Tullous v. Texas Aquaculture Processing Co. LLC

• Decision Date: 30 September 2008
• Docket Number: Civil Action No. H-06-1858.
• Parties: Derrick TULLOUS, on Behalf of Himself and All Others Similarly Situated, Plaintiff, v. TEXAS AQUACULTURE PROCESSING COMPANY LLC, Texas Aquaculture Cooperative, and ST Design Corporation d/b/a Prosource Management Solutions, Defendants.
• Court: U.S. District Court — Southern District of Texas

579 F.Supp.2d 811

Derrick TULLOUS, on Behalf of Himself and All Others Similarly Situated, Plaintiff, v. TEXAS AQUACULTURE PROCESSING COMPANY LLC, Texas Aquaculture Cooperative, and ST Design Corporation d/b/a Prosource Management Solutions, Defendants.

Civil Action No. H-06-1858.

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

September 30, 2008.

Richard J. (Rex) Burch, Bruckner Burch PLLC, Robert Debes, Jr., Debes Law Firm, Houston, TX, for Plaintiffs.

Andrew S. Golub & Amy Hawk of Dow Golub Berg & Beverly LLP—ST Design Corp., Ronald B. Collins & Randy M. Clapp of Duckett Bouligny & Collins, El Campo, TX—Texas Aquaculture, for Defendants.

OPINION & ORDER

MELINDA HARMON, District Judge.

Pending before the court in this Fair Labor Standards Act case are two motions for summary judgment, one filed by defendants Texas Aquaculture Processing Company, LLC and Texas Aquaculture Cooperative (collectively, "Texas Aquaculture") (Doc. 59) and the other filed by defendant ST Design Corporation, d/b/a Prosource Management Solutions, ("ProSource") (Doc. 60). Plaintiff Derrick Tullous ("Tullous") has filed a response in opposition to each motion for summary judgment (Docs. 65 and 68). Texas Aquaculture has filed a response in opposition to ProSource's motion for summary judgment (Doc. 64). For the reasons explained below, the Court ORDERS that Texas Aquaculture's and ProSource's motions are DENIED.

I. Background & Relevant Facts

The dispute in this case is whether employees of a catfish processing plant are entitled to overtime compensation pursuant to Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. Fish farms exist along the Texas coast, and Matagorda County, Texas is the site of many catfish farms in particular. Several of these catfish farmers formed a cooperative association, Texas Aquaculture, to process and package the catfish of each of the individual farmers. (See Klingaman Dep. at 22-23, Doc. 65 Ex. A). No catfish are raised at the processing plant. (See id.). Rather, each of the individual member farmers raise catfish on their own farms and sell the fish to Texas Aquaculture to process, package, and send to market. (See id. at 23-24). When the catfish are ready to be harvested, an individual farmer will hire a seining company to net the fish from his or her pond and load the fish onto a "live well" truck. (Id. at 25). The live well trucks are owned by independent trucking companies that are hired by Texas Aquaculture to transport live catfish from the farms to the processing plant. (Id.). Employees at the processing plant de-head, gut, and run the catfish through a processing machine that produces fillets. (Id. at 23-24). Texas Aquaculture, bearing the costs of processing, sells the processed fish to the end consumer, including restaurants, wholesalers, and other buyers, for a profit. (Id. at 24). Only member farmers' catfish are processed at the processing facility. (Hickl Aff. at 2, Doc. 59 Ex. C).

Approximately thirty independent farmers own Texas Aquaculture. (Klingaman Dep. at 27, Doc. 59 Ex. A). Although Texas Aquaculture is a separate legal entity,¹ the member farmers are extensively involved with its operation. When the cooperative was first established, the member farmers donated much of the equipment used by the processing plant. (Id. at 83-84; Hickl Dep. at 28-29, Doc. 59 Ex. B). Many of the farmers also donate significant time to the cooperative. (See id.; see also Hickl Aff. at 2, Doc. 59 Ex. C). Such involvement is not restricted by Texas Aquaculture's bylaws and is, if anything, encouraged. (Hickl Aff. at 2, Doc. 59 Ex. C).

Texas Aquaculture contracted with ProSource, a staff leasing agency organized under Texas law, to lease employees from ProSource to work at the fish processing plant. (See Staff Leasing Agreement, Doc. 60 Ex. J) (hereafter, the "Agreement."). While the Agreement was in place,² ProSource was responsible for, inter alia, payment of the leased employees' wages and benefits. (See id. at ¶ 4.3(a)). In doing so, ProSource performed the administrative functions of employment, such as payroll and workers' compensation insurance. (Traylor Dep. at 9-10, Doc. 60 Ex. A). Texas Aquaculture created a weekly summary of the hours each employee worked and submitted the summary to ProSource, which would then submit an invoice for Texas Aquaculture's approval. (Id. at 26). Once approved, ProSource processed the payroll. (See id. at 26-27). ProSource also maintained the employment records for the leased employees. (Id. at 54-55). Other than these payroll responsibilities, ProSource claims that it had little to do with the day-to-day operations of the processing plant. (See L. Baez Dep. at 34, Doc. 60 Ex. C; Cunda Dep. at 36-37, Doc. 60 Ex. H; Klingaman Dep. at 58, 67, Doc. 60 Ex. B; Tullous Dep. at 40, Doc. 60 Ex. F; G. Baez Dep. at 27, Doc. 60 Ex. G).

Nevertheless, ProSource did assume, pursuant to the Agreement, the "obligation" to "coordinate" with Texas Aquaculture in "the hiring, firing, disciplining, and reassignment" of the leased employees. (Agreement at ¶ 4.3(c), Doc. 60 Ex. J).³ ProSource further reserved "the right of direction and control over the adoption of employment and safety policies[.]" (Id. at ¶ 4.3(d)). Indeed, employees at the processing plant were required to abide by ProSource's employment policies and procedures. (See Klingaman Dep. at 40, Doc. 68 Ex. B; Employment Agreement at ¶ 2.1, Doc. 68 Ex. F; Agreement at ¶ 9.1, Doc. 60 Ex. J). Furthermore, the Employment Agreement between ProSource and the leased employees refers to ProSource and the client company (to whom employees are leased) as "Co-Employers." (Employment Agreement, Doc. 68 Ex. F). Finally, if Texas Aquaculture terminated an employee, the employee remained "an employee of ProSource" and was subject to reassignment by ProSource. (ProSource Unemployment Notice, Doc. 68 Ex. G).

Hourly employees at Texas Aquaculture's processing plant are not paid time and a half for hours worked in excess of forty in a week. Texas Aquaculture and ProSource dispute which entity was responsible for compliance with the requirements of the FLSA should the statute apply. Texas Aquaculture contends that it hired "ProSource specifically to handle all of the payroll decisions," to determine "how to pay the employees," to determine whether "they were exempt or not exempt under the Fair Labor Standards Act," and to determine whether "they were entitled to straight pay or time and a half, overtime[.]" (Klingaman Dep. at 108-109, Doc. 68 Ex. B). Texas Aquaculture claims that it was ProSource's decision to classify the employees of the processing plant as exempt under the FLSA. (See id. at 11).⁴

ProSource disagrees with Texas Aquaculture's characterization. Pursuant to the Agreement, Texas Aquaculture and ProSource agreed that Texas Aquaculture, not ProSource had the duty and obligation to comply with the FLSA. (See Agreement at ¶ 4.4(d), Doc. 60 Ex. J).⁵ According to ProSource, it questioned Texas Aquaculture's alleged decision not to pay the leased employees overtime and asked that Texas Aquaculture provide it with written support. (Traylor Dep. at 14-16, Doc. 60 Ex. A). ProSource received documentation approximately a year later in the form of a fax containing copies of certain FLSA regulations dealing with overtime exceptions. (See id. at 16; see also Doc. 60 Ex. L). Thereafter, ProSource claims it accepted Texas Aquaculture's decision on the overtime issue. (Traylor Dep. at 16, Doc. 60 Ex. A).

Tullous brought suit, individually and on behalf of all others similarly situated, pursuant to the FLSA seeking to recover the unpaid overtime allegedly owed current and former employees of the fish processing plant. Texas Aquaculture has moved for summary judgment arguing that, because the fish processing plant is run by farmers for agricultural purposes, it is exempt from the FLSA's overtime requirements. ProSource has moved for summary judgment on the basis that it was not an "employer" for the purposes of the FLSA.⁶ Alternatively, ProSource moves for summary judgment on statute of limitation grounds.⁷

II. Legal Standards

(1) Summary Judgment

A party moving for summary judgment must inform the court of the basis for the motion and identify those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, that show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. Fed. R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The substantive law governing the suit identifies the essential elements of the claims at issue and therefore indicates which facts are material. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). The initial burden falls on the movant to identify areas essential to the nonmovant's claim in which there is an "absence of a genuine issue of material fact." Lincoln Gen. Ins. Co. v. Reyna, 401 F.3d 347, 349 (5th Cir.2005). If the moving party fails to meet its initial burden, the motion must be denied, regardless of the adequacy of any response. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en banc). Moreover, if the party moving for summary judgment bears the burden of proof on an issue, either as a plaintiff or as a defendant asserting an affirmative defense, then that party must establish that no dispute of material fact exists regarding all of the essential elements of the claim or defense to warrant judgment in his favor. Fontenot v. Upjohn, 780 F.2d 1190, 1194 (5th Cir.1986) (the movant with the burden of proof "must establish beyond peradventure all of the essential elements of the claim or defense to warrant judgment in his favor") (emphasis in original).

Once the movant meets its burden, the nonmovant must direct the court's attention...