Chao v. Westside Drywall Inc

• Decision Date: 13 May 2010
• Docket Number: Civ. No. 08-6302-AC.
• Citation: 709 F.Supp.2d 1037
• Parties: Elaine L. CHAO, Secretary of Labor, United States Department of Labor, Plaintiff,v.WESTSIDE DRYWALL, INC., a corporation; and Mohsen Salem, and Shirine Salem, Defendants.
• Court: U.S. District Court — District of Oregon

709 F.Supp.2d 1037

Elaine L. CHAO, Secretary of Labor, United States Department of Labor, Plaintiff,v.WESTSIDE DRYWALL, INC., a corporation; and Mohsen Salem, and Shirine Salem, Defendants.

Civ. No. 08-6302-AC.

United States District Court, D. Oregon.

April 28, 2010.

As Amended May 13, 2010.

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Bruce L. Brown, Matthew Lee Vadnal, U.S. Department of Labor, Office of the Solicitor, Seattle, WA, for Plaintiff.

OPINION AND ORDER

ACOSTA, United States Magistrate Judge:

Introduction

The Secretary of the United States Department of Labor (“Secretary”) brings this action against defendants Westside Drywall, Inc. (“Westside”), Mohsen Salem (“Mr. Salem”), and Shirine Salem (“Ms. Salem”) (collectively, “Defendants”) on behalf of 52 laborers, seeking to enjoin Defendants' willful and non-willful violations of the overtime and record keeping provisions of sections 6, 7, 11, 15, 16(c), and 17 of the Fair Labor Standards Act of 1938, as amended (29 U.S.C. § 201 et seq.) (“FLSA” or “the Act”). The Secretary seeks back wages and overtime pay, liquidated damages, and injunctive relief. Presently before the court are the Secretary's motion to amend Exhibit A of the Complaint, and Defendants' motions to strike, for summary judgment, and for sanctions.

The court held oral argument on April 5, 2010. Defendants' motion to strike is granted, Defendants' motion for summary judgment is granted in part and denied in part, Defendants' motion for sanctions is denied, and the Secretary's first and second motions to amend are denied.

General Background

In April 2007 the Secretary began an investigation of Defendants' pay practices. The Secretary filed its FLSA complaint against Defendants eighteen months later, on October 1, 2008. Attached to the Secretary's complaint as Exhibit A is a two-page list containing the names of fifty-two persons (“claimants”) the Secretary claims Defendants employed but failed to properly pay and for whom Defendants did not maintain proper records, all in violation of the FLSA. The Secretary filed a First Amended Complaint later that same day, October 1, 2008, to correct the spelling of Mr. Salem's first name. (Am. Compl. pp. 1, lines 19-21).

The gravamen of the Secretary's charge is that Defendants seek to avoid their obligations under federal law by using certain “subcontractors” as an artificial barrier between Westside and its laborers. Specifically, the Secretary alleges that Defendants have an arrangement with certain “subcontractors” to provide laborers whom Defendants instruct and control but for whose work Defendants pay the “subcontractor.” The subcontractor in turn takes part of each payment as an illegal kickback for the arrangement before distributing the remainder in cash payments to the laborers, often at rates below the FLSA minimum wage. The Secretary alleges that this virtually invisible and untraceable violation of the FLSA is maintained through the threat of immediate termination, not just for the complaining laborer, but the laborer's friends and family as well-a serious risk for a labor force consisting largely of extended family relations.

Defendants respond that they are in full compliance with the FLSA. Defendants admit that, consistent with industry practice, Westside subcontracts certain labor components of its business. However, Defendants emphatically deny maintaining any relationship resembling that which the Secretary alleges. Defendants further argue that if in fact any claimants have been the victims of unlawful pay practices, that offense must be charged to the offending subcontractor, not Defendants.¹

Motion to Strike

I. Facts

Defendants' motion to strike raises a preliminary procedural matter regarding the admissibility of certain evidence offered by the Secretary. Specifically, Defendants object to portions of paragraphs 4 and 12 of the Amended Declaration of Karen Clark In Support of the Secretary's Response to the Defendants' Motion for Summary Judgment (“Am. Clark Decl.”), and the attached Exhibit A, pages 1 through 14, and Exhibit B in its entirety, on grounds that these statements and exhibits are inadmissible hearsay under Federal Rule of Evidence (“FRE”) 802.

The last two sentences of paragraph 4 state: “[Sabas Fernandez Hernandez] related that when he worked on Saturdays, the builder would provide the combination to Westside's supervisors who, in turn, gave it to Westside's employees. Lastly, he told me that when he was rehired by Westside in March 2008, Mr. Salem paid him approximately $2,300.00 in cash.” (Am. Clark Decl. ¶ 4). The first sentence in paragraph 12 states “Mario Alberto Luna told me that he worked for Westside in 2004, 2005, and 2006.” (Am. Clark Decl. ¶ 12).

Pages 1 through 4 of Exhibit A are two copies of a two-page form document titled “Employee Personal Interview Statement.” Both list “Sabas Fernandez-Hernandez” as the employee, “Westside Drywall” in Hubbard as the employer, “patch/drywall labor” as the occupation, and September 16, 2005 to June 27, 2006 as the period employed. The first document (pages 1 and 2 of Exhibit A) is typed in Spanish, dated September 17, 2007, bears the signature “Sabas Fernandez,” the statement “Taken by WHI Clark” (“Clark”) below the signature, and is stamped “received” by the Portland District Office Wage & Hour Division September 21, 2007. As the document is not completed in English, this court makes no attempt to decipher its contents. The second document (pages 3 and 4 of Exhibit A) appears to be a translation of the first document: it is typed in English with a notation at the end “[t]ranslation to English by WHI Clark.” This document does not bear any signatures and is not stamped “received.” Pages 5 through 14 of Exhibit A are copies of what appears to be time sheets filled in by hand, which alternately lack identifying information entirely or show only the incomplete name “Alan” at the top.

Exhibit B is a copy of the two-page “Employee Personal Interview Statement” form document completed by hand, dated March 17, 2008, and bears the signature “Mario A. Luna” with the statement “Taken by WHI Clark” below the signature. It shows “Mario Luna” as the employee, “Westside Dry wall” in Hubbard as the employer, “scrap pick up” as the occupation, and shows the period employed as “5-6 yrs to 1 yr ago.” It is not stamped “received” by the Portland District Office Wage & Hour Division. Neither Exhibit A nor Exhibit B are accompanied by affidavit or the sworn declaration of Hernandez or Luna stating that they are, respectively, the authors of these documents.

II. Legal Standard

Evidentiary affidavits filed in connection with motions for summary judgment must be made “on personal knowledge,” with “[s]worn or certified copies” of any supporting documents attached. Federal Rule of Civil Procedure (“FRCP”) 56(e). Where a party attempts to introduce an exhibit by attaching it to a declaration or affidavit, FRCP 56(e) requires that the declarant or affiant have personal knowledge of the exhibit. Orr v. Bank of America, NT & SA, 285 F.3d 764, 777 (9th Cir.2002). The evidence presented by both parties must be admissible. FRCP 56(e). Conclusory, speculative testimony in affidavits and moving papers is insufficient to raise genuine issues of fact and defeat summary judgment. Thornhill Publ'g Co., Inc. v. GTE Corp., 594 F.2d 730, 738 (9th Cir.1979). Hearsay statements in affidavits are inadmissible. Japan Telecom, Inc. v. Japan Telecom Am. Inc., 287 F.3d 866, 875 n. 1 (9th Cir.2002). Hearsay is any out-of-court statement, whether oral or written, offered in evidence to prove the truth of the matter asserted. FRE 801(a), (c). In the absence of a procedural rule or statute, hearsay is inadmissible unless it is defined as non-hearsay under FRE 801(d) or falls within a hearsay exception under FRE 803, 804, or 807. See FRE 802; 30B Michael H. Graham Federal Practice & Procedure: Evidence § 7031 at 279. When a statement is hearsay within hearsay, or double hearsay, each statement must qualify under some exemption or exception to the hearsay rule. FRE 805; United States v. Arteaga, 117 F.3d 388, 396 n. 12 (9th Cir.1997).

III. Analysis

A. The Evidence Is Hearsay

The last two sentences of Paragraph 4 and the first sentence of Paragraph 12 of Clark's amended declaration relate statements made to her by third persons, thus they are hearsay and subject to exclusion unless an exception to the hearsay rule applies. Likewise, Exhibit A, pages five through fourteen, consists of written statements made out of court, therefore this portion of Exhibit A is also hearsay and subject to exclusion unless an exception to the hearsay rule applies. Exhibit A, pages one through four, and Exhibit B present a double layer of hearsay: the documents themselves are hearsay and the statements within them are also hearsay, or “hearsay within hearsay.” Therefore all of the evidence objected to is subject to exclusion unless an exception to the hearsay rule applies to each hearsay statement.

B. There Are No Applicable Exceptions to the Hearsay Rule

1. Exhibit A, pages 5 through 14

Because the Secretary attempts to introduce Exhibit A through Karen Clark's affidavit, she must have personal knowledge of the document or otherwise be able to authenticate it under FRE 901 or 902. Clark describes no personal knowledge of pages five through fourteen of Exhibit A, nor does she describe any other manner in which she is otherwise competent to testify about their contents. The origin, contents, and significance of these documents are not discussed in her affidavit, and the documents are facially devoid of any identifying information supporting any conclusion about their author. The court perceives no applicable alternative method of authentication under FRE 901 or...