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Salinas v. U.S. Xpress Enterprises, Inc.

United States District Court, E.D. Tennessee

March 8, 2018

KEITH SALINAS, et al, Plaintiffs,
v.
U.S. XPRESS ENTERPRISES, INC., Defendants.

          REPORT AND RECOMMENDATION OF THE SPECIAL MASTER APPROVING THE COLLECTIVE ACTION SETTLEMENT

         In this FLSA collective action, the Court has appointed the undersigned Special Master pursuant to Fed.R.Civ.P. 53 and stipulation of the Parties to issue a report and recommendation concerning whether the proposed FLSA collective action settlement should be approved. The Special Master recommends the Court APPROVE the settlement in its totality.

         Factual and Procedural History.

         This action was filed by Angela Bolden on July 26, 2013 (ECF Doc. No. 1). In July of 2014, after Ms. Bolden accepted an offer of judgment, Keith Salinas was added to the caption and became the Named Plaintiff. (ECF Doc. No. 51). The Plaintiffs assert that U.S. Xpress Enterprises Inc. and U.S. Xpress Inc. (collectively "USX") failed to pay at least minimum wage for all hours worked by their over-the-road truck drivers while such drivers were in orientation and training. ("First Amended Complaint, " ECF Doc. No. 12). During the orientation and training periods, USX paid drivers a flat daily rate which did not consider the number of hours worked by each driver. The Plaintiffs allege this amount failed to pay them at least minimum wage for all hours worked based on several theories of liability. At all times, USX has denied and continues to deny that it paid drivers less than minimum wage. USX further asserted that approximately 1, 400 of the collective action members signed arbitration agreements requiring them to individually arbitrate their claims. (See ECF Doc. No. 107).

         The Plaintiffs put forth several theories as to why USX paid them less than minimum wage. First, the Plaintiffs contend that the initial classroom orientation which occurred prior to them driving constituted employment, and that they were entitled to be paid minimum wage during such periods. (See First Amended Complaint at ¶28). Second, the Plaintiffs contend that following the orientation, the daily rate provided in the Driver Finishing Program (an over-the-road training program that lasted approximately 4-5 weeks) failed to provide them at least the federal minimum wage for all hours worked. In support of this position, Plaintiffs argue that (1) all "on duty" DOT time constitutes compensable work; (2) all short rest breaks constitute compensable work; and (3) sleeper berth time beyond 8 hours per day constitutes compensable work. (See First Amended Complaint at ¶48).

         The Parties engaged in significant litigation prior to attending the mediation which ultimately led to the proposed settlement. In August of 2017, the Parties filed cross-motions for partial summary judgment. (See ECF Doc. Nos. 163, 166). Based on the filings, the Parties appear to agree that time a driver logged in an "on duty" DOT status was compensable work time, but the Parties disputed all other issues, including the amount of damages Plaintiffs were entitled to under each of their theories. Plaintiffs claim that as to the single claim that Defendants do not appear to dispute on liability (that Defendants were required to pay drivers at least minimum wage for all hours worked in an "on duty" status), the total amount of damages was $164, 385. (See Plaintiffs' Brief in Support of Plaintiffs' Motion for Summary Judgment at 13, ECF Doc. No. 164; Plaintiffs' Brief in Support of Plaintiffs' Motion to Approve Settlement at 7; ECF Doc. No. 192).

         The remaining claims brought by Plaintiffs are subject to disputes both to liability and to damages. Both Parties have filed for summary judgment with respect to the compensability of sleeper berth periods and the time a driver spent in orientation. (See ECF Doc. Nos. 163, 166). As the briefing makes clear, the compensability of such time remains heavily disputed. If Plaintiffs were to prevail on their claims and obtain the full damages award as calculated by their expert, Plaintiffs state that they would be entitled to the following, not including the potential for liquidated damages: $70, 513.37 for time spent in orientation ($21.75 per driver); $164, 385 for unpaid on-duty time ($48.47 per driver); $1, 123, 260 for time spent in a truck's sleeper berth beyond eight hours per day ($334 per driver), and $5, 246.60 for unpaid short rest break of 20-minutes or less ($1.60 per driver). (ECF Doc. No. 192 at 5-6).

         In addition to the claims brought in the collective action, 43 individuals filed arbitration following USX's motion to compel arbitration. Those arbitrations asserts the claims brought in the collective action, along with other individual claims. This settlement resolves 35 of those arbitrations. (ECF Doc. No. 192 at 13). The remaining arbitrations either settled under separate terms or were dismissed upon agreement.

         On October 3, 2017, the Parties attended a full-day mediation before the undersigned. During the mediation, both Parties acted in good faith and made reasonable compromises to reach an agreement. The proposed agreement creates a settlement fund of $2, 200, 000, which will fully resolve the instant matter and the thirty-five arbitrations. (Settlement Agreement at 3, ECF Doc. No. 192-2). In exchange for payment from the fund, the FLSA collective action members will release wage and hour claims "for time spent in orientation and the driver finishing program." (Id. at 4). The arbitration claimants will release all employment related claims against Defendants. (Id. at 4-5).

         On January 26, 2018, Plaintiffs filed their motion to approve the FLSA settlement. The motion is now ripe for consideration, and for the reasons discussed below, I recommend the Court APPROVE the Settlement in full.

         The proposed settlement fairly resolves a bona-fide dispute.

         The law favors compromise and settlement of collective actions. Carroll v. Blumaq Corp., 2010 WL 11520634 (E.D. Term. Nov. 15, 2010); see also Lynn's Food Stores, 679 F.2d 1350, 1354 (11th Cir. 1982); Little Rock Sch. Dist. V. Pulaski County Special Sch. Dist. No. 1, 921 F.2d 1371, 1388 (8th Cir. 1990) (in a class action context, providing that "[a] strong public policy favors [settlement] agreements, and courts should approach them with a presumption in their favor"); Ortega v. Uponor, Inc. (In re Oponor, Inc.), 716 F.3d 1057, 1063 (8th Cir. 2013) (in a class action context, providing that "[a] settlement agreement is presumptively valid."); In re Warfarin Sodium Antitrust Litig., 391 F.3d 516 535 (3d Cir. 2004) ("there is an overriding public interest in settling class action litigation, and it should therefore be encouraged"); Wal-Mart Stores, Inc. v. Visa U.S.A. Inc., 396 F.3d 96, 116 (2d Cir. 2005) (noting the "strong judicial policy in favor of settlements, particularly in the class action context") (internal quotations omitted); Officers for Justice v. Civil Serv. Comm'n, 688 F.2d 615, 625 (9th Cir. 1982) ("[V]oluntary conciliation and settlement are the preferred means of dispute resolution. This is especially true in complex class action litigation."); Speed Shore Corp. v. Denda, 605 F.2d 469, 473 (9th Cir. 1979) ("It is well recognized that settlement agreements are judicially favored as a matter of sound public policy. Settlement agreements conserve judicial time and limit expensive litigation."); Newberg On Class Actions § 11.41 (4th ed. 2002) ("The compromise of complex litigation is encouraged by the courts and favored by public policy.").

         A court reviewing a settlement of FLSA claims must conclude that it is "fair, reasonable, and adequate." Carroll v. Blumaq Corp., 2010 WL 11520634; see also Thompson v. United Stone, LLC, et al, 2015 WL 867988, at *2 (E.D. Tenn. 2016 Mar. 2, 2015) Int'l Union, United Auto., Aerospace, and Agr. Implement Workers of Am. V. Gen. Motors Corp., 497 F.3d 615, 631 (6th Cir. 2007). The court must also determine whether the settlement reflects a reasonable compromise over issues that are actually in dispute. Rampersad v. Certified Installation LLC, 2012 WL 5906878, at *1 (E.D. Tenn. Nov. 26, 2012) (citing Lynn's Food Stores, Inc. v. United States, 697 F.2d 1350, 1354 (11th Cir. 1982).

         Courts may approve an FLSA settlement where such an agreement represents the "resolution of a bona fide dispute over FLSA provisions." Thompson v. United Stone, LLC, et al, 2015 WL 867988, at *1 (E.D. Tenn. March 2, 2015) (quoting Lynn's Food Store, Inc. v. United States, 679 F.2d 1350, 1355 (11th Cir. 1982).

         Courts reviewing whether a bona fide dispute exists consider the following factors: (1) the nature of the dispute; (2) the employer's business and type of work performed by the employee; (3) the employer's reasons for disputing the employee's right to the claimed wages; (4) the employee's justification for the disputed wages; and (5) if the parties dispute the computation of wages owed, each party's estimate of the number of hours worked and the applicable wage. Felix v. Thai Basil At Thornton, Inc., 2015 U.S. Dist. LEXIS 62020, *3 (D. Colo. May 6, 2015).

         The dispute here is focused on whether Plaintiffs were paid at least the federal minimum wage during the first 4-5 weeks of their employment with Defendants. During this period, Plaintiffs were in training and were paid a daily rate.

a. Plaintiffs assert that they were required to participate in a classroom orientation at the start of their employment which was not paid at the applicable minimum wage. Defendants contend that such time is pre-employment and, thus, no compensation was necessary. Regardless, Defendants paid Plaintiffs for 8 hours per day of orientation, while Plaintiffs assert the orientation lasted about 9 hours per day (rendering a total of 3 hours non-compensated). If such time was held to be work, the damages per driver on this claim would be $21.75. Whether such an initial orientation constitutes compensable work is a mixed question of law and fact. Helde v. Knight Tranp., Inc., 982 F.Supp.2d 1189, 1199 (W.D. Wash., Oct. 9, 2013) (finding a factually similar orientation program for truck drivers to be compensable); but see Hurst v. First Student, 181 F.Supp.3d 827, 838-41 (D. Ore. 2016) (finding a factually similar orientation program for truck drivers to be non-compensable).
b. Plaintiffs contend that a substantial amount of time which over-the-road truck drivers spend over-the-road constitutes working time, including all "on duty" DOT time, short rest breaks of less than 20 minutes, see 29 C.F.R. §785.18 ("rest periods of short duration, running from 5 minutes to about 20 minutes ... must be counted as hours worked"); sleeper berth time beyond 8 hours per day, see 29 C.F.R. § 785.22 (when on duty for more than 24 hours, up to 8 hours of sleep time may be credited as non-work time. While Defendants generally recognized that "on duty" DOT time was compensable, the other periods of time were subject to legal and factual disputes between the Parties. Based on the records produced in this matter, Plaintiffs estimated the aggregate (non-liquidated) damages for "on duty" time was $164, 385 ($48.47 per driver), for short rest breaks was $5, 426.60 ($1.60 per driver), and for sleeper berth time over eight hours was $1, 123, 360 ($334 per driver). Defendants contested the compensability of the rest breaks and sleeper berth time, as well as the amount of on-duty time that went unpaid. (See Defendants' Answer, ECF Doc. No. 16).

         The settlement will provide approximately $250 per driver in the collective action, after fees, costs, and administrative expenses are paid. (ECF Doc. No. 192 at 6). This amount gives drivers full value on their "on duty" and short rest break claims (totaling $50.07 per driver) and more than 50% of the value for their sleeper berth and orientation claims. Considering the inherent risks in maintaining the collective action through trial, and the legal and factual disputes surrounding the compensability of sleeper berth time, this is a fair result for collective action members.

         The law regarding the compensability of sleeper berth time for over-the-road drivers continues to develop, but remains subject to significant uncertainty and risk to both sides. The most significant case to address this issue so far is Petrone v. Werner Enterprises, a case from the District of Nebraska which alleged that trainee drivers failed to receive minimum wage because the defendant failed to pay them for, inter alia, sleeper berth time in excess of 8 hours per day. The procedural history of that case alone emphasizes the risks and uncertainty to all Parties should this case not resolve.

         In 2015, the Petrone court entered summary judgment in the plaintiffs' favor, holding that the DOL guidance, and specifically 29 C.F.R. § 785.22, the DOL Field Operations Handbook, and two opinion letters issued by the DOL, were entitled to Auer deference and compel trucking companies to pay over-the-road drivers for sleeper berth time in excess of 8 hours per day. 121 F.Supp.3d 860 (D. Neb. 2015) (Strom, J.) ("Petrone I"). But the Petrone court then certified its holding for interlocutory appeal to the Eighth Circuit. The Eighth Circuit denied the petition, and the case was sent to the trial court for a trial on damages.

         Prior to that trial, a new judge was assigned to the case, and Werner filed a motion for reconsideration, requesting the court reverse the summary judgment grant provided to plaintiffs and instead hold that Werner was entitled to judgment as a matter of law on the sleeper berth claims. The new judge partially granted Werner's motion, reversed the plaintiffs' summary judgment award, but held that the issue of sleeper berth compensability was a mixed question of law and fact, and required a jury to resolve. 2017 WL 510884 (D. Neb. Feb. 2, 2017) (Smith Camp, J.) ("Petrone II"), (vacating summary judgment award and holding that whether sleeper berth time is compensable must be determined by jury); see also Petrone v. Werner Order on Motion to Clarify (Smith Camp, J.) (further holding that whether sleeper berth time is compensable must be determined by jury).

         The unresolved nature of these legal theories demonstrates that there is a bona fide dispute of an FLS A claim.

         The proposed settlement is fair, reasonable, and adequate based on the attendant risks of continued litigation.

         In reviewing whether a FLSA settlement is fair, reasonable and adequate, courts consider the following factors:

(1) The existence of fraud or collusion behind the settlement;
(2) The complexity, expense, and likely duration of the litigation;
(3) The state of the proceedings and the amount of discovery completed;
(4) The probability of Plaintiff s success on the merits;
(5) The range of possible recovery; and
(6) The Opinions of counsel.

Nutting v Unilever Mfg. (U.S.) Inc., 2014 WL 2959481, at 3 (W.D. Tenn. June 13, 2014); (citing Dees v. Hydradry, Inc.,706 F.Supp.2d 1227, 1241 (M.D. Fla. 2010); Pessoa v. Countrywide Home Loans, Inc., No. 2007 WL 101777, at *3 (M.D. Fla. April 2, 2007)); see also Greene v. ...


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