Sally Hatfield v. Prime Staff Holdings, LLC ( 2016 )

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[DO NOT PUBLISH]
IN THE UNITED STATES COURT OF APPEALS
FOR THE ELEVENTH CIRCUIT
________________________
No. 15-12280
________________________
D.C. Docket No. 5:11-cv-00416-WTH-PRL
SALLY HATFIELD,
and similarly situated individuals,
TRACI IVELENE GLAUSIER,
And similarly situated individuals,
LAUREN MCCLAIN,
COELEEN BENDER,
KENNETH KEYES, et al.,
Plaintiffs - Appellees,
versus
A+ NURSETEMPS, INC.,
a Florida for-profit corporation
d.b.a. Nursetemps, Inc.,
Defendant,
PRIME STAFF HOLDINGS, LLC,
STAFF AMERICA, INC.,
Defendants - Appellants.
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________________________
Appeal from the United States District Court
for the Middle District of Florida
________________________
(June 3, 2016)
Before HULL, JULIE CARNES, and BARKSDALE, * Circuit Judges.
PER CURIAM:**
For this action by six nurses (the nurses; subsequently, Sally Hatfield was
voluntarily dismissed), at issue is whether, under Federal Rule of Civil Procedure
69(a)(1) (procedure on execution and proceedings supplementary to, and in aid of,
judgment or execution), a judgment pursuant to the Fair Labor Standards Act
(FLSA), 29 U.S.C. §§ 201–19, against A+ Nursetemps, Inc., can be enforced,
under a theory of FLSA successor liability, against Prime Staff Holdings, LLC, and
Staff America, Inc. (appellants). Michael Arthur owned A+ Nursetemps while it
was operating, and presently owns Prime Staff Holdings, which he acquired after
this action was filed, and then used to acquire Staff America. A+ Nursetemps and
Staff America are nurse registry and staffing agencies that refer nurses, such as
plaintiffs-appellees, as shift workers to healthcare providers. Claiming A+
*
Honorable Rhesa Hawkins Barksdale, United States Circuit Judge for the Fifth Circuit,
sitting by designation.
** Pursuant to 11TH CIRC. R. 36-2, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 11TH CIR.
R. 36, I.O.P.7.
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Nursetemps did not transfer assets to them, appellants maintain the judgment
against A+ Nursetemps cannot be enforced against them. It can, however,
because, under federal common law for the FLSA, appellants are successors of A+
Nursetemps. AFFIRMED.
I.
In two actions, judgments were entered against A+ Nursetemps for failing to
pay overtime compensation under the FLSA to its nurses, who, the district court
concluded, were properly classified as employees. The first judgment included
nearly $300,000 in unpaid wages and liquidated damages, and was awarded in
May 2013 to 148 of A+ Nursetemps’ adjudged-employees in a Department of
Labor (DOL) action filed in May 2007. Harris v. A+ Nursetemps, Inc., No. 5:07-
cv-182-Oc-10PRL (M.D. Fla. 21 May 2013). Although it had been resolved by a
consent judgment in November 2008, it was necessary for the DOL in May 2012 to
move for a contempt citation to enforce the judgment.
In the second action, which underlies this appeal, nurses not included in the DOL
action filed this action in Florida state court in June 2011. Hatfield v. A+
Nursetemps, Inc., No. 5:11-cv-416-Oc-10PRL (M.D. Fla. 20 June 2013). A+
Nursetemps removed it to district court, which exercised 28 U.S.C. § 1331 federal-
question jurisdiction under the FLSA. Nearly $75,000 in unpaid wages and
liquidated damages was awarded by summary judgment to the nurses on 20 June
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2013. That August, the nurses were also awarded, by default judgment,
approximately $70,000 in attorney’s fees and costs. A+ Nursetemps did not appeal
either award.
The nurses, however, were unable to satisfy the judgment against A+
Nursetemps. Therefore, as discussed infra, in November 2013, they successfully
moved, pursuant to rule 69, to implead as successors-in-interest of A+ Nursetemps,
both Prime Staff Holdings and Staff America. Those two entities were acquired by
Arthur shortly after this action was filed; and A+ Nursetemps ceased operations
shortly before the judgments were issued in the DOL, and this, action. Arthur was
the only witness at the bench trial for the rule 69 proceeding. He testified, inter
alia, that: another judgment was rendered against A+ Nursetemps in January
2013, separate from the DOL judgment; and the subsequent collection efforts for
the January 2013 judgment resulted in A+ Nursetemps’ accounts being garnished.
Judgment was awarded the nurses. The court, relying upon federal common
law fashioned under the FLSA, based its decision on successor liability.
II.
For the following reasons, FLSA successor liability was a viable theory, and
judgment was rendered properly against appellants on that basis.
A.
1.
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In relevant part, rule 69 provides: “The procedure on execution—and in
proceedings supplementary to and in aid of judgment or execution—must accord
with the procedure of the state where the court is located, but a federal statute
governs to the extent it applies”. Fed. R. Civ. P. 69(a)(1). Along that line, state-
law procedures govern, unless a federal statute explicitly provides the procedures
for execution of judgments. See James Wm. Moore et al., 13-69 Moore’s Federal
Practice, Civil § 69.03 (2015); see also Branch Banking & Tr. Co. v. Ramsey, 559
F. App’x 919, 923–24 (11th Cir. 2014) (determining a specific provision of 28
U.S.C. § 566 governed the procedure for a federal writ of execution; accordingly,
federal law applied); United States v. Gianelli, 543 F.3d 1178, 1182 (9th Cir. 2008)
(applying federal law pursuant to the Federal Debt Collection Procedures Act, 28
U.S.C. § 3001, which “provides the exclusive civil procedures for the United
States to . . . recover a judgment on a debt”); F.T.C. v. Namer, 481 F. App’x 958,
959–60 (5th Cir. 2012) (same). The FLSA does not provide such procedures.
Therefore, Florida procedural law applies for execution of the judgment at issue.
Toward that end, rule 69 was adopted in 1937 as part of the original Federal
Rules of Civil Procedure, and largely “follow[ed] in substance” 28 U.S.C. § 727
(superseded). See Fed. R. Civ. P. 69 advisory committee’s note to subdivision (a).
Section 727 provided, inter alia, that state rules in effect in 1872 were applicable
in federal court. (“The party recovering a judgment . . . in any common-law cause
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in any district court, shall be entitled to . . . reach the property of the judgment
debtor, as were provided, on June 1, 1872, in like causes by the laws of the State in
which such court is held[.]” Act of June 1, 1872, c. 255, 17 Stat. 197, codified at
28 U.S.C. § 727 (superseded); Charles A. Wright et al., 12 Federal Practice &
Procedure § 3011 n.3 (2d ed.).) Concerning such supplementary proceedings
pursuant to rule 69, “[t]he Advisory Committee believed that to develop a set of
nationally uniform rules . . . would have been impractical and near impossible
since the rules would have to be relatively detailed to meet the diverse situations in
the various states”. Moore et al., § 69 app. 102. Moreover, some States had
existing rules for supplementary proceedings, reducing the need for a federal
standard. Id.
Relevant here, Florida Statute § 56.29(1), which is part of the procedural authority
relied on by the nurses for the rule 69 proceeding, entitles a judgment-holder to
“proceedings supplementary to execution” if they: (1) hold an unsatisfied
judgment; and (2) file a motion and affidavit stating the execution of the judgment
is valid and outstanding, as well as identify the issuing court, case number, and
unsatisfied amount. In such a proceeding, a Florida “court may order any property
of the judgment debtor, not exempt from execution, in the hands of any person, or
any property, debt, or other obligation due to the judgment debtor, to be applied
toward the satisfaction of the judgment debt”. § 56.29(5). A court may also enter
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“orders necessary or proper to subject property or property rights of any judgment
debtor to execution, and including entry of money judgments against any
impleaded defendant irrespective of whether such defendant has retained the
property”. § 56.29(9).
2.
When the nurses could not execute the judgment against A+ Nursetemps, which
had ceased operating before judgment was rendered, they moved to implead
Arthur’s other two companies, Prime Staff Holdings and Staff America. Citing
rule 69(a)(1), Florida Rule of Civil Procedure 1.190(d), and Florida Statute §
56.29(1), they maintained they were entitled to execute the judgment against
Arthur’s two newer companies. In that regard, relying on federal common law for
the FLSA, they claimed Prime Staff Holdings and Staff America were successor
entities to A+ Nursetemps.
Neither Arthur nor A+ Nursetemps responded to the impleader motion. In granting
it, the court concluded: the motion complied with rule 69 and Florida Statute §
56.29; and appellants “had notice of this lawsuit through their principal, Michael
Arthur”. Order, Hatfield v. A+ Nursetemps, Inc., No. 5:11-cv-416-Oc-10PRL, at
*3 (M.D. Fla. 12 Dec. 2013).
Thereafter, appellants moved, inter alia, for summary judgment, contending: the
nurses failed to establish appellants retained transferred assets from A+
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Nursetemps; and this was required for successor liability. The court denied
summary judgment, concluding: “Although the Eleventh Circuit . . . has not yet
addressed the question . . . , the Parties appear to agree, at least for purposes of
ruling on summary judgment, that successor liability is a viable doctrine applicable
to FLSA claims for unpaid overtime compensation”. Order Denying Summary
Judgment, Hatfield v. A+ Nursetemps, Inc., No. 5:11-cv-416-Oc-10PRL, at *5
(M.D. Fla. 16 Dec. 2014).
Following that denial, the parties filed a joint pretrial statement, which
provided: “No merger or transfer of assets has occurred involving A+ Nursetemps,
Inc. and Prime or [Staff America]”. Appellants based a renewed motion to dismiss
in large part on that statement. In response, the nurses, inter alia, stated that, after
filing the pretrial statement, they discovered legal authority showing an asset
transfer of shared goodwill, customer lists, employees, and management took
place; and, relying upon that authority, they moved immediately to supplement
their opposition to the renewed motion to dismiss.
At the bench trial, the majority of A+ Nursetemps’ former employees were
shown to be employed by Staff America. The court concluded Prime Staff
Holdings and Staff America were successors-in-interest, under federal law, of A+
Nursetemps, and, therefore, the judgment could be enforced against them.
Glausier v. A+ Nursetemps, Inc., No. 5:11-cv-Oc-416-10PRL, 2015 WL 2020332,
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at *5–6 (M.D. Fla. 1 May 2015). In so doing, the court stated it had “no reason to
believe that the Eleventh Circuit would choose” not to apply federal-common-law
successor liability in this FLSA action. Id. at *5.
B.
At issue is whether, based on the bench trial for the rule 69 proceeding, the
judgment may be enforced against Prime Staff Holdings and Staff America under a
FLSA common-law theory of successor liability. Along that line, bench trial
conclusions of law are reviewed de novo; factual findings, for clear error. E.g.,
Tartell v. S. Fla. Sinus & Allergy Ctr., Inc., 790 F.3d 1253, 1257 (11th Cir. 2015).
“A factual finding is clearly erroneous if, after viewing all the evidence”, the court
is “left with the definite and firm conviction” an error was made. Id. (internal
quotation marks omitted).
In contesting successor liability, Prime Staff Holdings and Staff America maintain
“Staff America did not assume or absorb any business assets from A+
Nursetemps”, or otherwise receive the assets of that company via a sale, merger, or
acquisition. In addition, they assert the record does not support the court’s
concluding that a transfer of assets occurred.
In response, the nurses maintain FLSA successor liability applies, regardless of
whether a transfer of assets occurred. In that regard, they claim the federal-
common-law standard, as applied by the district court, was satisfied; and,
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therefore, the court did not err in concluding the judgment against A+ Nursetemps
is enforceable against Prime Staff Holdings and Staff America.
Because, as discussed above, our review is de novo for conclusions of law, those
provided in the district court’s comprehensive opinion are not entitled to deference;
but, again, the findings of fact must be upheld unless clearly erroneous. Regarding
the merits of the successor-liability claim against appellants, and pursuant to our de
novo review, the conclusions of law in the opinion are well-reasoned. Glausier,
2015 WL 2020332, at *6–7. And, for the following reasons, because A+
Nursetemps’ liability was based on a FLSA violation, the federal-common-law
standard, considered more favorable to plaintiffs in federal-employment and labor-
relations actions, applies. See Teed v. Thomas & Betts Power Sols., L.L.C., 711
F.3d 763, 764–65 (7th Cir. 2013).
Although this court does not appear to have applied the federal-common-law
standard in FLSA actions, it and the Supreme Court have consistently applied it
under other federal labor laws. For example, following its recognition in John
Wiley & Sons, Inc. v. Livingston, 376 U.S. 543, 548 (1964), of successor liability
under the Labor Management Relations Act, the Supreme Court in Golden State
Bottling Co. v. National Labor Relations Board recognized successor liability
under the National Labor Relations Act, explaining “the labor-law doctrine of
successorship” was not as narrowly construed as the rule of corporate liability
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(which restricts successor liability to: explicit assumption by the acquirer, an
acquirer who is “merely a continuation” of the predecessor, and transactions
“entered into to escape liability”). 414 U.S. 168, 176–87, 182 n.5 (1973); see also
Walling v. James V. Reuter, Inc., 321 U.S. 671, 674–75 (1944) (applying successor
liability in a FLSA injunctive-relief action). Other circuits have followed suit. See,
e.g., Teed, 711 F.3d at 764–65 (collecting cases); Steinbach v. Hubbard, 51 F.3d
843, 845–48 (9th Cir. 1995); see also Cuervo v. Airport Servs., Inc., 984 F. Supp.
2d 1333, 1337–39 (S.D. Fla. 2013) (collecting cases and, predicting the Eleventh
Circuit would agree, applying the federal-common-law standard).
And, this court recognized successor liability under Title VII of the Civil Rights
Act of 1964, ruling successor liability in labor cases was “equally compelling in
Title VII litigation”. In re Nat’l Airlines, Inc., 700 F.2d 695, 698 (11th Cir. 1983).
In so holding, this court explained that, based on Supreme Court precedent, “the
test for successor liability is fact specific and must be conducted in light of the
facts of each case and the particular legal obligation which is at issue . . . . [T]here
is, and can be, no single definition of successor which is applicable in every legal
context. A new employer, in other words, may be a successor for some purposes
and not for others”. Id. (internal quotation marks omitted).
Therefore, this court’s precedent supports, as stated by the seventh circuit, that
“having a distinct federal standard applicable to federal labor and employment
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statutes . . . [is] often . . . necessary to achieve the statutory goals [of those laws]
because the workers will often be unable to head off a corporate sale by their
employer aimed at extinguishing the employer’s liability to them”. Teed, 711 F.3d
at 766. In other words, “successor liability is appropriate in suits to enforce federal
labor or employment laws” to prohibit employers who violated those laws from
avoiding liability by selling, or otherwise disposing of, their assets and dissolving,
and the acquirer likewise does not assume liability in its purchase. Id. at 766–67.
The FLSA, at minimum, protects workers by enforcing minimum wages and
overtime regulations; it cannot be disputed that applying successor liability in this
instance achieves that purpose. Id. at 767. Accordingly, as the district court
concluded, we proceed under federal successor-liability law.
Appellants contend Coffman v. Chugach Support Services, Inc., 411 F.3d 1231,
1237 (11th Cir. 2005), and Bud Antle, Inc. v. Eastern Foods, Inc., 758 F.2d 1451,
1457 (11th Cir. 1985), neither of which concerns FLSA successor liability,
demonstrate a transfer of tangible assets is required for successor liability.
(Appellants also asserted at oral argument that the nurses’ confession of error filed
10 March 2016 in a companion case, No. 16-10054, concerning which party is
responsible for attorneys’ fees and court costs for the supplemental proceeding at
issue, is determinative here. As discussed at oral argument, that case is irrelevant to
the question at hand.)
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The district court’s opinion in this action, distinguishing the decisions in Coffman
and Bud Antle, is instructive. Glausier, 2015 WL 2020332, at *5 n.11. It explained
that both decisions appear to “require a transfer of assets . . . to hold the acquiring
corporation liable”. Id. (quoting Bud Antle, 758 F.2d at 1457) (citing Coffman, 411
F.3d at 1237). And, “the basis of the decision” in each case was an absence of
“common identity”, as explained in Bud Antle, 758 F.2d at 1458–59, or, in other
words, an absence of “continuity”, as described in Coffman, 411 F.3d at 1237, in
ownership and control between the prior and subsequent entities. Glausier, 2015
WL 2020332, at *5 n.11. In other words, there was no relationship between the
predecessor and the successor. The district court here correctly concluded: “Both
of these decisions are, therefore, factually distinguishable from this case on that
critical basis”. Id.
The seventh circuit in Teed held the federal successor-liability standard was
satisfied, making the acquiring company liable for any FLSA violations by its
predecessor. 711 F.3d at 765–69. Although not a rule 69 proceeding, the
employees seeking overtime pay in a FLSA action in Teed sought to substitute
their employer’s acquirer for their employer, before the parties settled (subject to
the result of the appeal). Id. at 764–65. The federal standard applied in Teed
considers whether: (1) “the successor had notice of the pending” action; (2) “the
predecessor . . . would have been able to provide the relief sought in the [action]
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before the sale”; (3) “the predecessor could have provided the relief after the sale”
(its “inability to provide relief favors successor liability”); (4) “the successor can
provide the relief sought in the [action]”; and (5) “there is continuity between the
operations and work force of the predecessor and the successor”. Id. at 765–66.
C.
The facts at hand more than satisfy the federal standard for FLSA successor
liability. The first factor, notice of the action, is clearly satisfied by the connection,
through Arthur, of the three nurse-staffing entities. After this action was filed in
June 2011 against his wholly-owned company A+ Nursetemps, Arthur formed
Prime Staff Holdings that September, which, he testified, was for the sole purpose
of purchasing Staff America and continuing his nurse-registry and healthcare-
staffing business. The following month, Prime Staff Holdings completed its
purchase of Staff America through a stock-purchase agreement for ten dollars and
a two-and-a-half percent interest for the preceding owner. Arthur was listed as the
registered agent for Prime Staff Holdings and Staff America, as well as the
managing member, president, and sole principal of Prime Staff Holdings, which
was a director of Staff America. Obviously, the court did not clearly err in finding
Prime Staff Holdings and Staff America were apprised of the pending action
against A+ Nursetemps.
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For the second and third factors, it appears from the record that A+ Nursetemps
would not have had the resources to satisfy the judgment before or after the
transition. Those factors, as the district court concluded, are not determinative.
See id. at 768. As explained in Teed, the predecessor’s being unable to provide
relief prior to the transition arguably weighs against applying successor liability
because of the windfall the plaintiffs would receive; however, weighing against
that consideration is the windfall the employer would enjoy when it avoids
judgment by transitioning to a new company that has not expressly assumed its
predecessor’s liabilities. Id. at 765, 768. Regarding the third factor, the
predecessor’s inability to provide relief after the transition weighs in favor of
successor liability. Id. at 766. Therefore, that the nurses could not have received
the judgment from A+ Nursetemps either before or after the transition generally
weighs in favor of applying successor liability to appellants.
The fourth factor—whether the successors can provide the relief sought by
plaintiffs—is also satisfied. See id. at 766. The court did not clearly err in finding
the companies have continued to be successful in the nurse-registry business and
that, through a payment plan, they can provide the sought-after relief.
Finally, and most unfavorable to appellants, the satisfaction of the substantial-
continuity factor weighs overwhelmingly in favor of imposing successor liability.
A+ Nursetemps never filed for bankruptcy, as Arthur did personally, but it did
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wind down its business operations while this action was pending in district court.
At the bench trial, Arthur testified that A+ Nursetemps ceased business as of 3
May 2013. Just over two weeks later, the judgment in the DOL action was
rendered against A+ Nursetemps; about a month after the DOL judgment, the
judgment in this action was issued. Moreover, as stated supra, Arthur testified,
and the district court found, that he created Prime Staff Holdings and Staff
America to continue his nurse-staffing business; in addition, and more important,
the court found he did so to avoid judgment in this action.
Furthermore, the companies also occupied the same office space for at least some
time. Although A+ Nursetemps’ business address was listed as 2008 Highway 44,
with Prime Staff Holdings and Staff America’s as 2020 Highway 44, Arthur
testified that Staff America took over 2008 Highway 44 from A+ Nursetemps
shortly after it ceased operations. Arthur sent himself a letter dated 3 May 2013,
the day A+ Nursetemps ceased operating and shortly before the judgments were
entered against A+ Nursetemps in the DOL, and this, action, requesting that A+
Nursetemps be allowed to “store its furniture and equipment assets in the front
office until a Receiver makes arrangements to pick it up”. Moreover, on 26 April
2013, Staff America signed a Sublease Agreement with A+ Nursetemps for three-
quarters of its 2008 Highway 44 location.
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Additionally, Staff America performs the same services—as a nurse registry and
medical-staffing agency—for many of the same clients as did A+ Nursetemps. As
the district court found, Staff America enters into contracts with healthcare
providers, as A+ Nursetemps did, to supply them with nurses and other healthcare
workers in its registry.
Most crucial to the district court’s findings regarding continuity, Staff America
employed many of the same persons as did A+ Nursetemps. Of the 169 nurses
employed at A+ Nursetemps, 111 were subsequently employed at Staff America
between January 2013 and April 2014. In other words, approximately 66 percent
of the nurses who worked for A+ Nursetemps began working for Staff America
during that time. As the district court found, those employees constituted “the
heart and soul asset or goodwill of the business itself”, a staffing agency. Glausier,
2015 WL 2020332, at *4. And, as stated supra, Arthur owned and managed all
three entities. Obviously, an extremely large part of the value of the company, a
registry of healthcare workers, was its employees; it would be a mere shell without
them.
Therefore, consistent with the district court’s discussion of federal-common-law
successor liability under the FLSA, continuity is satisfied especially by Staff
America’s employing 66 percent of A+ Nursetemps’ former employees.
III.
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For the foregoing reasons, the judgment resulting from the rule 69 proceeding is
AFFIRMED.
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