United States District Court, D. Kansas
MEMORANDUM AND ORDER
DANIEL D. CRABTREE, District Judge.
Plaintiffs bring this action alleging that defendants Freightquote.com, Inc. and Freightquote 401(k) Plan ("Freightquote") violated the Fair Labor Standards Act ("FLSA"), the Kansas Wage Payment Act ("KWPA"), and the Employee Retirement Income Security Act of 1974 ("ERISA"). Specifically, plaintiffs allege that Freightquote improperly classified employees in the Account Representative/Freight Broker, Customer Activation Specialist, and Truckload Coverage Specialist job families as exempt from the FLSA's and KWPA's overtime requirements. They seek to recover unpaid regular pay, unpaid overtime, and related benefits and penalties for themselves and other similarly situated employees.
This matter comes before the Court on the following motions: (1) Freightquote's Motion for Protective Order (Doc. 172); (2) Freightquote's Motion for Summary Judgment (Doc. 141); (3) plaintiffs' Partial Motion for Summary Judgment (Doc. 145); and (4) plaintiffs' Motion for Class Certification (Doc. 140). After considering the parties' arguments, the Court denies Freightquote's Motion for Protective Order, denies in part and grants in part Freightquote's Motion for Summary Judgment, denies plaintiffs' Motion for Summary Judgment, and denies plaintiffs' Motion for Class Certification.
I. Motion for Protective Order
On March 18, 2015, the Court issued a Memorandum and Order conditionally certifying plaintiffs' FLSA claims as a collective action (Doc. 170). In that Order, the Court instructed the parties to confer and submit a joint proposed Notice to send to putative class members to notify them of this collective action and their right to opt into it. The parties filed their joint Notice on April 1, 2015 (Doc. 171).
On April 29, 2015, Freightquote filed a Motion for Protective Order to Govern Procedure for Class Notice Administration. Plaintiffs have hired Class Action Administration ("CAA"), a third-party class action administrator, to distribute the Notice, respond to questions from putative class members, and accept class members' Consents to Join this collective action. Freightquote's motion seeks an order requiring CAA to (1) include a statement about Freightquote's defenses in its automated response to putative class members who call with questions about the Notice and (2) provide Freightquote's lawyers with copies of reports CAA will provide to plaintiffs' lawyers during the notice period. The Court addresses each request in turn.
First, Freightquote requests an order requiring CAA to include a statement about Freightquote's defenses in CAA's automated responses to putative class members who call with questions about the Notice. Plaintiffs have tasked CAA with sending the parties' agreed-upon Notice to all putative FLSA class members who can be identified. The Notice is eight pages long and describes, among other things, plaintiffs' claims and Freightquote's defenses. See Doc. 171-1 at 4. In particular, under the heading "How does Freightquote.com, Inc. Answer, " the Notice states: "Freightquote.com, Inc. says that it properly paid its employees because their salaries and job duties made them exempt from the overtime requirements of the Fair Labor Standards Act and Freightquote.com, Inc. does not owe any overtime." Id.
The Notice also provides a contact number for putative class members to call if they have questions. According to the phone script provided by CAA, callers to this number first will hear an automated response that says: "You have reached the Koehler v. Freightquote.com, Inc. Administrator. Please select from one of the following options." Doc. 172-1 at 4. One of the options will direct callers to "press 1" "[t]o learn why you received a notice." Id.
Freightquote takes issue with the script used to respond to callers who select this option. As proposed, it would read:
Why You Received a Notice Phrase (0491)
A class action lawsuit was filed against Freightquote.com, Inc. alleging that they violated the Fair Labor Standards Act by not paying overtime and treating Account Representatives, Customer Activation Specialists, and Truckload coverage Specialists as exempt from the overtime requirements of the Fair Labor Standards Act.
You were mailed a notice because Freightquote.com Inc.'s records show that you currently work, or previously worked for, Freightquote.com, Inc. as an Account Representative, Customer Activation Specialist, Truckload Coverage Specialist or held a similar job title with similar job duties and compensation.
To repeat this message, press 1
To return to the main menu, press 2
To speak with an Associate, press 3
Freightquote argues that this message is misleading because it omits any statement about Freightquote's defenses. To remedy this, the company asks the Court to require CAA to include the following: "Freightquote.com's position is that these employees' salaries and job duties cause them to be exempt from the overtime requirements of the Fair Labor Standards Act and it does not owe any overtime." Doc. 172 at 6. Freightquote argues that this statement "would add approximately 8-10 seconds to the automated message, " increasing its length minimally. Doc. 174 at 3.
The Court denies Freightquote's request to add language to the automated phone message about the company's defenses. "Under the FLSA, the Court has the power and duty to ensure that the notice is fair and accurate, but it should not alter plaintiff's proposed notice unless such alteration is necessary." Wass v. NPC Int'l, Inc., No. 09-2254-JWL, 2011 WL 1118774, at *8 (D. Kan. Mar. 28, 2011) (quotation omitted). Every identifiable putative class member will receive the Notice form on which the parties have agreed. The Notice clearly states Freightquote's argument that its employees are exempt from the FLSA's overtime requirements. Because the Notice identifies Freightquote's primary defense, putative class members who call the CAA number will not be misled-they already will have seen Freightquote's position. Freightquote has failed to show that the Court must alter plaintiffs' proposed phone script to ensure that the Notice is fair and accurate. The Court therefore rejects Freightquote's first argument.
Second, Freightquote seeks an order requiring CAA to provide Freightquote's lawyers with copies of reports CAA will provide to plaintiffs' lawyers during the notice administration period. According to Freightquote, "CAA plans to keep records related to questions posed by callers and answers provided thereto, as well as records related to how many consents to join have been received, how [many] purported responses were returned with inadequate information, how many Notices were returned as undeliverable, etc." Doc. 174 at 4. CAA will provide these records to plaintiffs at various times during the notice period.
Freightquote argues that it is entitled to receive these records "to insure the integrity of the Notice/Opt-In process." Id. at 5. For instance, according to the company, "if callers are repeatedly asking questions about a particular Notice provision, then that may either highlight a problem with the Notice that should be corrected or identify an issue that may be explored during discovery of the opt-in members." Id. To support its argument, Freightquote cites generally to several cases which hold that third-party class action administrators must serve neutral roles.
In response, plaintiffs assert a host of objections, including that the CAA reports are protected by the work product privilege and the attorney-client privilege. But the Court need not address these issues to decide Freightquote's objection. Freightquote has provided no specific authority supporting its argument that it should receive the CAA reports. In the absence of such authority, the Court is not persuaded "to depart from the usual procedure of allowing plaintiffs and their counsel to manage the process of mailing notice to the putative class members." Wass, 2011 WL 1118774, at *13. Instead, the Court will require plaintiff's counsel to bring any problems with the Notice to defendant's attention, and it will look harshly on any effort to hide such problems, if any do emerge, from Freightquote's counsel. The Court rejects Freightquote's second request and therefore denies Freightquote's Motion for Protective Order entirely.
II. Motions for Summary Judgment
Freightquote seeks summary judgment on several grounds. On plaintiffs' FLSA claims, it argues that (1) plaintiffs are exempt from the FLSA's overtime requirements under the Act's administrative exemption and (2) plaintiffs have failed to provide sufficient evidence of their damages. Freightquote also argues that it is entitled to summary judgment on plaintiffs' claims that it "willfully" violated the FLSA and on plaintiffs' KWPA and ERISA claims because they are entirely derivative of the FLSA claims. Plaintiffs' cross-motion seeks summary judgment on just one issue-that Freightquote employees in three specific job families do not qualify as exempt from the FLSA's overtime requirements under the Act's administrative exemption. The Court addresses each argument in turn below.
A. Evidentiary Objections
Before turning to the uncontroverted facts pertinent to the motions for summary judgment, the Court addresses several evidentiary objections made by the parties. Freightquote takes issue with eight declarations by former Freightquote employees (including Named Plaintiffs Nancy Koehler and Regina Brisbane) that plaintiffs submitted in their brief opposing Freightquote's motion for summary judgment. See Docs. 157-3, 4, 5, 6, 7, 10, 11, and 12. Freightquote argues that the Court should ignore portions of those employees' declarations that contradict earlier deposition testimony as attempts to create sham fact issues.
A district court can disregard evidence on summary judgment if it "constitutes an attempt to create a sham fact issue." Law Co. v. Mohawk Constr. & Supply Co., 577 F.3d 1164, 1169 (10th Cir. 2009) (quotation omitted). To determine whether an affidavit (or declaration) tries to create sham fact issues, the Tenth Circuit has instructed courts to consider whether: "(1) the affiant was cross-examined during his earlier testimony; (2) the affiant had access to the pertinent evidence at the time of his earlier testimony or whether the affidavit was based on newly discovered evidence; and (3) the earlier testimony reflects confusion which the affidavit attempts to explain." Id. (citation omitted). But because Freightquote fails to address any of the Tenth Circuit's factors or identify any portions of the eight declarations that contradict earlier deposition testimony, the Court rejects Freightquote's argument.
For their part in this dispute, plaintiffs argue that the Court should disregard four exhibits submitted by Freightquote in support of its motion for summary judgment. First, plaintiffs object to Freightquote's Exhibit E, titled "Defendants' Responses to Plaintiff's Fifth Revised Topics for Examination." See Doc. 142-6. Plaintiffs argue that the Court cannot consider Exhibit E, a narrative response to plaintiffs' Rule 30(b)(6) deposition topics, under this Court's Local Rules. See D. Kan. Rule 56.1(d) ("All facts on which a motion [for summary judgment] or opposition is based must be presented by affidavit, declaration under penalty of perjury, and/or relevant portions of pleadings, depositions, answers to interrogatories, and responses to requests for admissions."). The Court rejects this argument, however, because Freightquote adopted these responses by affidavit and D. Kan. Rule 56.1(d) explicitly provides that a party can present facts in support of a motion for summary judgment by affidavit. See Doc. 142-3 at ¶¶ 3-4; see also 10A Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 2722 (3d ed.) ("Exhibits that have been properly made a part of an affidavit also may be considered."). Plaintiffs also argue broadly that Exhibit E "constitutes hearsay without an exception." Doc. 157 at 103. But plaintiffs make no attempt to explain how this exhibit is hearsay and, in any case, the Court disagrees. The Court therefore considers Freightquote's Exhibit E on summary judgment.
Second, plaintiffs argue that the Court should ignore three exhibits-Exhibits J, L, and M. These are questionnaires that various Freightquote employees completed after plaintiffs filed this lawsuit. Plaintiffs assert that the questionnaires also violate D. Kan. Rule 56.1 because, apparently, they are not affidavits or declarations. The Court agrees. The questionnaires are not sworn, so they are not affidavits. And 28 U.S.C. § 1746 governs declarations for purposes of summary judgment. To be an admissible declaration under § 1746, the declarant must "subscribe" that the statement is true under penalty of perjury. 28 U.S.C. § 1746. To be properly subscribed to, a declaration must include language substantially similar to the following statement: "I declare (or certify, verify, or state) under penalty of perjury under the laws of the United States of America that the foregoing is true and correct, " followed by a date and a signature. Id. But the questionnaires that Freightquote attaches say only, "These statements are truthful and, to the best of my knowledge, they are accurate." See, e.g., Doc. 142-12 at 3. Thus, they do not comply with § 1746 and are not admissible as declarations.
Freightquote also argues that they qualify as "documents" or "other materials" under Fed.R.Civ.P. 56(c)(1)(A), and that they are properly authenticated in an affidavit by Julianne P. Story, one of Freightquote's attorneys in this case. But to be properly authenticated, "the affiant must be a person through whom the exhibits could be admitted into evidence." 10A Wright, Federal Practice and Procedure § 2722. Ms. Story cannot authenticate these questionnaires because they contain information of which she has no personal knowledge. See Fed.R.Civ.P. 56(c)(4) ("An affidavit or declaration used to support or oppose a motion must be made on personal knowledge...."). As a result, the Court concludes that Freightquote's Exhibits J, L, and M are inadmissible.
B. Uncontroverted Facts
The following facts are uncontroverted or, where controverted, are stated in the light most favorable to the party opposing summary judgment. Scott v. Harris, 550 U.S. 372, 378 (2007).
Freightquote is a logistics advisor and shipping broker headquartered in Kansas City, Missouri. Broadly speaking, Freightquote advises its customers on available shipping solutions and then arranges shipments with carriers to meet customer needs. This process involves at least two steps. First, Freightquote obtains the customer's agreement to ship a product using Freightquote's services. Second, Freightquote finds carriers who will agree to ship the products according to the needs of its customer. Generally, Freightquote profits when its customers pay Freightquote more than Freightquote pays its carriers. The difference between what the customer pays and what Freightquote pays the carrier is called the "gross margin."
In delivering its services, Freightquote employs individuals in a variety of job positions. They include the three positions at issue in this lawsuit-Account Representatives/Freight Brokers, Customer Activation Specialists, and Truckload Coverage Specialists. The Account Representative/Freight Broker job family encompasses several job titles. The different titles generally signify seniority and the amount of business an employee handles, but all such jobs share the same essential job duties. This is also true of the Customer Activation and Truckload Coverage job families.
Currently, Freightquote and its subsidiaries employ individuals in the relevant job categories primarily in two states, Missouri and Minnesota. Before June of 2013, Freightquote's headquarters were located in Lenexa, Kansas. During that time, Freightquote had employees in Kansas, Pennsylvania, and elsewhere. Employees in the Account Representative/Freight Broker family of jobs now work from Freightquote's locations in Missouri and Minnesota, although a few work remotely from different locations. All employees in the Truckload Coverage family of jobs work from Freightquote's location in Kansas City, Missouri. Freightquote has eliminated the Customer Activation job category.
The Job Duties of Account Representative/Freight Broker Employees
Named Plaintiffs John Smith and Scott Matney seek to represent employees in the Account Representative/Freight Broker job family. The following job titles are within the Account Representative/Freight Broker family of jobs: Account Representative, Account Manager, Sales Executive, Senior Account Manager, Account Executive, Senior Account Executive, Senior Account Executive I, Senior Account Executive II, Senior Account Executive III, Senior Account Executive IV, Senior Account Executive V, Freight Broker, Freight Broker-Account Manager, Freight Broker-Senior Account Manager, Freight Broker-Account Executive, Freight Broker-Senior Account Executive, and Freight Broker-Trainee. The job titles within the Account Representative/Freight Broker family of jobs are part of Freightquote's Sales Department. The Sales Department focuses on selling Freightquote's shipping services to customers. The Account Representative/Freight Broker group is by far the largest of the three job families at issue in this case, and all such employees share the same essential job duties.
The parties broadly agree that Account Representative/Freight Brokers interact with Freightquote's customers and help them ship their goods. It is undisputed that Account Representative/Freight Broker employees spend some of their time calling potential or current customers to convince them to use Freightquote to ship goods. Generally, these employees make 30-100 outbound calls each day for prospecting purposes, although the number fluctuates depending on the seniority of a particular employee and the attendant book of business. This activity accounts for 10-25% of Account Representative/Freight Broker employees' time. Freightquote uses a "daily scorecard" that tracks employees' call volume, gross margin, and talk time, among other things, and allows employees to see how they are performing each day.
When speaking with a customer, Account Representatives/Freight Brokers generally follow a similar process. They first determine if the particular customer has a Freightquote account. If the customer does not, then the Account Representative/Freight Broker normally establishes one. Once an account is active, the employee asks questions to arrive at a price quote for how much Freightquote will charge the customer to ship its goods. These questions usually include:
Questions Seeking Information About Logistics:
Zip code, city, and state of pickup and delivery locations;
Type of pick-up and delivery locations ( e.g., residence, business, tradeshow, convention, construction site);
Necessity of appointments for pickup or delivery;
Whether pick up or delivery locations have limited access ( e.g., government facility);
Interest/ability of customer or receiver to drop off or pick up freight at a terminal;
Whether pick up or delivery requires inside access;
Whether the shipment must be set up as a blind shipment; and
Payment arrangements ( e.g., Collect on Delivery).
Questions Seeking Information About Equipment Needs:
Availability of a dock or forklift at the pickup or delivery location; and
Necessity of equipment for pick up or delivery ( e.g., liftgate).
Questions Seeking Information About Handling Requirements:
Number of handling units;
Weight and dimension per handling unit;
Item(s) to be shipped;
Motor Freight Classification;
Packaging of the freight; and
Whether the shipment needs to be sorted or segregated by marks, brands, sizes, flavors, or other distinguishing marks.
Questions Seeking Information About Insurance or Special Permit Requirements:
Whether the goods are new or used;
Whether the material is hazardous;
The value of the shipment; and
Whether the carrier can provide adequate carrier liability.
Once an Account Representative/Freight Broker obtains this information, he or she runs a price quote. Sometimes, the Freightquote computer system suggests a price quote. Other times, however, Account Representative/Freight Broker employees have to call prospective carriers and negotiate pricing. If the Freightquote computer system suggests rates for a particular shipment, then the employee informs the customer about carrier options and pricing. Freightquote says that Account Representatives/Freight Brokers have discretion to increase or decrease the price within broad parameters (usually a range of about 40%) or to request approval beyond these parameters. The company also asserts that the pricing decision requires Account Representatives/Freight Brokers to incorporate a significant amount of knowledge about the trucking industry, the particular customer, and possible carriers, all of which they do without significant supervision. Freightquote states that Account Representatives/Freight Brokers can set up their workdays as they see fit.
Plaintiffs dispute this description. They cite affidavit testimony from several former Account Representative/Freight Broker employees who say that they negotiated with customers, but only within limited parameters. Plaintiffs assert that Account Representatives/Freight Brokers typically accept the quote indicated by the Freightquote computer system and cannot deviate from it without supervisor approval. Thus, plaintiffs argue that Account Representatives'/Freight Brokers' primary task is to take quotes provided by the computer system and dictate those terms to the customer. They assert that these employees do not have significant discretion in performing their duties because, among other things, Freightquote requires them to spend a prescribed amount of time on the phone.
Aside from calling customers and quoting prices, Account Representative/Freight Broker employees perform other duties. They sometimes assist customers with tracking shipments, the parties agree. Account Representatives/Freight Brokers also play a role when shipments are damaged in transit. Freightquote asserts that these employees are "advocates" for customers with the company's internal claims department and with carriers. Plaintiffs dispute this characterization, arguing that when freight is damaged, these employees simply refer the customer to the claims department and play no role in determining liability. Finally, Freightquote states that employees generally "manage and grow customer and carrier relationships." Doc. 142 at 6. Plaintiffs respond that Account Representatives/Freight Brokers communicate with customers only to make sales, not to grow Freightquote's business generally.
Freightquote classifies employees in the Account Representative/Freight Broker job family, including Named Plaintiffs John Smith and Scott Matney, as exempt from the FLSA's overtime and minimum wage requirements. These employees earn wages in excess of $455 per week, plus commissions where applicable, but do not receive overtime pay for working more than 40 hours. Generally, Freightquote's commissioned employees receive commissions based on a percentage of Freightquote's gross margin. Freightquote deducts from Account Representative/Freight Broker employees' pay for full day absences if and when such employees are absent and have exhausted their Paid Time ...