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McDonald v. Eagle Express Lines

September 29, 2009

KEITH MCDONALD, INDIVIDUALLY, AND ON BEHALF OF ALL PERSONS SIMILARLY SITUATED, PLAINTIFF,
v.
EAGLE EXPRESS LINES, INC. DEFENDANT.



The opinion of the court was delivered by: Judge Joan H. Lefkow

OPINION AND ORDER

Plaintiff Keith McDonald ("McDonald"), on behalf of himself and other consenting similarly situated employees, has brought suit under the Fair Labor Standards Act ("FLSA"), codified at 29 U.S.C. § 201 et seq., against defendant Eagle Express Lines, Inc. ("Eagle"), for misclassifying its local driver employees as exempt under the FLSA from overtime wages, thereby wrongfully denying them compensation guaranteed by law. McDonald also makes a quantum meruit claim in which he asserts that he and fellow employees worked hours in excess of forty hours per week without overtime pay at the direction of Eagle. Finally, in count III, McDonald claims Eagle was unjustly enriched and so is liable to McDonald and other employees for all hours worked in excess of forty hours per pay period at the rate of time-and-a-half. Eagle has moved to dismiss the complaint under Federal Rule of Civil Procedure 12(b)(1) for lack of subject matter jurisdiction.*fn1 For the reasons stated below, Eagle's motion is denied.

LEGAL STANDARD

A motion to dismiss under Federal Rule of Civil Procedure 12(b)(1) challenges the court's subject matter jurisdiction. In determining whether subject matter jurisdiction exists, the court must accept all well-pleaded facts alleged in the complaint and draw all reasonable inferences from those facts in the plaintiff's favor. Sapperstein v. Hager, 188 F.3d 852, 855 (7th Cir. 1999). "When evidence pertinent to subject matter jurisdiction has been submitted, however, the district court may properly look beyond the jurisdictional allegations of the complaint... to determine whether in fact subject matter jurisdiction exists." Id. at 855 (quoting United Transp. Union v. Gateway W. Ry. Co., 78 F.3d 1208, 1210 (7th Cir. 1996)) (internal quotation marks omitted). "The burden of proof on a 12(b)(1) issue is on the party asserting jurisdiction." United Phosphorus, Ltd. v. Angus Chem. Co., 322 F.3d 942, 946 (7th Cir. 2003)

BACKGROUND

Based primarily in the Midwest, Eagle is an Illinois corporation. It is a full service asset-based contract carrier that specializes in the delivery of time sensitive items for the United States Postal Service ("USPS") and other manufacturing and distribution companies. Eagle has service contracts with the USPS that were in effect at all times pertinent to the present case. The contracts are subject to the Service Contract Act of 1965 ("SCA"), codified at 41 U.S.C. § 351 et seq., which requires Eagle to pay all service employees no less than the minimum salary and fringe benefits dictated by the Register of Wage Determinations. See App. A. to Aff. of Todd D. Pals. The Register of Wage Determinations provides the minimum wage rate per hour as well as information regarding vacation and holiday pay and health, welfare, and pension payments.

Plaintiff Keith McDonald is a resident of Lansing, Illinois, and a former truck driver for Eagle. During his employment, McDonald regularly delivered goods on a designated route from Bolingbrook, Illinois to Chicago, Illinois. McDonald alleges that, as regular pattern and practice, Eagle required drivers to work more than forty hours a week. On average, McDonald alleges that he was typically scheduled to work at least fifty-five hours per week without additional compensation for overtime. Further, McDonald alleges that he and similarly situated colleagues were considered exempt from receiving overtime due to Eagle's willful and/or knowing and/or reckless misclassification of their positions as "local drivers" under the FLSA. Compl. ¶ 1. While McDonald and other "local" drivers were assigned to entirely local intrastate routes, McDonald contends that he and his colleagues had additional duties and responsibilities that did not qualify them as exempt under the FLSA. Compl. ¶ 15-16. Additionally, McDonald asserts quantum meruit and unjust enrichment claims for the benefits of such unpaid work, which were conferred upon and accepted by Eagle. McDonald seeks to recover time-and-a-half compensation for all hours worked in excess of forty hours a week beginning three years prior to the filing of the complaint until judgment is entered in the case. In addition to compensation for overtime, McDonald seeks liquidated damages, as provided in 29 U.S.C. § 216(b), as well as any other equitable relief the court deems just and proper.

ANALYSIS

Eagle contends that the court lacks jurisdiction because the contract between Eagle and the USPS is a federal contract explicitly governed by the administrative procedures available in the SCA. The SCA provides that any work conducted pursuant to federal service contracts must pay wages and fringe benefits consistent with those established by the Secretary of Labor. 41 U.S.C. §§ 351, 358. Those established wage and benefit rates are found in the Secretary's Register of Wage Determinations. The Secretary of Labor has sole jurisdiction to enforce the SCA. 41 U.S.C. §§ 352(b), 353. The SCA does not provide for an explicit or implicit private right of action. Dist. Lodge No. 166, Int'l Ass'n of Machinists & Aerospace Workers, AFL-CIO v. TWA Servs., Inc., 731 F.2d 711, 714-16 (11th Cir. 1984); Miscellaneous Serv. Workers, Drivers & Helpers, Teamsters Local # 427 v. Philco-Ford Corp., 661 F.2d 776, 779-81 (9th Cir. 1981); Oji v. PSC Envtl. Mgmt. Inc., 771 F. Supp. 232, 233-34 (N.D. Ill. 1991). Eagle contends that McDonald is a service employee within the meaning of the SCA and is therefore not entitled to bring a private claim under the FLSA for overtime wages. Instead, Eagle argues that McDonald must file a complaint with the Secretary of Labor and proceed along the administrative channels prescribed by the SCA. Furthermore, Eagle asserts that McDonald's state claims must be dismissed, as no basis for original jurisdiction would exist if the FLSA claim is not proper.

Both parties agree that subject matter jurisdiction in this case, including supplemental jurisdiction for McDonald's quantum meruit and unjust enrichment state claims, is contingent on the propriety of the FLSA claim. Therefore, the issue is whether McDonald may bring a claim under the FLSA for overtime compensation despite the fact that the SCA governs the work he performed. For the reasons stated below, the court concludes that the court has jurisdiction over McDonald's FLSA claim.*fn2

Eagle relies on Nichols v. Mower's News Service, Inc., 492 F. Supp. 258 (D. Vt. 1980), and Oji v. PSC Envtl. Mgmt. Inc., 771 F. Supp. 232, 233-34 (N.D. Ill. 1991), in support of its motion to dismiss. Nichols involved the same fact pattern as here. In a briefly articulated decision, the court concluded that claims for overtime pay are regulated by the SCA and dismissed plaintiff's claim for lack of subject matter jurisdiction. Id. Oji involved a suit by an employee for unpaid retirement benefits clothed as an action by a third-party beneficiary for breach of a contract to pay the benefits. The court inferred that the plaintiff was seeking to recover under a federal government contract subject to the SCA. Oji, 771 F. Supp at 233-34. As such, the plaintiff's claim was under the SCA. Because there is no private right of action under the SCA, the court dismissed the lawsuit. As in Nichols, Eagle argues that consideration of legislative intent underlying the SCA and FLSA is unnecessary because the SCA plainly governs. The argument is unpersuasive in light of substantial authority to the contrary on which plaintiff relies. Indeed, Nichols is an outlier.

In the background, Powell v. U.S. Cartridge Company presents an important parallel. There, munitions workers operating under government contracts controlled by the Walsh-Healey Act sued their employers for overtime compensation under the FLSA.*fn3 339 U.S. 497 (1950). The United States Supreme Court characterized the broad sweeping nature of the FLSA as indicating "congressional awareness that the coverage of the Fair Labor Standards Act overlaps that of other federal legislation affecting labor standards." Powell, 339 U.S. at 518. The Court noted that the FLSA specifically exempts certain employees from coverage but does not exempt employees of private contractors under public contracts. Id. at 517. Thus, the Court held that the Walsh-Healey Act did not preclude application of the FLSA. Id. at 519-20.

The SCA, like the Walsh-Healey Act, also deals with the wage rates of and benefits due to employees of government contractors. Courts have looked to Powell in determining whether the FLSA can supplement the SCA, have concluded that the FLSA and SCA can indeed supplement one another, and have held that the FLSA allows for a private right of action despite the SCA's applicability.

For example, in Lee v. Flightsafety Services Corp., the court affirmed a judgment under the FLSA in favor of firefighters and engineers working under an SCA contract, reasoning from the parallel to Powell and asserting that Congress intended the FLSA to "overlap" with other federal legislation, including the SCA. 20 F.3d 428, 431 (11th Cir. 1994). Similarly, in Masters v. Maryland Management Co., the Fourth Circuit concluded that the SCA can be supplemented by the FLSA where they are not in direct conflict. 493 F.2d 1329, 1332-33 (4th Cir. 1974). The court affirmed the judgment in favor of the employees, reasoning that because the overtime computation rate was the same under both the FLSA and the SCA, the two acts did not conflict, permitting the employees to file a suit under the FLSA. Id.; see also Mersnick v. USProtect Corp., No. C-06-03993 RMW, 2006 WL 3734396, at *3-5 (N.D. Cal. Dec. 18, 2006) (FLSA overtime claim was not precluded by the SCA or a settlement entered into between the Department of Labor and the plaintiff's employer under the SCA regarding unpaid compensation); Koren v. Martin Marietta Services, Inc., 997 F. Supp. 196, 211, 214-17 (D.P.R. 1998) (summary judgment denied on FLSA claims because the SCA did not impliedly repeal the FLSA's private enforcement provisions for unpaid overtime compensation); Brown v. Luk, Inc.,No. 95-CV-1780, 1996 WL 280831 (N.D.N.Y. May 10, ...


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