5th Cir. Weighs What Federal Wage Suits Need to Avoid Dismissal

Aug. 31, 2020, 10:06 AM

The fundamental components that workers must include in federal wage-and-hour lawsuits will be reviewed by a federal appeals court in New Orleans today during oral argument in a case that could make it harder for claims to survive early dismissal.

Three former truck drivers are challenging a Texas federal judge’s ruling that threw out their Fair Labor Standards Act claim against Black Magic Enterprises, a now-defunct oilfield services company. The judge found that the workers’ lawsuit didn’t show that they were covered by the law or contain other essential facts about their allegations that they were underpaid and sometimes not paid at all.

The case gives the U.S. Court of Appeals for the Fifth Circuit the chance weigh in on what worker lawsuits need to survive motions to dismiss, which are typically filed in the early stages of litigation. At that point, courts generally consider whether plaintiffs have met minimum pleading standards without taking account evidence, credibility determinations, or other factors about the ultimate truth of their allegations.

Like other circuits, the Fifth Circuit makes it relatively easy for workers to clear that initial hurdle for federal wage-and-hour claims, said Michelle Anderson, an attorney with management-side firm Fisher Phillips who’s not involved in the Black Magic case.

“If the Fifth Circuit were to agree with the district court, then that would potentially raise the pleading standard for an FLSA case,” Anderson said.

Employers have increasingly used motions to dismiss as a tactic to delay litigation, said Nina Martinez, an attorney who represents workers at Outten & Golden.

Workers’ attorneys are usually able to overcome such motions, even in the Second, Third, and Ninth circuits, which raised their pleading standards after applying a pair of U.S. Supreme Court rulings from 2007 and 2009 to the FLSA context, Martinez said. When they lose, judges often give them the chance to amend their complaint to fix any deficiencies, she said.

But the district judge who dismissed the Black Magic drivers’ lawsuit rejected their request to correct their complaint.

Fifth Circuit Judges Pricilla Owen and Catharina Haynes, who joined the circuit during the George W. Bush administration, and James Dennis, a Clinton administration appointee, will hear the case. The Fifth Circuit sets binding precedent for federal courts in Texas, Louisiana, and Mississippi.

Lawsuit Bounced by Texas Judge

The FLSA pleading issue arises from a lawsuit filed by three Mexican citizens against Black Magic, which ran a trucking business hauling materials and equipment to oil rigs in Texas under the name JMPAL Trucking. Although the company went bankrupt in 2017, the workers have continued to pursue their claims against its owners.

Ruben Molina-Aranda, Jose Eduardo Martinez-Vela, and Juan Gerardo Lopez-Quesada alleged that Black Magic ran an H-2B visa program scam, recruiting them for laborer positions and then employing them as truck drivers, which allowed the company to pay them under market value. They brought a civil Racketeering Influenced and Corrupt Organizations Act claim against the company for alleged visa, wire, and mail fraud.

The former truck drivers also accused Black Magic of not paying minimum wage, due to unreasonable deductions for housing and other fees, or overtime wages when they worked more than 40 hours in a week.

U.S. District Judge Robert Junell ruled that the drivers failed to properly plead their fraud and wage-and-hour claims.

On the FLSA claims, the drivers didn’t present facts showing they hauled goods and materials across state borders, thus failing to support their assertion that they were involved in interstate commerce, the judge said. Without that connection to interstate commerce, the workers aren’t covered by the FLSA.

In addition, Junell ruled that the drivers didn’t provide enough detail to establish how much they’re owed.

“Simply stating that Plaintiffs regularly worked between 50 and 80 hours and that Defendants unreasonably made deductions from pay that caused Plaintiffs to receive less than minimum wage is not sufficient to establish how much compensation and overtime pay they are due,” the judge wrote.

Debating FLSA Pleading Thresholds

The drivers argue that they met the minimal burden to show they worked for a company engaged in interstate commerce. The U.S. Labor Department said in a 1997 opinion letter that just handling any goods that were produced or shipped from outside the state meets that bar, according to the driver’s brief.

District courts within the Fifth Circuit have ruled that employees met that standard when their work involved vehicles, fuel, computers, phones, food, drinks, spices, and cooking utensils, the drivers said.

Black Magic, however, argued in its brief that the drivers can’t show they were involved in interstate commerce under the Fifth Circuit’s test from a 1960 ruling.

That standard—which is used to determine whether employees are personally involved in interstate commerce—turns on whether the work was so related to a business engaged in interstate commerce that it’s part of it, rather than an isolated activity.

The Fifth Circuit applied that test in 2007 to rule that an employee wasn’t covered by the FLSA despite driving out-of-state passengers around Houston for their treatments at a medical facility there, the company said.

The drivers also said they adequately alleged minimum wage and overtime violations by stating when and how much they worked, how much they were paid, and what they were owed. The district court’s ruling “applied a standard that makes pleading a FLSA claim all but impossible,” they said.

But the drivers’ general allegations about their work weren’t enough to establish how much compensation they’re owed, Black Magic said.

Although some district courts have permitted FLSA claims to move forward based on similarly vague information, the Fifth Circuit panel should rule that workers must provide “some sense of how much is owed and for what in order to survive,” the company said.

Black Magic’s lawyer, Raffi Melkonian of Wright Close & Barger, and the drivers’ attorney, Georgetown University law professor Brian Wolfman, declined to comment.

The case is Molina-Aranda v. Black Magic Enterprises, 5th Cir., Oral argument 8/31/20.

To contact the reporter on this story: Robert Iafolla in Washington at riafolla@bloomberglaw.com

To contact the editors responsible for this story: Jay-Anne B. Casuga at jcasuga@bloomberglaw.com; Andrew Harris at aharris@bloomberglaw.com

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