David Camp and Keith Hadmack, on behalf of themselves and all others similarly situated, Plaintiffs v. Bimbo Bakeries USA, Inc. and Bimbo Foods Bakeries Distribution, LLC, Defendants

2019 DNH 063

Opinion

UNITED STATES DISTRICT COURT

DISTRICT OF NEW HAMPSHIRE

David Camp and Keith Hadmack, on behalf of themselves and all others similarly situated, Plaintiffs

v. Case No. 18-cv-378-SM Opinion No. 2019 DNH 063 Bimbo Bakeries USA, Inc. and Bimbo Foods Bakeries Distribution, LLC, Defendants

O R D E R

Pending before the court are several motions for both

substantive and procedural relief. The court will address each

in turn.

I. Plaintiffs’ Motion to Dismiss Counterclaim.

In response to plaintiffs’ claims that defendants

(collectively “Bimbo Bakeries”) improperly classified them as

independent contractors, Bimbo Bakeries filed a counterclaim

seeking damages for “unjust enrichment.” In it, Bimbo Bakeries

assert that:

if the Court finds that Counterclaim Defendants were employees of BFBD or its affiliates (which it should not), it should find that Counterclaim Defendants were enriched as a result of their status as independent contractors, including but not limited to, the revenue they generated and retained by selling certain products to their customers, the profits generated from the sale and/or partial sale of their distribution rights to other IBPs, the revenue generated pursuant to the Advertising Agreements they entered into with BFBD or its predecessor, and the tax deductions they took for the costs of operating their businesses.

Answer and Counterclaim (document no. 48) at 30 (emphasis

supplied). In their memorandum of law (document no. 53),

defendants more specifically identify the ways by which they

claim plaintiffs were enriched (presumably, unjustly) by virtue

of their relationships with Bimbo Bakeries.

Plaintiffs profited from their sales of bakery products that they purchased from BFBD or its affiliates and then sold to their customers at a higher price.

Plaintiffs entered into commercial Advertising Agreements pursuant to which they were paid to advertise brands of certain products created by BFBD or its affiliates on their clothing and vehicles.

Plaintiffs profited by selling portions of their distribution rights, as Plaintiff Camp did on two occasions for a total of nearly $36,000.

Plaintiffs were able to take tax deductions for costs associated with running their businesses by virtue of their independent contractor status.

Defendants’ Objection (document no. 53) at 3.

That is likely an accurate summary of the benefits

plaintiffs realized as a consequence of their relationships with

2 Bimbo Bakeries. Plaintiffs were “enriched” as a result of their

efforts to sell Bimbo Bakeries’ products. Plaintiffs were also

“enriched” as a result of their agreements to perform various

advertising services on behalf of Bimbo Bakeries. And,

plaintiffs likely were able to avail themselves of various tax

deductions available to independent contractors. But, none of

that inured to Bimbo Bakeries’ detriment. Indeed, Bimbo

Bakeries were also “enriched” as a result of their relationships

with plaintiffs and benefited financially from plaintiffs’

efforts to both advertise and sell Bimbo Bakeries’ products.

And, by classifying plaintiffs as independent contractors Bimbo

Bakeries no doubt avoided substantial employer tax (and perhaps

insurance) obligations. That’s typically how business

relationships work - each side receives some benefit.

The problem with Bimbo Bakeries’ counterclaim is that it

fails to plausibly allege how plaintiffs (if properly viewed as

employees) were unjustly enriched, at the expense of Bimbo

Bakeries. Nor does it plausibly allege that plaintiffs obtained

some benefit from Bimbo Bakeries that would be unjust or

inequitable for them to retain if they are deemed to have been

employees. See generally, Estate of Mortner v. Thompson, 170

N.H. 625, 631-32 (2018); Clapp v. Goffstown Sch. Dist., 159 N.H.

3 206, 210, 977 A.2d 1021, 1025 (2009); Kowalski v. Cedars of

Portsmouth Condo. Ass’n, 146 N.H. 130, 133 (2001).

Many of the cases upon which Bimbo Bakeries rely in support

of their unjust enrichment claim are readily distinguishable and

of minimal persuasive value. For example, in Parham v. Wendy’s

Co., 2015 WL 1243535, at *1 (D. Mass. Mar. 17, 2015), the court

noted that the employer’s counterclaim for unjust enrichment

arose “from an allegation that [the plaintiff] recorded work

hours when he was not actually performing work for Wendy’s,

causing Wendy’s to pay him for time when he was not working.”

There is no similar claim in this case.

In a case somewhat analogous to this one (and upon which

Bimbo Bakeries rely), exotic dancers claimed they were

improperly treated as independent contractors rather than

employees. The employer filed a counterclaim, asserting that if

the dancers are properly viewed as employees, they should not be

permitted to retain “private and semi-private performance fees.”

Ruffin v. Entm’t of the E. Panhandle, 845 F. Supp. 2d 762, 766

(N.D. W. Va. 2011). Specifically, if the dancers were employees

entitled to an hourly wage, the performance fees they charged

customers (which were characterized as “service fees,” rather

than “tips”) should have gone to their employer. Thus, when

4 calculating damages, the court concluded that those performance

fees would be treated as an “offset” against the dancers’

entitlements as employees. Id. at 769. See also McFeeley v.

Jackson St. Entm’t, LLC, 2012 WL 5928769, at *4 (D. Md. Nov. 26,

2012).

The persuasive value of cases like those involving the

exotic dancers is, however, limited. The law is well-

established that employees are entitled to retain “tips,” while

employer’s are entitled to retain “service fees” when they are

entered into the employer’s gross receipts. It was also

established in those cases (or at least assumed at the dismissal

stage) that the performance fees the dancers charged customers

of their employer were “service fees.” Consequently, if the

dancers were properly viewed as employees, they would not, as a

matter of law, be entitled to retain their performance fees.

See generally 29 C.F.R. § 531.55 (distinguishing between “tips”

and “service charges”). See also McFeeley v. Jackson St.

Entm’t, LLC, supra; Doe v. Cin-Lan, Inc., 2010 WL 726710, at *6

(E.D. Mich. Feb. 24, 2010).

Here, however, there is no established principle of

employment law that provides employees are not entitled to

retain sums paid to them by their employer to advertise the

5 employer’s goods and/or services. Nor is there any established

principle of employment law precluding employees from retaining

any profits made when they purchase an employer’s products and

re-sell them at a profit. Nor, of course, is there a principle

of law establishing that an employer is entitled to an amount

equal to any tax deductions that an employee may have

erroneously taken.

“Unjust enrichment” is simply a poor fit to the facts

alleged in this case. Nevertheless, the same principle of

“offset” discussed in Ruffin will apply in this case should

plaintiffs ultimately prevail. If it is determined that

plaintiffs were employees of Bimbo Bakeries, and not independent

contractors, their final recovery (if any) will take into

account compensation they actually received from Bimbo Bakeries

for their labor, as well as sums they should have received had

they been properly treated as employees. Their recovery (if

any) will likely amount to the difference between the two, and

obviously not the total of the two. In the simplest of terms,

suppose it is ultimately determined that, for all his labor on

behalf of Bimbo Bakeries (advertising, selling, and delivering

products) a plaintiff actually received $1,400 in a particular

workweek. If it is also determined that, had he been

compensated in accordance with the law, he would have received

6 $1,500 in wages and overtime, he will be entitled to recover

$100 in damages.

But, that there will likely be various offsets when

calculating the total damages to which plaintiffs are entitled

(should they ultimately prevail) does not compel the conclusion

that Bimbo Bakeries have stated a viable common law claim for

“unjust enrichment.” They have not.

Bimbo Bakeries’ counterclaim fails to plausibly allege the

essential elements of a viable common law claim for unjust

enrichment against plaintiffs. Accordingly, Bimbo Bakeries’

unjust enrichment claim must be dismissed.

II. Defendants’ Motion to Reconsider.

Bimbo Bakeries move for “partial reconsideration” of a

“narrow aspect” of the court’s order granting plaintiffs’ motion

for conditional certification. Specifically, Bimbo Bakeries

assert that it would be inappropriate to send notice of a

pending collective action under the FLSA to individuals who are

subject to arbitration agreements. In support of that view,

Bimbo Bakeries rely upon an opinion of the Court of Appeals for

the Fifth Circuit that was issued approximately two weeks after

this court’s order of conditional certification. See In Re

7 JPMorgan Chase & Co., 916 F.3d 494 (5th Cir. 2019). According

to Bimbo Bakeries, the Fifth Circuit’s opinion “is the first

decision by an appellate court interpreting the text of the FLSA

and the Supreme Court’s controlling precedent in Hoffmann-

LaRoche as it relates to the propriety of sending notice to

individuals with binding arbitration agreements.” Defendants’

Memorandum (document no. 63-1) at 4. Thus, Bimbo Bakeries

implicitly suggest that opinion is entitled to substantial

deference.

In JPMorgan Chase, the collective of potential plaintiffs

consisted of approximately 42,000 current and former JPMorgan

Chase employees. But, the parties did not dispute that

approximately 35,000 (or 85%) of those potential members of the

collective were subject to binding arbitration agreements (and

were thus precluded from participating in the collective

action). Id. at 498. Given the absence of any disagreement

about the existence or enforceability of those arbitration

agreements, it is not surprising that the court held that

“[w]here a preponderance of the evidence shows that the employee

has entered into a valid arbitration agreement, it is error for

a district court to order notice to be sent to that employee as

part of any sort of certification.” Id. at 503.

8 Here, however, the plaintiffs contest both the existence

and the enforceability of any arbitration agreements. As the

Court of Appeals for the Fifth Circuit noted, “if there is a

genuine dispute as to the existence or validity of an

arbitration agreement, an employer that seeks to avoid a

collective action, as to a particular employee, has the burden

to show, by a preponderance of the evidence, the existence of a

valid arbitration agreement for that employee.” In re JPMorgan

Chase & Co., 916 F.3d at 502–03 (emphasis supplied). Bimbo

Bakeries have not carried their burden.

Despite having had two opportunities to introduce evidence

suggesting that at least some potential members of the

collective are subject to enforceable arbitration agreements -

first, in opposition to preliminary certification and, more

recently, in their efforts to obtain reconsideration - Bimbo

Bakeries have balked. According to Bimbo Bakeries, the

potential collective could include as many as 500 people. Yet,

Bimbo Bakeries have not produced even a single executed

arbitration agreement signed by a potential member of the

collective. Instead, they have merely proffered an untethered

“Exemplar Distribution Agreement” (document no. 67), which

consists of a few isolated pages extracted from what Bimbo

Bakeries say (in their memorandum, and not by way of affidavit)

9 is a Distribution Agreement executed by “many” potential members

of the collective. Defendants’ Memorandum (document no. 63-1)

at 3. 1

Extended discussion of the point is not warranted. Even if

the court were to assume that Bimbo Bakeries have established

the predicate elements of a motion to reconsider, see generally

Local Rule 7.2(d); Fed. R. Civ. P. 59, they have failed to

demonstrate that they are entitled to the relief they seek.

III. Motion for Miscellaneous Relief.

In its order granting plaintiffs’ request for conditional

certification, the court approved the form of the notice

plaintiffs proposed to send to potential members of the

collective. See Order dated February 4, 2019 (document no. 54)

at 13. Nevertheless, in what plaintiffs describe as a

continuation of defendants’ “scorched earth litigation

strategy,” Bimbo Bakeries move the court for “miscellaneous

1 Parenthetically, the court notes that in its opposition to preliminary certification, Bimbo Bakeries represented that potential members of the collective are “bound by at least 10 different forms of the [Distribution Agreement] with materially varying terms (e.g., arbitration agreements).” Opposition Memorandum (document no. 33-1) at 2. If there are, indeed, multiple versions of the Distribution Agreement, with materially different terms, the persuasive value of the single, partial, unsigned, “exemplar agreement” is diminished to an even greater extent.

10 relief” in the form of an order that disregards its earlier

order approving plaintiffs’ proposed notice and directs the

parties “to meet and confer and submit a [new] proposed joint

notice and stipulation regarding the procedure for issuance.”

Motion for Miscellaneous Relief (document no. 56) at 1.

Alternatively, Bimbo Bakeries move the court to simply approve a

different proposed notice - one more to Bimbo Bakeries’ liking -

and “enter an order directing that (1) the Notice should be

distributed by a claims administrator at Defendants’ expense, or

(2) Plaintiffs and their counsel (as well as others acting at

their direction) are prohibited from using any names or contact

information produced by Defendants for any purpose other than

mailing the Court-approved Notice.” Id. at 1-2. 2

Neither alternative proposed by Bimbo Bakeries is, at least

as submitted, reasonable or warranted. First, given Bimbo

Bakeries’ short history before the court, it would seem that

forcing the parties to meet in an effort to negotiate a mutually

acceptable form of notice would likely be a time-consuming,

expensive, and futile gesture.

2 As plaintiffs point out, Bimbo Bakeries already raised many of those issues in its memoranda in opposition to conditional certification. Consequently, their “Motion for Miscellaneous Relief” is more properly viewed as yet another motion to reconsider the relief awarded in this court’s order granting conditional certification (document no. 54).

11 The alternative suggested by Bimbo Bakeries is no more

appealing. The proposed notice they have submitted is decidedly

one-sided and crafted in a manner seemingly designed to

intimidate potential members of the collective. See Defendants’

Proposed Notice of Collective Action (document no. 56-2)

(dedicating a substantial portion of that document to a detailed

discussion of defendants’ asserted defenses; containing an

equally lengthy discussion of defendants’ (now-dismissed)

counterclaim and the potential liability faced by anyone who

might choose to join the collective; noting Bimbo Bakeries’

“right to seek to recover certain litigation costs from you and

other Distributors” who join the collective; and warning

potential collective members who are subject to an arbitration

provision with a liquidated damages clause, “you will be liable

to Bimbo Bakeries for $10,000 in liquidated damages if you join

a collective action like this case instead of arbitrating your

claim.”) (emphasis supplied).

As noted earlier, plaintiffs assert that even if some

members of the collective have Distribution Agreements that

contain mandatory arbitration provisions, those provisions are

not enforceable. Defendants’ proposed notice implicitly assumes

such provisions (as well as the $10,000 liquidated damages

12 clauses) are enforceable. The court has not yet resolved those

potential disputed issues.

Conclusion

For the foregoing reasons, as well as those set forth in

plaintiffs’ various legal memoranda:

(1) Plaintiffs’ motion to dismiss Bimbo Bakeries’ counterclaim (document no. 52) is granted and Bimbo Bakeries counterclaim for unjust enrichment is hereby dismissed;

(2) Bimbo Bakeries’ Motion for Partial Reconsideration (document no. 63) is denied; and

(3) Bimbo Bakeries’ Motion for Miscellaneous Relief (document no. 56) is denied.

On or before May 15, 2019, Bimbo Bakeries shall provide

plaintiffs’ counsel with the names of all potential members of

the collective. They shall also provide plaintiffs’ counsel

with complete examples of each one of the various Distribution

Agreements they say are implicated in this case and they shall

indicate which one of those various Distribution Agreements was

signed by each potential member of the collective.

Once all potential members of the collective are

identified, and it is clear which of those potential members may

be subject to enforceable arbitration agreements, plaintiffs may

13 (if they choose) file an appropriate motion and supporting

memorandum of law challenging the enforceability of those

arbitration agreements (and, if standing is an issue, plaintiffs

may seek leave to amend their complaint to add additional

plaintiffs as necessary).

SO ORDERED.

____________________________ Steven J. McAuliffe United States District Judge

April 3, 2019

cc: Harold L. Lichten, Esq. Matthew Thomson, Esq. Christopher B. Coughlin, Esq. William D. Pandolph, Esq. Michael J. Puma, Esq. Siobhan E. Mee, Esq.