Perez v. Paragon Contractors Corp.

340 F.Supp.3d 1194

Thomas E. PEREZ, Secretary of Labor, United States Department of Labor, Plaintiff,

v.PARAGON CONTRACTORS CORP. and Brian Jessop, Individually Defendants.

Case No. 2:06-cv-00700 TC

United States District Court, D. Utah, Central Division.

Signed September 10, 2018

Amanda A. Berndt, Jeffrey E. Nelson, John K. Mangum, US Attorney'S Office, Salt Lake City, UT, Karen E. Bobela, Pro Hac Vice, Alicia A.W. Truman, Pro Hac Vice, Katherine Vigil, Lydia Tzagoloff, Pro Hac Vice, US Department of Labor Office of the Solicitor, Denver, CO, for Plaintiff.

Kenneth A. Okazaki, Jones Waldo Holbrook & Mcdonough, Rick J. Sutherland, M. Christopher Moon, Jackson Lewis, Deborah Rae Chandler, Anderson & Karrenberg, Salt Lake City, UT, for Defendants.

Kenneth A. Okazaki, Jones Waldo Holbrook & McDonough, Rick J. Sutherland, M. Christopher Moon, Jackson Lewis, Deborah Rae Chandler Anderson & Karrenberg Salt Lake City, UT, Heath H. Snow, Bingham Snow & Caldwell LLP, St George, UT, for Defendants.

MEMORANDUM DECISION INCLUDING FINDINGS OF FACT AND CONCLUSIONS OF LAW AND CONTEMPT ORDER

David Nuffer, United States District Judge

On June 1, 2016, Defendants were found to be in contempt of a 2007 Permanent Injunction prohibiting future violations of the FLSA's child labor provisions.¹ Just over a year later, Plaintiff filed another show cause motion² arguing that Defendant Paragon Contractors Corporation ("Paragon") simply changed its name to Par 2 Contractors, LLC ("Par 2"), and promptly resumed using child labor. Plaintiff alleges that Par 2, as a successor in interest to Paragon, is bound by the 2007 injunction. Defendants deny that Par 2 is a successor to Paragon.

An evidentiary hearing was held on February 26–27, 2018.³ Plaintiff was represented by Karen E. Bobela, attorney for the United States Department of Labor. Defendants were represented by Rick Sutherland. Par 2, an intervening party, was represented by Jeffrey Matura. The testimony of witness was heard and several exhibits and joint stipulations by the parties were received. After considering all of the evidence and the arguments of counsel, it is determined that Par 2, as a successor to Paragon and Brian Jessop, individually, violated the permanent injunction on November 29, 2007.

FINDINGS OF FACT....1197

CONCLUSIONS OF LAW....1210

A. Par 2, as a successor to Paragon, qualifies as a "person[ ] in active concert or participation with them" capable of violation of the injunction....1210

B. Defendants and Par 2 are in Contempt of the 2007 Injunction....1215

C. Conclusion....1216

ORDER....1216

FINDINGS OF FACT^{4 ,5}

1. A Permanent Injunction against Defendants Paragon, Brian Jessop, and James Jessop was entered on November 29, 2007.⁶ Pursuant to the injunction:

Defendants shall not, contrary to Sections 12(c) and 15(a)(4) of the FLSA, employ, suffer or permit minors to work in commerce or in the production of goods for commerce, or in an enterprise engaged in commerce or in the production of goods for commerce, within the meaning of the FLSA under conditions constituting oppressive child labor as defined in § 3(l) of the FLSA, 29 U.S.C. § 203(l), and in occupations therein declared to be hazardous as defined in the regulations found at 29 C.F.R. Part 570 (Subparts C and E).

2. The Injunction enjoins and restrains "defendants, their officers, agents, servants, employees, and those persons in active concert or participation with them who receive actual notice of [the injunction]."⁷

3. On June 1, 2016, following an evidentiary hearing, Defendants Paragon and Brian Jessop were found to be in contempt of the 2007 injunction.⁸

4. A Sanctions Order was entered on December 6, 2016, finding:

Here, shortly after being caught using child labor in the construction industry and agreeing to the entry of the Injunction, Defendants secretly began profiting from child labor once again. Defendants sought to conceal their knowing and willful violation of the Injunction. They told employees to lie about the child labor and even developed signals and strategies for hiding child workers during inspections. They failed to maintain records of work performed on the Ranch, denied the Department access to the Ranch, refused to provide names of employees who worked at the Ranch, refused to respond to subpoenas, and made incredible denials of their involvement with the work at the Ranch.⁹

Additionally, a specific finding was entered that Defendants were "not credible," and their testimony was "evasive and often ... contradicted by other witnesses' testimony."¹⁰

5. It was also determined that "Defendants have left the Court with no assurance that they are in compliance with its order or that they will, on their own accord, comply in the future."¹¹ As a remedy for Defendants' contempt, a special master was appointed to monitor Defendants' compliance with the injunction, and Defendants were ordered to make an initial payment of $200,000 to the Department of Labor to place into an interest bearing account to serve as a fund to compensate children for their work.¹²

6. Plaintiff filed another show cause motion on September 25, 2017, alleging that Defendants and Par 2 Contractors, LLC, as successor in interest to Paragon, were again in contempt of the 2007 injunction, as well as the Order Appointing Special Master.¹³

7. Defendants appealed the sanctions order to the United States Court of Appeals for the Tenth Circuit. In March 2018, the Tenth Circuit affirmed Judge Campbell's finding of contempt and the compensatory damages contempt sanction, but reversed the appointment of a special master.¹⁴

8. In light of the Tenth Circuit's decision, the parties stipulated that the only issue currently before this Court is whether Defendants and Par 2, as a successor in interest to Paragon, violated the 2007 Permanent Injunction.¹⁵

Par 2 is a Successor in Interest to Paragon

There has been a substantial continuity in operations, work force, location, management, working conditions and methods of production between Paragon and Par 2 .

9. Par 2 is a commercial framing company, as was Paragon.¹⁶

10. Par 2 filed Articles of Incorporation with the Utah Secretary of State on December 2, 2013, but it did not begin to operate as a business until August 2014.¹⁷

11. While Paragon remains an active company, it has no contracts for work, jobs, or employees.¹⁸ Paragon sold most of its tools and equipment over the last few years.¹⁹ At most, Paragon had "a job or two" that was "still going on" in 2016 somewhere in Louisiana, but Brian Jessop does not remember any details of the job.²⁰ Paragon had no jobs or contracts for work in 2017.²¹

12. Brian Jessop testified that he has been downsizing Paragon's operations since 2011 for personal reasons, but his testimony is inconsistent with Paragon's tax records, that he read into the record, establishing that Paragon's gross receipts and sales were $5,619,108 in 2010, $6,683.579 in 2011, and $6,088,107 in 2012.²²

13. Porter Brothers is a general contractor located in Gilbert, Arizona.²³ Porter Brothers hired Paragon as a subcontractor for various jobs between 2013 and 2015.²⁴ In May 2015, Porter Brothers received a bid from the same individuals it worked with at Paragon, but under the company name Par 2 Contractors, LLC, and Porter Brothers has worked with Par 2 (and not Paragon) ever since.²⁵

14. Like Paragon, Par 2 does work for large commercial hotels like Hyatt and Marriott, universities, and other large scale commercial projects.²⁶

15. Par 2's annual dollar volume of business was $1,030,998 in 2014, $5,753,562 in 2015, and $8,022,510.87 (YTD at the time of Wage Hour's investigation) in 2016.²⁷

16. Paragon's address is 1065 W. Utah Avenue, Hildale, UT, 84784.²⁸ Par 2 shared the same address from the time it incorporated up until the summer of 2017.²⁹

17. Paragon's phone number was (435) 874-1310.³⁰ Par 2 used the same phone number for several years.³¹ Jake Barlow claimed that Par 2 eventually got a new phone number but he could not recall when and there is no evidence to support his testimony.³² Don Jessop also could not recall when Par 2 got a separate phone number.³³

18. All of Par 2's upper level employees are former employees or management of Paragon:

Brian Jessop:

a. Brian Jessop was the owner of and estimator for Paragon, and he continues to be an estimator for Par 2.³⁴

b. Brian Jessop is a party to the 2007 Injunction.³⁵

c. Brian Jessop is also a supervisor for Par 2, as reflected on a Fall Protection Pre-Test that he signed for Kimball Barlow in November 2015 in the capacity of a supervisor for Par 2.³⁶

d. Par 2's foreman identified Brian Jessop as Par 2's safety coordinator in November 2016.³⁷

e. When contractors like Porter Brothers sent bid requests to Par 2, they sent the requests to Brian Jessop, and the bids Porter Brothers received from Par 2 had Brian Jessop's name at the bottom of them.³⁸

f. Brian Jessop communicated with estimators and project managers from Porter Brothers—on behalf of Par 2—to clarify proposals and contracts for work.³⁹

g. On several occasions, Brian Jessop authorized material changes to proposals on behalf of Par 2.⁴⁰

h. Brian Jessop was also the primary contact person identified on at least one of Par 2's subcontractor agreements with Porter Brothers,⁴¹ on another contractor's (Bonneville Builders) subcontractor list,⁴² and on another Par 2 subcontract agreement with Wadman Corporation.⁴³

i. Brian Jessop has been involved with most of Par 2's bids since Par 2 was formed, including making material changes to bids.⁴⁴

j. Brian Jessop's involvement is not limited to the bidding process; he also oversees the day to day operations of Par 2's work sites through the completion of Par 2's work.⁴⁵

Don Jessop:

a. Don Jessop is Brian Jessop's brother.⁴⁶

b. Don Jessop's declaration states he was employed by Paragon until 2004.⁴⁷ However, in August 2017, Don Jessop told the U.S. Department of Labor, Wage Hour Division ("Wage Hour") that he worked for Paragon between 199...