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Prescott v. MorGreen Solar Solutions, LLC

United States District Court, E.D. North Carolina, Western Division

March 29, 2019

CHARLES PRESCOTT, on behalf of himself and all others similarly situated, Plaintiffs,
v.
MORGREEN SOLAR SOLUTIONS, LLC; DARRIN GREEN; VAUGHN INDUSTRIES, LLC, Defendants. VAUGHN INDUSTRIES, LLC, Counter Claimant,
v.
CHARLES PRESCOTT, on behalf of himself and all others similarly situated, Counter Defendant. VAUGHN INDUSTRIES, LLC, Cross-Claimant,
v.
MORGREEN SOLAR SOLUTIONS, LLC; DARRIN GREEN, Cross-Defendants. MORGREEN SOLAR SOLUTIONS, LLC; DARRIN GREEN, Counter Claimants,
v.
CHARLES PRESCOTT, on behalf of himself and all others similarly situated, Counter Defendant.

          ORDER

          LOUISE W. FLANAGAN UNITED STATES DISTRICT JUDGE.

         This matter is before the court on plaintiff's motion for entry of default judgment (DE 46) and cross-claimant Vaughn Industries, LLC's (“Vaughn”) motion for entry of default judgment (DE 74), argued at hearing March 27, 2019. Issues raised are ripe for ruling. For the following reasons, the court grants both motions.

         STATEMENT OF THE CASE

         As previously recounted by the court, plaintiffs filed complaint July 21, 2017, claiming defendants misclassified them as independent contractors, willfully failed to remit compensation for all hours worked, willfully failed to remit required overtime pay, and violated statutory record-keeping requirements. See Prescott v. MorGreen Solar Sols., LLC, 352 F.Supp.3d 529, 534 (E.D. N.C. 2018). Count one alleges violations of the Fair Labor Standards Act, 29 U.S.C. §§ 206, 207 (“FLSA”), and plaintiffs proceeded on that claim in the posture of a proposed FLSA collective action. See 29 U.S.C. § 216(b). Count two alleges violations of the North Carolina Wage and Hour Act, N.C. Gen. Stat. §§ 95-25.6, .7, & .13 (“NCWHA”), and plaintiffs proceeded on that claim in the posture of a putative class under Federal Rule of Civil Procedure 23.

         Cross-claimant Vaughn answered plaintiffs' complaint September 28, 2017, and initiated cross-claims against MorGreen defendants.[1] No. answer having been filed by defendant Darrin Green (“Green”) or defendant MorGreen Solar Solutions, LLC (“MorGreen”) (collectively, “MorGreen defendants”), on January 26, 2018, plaintiffs moved for entry of default against MorGreen defendants, which was granted on March 16, 2018, by the clerk of the court. (DE 27, DE 44). On March 15, 2018, cross-claimant Vaughn also filed motion for entry of default on its cross-claims against MorGreen defendants. (DE 39).

         On March 26, 2018, plaintiff filed instant motion for entry of default judgment. (DE 46). In support, plaintiffs have submitted plaintiffs' pro-rated damages and declaration of attorney Gilda A. Hernandez.

         During this time period, on March 14, 2018, MorGreen defendants' attorney filed notice of appearance, and, without seeking leave of the court, on April 12, 2018, MorGreen defendants filed answer to complaint.[2] Also during this period, on April 17, 2018, the court granted plaintiffs and cross-claimant Vaughn's joint motion for settlement approval, resolving all claims as to those parties.[3] The court “dismisse[d] all claims of Plaintiffs who submitted individually executed settlement agreements in this matter, as they relate to Defendant Vaughn only, based on or arising out of any acts, facts, transactions, occurrences, representations or omissions alleged in the Complaint in this matter on the merits and with prejudice and without costs to any of the parties as against any other settling party, except as provided in the parties' mediation agreement and individually-executed settlement agreements.” (Court-approved settlement agreement (DE 56) ¶ 12).

         Both plaintiffs and cross-claimant Vaughn filed motions to strike MorGreen defendants' answer on April 16, 2018 and April 20, 2018, respectively. (DE 54, DE 59). MorGreen defendants did not file response to the motions to strike, but on April 17, 2018, filed motion to set aside order on motion for entry of default, alleging “Defendants had consulted with several law firms, none of which were willing and/or able to take them on as clients” and that “Defendants filed an Answer with the Court on April 12, 2018, which was as early as they could possibly find counsel.” (DE 58 at 1).

         On August 27, 2018, the court issued order, holding resolution of ripe motions in abeyance pending further briefing, directing MorGreen defendants to submit additional information to the court regarding when MorGreen defendants contacted law firms, what was the response of the law firms including terms and deadlines, and any communication between the parties. (DE 66 at 3-4). In response, MorGreen defendants filed timely affidavit and memorandum, (DE 67, DE 68), in which defendant Green provided some, but not all, of the information requested by the court, stating in part that two of the law firms contacted informed MorGreen defendants to do nothing in response to the lawsuit “since we were a startup company with no assets and we were protected because of being a LLC.” (DE 67 at 1-2).[4]

         On November 29, 2018, the court granted cross-claimant Vaughn's motion for entry of default, granted plaintiffs' and cross-claimant Vaughn's motions to strike, and denied MorGreen defendants' motion to set aside order on motion for entry of default. See Prescott, 352 F.Supp.3d at 534 (citing Payne ex rel. Estate of Calzada v. Brake, 439 F.3d 198, 204-05 (4th Cir. 2006) (“When deciding whether to set aside an entry of default, a district court should consider whether the moving party has a meritorious defense, whether it acts with reasonable promptness, the personal responsibility of the defaulting party, the prejudice to the party, whether there is a history of dilatory action, and the availability of sanctions less drastic.”)). The court also noted that plaintiffs' motion for entry of default judgment was ripe and pending, but where it appeared that cross-claimant Vaughn would also file motion for entry of default judgment, the court would take up and address both of these motions together under separate order.

         Time elapsed with no motion for entry of default judgment filed by cross-claimant Vaughn. On January 14, 2019, the court entered order directing cross-claimant Vaughn to proceed to reduce this matter to judgment. On February 4, 2019, cross-claimant Vaughn filed the instant motion for entry of default judgment. (DE 74). In support, cross-claimant Vaughn filed 1) declarations of attorneys David Andrews and Patrick Lawler 2) copies of checks mailed to the settlement agreement administrator in the amount of $149, 501.50, which is the sum of the settlement agreement payment and the employers matching taxes, and 3) subcontract agreement between cross-claimant Vaughn and MorGreen defendants (the “subcontract”).

         On March 27, 2019, the court held hearing regarding the instant motions for entry of default judgment in which all parties provided the court with argument.

         STATEMENT OF FACTS

         The following facts are alleged in plaintiffs' complaint and cross-claimant Vaughn's answer and cross-claims and are accepted as true upon consideration of default judgment.

         A. Plaintiffs' Facts Alleged

         Cross-claimant Vaughn provides renewable energy services as a contractor throughout the State of North Carolina, as well as in several other states, specializing in the installation of solar fields or farms. (Compl. (DE 1) ¶ 37). Defendant Green founded and holds a majority ownership stake in defendant MorGreen. Defendant MorGreen, a subcontractor who performed construction services on cross-claimant Vaughn's behalf, contracted exclusively with cross-claimant Vaughn throughout defendant MorGreen's existence. Plaintiffs worked for defendants, manually installing solar panels in Wilson, North Carolina from approximately November 2016, until January 14, 2017 (“Wilson Project”). (Id. ¶ 24).

         Plaintiffs allege defendants “had a systemic company-wide policy, pattern, or practice of misclassifying their employees as independent contractors, willfully failing to compensate employees for all hours worked, willfully failing to pay employees the statutory minimum wage rate for all hours worked, willfully failing to compensate employees at the appropriate overtime rate for overtime hours worked, and violating statutory record-keeping provisions.” (Id. ¶ 1).

         More specifically, plaintiffs worked as hourly-paid installers/laborers on behalf of all defendants, assisting in the manual installation of solar panels. In addition to receiving an hourly wage, they also received a set per diem rate for each day of work. Plaintiffs were not paid a salary for their work.

         From the beginning of their work until approximately December 3, 2016, plaintiffs typically worked five days per week, from Monday through Friday, from approximately 6:30 a.m. until 5:00 p.m. They also took a one-hour unpaid lunch break each day. Accordingly, during this period, plaintiffs typically worked approximately 47.5 hours per week. From December 4, 2016, until the end of their employment, plaintiffs typically worked seven days per week, from Monday through Saturday, from approximately 6:30 a.m. until 5:00 p.m., and on Sunday from 6:30 a.m. until 12:00 p.m. They also took a one-hour unpaid lunch break each day. Accordingly, during this period, plaintiffs typically worked approximately 62.5 hours per week. Although the aforementioned typical schedule is a conservative estimate, plaintiffs often worked more hours than listed during this period, including until 8:00 p.m. or 9:00 p.m. from Monday through Saturday, totaling approximately 86.5 hours in certain weeks.

         The schedules that defendants required plaintiffs to work virtually eliminated their ability to pursue sources of income outside of their jobs with defendants. Defendants, in their sole discretion, set plaintiffs' hourly rates of pay and per diem rates. Plaintiffs had no control over their profit or loss capabilities, despite the fact that defendants classified them as independent contractors. Plaintiffs were not permitted to hire their own employees, despite the fact that defendants classified them as independent contractors. Likewise, if plaintiffs did not show up to work, they could not send a replacement hired by them to perform the work.

         Defendants instructed, supervised, and corrected all aspects of plaintiffs' work, despite the fact that defendants classified them as independent contractors. Cross-claimant Vaughn supplied plaintiffs with building materials and tools needed to perform their work. For example, all nuts, bolts, washers, rivets, wiring, racking, and modules were provided by cross-claimant Vaughn.

         Throughout the course of their employment, and particularly toward the end of their employment, defendants regularly failed to pay plaintiffs both their agreed-upon hourly wages and per diem rates. All defendants always had access to plaintiffs' time records. Plaintiffs regularly complained to defendants about their unlawful pay practices, and defendants' practices have been the subject of at least one investigation by the North Carolina Department of Labor wherein the agency determined that defendants had violated the NCWHA and provided plaintiff with a right to sue letter.

         MorGreen defendants, a subcontractor for cross-claimant Vaughn, contracted exclusively with cross-claimant Vaughn throughout MorGreen defendants' existence. Defendant Green founded and holds a majority ownership stake in Defendant MorGreen. Defendant Green was actively involved in the day-to-day activities of Defendant MorGreen, and he dictates how the company operates, markets itself, acquires business, and compensates its employees. Defendant Green had and exercised the power to directly dictate whether Defendant MorGreen complied with or violated the FLSA and NCWHA.

         The services performed by plaintiffs, including racking, wiring, and panel installation, was integral to cross-claimant Vaughn and MorGreen defendant's businesses and operations, which center around renewable energy construction and installation.[5]

         B. Cross-Claimant Vaughn's Facts Alleged

         On or about November 1, 2016, cross-claimant Vaughn and MorGreen defendants entered into the subcontract pursuant to which Morgreen defendants agreed to provide labor, materials, equipment and services necessary to perform work regarding a solar panel installation project in Wilson, North Carolina. (See DE 17; see also subcontract (DE 75-3)). Cross-claimant Vaughn alleges the relevant provisions of the subcontract as follows:

3. In paragraph 11 of the Subcontract, the parties agreed that Cross-Claim Defendants “shall be solely responsible for and have control over construction means, methods, techniques, sequences and procedures and for coordinating and supervising all portions of the Work under the Subcontract and shall be responsible for the acts and omissions of Subcontractor's employees, subcontractors and their agents and employees and for all applicable employer taxes, benefits and insurance.”
4. The parties agreed in paragraph 11 that the Subcontract shall not be construed to “imply a joint venture, partnership or principal-agent relationship between the parties; and neither party by virtue of the Subcontract shall have any right, power, or authority to act or create any ...

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