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Nicks v. Koch Meat Co., Inc.

United States District Court, N.D. Illinois, Eastern Division

September 18, 2017

JIMMY R. NICKS and JAMES EARL PATRICK, individually and on behalf of all persons similarly situated, Plaintiffs,
v.
KOCH MEAT CO., INC., d/b/a KOCH FOODS, KOCH FOODS OF MISSISSIPPI, LLC, and JET POULTRY SERVICES, INC., Defendants.

          MEMORANDUM OPINION AND ORDER

          AMY J. ST. EVE, DISTRICT COURT JUDGE.

         On December 22, 2016, Plaintiffs Jimmy R. Nicks (“Nicks”) and James Earl Patrick (“Patrick”), individually and on behalf of all persons similarly situated, filed an Amended Collective Class Action Complaint against Defendants Koch Foods, Inc. (“Koch Foods”), Koch Meat Co., Inc. d/b/a Koch Poultry Co. (“Koch Meat”), Koch Foods of Mississippi (“Koch Foods MS”), JET Poultry Services, Inc. (“JET”), and several other Koch subsidiaries operating in Georgia, Alabama, and Tennessee (“AL-TN-GA Koch Defendants”), collectively “Defendants,” seeking relief under the Fair Labor Standards Act of 1938, 29 U.S.C. § 201, et seq. (“FLSA”). (R. 99.) The Court denied Defendants’ motion to dismiss on May 15, 2017, and Plaintiffs have now moved for conditional certification and authorization to facilitate notice pursuant to 29 U.S.C. § 216(b). (R. 136.)

         For the following reasons, the Court grants Plaintiffs’ motion.

         PROCEDURAL HISTORY

         Plaintiffs initially filed a collective action against Defendants on June 21, 2016 on behalf of all individuals employed by Defendants as members of live-haul, chicken catching crews in the United States. (R. 1, Compl. ¶ 14.) JET filed a motion to dismiss on August 3, 2016, and Koch Foods MS filed a motion to dismiss on August 4, 2016. Both motions claimed the Court should dismiss this case for lack of personal jurisdiction and alternatively, for improper venue. On October 27, 2016, the Court denied Koch Foods MS’s motion to dismiss without prejudice and granted Plaintiffs permission to conduct limited jurisdictional discovery related to the Koch Defendants’ corporate structure, operations, and internal governance structure. (R. 82, Mem. Op. and Order 4.) The Court reserved opinion on the Koch Defendants’ venue challenge under 28 U.S.C. 1391(b)(1) and granted limited venue discovery relating to (b)(2). (Id. 7.) In compliance with the Court’s order, Plaintiffs ordered discovery on the Koch Defendants and conducted relevant depositions.

         On December 19, 2016, Plaintiffs and JET entered into a settlement agreement. (R. 101, Ex. 1, Settlement Agreement with JET.) As part of the settlement, JET agreed that the Court would retain jurisdiction with respect to the enforcement of the settlement terms and that JET would “submit to the jurisdiction of the Court for purposes of interpreting, implementing, and enforcing the settlement.” (Id. ¶ 14.) On January 11, 2017, the Court approved the settlement and dismissed the claims against JET with prejudice. (R. 105.)

         Based on the limited jurisdictional and venue discovery, Plaintiffs filed the First Amended Complaint, in which Plaintiffs added certain Koch Defendants and modified their allegations. (R. 9, Am. Compl.) The Koch Defendants subsequently filed a motion to dismiss, or alternatively transfer, and as noted above, the Court denied that motion. (R. 31, May 15, 2017 Order.)

         BACKGROUND

         In considering this motion, the Court presumes familiarity with the background of this action as set forth in the May 15, 2017 Order and does not recite a detailed background here. The Court will, however, provide a factual background as it pertains to Plaintiffs’ allegations that they and the other potential claimants are similarly situated.

         Plaintiffs were “previously employed to catch and cage Koch’s chickens as member[s] of a live-haul chicken catching crew[.]” (Am. Compl. ¶¶ 10-11.) According to Plaintiffs, Koch Foods[1] has a policy and practice of failing to pay overtime premiums and minimum wage to the individuals, like Plaintiffs, who catch chickens at Koch’s subsidiary farms in Mississippi, Alabama, Georgia, and Tennessee. (Id. ¶ 2.)

         I. Koch Corporate Structure

         Plaintiffs allege that although the Koch Defendants have organized themselves as several separately registered companies, these companies are unified in interest and ownership. (Id. ¶ 14.) Koch Foods is the parent company of the Koch LLC subsidiaries, including Koch Meat and the eight separate divisions, each of which is referred to as a “Complex,” that handle live growing and processing of chickens for Koch in Mississippi, Alabama, Georgia, and Tennessee. (Id. ¶¶ 15, 27.) Koch Meat, the original Koch entity that preceded the creation of Koch Foods, directly pays the officers, directors, and other employees of Koch Foods, as well as the managers of the eight Complexes. (Id. ¶ 28.)

         The eight Koch Complexes are each registered as limited liability companies (“LLCs”) in the state in which they are located, with facilities in-state, but with a corporate headquarters in Illinois. (Id. ¶¶ 29-50.)[2] The Complexes are organized into an Eastern and Western Region, and each Region has a Vice President (“VP”) who reports directly to the President and the Chief Operating Officer of Koch Foods, both of whom are located at Koch’s Corporate Headquarters in Illinois. (Id.) Plaintiffs allege that the finances of each Complex are “consolidated with the ultimate goal of increasing the profitability of the entity at a whole.” (Id. ¶ 16.) Plaintiffs allege that at each Complex there is a “Foods” entity that processes the chickens and a “Farms” entity that grows the chickens, although the entities have the same management and reporting structure. (Id. ¶ 18.) The Foods entities pay all employees at a given Complex, regardless of whether the employee works in the grow-out operation or the chicken processing operation. (Id.)

         Each Complex has a Complex Manager, who oversees the live production and processing operations at that Complex. (Id. ¶ 73.) The Complex Managers report to the corresponding Eastern or Western Region VPs, who are responsible for managing the Complexes’ operations, including reducing the Complexes’ labor costs when possible. (Id. ¶¶ 73-74.) The Region VPs are Koch Foods employees who oversee multiple Koch subsidiaries. (Id. ¶ 74.) Plaintiffs allege that the Complex employees must abide by the directives of the Region VPs. (Id. ¶ 75.) Koch Foods, for example, holds weekly conference calls, led by Koch Foods Cost Controller, Wayne Brantley, in which each Complex provides operational reports to the COO and the Region Vps. (Id.) Each Complex also has a Controller, who is responsible for maintaining the books and records for the Complex and reporting the financial results to Koch Foods CFO Lance Buckert (“Buckert”) at the end of every month. (Id. ¶ 76.) The Koch Defendants also share key managerial employees, such as Cost Controller, Director of Purchasing, and Senior Director Quality Assurance. (Id. ¶ 77.)

         II. Koch Chicken Catching Operations

         Koch Foods produces poultry products for human consumption worldwide and thus requires large quantities of chickens for its processing operations. (Id. ¶ 63.) Koch Foods hatches chicken in Koch-owned hatcheries and ships them to poultry growers. (Id. ¶ 65.) Koch chickens are all raised “cage free,” and Koch Foods only retrieves the chickens for processing once they reach a marketable age and size. (Id. ¶ 69.) Plaintiffs allege that Koch Foods, through each of the Koch Complexes, employs crews of chicken-catchers like Plaintiffs who operate in substantially the same manner, regardless of the Complex at which they work. (Id. ¶¶ 87, 90.) According to Plaintiffs, the live-haul catching crews are critical to the Koch Defendants’ chicken processing business and allow it to produce large-scale poultry products for interstate distribution. (Id. ¶ 88.) Each live-haul crew consists of eight to twelve chicken-catchers, one or two forklift operators, and a crew leader. (Id. ¶ 89.)

         Plaintiffs allege that prior to 2012, the Koch Defendants used a combination of direct employee chicken catching crews and crews provided by third party staffing companies, but the services provided by both types of crews was identical. (Id. ¶¶ 92-93.) In the 2012 to 2013 time period, the Koch Defendants began exclusively using third party contractors to staff its live-haul crews because they were having difficulty maintaining a labor force to serve on the chicken catching crews. (Id. ¶¶ 55, 94.) Koch Foods COO Mark Kaminsky and the Region VPs approved this decision. (Id. ¶ 95.) Koch Foods has engaged 11 contractors, but there is significant overlap in the ownership of many of those contractors,[3] and all the contractors provide substantially similar services regardless of the Complex with whom they are contracting. (R. 138, Ex. A, Keyes Dep. 163: 24 – 164: 10.) Plaintiffs claim that Koch Foods, through the subsidiary Complexes, pays the third party contractors, including JET,[4] based on the number of chickens caught, and the third party contractors in turn pay the members of the chicken catching crews. (Am. Compl. ¶¶ 56, 100-02; R. 138, Exs. L-V, Contractor Agreements.) Plaintiffs further allege that Koch Foods does not pay the third party contractors enough for them to pay their employees minimum wage and overtime pay and still operate profitably. (Id. ¶ 103.)

         Plaintiffs allege that although the Koch Defendants use third party staffing contractors for their live-haul crews, the contractors and Koch are joint employers of Plaintiffs and other members of the crews. (Id. ¶ 104.) Plaintiffs claim that the Koch Defendants maintain operational control over the day-to-day functions of Plaintiffs and every aspect of the chicken catching operation. (Id. ¶¶ 105, 108.) Plaintiffs travel to Koch Foods’ farms to capture the chickens and they place them in Koch cages for transport to Koch Foods’ processing plants at each of the Koch Complexes. (Id. ¶ 106.) Plaintiffs allege that JET and the other third party staffing companies merely provide the “human labor,” but the equipment and materials they use, as well as the chickens they catch, belong to Koch. (Id. ¶¶ 109-10.) The staffing companies transport the crew members from their homes to the Koch farms, and after the shift is complete, the companies drop off the crew members at their homes. (Id. ¶ 113.) The pick-up and drop-off process can take up to two hours each way, and the Koch Defendants set the work locations and shift durations. (Id.) Plaintiffs allege that each contractor has a similar agreement with Koch to catch and load chickens pursuant to scheduled Koch provides. (Id. ¶ 109; Keyes Dep. 165: 1-7; Contractor Agreements.)

         According to Plaintiffs, the Koch Defendants also largely control the rate and method of payment to Plaintiffs at each of the Complexes by paying the staffing companies on a piece rate basis with such thin margins that it is impossible for the companies to pay overtime and minimum wage. (Id. ¶ 114.) The Koch Defendants maintain the chicken catching records upon which they base their payments to the staffing companies, and the Koch Defendants determine the work schedules and conditions of Plaintiffs’ employment. (Id. ¶¶ 115-16; Keyes Dep. 120: 12-21, 108: 4-15; R. 138 Berman Dep. 6: 10 – 7: 4.) The Live Haul Operations Manager at each Complex supervises the work of the live-haul crews and dictates their daily schedules and working conditions as well as the number of chickens they need to catch. (Am. Compl. ¶ 117; Keyes Dep. 106: 22 – 107: 10.) Koch employees also set the growing and catching requirements as directed by Koch Foods in Illinois. (Am. Compl. ¶ 118.) Specifically, Koch Foods dictates the times at which chickens are put in cages and how many chickens are put in cages based on specific factors related to Koch Foods’ processing plants that Koch Foods’ employees monitor. (Id. ¶¶ 119-20; Keys Dep. 108: 4-15.) The Koch Complexes also employ an internal auditor and an independent auditor who visit the work sites to ensure that the live-haul crews are adhering to Koch’s directives and if there are any aberrations, the Quality Control department at Koch Foods or the Koch Complex notifies the staffing companies that the crews must follow Koch’s directives. (Am. Compl. ¶¶ 122-23.) The Koch Complexes also employ Live Haul Supervisors on-site who oversee the catching practices and ensure that the live-haul crews are following Koch’s directives. (Id. ¶ 124.) Both the Koch Defendants and the third party staffing companies retain the right to hire and terminate live-haul crew members. (Id. ¶ 125.)

         Plaintiffs allege that regardless of the Complex or state, the live-haul crews’ work is uniform. (Id. ¶ 126.) According to one Koch Live Production Manager, “there is only one way to catch a chicken.” (Keyes Dep. 156: 11.) On a typical work day, vans pick up the crews at their respective homes on a route that Koch Foods and the Koch Complexes determine based on the availability of Koch’s processing plans. (Am. Compl. ¶ 113, 126.) The vans take the crew members several miles away from their homes to farms where they spend the day catching chickens. (Id.) Their work requires no specialized training, is unskilled, repetitive work, and does not involve raising poultry. (Id. ¶¶ 127-28.) Live-haul crews typically work ten to twelve hours per day, five to six days per week, catching tens of thousands of chickens each day. (Id. ¶¶ 129-30.) Once they place the chickens in the cages, the crew forklift operator moves the cages onto trucks owned by the Koch Defendants for transport to the processing plant at a Koch Complex. (Id. ¶ 131; R. 138, Ex. C, Mitchell Decl. ¶ 5; Ex. D. Burkes Decl. ¶ 7.) The Koch Defendants own the forklifts and cages used by the crews and they also own the chickens, the chicken feed, and the trucks used to distribute the chicken feed. (Am. Compl. ¶¶ 132-33; Mitchell Decl. ¶ 5; Burkes Decl. ¶ 7.)

         III. Pay-Related Allegations

         Plaintiffs allege that all crew members are non-exempt employees paid on a piece-rate basis per 1,000 chickens caught. (Id. ¶ 134.) According to Plaintiffs, Defendants require crew members to work hours in excess of 40 hours per week, but do not pay them overtime or compensate them for travel time or time spent waiting for the Koch Defendants’ machines to become available. (Id. ¶¶ 136-37; Mitchell Decl. ¶¶ 7-8; Burkes Decl. ¶¶ 7-8.) Plaintiffs contend that Defendants do not properly record the number of hours worked by crew members, and accordingly, do not pay crew members minimum wage or pay them overtime premium for hours worked over 40 hours per work. (Am. Compl. ¶¶ 138-40; Mitchell Decl. ¶¶ 7-8; Burkes Decl. ¶¶ 7-8.) The Koch Defendants have not advised the third party staffing companies that they are obligated to pay overtime and minimum wage, and in fact, the Koch Defendants’ negotiated prices do not account for minimum wage or overtime costs. (Am. Compl. ¶¶ 145-46.) As a result, Plaintiffs allege that Defendants have violated the FLSA provisions relating to minimum wage and overtime pay. (Id. ¶¶ 167, 182.)

         LEGAL STANDARD

         I. FLSA Collective Actions-29 ...


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