Hornady v. Outokumpu Stainless USA

Ian David Rosenthal, Holston Vaughan & Rosenthal LLC, Patrick H. Sims, Cabaniss, Johnston, Gardner, Dumas & O'Neal, Mobile, AL, for Plaintiffs William Heath Hornady, Christopher Miller, Takendric Stewart.

Ian David Rosenthal, Holston Vaughan & Rosenthal LLC, Mobile, AL, for Plaintiffs Lafayette Wilson, Brian Moore.

Jennifer F. Swain, Charles A. Powell, IV, Littler Mendelson, P.C., Devin Clarke Dolive, Ronald W. Flowers, Jr., Burr & Forman, LLP, Birmingham, AL, Gavin S. Appleby, Pro Hac Vice, Littler Mendelson, Atlanta, GA, H. William Wasden, Burr Forman, Mobile, AL, Sinead Daly, Pro Hac Vice, Littler Mendelson, Miami, FL, for Defendant Outokumpu Stainless USA.

ORDER

JEFFREY U. BEAVERSTOCK, CHIEF UNITED STATES DISTRICT JUDGE

I. INTRODUCTION

A. Background and Recent Procedural History

1. The Report and Recommendation

2. The Court's Review of the Record

3. February 2021 Hearing, Show Cause Orders

B. The Collective Action

1. The Parties

2. Plaintiffs’ Claims

3. Defendant's Pay and Timekeeping Practices

a. The Significance of the Regular Rate of Pay and Defendant's Pay Rates

b. The Parameters of Defendant's Workweek

c. Rounding Principles under the FLSA and Defendant's Rounding Policies

d. Regulations Applicable to Bonuses and Defendant's Incentive Plan

e. Defendant's Duty to Maintain Records

C. Summary of Opinion

II. DISCUSSION

A. Legal Standards

1. Finding of Bad Faith Required

2. The Nature of the Misconduct

3. Rule 37 of the Federal Rules of Civil Procedure

B. Evidence of Bad Faith: Defendant's Response to Numerous Discovery Orders

1. September 4, 2018: The Initial FLSA Scheduling Order

2. October 9, 2018: Initial Scheduling Conference

3. October 25, 2018: Superseding Preliminary Scheduling Order

4. Companion Case and Discovery Therein

5. First Quarter 2019: First Settlement Conference and Phase I Discovery Order

6. June 12, 2019: Plaintiffs’ First Motion to Compel and Defendant's First Sanction

7. August 19, 2019: Scheduling Conference and Amended Phase I Scheduling Order

a. September 13, 2019: Plaintiffs Second Motion to Compel

b. November 5, 2019: Hearing on Second Motion to Compel

8. December 9, 2019: Hearing on Third Motion to Compel

9. January 17, 2020: Discovery Conference and January 21, 2020 Order

a. March Deposition of the Corporate Representative

10. May 2020: Discovery Conference and June 2, 2020 Stipulated Order

11. Orders Requiring the Production of Incentive Plan Data

12. June 15, 2020: Plaintiffs’ Initial Motion for Sanctions

C. Evidence of Bad Faith: Defendant's Misrepresentation and Manipulations

1. July, 2020: Context within which ADP Records were Subpoenaed

2. February 5, 2021: Informal Conference

3. February 17, 2021: Status Hearing

4. Defendant's failure to tell ADP about March 5, 2021 Hearing

5. March 12, 2021: The Show Cause Hearing

D. Other Considerations and Factors

1. Format of Document Production

2. Defendant's Other Scapegoat

3. Spoliation of Time and Pay Records

4. Defendant's Familiarity with Complex Litigation

5. The Efficacy of Lesser Sanctions

6. Prejudice to the Efficient Administration of Justice and Plaintiffs

7. Deterrence to other Employers

III. Conclusion

I. Introduction

This case is lamentable. Mercifully, it is rare. Here, the Court is compelled to protect not only plaintiffs but the Court itself from a defendant's pervasive bad faith. Plaintiffs¹ in this FLSA action seek to be paid for all time they worked for Outokumpu Stainless USA, LLC ("Defendant") as reflected in Defendant's time and pay records. (Doc. 223). Time and pay records are of primary importance in FLSA actions. Defendant refused to produce complete and accurate records and misrepresented to the Court and Plaintiffs material facts surrounding its refusals. The Magistrate Judge entered orders and imposed sanctions against Defendant through the course of discovery, but Defendant was undeterred. Defendant persisted in its misconduct through the date set for final pre-trial conference, at which point Defendant still had not produced basic time and pay records. As a consequence, the Court was left with no choice but to cancel the pre-trial conference and, instead, conduct a general status conference. This was followed by show cause hearings to address Defendant's failures. For the reasons set out below, the Court determines default judgment is the only remaining sanction sufficient to address Defendant's bad faith and the damage wrought by it.

A. Background and Recent Procedural History

This matter is before the Court on the Report and Recommendation of United States Magistrate Judge Nelson ("Magistrate Judge") (Doc. 261), as well as briefing and evidentiary support submitted in response to the undersigned's Show Cause Orders. (Docs. 288, 298, 300, 302). Plaintiffs William Heath Hornady, Christopher Miller, Colin Hartery, and Takendric Stewart brought this collective wage and hour action under Section 216(b) of the Fair Labor Standards Act, 29 USC § 201 et seq. ("FLSA") against Defendant employer, Outokumpu Stainless USA, LLC ("Defendant"). (Doc. 223). The Report and Recommendation addressed Plaintiffs’ "Renewed Motion for Sanctions and/or Related Motion to Compel," filed on September 3, 2020. (Doc. 238).

Defendant's discovery obligations in this action were not novel. Defendant's discovery failures, though, were extraordinary resulting in a long train of discovery and sanction motions against it. Plaintiffs filed their initial "Motion for Sanctions and/or Related Motion to Compel" on June 15, 2020 ("Initial Motion"). (Doc. 216). In response to the Initial Motion, Defendant represented to the Magistrate Judge that its third-party payroll processor, Automatic Data Processing, Inc. ("ADP") was being uncooperative, impeding Defendant's ability to meet its discovery obligations to produce its time and pay records for Plaintiffs. (Doc. 220). Defendant further represented to the Magistrate Judge it needed ADP's data, in order to accurately respond to the production requests for Defendant's time and pay records. (Doc. 332). Based on those representations, and in lieu of recommending additional sanctions,

the Magistrate Judge ordered Defendant to serve ADP with a subpoena. (Doc. 229). Defendant served ADP with a subpoena as ordered, but, thereafter, misrepresented that ADP failed to comply with it. (Docs. 242, 299 and 333). Defendant produced no records to Plaintiffs as a result of the subpoena. Defendant's continued refusal to produce its records resulted in Plaintiffs’ Renewed Motion for Sanctions, seeking, again, a default judgment ("Renewed Motion"). (Doc. 238).

In both the Initial and Renewed Motions, Plaintiffs cataloged Defendant's violations of numerous discovery orders, resulting in Defendant's failure to produce complete and accurate time and pay records, records which are the linchpin in this FLSA action. Plaintiffs correctly argued Defendant's production of complete and accurate discovery was essential to analyzing the underlying claims, calculating whether all time had been paid, overtime had been paid at the correct rate of pay, and overtime had been paid timely. (See Docs. 216 and 238). In addition, Plaintiffs’ argued Defendant's obstruction was fatal to their ability to calculate damages. (Id. ).

1. The Report and Recommendation

The Report and Recommendation, as well as related filings, were forwarded to the Court on October 26, 2020. (Doc. 261).² The Magistrate Judge recommended sanctions lesser than default, because the record at the time did not demonstrate the full extent of Defendant's bad faith. (Id. ). Moreover, the Magistrate Judge observed, even if the record arguably supported a finding of bad faith, lesser sanctions were available, by amending the remedial, and "burden shifting," procedure set out in Anderson v. Mt. Clemens Pottery Co. , 328 U.S. 680, 687, 66 S. Ct. 1187, 90 L. Ed. 1515 (1946). (Id. ).

In Mt. Clemens , the Supreme Court acknowledged, under the FLSA, the employee bears the burden of proving he performed work for which he was not properly compensated. Anderson , 328 U.S. at 687, 66 S.Ct. 1187. "Because of ‘the remedial nature of [the FLSA] and the great public policy which it embodies,’ courts are careful to construe the statute so as not to create impossible hurdles for employees." Rafferty v. Denny's, Inc. , 13 F.4th 1166 (11th Cir. 2021) (citing Anderson , 328 U.S. at 686-87, 66 S.Ct. 1187, superseded by statute on other grounds , Portal-to-Portal Act of 1947; quoting Allen v. Board of Public Educ. for Bibb County , 495 F.3d 1306, 1315 (11th Cir. 2007) ).

The Eleventh Circuit has "emphasized that it is the duty of the employer—not the employee—to keep track of the employee's ‘wages, hours, and other conditions of employment.’ " Rafferty , 13 F.4th at 1190 (quoting Allen , 495 F.3d at 1315.) "That is so because the employer enjoys a better position to be aware of and create records of the most probative facts about the nature and amount of work performed. And denying a claim simply because the employee cannot produce records of her time worked would reward an employer's

failure to comply with its statutory duty to maintain proper records." Id.

To remedy this situation, the Supreme Court in Mt. Clemens authorized a burden-shifting scheme: an employee "satisfies her burden if she ‘proves that [she] has in fact performed work for which [she] was improperly compensated and if [she] produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference.’ " Rafferty , 13 F.4th at 1191 (quoting Anderson , 328 U.S. at 687, 66 S.Ct. 1187 ). In Rafferty , the Eleventh Circuit determined plaintiff met her burden, through her deposition testimony, and demonstrated there were weeks where her...