Nevada v. U.S. Dep't of Labor

• Decision Date: 19 March 2018
• Docket Number: Civil Action No. 4:16–CV–00731
• Parties: State of NEVADA, et al., v. UNITED STATES DEPARTMENT OF LABOR, et al.
• Court: U.S. District Court — Eastern District of Texas

321 F.Supp.3d 709

State of NEVADA, et al.,

v.UNITED STATES DEPARTMENT OF LABOR, et al.,

Civil Action No. 4:16–CV–00731

United States District Court, E.D. Texas, Sherman Division.

Signed March 19, 2018

Lawrence VanDyke, Nevada Office of the Attorney General, Carson City, NV, David Austin Robert Nimocks, David Jonathan Hacker, Office of the Texas Attorney General, Austin, TX, Jordan Tindle Smith, State of Nevada, Attorney General's Office, Las Vegas, NV, for Plaintiffs.

Robert Francois Friedman, Sean Michael McCrory, Littler Mendelson, PC, Dallas, TX, Maurice Baskin, Littler Mendelson, PC, Washington, DC, for Consolidated Plaintiffs.

Kevin Matthew Snell, Julie Shana Saltman, United States Department of Justice, Federal Programs, Washington, DC, James Garland Gillingham, United States Attorney's Office, Tyler, TX, for Defendants/Consolidated Defendants.

Brian Carl Newby, Laura Hilton Hallmon, Cantey Hanger LLP, Fort Worth, TX, John K. Shunk, Kendra N. Beckwith, Messner Reeves LLP, Denver, CO, for Petitioners.

Clyde Moody Siebman, Elizabeth Siebman Forrest, Siebman Forrest Burg & Smith LLP, Sherman, TX, for Respondent.

Yona Rozen, AFL–CIO, Washington, DC, for Intervenor Defendant.

MEMORANDUM OPINION AND ORDER

AMOS L. MAZZANT, UNITED STATES DISTRICT JUDGE

Before the Court is Non–Party Chipotle Mexican Grill, Inc. and Non–Party Chipotle Services, LLC's (collectively "Chipotle") Motion for Contempt (Dkt. # 89). After reviewing the relevant pleadings and motion, the Court finds that the motion should be granted.

BACKGROUND

Congress passed the Fair Labor Standards Act ("FLSA") in 1938. The FLSA mandates that employees earn no less than the federal minimum wage for every hour worked. Employees must also earn one and one-half times their regular pay for each hour worked beyond a forty-hour week. When enacted, the FLSA had several exemptions to the overtime requirement. Specifically, anyone employed in a bona fide executive, administrative, or professional capacity was exempt from the minimum wage and overtime requirements. 29 U.S.C. § 213. This is often referred to as the "white collar" or "EAP" exemption.

At passage, Congress did not define "bona fide executive, administrative, or professional capacity." 29 U.S.C. § 213. Rather, the FLSA empowered the Secretary of Labor to define these terms through regulations. The Secretary of Labor further permitted the Department of Labor (the "DOL") to issue regulations interpreting the EAP exemption.

In March 2014, President Obama directed the DOL to revise the FLSA's overtime exemption for "executive, administrative, and professional employees." Memorandum on Updating and Modernizing Overtime Regulations, 2014 DAILY COMP. PRES. DOC. 201400165 (Mar. 13, 2014). The DOL announced its plan to revise Code of Federal Regulations Title 29 Part 541 to increase exempt employees' salaries from $455 per week ($23,660 annually) to $921 per week ($47,892 annually) (the "Final Rule"). Soon after, a collection of states ("State Plaintiffs") filed suit against the DOL, the DOL's Wage and Hour Division, and their agents, challenging the validity of the Final Rule. On October 12, 2016, the State Plaintiffs moved for emergency preliminary injunctive relief. The Court issued a preliminary injunction against the Final Rule on November 22, 2016, holding the DOL likely lacked statutory authority to enact the Final Rule and the Final Rule would cause irreparable harm if implemented on December 1, 2016 (the "Court's Order" or the "Injunction"). The Court's Order read as follows:

[T]he Court has authority to enjoin the Final Rule on a nationwide basis and decides that it is appropriate in this case, and therefore GRANTS the State Plaintiffs' Emergency Motion for Preliminary Injunction (Dkt. # 10).

Therefore, the Department's Final Rule described at 81 Fed. Reg. 32,391 is hereby enjoined. Specifically, Defendants are enjoined from implementing and enforcing the following regulations as amended by 81 Fed. Reg. 32,391 ; 29 C.F.R. §§ 541.100, 541.200, 541.204, 541.300, 541.400, 541.600, 541.602, 541.604, 541.605, and 541.607 pending further order of this Court.

(Dkt. # 60 at pp. 19–20) (emphasis in original).¹ Six months later, Carmen Alvarez ("Alvarez") sued Chipotle under the FLSA and New Jersey State Wage and Hour Law, alleging Chipotle ignored the Final Rule by not paying her proper overtime wages. Alvarez claimed to bring suit on behalf of herself and others "similarly situated" so as to certify an FLSA collective action and class action under Federal Rules of Civil Procedure 23(a) and (b)(3). Alvarez's counsel—Joseph Sellers ("Sellers") and Miriam Nemeth ("Nemeth") of Cohen Milstein Sellers & Toll PLLC, Justin Swartz ("Swartz") and Melissa Stewart ("Stewart") of Outten & Golden LLP, and local counsel Glen Savits ("Savits") (the "Lawyers")—acknowledged the Injunction in Alvarez's complaint but stated it did not apply to them or to their client:

32. Although it preliminarily enjoined the Department of Labor from implementing and enforcing the Overtime Rule, the Eastern District of Texas did not stay the effective date of the Rule or otherwise prevent the Rule from going into effect. Therefore, as a rule duly promulgated pursuant to the requirements of the APA, the Rule went into effect on December 1, 2016.

33. Because the Eastern District of Texas's preliminary injunction was limited to implementation and enforcement of the Overtime Rule by the Department of Labor and its officials, it did not affect the ability of persons not party to the Nevada case, including Plaintiff and similarly situated employees, to bring private lawsuits pursuant to the FLSA's private cause of action, 29 U.S.C. § 216(b), to enforce their right to overtime pay under the Rule, nor did it prevent non-parties from bringing lawsuits under state law.

(Dkt. # 89, Exhibit 1 at pp. 13–14). This is the second lawsuit in which one of Alvarez's counsel—Swartz—has argued that this Court's Injunction of the Final Rule does not apply to him or to his client. In the United States District Court for the District of Massachusetts, Swartz also ignored this Court's Order² :

107. On November 22, 2016, the United States District Court for the Eastern District of Texas issued an injunction in Nevada v. United States Dep't of Labor , No. 16 Civ. 731 2016 WL 6879615, at *9 (E.D. Tex. Nov. 22, 2016) that enjoined only the U.S. Department of Labor from "implementing and enforcing" the amended versions of, inter alia , 29 C.F.R. §§ 541.100 and 541.200.³

(Dkt. # 89, Exhibit 1 at p. 205). On August 1, 2017, Chipotle filed its Motion for Contempt against Alvarez and the Lawyers (collectively "Respondents") (Dkt. # 89). On August 2, 2017, Chipotle filed a Motion for Judicial Notice regarding its Motion for Contempt (Dkt. # 96). On September 25, 2017, Chipotle filed its Addendum to Motion for Judicial Notice (Dkt. # 112). On September 18, 2017, Respondents filed their Response (Dkt. # 107). On September 25, 2017, Chipotle filed its Reply (Dkt. # 113). On October 9, 2017, Respondents filed their Sur-reply (Dkt. # 118). On November 6, 2017, the Court held a hearing on Chipotle's Motion for Contempt and Motion for Judicial Notice. Respondents filed supplemental briefing on November 8, 2017 (Dkt. # 122) and Chipotle responded to that supplemental briefing on November 10, 2017 (Dkt. # 123). On November 17, 2017, Respondents filed a Motion to Supplement the Record with several affidavits (Dkt. # 125). On November 22, 2017, Chipotle responded in opposition to the Motion to Supplement the Record (Dkt. # 126).

LEGAL STANDARD

To succeed on a motion for contempt, the movant must show by clear and convincing evidence that: (1) a court order was in effect; (2) the order required or prohibited certain conduct by the respondent; and (3) the respondent did not comply with the court's order. United States v. City of Jackson , 359 F.3d 727, 731 (5th Cir. 2004) ; Piggly Wiggly Clarksville, Inc. v. Mrs. Baird's Bakeries , 177 F.3d 380, 382 (5th Cir. 1999). "Good faith is not a defense to civil contempt; the question is whether the alleged contemnor complied with the court's order." Chao v. Transocean Offshore, Inc. , 276 F.3d 725, 728 (5th Cir. 2002).

ANALYSIS

Chipotle moves for contempt, contending that Respondents sued to enforce the Final Rule in violation of the Court's Order. Respondents counter that (I) the Court has no jurisdiction over them, (II) Respondents did not violate the Court's Order as the Order did not apply to them, and (III) if the Court does hold Respondents in contempt, it should spare the junior Lawyers—Savits, Nemeth, and Stewart—from sanctions. The Court will address each argument in turn.

I. The Court Has Jurisdiction over Respondents

Respondents were not parties to the original action giving rise to the Court's Order. Respondents claim that the Court has no jurisdiction over them since (A) they lacked notice of the Court's Order, (B) the first-filed doctrine precludes the Court's jurisdiction, and (C) they did not receive sufficient service and were prejudiced by insufficient process. Conversely, Chipotle claims that the Court has personal jurisdiction over any party with sufficient notice of the Court's Order who subsequently defies the Court's Order. The Court will address each of these arguments separately.

A. Respondents Had Notice of the Order

"Nonparties who reside outside the territorial jurisdiction of a district court may be subject to that court's jurisdiction if, with actual notice of the court's order, they actively aid and abet a party in violating that order." Waffenschmidt v. MacKay , 763 F.2d 711, 714 (5th Cir. 1985).

Respondents had notice of the Court's Order. In actions before the District Court for the District of New Jersey and the District Court for the District of Massachusetts, some or all of Respondents recognized the Injunction. When filing suit in the United States District Court for the District of Massachusetts, one of the Respondents—Swartz—acknowl...