Madison Equities, Inc. v. Office of Attorney Gen.

• Citation: 967 N.W.2d 667
• Decision Date: 22 December 2021
• Docket Number: A20-0434
• Parties: MADISON EQUITIES, INC., et al., Respondents, v. OFFICE OF ATTORNEY GENERAL, Appellant.
• Court: Supreme Court of Minnesota (US)

967 N.W.2d 667

MADISON EQUITIES, INC., et al., Respondents,

v.OFFICE OF ATTORNEY GENERAL, Appellant.

A20-0434

Supreme Court of Minnesota.

Filed: December 22, 2021

William L. Moran, Lehoan T. Pham, HKM, P.A., Saint Paul, Minnesota, for respondents.

Keith Ellison, Attorney General, James W. Canaday, Deputy Attorney General, Jason Pleggenkuhle, Jonathan D. Moler, Assistant Attorneys General, Saint Paul, Minnesota, for appellant.

Heidi M. Silton, Kate M. Baxter-Kauf, Lockridge Grindal Nauen P.L.L.P., Minneapolis, Minnesota; and Karl A. Racine, Attorney General for the District of Columbia, Loren L. AliKhan, Solicitor General, Caroline S. Van Zile, Principal Deputy Solicitor General, Ashwin P. Phatak, Deputy Solicitor General, Thais-Lyn Trayer, Assistant Attorney General, Washington, D.C., for amici curiae District of Columbia, et al.

OPINION

GILDEA, Chief Justice.

This case comes to us after the Minnesota Attorney General issued a civil investigative demand under Minn. Stat. § 8.31 (2020) ("Demand"), to Madison Equities, Inc. and nine of its subsidiary and related companies—collectively referred to in this opinion as "Madison Group"—to investigate allegations of wage theft.¹ The Madison Group, arguing that the Demand was overbroad, sought a protective order from the district court. For his part, the Attorney General moved to compel responses to the Demand. The district court denied the Madison Group's motion but granted the Attorney General's motion. The court of appeals affirmed in part and reversed in part, limiting the Demand to information related to security guards from only four of the Madison Group entities. We agree in part with the court of appeals that the definition of "worker" in the Demand must be narrowed. But, because we conclude that the court of appeals erred in limiting the scope of the Demand to certain of the companies, we reverse in part, and because the district court did not adequately explain its rationale for ordering responses to two questions in the Demand, we remand to the district court for further proceedings consistent with this opinion.

FACTS

Madison Equities is a private real estate company that owns numerous properties in Ramsey County through wholly owned, closely held subsidiaries. In 2019, the Attorney General received complaints from security guards employed by Madison Equities who alleged that Madison Equities issued paychecks from multiple entities within its network of closely held subsidiaries to avoid paying required overtime.

According to affidavits filed by the Attorney General, the security guards worked for Madison Equities at seven physical properties that correspond to the names of the nine related Madison Group companies.² Some security guards worked at multiple properties, while at least one security guard performed all work at one property. Regardless of the location of their work, the security guards alleged that they wore the same uniform, received the same rate of pay, and were supervised by the same security director. The security guards were instructed to report no more than 40 hours per week on their time sheets and, after recording 40 hours, to clock in and out for additional hours using a work-issued cell phone associated with each property. When the security guards worked more than 40 hours per week, they were paid by multiple entities and did not receive an overtime premium. The entities that paid the security guards did not always correspond with the location where the work was performed.³ Each complaining security guard filled out one W-4 but received multiple W-2s. One employee, identified as Employee E, alleged that maintenance workers also experienced similar pay practices.⁴

The Attorney General issued the Demand under Minn. Stat. § 8.31 to the Madison Group. The Demand asserted that the Attorney General had reasonable grounds to believe that the Madison Group had "failed to pay their workers—including but not limited to security guards—all wages required by state and federal law, including overtime wages." The Attorney General identified six specific wage statutes in Minnesota Statutes chapters 177 and 181 that he claimed to have reasonable grounds to believe had been violated.⁵

Even though the Attorney General received complaints from only security guards, the Demand was not limited to security guards. Instead, the Demand asked for information about all workers employed by any of the Madison Group entities. The Demand defined "worker" to include "any individual who performed any work or service for Madison Equities and/or the [nine] M.E. Property Companies, whether classified as an employee or independent contractor."

The Demand contained 17 interrogatories and 14 requests for production of documents. The Demand sought information from the Madison Group about the structure, organization, and relationships with and among the related companies; how they pay their workers; all properties that they have an interest in and whether security guards work at those properties; security guard wages; and the identity of any worker who had complained to any one of these 10 entities about their pay practices.

Two interrogatories (numbers 6 and 17) sought information related to a broader set of 30 companies referred to as the "M.E. Related Companies."⁶ Interrogatory 6 instructed the Madison Group to "[d]escribe with particularity any relationship between Madison Equities or the [nine] M.E. Property Companies with any of the [30] M.E. Related Companies, including agreements, transactions, or shared workers." Interrogatory 17 asked for the identity of all non-salary workers who work for more than one of the 40 companies encompassed by the Madison Group and the M.E. Related Companies, and information about the positions of those shared workers.

The Madison Group did not provide any information in response to the Demand but instead moved for a protective order to quash the Demand in its entirety. The Attorney General filed a cross-motion to compel compliance with the Demand.

After a hearing on the parties’ motions, the district court denied the motion for a protective order and granted the motion to compel in its entirety. The district court concluded that the security guards’ complaints "provide a reasonable basis to believe the [Madison Group] may have violated the law" and that "the request is sufficiently tailored for the level of pre-complaint discovery that the Legislature contemplated." The district court recognized that the alleged unlawful activity depends on considering the Madison Group as one employer but declined to define what constitutes a single employer for purposes of wage law violations. In reaching these conclusions, the district court found that the Attorney General sought responsive data only from the 10 entities that issued paychecks to the complaining security guards or corresponded to the buildings where those guards worked, i.e., the Madison Group. But in granting the Attorney General's motion to compel, the district court also required the Madison Group to respond to interrogatories 6 and 17, which sought information about the 30 M.E. Related Companies.

The Madison Group appealed. The court of appeals affirmed in part and reversed in part. Madison Equities, Inc. v. Off. of Att'y Gen. , No. A20-0434, 2021 WL 79337 (Minn. App. Jan. 11, 2021). The court of appeals held that the Attorney General had a reasonable basis to investigate only the four companies identified by name that paid the complaining security guards—Madison Equities, First Bank Building LLC, U.S. Bank Center LLC, and Alliance Center LLC—and that the district court abused its discretion by not limiting the scope of the Demand to those four entities. Id. at *2–3. The court of appeals also held that the district court abused its discretion by not limiting the definition of "worker" in the Demand to security guards because the Attorney General received complaints only from security guards. Id. at *3. The court of appeals agreed with the district court that the Attorney General "need not establish at this early stage of the proceedings whether the entities are joint employers" and that the Attorney General could "obtain information dating back three years from the filing of the [Demand]."⁷ Id. at *4 & n.2.

We granted the Attorney General's petition for further review.

ANALYSIS

On appeal, the Attorney General argues that the court of appeals erred in limiting the scope of its Demand. Specifically, the Attorney General argues that the court of appeals erred in requiring information about only four of the Madison Group entities and eliminating all workers from the scope of the Demand except for security guards. Noting that the proper standard of review is abuse of discretion, the Attorney General contends that the court of appeals improperly substituted its judgment for that of the district court. The Madison Group urges us to affirm.

We review the district court's decision to deny the protective order and grant the motion to compel for an abuse of discretion. Minn. Twins P'ship v. State ex rel. Hatch , 592 N.W.2d 847, 850 (Minn. 1999) (noting that "[a] district court has broad discretion ‘to issue discovery orders’ and will be reversed on appeal only upon an abuse of such discretion" (quoting Shetka v. Kueppers, Kueppers, Von Feldt & Salmen , 454 N.W.2d 916, 921 (Minn. 1990) )). A district court abuses its discretion when it makes "findings unsupported by the evidence or by improperly applying the law." In re Comm'r of Pub. Safety , 735 N.W.2d 706, 711 (Minn. 2007). But to the extent that the parties’ arguments depend on the interpretation of Minn. Stat. § 8.31, we review statutory interpretation issues de novo. In re GlaxoSmithKline PLC , 732 N.W.2d 257, 264 (Minn. 2007).

A.

We turn first to the Attorney General's contention that the court of appeals erred in limiting the scope of the Demand to just the four named companies from which the complaining security guards received paychecks. In...