Foreman v. Five Star Food Service, Inc.

Citations: 950 F. Supp. 2d 958; 2013 WL 3187081; 2013 U.S. Dist. LEXIS 88103Docket: Case No. 3:11-cv-01124

Court: District Court, M.D. Tennessee; June 24, 2013; Federal District Court

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John Foreman has filed a Motion for Partial Summary Judgment, which Five Star Food Service, Inc. opposed. Conversely, Five Star has also filed a Motion for Summary Judgment, opposed by Foreman and Gary Runge. The court has decided to grant Foreman’s motion and deny Five Star’s motion. 

Five Star, a Delaware corporation based in Chattanooga, Tennessee, is a major provider of vending, coffee, and food services in the U.S., with operations in Middle Tennessee. The case presents two distinct claims: Foreman and Runge claim unpaid overtime compensation under the Fair Labor Standards Act (FLSA), while Foreman alleges that Five Star terminated him in retaliation for complying with a lawful subpoena, violating Tennessee law. The court will analyze these claims separately.

Regarding the summary judgment standard, the court evaluates each motion independently, considering all reasonable inferences against the party whose motion is being assessed. Under Federal Rule of Civil Procedure 56(a), summary judgment is warranted when there is no genuine dispute regarding material facts, and the movant is entitled to judgment as a matter of law.

The FLSA claim involves two employee categories at Five Star: vending route drivers and Avanti Market merchandisers. Vending route drivers service vending machines, managing inventory, collecting payments, and maintaining cleanliness. Avanti Market merchandisers oversee automated convenience stores, ensuring proper stock rotation and cleanliness. Both roles involve transporting products from Five Star’s Nashville warehouse to various locations in Middle Tennessee. Additionally, some products used by Five Star originated from Vistar of Tennessee, a distributor that sources goods from multiple states outside of Tennessee.

Vistar of Tennessee sells and distributes products to Five Star, regularly delivering them to Five Star's Nashville warehouse, where Five Star takes ownership. Five Star's vending route drivers and merchandisers load these products onto trucks at the Nashville warehouse to service designated routes within Middle Tennessee, only transporting products within the state. These products include items manufactured and packaged outside of Tennessee. The distribution process involves: 1) out-of-state shippers manufacturing and packaging food products, 2) Vistar transporting these products to its Memphis warehouse, 3) Vistar selling and delivering products to Five Star, and 4) Five Star’s drivers loading and transporting these products to vending locations. The record does not clarify the volume of Five Star’s purchases from Vistar relative to its overall business or whether their transactions are based on a requirements contract or regular individual sales. Additionally, details about Vistar's contractual relationships with out-of-state manufacturers remain unspecified. Vistar's President states that products were distributed to Five Star with the intent for Five Star to sell them to consumers. Foreman was hired by Five Star as a vending route driver on September 6, 2011, earning $500 weekly for over forty hours of work, before being transferred to a merchandiser position on October 3, 2011, and ultimately discharged on November 8, 2011.

Foreman, employed as a merchandiser, received a base wage of $12.50 and potential overtime pay for hours exceeding 40 per week. A dispute arises regarding whether Foreman accurately recorded his overtime hours, with Foreman claiming he was required to work 'off the clock' without proper documentation, while McDaniel denies instructing him to do so. Foreman seeks summary judgment on his Fair Labor Standards Act (FLSA) claim, asserting that Five Star failed to compensate him for overtime during his four weeks as a vending route driver and for unrecorded hours during five weeks as a merchandiser. In its defense, Five Star contends that Foreman is not entitled to overtime due to the 'Motor Carrier Act' (MCA) exemption and challenges Foreman’s allegations about working off the clock.

Under the FLSA, employers must pay overtime unless specific exemptions apply, such as the MCA exemption outlined in 29 U.S.C. § 213(b)(1). These exemptions are to be interpreted narrowly against employers, placing the burden on them to demonstrate that the exemption applies to the employee. The MCA allows the Secretary of Transportation to regulate qualifications and maximum hours for employees involved in interstate commerce. The exemption applies if the Secretary has the authority to regulate the employee, irrespective of whether that authority has been exercised. The critical issue in this case is whether Foreman’s work as a vending route driver and merchandiser falls within the Secretary's regulatory powers under the MCA, as the parties agree that there has been no actual regulation of Foreman’s activities.

The Motor Carrier Act (MCA) empowers the Secretary of Transportation to regulate the transportation of materials across state lines or within a state through another state. For an employee to be covered by the MCA, they must be employed by a 'motor carrier' or 'motor private carrier,' affect highway safety, and engage in 'interstate commerce' as defined by the MCA. The court concludes that the plaintiffs were not involved in 'interstate commerce' as per the MCA's definition and will presume, without ruling, that the other criteria for exemption are satisfied. The MCA’s definition of 'interstate commerce' is narrower than that under the Commerce Clause or the Fair Labor Standards Act (FLSA). While the FLSA covers employees involved in commerce or production of goods for commerce, the MCA applies only to those part of a continuous movement in interstate commerce. Federal courts have developed extensive jurisprudence on whether an employee transporting goods is engaged in interstate or intrastate commerce, focusing on the shipper's intent at shipment. The Sixth Circuit has clarified that the mere handling of goods previously involved in interstate commerce does not automatically invoke MCA coverage. Five Star argues for a broad interpretation of the MCA, citing cases where intrastate shipments of out-of-state goods fell under the Secretary's regulatory authority, but these cases are fact-specific and differ from the current circumstances.

Numerous courts have determined that 'hub-and-spoke' shipments fall under the Motor Carrier Act (MCA), even if the shipper temporarily warehouses products before delivering them to customers. The typical scenario involves a company with specific or projected customer orders that ships products across state lines to an in-state warehouse, where the products are briefly stored before being delivered to customers. An example is a carpet manufacturer that shipped carpets from Georgia to its Texas warehouse, later distributing them to customers in the Dallas-Fort Worth area, including 'nonsidemarked' carpets whose final destination was unknown at the time of shipment. The court found that the manufacturer, as the out-of-state shipper, determined the final destination of the carpets and that all carpets were manufactured out-of-state. The Fifth Circuit noted that the intent at the shipment's start determines the freight's interstate or intrastate status. A temporary stop for storage does not alter the interstate nature of the shipment if it is necessary for further interstate transport. The court ruled that the manufacturer's intent to transport the carpets to Texas customers remained intact despite using a local carrier for the final delivery. Similarly, in Collins v. Heritage Wine Cellars, the court ruled that a wine wholesaler's shipments from its in-state warehouse to retailers, which were driven by pre-existing orders and projected demands, also fell under MCA requirements due to the brief storage duration before delivery.

Heritage exercised control over its wine shipments from origin to retail locations in Illinois, directing the entire transportation process. The Seventh Circuit determined that Heritage's drivers engaged in interstate commerce while delivering from an Illinois warehouse to customers within the state, as the wine had been shipped across state lines and was only temporarily stored before being distributed intrastate. The court contrasted this situation with a hypothetical where title to the wine would pass to a wholesale distributor upon arrival at its warehouse, which would then deliver to retail stores using its own trucks. In that case, such deliveries would be classified as intrastate under the Motor Carrier Act (MCA), despite the wine originating from out of state. Various courts have similarly ruled that integrated companies’ intrastate shipments fall under the MCA when they arrange for interstate transport to an in-state warehouse, from which their affiliates deliver to customers. An example includes the case of Billings v. Rolling Frito-Lay Sales, where Frito-Lay shipped products to its Texas distribution center for local delivery by its affiliate. The court found that these activities constituted interstate commerce under the MCA, citing that Frito-Lay owned the warehouse, no significant product modifications occurred there, and shipments were made to meet local demand.

The court distinguished the present case from Billings, noting that the sales representatives are not independent contractors purchasing products for resale; rather, Frito-Lay maintains control over the product throughout its distribution. Relevant case law, including Musarra and Bilyou, establishes a focus on the degree of control exerted by the shipping company over the product's destination. The analysis contrasts scenarios where a company retains control over the product's final local destination with situations where a product is sold to an unaffiliated local entity, which assumes ownership and then sells to its own customers. The defendants failed to present compelling cases supporting their position, while precedents such as Collins and Billings suggest that a different outcome would occur if the interstate shipper sold goods to an independent entity. Five Star's interpretation—that any entity in the distribution chain intending to ship products interstate automatically implicates downstream distributors in interstate commerce—is rejected. The Motor Carrier Act's language does not reflect intent to regulate purely intrastate shipments based solely on their impact on interstate commerce. In the current situation, Vistar of Tennessee sourced goods from unidentified manufacturers, shipped them across state lines to a Memphis warehouse where it held title, and then sold those goods intrastate to Five Star, which took title in Nashville. Thus, the transaction constitutes a purely intrastate sale between unaffiliated entities.

Five Star employees transported products from the Nashville warehouse to Middle Tennessee without oversight from either the out-of-state producers or Vistar of Tennessee regarding the final destination. Unlike previous cases, the out-of-state producers and Vistar did not maintain control over the products throughout their journey. Vistar sold the products to Five Star in a straightforward transaction, after which Five Star determined the destination. There was no intention from either Vistar or Five Star for the products to cross state lines after the sale. Consequently, Foreman's transport activities are not regulated under the Motor Carrier Act (MCA) as they do not meet the criteria for 'interstate commerce' defined by the MCA. Although Foreman’s work may relate to interstate commerce under the Commerce Clause, handling goods from another state does not suffice for MCA jurisdiction. The defendants referenced Department of Labor (DOL) opinion letters suggesting that vending machine service workers might qualify for an MCA exemption from Fair Labor Standards Act (FLSA) overtime requirements. However, the court noted that such opinion letters and agency documents lack legal authority and do not receive Chevron deference. It deemed the cited letters unpersuasive, interpreting a 1971 DOL letter as non-committal regarding the applicability of the MCA exemption.

The letter in question fails to address the specific circumstances of the case, where products were transported from one warehouse to another within the same state as part of an arm's length transaction. The defendants reference section 24c03 of the DOL’s Field Operations Handbook, which indicates that vending machine servicemen transporting products within the same state, procured from other states for vending machines, are engaged in interstate commerce until the products are placed in the machines. However, this section does not clarify what is meant by "procured from other States," raising questions about whether the DOL assumes the stocking entity shipped products across state lines or purchased them from an in-state wholesaler. Furthermore, the Handbook lacks legal authority supporting its broad claims, and the court concludes that Five Star has not demonstrated that the MCA exemption clearly applies to Foreman. Consequently, the FLSA’s overtime provisions are applicable, making Five Star liable for Foreman's unpaid overtime.

Regarding Foreman's employment, there is a factual dispute about whether he worked "off the clock" during his five weeks as a merchandiser. For the four weeks he worked as a vending route driver, it is agreed that he worked overtime but was not compensated with premium overtime pay. While Foreman submitted time cards indicating overtime, no damages calculation is provided. Concerning plaintiff Gary Runge, the court notes that while Five Star is liable to Foreman for overtime under the FLSA, it remains unclear if Runge's claim presents any factual disputes for trial due to limited submitted facts. The court orders both parties to submit a joint statement before trial to clarify which issues remain for trial.

In relation to Foreman's retaliatory discharge claim, he began a 90-day probationary period upon hiring as a vending route driver on September 6, 2011, during which he received training and evaluation. Foreman was subsequently transferred to an Avanti Markets merchandiser position in early October 2011, with the reasons for this transfer unspecified. On October 5, 2011, a meeting involving the supervisors of the merchandisers was held shortly after Foreman's transfer.

Azarbarzin, McDaniel, and Stephanos met to discuss performance expectations for merchandisers. In October 2011, Foreman trained as a merchandiser, initially shadowing Runge, and subsequently receiving training from Azarbarzin while servicing machines. Foreman identified significant pre-existing issues at the service locations, such as outdated products, and made suggestions that McDaniel found favorable. On October 13, 2011, a meeting addressed performance issues, and Foreman reminded McDaniel of his planned absence on October 14 for a personal matter, which upset McDaniel. Foreman missed work on October 14 for a court hearing regarding his workers’ compensation settlement. Upon returning, he noted McDaniel’s dissatisfaction over his absence, coupled with comments about needing to cover for him. 

On October 31, 2011, another meeting was held to discuss unmet expectations, after which Foreman was allegedly counseled about performance deficiencies, including failure to rotate products and smoking on the job. Foreman denies this counseling took place, and disputes the clarity of Stephanos' testimony regarding it. On November 1, 2011, Foreman received a subpoena for a federal discrimination case against his former employer. After he presented the subpoena to Azarbarzin on November 2, she became visibly upset and conferred with McDaniel and Stephanos for 30 to 45 minutes. Azarbarzin later indicated it would be challenging to cover Foreman’s route on the subpoena date, and pressed him for case details despite his discomfort. No one from Five Star explicitly prohibited him from leaving work to comply with the subpoena. On November 4, McDaniel inspected one of Foreman’s service locations, identified multiple deficiencies, and counseled Foreman about them.

Foreman acknowledges that McDaniel identified performance issues but denies receiving any counseling regarding them. He claims that prior to a meeting on November 7, 2011, he was never individually counseled or reprimanded by Five Star supervisors, who had consistently praised his work until his termination. On November 7, Stephanos inspected Foreman's route and noted various problems, including outdated products and unclean kiosks. Following this inspection, Stephanos and McDaniel informed Peggy Russell, the HR director, about Foreman's performance issues. On November 8, Stephanos sent Russell an email detailing prior discussions with Foreman, which suggested that Foreman had been counseled individually on specific dates. However, this email misrepresented the situation, as Foreman had only attended group meetings rather than receiving personal counseling. Russell noted that Five Star typically conducts individual counseling and has a progressive discipline system, which Foreman did not experience before his termination. No documentation supports that Foreman received any verbal or written warnings. Ultimately, on November 8, 2011, Russell approved Foreman's termination. Tennessee law permits at-will employment termination but recognizes a public policy exception for retaliatory discharge.

A claim for retaliatory discharge in violation of public policy arises when an employer terminates an employee, in substantial part, due to the employee complying with a lawful subpoena. To succeed in such a claim, a plaintiff must demonstrate four elements: 1) existence of an at-will employment relationship, 2) discharge of the employee, 3) the discharge's causation linked to the employee's exercise of a constitutional or statutory right, or a violation of clear public policy, and 4) that the employee's protected actions were a substantial factor in the employer's decision to terminate. 

In this case, Five Star disputes the causation elements of Foreman's claim. The court will apply a burden-shifting analysis, wherein Foreman must first establish a prima facie case of retaliatory discharge. Once established, the burden shifts to Five Star to provide a legitimate, non-pretextual reason for Foreman's termination, after which Foreman must show that the reason is a pretext for retaliation.

Foreman has met his prima facie burden, as he was terminated shortly after notifying his employer of his compliance with a subpoena. Evidence indicates that supervisors reacted negatively to this notification and conducted private discussions about it. Five Star claims Foreman was terminated for performance deficiencies unrelated to the subpoena request. However, Foreman contends that this rationale is a pretext for retaliation, arguing that the evidence presented by Five Star is merely self-serving. The court finds merit in Foreman's claims, particularly given the lack of prior criticism regarding his performance before he notified supervisors about the subpoena.

A 45-minute meeting took place where supervisors expressed frustration over Foreman needing to miss work to comply with a subpoena and sought information about the case. Foreman alleged that the supervisors conducted an unannounced inspection of his route to create grounds for his termination. Subsequently, Stephanos sent an email to Russell, misleadingly suggesting that Foreman had been individually counseled on multiple occasions for performance issues. Despite the company policy encouraging documentation of counseling sessions, no such records were created for Foreman, and Five Star did not apply its optional progressive discipline policy before his termination. 

Five Star acknowledged that a supervisor's biased intent could be attributed to a decisionmaker under the "cat's paw" theory, which would hold the employer liable if the supervisor's discriminatory actions led to the employment decision. The court found that evidence suggests Five Star's stated reason for Foreman's termination could be a pretext motivated by his intention to comply with the subpoena. Consequently, a genuine dispute of material fact exists regarding his retaliatory discharge claim, preventing summary judgment. 

The court granted Foreman's Motion for Partial Summary Judgment and denied Five Star's Motion for Summary Judgment, allowing the retaliatory discharge claim to proceed to trial. The parties were instructed to file a joint statement by July 15, 2013, to clarify trial issues regarding Foreman's and Runge's FLSA claims. In the context of the complaint, Foreman sought to certify a collective action under the FLSA, with only one individual, Gary Runge, opting in as a plaintiff. Foreman’s motion was supported by his own deposition and declaration, while Five Star's motion relied on various depositions and documents.

Foreman filed a late Response to Five Star's Motion for Summary Judgment, which included depositions and the Foreman Declaration, prompting Five Star to request that the court disregard this late submission. Despite the general disfavor towards late filings, the court found that any prejudice to Five Star was minimal, especially since the late-filed Foreman Declaration was identical to a previously submitted declaration. Additionally, Five Star itself submitted late affidavits without seeking an extension for a reply. Consequently, the court decided to consider all materials filed by both parties.

Five Star's affidavits regarding the chain of title for products were vague, failing to clarify when title transfers occurred between out-of-state manufacturers, Vistar of Tennessee, and Five Star. Furthermore, no contracts or detailed descriptions of the relationships between the involved parties were provided. Five Star claimed that it purchased products from Vistar with the understanding they would always be in interstate commerce. However, the court found this assertion to be an overreach, as it lacked evidence showing Vistar intended for products to be shipped intrastate with the expectation they would later cross state lines. Vistar's intent to ship products across state lines based on its agreements with manufacturers was separate from Five Star's actions in distributing products within Tennessee.

Runge was employed as both a vending route driver and an Avanti market merchandiser during the relevant period. Neither Runge nor Foreman has moved for summary judgment on behalf of the plaintiffs. Foreman claims unpaid overtime hours as a merchandiser, but did not file a contract claim, despite evidence that Five Star compensated its merchandisers for overtime. Foreman's Complaint explicitly seeks recovery for these unpaid overtime hours. The court has determined that the FLSA overtime provisions apply to Five Star’s vending route drivers and merchandisers, making the actual hours worked by Foreman a key factor in assessing his damages.

Historical policy statements from the Interstate Commerce Commission (ICC) outlined criteria for courts to evaluate whether shipments fell under interstate commerce provisions of the Motor Carrier Act (MCA), yet these statements lacked clarity on the weight of each factor. Judge Posner criticized the reliance on multiple unweighted criteria, suggesting it complicates judicial decision-making regarding intrastate shipments. The relevance of these factors in the Sixth Circuit remains ambiguous, particularly following developments in case law. The parties involved do not reference ICC factors but instead engage in discussions regarding federal case law and Department of Labor opinions as they relate to the specific circumstances of this case.

Early Supreme Court rulings clarified that the FLSA does not automatically apply to intrastate sales by wholesalers purchasing goods interstate unless there is a "practical continuity of movement" between the interstate and intrastate segments. In Walling v. Jacksonville Paper Co., the Court held that FLSA coverage applied to a wholesaler’s activities when there was a brief warehousing period before intrastate distribution, indicating that not all aspects of a wholesaler's intrastate business are exempt solely based on interstate purchases.

In Higgins v. Carr Bros. Co., the Supreme Court ruled that the Fair Labor Standards Act (FLSA) did not apply to a wholesaler that shipped goods to a warehouse for local sale. The Atlantic Coast Line R. Co. v. Standard Oil Co. of Kentucky case clarified that the reshipment of interstate goods does not inherently imply a continuity of movement, allowing for the possibility of independent intrastate character. Courts have attempted to apply the "practical continuity of movement" test from Walling to the Motor Carrier Act (MCA) exemption, but distinctions exist between the definitions of "interstate commerce" under the MCA and FLSA, as noted in Baird and Packard. The court refrains from deciding if drivers moving products between warehouses were engaged in interstate commerce under the MCA, indicating it is a more complex issue. The excerpt references an unpublished district court case involving Compass Group, which the author argues misinterpreted the MCA exemption's reach regarding Congress's power over interstate commerce and erroneously equated FLSA and MCA definitions of interstate commerce. Additionally, it discusses the implications of compliance with federal subpoenas, emphasizing their legal significance and potential consequences for non-compliance, as highlighted in Gossett v. Tractor Supply Co. and the Tennessee Supreme Court's stance on retaliatory discharge claims.

Ambiguity arose regarding the applicable summary judgment standard for federal cases involving Tennessee's statutory and common law retaliatory discharge claims following the Gossett decision. Federal courts viewed Gossett as a non-binding procedural rule. In 2011, the Tennessee legislature clarified that burden-shifting is appropriate for statutory retaliatory discharge claims, resolving the issue for later cases. However, the Tennessee Supreme Court has not yet ruled on the applicability of burden-shifting for common law claims. In the current case, both parties agree that the burden-shifting framework applies to Foreman's common law retaliatory discharge claim, which the court will utilize. Even under the Gossett framework, the outcome would remain unchanged. Notably, Five Star did not contest Foreman's assertion that temporal proximity can suffice for establishing causation under Tennessee law. This raises potential differences between the prima facie burdens for Tennessee and federal retaliatory discharge claims, which could complicate analyses involving both jurisdictions. The court refrains from determining the sufficiency of temporal proximity alone since other supporting facts bolster Foreman’s claim.