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Fochtman v. Darp, Inc.

United States District Court, W.D. Arkansas, Fayetteville Division

November 12, 2019

MARK FOCHTMAN, et al., Individually, and on Behalf of All Others Similarly Situated PLAINTIFFS
v.
DARP INC. and HENDREN PLASTICS, INC. DEFENDANTS

          SUPPLEMENTAL OPINION AND ORDER

          TIMOTHY L. BROOKS UNITED STATES DISTRICT JUDGE

         On September 27, 2019, the Court issued a Memorandum Opinion and Order (Doc. 135) on the parties' cross-motions for summary judgment. The Court denied Defendant DARP, Inc.'s ("DARP") and Defendant Hendren Plastics, Inc.'s ("Hendren") motions, but granted in part and deferred ruling in part on Plaintiffs' motion. In particular, the Court granted Plaintiffs' motion for summary judgment with respect to liability, finding that the Defendants are jointly and severally liable for damages owed to the class for their failure to pay minimum-wage and overtime compensation. See Id. at 28. With respect to the calculation of damages, however, the Court deferred its ruling in favor of receiving supplemental briefing on two of Defendants' affirmative defenses. In particular, the Court asked the Plaintiffs to consider: (1) whether Defendants were entitled to a credit against damages for the value of in-kind services provided to the class in an amount equal to the statutory cap of $0.30 per hour, as provided in Section 11-4-213(a) of the Arkansas Minimum Wage Act ("AMWA"); and (2) whether Defendants were entitled to a credit against damages for the value of so-called "stipend" payments that DARP made to certain class members for their successful completion of the program.

         Plaintiffs filed a Supplemental Brief on damages (Doc. 136) on October 4, 2019. Hendren and DARP filed Supplemental Responses (Docs. 137, 139). On October 17, the Court held a telephonic hearing with counsel for all parties and received oral argument. The Court also directed DARP to file an updated spreadsheet detailing the stipend payments, as discussed in the telephonic hearing. See Doc. 142. DARP emailed the revised spreadsheet to the Court, which it now attaches as an exhibit to this Order. Plaintiffs stipulate that the figures in the revised spreadsheet accurately reflect the stipend payments made to the class members.

         Now having obtained additional stipulated facts and the parties' briefing on the last issue remaining in Plaintiffs' Motion for Summary Judgment (Doc. 87), the Court GRANTS IN PART AND DENIES IN PART Plaintiffs' request for damages. In summary, the class members will receive compensatory damages for all regular and overtime hours they worked at Hendren while residing at DARP. The parties agree that these hours translate to $615, 308.44 in regular compensation and $20, 909.06 in overtime compensation. See Doc. 100, pp. 32-33; Doc. 102, p. 1. Defendants are entitled to the maximum statutory credit against the compensatory damages award for the value of the in-kind services they provided the class members when they resided at DARP's facility. The Plaintiffs stipulate that these in-kind services were actually provided to the class and that the Court should apply the full $0.30-per-hour deduction on all regular hours worked, per Ark. Code Ann. § 11-4-213(a). See Doc. 136, pp. 2-3. The only remaining question to resolve regarding the $0.30-per-hour deduction is whether it applies to regular hours, overtime hours, or both. The Court will address this issue in detail in its discussion below.

         The Court further finds that Defendants are entitled to a deduction from compensatory damages in the sum of $30, 575.82, which is the total amount of stipend payments that DARP made to certain class members upon their completion of the program. Below, the Court will address whether the amount of the stipend should be prorated or reduced in some manner.

         Finally, the damages owed to Plaintiffs and class members will also include an award of liquidated damages in an amount equal to compensatory damages. The Court explained in its previous Order the reasons why liquidated damages were justified in this case. See Doc. 135, pp. 24-28 (finding that "Defendants have failed to carry their burden of showing they acted in good faith and with reasonable grounds in failing to pay wages to the class").

         I. LEGAL STANDARD

         Plaintiffs originally moved for summary judgment on both liability and damages. The Court found in Plaintiffs' favor on liability, and as to damages, the Court determined that Plaintiffs were entitled under the AMWA to an award of compensatory damages for all regular and overtime hours they worked. See Doc. 135, p. 20. The Court also found that Plaintiffs had met their burden under Federal Rule of Civil Procedure 56 to show they were entitled to an award of liquidated damages. The Court deferred ruling on two of Defendants' affirmative defenses. Prevailing on these defenses would mean that Defendants would be entitled to receive certain deductions from the compensatory damages award.

         Hendren contends in its Supplemental Response that since Plaintiffs are tasked with establishing "the amount of unpaid wages owed," they should also bear the burden of proving the amount of credits to which Defendants might be entitled to offset damages. (Doc. 137, p. 7). Clearly, this is an incorrect assessment of the burden of proof on summary judgment. In point of fact, Plaintiffs have already established that they are entitled to both compensatory and liquidated damages. They concede that Defendants are entitled to a credit for the value of in-kind services DARP provided to the class members, but they dispute that Defendants are entitled to a credit for the stipends they paid as a matter of law.

         The legal question of whether the stipends should be deducted from compensatory damages is for the Court to decide. As for the amount of the deduction, the burden rests with the Defendants to establish proof of the correct amount-or else that a genuine dispute of material fact exists as to the correct amount. See Fed. R. Civ. P. 56; Matsushita Bee. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87 (1986); Nat'l Bank of Commerce of El Dorado, Ark. v. Dow Chem. Co., 165 F.3d 602, 607 (8th Cir. 1999); Jaramillo v. Adams, 100 Ark.App. 335, 342 (2007) ("When an affirmative defense is raised, the defendant has the burden of proof.").

         Here, the Court reopened discovery for a brief period in order to allow DARP to gather proof to substantiate its payment of stipends to certain class members and to provide that proof to Plaintiffs' counsel. At this point, DARP has assembled a spreadsheet (Exhibit 1) that details the names of the class members who received stipends and the amounts of those stipends. Plaintiffs have advised that they do not disagree that the spreadsheet accurately reflects the stipend payments that were made to these members of the class.

         II. DISCUSSION

         A. Whether the $0.30-per-hour Credit Applies to Overtime Wages

         DARP provided room, board, and other in-kind services to the class members during the time they lived and worked at DARP. According to the version of Ark. Code Ann. § 11-4-213(a) that applies to this case, [1] an employer may deduct a maximum of $0.30 per hour from the wages of its employees to compensate for all in-kind services provided. Plaintiffs contend that this deduction applies only to regular hours worked, while Defendants believe the deduction applies to both regular and overtime hours. For the reasons explained below, the Court finds that Plaintiffs' interpretation of the statute is correct.

         The full text of Section 11-4-213(a) of the AMWA is as follows:

Every employer of an employee engaged in any occupation in which board, lodging, apparel, or other items and services are customarily and regularly furnished to the employee for his or her benefit shall be entitled to an allowance for the reasonable value of board, lodging, apparel, or other items and services as part of the hourly wage rate provided in § 11-4-210 in an amount not to exceed thirty cents (30 cent(s)) per hour.

         The important language to focus on is at the tail end of the paragraph. It states that an employer may take an "allowance" for in-kind services "as part of the hourly wage rate provided in § 11-4-210." Id. (emphasis added). Section 11-4-210 of the AMWA is titled "Minimum Wage." "Overtime" is separately described in Section 11-4-211. Thus, a straightforward reading of Section 11-4-213(a) makes clear that the employer's allowance for in-kind services applies to regular hours of minimum-wage work, and not overtime hours.

         If the statute itself were not clear enough, both Defendants concede that the administrative rule interpreting the statute states that the $0.30-per-hour credit does not apply to overtime hours. The full ...


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