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Gary v. Carbon Cycle Arizona LLC

United States District Court, D. Arizona

August 16, 2019

Michael Gary, Plaintiff,
v.
Carbon Cycle Arizona LLC, et al., Defendants.

          ORDER

          JAMES A. TEILBORG SENIOR UNITED STATES DISTRICT JUDGE

         At issue is Plaintiff Michael Gary's Motion for Attorneys' Fees and Costs (Doc. 50) to which Defendants Jerald F. Kovacich, Tom Mulholland, Samuel W. Grossman, Carbon Cycle Energy, LLC, Carbon Cycle Arizona, LLC, and Carbon Cycle Holdings, LLC filed a Response (Doc. 51), and Plaintiff filed a Reply (Doc. 57). The Court now rules on Plaintiff's Motion.

         I. BACKGROUND

         On September 5, 2018, Plaintiff brought this action against Defendants Carbon Cycle Arizona, LLC, Carbon Cycle Energy, LLC, Carbon Cycle Holdings, LLC, Samuel W. Grossman, Jerry Kovacich, Carlos E. Sala, [1] and Tom Mulholland. (Doc. 1 at 1). In his Complaint, Plaintiff asserted claims for failure to pay minimum wage in violation of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201-219 and the Arizona Minimum Wage Statute, A.R.S. §§ 23-362-23-364, and failure to make timely and reasonable payment of wages in violation of the Arizona Wage Statute, A.R.S. §§ 23-351, 23-353, and 23-355. (Id. at 1-2). Plaintiff sought to recover unpaid minimum wage compensation, liquidated damages, and statutory penalties for Defendants' alleged violations of the FLSA, as well as unpaid wages, treble damages, and statutory penalties for Defendants' alleged violations of the Arizona Wage Statute. (Id. at 2).

         Plaintiff asserts that on November 26, 2018, Defendants Carbon Cycle Arizona, LLC, Carbon Cycle Energy, LLC, Carbon Cycle Holdings, LLC, Jerry Kovacich, and Tom Mulholland transferred a gross amount of $11, 490.64, less applicable taxes to equal a net amount of $8, 492.33, via direct deposit into Plaintiff's bank account. (Doc. 50 at 2).[2] On January 14, 2019, these Defendants sent a Rule 68 Offer of Judgment to Plaintiff, which stated:

Defendants Jerry Kovacich, Tom Mulholland, Carbon Cycle Energy, LLC, Carbon Cycle Arizona, LLC, Carbon Cycle Holdings, LLC (“Defendants”) hereby offer to allow judgment to be entered in favor of Plaintiff Michael Gary and against these Defendants, in full resolution of all claims raised in the Complaint, as follows:
In addition to all sums previously paid, Defendants will pay to Plaintiff the sum of five thousand dollars ($5, 000), exclusive of taxable court costs and attorney's fees, for all claims sought in Plaintiff's complaint. Defendants reserve the right to object to any costs and fees sought by Plaintiff if this offer is accepted.

(Doc. 46-1 at 1). Plaintiff accepted Defendants' Jerry Kovacich, Tom Mulholland, Carbon Cycle Energy, LLC, Carbon Cycle Arizona, LLC, Carbon Cycle Holdings, LLC Rule 68 Offer of Judgment on January 16, 2019. (Doc. 46-2 at 1). Thereafter, these Defendants filed a Notice of Acceptance of Rule 68 Offer of Judgment on January 22, 2019. (Doc. 46). On January 23, 2019, the Clerk of the Court entered judgment against Carbon Cycle Arizona LLC, Carbon Cycle Energy LLC, Carbon Cycle Holdings LLC, Jerry Kovacich, and Tom Mulholland in the amount of $5, 000.00, exclusive of taxable court costs and attorney's fees. (Doc. 48).

         On January 28, 2019, Plaintiff filed the Motion for Attorneys' Fees and Costs (hereinafter, “Motion”) at issue, seeking recovery of his attorneys' fees in the amount of $13, 487.50 and $1, 072.90 in costs. (Doc. 50 at 9). Plaintiff specifies that his Motion is directed at Carbon Cycle Arizona, LLC, Carbon Cycle Energy, LLC, Carbon Cycle Holdings, LLC, Jerry Kovacich, and Tom Mulholland. (Id. at 2 n.1). Defendants, as well as Defendant Samuel Grossman, filed a Response (Doc. 51) on February 12, 2019.[3] Also on February 12, 2019, Plaintiff filed its Reply (Doc. 57).

         On April 12, 2019, Plaintiff accepted Defendant Samuel W. Grossman's Rule 68 Offer of Judgment for “the sum of two hundred fifty dollars ($250.00), exclusive of taxable court costs and attorney's fees, for all claims sought in Plaintiff's complaint.” (Docs. 64; 64-1).[4] In accordance with Plaintiff's Notice of Acceptance of Offer of Judgment (Doc. 64), the Clerk of Court entered judgment against Defendant Samuel Grossman in the amount of $250.00, exclusive of taxable court costs and attorney's fees. (Doc. 65).

         Unless specified otherwise, the Court uses the phrase “Defendants” in this Order to refer to Carbon Cycle Arizona, LLC, Carbon Cycle Energy, LLC, Carbon Cycle Holdings, LLC, Jerry Kovacich, and Tom Mulholland.

         II. ELIGIBILITY AND ENTITLEMENT TO FEES

         Plaintiff requests $13, 487.50 in attorneys' fees and $1, 072.90 in costs in accordance with Fed.R.Civ.P. 54(d), LRCiv 54.2, and 29 U.S.C. § 216(b), the FLSA fee-shifting statute which “provides for attorney fees and costs to a successful plaintiff.” Haworth v. State of Nev., 56 F.3d 1048, 1050 n.1 (9th Cir. 1995); (see Doc. 50 at 1, 9). For the reasons that follow, the Court concludes that Plaintiff is eligible for, and entitled to, attorneys' fees and non-taxable costs.

         A. Whether Plaintiff was the Prevailing Party

         Plaintiff argues that it is the prevailing party-and therefore entitled to attorneys' fees-because the filing of this action caused Defendants to pay unpaid wages to Plaintiff and because Plaintiff accepted Defendants' Rule 68 Offer of Judgment. (Doc. 50 at 3). Defendants do not contest that Plaintiff is the prevailing party. (See Doc. 51).

         “[P]laintiffs may be considered ‘prevailing parties' for attorney's fees purposes if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.” Hensley v. Eckerhart, 461 U.S. 424, 433 (1983). In Farrar v. Hobby, the Supreme Court clarified that “a plaintiff ‘prevails' when actual relief on the merits of his claim materially alters the legal relationship between the parties by modifying the defendant's behavior in a way that directly benefits the plaintiff.” Farrar v. Hobby, 506 U.S. 103, 111-12 (1992). Notably, “[a] judgment for damages in any amount, whether compensatory or nominal, modifies the defendant's behavior for the plaintiff's benefit by forcing the defendant to pay an amount of money he otherwise would not pay.” Id. at 113.

         In this case, Plaintiff accepted Defendants' Rule 68 Offer of Judgment, (Doc. 46-2 at 1), and the Court thereafter entered judgment against Defendants “in the amount of $5, 000.00, exclusive of taxable court costs and attorney's fees[, ]” (Doc. 48). Accordingly, Plaintiff is the “prevailing party” under the standard set forth in Farrar v. Hobby. Farrar, 506 U.S. at 111-13; see also Delta Air Lines, Inc. v. Aug., 450 U.S. 346, 376 (1981) (“[A] Rule 68 offer of judgment is a proposal which by definition stipulates that the plaintiff shall be treated as the prevailing party[.]”); Rother v. Lupenko, 691 Fed.Appx. 350, 351 (9th Cir. 2017) (affirming district court's award of attorneys' fees to plaintiffs who accepted defendants' Rule 68 Offer of Judgment in FLSA action and noting that it was “undisputed that Plaintiffs were the prevailing party”); Flores v. Fergiss Inc., No. 3:13-CV-01480-KI, 2014 WL 1123638, at *3 (D. Or. Mar. 20, 2014) (noting that plaintiffs, who accepted defendant's Offer of Judgment under Rule 68 in FLSA action, were prevailing parties for purposes of attorneys' fees and costs); Orozco v. Borenstein, No. CV-11-02305- PHX-FJM, 2013 WL 4543836, at *2 (D. Ariz. Aug. 28, 2013) (determining that plaintiff was the prevailing party where the filing of the FLSA action caused the defendants to pay plaintiff his unpaid wages). As the prevailing party, Plaintiff is entitled to his attorneys' fees in this FLSA action. See Christiansburg Garment Co. v. Equal Employment Opportunity Comm'n, 434 U.S. 412, 415 n.5 (1978) (noting that a fee award is “mandatory for prevailing plaintiffs” in actions brought under FLSA).

         B. Whether Each Defendant was Plaintiff's “Employer” For Purposes of the FLSA

         Section 216(b) of the FLSA states, in relevant part:

Any employer who violates the provisions of section 206 or section 207 of [the FLSA] shall be liable to the employee or employees affected in the amount of their unpaid minimum wages, or their unpaid overtime compensation, as the case may be, and in an additional equal amount as liquidated damages. . . . An action to recover the liability prescribed in the preceding sentences may be maintained against any employer[.] . . . The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney's fee to be paid by the defendant, and costs of the action.

29 U.S.C. § 216(b) (emphasis added). The Ninth Circuit has held that this section allows recovery from an employer who violates the FLSA, explaining that “the word ‘defendant' is used to describe the party who may be liable for the plaintiff's attorney's fees[, ]” and “refers to the employer against whom the charge of violation has been brought.” Richardson v. Alaska Airlines, Inc., 750 F.2d 763, 766 (9th Cir. 1984) (emphasis added). Therefore, Plaintiff may not recover attorney's fees from Defendants unless they were his employers at the time he alleges he was not paid the required minimum wage. See Id. (holding that the Age Discrimination in Employment Act, which incorporates the remedial provisions of the FLSA including the attorney's fee provision of 29 U.S.C. § 216(b), does not allow an award of attorney's fees against a non-employer); Rueling v. MOBIT LLC, No. CV-18-00568-PHX-BSB, 2018 WL 6047015, at *4 (D. Ariz. Nov. 19, 2018).

         1. The Definition of “Employer” Under the FLSA

         The FLSA defines an “employer” as “any person acting directly or indirectly in the interest of an employer in relation to an employee[.]” 29 U.S.C. § 203(d). The statute defines “to employ” as “to suffer or permit to work.” Id. § 203(g). Whether a party is an “employer” within the meaning of the FLSA is a question of law. Torres-Lopez v. May, 111 F.3d 633, 638 (9th Cir. 1997); Bonnette v. Cal. Health and Welfare Agency, 704 F.2d 1465, 1469 (9th Cir. 1983), overruled on other grounds by Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 538 (1985). “Courts have adopted an expansive interpretation of the definitions of ‘employer' and ‘employee' under the FLSA, in order to effectuate the broad remedial purposes of the Act.” Real v. Driscoll Strawberry Assocs., Inc., 603 F.2d 748, 754 (9th Cir. 1979). Under this expansive interpretation, “employees are those who as a matter of economic reality are dependent upon the business to which they render service.” Id. (citing Bartels v. Birmingham, 332 U.S. 126, 130 (1947)); see also Goldberg v. Whitaker House Coop., 366 U.S. 28, 33 (1961) (stating that “economic reality” is the test of employment under the FLSA).

         In analyzing “economic reality, ” courts must “consider the totality of the circumstances of the relationship, including whether the alleged employer has the power to hire and fire the employees, supervises and controls employee work schedules or conditions of employment, determines the rate and method of payment, and maintains employment records.” Hale v. State of Ariz., 993 F.2d 1387, 1394 (9th Cir. 1993) (citing Bonnette, 704 F.2d at 1470). Although these factors “provide a useful framework for analysis . . ., they are not etched in stone and will not be blindly applied.” Id. (citing Bonnette, 704 F.2d at 1470). Rather, the ultimate determination must be based “upon the circumstances of the whole activity.” Rutherford Food Corp. v. McComb, 331 U.S. 722, 730 (1947). Two or more employers may be joint employers of an employee, with each employer having individual liability for compliance with the FLSA. Bonnette, 704 F.2d at 1469 (citing Falk v. Brennan, 414 U.S. 190, 195 (1973); 29 C.F.R. § 791.2(a) (1981)).

         2. The Effect of Defendants' Rule 68 Offer, and the Resulting Judgment Following Plaintiff's Acceptance Thereof

         Of the $11, 147.50 in attorneys' fees which Defendants determined were reasonable, Defendants object to 6/7ths ($9, 555.00) of that amount because “Plaintiff was the employee of, and received paychecks from, a single entity-Carbon Cycle Energy, LLC.” (Doc. 51 at 2-3). Thus, Defendants contend that the other six defendants-Carbon Cycle Arizona, LLC, Carbon Cycle Holdings, LLC, Jerry Kovacich, Tom Mulholland, Samuel Grossman, and Carlos Sala-were not Plaintiff's “employers” under the FLSA, barring the recovery of attorneys' fees under 29 U.S.C. § 216(b) from those defendants. (Id. at 3). Accordingly, Defendants request an evidentiary hearing pursuant to LRCiv 54.2(h)[5] on the singular issue of “who” was Plaintiff's “employer.” (Id.). Defendants claim that some of the named defendants do not have any connection to Plaintiff, and appear to have been named solely to expand the litigation as much as possible in the hopes of monetary gain. (Id.).

         In his Reply, Plaintiff disagrees that an evidentiary hearing is needed to determine who was Plaintiff's employer, stating:

It was Defendants' tactical decision to make an Offer of Judgment on behalf of Carbon Cycle Arizona, LLC, Carbon Cycle Energy, LLC, Carbon Cycle Holdings, LLC, Jerry Kovacich, and Tom Mulholland. . . . If Defendants believed that only one Defendant was Plaintiff's employer, they should have only made the Offer of Judgment against only one employer Defendant.

(Doc. 57 at 5-6).

         The Court agrees. Defendants' Offer of Judgment explicitly states that it “offer[s] to allow judgment to be entered in favor of Plaintiff Michael Gary and against these Defendants” after listing Defendants Jerry Kovacich, Tom Mulholland, Carbon Cycle Energy, LLC, Carbon Cycle Arizona, LLC, Carbon Cycle Holdings, LLC. (Doc. 46-1 at 1). Notably, Plaintiff alleged in his Complaint that each named defendant was his “employer, ” as that term is defined by the FLSA. (See Doc. 1 ¶¶ 10-20).[6] Thus, at issue is whether the entry of judgment against Defendants (specifically, Carbon Cycle Arizona, LLC, Carbon Cycle Energy, LLC, Carbon Cycle Holdings, LLC, Jerry Kovacich, and Tom Mulholland) pursuant to Plaintiff's acceptance of Defendants' Rule 68 Offer of Judgment constitutes an admission that the specific Defendants listed in the Offer of Judgment are liable for Plaintiff's attorneys' fees and, thus, deemed “employers” from whom Plaintiff may recover. See Richardson, 750 F.2d at 766. The Court concludes it does.

         As discussed, supra, Plaintiff was the prevailing party in this action, and Defendants do not contest this. (See Doc. 51). Importantly, Title 29 U.S.C. section 216(b) provides that an award of attorneys' fees “shall” be made to the successful plaintiff. 29 U.S.C. § 216(b). Therefore, “[t]he award of an attorney's fee is mandatory” if a plaintiff prevails in the FLSA action. Houser v. Matson, 447 F.2d 860, 863 (9th Cir. 1971) (citation omitted); see also Christiansburg Garment Co., 434 U.S. at 415 n.5 (noting that a fee award is “mandatory for prevailing plaintiffs” in actions brought under FLSA).

         When interpreting an Offer of Judgment under Rule 68, “a court will ordinarily apply the usual rules of contract construction.” Herrington v. Cty. of Sonoma, 12 F.3d 901, 907 (9th Cir. 1993) (citing Erdman v. Cochise Cty., Ariz., 926 F.2d 877, 880 (9th Cir. 1991)); see also Guerrero v. Cummings, 70 F.3d 1111, 1113 (9th Cir.1995), cert. denied, 518 U.S. 1018 (1996). “Thus, ambiguities will be construed against the offeror as the drafting party and, where such ambiguities are found to exist, extrinsic evidence of the parties' actual intentions will be examined to clarify those ambiguities and arrive at the meaning of the offer's material terms.” Id.

         Despite the explicit mandate in 29 U.S.C. § 216(b) that attorneys' fees be awarded to the prevailing plaintiff, Defendants chose to structure their Offer of Judgment such that it was “exclusive of taxable court costs and attorney's fees[.]” (Doc. 46-1). Further, Defendants' Offer of Judgment contained no language admitting or denying liability as to attorneys' fees specifically. As the drafting party, Defendants could have easily formulated the offer to signal Plaintiff that it was inclusive of attorneys' fees. Therefore, as the drafting party and offeror, Defendants “should bear the burden of the ambiguity created” by their silence as to liability for attorneys' fees in their Offer of Judgment. Webb v. James, 147 F.3d 617, 623 (7th Cir. 1998). Further, the FLSA provides for attorneys' fees for the prevailing party and allows recovery of those fees from “any employer who violates” the [FLSA], ” Richardson, 750 F.2d at 766, but Defendants said nothing in their Offer of Judgment which would terminate that statutory liability. This is consistent with the rule of contract construction requiring that ambiguities in a contract be construed against the drafter. Herrington, 12 F.3d at 907; see Nusom v. Comh Woodburn, Inc., 122 F.3d 830, 833 (9th Cir. 1997) (“We recognize that in general, defendants making a Rule 68 offer contemplate a lump-sum judgment that represents their total liability. . . . At the same time, defendants are the master of what their Rule 68 offers offer. If there is any room for doubt about what is included, or excluded, when ‘costs' are offered, the defendant can craft its offer to make clear the total dollar amount that it will pay.”).

         Moreover, the Ninth Circuit has also concluded that “Rule 68 offers differ from contracts with respect to attorney fees, ” because, as to them, any waiver or limitation must be “clear and unambiguous.” Nusom, 122 F.3d at 833 (citing Guerrero, 70 F.3d at 1113; Erdman, 926 F.2d at 880). For example, in Erdman, the defendant's offer of judgment did not clearly exclude an award of attorneys' fees and, therefore, the defendant was bound by the letter of the offer and was obligated to pay reasonable attorneys' fees in addition to the amount stated in the offer. Erdman, 926 F.2d at 880-81. Furthermore, Nusom extended Erdman to non-section 1983 actions and to actions resting on statutes which do not define attorneys' fees as a component of costs, such as the FLSA. Nusom, 122 F.3d at 833 (holding that “the judgment does not foreclose the [plaintiffs] from seeking attorney fees” in action brought under Truth in Lending Act, which does not include attorneys' fees as a component of “costs, ” because the judgment “does not clearly and unambiguously waive or limit them”); see Gutierrez v. Good Savior, LLC, No. CV 14-4595-AJW, 2016 WL 5661869, at *3 (C.D. Cal. Sept. 28, 2016).

         For these reasons, the Court concludes that Defendants cannot now contest their liability as to attorneys' fees on the basis that each party listed in the Offer of Judgment is not Plaintiff's “employer, ” as that term is defined under the FLSA. As master of the offer, Defendants could have structured their Offer of Judgment in such a way as to make clear that it was inclusive of attorneys' fees, or only permitted recovery of attorneys' fees from one specific, named employer Defendant. Defendants cannot back-pedal now. Accordingly, the Court declines Defendants' request for an evidentiary hearing under LRCiv 54.2(h), and will not reduce Plaintiff's award of attorneys' fees by 6/7th.

         C. Whether Plaintiff May Recover Fees for Preparing the Motion for Attorneys' Fees and Costs

         Plaintiff states that he is entitled to his attorneys' fees for preparing the Motion for Attorneys' Fees and Costs at issue, (Doc. 50 at 3-4), and Defendants do not ...


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