Ahle v. Veracity Research Co., Civil No. 09-0042 ADM/RLE

Citation738 F.Supp.2d 896
Decision Date25 August 2010
Docket NumberCivil No. 09-0042 ADM/RLE
PartiesDouglas AHLE, Andrew Jordan, and William Wiseman, individually and on behalf of others similarly situated, Plaintiffs, v. VERACITY RESEARCH CO., Defendant.
CourtUnited States District Courts. 8th Circuit. United States District Court of Minnesota
738 F.Supp.2d 896

Douglas AHLE, Andrew Jordan, and William Wiseman, individually and on behalf of others similarly situated, Plaintiffs,

Civil No. 09-0042 ADM/RLE.

United States District Court,
D. Minnesota.

Aug. 25, 2010.

738 F.Supp.2d 899

Matthew H. Morgan, Esq., Reena I. Desai, Esq., Donald H. Nichols, Esq., Paul J. Lukas, Esq., and Robert L. Schug, Esq.,

738 F.Supp.2d 900
Nichols Kaster, PLLP, Minneapolis, MN on behalf of Plaintiffs.

Joseph M. Sokolowski, Esq., Krista A.P. Hatcher, Esq., and Lindsay J. Zamzow, Esq., Fredrikson & Byron, PA, Minneapolis, MN, on behalf of Defendant.


ANN D. MONTGOMERY, District Judge.


In their Complaint [Docket No. 1], Plaintiffs Douglas Ahle ("Ahle"), Andrew Jordan ("Jordan"), William Wiseman ("Wiseman"), and the opt-in Plaintiffs (collectively "Plaintiffs") assert claims against Defendant Veracity Research Co. ("Veracity") for violations of the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. §§ 201-219. On June 24, 2010, the undersigned United States District Judge heard oral argument on the parties' Cross-Motions for Partial Summary Judgment [Docket Nos. 183 and 191]. On July 30, 2010, oral argument was heard on Defendant's Motion to Decertify [Docket No. 231]. For the reasons stated herein, Plaintiffs' partial summary judgment motion is granted in part and denied in part, Veracity's partial summary judgment motion is granted in part and denied in part, and Veracity's motion to decertify is denied.


Veracity is a full-service investigative firm specializing in insurance defense investigations. Answer to Compl., Defenses and Am. Counterclaim (Counterclaim) [Docket No. 29] ¶ 5. Named Plaintiffs Ahle, Jordan, and Wiseman formerly worked as investigators for Veracity. Id. ¶¶ 6-8; Collective Action Compl. [Docket No. 1] ¶¶ 4-6. Approximately 150 other individuals have opted into this litigation. The plaintiff class members are current or former investigators for Veracity.

Veracity is hired by insurance companies, third-party administrators, and law firms to investigate suspect claims. Morgan Decl., May 13, 2010 [Docket No. 186], Ex. 1 (Foster Dep.) 45:22-46:8. Veracity categorizes its investigators by title and level; the titles and levels that are at issue in this litigation are surveillance investigators (levels 1-3), claims investigators (level 4), and senior field investigators (level 5). Morgan Decl., May 13, 2010, Ex. 2 (Doyle Dep.) 60:10-19. Surveillance investigators primarily work in the field conducting surveillance, undercover investigations, and background checks. Id. 50:15-21; Foster Aff., July 7, 2009 [Docket No. 59], ¶ 7. Claims investigators generally perform the same duties as surveillance investigators, but they also interview witnesses, obtain statements, take photographs, and, occasionally, perform sales functions. Foster Aff., July 7, 2009, ¶¶ 8, 10-11. Senior field investigators supervise and manage surveillance and claims investigators in the field, train new investigators, and perform occasional promotion and sales duties. Id. ¶ 13. Thus, all of the titles and levels of investigators at issue have in common some surveillance duties, although the parties dispute whether the primary duty of investigators in each of these titles and levels is surveillance.

After receiving an assignment from Veracity but before driving to the surveillance site, the investigator typically completes several tasks including reviewing the assignment sheet, performing a background check on the subject, matching the

738 F.Supp.2d 901
name of the subject to an address, mapping out directions to the surveillance site, and ensuring that the investigator's camera, laptop computer, and cellular phones are fully charged. Morgan Decl., May 13, 2010, Ex. 8 at VRC001063-64. According to Plaintiffs, investigators also are required to perform maintenance including cleaning the windows and filling the fuel tank on their vehicles before leaving for a surveillance site. Morgan Decl., May 13, 2010, Exs. 13, 14, ¶ 6. At the surveillance site, investigators monitor and video record the subject and take notes of their observations. Morgan Decl., May 13, 2010, Ex. 13, ¶ 5. Claims investigators may also interview witnesses, obtain statements, and collect documents. Foster Dep. 149:7-23.

Investigators record their activities in a daily investigative report ("DIR"). Morgan Decl., May 13, 2010, Exs. 13, 14 ¶ 7. An investigator's DIR discloses when the investigator left home for the surveillance site, the drive time, the arrival time, observation notes, the departure time from the site, and the arrival time back at the investigator's home. Id. Once completed, the investigator sends the DIR online to Veracity. Id. Investigators send any video recording taken during the day to their managers by depositing the tapes at a FedEx drop-off location. Id.

The dispute in this action centers on whether Plaintiffs, given their daily duties, were properly classified as FLSA "exempt" employees who are not required to be paid overtime for work in excess of forty hours per week. Based on Veracity's founders' view of the "industry standard," Veracity classified its investigators as exempt when it began business in 1995. Doyle Dep. 15:10-17:6. Plaintiffs initiated this action on January 8, 2009, claiming that they were improperly classified as exempt and, therefore, were wrongfully denied compensation for overtime hours allegedly worked while employed by Veracity as investigators.


A. Summary Judgment

Federal Rule of Civil Procedure 56(c) provides that summary judgment shall issue "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). On a motion for summary judgment, the Court views the evidence in the light most favorable to the nonmoving party. Ludwig, 54 F.3d at 470. The nonmoving party may not "rest on mere allegations or denials, but must demonstrate on the record the existence of specific facts which create a genuine issue for trial." Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir.1995).

Plaintiffs move for summary judgment on the applicability of several exemptions from the FLSA's wage and hours requirements; Veracity seeks summary judgment on Plaintiffs' travel time claims, the applicability of the fluctuating workweek method of calculating damages, and the issue of whether a two or three-year statute of limitations applies to Plaintiffs' claims; and both parties move for summary judgment on the issue of liquidated damages.

1. The Applicability of Exemptions

Plaintiffs challenge the applicability of three exemptions from the

738 F.Supp.2d 902
FLSA's minimum wage and maximum hours requirements that have been raised in this lawsuit: the administrative exemption, the outside sales exemption, and the motor carrier exemption. The " 'general rule [is] that the application of an exemption under the [FLSA] is a matter of affirmative defense on which the employer has the burden of proof.' " Hertz v. Woodbury County, 566 F.3d 775, 783 (8th Cir.2009) (quoting Corning Glass Works v. Brennan, 417 U.S. 188, 196-97, 94 S.Ct. 2223, 41 L.Ed.2d 1 (1974)) (first alteration in original). Because of the remedial nature of the FLSA, exemptions are to be "narrowly construed against the employers seeking to assert them and their application limited to those establishments plainly and unmistakably within their terms and spirit." Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 80 S.Ct. 453, 4 L.Ed.2d 393 (1960).

a. The Administrative Exemption

The wage and hour requirements of the FLSA do not apply to "any employee in a bona fide ... administrative capacity." 29 U.S.C. § 213(a)(1). United States Department of Labor ("DOL") regulations define an "administrative employee" as someone:

(1) Compensated on a salary or fee basis at a rate of not less than $455 per week ..., exclusive of board, lodging or other facilities;
(2) Whose primary duty is the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and
(3) Whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
29 C.F.R. § 541.200(a). There is no dispute the salary element of the definition is met. See Pls.' Mem. in Supp. of Summ. J. [Docket No. 185] at 22-23. Plaintiffs maintain, however, that neither the second nor the third elements of the definition are met.

Veracity responds there are three distinct groups of class members in this collective action: those whose primary duty was surveillance investigations, those whose primary duty was claims investigations, and those whose primary duty was something other than investigations. See Def.'s Mem. in Opp'n to Summ. J. [Docket No. 211] at 26-36. Veracity does not advance any argument regarding the first group, apparently acknowledging that those individuals do not qualify for the administrative exemption, and instead focuses its arguments on the second and third groups. See id.

i. Individuals with Claims Investigation as a Primary Duty

Directly Related to the Management or General Business Operations

DOL regulations explain that the work contemplated by the phrase "directly related to the management or general business operations" is "work directly related to assisting with the running or servicing of the business, as distinguished, for example, from working on a...

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