theclaims predating the commencement of the action by three years asbarred by the statute of limitations contained in 29 U.S.C. § 255;(5) the claims against Ms. Barbara Estevens and Mr. WilliamA. Lombardi for failure to plead a factual basis for personalliability. Defendants' claims will be dealt with seriatim.

Discussion

1. Delay in Filing Contempt Petition

Lombardi contends that plaintiff's two year delay in filingafter completion of the investigation has resulted in substantialprejudice to it and dismissal is appropriate, citing OccidentalLife Ins. Co. v. EEOC, 432 U.S. 355, 373, 97 S.Ct. 2447, 2458, 53L.Ed.2d 402 (1977); Albermale Paper Co.v. Moody, 422 U.S. 405, 424-25, 95 S.Ct. 2362, 2374-75, 45L.Ed.2d 280 (1975); Emhart Indus. v. NLRB, 907 F.2d 372 (2d Cir1990); Donovan v. Breaker of America, Inc., 566 F. Supp. 1016(E.D.Ark. 1983); Brennan v. Sine, 495 F.2d 875, 876-77 (10th Cir.1984). However, those cases do not support its position. SeeOccidental Life, 432 U.S. at 373, 97 S.Ct. at 2458 (affirmedcourt of appeals reversal of district court dismissal of EEOCsuit due to four year delay in bringing suit, but noted thatcourts may provide relief in cases involving inordinate delays);Albermale, 422 U.S. at 423-24, 95 S.Ct. at 2374-75 (party soughtback pay five years after filing the complaint and havingpreviously disclaimed such relief); Brennan, 495 F.2d at 877(dismissal for failure to prosecute for eighteen months from thefiling of the complaint to prepare the case for trial).

The cases involving the FLSA, cited by Lombardi, are likewisedistinguishable. In Emhart, the Second Circuit declined toenforce an NLRB adjudicatory order, issued three and one halfyears after the dispute arose and after the parties entered intotwo intervening agreements, because the passage of time had soaltered the circumstances that enforcement would undermine morelabor policies than it would promote. 907 F.2d at 378-79; seealso Breaker of America, Inc., 566 F. Supp. at 1020 (six yeardelay in bringing an action under Section 17 of the FLSA heldinexcusable and prejudicial to defendants).

While the Secretary's unexplained two year delay is notcondoned, the delay does not warrant dismissal. Donovan v.Sureway Cleaners, 656 F.2d 1368, 1373 (9th Cir. 1981) (upholdingfinding of contempt of a 1971 injunction in a contempt proceedingfiled in 1975). Plaintiff notified defendants of the allegedcontinued violation of the injunction. Lombardi claims that itresponded to the investigation report by sending a letter to theSecretary of Labor indicating that it was complying with FLSA,but did not receive a reply from plaintiff. However, plaintiffcontends the unaddressed letters allegedly sent to plaintiff'scompliance officer were not received and plaintiff had noknowledge of them until October 26, 1990.

"Once a prospective injunction has been issued against anemployer, . . . the employer is put on notice that futureviolations will result in civil contempt proceedings to enforcethe injunction. Under these circumstances the employer would notincur any `wholly unexpected liabilities.'" Sureway Cleaners, 656F.2d at 1375. Having voluntarily entered into an agreement not toviolate FLSA, a prospective injunction, defendants should not besurprised that their activities may be subject to review and thatthey may be held liable for non-compliance. Id. Nor candefendants claim prejudice since they had notice of theallegations and received plaintiff's back wage data which formedthe basis of the claims. Defendants had information which wouldenable them to conduct discovery prior to the contempt hearingand yet failed to conduct any discovery until October 26, 1990,six days prior to the hearing. Under the circumstances, the delaydoes not warrant dismissal.

Defendants' motion to dismiss petition as a sanction forplaintiffs alleged rule 11 violation is also denied. Theallegations of continuing violations were adequately supported bythe 1988 investigation which revealed defendants' allegedcontinued illegal employment practices. If plaintiff'sallegations are later found to be unsupported in law or fact,Rule 11 sanctions may be imposed at that time.

2. Statute of Limitations

Defendants contend the petition is subject to the limitationsprovisions in 29 U.S.C. § 255(a), which provides that anyaction to enforce compliance with FLSA must be brought within twoyears after the cause of action arose or, in cases of willfulviolation, three years after the cause of action arose, citingWirtz v. Chase, 400 F.2d 665 (6th Cir. 1968). Plaintiff contends§ 255(a) does not apply to contempt proceedings.

Other circuit courts have disagreed with Chase and have heldthat § 255(a) does not apply to contempt actions. See SurewayCleaners, 656 F.2d at 1373; Wirtz v. Ocala Gas Co., 336 F.2d 236(5th Cir. 1964). In Sureway Cleaners, following Ocala, it washeld that a civil contempt is not a new action but a continuationof an existing cause of action. 656 F.2d at 1374 ("[Civilcontempt] merely remedies the disobedience of an injunctionalready entered by the court."). Because § 255(a) applies toactions commenced to enforce a cause of action, it cannot applyto contempt proceedings. 656 F.2d at 1375. Furthermore,application of § 255(a) "would also reward a wrongfulemployer who violated an injunction and escaped detection . . .for . . . two or three years [and] limit the effectiveness of aninjunction as a means of providing prospective relief." Id. TheFifth and Ninth Circuit's reasoning is compelling. The limitationof § 255(a) does not apply to this contempt proceeding.

3. Liquidated Damages

Defendants move to strike and/or dismiss plaintiff's claim forliquidated damages, pursuant to 29 U.S.C. § 216(b), on thebasis that this court does not have authority to issue liquidateddamages in a contempt proceeding. Plaintiff claims thatdefendants "seek to impose a Hobson's choice on theplaintiff, — file under § 216(c) and allow the defendants toescape the consequences of violating the court order or file forcontempt and deprive employees of liquidated damages."Plaintiff's Memorandum at 6. However, plaintiff has sought toattach a new cause of action under § 216(c) to a continuedaction, enforcement of injunction issued under § 217.

There are three distinct causes of action under the FLSA.First, employees may sue an employer, pursuant to 29 U.S.C. § 216(b),to recover unpaid overtime or minimum wages and an equalamount of liquidated damages. Second, under 29 U.S.C. § 216(c),the Secretary may sue, on behalf of employees, for unpaidovertime and minimum wages and an equal amount of liquidateddamages. Third, the Secretary may, pursuant to 29 U.S.C. § 217,bring an action for injunctive relief.

It is well settled that liquidated damages may only be awardedin suits under 29 U.S.C. § 216(b) and (c), where the employerhas a right to a jury trial on the back pay issue. Brock v.Superior Care, Inc., 840 F.2d 1054, 1063 (2d Cir. 1988) ("TheFLSA does not allow liquidated damages where, as here, theemployer has no right to a jury on the underlying issue of unpaidovertime compensation."); Dole v. Scott-Rice of Texas, Inc.,731 F. Supp. 776, 777 (N.D.Tex. 1990) (liquidated damages not awardedin a judicial trial). "If the Secretary is permitted to collectsection 16 liquidated damages in an action where the overtimewage issues are determined by the judge pursuant to section 17,then the employer is stripped of the protection that the Actprovides by limiting the amount of liquidated damages to theamount of the jury's back pay award." Brock, 840 F.2d at 1064(Secretary's claim seeking overtime wages was brought solelyunder Section 17 and Secretary could not seek liquidateddamages), citing, Marshall v. Hanioti Hotel Corp., 490 F. Supp. 1020,1024 (N.D.Ga. 1980).

Secretary's contempt petition is a continuation of theunderlying cause of action for injunctive relief, broughtpursuant to Section 17. Sureway Cleaners, 656 F.2d at 1375. Whilethe underlying suit included a claim for liquidated damages underSection 16(c), that claim was resolved by the consent decree. Theonly claim here presented is enforcement of the injunction. Sincethis court could not have awarded liquidated damages under theSecretary's Section 17 claim, it follows that similar reliefcannot be awarded in an action to enforce a judgment enteredpursuant to that claim.

The Secretary, however, is not precluded from seekingliquidated damages on behalf of employees. Liquidated damages maybe sought by a new and separate suit under Section 16(c). It isnot clear from the petition if the Secretary seeks liquidateddamages as a separate cause of action and not simply as relieffor violation of an injunction entered under Section 17. "Had theSecretary wanted to be sure he could get liquidated damages, heshould have amended his complaint to seek overtime wagesunder Section 16(c). Having elected to pursue overtime wages onlyunder Section 17, and gained what he apparently thought was theadvantage of avoiding a jury trial on that component of relief,the Secretary has no valid claim for liquidated damages." Brock,840 F.2d at 1064. Having elected to bring an action to enforcethe injunction, rather than a new suit under Section 16(c), theSecretary opted to forego liquidated damages. If, however, theSecretary wishes to join, pursuant to Fed.R.Civ.P. 18, a claimfor liquidated damages, she may amend her petition to add theclaim, but the back pay issue will be presented to a jury.

Accordingly, defendants' motion to strike the liquidateddamages claim is granted, without prejudice to plaintiff'srenewal of the claim in accordance with this ruling.

4. Failure to Maintain Time Cards

Defendants move to dismiss plaintiff's claim that thedefendants have failed to maintain time cards on the basis that29 C.F.R. § 216.6 only obligates employers to maintain timecards for two years. In view of plaintiff's clarification thatshe simply claims defendants failed to maintain accurate recordsduring the relevant period, the motion is denied as moot.

5. Claims Against Barbara Estevens and William Lombardi

Individual defendants move to dismiss the petition against themon the basis that FLSA applies to employers and Lombardi is theemployer in this case not the individual defendants. Thisargument lacks merit. The 1984 judgment enjoined violations bythe individual defendants as employers and, thus, they are boundby the injunction. Furthermore, individuals who control oroperate a business and act directly upon employees are employersunder the Act. Donovan v. Agnew, 712 F.2d 1509, 1510-14 (1st Cir.1983); Shultz v. Mack Farland & Sons Roofing, 413 F.2d 1296,1299-1301 (5th Cir. 1969). Thus, individual defendants have beenproperly named and brought into this action.

Conclusion

Accordingly, defendants' motion to dismiss is denied in partand granted in part.

SO ORDERED.

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