Manzo v. Engrained Cabinetry and Countertops LLC

Opinion

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA

9 Tony Manzo, et al., No. CV-22-08081-PCT-JJT

10 Plaintiffs, ORDER

11 v.

12 Engrained Cabinetry and Countertops LLC, et al., 13 Defendants. 14 15 Plaintiffs brought this case against Defendants Engrained Cabinetry and 16 Countertops, LLC (“ECC”), Inspired Closets of Arizona, LLC (“ICA”), and Thomas 17 Corkery (collectively, “Defendants”) under the Fair Labor Standards Act (“FLSA”), 18 29 U.S.C. § 201, et seq., and A.R.S. § 23-363 for violating minimum wage and overtime 19 provisions. Plaintiffs have filed a Motion for Partial Summary Judgment (Doc. 52, “Mot.”), 20 to which Defendants have filed a Response (Doc. 60, “Resp.”) and Plaintiffs have filed a 21 Reply.1 (Doc. 62, “Reply.”) For the following reasons, the Court grants Plaintiffs’ Motion 22 for Partial Summary Judgment. 23 I. BACKGROUND 24 Plaintiffs are former employees of ECC and ICA, for both of which Corkery is a 25 principal, director, officer, and/or owner.2 ECC and ICA are primarily in the business of

26 1 The issues have been fully briefed, and oral argument will not aid in the Court’s decision. See Fed. R. Civ. P. 78(b) (permitting resolution of motions without oral hearings); 27 LRCiv 7.2(f) (same).

28 2 On November 10, 2022, the Court granted the Parties’ Joint Stipulation for Conditional Certification and Notice to Class Members (Doc. 42), conditionally certifying 1 selling and installing cabinets, countertops, and storage. To this end, Plaintiffs’ job 2 responsibilities consisted of designing and selling those items during various times 3 between 2013 and 2022.3 (Doc. 53, Plaintiffs’ Statement of Material Facts (“PSOF”) ¶ 13.) 4 ECC and ICA sell their goods and services primarily to homeowners, but their customers 5 also include other businesses. (Doc. 61, Defendants’ Controverting Statement of Facts and 6 Separate Statement of Facts (“DSOF”) ¶¶ 30–35.) 7 The parties dispute the specific pay arrangement utilized for each Plaintiff but, by 8 and large, Defendants paid Plaintiffs primarily on a commission basis. (DSOF ¶ 13.) 9 Certain Plaintiffs received a draw at the beginning of their employment, which they were 10 required to pay back over time, but other Plaintiffs received no such draw. (Doc. 61-1, 11 Ex. 1–3.) Plaintiffs were permitted to work from home, but Defendants have not produced 12 any evidence reflecting the number of hours their employees worked in any given 13 workweek, either in the office or at home. (Doc. 61-1, Corkery Decl. ¶ 16.) 14 Plaintiffs filed their operative Complaint on August 22, 2022, alleging Defendants 15 violated the minimum wage and overtime provisions of the FLSA and Arizona law. 16 (Doc. 30, “FAC.”) As relevant here, Defendants alleged in their Answer the affirmative 17 defense that Plaintiffs are exempt employees under the “retail or services establishment” 18 exemption to FLSA established by 29 U.S.C. § 207(i). (Doc. 41., “Answ.”) With the instant 19 Motion, Plaintiffs seek partial summary judgment on the inapplicability of the “retail or 20 services establishment” exemption.4 21 22

23 the following collective: All employees paid on a commission basis responsible for designing cabinetry as part of their job duties on or after May 5, 2019. (Doc. 43.) 24 3 The dates during which the Plaintiffs worked for ECC and ICA vary, but any 25 discrepancies in the dates are immaterial to the Motion. (DSOF ¶¶ 4–11.)

26 4 Defendants also alleged in their Answer the affirmative defense that Plaintiffs are exempt employees under the professional exemption to the FLSA established by 29 U.S.C. 27 § 213(a)(1). (Answ.) The instant Motion seeks partial summary judgment on the inapplicability of the professional exemption, too. Because Defendants concede in their 28 Response that the professional exemption does not apply, the Court grants Plaintiffs’ Motion with respect to that exemption. (Resp. at 1, 6.) 1 II. LEGAL STANDARD 2 Under Federal Rule of Civil Procedure 56(a), summary judgment is appropriate 3 when the movant shows that there is no genuine dispute as to any material fact and the 4 movant is entitled to prevail as a matter of law. Fed. R. Civ. P. 56(a); Celotex Corp. v. 5 Catrett, 477 U.S. 317, 322–23 (1986). “A fact is ‘material’ only if it might affect the 6 outcome of the case, and a dispute is ‘genuine’ only if a reasonable trier of fact could 7 resolve the issue in the non-movant’s favor.” Fresno Motors, LLC v. Mercedes Benz USA, 8 LLC, 771 F.3d 1119, 1125 (9th Cir. 2014) (citing Anderson v. Liberty Lobby, Inc., 477 U.S. 9 242, 248 (1986)). The court must view the evidence in the light most favorable to the 10 nonmoving party and draw all reasonable inferences in the nonmoving party’s favor. 11 Torres v. City of Madera, 648 F.3d 1119, 1123 (9th Cir. 2011). 12 The moving party “bears the initial responsibility of informing the district court of 13 the basis for its motion, and identifying those portions of [the record] . . . which it believes 14 demonstrate the absence of a genuine issue of material fact.” Celotex, 477 U.S. at 232. 15 When the moving party does not bear the ultimate burden of proof, it “must either produce 16 evidence negating an essential element of the nonmoving party’s claim or defense or show 17 that the nonmoving party does not have enough evidence of an essential element to carry 18 its ultimate burden of persuasion at trial.” Nissan Fire & Marine Ins. Co., Ltd. v. Fritz Cos., 19 210 F.3d 1099, 1102 (9th Cir. 2000). If the moving party carries this initial burden, the 20 nonmoving party must produce evidence to support its claim or defense. Id. at 1103. 21 Summary judgment is appropriate against a party that “fails to make a showing sufficient 22 to establish the existence of an element essential to that party’s case, and on which that 23 party will bear the burden of proof at trial.” Celotex, 477 U.S. at 322. 24 In considering a motion for summary judgment, the court must regard as true the 25 nonmoving party’s evidence, as long as it is supported by affidavits or other evidentiary 26 material. Anderson, 477 U.S. at 255. However, the nonmoving party may not merely rest 27 on its pleadings; it must produce some significant probative evidence tending to contradict 28 the moving party’s allegations, thereby creating a material question of fact. Id. at 256–57 1 (holding that the plaintiff must present affirmative evidence in order to defeat a properly 2 supported motion for summary judgment); see also Taylor v. List, 880 F.2d 1040, 1045 3 (9th Cir. 1989) (“A summary judgment motion cannot be defeated by relying solely on 4 conclusory allegations unsupported by factual data.” (citation omitted)). And, for a genuine 5 issue of material fact to arise, the nonmoving party may need to present more than “a 6 self-serving declaration that states only conclusions.” Nigro v. Sears, Roebuck and Co., 7 784 F.3d 495, 497 (9th Cir. 2015). 8 III. ANALYSIS 9 The FLSA has two major wage provisions. It requires employers to pay (1) an 10 hourly minimum wage that is set by statute and calculated according to the number of hours 11 worked in a week, and (2) overtime wages at a rate of 1.5 times an employee’s hourly wage 12 for every hour worked over 40 hours in a week. See 29 U.S.C. § 206(a)(1) (minimum 13 wage); 29 U.S.C. § 207(a)(1) (overtime); see also Probert v. Fam. Centered Servs. of 14 Alaska, Inc., 651 F.3d 1007, 1009–10 (9th Cir. 2011). 15 The FLSA also contains a litany of exemptions to the minimum wage and overtime 16 provisions, all of which carry a burden that is the defendant’s to establish. Klem v. Cty. of 17 Santa Clara, 208 F.3d 1085, 1089 (9th Cir. 2000). At issue here is the “retail or service 18 establishment” exemption under 29 U.S.C. § 207(i). For Plaintiffs to qualify for the “retail 19 or service establishment” exemption, Defendants must demonstrate that (1) ECC and ICA 20 are retail or service establishments, (2) Plaintiffs’ regular rate of pay exceeded 1.5 times 21 the statutorily defined minimum, and (3) more than half of Plaintiffs’ compensation derives 22 from commissions. 29 U.S.C. § 207(i). 23 Because the FLSA does not define “retail or service establishment,” the parties 24 direct the Court to the Code of Federal Regulations (“Regulations”) for guidance. The 25 Regulations provide that, for an establishment to be a “retail or service establishment,” (1) 26 it must engage in the making of goods or services, (2) 75% of its sales must be recognized 27 as retail in the particular industry, and (3) not over 25% of its sales may be sales for resale. 28 29 CFR § 779.313. 1 Plaintiffs make two primary arguments in their Motion. First, Plaintiffs argue that 2 ECC and ICA are not “retail or service establishments” as defined by the Regulations. 3 Second, Plaintiffs argue that Defendants have not produced sufficient evidence to create a 4 genuine dispute regarding whether Plaintiffs’ regular rate of pay exceeded 1.5 times the 5 statutorily defined minimum. Defendants counter that the burden is instead on Plaintiffs to 6 first present evidence that the “retail or service establishment” exemption does not apply. 7 In support of their argument, Defendants provide a Declaration by Tom Corkery, 8 co-owner of ECC and ICA. (Corkery Decl. ¶ 2.) In his Declaration, Corkery notes that the 9 primary market for ECC and ICA is individual homeowners, “estimat[ing]” that well over 10 75% of sales for both companies are to homeowners. (Corkery Decl. ¶¶ 4, 6.) He also 11 asserts that none of ECC or ICA’s sales are sales for resale. (Corkery Decl. ¶¶ 4, 6.) Besides 12 the statements in Corkery’s Declaration, Defendants provide no other evidence supporting 13 their contention that ECC and ICA are “retail or service establishments.” 14 Regarding Plaintiffs’ regular rate of pay, Corkery states in his Declaration that he is 15 “confident” that three of the Plaintiffs—Tony Manzo, Nicole Cavasini-Pludowski, and 16 Suzanne Adams—were paid “at least $10.875 per hour” each month of their employment. 17 (Corkery Decl. ¶¶ 11–15.) These assertions, however, amount to no more than self-serving 18 conclusory statements that those Plaintiffs were paid at least 1.5 times the federal minimum 19 wage. And despite his confidence, Corkery acknowledges that he is unaware of exactly 20 how many hours Plaintiffs worked each month. (Corkery Decl. ¶¶ 12, 14.) He attached as 21 exhibits tables that purportedly display commissions and draws received by Manzo, 22 Cavasini-Pludowski, and Adams during their employment, but the tables conspicuously 23 lack any data about hours worked. (Doc. 61-1, Ex. 1–3.) 24 Based on this record, the Court finds that Defendants have failed to meet their 25 burden of producing sufficient evidence to establish a genuine dispute as to a material fact 26 on which they bear the burden of proof at trial. See Celotex, 477 U.S. at 322. This is so 27 both regarding whether ECC and ICA are “retail or service establishments” and whether 28 Plaintiffs’ regular rate of pay exceeded 1.5 times the federal minimum wage. 1 Under the Regulations, at least 75% of ECC and ICA’s sales must be recognized as 2 retail in the particular industry and less than 25% of their sales may be sales for resale. 3 29 CFR § 779.313. The Court assumes that all sales to individual homeowners do indeed 4 constitute retail sales,5 but the conclusory statements in the Corkery Declaration fail to 5 satisfy the Regulation’s per se requirements about retail sales and sales for resale. Corkery 6 averred that none of ECC or ICA’s sales are for resale but, as Plaintiffs point out in their 7 Reply, that is a legal conclusion that depends upon whether a “sale is recognized as a bona 8 fide retail sale in the industry.” 29 CFR § 779.335. Perhaps Defendants could have produced 9 additional evidence to establish that ECC and ICA’s sales to other businesses properly fall 10 outside the scope of sales for resale, but the record lacks that evidence. Because Defendants 11 have “failed to make a sufficient showing on an essential element of [their] case,” Plaintiffs 12 are entitled to judgment as a matter of law. Celotex, 477 U.S. at 323. 13 Defendants have also fallen short of identifying a triable issue regarding whether 14 Plaintiffs’ regular rate of pay exceeded 1.5 times the statutory minimum. Defendants do not 15 solely rely on Corkery’s conclusory statements in his Declaration, as they also provide 16 commission tables for Manzo, Cavasini-Pludowski, and Adams. Those tables, however, shed 17 no light on weekly hours worked, and “regular rate refers to the hourly rate actually paid the 18 employee for the normal, non-overtime workweek for which he is employed.” Walling v. 19 Youngerman-Reynolds Hardwood Co., 325 U.S. 419, 424 (1945). Without any evidence on 20 this essential element of establishing the “retail or service establishment” exemption, no 21 reasonable jury could find for Defendants. See Anderson, 477 U.S. at 255–56. 22 Defendants contend that Plaintiffs must affirmatively present evidence of some kind 23 to meet their evidentiary burden. (Resp. at 4–5.) This is a misstatement of the law. Plaintiffs 24 must merely identify “the absence of a genuine issue of material fact” to the Court, a task 25 5 Plaintiffs argue that ECC and ICA categorically lack a retail concept, placing the 26 two businesses outside the scope of the “retail or service establishment” exemption under the first prong of 29 CFR § 779.313. The Court need not address this argument because the 27 Motion can be adequately resolved in Plaintiffs’ favor without doing so. For purposes of resolving the Motion, the Court assumes that ECC and ICA engage in the making of goods 28 or services. || that they have accomplished here. Celotex, 477 U.S. at 232. To be sure, the burden of || proving the underlying FLSA claims at trial falls on Plaintiffs. Brock v. Seto, 790 F.2d 3|| 1446, 1447-48 (9th Cir. 1986). But that is a matter for another day. Here the burden of production was Defendants’, and Defendants have not met that burden. 5 IT IS THEREFORE ORDERED granting Plaintiff's Motion for Partial Summary || Judgment. (Doc. 52.) 7 Dated this 23rd day of February, 2024. CN

9 Unifgd StateDistrict Judge 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28

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