Opinion
Civil No. 03-5523 (DWF/SRN)
March 16, 2004
Frank Vogl, Best Flanagan, Minneapolis, MN; Mark R. Thierman, Micheline N. Fairbank, Thierman Law Firm, Reno, NV, Of Counsel for Plaintiffs
Alan L. Rupe, Kutak Rock LLP, Wichita, KS, for Defendants
Amy M. Shortridge, Kutak Rock LLP, Kansas City, MO, for Defendants
H. Alien Blair, Jeanette M. Bazis, Minneapolis, MN, for Defendants
MEMORANDUM OPINION AND ORDER
Introduction
The above-entitled matter came on for hearing before the undersigned United States District Judge on February 13, 2004, pursuant to the Motion to Dismiss, or, in the alternative, for Summary Judgment and for a Stay of Discovery brought by Defendants The Schwan Food Company ("SFC"), Schwan's Home Service, Inc. ("SHSI"), and Schwan's Sales Enterprises, Inc. ("SSEI") (collectively "Schwan"). For the reasons set forth below, Defendants' Motion for Summary Judgment is granted.
Because the Court relied on affidavits submitted outside of the pleadings, the Court has reviewed this as a Motion for Summary Judgment as opposed to a Motion to Dismiss.
Background
SHSI is the largest branded home delivery frozen food company in the United States. SHSI is a subsidiary of SFC and it serves as the homes sales and delivery arm of SFC. Specifically, SFC sells and delivers its food products directly to customers at their residences through SHSI.SHSI operates through sales companies that are structured as independent small businesses. The sales companies sell and deliver products in specific geographic territories. The sales companies work out of depots that contain office, freezer, and parking space. Each sales company is managed by a sales manager. A sales manager's duties include: general supervision, direction and control over the sales company; hiring, training, managing, and discharging employees; maintaining property and equipment; ensuring that property and equipment satisfy safety standards; overall management and supervision of staff; employee relations; ensuring proper customer service; monitoring bank deposits; route book maintenance; route mapping; and all additional duties as assigned by the divisional managers. Each of the plaintiffs in this case was employed in Texas as a sales manager for SHSI.
Route managers are SHSI employees that sell and deliver SFC's food products to customers. Route managers operate delivery trucks and deliver products to customers, fill pre-existing orders, make new sales, take orders for future sales, and solicit orders from new customers. The route managers are managed and supervised by sales managers. On average, each sales manager manages 8-10 route managers. However, a sales manager can manage as many as 24 route managers. Sometimes sales managers are required to operate the route delivery trucks regularly operated by route managers, such as when they are training route managers or when a route manager is ill or on vacation.
Since 1990, Schwan has manufactured food products in at least nine states and Schwan owns manufacturing facilities in each of those states. Schwan also works with other companies that manufacture food products under the Schwan label. Schwan owns the food it manufactures at its facilities and takes title to food that it purchases from other companies when it accepts delivery of the food. Once Schwan takes title to its food products, Schwan retains title until the products are sold to customers.
When Schwan food products leave the manufacturing facilities, the products are shipped in caselots to one of Schwan's four distribution centers in the United States. From the distribution center, the caselots are shipped to the depots via long-haul, over-the-road trucks. When the food products reach a depot, the caselots are unloaded into the depot's central freezer. Caselots are generally broken down into smaller individual sales units within 24 to 72 hours of arriving at the depot. The individual sales units are not processed or repackaged at the depots, but are only stored temporarily at the depots until they can be delivered to Schwan's customers. The typical amount of time a food product spends in storage at the depot is between 1 and 10 days.
The amount of food product shipped from the distribution centers to the depots is based on standing customer orders, historic buying patterns, and predicted sales to targeted residential customers. In addition, customers can order Schwan products via the Internet. In order to produce and ship the optimal amount of products to the depots, each sales order is entered into a hand-held computer by a route manager. The data from these computers is uploaded into a central database that analyzes past sales to predict future sales. By using this sales and distribution data, Schwan is able to predict at any time with 95% accuracy which, and how many of its products, a customer will purchase.
Although Schwan uses long-haul, over-the-road trucks to deliver its products to its depots, it employs a fleet of smaller route delivery trucks to transport the food products from the depots to its residential customers. Each sales company has a set of routes that require route managers to make frequent stops at customer homes. Schwan uses these smaller route delivery trucks for residential deliveries because the trucks must navigate narrow residential streets and most sales involve only individual sales units.
As previously stated, Plaintiffs were sales managers for SHSI. Plaintiffs' claims arise under the Fair Labor Standards Act of 1938 ("FLSA"), 29 U.S.C. § 216(b), and requests overtime compensation, injunctive relief, liquidated damages, and attorney fees and costs. Schwan, on the other hand, asserts that the Motor Carrier Act ("MCA") exemption to the FLSA, 29 U.S.C. § 213(b)(1) is applicable to Plaintiffs and all of its sales managers.
Discussion
I. Standard of Review
Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The court must view the evidence and the inferences that may be reasonably drawn from the evidence in the light most favorable to the nonmoving party. Enter. Bank v. Magna Bank of Missouri, 92 F.3d 743, 747 (8th Cir. 1996). However, as the Supreme Court has stated, "[s]ummary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the Federal Rules as a whole, which are designed 'to secure the just, speedy, and inexpensive determination of every action.'" Celotex Corp. v. Catrett, 477 U.S. 317, 327 (1986) (quoting Fed.R.Civ.P. 1).
The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Enter. Bank, 92 F.3d at 747. The nonmoving party must demonstrate the existence of specific facts in the record which create a genuine issue for trial. Krenik v. County of Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995). A party opposing a properly supported motion for summary judgment may not rest upon mere allegations or denials, but must set forth specific facts showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256 (1986); Krenik, 47 F.3d at 957.
II. The Motor Carrier Act Exemption
The FLSA requires employers to compensate employees engaged in commerce for workweeks of longer than forty hours at a rate of not less than one and one-half times the employee's regular rate of compensation. See 29 U.S.C. § 207(a)(1). However, Congress has provided exemptions for certain employees including those employees "whom the Secretary of Transportation has power to establish qualifications and maximum hours of service. . . ." 29 U.S.C. § 213(b)(1). The Secretary of Transportation need not actually exercise his or her power for the exemption to apply, but need only possess the power to do so. See Levinson v. Spector Motor Serv., 330 U.S. 649, 678 (1947).
The Secretary of Transportation has the power to establish qualifications and the maximum hours of service for employees who have been:
(1) . . . employed by carriers whose transportation of passengers or property by motor vehicle is subject to his jurisdiction under section 204 of the Motor Carrier Act . . . and (2) engage[d] in activities of a character directly affecting the safety of operation of motor vehicles in the transportation on the public highways of passengers or property in interstate or foreign commerce within the meaning of the Motor Carrier Act.29 C.F.R. § 782.2(a) (citations omitted).
A. United States Department of Transportation ("U.S. DOT") Compliance
As a preliminary matter, Schwan asserts that the Court need look no further than its compliance with U.S. DOT regulations for over 50 years as to its sales managers in determining whether the Secretary of Transportation has the power to establish qualifications and maximum hours of service. Schwan asserts that its sales managers were required to: complete U.S. DOT required "Certifications of Compliance with Drivers License Requirements and Certificate of Violations" every year; pass an initial U.S. DOT required drug test and be subject to random and reasonable cause U.S. DOT required drug testing thereafter; pass a U.S. DOT required medical examination every two (2) years; pass a U.S. DOT required road test; pass a U.S. DOT written examination, and maintain (while driving) U.S. DOT required logs.
In addition, Schwan has produced a letter sent to it by the U.S. DOT, Federal Highway Administration ("FHWA"), in which counsel for the FHWA stated that it was the FHWA's opinion that Schwan's "intention from the origin of the shipments in question is for the goods to remain in interstate commerce until they reach their final destination." ( See Affidavit of Calvin Brink (hereinafter "Brink Aff"), ¶ 22, Ex. A ("FHWA Letter") at 2.) Thus, counsel for the FHWA determined that Schwan was "subject to the jurisdiction of the FHWA and must comply with the Federal Motor Carrier Safety Regulations." ( See id.)
Plaintiffs assert that although the Schwan drivers that transport food products from the manufacturer to the distribution centers or from the distribution centers to the depots may be involved in interstate commerce and subject to the MCA exemption, the sales managers whose routes are entirely intrastate are not subject to the MCA exemption. As such, Plaintiffs appear to assert that Schwan's compliance with U.S. DOT requirements with regard to its sales managers is voluntary and not required by law.
The Court acknowledges that some courts have accepted the actual regulation of a shipper by the U.S. DOT or FHWA as determinative of the issue of the Secretary of Transportation's power to regulate the shipper's employees for the purposes of the MCA exemption. See Garcia v. Pace Suburban Bus Service, a Div. of Regional Transp. Authority, 955 F. Supp. 75, 77-78 (N.D. Ill. 1996). However, in light of the argument presented by the Plaintiffs as to Schwan's allegedly voluntary compliance with the U.S. DOT's regulations, this Court believes that further analysis of Plaintiffs' claims is necessary. See Dole v. Circle "A " Const., Inc., 738 F. Supp. 1313 (D. Idaho 1990) (court looked beyond U.S. DOT audits to determine whether all employees were subject to the MCA exemption). Although the Court has determined that further analysis of the Plaintiffs' claims is necessary, the Court is mindful of the FHWA's determination that Schwan is entitled to the MCA exemption and gives the FHWA's determination the "great weight" that such a determination is due. See Boutell v. Walling, 327 U.S. 463, 470-71 (1946) (citing United States v. American Trucking Ass'ns, 310 U.S. 534, 549 (1940)).
B. Interstate Commerce
Plaintiffs assert that sales and route managers are not engaged in interstate commerce as the term is defined by the MCA because at the time Schwan products are moving across state lines, the products are not bound for a specific individual customer within a state, but are instead only headed to the in-state depot as general inventory. Thus, Plaintiffs contend that the product is outside the stream of interstate commerce once the product reaches the depots and that the eventual transport of the product in-state by the sales managers takes the sales managers's work outside of the MCA exemption to the FLSA.
Both parties acknowledge that the test for determining"whether transportation between two points in [a] State is interstate (or foreign) or intrastate in nature depends on the 'essential character' of the shipment . . . " Roberts v. Levine, 921 F.2d 804, 812 (8th Cir. 1990) (quoting The May Rep't Stores Co. Volume Shoe Corp., No. MC-C-30146, 1990 WL 287520 (I.C.C. June 7, 1990)). The crucial element of this test is the shipper's "fixed and persisting intent at the time of shipment." Id. However, the parties disagree as to how the intent element of that test is to be analyzed.
Plaintiffs base their assertion that the Sales managers are not operating in interstate commerce on an interpretative Bulletin of the Wage and Hour Division, United States Department of Labor ("DOL Bulletin"), that states:
The Commission has specifically found that there is no fixed and persisting intent where (i) at the time of shipment there is no specific order being filled for a specific quantity of a given product to be moved through to a specific destination beyond the terminal storage, and (ii) the terminal storage is a distribution point or local marketing facility from which specific amounts of the product are sold or allocated, and (iii) transportation in the furtherance of this distribution within the single State is specifically arranged only after sale or allocation from storage.
Ex Parte No. MC — 48, 71 M.C.C. 17 (1957).
The DOL Bulletin relied on by the Plaintiffs also references Baird v. Wagoner Transp. Co., 425 F.2d 407 (6th Cir. 1970). In Baird, the Sixth Circuit considered the factors set out in the DOL Bulletin and found that a petroleum company that shipped its product to an in-state distribution center based on forecasts and not actual orders was engaged only in intra-state commerce when it subsequently distributed its products in-state. See id. The Sixth Circuit held that each of the factors found in the DOL Bulletin was present in the shipper's operation, and as such, the drivers transporting the product from the in-state storage facility to the customers were not engaged in interstate commerce. See id.
Defendants urge the Court to reject the intent test outlined in the DOL Bulletin and instead to accept the intent test currently utilized by the Interstate Commerce Commission ("ICC"). The ICC employs a test that determines a shipper's intent by examining "all the facts and circumstances surrounding the transportation." Roberts, 921 F.2d at 812 (quoting Armstrong World Indus., Inc., 2 I.C.C.2d 63, 69 (1986)). In Roberts, the Eighth Circuit declined to adopt the three-part test outlined in the DOL Bulletin, and Baird. Relying on two recent circuit court cases that found the DOL Bulletin/Baird test to be "outmoded," the Eighth Circuit applied the ICC test to the facts of the case before it to resolve the matter. Roberts, 921 F.2d at 811 (citing California Trucking Ass'n v. I.C.C., 900 F.2d 208 (9th Cir. 1990) and Central Freight Lines v. I.C.C., 899 F.2d 413 (5th Cir. 1990)).
In Roberts, the Eighth Circuit was asked to consider whether the intra-state distribution of products that had previously been transported across state lines and stored in an in-state storage facility was interstate commerce. See id. at 813. In Roberts, the shipper controlled the production, shipment, and subsequent sale of the products. See id. at 814. The product was transported to in-state storage facilities based on past demand and estimated future need. See id. The product was stored only temporarily at the shipper's storage facility and then distributed in-state based on customer orders. See id. The Eighth Circuit considered all of these facts under the ICC test and determined that the shipper had the "fixed and persisting intent" to ship the product beyond the in-state storage facility. Id. Therefore, the Eighth Circuit held that the shipper was engaged in interstate commerce. See id.
Here, the Court finds that the test adopted by the ICC is appropriate for determining whether Schwan's sales managers engaged in interstate commerce. The Court bases this finding on the explicit language of Roberts which the Court accepts as binding precedent in this circuit. In applying the "all facts and circumstances" test to this case, the Court finds that the similarities between the shipper's operation and distribution network in Roberts are strikingly similar to Schwan's operation and distribution network. In both cases, the shipper controlled the production, shipment, and subsequent sale of the product, the shipments were made to in-state storage facilities based on forecasts and past demand, and the storage of the product at the storage facility was for a relatively limited period of time. Based on the facts of this case and the law of this circuit, the Court finds that Schwan had the fixed and persisting intent to ship its products beyond its in-state depots. Thus, the Court finds that Schwan's sales managers' intrastate transport of Schwan food products is one leg of an interstate journey.
C. Food Products Manufactured In Texas
Schwan manufactures certain food products in Texas. Plaintiffs have asserted that as to at least the distribution of these food products, the sales managers are engaged only in intrastate commerce. However, the record demonstrates that even the food products manufactured in Texas are transported to Schwan's distribution centers located in other states and then back to the in-state depots. Thus, even those food products manufactured and later sold to customers in Texas have entered the stream of interstate commerce.
D. Duties of the Sales Managers
In order for the MCA exemption to be applicable to an employee, the employee must also be engaged in activities that directly affect the safety of operation of motor vehicles on the public highways. See Levinson, 330 U.S. at 692. In determining whether the exemption applies to an employee, neither the name given to the employee's position nor that given to the work that the employee does is controlling. Instead the character of the activities involved in the performance of the employee's job controls. See Pyramid Motor Freight Corp. v. Ispass, 330 U.S. 695, 707-08 (1947).
If the "bona fide duties of the job performed by the employee are in fact such that he is . . . called upon in the ordinary course of his work to perform, either regularly or from time to time, safety-affecting activities . . . he comes within the exemption." 29 C.F.R. § 782.2(a)(3). The rule applies "regardless of the proportion of the employee's time or of his activities which is actually devoted to such safety-affecting work in the particular workweek." Id. The rule applies even to those work weeks in which the employee performs no work directly affecting the safety of operation. See id.
Plaintiffs acknowledge that the driving of the route delivery trucks by the sales managers is an activity directly affecting safety. However, Plaintiffs contend that the MCA exemption is not applicable to the sales managers because the sales managers did not drive the route delivery trucks on a regular basis. Schwan, on the other hand, asserts that the focus of the inquiry is on the Plaintiffs' duties and that one of the "Essential Duties and Responsibilities" specified in the sales managers' job description is operating the route delivery trucks. ( See Affidavit of Lynn Rasmussen, f 5, Ex. A at 1.)
The Court finds that Schwan's sales managers's duties include driving route delivery trucks and that this is an activity directly affecting safety as that phrase is used in the MCA. The sales manager position requires driving route delivery trucks in its job description, and it is undisputed that sales managers actually engage in that activity. While sales managers do not necessarily drive the delivery trucks every day or even every week, sales managers are required, at the very least, to drive the vehicles from "time to time." Thus, the Court finds that Schwan's sales managers are engaged in activities that directly affect the safety of operation of motor vehicles on the public highways.
Conclusion
As previously discussed, the Court finds that Schwan's sales managers are engaged in interstate commerce as interstate commerce is defined pursuant to the MCA. The Court also finds that Schwan's sales managers are engaged in activities that directly affect the safety of operation of motor vehicles on the public highways. Based on these findings, the Court finds that Schwan's sales managers are employees "whom the Secretary of Transportation has power to establish qualifications and maximum hours of service. . . ." 29 U.S.C. § 213(b)(1). Thus, Schwan's sales managers are exempted from the FLSA by the MCA exemption, and Defendants are entitled to summary judgment.
For the reasons stated, IT IS HEREBY ORDERED:
1. Defendant's Motion for Summary Judgment (Doc. No. 21) is GRANTED.
2. Plaintiff's complaint (Doc. No. 1) is DISMISSED WITH PREJUDICE.LET JUDGMENT BE ENTERED ACCORDINGLY.