Valenzuela v. Ruby J Farms LLC ( 2023 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 9 Robert A Valenzuela, No. CV-21-00442-TUC-JGZ 10 Plaintiff, ORDER AND JUDGMENT 11 v. 12 Ruby J Farms LLC, et al., 13 Defendants. 14 15 This case involves a dispute over the nature of the work relationship of Plaintiff 16 Robert Valenzuela and Defendants Ruby J Farms LLC (RJF) and Anthony Comella. 17 Valenzuela alleges Defendants owe him unpaid compensation and wages; RJF alleges 18 Valenzuela wrongfully kept possession of a Rolex watch owned by RJF. The Court held 19 a jury trial on August 21–24, 2023. Prior to trial, the parties stipulated to the Court 20 determining the nature of Valenzuela’s work relationship with Defendants. (Doc. 86-2.) 21 This stipulation required the Court to decide whether Valenzuela and Defendants had an 22 employer-employee relationship under the Arizona Wage Act, Arizona Minimum Wage 23 Act, and Fair Labor Standards Act. (See id.) 24 This Order sets forth the Court’s findings of fact and conclusions of law. The 25 Court designates its findings of fact as “Findings,” its conclusions of law as 26 “Conclusions,” and mixed questions of fact and law as “Findings and Conclusions.” The 27 Court based its decision on all of the testimony and exhibits admitted during trial and the 28 Court’s evaluation of the witnesses’ credibility. 1 I. Findings 2 Around September 2020, Valenzuela responded to RJF’s avocado salesman job 3 posting. After this job application, Valenzuela met in person with Anthony Comella, 4 informed Comella that he did not want to sell avocadoes, and proposed bringing a 5 watermelon program to RJF. Valenzuela and Anthony Comella reached an oral 6 agreement regarding work Valenzuela would perform for RJF. This agreement was never 7 articulated in writing. Around October 2020, Valenzuela began performing work for RJF 8 and Comella related to the procurement and sale of watermelons. RJF is a business that 9 primarily brokers produce deals. The parties also stipulated to the following facts about 10 RJF and Comella: 11 a. At all relevant times, Anthony J. Comella managed Ruby J. Farms, LLC, acted as its chief executive officer, exercised significant 12 economic control over Ruby J. Farms, LLC, and was the decision- maker with respect to all actions by the company that are at issue. 13 b. Mr. Comella is the Trustee of the Comella Family Trust, the sole 14 owner of the Ruby J. Farms, LLC, and therefore exercises substantial economic and other control over the company in that role 15 as well. 16 (Doc. 70 at 7.) 17 At the time of Valenzuela and Comella’s agreement, RJF did not have any 18 employees selling watermelons. Valenzuela had decades of experience selling or 19 procuring watermelons. At RJF, Valenzuela’s title was Director of Sales and 20 Procurement. RJF provided Valenzuela with a company business card, email address, and 21 credit card. RJF updated its information with Blue Book Services, which listed 22 Valenzuela as connected with the company in October 2020. RJF and Comella did not 23 provide Valenzuela with a company vehicle. Valenzuela charged some work-related 24 expenses to his company credit card and paid for other expenses out of pocket, which he 25 expected RJF to reimburse him for at a later time. Comella allowed Valenzuela to use 26 RJF employees and contractors in the course of his work. Comella also hired additional 27 employees recommended by Valenzuela to support the watermelon program. 28 Valenzuela and Comella agreed Valenzuela would be compensated purely on 1 commission; Valenzuela would not receive a salary or hourly wage. Throughout the 2 duration of his work relationship with RJF, Valenzuela received at least one 1099 Form 3 and nine checks from RJF. RJF issued these checks for draws on Valenzuela’s 4 commissions and expense reimbursements. All checks were made out to Valenzuela’s 5 company, Tri-Val LLC. Valenzuela did not request and receive the draws on his 6 commission until he believed he had earned his commission and RJF began receiving 7 revenue for the watermelons he sold. 8 During the first watermelon project, Valenzuela traveled extensively for work. 9 RJF and Comella did not regularly tell Valenzuela what hours to work, where to travel 10 for business, or what growers or buyers to call or visit. Comella provided Valenzuela 11 with directions for negotiations with growers and instructed Valenzuela not to complete 12 certain tasks related to the watermelon program. Valenzuela worked exclusively for RJF 13 and Comella and conducted no other business deals outside his work for them. RJF and 14 Comella directed Valenzuela to execute contracts with growers in Mexico on behalf of 15 RJF. RJF provided Valenzuela with the contract forms. Comella had final decision- 16 making authority on all contracts and any advances paid to growers. Comella also 17 instructed Valenzuela to complete specific tasks related to produce deals outside the 18 watermelon program. 19 The first project in the watermelon program ended around May 2021 when 20 Valenzuela no longer had watermelons to procure or sell. Comella knew this and asked 21 Valenzuela to work on RJF’s Yuma-based watermelon project. Comella also asked 22 Valenzuela to invest money in this project. Valenzuela agreed to work on the project but 23 declined to invest any money in it. While working on the project, Valenzuela temporarily 24 relocated to Yuma and rented an apartment there. Comella knew this, approved of it, and 25 communicated regularly with Valenzuela. When in Yuma, Valenzuela worked at the 26 farms which RJF had partnered with to grow the watermelons and RJF’s warehouse 27 space. 28 Comella personally supervised Valenzuela’s work on the Yuma project. Comella 1 instructed Valenzuela to increase acreage, order seed, wait until specific times to sell 2 watermelons, communicate messages to other RJF workers, stop hiring trucks, stop 3 selling to a specific buyer, and provide Comella with daily updates. Comella also directed 4 Valenzuela on what to say and how to interact with a customer and a grower. On June 25, 5 2021, Comella dictated an email sent by Kara Garcia, which provided Valenzuela with 6 specific procedures to follow for the Yuma project. Comella also personally told 7 Valenzuela he would terminate their work relationship if Valenzuela refused to do things 8 the way Comella liked them done. On September 1, 2023, at the end of the Yuma project, 9 Comella sent an email to Valenzuela expressing Comella’s intention to continue working 10 with Valenzuela. At least two RJF employees who worked with Valenzuela believed 11 Valenzuela was a RJF employee. 12 II. Findings and Conclusions 13 RJF and Comella exercised significant authority over the manner in which 14 Valenzuela worked by controlling Valenzuela’s advances to growers in Mexico, contract 15 execution, activities in Yuma, and interactions when representing RJF. Valenzuela’s 16 occupation procuring and selling watermelons involved a substantial degree of unique 17 experience and skill. Valenzuela’s occupation was an integral part of Comella and RJF’s 18 business: Valenzuela was RJF’s Director of Sales and Procurement, RJF’s only 19 watermelon salesperson, and the primary individual updating Comella from Yuma. RJF 20 and Comella supplied most of Valenzuela’s materials and place of work by providing 21 Valenzuela with contract templates, investment capital for all projects, employees and 22 helpers to assist Valenzuela, a company credit card, a company email address, a desk in 23 RJF’s Nogales office, and warehouse space in Yuma. The duration of employment was 24 open-ended and had a moderate degree of permanence. The pure commission-based 25 method in which Valenzuela received payment provided him with an opportunity for 26 significant profit and loss depending upon his managerial skill. Comella did not believe 27 Valenzuela was an employee of RJF or Comella. Even so, Comella and RJF exercised 28 significant control over the manner in which Valenzuela worked. This is consistent with 1 the community belief as expressed by other RJF employees, who believed Valenzuela 2 was in fact an employee. 3 III. Conclusion 4 Valenzuela asserts claims under the Arizona Wage Act (AWA), Arizona 5 Minimum Wage Act (AMWA), and Fair Labor Standards Act (FLSA). (Doc. 70 at 1–2.) 6 A. AWA and AMWA Claims 7 Valenzuela has met his burden of showing he was an employee of RJF under the 8 AWA and an employee of RJF and Comella under the AMWA. Arizona courts consider a 9 variety of factors when determining whether a person was an employee, including: 10 1. The extent of control exercised by the master over details of the 11 work and the degree of supervision; 12 2. The distinct nature of the worker’s business; 13 3. Specialization or skilled occupation; 14 4. Materials and place of work; 15 5. Duration of employment; 16 6. Method of payment; 17 7. Relationship of work done to the regular business of the employer; 18 8. Belief of the parties. 19 Santiago v. Phoenix Newspapers, Inc., 794 P.2d 138, 142 (Ariz. 1990). In addition to 20 these nonexhaustive factors, Arizona courts also consider community belief and custom. 21 See id. at 145 (citing Restatement (Second) of Agency § 220 cmt. h (Am. L. Inst. 1958)). 22 All factors favor finding Valenzuela an employee except for the skilled-occupation, 23 method-of-payment, and belief-of-the-parties factors. The factors taken together and the 24 economic reality of the circumstances, including Comella’s substantial extent of control 25 and threat to terminate Valenzuela if he did not follow Comella’s directions, support the 26 finding of an employer-employee relationship. 27 Further, Comella and RJF fall under the AMWA’s broad definition of employer. 28 See A.R.S. § 23-362(B) (“‘Employer’ includes any . . . individual or other entity acting 1 directly or indirectly in the interest of an employer in relation to an employee.”). Because 2 of the AWA’s narrower definition of an employer, only RJF is an employer of 3 Valenzuela under the AWA. See A.R.S. § 23-350(3) (“‘Employer’ means any individual 4 . . . employing any person.”); Rosen v. Fasttrak Foods LLC, No. CV-19-05292-PHX- 5 DWL, 2021 WL 2981590, at *5 (D. Ariz. July 15, 2021) (“The term ‘employer’ is 6 defined much more narrowly under AWA than it is under the FLSA or AMWA.”); 7 Channel v. Home Mortg., Inc., No. CV 03-00100-PHX-ROS, 2005 WL 8160525, at *5 8 (D. Ariz. Sept. 21, 2005) (“There is nothing in [the AWA’s definition of employer] 9 suggesting that where an ‘employer’ is a corporation, the definition is intended to 10 encompass both the corporation and individual employees within the corporation 11 authorized to set an employee’s hours and pay wages.”). 12 B. Fair Labor Standards Act 13 Valenzuela has met his burden of showing he was an employee of RJF and 14 Comella under the FLSA. Under the FLSA, courts consider the following factors when 15 determining whether an individual is an employee: 16 1) the degree of the alleged employer’s right to control the manner in which the work is to be performed; 17 2) the alleged employee’s opportunity for profit or loss depending upon his 18 managerial skill; 19 3) the alleged employee’s investment in equipment or materials required for his task, or his employment of helpers; 20 4) whether the service rendered requires a special skill; 21 5) the degree of permanence of the working relationship; and 22 6) whether the service rendered is an integral part of the alleged employer’s 23 business. 24 Real v. Driscoll Strawberry Assocs., Inc., 603 F.2d 748, 754 (9th Cir. 1979). All factors 25 favor finding Valenzuela an employee except for the opportunity-for-profit and special- 26 skill factors. The economic reality of these circumstances, including Comella’s ability to 27 terminate Valenzuela and his control over the manner in which Valenzuela worked, 28 support a finding that RJF and Comella had an employer-employee relationship with Valenzuela. See Gilbreath v. Cutter Biological, Inc., 931 F.2d 1320, 1324 (9th Cir. 1991) 2|| (existence of an employer-employee relationship turns on whether the alleged employer could hire and fire the employee, supervised and controlled the employee, determined 4|| payment, and maintained employment records); Lambert v. Ackerley, 180 F.3d 997, 1012 5|| (9th Cir. 1999) (“Where an individual exercises ‘control over the nature and structure of 6 || the employment relationship,’ or “economic control’ over the relationship, that individual || 1s an employer within the meaning of the [FLSA].”). 8 Dated this 24th day of August, 2023. 9 i /, Jennifer G. Zi 12 United States District Judge 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 -7-