Chao v. Hotel Oasis, Inc.

• Decision Date: 28 June 2007
• Docket Number: No. 06-1021.,06-1021.
• Citation: 493 F.3d 26
• Court: U.S. Court of Appeals — First Circuit
• Parties: Elaine L. CHAO, Secretary of Labor, United States Department of Labor, Plaintiff, Appellee, v. HOTEL OASIS, INC., d/b/a Parador Oasis; Lionel Lugo-Rodríguez, Individually and as President of Hotel Oasis, Inc., Defendants, Appellants.

493 F.3d 26

Elaine L. CHAO, Secretary of Labor, United States Department of Labor, Plaintiff, Appellee, v. HOTEL OASIS, INC., d/b/a Parador Oasis; Lionel Lugo-Rodríguez, Individually and as President of Hotel Oasis, Inc., Defendants, Appellants.

No. 06-1021.

United States Court of Appeals, First Circuit.

Heard May 9, 2007.

Decided June 28, 2007.

Mauricio Hernández-Arroyo, for appellants.

Mary J. Rieser, Attorney, U.S. Department of Labor, Office of the Solicitor, Fair Labor Standards Division, with whom Jonathan L. Snare, Acting Solicitor of Labor, Steven J. Mandel, Associate Solicitor, and Paul L. Frieden, Counsel for Appellate Litigation, were on brief, for appellee.

Before TORRUELLA, Circuit Judge, SELYA and CYR, Senior Circuit Judges.

TORRUELLA, Circuit Judge.

This case arises from an investigation of defendant-appellant Hotel Oasis, Inc. ("Oasis") by the Wage and Hour Division of the U.S. Department of Labor. The district court found multiple minimum wage and overtime violations, and entered judgment against Oasis and its president. The employers appeal the district court's judgment, alleging error in the court's failure to set aside a stipulation entered prior to trial, its conclusion that Oasis's president is personally liable as an employer, and its discretionary decision to award liquidated damages. We affirm on all grounds.

I. Background

Oasis operates a hotel and restaurant facility in southwestern Puerto Rico. Defendant-appellant Dr. Lionel Lugo-Rodríguez ("Lugo") is the president of the corporation, runs the hotel, and manages its employees. Oasis's records and employee testimony show that between October 3, 1990 and June 30, 1993,¹ employees were paid less than minimum wage, were not paid for training time or meetings held during non-working hours, were paid in cash "off the books," and were not paid appropriately for overtime. Oasis also maintained two sets of payroll records for the same employees, covering the same time periods, one showing fewer hours at a higher rate, and the other showing more hours at a sub-minimum wage rate. Oasis contends that two sets of books were necessary, one for temporary employees and one for permanent employees.

On April 5, 1994, the Secretary of Labor (the "Secretary") filed a complaint in the United States District Court for the District of Puerto Rico against Oasis and Lugo (collectively, "Defendants"), alleging violations of the minimum wage, overtime, and recordkeeping provisions of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 215-216. The Secretary also sought liquidated damages pursuant to § 216(c), and a permanent injunction pursuant to § 217, enjoining Oasis from further violations of the FLSA. In their answer to the complaint, Defendants raised an affirmative defense that the FLSA did not apply to Oasis because Oasis's "annual dollar value" ("ADV") was less than $500,000. See 29 U.S.C. § 203(s)(1)(a).

On February 9, 1996, during a pre-trial conference, Jorge Sala, then-counsel for Oasis, stipulated that Oasis had an ADV of at least $500,000 per year from April 1, 1991 to October 1, 1995 (the "Sala Stipulation").² In exchange, the Secretary agreed that Oasis was in compliance with the FLSA thereafter. Defendants point out that discovery had not been concluded at the time Sala entered the stipulation, and that Defendants had refused to execute a similar stipulation mailed to them ten weeks earlier by counsel for the Secretary. On July 18, 1996, Sala filed a motion to withdraw as counsel, and Defendants hired a new attorney.

During a September 6, 1996 telephone status conference, Defendants attempted to renew their ADV defense, apparently claiming that Sala did not have the authority to enter into the stipulation.³ On September 16, 1996, the district court issued an order reaffirming the Sala Stipulation and stating that the stipulation would not be set aside absent "the most extraordinary extenuating and grievous circumstances."

At a June 1997 pre-trial conference, Defendants asserted for the first time that the Sala Stipulation was based on a computational mistake. The district court once again upheld the stipulation, ruling that the Secretary could rely on the stipulation to meet its burden to prove FLSA coverage, but that Defendants would be allowed to adduce evidence at trial to prove that Oasis's ADV was less than $500,000 for the relevant periods.

A bench trial began on June 23, 1997. After five successive days, the trial was continued for over two years, resuming on February 7, 2000. On July 13, 1998, more than a year after the trial commenced, Defendants submitted a motion for summary judgment, which included expert affidavits concluding that Oasis did not meet the ADV threshold. The district court refused to entertain the motion for summary judgment because it was submitted well after the trial began. In addition, the court precluded Defendants from introducing the accompanying expert testimony at trial because "[n]either the expert nor the report [was] identified and disclosed to Plaintiff before the trial commenced."

At trial in February 2000, Defendants attempted to introduce Rule 1006 summaries,⁴ which purported to show that Oasis's ADV was less than $500,000 for some of the periods covered by the Sala Stipulation. The Secretary's counsel objected on several grounds over the course of the trial, including that the summaries were inadmissible because they were based on hearsay, and that he had not been provided the summaries before trial and therefore could not concede their numerical accuracy. For these reasons, the district court refused to admit the summaries at that point. Instead, after testimony was concluded on all subjects other than the ADV, the court adjourned the trial, giving Defendants thirty days to comply with Rule 1006 and the Secretary another sixty days to review the data and develop her position.

The trial was continued several times thereafter. On October 19, 2000, the Secretary filed a memorandum in support of her motion to preclude Defendants from presenting evidence contrary to the Sala Stipulation. Defendants never formally opposed the motion, and on May 15, 2002, the district court granted the motion. The court explained that it had given Defendants "an opportunity to demonstrate that the Sala Stipulation was wrong," but that "the record is bereft of any solid argument developed by Oasis which may point to `extraordinary extenuating or grievous circumstance[s]' which might justify setting the Sala Stipulation aside." With no evidence of "a clear manifest injustice," the court held Defendants to the stipulation based on the long-standing principle that a party is bound by its attorney's actions.

On June 28, 2002, having reaffirmed the Sala Stipulation, the district court nevertheless offered Defendants an alternative way to submit the Rule 1006 summaries in lieu of an evidentiary hearing: "[the parties] shall file a joint proffer of evidence or offer of proof, to preclude the necessity of the hearing; it shall be akin to a book of evidence that is offered, albeit not admitted." Although the court's May 15, 2002 order holding Defendants to the Sala Stipulation was final, the court felt that the proffered evidence would give the Court of Appeals a complete record on which to decide the ADV issue on the merits.

A year later, on June 20, 2003, the district court entered an order granting the Secretary's unopposed motion for partial summary judgment on the issue of Lugo's personal liability as an employer under the FLSA.⁵ In addition, the order again addressed the Sala Stipulation and the Rule 1006 summaries. Although neither party had complied with the court's alternative method of submitting the Rule 1006 evidence, the court granted them another twenty days to file their offers of proof on the ADV issue. The court also reminded Defendants that "[t]he Sala Stipulation was bilateral and had a `quid pro quo' for the employer, because the Department of Labor, as part of the announced stipulation, agreed that Defendants had been in compliance since October[] 1995." Defendants finally submitted the Rule 1006 summaries on July 17, 2003, and various memoranda and supplemental filings by both parties followed.

After further hearings, the district court entered judgment in favor of the Secretary on October 31, 2003. The accompanying Opinion & Order denied a number of "Rule 50 Motions" filed by Defendants over the course of the proceedings, the most relevant to this appeal being a motion not normally thought of as within the compass of Rule 50 — a motion to reconsider the court's denial of Defendants' July 13, 1998 motion for summary judgment on the ADV issue. The opinion also once again explained the history of both the Sala Stipulation and the issue of Lugo's personal liability as an employer. The court noted that its grant of partial summary judgment on Lugo's status was further supported by Defendants' admissions at trial that "Lugo had ultimate control over [Oasis]'s operations, and over employment practices."

On June 21, 2005, the court amended the judgment, ordering Oasis to pay $141,270.64 in back wages and an equal amount in liquidated damages to 282 current and former employees. Oasis filed one last motion for reconsideration on July 1, 2005, asking the court to reconsider its decisions on liquidated damages and Lugo's personal liability as an employer. The district court issued an amended opinion and order on November 1, 2005, denying the motion for reconsideration on the ground that Defendants were merely rehashing old arguments. Defendants appeal from the final judgment and from the court's denial of their last motion for reconsideration.

II. Discussion

Defendants raise three issues on appeal. First, they claim that the district court should have set aside the Sala Stipulation and allowed them to prove the ADV defense at trial. Second, they challenge the district court's finding that...