Gate Guard Servs. L.P. v. Perez

• Decision Date: 07 April 2014
• Docket Number: Civil Action No. V–10–91.
• Citation: 14 F.Supp.3d 825
• Parties: GATE GUARD SERVICES L.P. et al., Plaintiff/Counter–Defendants, v. Thomas E. PEREZ, Secretary of Labor, United States Dept. of Labor, Defendant/Counter–Plaintiff.
• Court: U.S. District Court — Southern District of Texas

14 F.Supp.3d 825

GATE GUARD SERVICES L.P. et al., Plaintiff/Counter–Defendants

v.Thomas E. PEREZ, Secretary of Labor, United States Dept. of Labor, Defendant/Counter–Plaintiff.

Civil Action No. V–10–91.

United States District Court, S.D. Texas, Victoria Division.

Signed April 7, 2014.

Daniel Douglas Pipitone, Chamberlain Hrdlicka et al., Houston, TX, Annette A. Idalski, Chamberlain Hrdlicka et al., Kelly E. Campanella, Chamberlain Hrdlicka White Williams Martin, Atlanta, GA, for Plaintiff/Counter—Defendants.

John Albert Smith, III, Lawrence McKinley Ludka, Office of U.S. Attorney, Corpus Christi, TX, Colleen Backus Nabhan, Jennifer J. Johnson, Richard M. Moyed, U.S. Department of Labor, Dallas, TX, for Counter—Plaintiff.

MEMORANDUM OPINION & ORDER

JOHN D. RAINEY, District Judge.

On February 13, 2013, 2013 WL 593418, the Court granted summary judgment in favor of Plaintiffs Gate Guard Services, L.P. and owner Bert Steindorf (collectively “GGS”) in their Declaratory Judgment Action against Hilda L. Solis,¹ Secretary of Labor, United States Department of Labor (hereinafter “the DOL”); dismissed all claims by the DOL in its FLSA Enforcement Action against GGS; and entered final judgment in favor of GGS and against the DOL. (Dkt. Nos. 135 & 136.) On July 24, 2013, the Court denied GGS's Motion to Recover Attorneys' Fees (Dkt. No. 137) without prejudice, for reasons set forth infra. (Dkt. No. 146.) Now pending before the Court is GGS's Supplemental Motion to Recover Attorneys' Fees (Dkt. No. 147), to which the DOL has responded (Dkt. No. 148) and GGS has replied (Dkt. No. 149).

I. Factual and Procedural Background

GGS is a Texas limited partnership that locates gate attendants for oilfield operators. GGS contracts with approximately 400 gate attendants that perform the job of logging in vehicles entering and departing oilfield operation sites.

In July 2010, DOL Lead Wage and Hour Investigator David Rapstine (“Rapstine”) began investigating GGS after receiving complaints from former GGS service technicians Danny McDaniel and Jerry Studlar, who was a “friend” of Rapstine from “parties” and “the bars and stuff like that.” (Simmons Dep., Dkt. No. 137, Ex. E at 61:3–63:24.) Rapstine first contacted GGS via a July 15, 2010 letter advising GGS that an “opening conference” would take place on July 29, 2010. Rapstine then arrived unannounced at GGS's office on July 19, 2010 and spoke to manager Sidney Smith.

An opening conference was held as planned on July 29, 2010. Shortly after concluding the conference, Rapstine sent an email to Sabrina Loudin, another Wage and Hour Investigator, stating in part: “Wish you could have been there, it was a good example of being quiet and letting them do all of the talking and consequently, digging their own grave.” (Dkt. No. 137, Ex. A–6.) Without further investigation beyond the opening conference and his interviews with McDaniel, Studlar, and one other GGS worker, Rapstine began his back wages calculations. After he was finished completing these calculations—which totaled more than $6 million—Rapstine began to interview other gate attendants. Rapstine could not recall whether he prepared a list of questions before conducting these interviews, but said that it was not his normal practice to do so. Rapstine also stated that he wrote down the answers to the questions he asked during the interviews; however, after he was finished turning the notes into witness interview statements, he “destroyed” all of his interview notes by shredding them and/or putting them in a “burn barrel.” (Rapstine Dep., Dkt. No. 137, Ex. A at 237:14–20; 243:4–244:5.) After interviewing fewer than 17 gate attendants out of approximately 400, Rapstine concluded his investigation.

In October 2010, Rapstine informed GGS of the DOL's findings. Specifically, the DOL found GGS to be in violation of the FLSA because the gate attendants were employees, not independent contractors. The DOL also mandated that GGS compensate the gate attendants at the federal minimum wage rate for 24 hours for each day they are assigned to an oilfield operation. Rapstine further advised GGS to pay $6,192,752.00 in back wages and unpaid overtime to the gate attendants and service technicians, as calculated in the “Summary of Unpaid Wages Due” he issued to GGS. On November 10, 2010, GGS's counsel spoke to DOL District Director Eden Ramirez (“Ramirez”), who confirmed that litigation was imminent because GGS refused to come into compliance with the FLSA. Then on November 19, 2010, GGS's counsel met with Ramirez, Targeted Enforcement Coordinator Michael Speer, and an attorney from the DOL's Office of the Solicitor for a final conference. The DOL insisted that GGS immediately come into compliance by re-classifying the gate attendants as employees and paying over $6 million in back wages to the gate attendants and service technicians.

Later that same day, November 19, 2010, GGS filed the above-captioned declaratory judgment action seeking a determination of whether it is in compliance with the FLSA (“Declaratory Judgment Action”). Specifically, GGS sought declaratory relief arising from the DOL's flawed classification of the gate attendants as employees instead of independent contractors, its calculation totaling over $6 million in back wages, and its allegation that GGS had not complied with recordkeeping requirements. On February 16, 2011—before GGS served the DOL with its complaint in the Declaratory Judgment Action—the DOL filed an enforcement action under the FLSA in the Southern District of Texas, Corpus Christi Division, which was assigned to U.S. District Judge Janis Graham Jack (“FLSA Enforcement Action”). Hilda L. Solis, Secretary of Labor, United States Department of Labor v. Gate Guard Services, LP DBA Gate Guard Services, Bert Steindorf and Sidney L. Smith, Civil Action No. 2:11–41 (S.D.Tex.2011). The FLSA Enforcement Action sought back wages, liquidated damages, and injunctive relief against co-defendants GGS, owner Bert Steindorf, and manager Sidney Smith based on alleged minimum wage, overtime, and record-keeping FLSA violations pertaining to at least 345 of the gate attendants, as well as for overtime and record-keeping violations regarding the service technicians.²

GGS immediately moved to dismiss the FLSA Enforcement Action, or in the alternative, to transfer the case to the Victoria Division pursuant to the first-to-file rule because the claims were substantially related, there was a likelihood of conflict if the two cases proceeded simultaneously, and the Victoria Division was the most convenient forum. The DOL opposed GGS's motion, claiming that the two actions were not substantially similar. Judge Jack granted GGS's motion to transfer, and on March 22, 2011, the FLSA Enforcement Action was transferred to the Victoria Division and assigned Civil Action No. 6:11–14.

While GGS's motion to dismiss or transfer the FLSA Enforcement Action was still pending, the DOL moved to dismiss the Declaratory Judgment Action on the grounds that the Court lacked subject matter jurisdiction over GGS's Amended Complaint, and that the case was neither ripe for judicial review, nor would it resolve all of the issues between the Parties. GGS opposed dismissal and instead moved the Court to consolidate the FLSA Enforcement Action into the first-filed Declaratory Judgment Action. The Court denied the DOL's motion to dismiss and further found that the two cases should be consolidated in the interests of judicial economy and to avoid excessive costs and duplication of effort, given the substantial overlap between the cases.

Once the cases were consolidated and discovery was underway, GGS filed a number of discovery-related motions during the course of the litigation. The first was a Motion to Compel Answers to Deposition Questions, Imposition of Sanctions, and Request for Guidelines on Deposition Conduct and for Magistrate Supervision of Depositions (Dkt. No. 41), based on disruptive conduct by the DOL's lead attorney, Colleen B. Nabhan, during the deposition of Rapstine.³ GGS later withdrew the motion, but only after the DOL agreed that Ms. Nabhan would not defend any other depositions in the litigation going forward, all counsel for the DOL would refrain from coaching witnesses during the depositions, the DOL's counsel would appropriately limit the assertion of government privileges, and Rapstine would sit for an additional deposition as if the initial deposition had not taken place.

GGS next filed a Motion to Compel Production of Documents (Dkt. No. 58) seeking information that gate attendants provided to DOL Wage and Hour Investigators regarding their work for GGS in the form of questionnaires, witness statements, and investigation notes, as well as representations contained in the DOL's FLSA Narrative after the DOL asserted that the information was protected under the government informant privilege. GGS later moved to amend its motion to compel after the DOL filed some of the withheld questionnaires and witness statements as evidence with the Court, therefore waiving the privilege. GGS also filed a Motion for Protective Order after DOL investigators telephoned gate attendants and sent out mass mailings stating that it was “imperative” that the gate attendants complete a survey before a specified deadline, and the DOL refused to revise its cover letter and survey and refused to stop telephoning or otherwise contacting the gate attendants regarding their responses. Finally, GGS filed a Motion to Seal Portions of the Deposition Transcripts of Bert Steindorf and Sidney L. Smith and Motion for Protective Order (Dkt. No. 96) after the DOL refused GGS's request that it not disseminate publicly portions of Steindorf's and Smith's deposition testimony regarding confidential company information and trade secrets, including GGS's client list and marketing practices. The Court granted GGS's motion to seal in part and ordered that specific evidence related to confidential...