I've been falling behind on my summaries of Fifth Circuit adlaw cases recently, so it's time to play catch up. I've got a real assortment for you here: A "space city special"--admin.law-speak for lawsuit against NASA--a tax case, a Chenery puzzle, and several employment cases, including one that presents the same question that SCOTUS answered more than two decades ago in a little case called Auer v. Robbins. How do you think it turned out this time? I'll give you a hint: the Fifth Circuit held that Auer no longer dictated the answer.
Johnnetta Punch v. Bridenstine, No. 18-40580 (5th Cir. Dec. 17, 2019) (Jones, Ho, Oldham)
Johnetta Punch sued NASA claiming the agency discriminated against her. The district court concluded that by pursuing her claims in severally mutually exclusive forums, Punch pled her way out of federal court. The Fifth Circuit affirmed in a colorful and thorough opinion by Judge Oldham. This case's procedural history is really complicated, so I wont' try to summarize it here. To give you a taste, though, here is the "Chronology of Events" Judge Oldham included as an appendix to his opinion:
My takeaway? It takes a rocket scientist to understand how to sue NASA. I suppose that's fitting.
Escribano v. Travis County, No. 19-50236 (5th Cir. Jan. 10, 2020) (Davis, Smith, Costa)
Six Travis County, Texas Sheriff's Office detectives sued the County alleging they were entitled to overtime pay under the Fair Labor Standards Act. The case ended up hinging on whether the FLSA's exemptions for executive and highly compensated employees applied to the detectives. 29 C.F.R. §§ 541.100(a), 541.601(c). The detectives argued that the exemptions didn't apply and that even if they did, the detectives were still entitled to overtime pay under the first-responder exception to those exemptions. Id. §§ 541.3(b).
Both exemptions apply only to "salaried" employees. The executive exemption also required the County to show that the detectives
- were paid at least $455/week;
- were primarily managers;
- “customarily and regularly direct[ed] the work of” at least two other employees; and
- had hiring and firing authority, or that their suggestions as to “hiring, firing, [or] promotion” were “given particular weight.” Id. § 541.100(a).
The highly-compensated-employee exemption required the County to show (in addition to the salary requirement mentioned earlier) that the detectives:
- were paid at least $455/week;
- earned at least $100,000 annually; and
- “customarily and regularly perform[ed] any one or more of the exempt duties or responsibilities of an executive, administrative or professional employee . . . .” Id. § 541.601(a).
A jury found that none of the detectives were compensated on a salary basis, which meant that neither exemption applied. It also meant that the applicability of the "first-responder exception" didn't matter. Accordingly, the jury awarded damages to the detectives, and the district court entered judgment in their favor. And then things started getting complicated.
The County moved for judgment as a matter of law under Federal Rule of Civil Procedure 50(b), arguing that no rational jury could have found that the detectives were not paid on a salary basis. The detectives opposed but just in case the district court agreed with the County on the salary question, they also conditionally moved under Rule 59 for a new trial to determine whether their primary duty was front-line law enforcement or management. That answer would resolve the executive exemption and first-responder exception.
The district court agreed with the County, ruling as a matter of law that the detectives were paid a salary. Having vacated the jury’s finding on this first requirement of the exemptions, the district court also granted the detectives’ request for a new trial. At a new trial, the court explained, the jury would determine whether the detectives primarily performed office work and, as a result, were exempt as highly-compensated employees.
The detectives sought reconsideration and confusion ensued. The detectives claimed that they had only conditionally moved for a new trial on the management issue because it is an element of the executive exemption and the first-responder exception. Accordingly, they insisted that the office-work issue, which is part of the highly-compensated employee exemption, was irrelevant. The district court disagreed. It explained that its order vacating the jury's no salary finding left the ultimate exemption question unresolved. Now that the court had ruled that the County had proven the first element of both exemptions as a matter of law, a new trial was necessary to see if the County could prove the remaining elements of either exemption. Accordingly, the district court asked the detectives to clarify how they intended to proceed.
Rather than challenge the exemptions in a new trial as the district court suggested they should, however, the detectives decided they no longer wanted a new trial at all and withdrew their Rule 59 motion. They proceeded to argue that they were entitled to a judgment in their favor without a new trial simply because the parties had stipulated to the prima facie elements of an FLSA overtime claim and the County had failed to prove any exemption applied at trial.
Displaying remarkable patience, the district court explained once again that its order vacating the jury’s “no salary” finding meant a new jury needed to answer the remaining questions about the exemptions, the district court refused to enter judgment for the detectives. It then withdrew the detectives’ request for a new trial given that they no longer wanted one. This went on and on. The district court gave the detectives four chances to seek a new trial before it finally gave up and entered final judgment in favor of the County. The detectives appealed.
The Fifth Circuit first addressed two important jurisdictional issues. First, the County argued that the Fifth Circuit lacked appellate jurisdiction because the detectives' notice of appeal was untimely. Because the detectives had appealed within 30 days of the district court's docket entry entering final judgment dismissing the case, however, appellate jurisdiction existed under the final judgment rule embodied in Federal Rule of Appellate Procedure 4(a)(1)(A).
Second, the detectives argued that the County's Rule 50(b) motion had been untimely and, as a result, the district court lacked jurisdiction to rule in the County's favor on the salary-basis issue. The detectives admitted that they hadn't raised this argument in the district court, but they argued that Rule 50(b)'s deadline is "jurisdictional" and therefore not subject to waiver or forfeiture. In support of that argument, the detectives pointed to the Fifth Circuit's decision in U.S. Leather, Inc. v. H&W P'ship, 60 F.3d 222, 225 (5th Cir. 1995). Judge Costa's explanation of why that case didn't help the detectives is worth reading in full:
Having addressed these jurisdictional issues, the Fifth Circuit explained that it agreed with the district court that a new trial was needed to answer the additional questions about whether the detectives were exempt from the FLSA.
With all that out of the way, the Fifth Circuit finally addressed the district court's ruling that the detectives were, as a matter of law, paid on a salary basis. The parties agreed that this issue hinged entirely on a single requirement of the applicable regulation: whether the detectives' pay was "subject to reduction because of variations in the quality or quantity of the work performed." See 29 C.F.R. § 541.602(a).
The Supreme Court addressed the same question back in 1997 in a little case called Auer v. Robbins, 519 U.S. 452, 459-61 (1997)--you may have heard of it. Auer followed the Secretary of Labor's view that an employee's pay is subject to reduction if the employer had “an actual practice of making . . . deductions or an employment policy that creates a ‘significant likelihood’ of . . . deductions.” Id. at 461. That, in turn, depended on whether a “clear and particularized policy . . . ‘effectively communicates’ that deductions will be made in specified circumstances.” Id.
The detectives and the County assumed that Auer’s “practice or policy” standard applied, so that was the standard the district court used in ruling on the County's Rule 50(b) motion. But in a post-Auer regulation, the Department of Labor announced that there must be a practice of making deductions, with the existence of a policy only being evidence of that practice. 29 C.F.R. § 541.603(a)8; 69 Fed. Reg. at 22,180. As a result, the Fifth Circuit explained, the ultimate inquiry is now just “practice.” Even under that standard, though, the Fifth Circuit agreed with the district court that the detectives were compensated on a salary basis and, for that reason, affirmed.
Baker Hughes, Inc. v. United States of America, No. 18-20585 (5th Cir. Nov. 21, 2019) (Southwick, Willett, Oldham)
Baker Hughes appealed a district court summary judgment order in favor of the government in a dispute over an income tax deduction. The district court held that a $52 million payment from Baker Hughes's predecessor in interest to one of the predecessor in interest's subsidiaries was not a "bad debt" under 26 U.S.C. 166 or an "ordinary and necessary business expense" under 26 U.S.C. 162, and as a result, the IRS was correct to conclude that the payment didn't qualify for an income tax deduction. The Fifth Circuit affirmed.
Expeditors & Production Service Co., Inc. v. Director, Office of Workers' Compensation Programs, No. 18-60895 (5th Cir. 2019) (Stewart, Clement, Ho) (per curiam)
Expeditors hired Garrick Spain to work on its behalf for Anadarko Petroleum as a shipping and receiving dispatcher. Anadarko operates two facilities at Port Fourchon, Louisiana: C-Port 1 and C-Port 2. Spain worked at C-Port 1. His job required him to work weekly shifts. When he was on duty, he would work 12 hours at a time, and even when he was "off" he would remain on call. Due to that schedule, Expeditors required Spain to live in an on-premises trailer at C-Port 2. His trailer was close to the water and less than 2 miles from C-Port 1.
Spain was injured when he slipped and fell at the mobile home trailer Anadarko provided for him at C-Port 2. He sought to claim benefits under the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. 901, et seq. The LHWCA “provides compensation for the death or disability of any person engaged in ‘maritime employment,’” when certain conditions are met. Herb's Welding, Inc. v. Gray, 470 U.S. 414, 415 (1985), First, the employee making a claim must have statutory status as a maritime employee. 33 U.S.C. § 902(3). Second, the injury must occur on an enumerated situs such as a terminal or an area adjoining navigable waters. 33 U.S.C. § 903(a).
To qualify as a covered "situs" under the LHWCA, a situs must bear a functional relationship to maritime commerce. See Thibodeaux v. Grasso Prod. Mgmt., 370 F.3d 486, 488-89 (5th Cir. 2004). That means it must “be used for loading, unloading, or one of the other functions specified in the [LHWCA].” Id. The Fifth Circuit has held that the situs extends throughout “the parcel of land underlying the employer’s facility.” New Orleans Depot, 718 F.3d at 392.
An ALJ and the Benefits Review Board ruled in Spain's favor, and Expeditor's appealed, arguing that the ALJ and Board erred (1) in finding C-Port 2 a qualifying situs under section 903(a) and (2) in concluding Spain's injury occurred at a marine terminal. With respect to the first argument, Expeditors insisted that even if C-Port 2 qualified as a covered situs for LHWCA purposes, Spain's trailer did not. The Court rejected that argument, explaining that under Fifth Circuit precedent, the test is whether the situs is within a "contiguous shipbuilding area which adjoins the water." Ala. Dry Dock & Shipbuilding Co. v. Kininess, 554 F.2d 176, 178 (5th Cir. 1977). Because (1) the trailer was within the same fenced in perimeter as the rest of C-Port 2 and (2) no non-marine facility stood between it and the water, it was part of the larger C-Port 2 marine terminal for purposes of the LHWCA.
The Court also rejected Expeditors' argument that C-Port 2 was not a marine terminal simply because Spain lived there and did his maritime work elsewhere. There was no dispute that Spain was a maritime employee, the Court reasoned, so as long as he "spen[t] some of [his] time in covered work, the injury [need] not have to occur[red] while [he] [wa]s actively engaged in the maritime activity." (quoting Ne. Marine Terminal Co., Inc. v. Caputo, 432 U.S. 249, 273 (1977)). There need not be a causal relationship between the nature of claimant's employment and the accident. "All that is required is that the obligations or conditions of employment create the zone of special danger out of which the injury arose.” Jones v. Halliburton Co., 583 F.3d 228, 238 (5th Cir. 2009).
Hobbs v. Petroplex Pipe and Construction, Inc., No. 19-50350 (5th Cir. Jan. 10, 2020) (Jolly, Smith, Costa)
Petroplex appealed the district court's ruling, following a bench trial, that Petroplex was liable to Joseph Hobbs and Drake Feeney under the FLSA. According to Petroplex, the district court erred in holding that Hobbs and Feeney were employees and not independent contractors under the Act. After a very detailed and fact-intensive discussion of the record, the Fifth Circuit concluded that the district court had not committed clear error and, for that reason, affirmed.
There's no simple way to summarize the Court's reasoning, but the Court's conclusion is worth a read, especially if you're in the oil and gas industry:
The Inclusive Communities Project v. Department of Treasury, No. 19-10377 (5th Cir. Dec. 30, 2019) (Jolly, Smith, Costa)
ICP sued Treasury and the Office of the Comptroller of the Currency, claiming that the agencies had violated section 3608 of the Fair Housing Act and the Fifth Amendment by failing to regulate the Federal Low-Income Tax Credit program in a manner that promoted fair housing. The district court granted summary judgment to OCC and Treasury on several grounds. In an opinion by Judge Smith, the Fifth Circuit affirmed on one of them, holding that ICP lacked standing to sue either agency. ICP, the panel explained, had failed to demonstrate causation and redressability. The problem, at a very basic level, was that it is very "difficult for a plaintiff to establish standing to challenge a government action if he isn't its direct object," and "[n]either Treasury nor OCC regulates ICP."
Excel Modular Scaffold & Leasing Co. v. OSHRC, No. 19-60067 (Wiener, Higginson, Ho)
Here's how Judge Higginson introduces this case, which involves a tragic on-the-job accident:
One aspect of the panel's description of the standard of review struck me as odd:
I would have assumed a legal conclusion would be reviewed de novo. As Justice Scalia explained in Pierce v. Underwood, 487 U.S. 552, 558 (1988):
Now of course, Justice Scalia was talking about the decision of Article III "judges" there, whereas in this case, we're talking about the decision of an ALJ. So maybe that's the difference. Or maybe courts view the waiver issue as fact-intensive. I'm not sure. If you know the explanation, please set me straight in the comments, or shoot me an e-mail.
Excel had raised the infeasibility defense in its answer to the citation, but it failed to raise it in its joint prehearing statement that it submitted to the ALJ. Agency regulations permit the ALJ to use "the prehearing procedures set forth in Federal Rule of Civil Procedure 16," 29 C.F.R. 2200.51(b), which in turn permits a judge to schedule a pretrial conference to "formulate and simply the issues ... eliminate frivolous claims or defenses," and issue a pretrial order. FRCP 16(c)-(d).
Citing a few decades-old cases dealing with Rule 16 in the regular civil litigation, the panel noted that a pretrial order controls the course of trial and that because of its importance "in achieving efficacy and expeditiousness upon trial in the district court, appellate courts are hesitant to interfere with the court's discretion in creating, enforcing, and modifying such orders." It then proceeded to apply those same principles to the ALJ proceedings, presumably because the agency's regulations invoke FRCP 16.
Anyway, Excel responded that the agency had implicitly consented to the defense by failing to object at the hearing to Excel's introduction of testimony relevant to the defense. Excel insisted that given that it had raised the defense in its answer to the citation and had introduced evidence on the issue at the hearing, the Secretary couldn't have been surprised or prejudiced by Excel's attempt to raise the defense in its post-hearing briefing. The Fifth Circuit rejected that argument, too, explaining that "[w]hile it is true that parties may consent to trial of an issue that was not preserved, consent occurs 'only when the parties squarely recognized they were trying an issue not raised in the pleadings.'" "More importantly," the panel added, "'[f]ailure to object to evidence relevant to the unpleaded issue' does not indicate consent 'if the evidence is also relevant to a pleaded issue.'"
Finally, the panel explains that even if Excel had not waived the infeasibility defense, the evidence presented at the hearing would not have been sufficient to establish the company's entitlement to it in any event. Reviewing the evidence, the panel concluded that the ALJ did not err in determining that Excel could have achieved partial compliance with the relevant standard. As the Court emphasized, where partial compliance was possible, an employer is not entitled to an infeasibility defense.
One thing remains a bit unclear to me about this case. The Court mentions that after finding that Excel had waived the infeasibility defense, the ALJ concluded in the alternative that Excel had also failed to demonstrate by a preponderance of the evidence that it was entitled to the infeasibility defense. Fair enough, but the Court never says whether the ALJ based that alternative conclusion on the same "partial compliance" rationale that the Court offered. Would it violate the Chenery principle for the Fifth Circuit to affirm based on a partial compliance rationale that the ALJ never articulated? SEC v. Chenery Corp. (Chenery I), 318 U.S. 80, 95 (1943) (a court reviewing an agency action may only affirm that action on the grounds articulated by the agency when it made its decision). I assume Chenery applies to judicial review of ALJ conclusions. Is that right?