Summary
In Solis v. Hotels.com Texas, Inc., No. Civ. A. 3:03-CV-0618-L, 2004 WL 1923754, at *2 (N.D. Tex. Aug. 26, 2004) (Lindsay, J.), this court stated that Sneed's "oblique reference" to a potential fraud exception "is insufficient to serve as a basis for circumventing the clear and unequivocal portions of § 216(c)."
Summary of this case from Centeno v. Facilities Consulting Grp., Inc.Opinion
Civil Action No. 3:03-CV-0618-L.
August 26, 2004
ORDER
Before the court are the Findings, Conclusions and Recommendation of the United States Magistrate Judge ("Report"), filed March 25, 2004; Plaintiffs' Objections to the Findings, Conclusions, and Recommendations of the United States Magistrate Judge, filed April 9, 2004; Defendants' Response to Plaintiffs' Objections to the Findings, Conclusions, and Recommendation of the United States Magistrate Judge, filed April 23, 2004; Secretary of Labor's Amicus Curiae Brief in Support of United States Magistrate Judge's Findings, Conclusions, and Recommendation, filed May 6, 2004; Defendants' Notice of New Authority in Support of Defendants' Motion for Partial Summary Judgment as to Opt-In Plaintiff Paola Judd and All Other Persons Participating in the Department of Labor Supervised Settlement, filed July 23, 2004; and Plaintiffs' Response to Defendants' Notice of New Authority in Support of Defendants' Motion for Partial Summary Judgment, filed August 10, 2004. After careful consideration of the findings and conclusions of the magistrate judge, a de novo review of the objections raised by Plaintiffs, the responses to those objections, and the applicable authority, the court determines that the findings and conclusions are correct, except for the finding regarding Plaintiff Paola Judd's purported claim of fraudulent inducement. Plaintiff's objections are overruled, and the magistrate judge's findings and conclusions are accepted in part and rejected in part, as herein stated.
I. Plaintiffs' Objections
A magistrate's judge's proposed findings of fact and recommendations are subject to de novo review by the district court. See Fed.R.Civ.P. 72(b) ("The district judge to whom the case is assigned shall make a de novo determination upon the record . . . of any portion of the magistrate judge's disposition to which specific written objection has been made. . . ."); see also 28 U.S.C. § 636(b)(1). The court may accept, reject, or modify, in whole or in part, the findings or recommendations made by the magistrate judge. 28 U.S.C. § 636(b)(1).
Plaintiffs Isabel Solis and Trisha Holloway, on behalf of themselves and all others similarly situated, object to the magistrate judge's Report on two grounds. First, they contend that the magistrate judge improperly weighed the summary judgment evidence and neglected to draw all reasonable inferences in favor of Plaintiffs as the nonmovants. Second, they contend that the magistrate judge erred in recommending a grant of summary judgment as to all past and present employees of Hotels.com, except opt-in Plaintiff Paola Judd, who executed releases and/or negotiated checks pursuant to the supervised settlement conducted by the Department of Labor ("DOL"), because genuine issues of material fact exist as to the validity of the time records on which the DOL relied in determining the amount of back wages due these employees for unpaid overtime compensation. Plaintiffs' objections are without merit.
Plaintiffs' objections focus on matters that are neither relevant nor material to determine whether there was a valid waiver under 29 U.S.C. § 216(c). Under that provision, the DOL is authorized to supervise payment of unpaid overtime compensation owed to employees. 29 U.S.C. § 216(c); Sneed v. Sneed's Shipbuilding, Inc., 545 F.2d 537, 539 (5th Cir. 1977). The agreement of an employee to accept the payment of back wages supervised by the DOL shall upon payment in full constitute a waiver by the employee of any right to bring a suit for unpaid wages and liquidated damages under § 216(b). See 29 U.S.C. § 216(c). For there to be a valid waiver, section 216(c) simply requires (a) that the employee agree to accept the payment which the [DOL] determines to be due and (b) that there be `payment in full.'" Sneed, 545 F.2d at 539.
Plaintiffs do not dispute that the DOL conducted a supervised settlement of back wages owed to past and former employees of Hotels.com; that Plaintiffs participated in the supervised settlement; that Hotels.com either mailed or distributed the back wages to such employees, along with an approved DOL Receipt Form WH-58, as modified by the employer, which stated that acceptance of the tendered back wages would result in a waiver of an employee's right to sue for back wages under § 216(b) of the FLSA; that Plaintiffs accepted and negotiated the settlement checks as payment in full; or that they acknowledged their acceptance of the tendered payment by either executing the DOL Receipts or negotiating the settlement checks.
Plaintiffs cite Sneed v. Sneed's Shipbuilding, Inc. for the proposition that an employee's waiver of rights under 216(c) may be rendered invalid if obtained through fraud. In Sneed, an employee accepted a check from a compliance specialist of the DOL's Wage and Hour Division and signed a receipt which stated that by accepting the tendered payment he was giving up his right to sue for wages and damages under § 216(b) of the FLSA. Thereafter, the employee returned the check to the employer without cashing it and filed a direct lawsuit against the employer under § 216(b). In its answer to the complaint, the employer asserted that the employee had waived his right to sue under the FLSA because he had taken possession of the check and signed the receipt acknowledging acceptance of the payment. In response to the employer's waiver argument, the employee contended that he did not know what he was signing and, in any case, the release was not supported by consideration. The Fifth Circuit noted in passing that the employee had never claimed that the release was obtained through fraud. Relying on this language, Plaintiffs posit that an allegation of fraud could lead to the invalidity of a waiver under 216(c). The court is not persuaded. First, this oblique reference found in the court's discussion of the underlying facts is insufficient to serve as a basis for circumventing the clear and unequivocal provisions of § 216(c). Second, in reaching its decision, the Fifth Circuit held that the district court erred in holding that the waiver signed by the employee was null and void for lack of adequate consideration. The court stated that the proper inquiry was not whether the consideration was adequate, but whether there was a waiver as defined by section 216(c). Sneed, 545 F.2d at 539. Thus, the proper inquiry for determining whether a waiver exists under § 216(c) is not whether an executed waiver is subject to avoidance under the law, but whether there has been a supervised settlement by the DOL, an agreement by an employee to accept payment as determined by the DOL, and receipt of payment in full. Once an employee agrees to accept a payment of back wages supervised by the DOL and receives payment in full of those wages, the employee waives any right to bring a suit against his employer to recover unpaid wages under § 216(b). Id.; see also 29 U.S.C. § 216(c).
Even if an employee's waiver under § 216(c) may be rendered invalid if obtained by fraud, Plaintiffs have failed to create a genuine issue of material fact that the alleged fraudulently altered records were actually relied on by the DOL in determining the back wages due. The competent summary judgment evidence establishes that Mr. Corando Carrizales, one of the DOL investigators involved in the supervised settlement, spent approximately 150 hours on the supervised settlement; that he reviewed three years of time records; and that his review of the records did not reveal any intentional alteration of the payroll records by Hotels.com. The evidence further establishes that some of the computations in the records were in error; that the errors were presented to Hotels.com for correction; that Hotels.com made the corrections; that the DOL again reviewed the computations; and that a final summary was accepted and approved by the DOL. Plaintiffs contend that back wages determined to be due by the DOL were based on inaccurate employee hours submitted by Hotels.com. In support of this contention, Plaintiffs have submitted the declarations of past and present employees of Hotels.com, specifically, Kristen R. Pegues-Bookman; Isabel Solis; James Wardrop; Elizabeth Gil; and Janelle Nelson. All of these individuals state that their time records were "adjusted" to exclude hours worked overtime. In addition, Mr. Wardrop and Ms. Nelson state that, as supervisors, they were instructed to "adjust" the time records of employees under their supervision to reflect a maximum 40 hours worked per week. None of these declarants, however, specifically identify the dates or time period during which they allegedly worked hours that were not documented. In addition, Mr. Wardrop does not identify the subordinates whose time cards he claims to have altered. Moreover, even if Hotels.com submitted "adjusted" time records to the DOL for review, one cannot reasonably infer that these records were the ones actually used to determine the amount of back wages due. As pointed out by Defendants, none of the declarations establishes any basis for personal knowledge as to what specific time records were reviewed by the DOL in approving the back wage calculations. Indeed, Plaintiffs concede that they can only assume that the back wages calculations approved by the DOL were based on altered time records. Such unsupported speculation is not competent summary judgment evidence and is insufficient to create a genuine issue of material fact. Plaintiffs have failed to establish, or create a genuine issue of material fact, that the records about which they complain were actually relied on by the DOL in its calculation of the back wages owed. The record does not support Plaintiffs' contention that the magistrate judge improperly weighed the summary judgment evidence or neglected to draw all reasonable inferences in their favor. The magistrate judge's conclusions are amply supported by the record and applicable law. Plaintiffs' objections are overruled.
III. Paola Judd
Paola Judd seeks to participate as a party plaintiff notwithstanding her execution of a Form WH-58 and negotiation of the check on her claim that her acts were fraudulently induced. As previously stated, once there has been an agreement to accept payment and payment in full, an employee may not pursue a claim under § 216(b) to recover unpaid back wages. With respect to Judd's purported state law claim of fraudulent inducement, Plaintiffs' First Amended Complaint ("Complaint") does not allege or raise such a claim. There are simply no allegations in the Complaint which, if proved, would entitle Judd to relief under a theory of fraudulent inducement. Oblique statements from which one could argue fraudulent inducement are contained solely in Judd's declaration as part of Plaintiffs' response to the summary judgment motion. Because Plaintiffs' Complaint does not allege or raise a claim of fraudulent inducement, no such claim is before the court. The court therefore rejects the magistrate judge's finding that genuine issues of material fact exist regarding Judd's purported claim of fraudulent inducement.
IV. Conclusion
For the reasons herein stated, the court determines that the magistrate judge's findings are correct, except the finding regarding Plaintiff Paola Judd's purported claim of fraudulent inducement. Plaintiffs' objections are overruled, and the findings and conclusions are accepted in part and rejected in part, as herein stated. Defendants' Motion for Partial Summary Judgment is granted as to all past and present employees of Defendant Hotels.com, including opt-in Plaintiffs Paola Judd and Elizabeth Gil, who negotiated checks for wages owed as determined by the DOL pursuant to 29 U.S.C. § 216(c), and these individuals are hereby dismissed from this lawsuit.
It is so ordered.