Major v. Chons Bros., Inc.

• Decision Date: 11 April 2002
• Docket Number: No. 00CA1941.,00CA1941.
• Citation: 53 P.3d 781
• Parties: Dale L. MAJOR, Douglas Brunker, Daniel Hurtado, Jeremy McConnell, Keith Balka, James Seals, Winston Jorgensen, Leon Ellison, and William Robins, Plaintiffs-Appellees and Cross-Appellants, v. CHONS BROS., INC., a Colorado corporation, Defendant-Appellant, and Merit Wrecker, LLC, a Colorado limited liability corporation; and Joey Drawbaugh, Defendants and Cross-Appellees.
• Court: Colorado Court of Appeals

53 P.3d 781

Dale L. MAJOR, Douglas Brunker, Daniel Hurtado, Jeremy McConnell, Keith Balka, James Seals, Winston Jorgensen, Leon Ellison, and William Robins, Plaintiffs-Appellees and Cross-Appellants, v. CHONS BROS., INC., a Colorado corporation, Defendant-Appellant, and Merit Wrecker, LLC, a Colorado limited liability corporation; and Joey Drawbaugh, Defendants and Cross-Appellees.

No. 00CA1941.

Colorado Court of Appeals, Div. III.

April 11, 2002.

Rehearing Denied July 25, 2002.

Davis Graham & Stubbs, LLP, Christine Kessler Lamb, Denver, Colorado, for Plaintiffs-Appellees and Cross-Appellants.

The Barsness Law Firm, Chad J. Barsness, Carbondale, Colorado, for Defendant-Appellant.

Brown, Berardini & Dunning, P.C., Brian J. Berardini, Denver, Colorado, for Defendant and Cross-Appellee Merit Wrecker, LLC.

Benson & Case, LLP, John Case, Michael P. Dulin, Denver, Colorado, for Defendant and Cross-Appellee Joey Drawbaugh.

Opinion by Judge DAILEY.

Defendant, Chons Bros., Inc., appeals a judgment awarding $210,398.04 in damages, attorney fees, and costs to plaintiffs. Plaintiffs cross-appeal summary judgments dismissing their claims against codefendants Merit Wrecker, LLC and Joey Drawbaugh. We affirm.

Plaintiffs, a mechanic and eight tow truck drivers, were formerly employed by Mirage Recovery Service, Inc. Mirage was owned and operated by Chons until 1998, when Merit purchased its trade name and towing business from Chons for $1 million. Drawbaugh was Mirage's general manager both before and after it was sold to Merit; he became a five-percent owner of Mirage after the sale.

Plaintiffs had worked only for Chons; they had not worked for Merit. Nonetheless, they sued Chons, Merit (on a successor liability theory), and Drawbaugh (on an employer theory) for alleged violations of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201, et seq. (2002), and the Colorado Wage Claim Act (CWCA), § 8-4-101, et seq., C.R.S.2001.

On the parties' cross-motions for summary judgment, the trial court granted plaintiffs' motion against Chons on an FLSA claim and Merit's and Drawbaugh's motions against plaintiffs. Plaintiffs and Chons subsequently stipulated to the amount of damages, and the court entered judgment thereon, together with an award of liquidated damages, attorney fees, and costs.

Chons and plaintiffs now appeal the summary judgment orders. In addition, Chons contends that the trial court erred in awarding liquidated damages to plaintiffs, striking its motion for attorney fees, and awarding excessive attorney fees to plaintiffs.

I. Summary Judgment Rulings

Initially, we reject the parties' contentions that the trial court erroneously granted summary judgments adverse to their interests.

Summary judgment permits "the parties to pierce the formal allegations of the pleadings and save the time and expense connected with trial when, as a matter of law, based on undisputed facts, one party could not prevail." Peterson v. Halsted, 829 P.2d 373, 375 (Colo.1992). However, because summary judgment is a drastic remedy, it is appropriate only where there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Churchey v. Adolph Coors Co., 759 P.2d 1336, 1340 (Colo. 1988).

On appeal, we review summary judgments de novo. Aspen Wilderness Workshop, Inc. v. Colorado Water Conservation Board, 901 P.2d 1251, 1256 (Colo.1995).

A. Chons' Appeal

Chons contends that the trial court erred in determining that, as a matter of law, it was not exempt from FLSA overtime requirements. We disagree.

Under the FLSA, an employer must compensate employees not less than one and one-half times their regular rate for hours worked in excess of forty hours per week. 29 U.S.C. § 207(a)(1). Employees may maintain an action against employers who do not comply with this provision to recover unpaid overtime wages. 29 U.S.C. § 216(b).

The FLSA overtime provision applies to tow truck employees, Brennan v. Valley Towing Co., 515 F.2d 100, 104 (9th Cir.1975), excepting only those "with respect to whom the Secretary of Transportation has power to establish qualifications and maximum hours of service" pursuant to 49 U.S.C. § 31502 (2002). 29 U.S.C. § 213(b)(1) (motor carrier exemption).

The motor carrier exemption extends to those employees who (1) are employed by carriers operating in interstate commerce, and (2) are engaged in activities directly affecting the safety of operation of motor vehicles in the transportation on the public highways of passengers or property in interstate commerce. See Benson v. Universal Ambulance Service, Inc., 675 F.2d 783, 786 (6th Cir.1982). See also 29 C.F.R. § 782.2(a) (2002)(the exemption "depends both on the class to which [the] employer belongs and on the class of work involved in the employee's job").

FLSA exemptions must be construed narrowly, A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 498, 65 S.Ct. 807, 810, 89 L.Ed. 1095, 1101 (1945), and employers bear the burden of showing their applicability. Pugh v. Lindsay, 206 F.2d 43, 46 (4th Cir.1953)("it is incumbent upon one asserting an exemption to bring himself clearly and unmistakably within the spirit and the letter of its terms").

Here, Chons argues that because it clearly qualified as a carrier engaged in interstate commerce, plaintiffs, as its employees, necessarily engaged in interstate commerce. Chons' argument, however, ignores a critical criterion for the exemption: the nature of the individual employee's job activities. See Dole v. Solid Waste Services, Inc., 733 F.Supp. 895, 929 (E.D.Pa.1989)(ultimately, the exemption depends upon the character of the employee's work, not upon the nature of employer's activities), aff'd, 897 F.2d 521 (3d Cir.1990).

Where the employee's continuing job duties have no substantial direct effect on the safety of operation of motor vehicles in interstate commerce, or where such activities are so trivial, casual, and insignificant as to be de minimis, the exemption does not apply. See 29 C.F.R. § 782.2(b)(3); Opelika Royal Crown Bottling Co. v. Goldberg, 299 F.2d 37, 43 (5th Cir.1962).

Here, plaintiffs' job activities were overwhelmingly conducted in Colorado. The mechanic worked solely in Colorado. The tow truck drivers regularly worked twelve- to eighteen-hour shifts, six days a week. Of the thousands of "tow tickets" Chons produced documenting tows conducted by the tow truck drivers over the three years preceding this action, only nine involved out-of-state tows.

This evidence, which was not disputed by Chons, leads to but one reasonable inference: plaintiffs' interstate commerce activity was de minimis, and thus, the motor carrier exemption from FLSA requirements did not apply. See Dole v. Solid Waste Services, Inc., supra, 733 F.Supp. at 929 (employees whose duties related to interstate commerce an "infinitesimal" part of the time were not exempt from FLSA protections); Kimball v. Goodyear Tire & Rubber Co., 504 F.Supp. 544, 548 (E.D.Tex.1980)(where drivers made one interstate delivery every three weeks, "the interstate portion of the drivers' work was infinitesimal and thus did not exempt the employer from the FLSA").

Consequently, the trial court properly granted summary judgment against Chons on this issue.

B. Plaintiffs' Cross-Appeal Against Merit

Plaintiffs contend that the trial court erred in granting Merit's motion for summary judgment on their FLSA claim. We disagree.

"The general rule, which is well settled, is that where one company sells or otherwise transfers its assets to another company, the latter is not liable for the debts and liabilities of the transferor." 15 William Meade Fletcher et al., Fletcher's Cyclopedia of the Law of Private Corporations § 7122, at 218 (perm. ed., rev. vol.1999). See Alcan Aluminum Corp. v. Electronic Metal Products, Inc., 837 P.2d 282, 283 (Colo.App.1992). However, various exceptions to this rule exist under state and federal common law. See, e.g., Alcan Aluminum Corp v. Electronic Metal Products, Inc., supra; Steinbach v. Hubbard, 51 F.3d 843, 845-846 (9th Cir. 1995).

Because an FLSA claim arises under federal law, the standard for determining successor corporate liability is determined by reference to federal common law. See Steinbach v. Hubbard, supra, 51 F.3d at 845 (applying, in the FLSA context, the federal common law successorship doctrine "that now extends to almost every employment law statute").

Under federal employment law, successor liability is "designed to grant remedial relief ... to an employee who, solely because of a change in ownership, is unable to obtain similar relief from the predecessor." Musikiwamba v. ESSI, Inc., 760 F.2d 740, 749 (7th Cir.1985). See also Holland v. Williams Mountain Coal Co., 256 F.3d 819, 825 (D.C.Cir.2001) (recognizing that successor liability is imposed primarily because "the victim of the predecessor's behavior may be left without a remedy unless recourse against the successor is allowed"); Preyer v. Gulf Tank & Fabricating Co., 826 F.Supp. 1389, 1397 (N.D.Fla.1993)("The main rational[e] underlying the imposition of successor liability is that an employee's statutory rights should not be vitiated by the mere sudden change in ownership of the employer's business.").

Under federal common law, successor liability attaches when (1) the purchasing entity is a bona fide purchaser; (2) the purchasing entity had notice of the potential liability; and (3) the selling entity is unable to provide adequate relief directly. See Equal Employment Opportunity Commission v. SWP, Inc., 153 F.Supp.2d 911, 917 (N.D.Ind.2001)(Equal Employment Opportunity Act); Korlin v. Chartwell Health Care, Inc., 128 F.Supp.2d 609, 613-14 (E.D.Mo. 2001)(Age Discrimination in Employment Act); Herrera v. Singh, 118 F.Supp.2d 1120, 1123 (E.D.Wash.2000)(Migrant and Seasonal Agricultural Workers Protection Act). See also Steinbach v. Hubbard, supra, 51 F.3d at 846 (reciting, in FLSA context, the standard...