Edge v. TLW Energy Services ( 2023 )

Case: 22-50288 Document: 00516739790 Page: 1 Date Filed: 05/05/2023
United States Court of Appeals
for the Fifth Circuit United States Court of Appeals
Fifth Circuit
____________ FILED
May 5, 2023
No. 22-50288 Lyle W. Cayce
____________ Clerk
Charles Edge; Adam Vara; Braden Glasson; Dakota
Maness; Colton Newman; Lorenzo Rodriguez; Michael
Cuellar,
Plaintiffs—Appellants,
Ben Forrest; Mason Frakes; Thomas Gonzalez,
Appellants,
versus
TLW Energy Services, L.L.C.; Troy Watkins,
Defendants—Appellees.
______________________________
Appeal from the United States District Court
for the Western District of Texas
USDC No. 5:21-CV-3
______________________________
Before Barksdale, Southwick, and Higginson, Circuit Judges.
Per Curiam:*
_____________________
*
This opinion is not designated for publication. See 5th Cir. R. 47.5.
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Primarily at issue is whether the district court abused its discretion by
sua sponte dismissing this action with prejudice for failing to move for default
judgment within the time ordered by the court. VACATED and
REMANDED.
I.
In January 2021, Charles Edge filed this putative collective action
under 29 U.S.C. § 216(b) against employers TLW Energy Services, L.L.C.
(TLW), and Troy Watkins, claiming violations of the Fair Labor Standards
Act of 1938 (FLSA), 29 U.S.C. §§ 201–209. The complaint claimed: over
the three preceding years, defendants paid Edge and other “current and
former employees . . . on a day-rate basis without overtime”, in violation of
FLSA overtime requirements. Defendants, represented by counsel,
answered on 8 March 2021, denying liability and asserting, inter alia: the
daily rates paid to Edge included both straight-time and overtime pay. Other
employees opted-in pursuant to § 216(b).
Defendants’ counsel moved to withdraw on 5 November 2021, stating
defendants were unresponsive and had not paid legal fees. The court on 9
November both granted withdrawal and directed Watkins to advise the court
by 9 January 2022 whether he would proceed pro se or obtain new counsel,
with TLW, by the same date, to inform the court of its new counsel, as an
LLC cannot appear pro se.
Defendants never filed those advisories. And, subsequent to
counsel’s withdrawal, no filings have been made by, or on behalf of,
defendants in district court, nor have they participated in this appeal.
The record reflects defendants provided some discovery prior to that
withdrawal, the extent of which is unclear. (As discussed infra, the court
instructed plaintiffs to provide it with particular evidence regarding overtime
payments. Plaintiffs state they cannot obtain the evidence because the non-
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participating defendants are unavailable for further discovery, which implies
that whatever defendants produced was insufficient.)
After the court ordered the above-referenced advisories, but before
they were due, plaintiffs on 19 November 2021 moved for partial summary
judgment on liability, claiming they: were employees of defendants and
covered by FLSA; worked more than 40 hours per week during their
employment; and were paid on a day-rate basis. Although defendants, as
stated above, had asserted in their answer that the day-rates included both
straight and overtime pay, plaintiffs claimed FLSA does not allow overtime
premiums to be included in a daily rate. Therefore, plaintiffs claimed:
defendants’ paying that daily rate was per se a violation of FLSA; and the only
matter needing further consideration was the amount of damages.
After defendants failed to answer timely the partial summary-
judgment motion, the court by a 16 December 2021 order directed
defendants to respond by 28 December and warned their failing to do so
“may result in the motion being considered as unopposed”. After
defendants failed to respond, the court on 25 January 2022 entered an order
directing them to show cause by 9 February why default should not be
entered against them. See Fed. R. Civ. P. 55(a) (allowing entry of default
against defendant who “has failed to plead or otherwise defend”); Sindhi v.
Raina, 905 F.3d 327, 332 (5th Cir. 2018) (providing Rule 55 allows court to
enter default against party for failure to comply with court orders). Once
again, defendants did not respond; and the clerk was instructed to enter
default on 25 February.
The court denied plaintiffs’ partial summary-judgment motion on 3
March 2022. It ruled they failed to make a prima facie showing of their claims
because: they did not provide authority supporting “paying a day rate is a
per se FLSA violation”; and there was insufficient evidence for the court to
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determine whether defendants failed to pay proper overtime premiums
because it needed “information that shows the total amount of the day rate,
the amounts that composed the ‘straight time’ and overtime, and what TLW
actually paid”.
Additionally, referring to the above-referenced default entered against
defendants, the court stated plaintiffs had “one final opportunity to present
evidence of [defendants’] alleged failure to pay overtime”. It directed
plaintiffs to move for default judgment within 30 days after the clerk’s entry
of default, and warned it would “be vital” they provide the above-described
evidence in order for the court to determine whether there was an overtime
violation.
The court noted further it was unclear whether the summary-
judgment motion was by Edge alone or on behalf of all plaintiffs and
instructed that any default-judgment motion needed to be clear on that point.
Finally, the court warned that failure to move for default judgment within the
allotted time might lead to involuntary dismissal pursuant to Rule 41(b)
(action subject to involuntary dismissal if plaintiff “fails to prosecute or to
comply with [the Federal Rules of Civil Procedure] or a court order”).
Instead of moving for default judgment as directed, plaintiffs moved
on 28 March for reconsideration of the order denying their partial summary-
judgment motion, or alternatively, pursuant to 28 U.S.C. § 1292(b), for the
court to certify the denial of that motion for immediate appeal and stay
proceedings pending appeal. Plaintiffs again claimed: including overtime
premiums in a daily rate is a per se FLSA violation; therefore, liability was
uncontested; and the court’s ruling otherwise was contrary to precedent.
The court denied the motion on 7 April, providing: “‘Day rate’ as a
term of art does not relieve the Court of its responsibility to determine
whether the alleged day rate scheme was illegal”. It ruled, as before, that
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there was insufficient evidence to determine whether the proper overtime
had been paid. Finally, because plaintiffs elected to file the motion for
reconsideration rather than moving timely for default judgment, the court
dismissed all claims with prejudice and directed the clerk to close the case.
II.
Plaintiffs claim the court erred in: dismissing this action with
prejudice; and denying partial summary judgment. As noted supra,
defendants have not participated in this appeal.
A.
Sua sponte dismissals under Rule 41(b) are reviewed for abuse of
discretion. E.g., Coleman v. Sweetin, 745 F.3d 756, 766 (5th Cir. 2014). This
review, however, is understandably “more exacting” where, as here, the
dismissal is with prejudice. Id. We will affirm “only if: (1) there is a clear
record of delay or contumacious conduct by the plaintiff, and (2) lesser
sanctions would not serve the best interests of justice”. Id. It bears emphasis
that “[b]ecause this test is conjunctive, both elements must be present”. Id.Additionally, in “most cases where this Court has affirmed dismissals
with prejudice”, at least one of the following aggravating factors have been
found: “(1) delay caused by the plaintiff himself and not his attorney; (2)
actual prejudice to the defendant; or (3) delay caused by intentional
conduct”. In re Deepwater Horizon, 988 F.3d 192, 197 (5th Cir. 2021)
(citation omitted).
Plaintiffs contend the following in asserting the court erred in
dismissing their claims with prejudice. Because defendants are in default,
they are liable to plaintiffs without need for further evidence. The court
placed an erroneous burden of proof on plaintiffs and required them to
produce evidence which they could not obtain, because, as discussed supra,
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it was in possession of defendants who would not participate in further
discovery. (The remainder, and vast majority, of plaintiffs’ brief addresses
the merits of their denied partial summary-judgment motion, requesting this
court render partial summary judgment in their favor and remand for a
hearing on damages.)
We hold the court abused its discretion in dismissing plaintiffs’ action
with prejudice because neither of the requisite elements listed above, and
addressed infra, are present.
First, there is no “clear record of delay” by plaintiffs. Coleman, 745
F.3d at 766. “Generally, where a plaintiff has failed only to comply with a
few court orders or rules, we have held that the district court abused its
discretion in dismissing the suit with prejudice.” Berry v. CIGNA/RSI-
CIGNA, 975 F.2d 1188, 1191 n.6 (5th Cir. 1992).
Although plaintiffs did not move for default judgment within the time
specified by the court, they did seek reconsideration within that period. A
single instance of failing to strictly adhere to a court-set deadline is short of
the severity of conduct our court has required for the “clear record of delay”
element to be met. Compare Campbell v. Wilkinson, 988 F.3d 798, 802 (5th
Cir. 2021) (reversing dismissal where “court did not explain why a mere 45-
day delay” justified dismissal with prejudice), and Raborn v. Inpatient Mgmt.
Partners Inc., 278 F. App’x 402, 405 (5th Cir. 2008) (no clear record of delay
where party’s counsel attended pre-trial conferences and, “except for the
two mentioned in the dismissal order”, complied with court’s orders and
instructions), and Berry, 975 F.2d at 1191 (“The district court apparently
dismissed [plaintiff’s] lawsuit merely because of [plaintiff’s] failure to file a
motion for default judgment. . . . [T]his does not amount to a clear record of
delay or contumacious conduct . . . .”), and Morris v. Ocean Sys., Inc., 730
F.2d 248, 252–53 (5th Cir. 1984) (reversing dismissal where no “significant
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periods of total inactivity” (citation omitted)), with Roberts v. Yellen, 858 F.
App’x 744, 746–47 (5th Cir. 2021) (clear record of delay where party was
inactive in proceedings for 26 months), and Griggs v. S.G.E. Mgmt., L.L.C.,
905 F.3d 835, 844–45 (5th Cir. 2018) (affirming dismissal where party
“persistently refused” to comply with court order).
It goes without saying that, in this default scenario, it was not in
plaintiffs’ interest to delay. Rather, the delays were the fault of defendants.
They were given several opportunities to explain and cure their lack of
participation; yet, plaintiffs’ action was dismissed for failing to comply with
a single deadline.
Second, “there has been no showing of the futility of lesser
sanctions”. Berry, 975 F.2d at 1192. “Lesser sanctions include assessments
of fines, costs, or damages against plaintiff, conditional dismissal, dismissal
without prejudice, and explicit warnings.” Thrasher v. City of Amarillo, 709
F.3d 509, 514 (5th Cir. 2013) (citation omitted). Because plaintiffs had
complied with all prior deadlines and orders, there is little to support any
sanctions being needed to secure future compliance, much less that these
lesser sanctions would not have been effective. See Campbell, 988 F.3d at
802; see also Rogers v. Kroger Co., 669 F.2d 317, 320 (5th Cir. 1982) (providing
dismissal with prejudice “is reserved for the most egregious of cases”).
Additionally, none of the above-provided three aggravating factors are
present: there is nothing to suggest any delay was because of plaintiffs, rather
than their counsel; defendants were not prejudiced, because they were not
participating in the proceedings; and there is no evidence plaintiffs’ counsel
intended to delay the proceedings by filing the motion for reconsideration.
See Campbell, 988 F.3d at 802.
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B.
Regarding plaintiffs’ requesting our court render partial summary
judgment in their favor, summary judgment rulings are reviewed de novo.
E.g., McDaniel v. Anheuser-Busch, Inc., 987 F.2d 298, 301 (5th Cir. 1993). Our
court, as needed, raises jurisdictional questions sua sponte and reviews them
de novo. E.g., Howery v. Allstate Ins. Co., 243 F.3d 912, 919 (5th Cir. 2001).
The denial of summary judgment is usually a non-final order, resulting
in this court’s lacking jurisdiction to consider it (subject to exceptions, such
as regarding qualified immunity). E.g., Jackson v. City of Atlanta, 73 F.3d 60,
62 (5th Cir. 1996); In re Corrugated Container Antitrust Litig., 694 F.2d 1041,
1042 (5th Cir. 1983). But, under the merger rule, interlocutory rulings merge
into a final judgment and are generally subject to review on appeal from that
judgment. E.g., Diece-Lisa Indus., Inc. v. Disney Enters., Inc., 943 F.3d 239,
248 (5th Cir 2019); Sindhi, 905 F.3d at 331; Dickinson v. Auto Ctr. Mfg. Co.,
733 F.2d 1092, 1102 (5th Cir. 1983).
Courts, however, apply the merger doctrine differently when the
appealed final judgment is an involuntary dismissal as a sanction for
plaintiff’s failure to prosecute or failure to comply with court orders, typically
declining to address interlocutory rulings, although their reasoning varies.
Some courts hold it is a matter of jurisdiction; others, a matter of discretion;
and some are unclear. Compare Shannon v. Gen. Elec. Co., 186 F.3d 186, 191–
93 (2d Cir. 1999) (holding no jurisdiction because “interlocutory orders
should not ordinarily merge with a final judgment dismissing an action for
failure to prosecute”), and R & C Oilfield Servs. LLC v. Am. Wind Transp.
Grp. LLC, 45 F.4th 655, 659–660 (3d Cir. 2022) (holding no jurisdiction),
with Sere v. Bd. of Trs. of Univ. of Ill., 852 F.2d 285, 288 (7th Cir. 1988)
(providing merger rule is “inapplicable where adherence would reward a
party for dilatory and bad faith tactics”), and Bertha v. Hain, 787 F. App’x
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334, 337–38 (7th Cir. 2019) (“We would not apply the [merger] rule if it would
encourage bad-faith tactics.” (emphasis added) (citing Sere, 852 F.2d at 288)),
and AdvantEdge Bus. Grp. v. Thomas E. Mestmaker & Assocs., Inc., 552 F.3d
1233, 1237 (10th Cir. 2009) (“There is no statute, rule, or precedent
requiring an exception to the merger rule when the final judgment is a
dismissal for failure to prosecute and this court sees no reason to adopt such
a rule. Rather, the better approach is a prudential rule allowing the appellate
court to review an interlocutory order . . . in that rare case when it makes
sense to do so.”). See also John’s Insulation, Inc. v. Addison & Assocs., Inc.,
156 F.3d 101, 105–08 (1st Cir. 1998); Knoll v. Am. Tel. & Tel. Co., 176 F.3d
359, 366 (6th Cir. 1999); DuBose v. Minnesota, 893 F.2d 169, 171 (8th Cir.
1990); Al-Torki v. Kaempen, 78 F.3d 1381, 1386 (9th Cir. 1996).
Our court, likewise, has regularly refused to rule on adverse
interlocutory orders on appeal from involuntary dismissals. In doing so,
however, it has applied both a jurisdictional and a discretionary approach.
For example, in one factually similar case, in reversing an involuntary
dismissal for failure to comply with discovery orders under Rule 37(b), our
court held the “denial of Plaintiff’s Motion for Partial Summary Judgment
[was] not a final decision as to which this Court [had] appellate jurisdiction”.
Gonzalez v. Trinity Marine Grp., Inc., 117 F.3d 894, 899 (5th Cir. 1997).
In another, in reversing a dismissal for failure to prosecute under Rule
16(f) (allowing court to, inter alia, dismiss action for party’s failure to obey
scheduling and other pretrial orders), our court “exercise[d] [its] discretion
not to address the merits of the [denied] motion for summary judgment”.
Hurman v. Port of Hous. Auth., 990 F.2d 626, 1993 WL 117842, at *3 n.6 (5th
Cir. 1993) (unpublished, but precedent pursuant to 5th Cir. R. 47.5.3).
Rather than treating the issue as jurisdictional, the panel relied on the
principle that a court may, in its discretion, deny a summary-judgment
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motion even when movant has otherwise met his burden, where the court
doubts the wisdom of concluding the case early; therefore, the losing party to
that motion does “not have the right to have summary judgment granted”.
Id.More recently, our court declined to consider an interlocutory ruling
on appeal of a Rule 41(b) dismissal, providing: “in the context of dismissal
for failure to prosecute, courts prudently decline to review adverse
interlocutory rulings because the matter under review is the dismissal itself”.
Griggs, 905 F.3d at 845 n.54. The Griggs opinion cited many of the above-
cited decisions from other circuits, some treating the matter as jurisdictional,
others as discretionary; thus, it is uncertain which particular rational was
applied. But, the discretionary approach appears to have been taken.
Accordingly, while our precedent is unclear whether this rule is
jurisdictional or discretionary, and assuming we do have jurisdiction, we
exercise our discretion not to address the summary-judgment order. Instead,
we remand this case to district court.
C.
On remand, plaintiffs are to have an opportunity to move for default
judgment in accordance with the procedure provided in Rule 55(b)(2) and
the principles mentioned below. See Wooten v. McDonald Transit Assocs., Inc.,
788 F.3d 490, 497–500 (5th Cir. 2015) (Rule 55 allows plaintiffs to submit
evidence to “‘establish the truth of any allegation [in their complaint]’ . . .
[and] flesh[] out [their] claim”. (quoting Fed. R. Civ. P. 55(b)(2)(C))).
In this regard, “[t]he role of a district court in adjudicating a motion for
default judgment is limited”, and the “court takes as true the facts asserted
by a plaintiff against a defaulting defendant”. Escalante v. Lidge, 34 F.4th
486, 492 (5th Cir. 2022).
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In addition, the court should consider the effect, if any, of plaintiffs’
contention that defendants’ unavailability for supplemental discovery (and
perhaps insufficient prior discovery) prevents plaintiffs from producing the
evidence the court requested, and, relatedly, whether appropriate sanctions
pertaining to that lack of evidence are warranted against defendants. See
Grunberg v. City of New Orleans, 1994 WL 574194, at *2 (5th Cir. 1994)
(unpublished, but precedent pursuant to 5th Cir. R. 47.5.3) (“If precise
evidence of hours worked by the employee is not available due to the
employer’s failure to keep adequate records, the employee may satisfy his
burden with admittedly inexact or approximate evidence.” (citation
omitted)); U.S. For Use of M-CO Const., Inc. v. Shipco Gen., Inc., 814 F.2d
1011, 1012–13 (5th Cir. 1987) (affirming default judgment where defendant
answered, denied liability, and asserted affirmative defenses, but because
defendant subsequently failed to comply with discovery orders, court struck
defendant’s pleadings as sanctions and granted plaintiff default judgment).
III.
For the foregoing reasons, we VACATE and REMAND for further
proceedings consistent with this opinion.
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