CSG Workforce Partners, LLC v. Watson
| Decision Date | 07 March 2013 |
| Docket Number | No. 12-4027,No. 12-4028,12-4027,12-4028 |
| Parties | CSG WORKFORCE PARTNERS, LLC; CSG EXTERIORS, LLC; CSG DRYWALL, LLC; CSG FRAMING, LLC; CSG INTERIORS, LLC; CSG PAINTING, LLC; CSG LANDSCAPING, LLC, Plaintiffs-Appellants, v. CYNTHIA C. WATSON, Regional Administrator of the Wage and Hour Division, U.S. Department of Labor, Defendant-Appellee. HILDA SOLIS, Secretary of Labor for the United States Department of Labor, Petitioner-Appellee, v. CSG WORKFORCE PARTNERS, LLC; CSG EXTERIORS, LLC; CSG DRYWALL, LLC; CSG FRAMING, LLC; CSG INTERIORS, LLC; CSG PAINTING, LLC; CSG LANDSCAPING, LLC, Respondents-Appellants. |
| Court | U.S. Court of Appeals — Tenth Circuit |
(D. Utah)
ORDER AND JUDGMENT*Before HARTZ, EBEL, and GORSUCH, Circuit Judges.
In these appeals, consolidated for disposition, appellants seek review of two district court judgments. In Case No. 12-4027, appellants contest the district court's dismissal of their action for lack of jurisdiction. In Case No. 12-4028, appellants seek reversal of the district court's order granting the United States Department of Labor's petition for the enforcement of an administrative subpoena related to its investigation of appellants' compliance with the Fair Labor Standards Act. We have jurisdiction under 28 U.S.C. § 1291 and affirm both judgments.
Plaintiff CSG Workforce Partners, LLC, and its related entities (also plaintiffs here) (collectively, CSG), provide a variety of construction services. Each was formed and operates as a limited liability company (LLC) under the Utah Revised Limited Liability Company Act, Utah Code Ann. §§ 48-2c-101 to 48-2c-1902.
In June 2010, the Wage and Hour Division of the United States Department of Labor (DOL) initiated a compliance review to evaluate CSG's conformity with the overtime provisions of the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (FLSA). DOL requested a number of documents from CSG to determine whether CSG's members (also referred to by the parties as "member-partners") were covered by the FLSA. CSG provided DOL with a detailed opinion letter from its attorney explaining why CSG's members were not covered by the FLSA, and it cooperated with DOL's requests until DOL began seeking documents related to alleged FLSA violations rather than FLSA coverage. CSG then resisted producing documents, and on August 31, 2011, DOL issued an administrative subpoena duces tecum seeking information about hours worked by current or former CSG members, shares issued by each of the CSG LLCs, total dollar volume of CSG's business from 2008-10, and lists of service contracts and current or future projects in which CSG had any involvement. On September 7, 2011, DOL informed CSG it had determined all of CSG's members (approximately 821 at the time) were employees for purposes of FLSA coverage and that it sought the subpoenaed information to determine whether there was joint employer status with any of its customers.
Upon CSG's request, DOL extended the time to respond to the subpoena from September 9 to September 16, but on September 14, CSG filed the action underlying Case No. 12-4027. CSG alleged that under Utah LLC law, its members are considered partners, not employees, and therefore are not subject to the FLSA, whichapplies only to employees.1 CSG asked the district court for a determination to that effect and an order quashing the subpoena. DOL moved to dismiss for lack of jurisdiction on the ground of sovereign immunity. CSG responded that the court had jurisdiction under an exception to sovereign immunity for ultra vires actions by officers and agencies of the United States.
The district court granted the motion to dismiss. The court determined that, in issuing the subpoena, DOL was acting within Congress's grant of investigatory authority, see 29 U.S.C. § 211(a),2 and subpoena power, see id. § 209; 15 U.S.C. § 49.3 The court observed that sovereign immunity's ultra vires exception does notapply to "an incorrect decision as to law or fact, if the officer making the decision was empowered to do so." Wyoming v. United States, 279 F.3d 1214, 1229-30 (10th Cir. 2002) (internal quotation marks omitted). The court therefore concluded that the exception was inapplicable because it was based on CSG's view that DOL had erred in the coverage determination.
Meanwhile, on September 27, 2011, DOL filed in the district court a Petition To Enforce Administrative Subpoena (Petition), which is the action underlying Case No. 12-4028. Affidavits attached to the Petition stated as follows: CSG primarily contracts with construction companies to provide the labor of its members, and CSG "has been instrumental in converting its clients' employees into CSG member-partners . . . and then providing these same member-partners back to its clients as laborers." No. 12-4028, Aplt. App. at 14. The laborers sign a membership agreement but do not make any investment in CSG. In this fashion, CSG, which does not maintain time records for its members, is able to skirt FLSA's requirement that employers pay their employees one-and-a-half times their regular wage for work in excess of 40 hours a week, see 29 U.S.C. § 207(a)(1). Two of CSG's clients were joint employers of CSG members, and the subpoenaed documents were "essential to identify potential joint employers of the CSG member[]-partners, determine the hours the member-partners have worked, compute any back wages that are due to CSG member-partners, and to establish the actual annual dollar volume of the CSG enterprise." No. 12-4028, Aplt. App. at 17.
CSG responded to an order to show cause why the subpoena should not be enforced, again contending that DOL lacked authority to subpoena documents related to FLSA compliance (as opposed to coverage) because CSG's members are not covered by the FLSA. A magistrate judge recommended that the district court grant the Petition, finding that DOL had met its burden under SEC v. Blackfoot Bituminous, Inc., 622 F.2d 512, 514 (10th Cir. 1980), to show that the subpoena was "not too indefinite" and "reasonably relevant to an investigation which the agency has authority to conduct," and that "all administrative prerequisites [had] been met." The magistrate judge determined that CSG had not shown cause why the subpoena should not be enforced. The magistrate judge relied on our statement in EEOC v. Dillon Cos., 310 F.3d 1271, 1277 (10th Cir. 2002), that "[w]e will not . . . encourage or allow an employer to turn a summary subpoena-enforcement proceeding into a mini-trial by allowing it to interpose defenses that are more properly addressed at trial." The district court adopted the recommendation as the order of the court and gave CSG thirty days to provide the subpoenaed information.
To reiterate briefly, the district court dismissed CSG's complaint in this matter on the ground that defendants were entitled to sovereign immunity from CSG's attempt to quash the subpoena and obtain a judicial order stating that its members were partners under Utah law and therefore not subject to the FLSA. We review denovo the district court's conclusion that DOL was protected by the doctrine of sovereign immunity. See FTC v. Kuykendall, 466 F.3d 1149, 1154 (10th Cir. 2006). So doing, we readily agree with the district court's conclusion.
The "application of the ultra vires exception to the sovereign immunity doctrine rest[s] upon the officer's lack of delegated power . . . or . . . lack of statutory authority." Wyoming, 279 F.3d at 1229 (internal quotation marks omitted). "Therefore, an official's erroneous exercise of delegated power is insufficient to invoke the exception." Id. "Official action is not ultra vires or invalid if based on an incorrect decision as to law or fact, if the officer making the decision was empowered to do so." Id. at 1229-30. Hence, "the mere allegation that an officer acted wrongfully does not establish that the officer, in committing the alleged wrong, was not exercising the powers delegated to him by the sovereign." Id. at 1230. Under these governing principles, we conclude that DOL had statutory authority to issue the subpoena, and any error DOL made regarding FLSA coverage was an error of fact or law that does not invoke the exception.
We are unpersuaded by CSG's principal argument to the contrary. CSG contends that, because this case was decided on a motion to dismiss, we must presume the truth of the allegation in its complaint that its members are partners and not subject to the FLSA. Because of that presumed fact, the argument goes, DOL was not statutorily empowered to issue a subpoena for documents related to FLSA violations (as opposed to coverage), and the ultra vires exception applies. Butwhether DOL was empowered by statute to issue the subpoena is a separate question from whether DOL erred in carrying out its delegated authority: "[T]he question of whether a government official acted ultra vires is quite different from the question of whether that same official acted erroneously as a matter of law." Wyoming, 279 F.3d at 1230. Thus, any error by the DOL in preliminarily finding that CSG's partners are employees does not satisfy the ultra vires exception.
The remainder of CSG's arguments reduce to whether CSG can contest coverage in court prior to complying with the subpoena. That issue has nothing to do with whether DOL acted ultra vires in issuing the subpoena. It is the focus of the appeal in Case. No. 12-4028, to which we now turn.
"We review a district court's rulings on subpoenas for an abuse of discretion." Dillon Cos., Inc., 310 F.3d at 1274 (internal quotation marks omitted). This appeal presents a legal question, and an error of law is an abuse of discretion, Westar Energy, Inc. v. Lake, 552 F.3d 1215, 1224 (10th Cir. 2009).
CSG complains that the district court's failure to consider the merits of its coverage defense to enforcement of the...
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