Jose Hernandez v. Larry Miller Roofing, Inc., et a ( 2016 )

Case: 15-10287 Document: 00513332838 Page: 1 Date Filed: 01/06/2016
REVISED January 6, 2016
IN THE UNITED STATES COURT OF APPEALS
FOR THE FIFTH CIRCUIT United States Court of Appeals
Fifth Circuit
FILED
January 5, 2016
No. 15-10287
Lyle W. Cayce
Clerk
JOSE E. HERNANDEZ, and all others similarly situated under 29 U.S.C.
216(b),
Plaintiff - Appellant
v.
LARRY MILLER ROOFING, INCORPORATED; LARRY MILLER,
Defendants - Appellees
Appeal from the United States District Court
for the Northern District of Texas
USDC No. 3:11-CV-716
Before STEWART, Chief Judge, KING and HIGGINSON, Circuit Judges.
KING, Circuit Judge:*
Plaintiff–Appellant Jose Hernandez filed a claim for unpaid overtime
wages in violation of the Fair Labor Standards Act against Defendants–
Appellees Larry Miller Roofing, Inc., and Larry Miller individually. The
district court stayed the action when LMRI filed a Suggestion of Bankruptcy.
* Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH
CIR. R. 47.5.4.
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LMRI filed a reorganization plan with the bankruptcy court, and Hernandez
voted to accept the plan. In accordance with this plan, Hernandez received
thirty percent of his FLSA claim for unpaid wages. Following the confirmation
of LMRI’s reorganization plan by the bankruptcy court, the district court
reopened Hernandez’s FLSA case against Miller individually. The court
granted summary judgment to Miller on the FLSA claim, reasoning that
LMRI’s reorganization plan released Hernandez’s FLSA claim against both
LMRI and Miller. Because we interpret LMRI’s reorganization plan as
releasing only Hernandez’s FLSA claim against LMRI, we REVERSE the
judgment of the district court and REMAND the case for further proceedings.
I. FACTUAL AND PROCEDURAL BACKGROUND
On April 7, 2011, Plaintiff–Appellant Jose Hernandez filed a claim
against his former employers, Defendants–Appellees LMRI and Larry Miller,
the president of LMRI, alleging violations of the FLSA, 29 U.S.C. § 207. Miller
claimed that while he was employed by LMRI between 2005 and March 2011,
LMRI did not pay him overtime wages for hours worked beyond forty hours
each week and did not compensate him for travel to job sites.
On November 12, 2012, LMRI filed a Suggestion of Bankruptcy under
Chapter 11 of the United States Bankruptcy Code, and the district court stayed
Hernandez’s FLSA case. On March 11, 2013, Hernandez filed a proof of claim
in LMRI’s bankruptcy action, alleging $47,698 in unpaid wages. After LMRI
filed its “Disclosure Statement to Debtor’s Plan of Reorganization” on July 17,
2013, Hernandez voted to accept the Bankruptcy Plan of Reorganization (“the
Plan”) and elected Class 5A treatment. Following a confirmation hearing, the
bankruptcy court confirmed the Plan on August 29, 2013.
The Plan included the following relevant provisions:
1.7 “Claim” shall mean any Debt or other right to payment from
the Debtor which has accrued as of the date of entry of the Order
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Confirming Plan whether or not such right is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, unmatured,
disputed, undisputed, legal, equitable, secured or unsecured or can
be asserted by way of set-off. Claim includes any right or cause of
action based on a pre-petition monetary or non-monetary default.
....
1.15 “Debt” shall mean any obligation which is owed by the Debtor,
alone, and any obligation of the Debtor and any other Person, to
any Entity.
....
11.5 The treatment of Claims under the Plan shall govern the
rights of such holders. . . . The completion of payments under the
Plan shall be in accord and satisfaction of any and all Claims
treated under the Plan. Once the Plan payments are completed,
Claims asserted against the Debtor shall be deemed paid in full,
including the release of rights to enforce or collect such Claims
against non-debtor parties. During the duration of the Plan, as
long as the Reorganized Debtor is making its payments under the
Plan, all holders of Claims against the Debtor are restrained and
enjoined from (a) commencing or continuing in any manner, any
action or other proceeding of any kind with respect to any such
Claim against the Debtor, its agents or attorneys, its assets or
third parties also liable for the payment of such Claim . . . .
....
11.10 The Debtor, Reorganized Debtor, the officers and directors
of the Debtor and the shareholders shall be discharged and
released from any liability for Claims and Debts, except for
obligations arising under this Plan. The exclusive remedy for
payment of any Claim or Debt so long as the Plan is not in default
shall be the Plan.
In accordance with the Plan, Hernandez received thirty percent of his claim for
unpaid wages under the FLSA—$14,309.40—in two equal payments, with the
final payment issued on February 18, 2014.
The district court administratively closed Hernandez’s FLSA case
without prejudice on September 13, 2013. However, after Hernandez filed a
motion to reopen on January 9, 2014, the district court lifted the stay as to
Miller individually on February 11, 2014. With Hernandez’s FLSA case
reopened as to Miller, Miller filed a motion for summary judgment. He argued
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that the FLSA claim against him was discharged under the Plan and that, in
the alternative, the doctrine of res judicata precluded Hernandez from
advancing the claim. Finding that the Plan and the Class 5A payments
released Miller and “anyone else” from Hernandez’s FLSA claim, the district
court granted summary judgment in favor of Miller on December 2, 2014. 1
Hernandez subsequently filed a motion to reconsider under Federal Rule of
Civil Procedure 59(e), arguing that bankruptcy courts lack the authority to
discharge the debts of non-debtor third parties, such as Miller. The district
court denied Hernandez’s motion, explaining that his argument was an
impermissible collateral attack on the judgment of the bankruptcy court.
Hernandez timely appealed.
II. STANDARD OF REVIEW
We review grants of summary judgment de novo, applying the same
standard as the district court. Cleveland v. City of Elmendorf, 388 F.3d 522,
525–26 (5th Cir. 2004). Summary judgment is appropriate if “there is no
genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a). “We construe all facts and inferences
in the light most favorable to the nonmoving party.” Dillon v. Rogers, 596 F.3d
260, 266 (5th Cir. 2010) (quoting Murray v. Earle, 405 F.3d 278, 284 (5th Cir.
2005)).
III. INTERPRETATION OF THE BANKRUPTCY PLAN
The determination of whether the district court properly granted
summary judgment turns on the interpretation of the Plan, specifically
whether the Plan releases Hernandez’s FLSA claims against both LMRI and
Miller. The plain language of the Plan is unambiguous in its release of
Hernandez’s FLSA claim against LMRI, and Hernandez explicitly agrees that
1 Because the district court granted summary judgment on the release issue, the court
declined to decide the res judicata issue.
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his claim against LMRI was released. However, Hernandez argues that his
FLSA claim against Miller was not released under the Plan. As a threshold
matter, we consider the nature of Hernandez’s FLSA claim against Miller. 2
Hernandez originally filed a claim for failure to pay overtime wages in
violation of the FLSA against LMRI and Miller. Under the FLSA, a plaintiff
can recover unpaid wages from an employer, which the statute defines as “any
person acting directly or indirectly in the interest of an employer in relation to
an employee.” 29 U.S.C. § 203(d). As recognized by the Supreme Court, this
definition is expansive and covers any employer, including a corporate officer,
with “managerial responsibilities” and “substantial control of the terms and
conditions of the [employer’s] work.” Donovan v. Grim Hotel Co., 747 F.2d 966,
971 (5th Cir. 1984) (quoting Falk v. Brennan, 414 U.S. 190, 195 (1973)); see
also id. at 972 (“The overwhelming weight of authority is that a corporate
officer with operational control of a corporation’s covered enterprise is an
employer along with the corporation, jointly and severally liable under the
FLSA for unpaid wages.” (quoting Donovan v. Agnew, 712 F.2d 1509, 1511 (1st
Cir. 1983))). Employers under the FLSA are jointly and severally liable for
unpaid wages. Id.; see also 2 Les A. Schneider & J. Larry Stine, Wage and
Hour Law § 21:13 (“If FLSA violations are found, the defendant
company/corporation and defendant individual may be jointly and severally
liable, that is, each is responsible for the entire amount due . . . .”).
Given that LMRI and Miller are jointly and severally liable for any FLSA
violation that may have occurred, we next turn to whether the Plan releases
Hernandez’s FLSA claim against Miller in addition to his claim against LMRI.
Assuming, without deciding, that a bankruptcy reorganization plan can
2 We note that, in determining the nature of Hernandez’s FLSA claim against LMRI
and Miller, we are not deciding whether any FLSA violation has actually occurred. In this
appeal, we consider only whether Hernandez’s FLSA claim against Miller can proceed in the
district court, and we do not reach the merits of that claim.
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release claims such as the FLSA claim against Miller in this case, we must
determine whether the Plan effectively released Hernandez’s FLSA claim
against Miller. When interpreting the provisions of bankruptcy reorganization
plans, this court “regularly appl[ies] principles of contract interpretation to
clarify the meaning of the language” in those plans. Compton v. Anderson (In
re MPF Holdings US LLC), 701 F.3d 449, 457 (5th Cir. 2012); see also Official
Creditors Comm. of Stratford of Tex., Inc. v. Stratford of Tex., Inc. (In re
Stratford of Tex., Inc.), 635 F.2d 365, 368 (5th Cir. 1981) (“The confirmed
arrangement, however, is tantamount to a judgment of the bankruptcy court.
Nevertheless, the arrangement represents a kind of consent decree which has
many attributes of a contract and should be construed basically as a contract.”
(citation omitted)). “Contract interpretation is a question of law, reviewed de
novo.” All. Health Grp., LLC v. Bridging Health Options, LLC, 553 F.3d 397,
399 (5th Cir. 2008). Under contract law, “[t]he language of the contract, unless
ambiguous, represents the intention of the parties.” Kimbell Foods, Inc. v.
Republic Nat’l Bank of Dall., 557 F.2d 491, 496 (5th Cir. 1977), aff'd sub nom.
United States v. Kimbell Foods, Inc., 440 U.S. 715 (1979).
The district court applied principles of contract interpretation to
determine the meaning of the Plan and concluded that “[t]he language of the
Plan to which Hernandez agreed clearly releases anyone else from the claims
asserted by claimants.” 3 We disagree. Within the Bankruptcy Code, 11 U.S.C.
3 We note that the Plan language may be somewhat ambiguous as to whether it
releases Hernandez’s FLSA claim against Miller. The Plan could be read to release all claims
that could be brought against the Debtor and any other party who is jointly liable with the
Debtor. However, as previously discussed, multiple employers who are liable for unpaid
wages under the FLSA are jointly and severally liable for such wages. See Donovan, 747 F.2d
at 972. Miller’s liability on the FLSA claim is therefore independent of the liability of LMRI
on that claim. Here, the Plan’s release provisions could also be read as not releasing claims
against an officer or third party for which the Debtor is severally liable. We do not need to
determine whether the Plan is ambiguous as to whether it releases Hernandez’s FLSA claim
against Miller because we conclude that our case law requires more specificity than the Plan
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§ 524(e) provides that “discharge of a debt of the debtor does not affect the
liability of any other entity on, or the property of any other entity for, such
debt.” Republic Supply Co. v. Shoaf, 815 F.2d 1046, 1049 (5th Cir. 1987)
(quoting 11 U.S.C. § 524(e)). However, we have previously explained that when
a bankruptcy plan has been confirmed by the bankruptcy court and gone
unchallenged on direct appeal, a “specific discharge or release” in such a plan
can release claims against non-debtors. 4 In re Applewood, 203 F.3d at 919; see
also Shoaf, 815 F.2d at 150. Accordingly, to determine whether the Plan
releases Hernandez’s FLSA claim against Miller, we must examine the
specificity of the release provisions. A review of our precedent on specificity
demonstrates that the provisions in the Plan are not sufficiently specific to
release Hernandez’s FLSA claim against Miller.
In Shoaf, we held that the bankruptcy court’s confirmation of a “clear
and unambiguous” reorganization plan that “expressly released” a third party
from liability on a guaranty barred a subsequent action against that third
party on the guaranty. 815 F.2d at 1047, 1050. In that case, “[t]he bankruptcy
judge . . . entered an order confirming the [reorganization plan] expressly
stating that [that plan] ‘include[d] the release of any guarantees given to a
creditor of the Debtor which guarantees arose out of the Debtor’s business
dealings with any creditor of the Debtor.’” Id. at 1049. This language was
inserted into the plan at the behest of a guarantor who agreed to release
provides to release a claim against a non-debtor. See Applewood Chair Co. v. Three Rivers
150 Planning & Dev. Dist. (In re Applewood), 203 F.3d 914, 919 (5th Cir. 2000).
4 Parties to a bankruptcy remain free to challenge the release of claims against a non-
debtor in the bankruptcy court or on direct appeal. However, as the Supreme Court explained
in Travelers Indemnity Co. v. Bailey, 557 U.S. 137, 152–54 (2009), once the time for objecting
to, or directly appealing, a plan has passed, parties may not challenge particular provisions
of a plan as exceeding the bankruptcy court’s authority. Thus, in this appeal, we do not
address whether confirmation of the Plan was beyond the authority of the bankruptcy court
under 11 U.S.C. § 524(e); rather, we only interpret the provisions of the Plan as written in
light of our precedent.
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$850,000 in life insurance proceeds to the debtor’s estate. Id. at 1048. The
inclusion of this language was a condition of that guarantor’s release of the
proceeds, and the final plan included this language while omitting a paragraph
that provided for a general release. Id. at 1049. Thus, we held that the
language with respect to third-party guarantors was specific enough to
discharge those guarantors of liability.
By contrast, in In re Applewood, we refused to enforce a release against
a third-party guarantor in a later action because the plan at issue “contained
no provision specifically releasing the personal guaranties of the [third party].”
203 F.3d at 919–20. “[W]e decline[d] to extend the holding of Shoaf to
situations where a plan of reorganization does not contain a specific discharge
of the indebtedness of a third-party.” Id. at 920. The release language in In
re Applewood included, in relevant part, the following:
The provisions of the confirmed plan shall bind all creditors and
parties in interest, whether or not they accept the plan and shall
discharge the Debtor, its officers, shareholders and directors from
all claims that arose prior to Confirmation.
Id. at 916. Distinguishing Shoaf, we noted that “[t]he approved final
reorganization plan [in Shoaf] contained a specific paragraph for the release of
Shoaf's guaranty.” Id. at 919. Additionally and “[i]mportantly, the final
reorganization plan confirmed by the bankruptcy court in Shoaf omitted a
paragraph that provided for a general release, leaving the paragraph
specifically releasing the Shoaf guaranty in the plan.” Id. (footnote omitted).
Because the provision in In re Applewood did not specifically release the
guarantor, who was also an officer, from his personal guaranties, we allowed
the creditor to proceed with his claim to recover from the guarantor. Id.
We applied the specificity test developed in Shoaf and In re Applewood
in FOM P.R. S.E. v. Dr. Barnes Eyecenter Inc., 255 F. App’x 909, 912 (5th Cir.
2007) (per curiam) (unpublished). In that case, FOM leased retail space to
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Debtor Dr. Barnes Eyecenter, Inc., (“DBEI”). Eyemart, an affiliate of DBEI,
unconditionally guaranteed DBEI’s obligations under the lease. FOM, 255 F.
App’x at 910. DBEI filed for Chapter 11 relief, and the reorganization plan
approved by the bankruptcy court “included a release of claims against
Eyemart, among others, in exchange for Eyemart’s agreement to subordinate
its claims to those of all other creditors.” Id. The reorganization plan included
in pertinent part:
Any claims held by Debtor’s insiders, including but not limited to
Debtor's affiliate Eyemart Express, Ltd., shall be subordinated to
the claims of all other creditors of DBEI's estate, and no
distributions shall be made on account of same until all other
claims are paid in full pursuant to this Plan. In return for the
subordination of their claims, Debtor’s insiders shall not have or
incur any liability to any person for any claim, obligation, right,
cause of action or liability, whether known or unknown, foreseen
or unforeseen, existing or hereafter arising, based in whole or in
part on any act or omission, transaction, or occurrence from the
beginning of time through the Effective Date in any way relating
to DBEI, its Bankruptcy Case, or the Plan; and all claims based
upon or arising out of such actions or omissions shall be forever
waived and released.
Id.
This court concluded that “the language in this case falls somewhere
between Shoaf and [In re Applewood] with respect to the specificity of the
release.” Id. at 912. “[H]owever, several factors [led] us to conclude that the
bankruptcy release does bar [FOM’s] claims.” Id. First, “the release of claims
was an integral part of the bankruptcy order” just as it was in Shoaf. Id. We
further noted that “the release of claims was not simply boilerplate language
that was inserted into the [reorganization plan], but rather a necessary part of
the [reorganization plan] itself.” Id. “Second, the language in [FOM], while
not as specific as in Shoaf, [was] more specific than that in [In re Applewood],”
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as the FOM language “explicitly mention[ed] Eyemart as an entity that
benefit[ed] from the release.” Id.
Applying the specificity test developed in our earlier cases to the release
language in this case, we hold that the release provisions in the Plan are not
specific enough to release Hernandez’s FLSA claim against Miller. 5 In FOM,
this court held that the reorganization plan released claims against a
guarantor that was mentioned by name in that plan. See FOM, 255 F. App’x
at 912 (“Here, [the plan] explicitly mentions Eyemart as an entity that benefits
from the release.”). Conversely, in In re Applewood, we held that the
boilerplate release language was not sufficiently specific to release claims
against a third party. 203 F.3d at 919. The release language in this case
closely resembles the language of the plan in In re Applewood. Miller is not
identified by name in any of the release language, and, while Miller is an officer
of LMRI, we held in In re Applewood that a party’s status as an officer
combined with boilerplate release language is not sufficiently specific. 6 Id.
Moreover, nowhere does the Plan mention anything related to a FLSA
claim or employment law violations more generally. The language in the Plan
is, if anything, generic. In contrast, the language in Shoaf “include[d] the
release of any guarantees given to any creditor of the debtor which guarantees
arose out of the debtor’s business dealings with any creditor of the debtor.” 815
5 Although the Eleventh Circuit declined to adopt our specificity test, it aptly
summarized the factors we consider in applying this test. Iberiabank v. Geisen (In re FFS
Data), 776 F.3d 1299, 1308–09 (11th Cir. 2015). In particular, the second, third, and fourth
factors described by the Eleventh Circuit— “whether the release identifies the released
parties, whether the release identifies the released claims, and whether the release of those
claims was an integral part of the bankruptcy order.”—support our holding that the Plan’s
release language lacked sufficient specificity to release the FLSA claim against Miller.
6 In fact, in all three of the relevant cases, we addressed whether a claim against a
non-debtor party who was, to some extent, an insider to the bankruptcy plan was released.
In In re Applewood, the non-debtor was an officer of the bankruptcy company. 203 F.3d at
919. In Shoaf, the non-debtor was a former officer of the company and a guarantor. 815 F.2d
at 1047–48. And in FOM, Eyemart was an affiliate of DBEI. 255 F. App’x at 910.
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F.2d at 1054. Thus, the plan in Shoaf was specific to the type of claims it was
releasing—i.e., guarantees that arose out of the debtor’s business dealings with
any creditor. Lacking any language relating to FLSA claims, we cannot say
that the Plan here was specific enough to release Hernandez’s FLSA claim
against Miller. 7
Ultimately, the language in the Plan at issue here closely approximates
the generic release language of the In re Applewood plan. Because we held
that the plan there was not specific enough to discharge a third party’s liability,
we cannot say that, in this case, the language of the Plan is sufficiently specific
to release Hernandez’s FLSA claim against Miller. Accordingly, we hold that
Hernandez may proceed on his FLSA claim against Miller.
We next turn to whether the doctrine of res judicata bars Hernandez’s
FLSA suit against Miller, which Miller raised in the district court as an
alternative ground for barring suit. The district court held that the provisions
of the Plan released Hernandez’s FLSA claim against Miller and thus declined
to analyze the res judicata effect of the bankruptcy court’s confirmation of the
Plan. We typically do not address issues not first addressed by the district
court. However, as the Eleventh Circuit appropriately observed, in cases such
as the one before us today, the res judicata inquiry and the interpretation of
7 There is also no indication that the Millers undertook any obligations under the Plan
with the expectation that any release language would be inserted into the Plan. See In re
FFS Data, 776 F.3d at 1307 (applying this court’s specificity test and explaining that the
insertion of release language into a plan in return for a third party undertaking some
obligation favors a finding that the release language is sufficiently specific). In both Shoaf
and FOM, the release language was inserted into the plans in consideration for something of
value from a third party. In Shoaf, a guarantor paid $850,000 into the bankruptcy estate in
return for the insertion of language releasing claims on guarantees into the plan. 815 F.2d
at 1049. Similarly, in FOM, “Eyemart received the release in consideration for its agreement
to subordinate its claims.” 255 F. App’x at 912. In this case, the Millers agreed to defer
payment on personal loans made to LMRI and on deferred unpaid compensation until
distributions to other unsecured creditors had been paid. However, there is no indication
that they did this with an expectation that any release language would be inserted into the
Plan.
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the reorganization plan are essentially one in the same. In re FFS Data, 776
F.3d at 1307 (“[T]his case is not truly about res judicata, but, rather, the
interpretation of the reorganization plan”). Accordingly, res judicata does not
bar Hernandez from proceeding on his FLSA claim against Miller for the same
reasons that the Plan is not sufficiently specific to discharge Miller’s liability
on Hernandez’s FLSA claim. 8
As a final matter, we note that Hernandez is not barred from proceeding
against Miller simply because he has already received compensation from
LMRI for the underlying FLSA violation. As we have explained, “discharge of
a debt to the debtor does not affect the liability of any other entity on, or the
property of any other entity for, such debt.” Shoaf, 815 F.2d at 1049 (citing
11 U.S.C. § 524(e)). Furthermore, the Ninth Circuit has explained, and we
agree, that a company’s bankruptcy has no effect on the ability of a plaintiff to
bring a FLSA claim against an officer. Boucher v. Shaw, 572 F.3d 1087, 1093
(9th Cir. 2009) (“[O]ur case law regarding guarantors, sureties and other non-
debtor parties who are liable for the debts of the debtor leaves no doubt about
the answer: the [debtor’s] bankruptcy has no effect on the claims against the
individual managers at issue here.”).
IV. CONCLUSION
For the foregoing reasons, the judgment of the district court is
REVERSED, and the case is REMANDED for further proceedings consistent
with this opinion.
8 In fact, Shoaf, 815 F.2d at 1051–54, In re Applewood, 203 F.3d at 919–20, and FOM,
255 F. App’x at 911–13, all involved the application of res judicata.
12