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Mode v. S-L Distribution Company, LLC

United States District Court, W.D. North Carolina, Charlotte Division

March 14, 2019

JARED MODE, on behalf of himself and all others similarly situated, Plaintiffs,
v.
S-L DISTRIBUTION COMPANY, LLC, S-L DISTRIBUTION COMPANY, INC., and S-L ROUTES, LLC, Defendants.

          ORDER

          ROBERT J. CONRAD, JR., UNITED STATES DISTRICT JUDGE

         THIS MATTER comes before the Court on Plaintiffs' Motion for Conditional Certification, (Doc. No. 109), and the parties' associated briefs and exhibits, (Doc. Nos. 109-10, 136-37, 140-41).

         I. BACKGROUND

         This is a class/collective action lawsuit centering on Plaintiff Jared Mode's (“Plaintiff”) allegation that Defendants S-L Distribution Company, LLC, S-L Distribution Company, Inc., and S-L Rouse, LLC (collectively, “Defendants” or “S-L”) intentionally misclassified him and a putative class of Defendants' distributors as independent contractors in violation of federal wage and hour laws.

         S-L collectively manufactures and distributes snack foods to retail stores in North Carolina and other states. (Doc. No. 1 ¶ 10). Plaintiff Jared Mode is a member of J&M Mode Distribution, LLC (“J&M”), a North Carolina limited liability company, and worked as an “Independent Business Operator” (“IBOs”). (Id. ¶ 12; Doc. No. 26 ¶ 2). S-L entered into similar Distributor Agreements (“Agreements”) with various distribution companies of which the putative class are principals, officers, and/or employees. (See, e.g., Doc. No. 23-1: Distributor Agreement between S-L and J&M). These Agreements expressly state that the Distribution Companies are independent contractors and further provide that in the event a court finds the parties did not have an independent contractor relationship, either party would be entitled to declare the Agreements null and void. (Id. at 2; id. at Art. 2A).

         Pursuant to these Agreements, S-L granted the Distribution Companies rights for its snack food products. Under the Agreements, the Distribution Companies would purchase the products at wholesale from S-L and then sell the products to various stores at a higher price. The Distribution Companies were responsible for ordering, selling, distributing, and merchandising S-L's products to customers in their respective geographic territories. (Id. at Arts. 3-5, 9). The Distribution Companies also agreed to be financially responsible for certain aspects of the distributorship, including the costs associated with stale products and product delivery. (Id. at Arts. 3-4, 9). The Agreements provide that the Distribution Companies control the schedule, hours, and operations of their businesses, claim tax deductions for the expenses associated with running their businesses, and are allowed to distribute other products in addition to S-L's snack foods. (Id. at Arts. 2, 4-5). The Distribution Companies also agreed to comply with all federal, state, and local laws including wage, overtime and benefit provisions for their employees. (Id. at Art. 2E). The Agreements also contain indemnification provisions. (Id. at Art. 19).

         On March 22, 2018, Plaintiff Jared Mode filed this action alleging that he and a putative class of Defendants' distributors are actually employees and thus are entitled to various protections under the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq., and North Carolina's Wage and Hour Act (“NCHWA”), N.C. Gen. Stat. §§ 95-25 et seq. (Doc. No. 1). Plaintiff alleges that Defendants violated these wage and hour laws by failing to pay minimum wage and overtime pay under the FLSA and by making illegal wage deductions under the NCWHA. (Doc. No. 1 ¶¶ 27-39). In response, S-L (i.e., “Third-Party Plaintiff”) filed an Answer and Counterclaim of unjust enrichment against Plaintiffs in the event that the Court determines that (1) Plaintiffs and/or their Distribution Companies were misclassified as independent contractors and (2) the Agreements are voided. (Doc. No. 25 ¶¶ 68-73). Additionally, S-L filed Third-Party Complaints stating claims for indemnification and unjust enrichment against the Distribution Companies (i.e, “Third-Party Defendants”). (Doc. Nos. 26-47, 52-56).

         On March 6, 2019, the Court dismissed the NCWHA claim and denied Plaintiffs and Third-Party Defendants' respective motions to dismiss S-L's counterclaim and Third-Party Complaint. (Doc. No. 141). Therefore, Plaintiffs now only have FLSA claims pending before this Court. On August 14, 2018, Plaintiffs filed a Motion for Conditional Certification under the FLSA, (Doc. No. 109). The Court has reviewed the parties' briefs and exhibits, (Doc. Nos. 109-10, 136-37, 140- 41), and the matter is ripe for adjudication.

         II. FLSA CONDITIONAL CERTIFICATION STANDARD

         The FLSA, 29 U.S.C. § 201 et seq., “embodies a federal legislative scheme to protect covered employees from prohibited employer conduct.” Houston v. URS Corp., 591 F.Supp.2d 827, 831 (E.D. Va. 2008). The FLSA allows a plaintiff alleging a violation of the statute to bring suit on his own behalf or on behalf of other employees who are similarly situated. 29 U.S.C. § 216(b). Section 216(b) of the FLSA expressly provides for the procedure for collective actions as follows:

An action to recover the liability prescribed [under the FLSA] may be maintained against any employer . . . in any Federal or State court of competent jurisdiction by any one or more employees for and in behalf of himself or themselves and other employees similarly situated. No. employee shall be a party plaintiff to any such action unless he gives his consent in writing to become such a party and such consent is filed in the court in which such action is brought.

Id. Thus, there are two general requirements for the certification of a FLSA collective action: (1) the members of the proposed class must be “similarly situated, ” and (2) the class members must “opt-in” by filing their consent to suit. Id.; see also Romero v. Mountaire Farms, Inc., 796 F.Supp.2d 700, 705 (E.D. N.C. 2011).

         The term “similarly situated” is not defined in the FLSA and the Fourth Circuit has not provided guidance on how “similarly situated” requirement of § 216(b) should be applied. Holland v. Fulenwider Enterprises, Inc., No. 1:17-CV-48, 2018 WL 700801, at *2 (W.D. N.C. Feb. 2, 2018). However, federal district courts in the Fourth Circuit typically follow a two-step approach when deciding whether the named plaintiffs are similarly situated to potential plaintiffs for the purposes of certifying the collective action. See, e.g., Butler v. DirectSAT USA, LLC, 876 F.Supp.2d 560, 566 (D. Md. 2012); Romero, 796 F.Supp.2d at 705; Choimbol v. Fairfield Resorts, Inc., 475 F.Supp.2d 557, 562-63 (E.D. Va. 2006).

         At the first stage, the court makes a preliminary determination whether to conditionally certify the class based upon the limited record before the court. Romero, 796 F.Supp.2d at 705. “Consistent with the underlying purpose of the FLSA's collective action procedure, this initial inquiry proceeds under a ‘fairly lenient standard' and requires only ‘minimal evidence.'” Id. (quoting Choimbol, 475 F.Supp.2d at 562); see also Romero, 796 F.Supp.2d at 705 (“The standard for conditional certification is fairly lenient and requires nothing more than substantial allegations that the putative class members were together the victims of a single decision, policy, or plan.”). The primary focus in this inquiry is whether the potential plaintiffs are “similarly situated with respect to the legal and, to a lesser extent, the factual issues to be determined.” De Luna-Guerrero v. The North Carolina Grower's Assoc., 338 F.Supp.2d 649, 654 (E.D. N.C. 2004) (quoting Ellen C. Kearns, The Fair Labor Standards Act, § 18.IV.D.3, at 1167 (1999)). Several courts have reasoned that “conditional certification is not really a certification. It is actually the district court's exercise of its discretionary power, upheld in Hoffmann-La Roche . . . to facilitate the sending of notice to potential class members, and it is neither ...


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