United States District Court, M.D. Tennessee, Nashville Division
FINDINGS OF FACT AND CONCLUSIONS OF LAW
KEVIN H. SHARP, District Judge.
In this action, Plaintiff MDT Services Group, LLC ("MDT") seeks damages from Defendant Cage Drywall, Inc. ("Cage") arising out of the following causes of action: "(1) breach of express and implied contract; (2) promissory estoppel; (3) quantum meruit; (4) unjust enrichment; (5) tortious interference with contractual relations; and (6) promissory fraud." (Docket No. 1 at 1).
After denial of Defendant's Motion for Summary Judgment and later Motion to Dismiss, the Court held a bench trial on July 15-17, 2014, after which the Parties were instructed to file proposed findings of fact and conclusions of law, and any responses thereto. The last such filing was entered by Defendant on September 22, 2014.
Having reviewed the Parties' proposed findings and conclusions, their arguments, the record, exhibits received in evidence, and testimony of the witnesses after considering their interests and demeanor, the Court enters the following Findings of Fact and Conclusions of Law in accordance with Rule 52(a) of the Federal Rules of Civil Procedure. Except where the Court discusses different testimony on a specific issue, any contrary testimony on a specific matter has been rejected in favor of the specific fact found. Further, the Court omits from its recitation facts that it deems immaterial to the issue presented.
I. FINDINGS OF FACT
1. Plaintiff is a Georgia limited liability company that offers temporary employment placement services connecting skilled laborers with construction subcontractors.
2. Defendant is a Tennessee corporation and construction subcontractor that specializes in drywall services.
3. Defendant was hired as a subcontractor by Turner Construction in 2010 to provide framing, drywall, and acoustical ceilings for construction of a hospital in Owensboro, Kentucky (the "Owensboro Project"). This ten-story, $600 million hospital was the largest project Defendant had ever undertaken.
4. Plaintiff contacted Defendant around the end of August 2011. Their subsequent negotiations resulted in the Parties' first contract, which defined hourly rates for each class of worker (e.g., mechanic, hanger, finisher, etc.) that Plaintiff would send to the Owensboro Project.
5. Defendant paid Plaintiff directly. Plaintiff, in turn, paid a portion of the hourly rate to each worker as a base rate, plus per diem. Plaintiff also paid a portion of workers' housing costs when they relocated to a hotel or apartment near the work site. However, because Plaintiff hired its employees as "independent contractors", they were not paid overtime wages.
6. The first MDT employees reported to Owensboro on September 11, 2011.
7. From September to December 2011, 50 to 80 laborers from MDT worked on the Owensboro project each week. The majority of laborers were provided by other companies, first Rimax and later Intercontinental.
8. The Parties' relationship was not entirely smooth during this period. Defendant received complaints from workers who were fined by Plaintiff for infractions like "tardiness, failure to appear at the designated job site, failure to notify MDT of unavailability, underperformance, and lack of productivity."
9. For its part, Plaintiff complained that Defendant did not adhere to the agreed payment schedule. Defendant had originally paid Plaintiff on a weekly basis, as Plaintiff paid its workers. Over time, Defendant's payments become increasingly intermittent - first biweekly and then monthly. Plaintiff engaged a factoring company to fund the payroll.
10. At the end of November, Defendant began cutting back the number of MDT workers on the Owensboro Project. Riley Kinzer, Cage Project Superintendent, notified MDT in an email dated December 5, 2011, that "due to the progression of the job not being what it should we had to make a big cut in the number of employees" and MDT's services were no longer required.
11. However, two days later, Defendant requested Plaintiff return as the primary labor supplier on the Owensboro Project. A recent Homeland Security investigation had revealed workers from Intercontinental lacked I-9 forms for employment eligibility verification. Unlike Intercontinental, Plaintiff used E-Verify to confirm the legal status of each worker before they entered the job site.
12. Plaintiff agreed to take over worker supply but faced regulatory compliance challenges of its own. At the end of November, MDT was audited by the Kentucky Labor Cabinet and United States Department of Labor ("DOL"), revealing its workers had been improperly hired as independent contractors. Instead, the workers qualified as statutory employees subject to the requirements of the Fair Labor Standards Act ("FLSA"), including statutory overtime pay.
13. In light of these developments, the Parties renegotiated and drafted a subsequent contract (the "final contract"). The final contract defined new hourly rates "[for] all projects where MDT provides manpower for Cage Drywall except for projects requiring certified payroll reporting, " higher than the rates in the original contract, as well as an overtime rate to comply with FLSA requirements. The final contract also included a "non-solicitation/no-hire" provision, in which Defendant agreed not to "solicit to hire, or in any way engage, contract or hire" MDT's employees while the contract was in force and for one year after.
14. Work in Owensboro continued on schedule. January was Plaintiff's busiest month on the project, with over 100 MDT workers on the job and weekly net profits over $30, 000, three times the net profit of prior weeks.
15. Yet, despite the project's success, Plaintiff sent a letter to its employees the week of January 23, 2012, informing them that "[d]ue to the high amount of payroll in the recent work weeks starting next week [MDT is] temporary [ sic ] forced to move our pay period on two weeks in hold. This means that the current week (01/23-01/29) wages will be paid on 02/10/2012. You will not have a check next week."
16. Mr. Ivanov and MDT CEO Luis Nunez travelled to Owensboro shortly after the letter was sent. They met with their employees on the Owensboro Project to explain the circumstances of the delay and offer cash advances to those who needed them. Mr. Nunez testified that just a few workers requested advances.
17. The Parties' respective versions of subsequent events differ. According to Mr. Ivanov, when the workers arrived on site on Monday, February 1, following the news of the pay delay, Defendant presented them with two time sheets - the usual MDT sheet and a new Cage time sheet. Cage management allegedly informed the workers that if they signed the MDT time sheet, they would no longer have jobs.
18. This account was largely supported by the testimony of witnesses employed by MDT on the project. As explained by Joseph Cox, a drywall hanger and finisher who began working for MDT at Owensboro around November 2011, and subsequently joined Cage at the end of January 2012, "Monday morning when I got to the job, there was [ sic ] two papers on the table. You sign this one [MDT], you're fired; if you sign this one [Cage], you're hired." "[Cage] didn't want us to quit or they didn't want us to get fired. They wanted us to stay and work for them, so we signed in for them that we would have a job."
19. The number of MDT employees at the Owensboro site immediately dropped as workers moved to Cage. As of the first week of February, MDT retained only 16 workers and weekly net profits had fallen to $2, 600.
20. Supervisors at Cage, including Mr. Kinzer, knew that at least some of the workers hired in February 2012 were from MDT. However, at that time, Defendant's highest priority was ensuring the project was properly staffed.
21. Defendant offers inconsistent testimony regarding how it hired MDT employees. Mr. Kinzer claims that when their pay was delayed, MDT workers approached Ramon Zuniga of Ponce Drywall, another Cage subcontractor, requesting to continue on the Owensboro Project. Mr. Kinzer also stated in his deposition that the morning the workers received the letter from MDT, he met "probably 100 employees standing at [his] job trailer with these letters in hand refusing work because they wasn't [ sic ] being paid." Because Mr. Kinzer did not testify at the bench trial, the Court has no basis on which to judge his credibility or demeanor.
22. Mr. Zuniga testified that after disgruntled MDT workers approached him for work, he contacted Cage, who agreed to hire the workers and paid Mr. Zuniga a commission fee.
23. Chris Loftis, Cage Superintendent, testified that the Monday after MDT notified workers of the delay in pay, approximately 85 of the 100 MDT workers failed to arrive on site. He believed they had quit and were not coming back. While workers did filter back in over the coming weeks, it took over a ...