460 F.3d 595 (4th Cir. 2006), 05-1192, Schultz v. Capital Intern. Security, Inc.

Docket Nº:05-1192.
Citation:460 F.3d 595
Party Name:Douglas C. SCHULTZ; Anthony D. Phiniezy; Melissa J. Lopes; Steven Rowe; Jared C. Baker, Plaintiffs-Appellants, v. CAPITAL INTERNATIONAL SECURITY, INCORPORATED; Ousama Alhbri, a/k/a Sammy Hebri, Defendants-Appellees.
Case Date:August 28, 2006
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

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460 F.3d 595 (4th Cir. 2006)

Douglas C. SCHULTZ; Anthony D. Phiniezy; Melissa J. Lopes; Steven Rowe; Jared C. Baker, Plaintiffs-Appellants,


CAPITAL INTERNATIONAL SECURITY, INCORPORATED; Ousama Alhbri, a/k/a Sammy Hebri, Defendants-Appellees.

No. 05-1192.

United States Court of Appeals, Fourth Circuit.

Aug. 28, 2006

Argued: May 24, 2006.

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[Copyrighted Material Omitted]

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Charles W. Gilligan, O'Donoghue & O'Donoghue, Washington, D.C., for Appellants.

Haig Vahan Kalbian, Kalbian & Hagerty, L.L.P., Washington, D.C., for Appellees.


Francis J. Martorana, Sally M. Tedrow, O'Donoghue & O'Donoghue, Washington, D.C., for Appellants.

Claire A. DeLelle, Kalbian & Hagerty, L.L.P., Washington, D.C., for Appellees.

Before WILKINS, Chief Judge, and WILLIAMS and MICHAEL, Circuit Judges.

Affirmed in part, vacated in part, and remanded by published opinion. Judge Michael wrote the opinion, in which Chief Judge Wilkins and Judge Williams joined.


MICHAEL, Circuit Judge:

Prince Faisal bin Turki bin Nasser Al-Saud (the Prince) is a diplomat and a

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member of the Saudi royal family. The Prince, who has a residence in McLean, Virginia, engaged Capital International Security, Inc. (CIS) to provide a personal security detail. Five of the agents who worked on the Prince's detail sued CIS and its president, Sammy Hebri, asserting claims for unpaid overtime under the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (FLSA or Act). After a bench trial the district court entered judgment for CIS and Hebri, holding that the agents were not entitled to overtime pay because they were independent contractors, not employees. The agents appeal, and we vacate the judgment in favor of CIS and remand the case for further proceedings on the overtime claim. The undisputed facts compel the legal conclusion that the Prince and CIS were joint employers and that the agents were their employees for purposes of the FLSA. Because Hebri was not an employer, we affirm the judgment awarded to him. We also affirm the evidentiary rulings challenged by two of the agents.


The facts in this case are essentially undisputed. The following account is based on the district court's findings and other uncontroverted facts established at trial. The plaintiffs, Douglas Schultz, Anthony Phiniezy, Melissa Lopes, Steven Rowe, and Jared Baker, were "personal protection specialists" (PPS agents) licensed by the Virginia Department of Criminal Justice Services (VDCJS). Licensed PPS agents "engage[] in the duties of providing close protection from bodily harm to any person." Va.Code Ann. § 9.1-138. A PPS agent may operate his own security business in Virginia if he obtains a private security business license from the VDCJS. Id. § 9.1-139(A). Although all five plaintiffs had at some point obtained individual PPS licenses, none of them had the additional license required to operate a security business.

The plaintiff-agents provided security services for the Prince and his family at the Prince's Virginia residence in twelve-hour shifts. The agents were paid a daily rate for each shift; they received no extra pay for overtime. The agents had a command post at the residence, from which they observed security camera monitors, answered the telephone, and kept a daily log of all arrivals and departures. They also made hourly walks of the property, ensured that members of the Prince's family were safe when departing and arriving, sorted mail, and performed various tasks upon request of the Prince's family. In addition to their security duties, the agents were responsible for having the household's vehicles washed and fueled, making wake up calls, moving furniture, and doing research on the Internet. Although the nature of the work the agents performed for the Prince remained more or less the same throughout their employment, certain facts bearing on whether they were employees or independent contractors changed over time.

In 1998 a company called Vance International, Inc. (Vance) supplied the Prince's security detail. Vance submitted bills for its services to the Saudi Embassy, which paid for the Prince's detail because he was a diplomat representing the Royal Kingdom of Saudi Arabia. From the beginning, plaintiffs Schultz and Phiniezy worked for Vance on the Prince's detail. The other three plaintiffs joined the detail later, sometime between 1998 and 2002. Vance trained the agents assigned to the detail and helped them obtain their Virginia PPS licenses. The detail was led by two men: a Vance employee named Randy Parham and an employee of the Prince, Sami Abushalback. Abushalback, a former Vance employee, was the Prince's

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head of security and personal secretary. During the time Vance was involved with the detail, Parham and Abushalback drafted a document called the Standard Operating Procedure (SOP), which specified how the detail would operate. Vance representatives visited the detail on site each month to perform an audit. Vance also randomly removed agents from the detail and assigned them to serve other Vance clients.

In 1998 the Prince and Abushalback decided to terminate Vance's services. The Prince became unhappy with Vance because it changed agents frequently, exercised too much control over the agents, and wanted too many reports. After the decision to terminate Vance, Abushalback approached Parham, Phiniezy, Schultz, and two other Vance employees and asked them if they would continue working for the Prince under a new company, FAM International (FAM). The agents agreed. Because the agents had each signed a non-competition agreement with Vance, the company sued and obtained an injunction. The Prince contributed between $50,000 and $60,000 to settle the case. He also paid each agent $1,000 because none of them could work during the litigation. Once FAM took over the detail, Abushalback exercised more control over the agents.

In July 2002 the Prince terminated FAM's contract because FAM could not float the funds to meet its biweekly payroll obligations while awaiting payment from the Saudi Embassy. Around this time, the Prince's long-time driver and travel agent, Sammy Hebri, formed a company called Capital International Security, Inc. (CIS). Hebri started CIS for the purpose of replacing FAM as the Prince's security contractor. Hebri had no prior experience in the private security business. Abushalback negotiated an oral contract with Hebri for CIS to administer the detail. CIS had virtually no involvement in the detail's day-to-day operations. In fact, when CIS took over the detail, neither CIS nor Hebri was given a copy of the detail's SOP. Parham, who was the detail leader throughout the transition period, reported to Abushalback. With Parham's input, Abushalback decided each agent's work assignments. Parham did, however, send CIS approximately seventeen status reports on detail operations and issues between July 2002 and the filing of this lawsuit in March 2004.

CIS was involved to a degree in the detail's personnel matters. CIS helped recruit new agents by placing advertisements in newspapers and screening resumes for applicants with PPS licenses. CIS forwarded screened resumes to Parham, but it did not interview applicants or otherwise participate in hiring decisions. Parham reviewed the selected resumes and conducted interviews. Abushalback had the final say on hiring, though he usually deferred to Parham. Parham notified CIS when a new agent was hired, and CIS then added the person to payroll. When Parham, the detail leader, resigned in January 2004, Abushalback chose the new leader, Bob Hillyard, without input from CIS.

Abushalback generally handled scheduling, compensation levels, discipline, and termination of detail members, although CIS also played a limited role in these matters. For instance, in April 2003 the agents requested a meeting with Hebri to discuss their pay rate. Hebri raised the pay issue with Abushalback, who told Hebri that there was "no need for anybody to have anything." J.A. 439. CIS then sent a letter to the agents explaining that "due to circumstances beyond the control of [CIS], [the company] will not be able to discuss pay raises until January 2004." J.A. 81. Also, in March 2004 Hebri sent a

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memo to the agents threatening disciplinary action against any agent found carrying a firearm he was not trained to use. CIS and the Prince both provided equipment to the detail. Although most detail members carried their own personal handguns, CIS provided handguns for those agents who did not carry their own. CIS also provided the agents with radios, holsters, first aid kits...

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