Fochtman v. DARP, Inc.

IN THE UNITED STATES DISTRICT COURT

WESTERN DISTRICT OF ARKANSAS

FAYETTEVILLE DIVISION .

MARK FOCHTMAN; CORBY SHUMATE;

MICHAEL SPEARS; ANDREW DANIEL;

FABIAN AGUILAR; and SLOAN SIMMS

Individually, and on Behalf of All Others

Similarly Situated PLAINTIFFS

V. CASE NO. 5:18-CV-5047

DARP, INC.; HENDREN PLASTICS, INC.;

and JOHN DOES 1-29 DEFENDANTS

MEMORANDUM OPINION AND ORDER

Now pending before the Court are two motions. The first is a Motion for Class

Certification (Doc. 44) filed on behalf of all Plaintiffs on September 17, 2018. The second

is a Motion to Withdraw as Class Representative (Doc. 46) filed by Plaintiff Corby

Shumate on October 31, 2018. Defendant DARP, Inc. (“DARP”) filed a Response in

Qpposition to Class Certification (Doc. 47), as did Defendant Hendren Plastics, Inc.

(“Hendren Plastics”) (Doc. 48). Thereafter, Plaintiffs filed a combined Reply (Doc. 50) to

both Defendants’ Responses. Defendants did not file any response in opposition to Mr.

Shumate’s Motion to Withdraw as Class Representative.

On December 14, 2018, the Court held a hearing on the pending motions. After

oral argument concluded, the Court ruled from the bench, granting both the Motion for

Class Certification and the Motion to Withdraw as Class Representative. This Order sets

forth the bases for the Court's decisions in greater detail. In the event anything in this

Order conflicts with statements made from the bench, this Order will control.

I. BACKGROUND

Plaintiffs filed the instant Complaint on March 9, 2018," alleging violations of law

arising from their participation in a residential drug rehabilitation program run by DARP,

which stands for “Drug and Alcohol Recovery Program.” Plaintiffs seek to represent a

class of similarly-situated individuals who were ordered to attend DARP by drug courts in

Arkansas and Oklahoma. State drug courts routinely allow certain individuals charged

with drug crimes to participate in diversion programs, where they are given the option of

completing drug and alcohol rehabilitation in lieu of imprisonment. There are a number

of inpatient drug rehabilitation centers that partner with these drug courts to provide

inpatient services. DARP’s particular mission is “the ethic of hard work.” (Doc. 44-1). To

that end, DARP requires its residents to work during their time at DARP. DARP advises

its residents in writing that it will “never charge . . . any fees or costs; however, participants

are expected to work at full-time jobs knowing that they will not receive any immediate

financial compensation for their work.” (Doc. 44-13).

In fact, the “Admission Agreement” that each resident signs states the following:

| understand that | will not be required to pay the D.A.R.P. Foundation any

fee for the services rendered me in connection with the D.A.R.P. recovery

process. | understand that | will be furnished room and board, clothing, and

other necessities. | understand that participants of the D.A.R.P. Foundation

receive no pay while in the program and that the money earned goes toward

operation of the D.A.R.P. Foundation. This includes all overtime accrued

while working and participating at D.A.R.P., for which there will be no

compensation.

1 This case was originally filed in Benton County, Arkansas Circuit Court on October 23,

2017, and removed to this Court on November 6, 2017, as Case Number 5:17-CV-05228,

Mark Fochtman and Shane O’Neal v. CAAIR, Inc., Simmons Foods, Inc, DARP, Inc., and

Hendren Plastics, Inc. (“Fochtman I’). This Court found jurisdiction was proper under the

Class Action Fairness Act and denied Defendants’ motions to remand on February 27,

2018 (Doc. 2). The instant case was severed from Fochtman | on February 27, 2018.

See Case Number 5:17-CV-05228, Doc. 97.

(Doc. 44-24).

In a nutshell, then, DARP residents agree to forego payment of their wages in

exchange for a bed to sleep in, the option to participate in AA or NA meetings,

transportation to and from the job that DARP arranges for them, “healthy meals at no

cost,” and “basic necessities of hygiene supplies to include toothpaste, shampoo,

toothbrushes, razors, etc. at no cost,” (Doc. 44-13).

The record indicates that, at some point, DARP entered into an agreement to

provide resident labor to Hendren Plastics. See Doc. 21-1. According to the agreement,

DARP would send its residents to Hendren Plastics to work daily shifts. The residents

would clock in and out of the factory, just as non-DARP employees would, and Hendren

Plastics would keep track of the hours the residents worked. The agreement affirms that

DARP’s “goal” in working with Hendren Plastics was “to provide a reliable work force for

[the] company.” id. Accordingly, DARP residents worked at “a flat rate of $9.00 per man |

hour” for the first forty hours per week, and at a rate of “$13.50 an hour” for every hour

worked over forty per week. /d. Under this scheme, the residents were never paid directly |

for their work. Instead, Hendren Plastics would calculate the hours worked at the flat

rates agreed upon and then cut lump-sum checks to DARP for the residents’ labor.

The residents understood that DARP would not be paying them wages. They all

signed an identical document entitled “Disclaimer of Employment Relationship,” which

explained that: (1) they would not receive wages or otherwise be paid during their stay

at DARP; (2) they might be offered “a benefit package, gratuity/stipend” by DARP—that

was “[njot to include any accrued overtime’—“upon successful completion” of the

program; and (3) they would not be considered “employees” of DARP and had no right to

claim workers’ compensation or unemployment benefits. (Doc. 1-11).

The class action Complaint contains claims concerning Defendants’ alleged failure

to pay minimum wages and overtime compensation under the Arkansas Minimum Wage

Act (“AMWA”) (Counts | and II).2, The Motion for Class Certification (Doc. 44) requests

that the Court certify a class defined as: “All individuals who were DARP participants at

any time from October 23, 2014 until the present, and who worked for Hendren Plastics,

Inc. in the State of Arkansas during their time at DARP.” Plaintiffs further request that

their counsel be appointed as class counsel and that Plaintiffs Fochtman, Spears, Daniel,

Aguilar, and Simms be appointed as class representatives.°

Defendants DARP and Hendren dispute whether: the purported class is sufficiently

numerous to be appropriate for class certification; there are questions of law and fact

common to the class; the putative class representatives have claims that are typical of

those of the rest of the class; the class representatives will adequately protect the

interests of the class; class issues predominate over individual issues; and a class action

is a superior method of resolving this dispute, as compared to individual lawsuits. Below,

the Court will consider these arguments.

li. LEGAL STANDARD

Pursuant to Rule 23, certifying a class action requires a two-step analysis. First,

a class action may maintained if: (1) the class is so numerous that joinder of all

members is impracticable, (2) there are questions of law or fact common to the class, (3)

the claims or defenses of the representative parties are typical of the claims or defenses

of the class, and (4) the representative parties will fairly and adequately protect the

interests of the class. Fed. R. Civ. P. 23(a)(1)-(4). Second, a class action will be deemed

2 Counts Ill and IV were dismissed without prejudice on June 27, 2018 (Doc. 35).

3 Plaintiff Corby Shumate has moved to withdraw as class representative. (Doc. 46).

appropriate if a court finds that questions of law or fact common to class members

predominate over questions affecting only individual members, and that a class action is

superior to other available methods for fairly and efficiently adjudicating the controversy.

Fed. R. Civ. P. 23(b)(3).

An implicit requirement for any class certification inquiry involves a court's

assessment as to the ascertainability of the class. The description of a proposed class

must be sufficiently definite to permit class members to be identified by objective criteria.

See Sandusky Wellness Ctr., LLC v. Medtox Sci., Inc., 821 F.3d 992, 996-97 (8th Cir.

2016). “The requirement that a class be clearly defined is designed primarily to help the

trial court manage the class. It is not designed to be a particularly stringent test, but

plaintiffs must at least be able to establish that the general outlines of the membership of

the class are determinable at the outset of the litigation.” Bynum v. Dist. of Columbia,

214 F.R.D. 27, 31 (D.D.C. 2003).

The district court retains “broad discretion in determining whether to certify a class,

recognizing the essentially factual basis of the certification inquiry and . . . the district

court's inherent power to manage and control pending litigation.” In re Zurn Pex Plumbing

Prods. Liab. Litig., 644 F.3d 604, 616 (8th Cir. 2011) (internal quotations and citations

omitted).

Ill. DISCUSSION

. A. Numerosity (Rule 23(a)(1)) and Ascertainability

The Court begins its analysis by assessing whether the class is so numerous that

joinder of all members is impracticable, and, relatedly, whether the members of the class

are readily ascertainable. The Eighth Circuit, “unlike most other courts of appeals, has

not outlined a... separate, preliminary requirement” of ascertainability that would require

plaintiffs to demonstrate a method of identifying class members that is administratively

feasible. See Sandusky Wellness, 821 F.3d at 996. Rather, the Eighth Circuit simply

adheres to a rigorous analysis of the Rule 23 factors, and while it recognizes that this

analysis necessarily entails that a class be “adequately defined and clearly

ascertainable,” the focus of this threshold inquiry is on whether the proposed class

definition identifies class members by objective criteria, rather than on the administrative

concerns that are already taken into account by the Rule 23(b)(3) factors of predominance

and superiority. See id.

Defendants do not dispute that the precise number of class members is either

known or may be discovered fairly easily. Plaintiffs maintain there are approximately 180

former DARP residents who meet the class definition, and Defendants do not dispute that

number. Instead, DARP argues that it is unclear at this time whether any of the 180

putative class members will ultimately want to remain as members of the class or will

instead opt out. DARP claims “[t]his absence of clarity means Plaintiffs have not proven

that members of the proposed class are sufficiently numerous to warrant certification.”

(Doc. 47, p. 5).

DARP’s argument above tends to demonstrate that it does not understand what

the numerosity requirement of Rule 23 actually entails. In order to make a finding thata

class will be so numerous that joinder will be impractical, the Court does not need to

consult its crystal ball and predict how many class members will opt out and how many

will remain. The numerosity requirement asks, simply, how many individuals meet the

class definition. Here, the number is 180, and the class members’ identities are easily

ascertainable.

6 .

DARP also. attempts to muddy the waters by making a merits-based argument

about numerosity. DARP contends that few, if any, of the 180 putative class members

will ultimately be classified as employees under the AMWA and therefore will not be

entitled to damages. Obviously, it would be improper for the Court to delve deeply into

the merits at the pre-certification phase, and this argument will be disregarded for that

reason.

Turning to Hendren Plastics, it offers two arguments as to why the numerosity

inquiry has not been met. Hendren Plastics does not dispute there are 180 potential class

members, but it argues that Plaintiffs have not sufficiently explained why this case could

not be resolved in 30, 50, or even 180 separate lawsuits. The Court rejects this argument

as frivolous. It defies common sense to argue that 180 separate lawsuits brought by

similarly-situated individuals, litigating the same issues of liability, would somehow be

more efficient and more cost-effective than a class action. Hendren Plastics’ second

argument suggests—without any citation to authority—that Plaintiffs should be required

to dismiss this lawsuit in favor of pursuing their claims in an administrative proceeding

before the Arkansas Department of Labor (“DOL”). At the motion hearing, the Court

inquired of counsel for Hendren Plastics whether he contended that the Plaintiffs had a

duty to exhaust administrative remedies with the DOL before initiating a wage-and-hour

lawsuit under the AMWA. Counsel responded that he was not aware of such a duty. For

all these reasons, the numerosity and ascertainability requirements are easily satisfied.

B. Commonality (Rule 23(a)(2))

The requirement of commonality does not mean “that every question of law or fact

be common to every member of the class.” Paxton v. Union Nat. Bank, 688 F.2d 552,

, 7

561 (8th Cir. 1982). Furthermore, multiple common questions are not required in order

to establish commonality. According to the Supreme Court, “[e]ven a single [common]

question will do.” Wal-Mart Stores, Inc. v. Dukes, 564 U.S. 338, 359 (2011) (alterations

in original, internal quotation marks and citation omitted).

Plaintiffs list the following questions of law and fact as common to the class and

subject to class-wide proof:

e whether class members were employees of DARP under the AMWA;

e whether class members were employees of Hendren Plastics under the

AMWA;

e whether DARP and Hendren Plastics failed to pay them at least the

minimum wage;

e whether DARP and Hendren Plastics failed to pay them overtime

compensation;

e the amount of credit (for food/board/facilities) DARP and Hendren

Plastics may claim against any minimum wages owed; and

e whether DARP and Hendren Plastics complied with AMWA’s record-

keeping requirements.

It is also undisputed that all class members:

e were DARP residents who lived at DARP and worked at Hendren

Plastics under substantially the same conditions;

e clocked in and out in the same way;

e had their hours recorded in the same manner; and

e were paid the same negotiated hourly rates for their work.

Defendants’ arguments on the issue of commonality go only to the merits of the

case. First, Defendants note that all class members signed the same “Disclaimer of

Employment Relationship” form (Doc. 1-11), which, to Defendants, definitively proves that

the class members were not employees under the AMWA and have no valid claims for

damages. Defendants, once again, improperly urge the Court to decide the merits of the

case and make a finding that Plaintiffs and the putative class are not employees. This

the Court cannot do at the class certification stage. See Amgen v. Conn. Ret. Plans and

Tr. Funds, 568 U.S. 455, 466 (2013) (“Rule 23 grants courts no license to engage in □□□□□

ranging merits inquiries at the certification stage. Merits questions may be considered to

the extent—but only to the extent—that they are relevant to determining whether the Rule

23 prerequisites for class certification are satisfied.”).

More to the point, the Court’s reading of Tony and Susan Alamo Foundation v.

Secretary of Labor, 471 U.S. 290, 292 (1985), is that even a worker who affirmatively

declines the law's protections may still be considered an employee and may still be

entitled to minimum wage and overtime compensation. In the case at bar, it is undisputed

that DARP residents actually received some amount of in-kind compensation—in the form

of meals, lodging, and other amenities—and that DARP agreed in writing to provide such

amenities to all residents in exchange for work/wages. See Doc. 44-13. The law is clear

that the test for employment is one of “economic reality.” Alamo, 471. U.S. at 301. The

fact that all putative class members in this case shared the same economic reality weighs

in favor of finding that they share common, dispositive questions of law and fact.

With regard to Defendants’ argument that DARP residents received different in-

kind benefits, the Court is not persuaded that these variations were so significant that

they cannot be easily accounted for in the calculation of damages, if such becomes

necessary. According to Defendants, DARP served extra meals to some workers but not

others (if they worked the late shift at the factory), transported some workers but not

others to the doctor (if they needed medical care), provided clothing and toiletries to

workers who needed them (but not to those who brought these items from home), and

saved money on food and housing for those workers who went home on the weekends

(because they were granted furloughs). (Doc. 48, p. 29). Plaintiffs point out that the

AMWA only allows an employer to take a credit of up to $0.30 per hour for board and

lodging—regardless of the true cost of the lodging or the true cost of the food provided.

(Doc. 50, p. 12). So, regardless of whether DARP offered a given resident four meals a

day or three meals a day, the Statutory cap on credits would make the damages

calculation a bit more straightforward than Defendants would have the Court believe. Any

other variations in the in-kind benefits DARP provided to its residents are not significant

enough to defeat class certification, in the Court's view.

Finally, Defendants’ argument that some workers received a stipend upon

successful completion of the DARP program, while others did not, does not mean the

case is unsuitable for class certification. Provided that the calculation of damages will not

bog down the litigation and render the class action model unworkable and inefficient, .

there is no reason to refuse to certify a class simply because some class members may

require certain, special deductions in their damage calculations. See Comcast Corp. v.

Behrend, 569 U.S. 27, 34 (2013) (finding that individual damages calculations are

permissible if they do not “overwhelm questions common to the class”). Here, the stipend

DARP paid to successful residents who completed the program was either $500 (for six

months of successful compliance) or $1000 (for twelve months). It should be a simple

matter of arithmetic to subtract those stipends from the damage totals of the individual

10 □

workers who received them. The Court finds that commonality inquiry weighs in favor of

class certification.

C. Typicality (Rule 23(a)(3))

The typicality inquiry asks whether the named Plaintiffs’ claims are typical of those

of the rest of the class. Defendants rehash their arguments with respect to commonality

and maintain that the named Plaintiffs’ claims cannot possibly be typical of the rest of the

class because each class member must have had his own, individual expectations about

whether he was an employee and entitled to receive minimum wages and overtime

compensation. Again, the Court rejects Defendants’ arguments for the reasons

previously stated. Since Plaintiffs were all DARP residents who worked at Hendren

Plastics under substantially the same conditions as the rest of the putative class, the

Plaintiffs’ claims are typical of those of the class.

D. Adequacy of Class Representatives (Rule 23(a)(4))

DARP argues that the named Plaintiffs will not adequately represent the interests

of the class, simply because their interests are allegedly not aligned with the majority of

former DARP residents. DARP contends that most, if not all, of its former residents

benefited from the program and will have no interest in being part of this class action

lawsuit. Again, DARP seems to think that if some class members opt out in the future,

that fact is somehow relevant to the class-certification analysis. It is not. Plaintiffs’

interests and legal claims align with those of ai// the individuals who could potentially be

members of the class. It follows logically that if any class member later chooses to opt

out, Plaintiffs will still be adequate representatives of all those class members who decide

to remain in the lawsuit.

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As for Hendren Plastics, it suggests that Plaintiffs will not make adequate class

representatives because they are convicted felons with drug dependency issues. Most,

if not all, class members are also convicted felons with drug dependency issues, by virtue

of the nature of the claims at issue in this case. To suggest, without more, that a felon

could never serve as a class representative strikes the Court as rather a specious

argument. Further, Hendren Plastics has failed to offer any examples of Plaintiffs

behaving inappropriately in this litigation or refusing to participate. To the contrary, to the

Court's knowledge, all Plaintiffs have actively participated in discovery and have

adequately prosecuted this case, both on their own behalf and on behalf of all others

similarly-situated. For these reasons, the Court finds that the Plaintiffs will adequately

represent the claims and interests of the class.

E. Requirements of Rule 23(b)

In addition to finding that Rule 23(a) has been satisfied, the Court must also

consider whether one of three possible requirements of Rule 23(b) has been met. In

particular, the Court must determine if “questions of law or fact common to class members

predominate over any questions affecting only individual members’—which is commonly

referred to as the “predominance” inquiry—and if “a class action is superior to other

available methods for fairly and efficiently adjudicating the controversy“—which is referred

to as the “superiority” inquiry. Fed. R. Civ. P. 23(b)(3). The following factors are pertinent:

(A) the class members’ interests in individually controlling the

prosecution or defense of separate actions;

(B) the extent and nature of any litigation concerning the controversy

already begun by or against class members;

(C) the desirability or undesirability of concentrating the litigation of the

claims in the particular forum; and

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(D) _ the likely difficulties in managing a class action.

Fed. R. Civ. P. 23(b)(3)(A)-(D).

1. Predominance

With respect to predominance, the relevant inquiry is whether class issues will tend

to predominate over individual issues. Plaintiffs contend that the salient question here is

whether the residents of DARP were employees of DARP and/or Hendren Plastics. That

is a question that depends on the economic reality of the workers’ situations. It is

undisputed that all putative class members worked in the same location and under the

same conditions, were paid the same hourly rates, and were given substantially the same

in-kind benefits in exchange for their work. Defendants contend that the Court should not

find that class issues predominate over individual ones because it is unknown at this time

whether any class members will ultimately qualify as employees under the AMWA, due

to their differing expectations, intentions, and motivations in choosing DARP for inpatient

substance abuse treatment. The Court rejects Defendants’ merits-based arguments for

the reasons previously explained. Class issues will tend to predominate over individual

ones in this matter.

2. Superiority

The second and final factor to consider in the Rule 23(b) analysis is whether the

class action is a superior means of resolving this dispute as compared to other litigation

methods. According to the Supreme Court, the “principal purpose” of a class action is to

advance “the efficiency and economy of litigation.” Am. Pipe & Const. Co. v. Utah, 414

U.S. 538, 553 (1974). In this regard, Rule 23 class actions may be viewed as having

been created as a management tool to make litigation easier, not more complicated. |

13

Plaintiffs here advise that there are approximately 180 individuals who meet the

class definition and share common claims for damages and common questions of law

and fact. Defendants really do not disagree. It will be far more efficient to dispose of all

class members’ claims in one forum rather than entertain piecemeal litigation.

Furthermore, the Court does not believe that the management of this class action will be

overly complex or burdensome—and will certainly not be more burdensome than litigating

180 separate lawsuits on the same question of liability. The superiority requirement is

therefore satisfied.

IV. CONCLUSION

For all these reasons and those stated in open court at the class certification

hearing, IT IS ORDERED that Plaintiffs’ Motion for Class Certification (Doc. 44) is

GRANTED.

IT IS FURTHER ORDERED that Separate Plaintiff Corby Shumate’s Motion to

Withdraw as Class Representative (Doc. 46) is GRANTED.

IT IS FURTHER ORDERED that the certified class is defined as follows:

All individuals who were DARP participants at any time from October 23,

2014, until the present, and who worked for Hendren Plastics, Inc. in the

State of Arkansas. during their time at DARP.

IT iS FURTHER ORDERED that Plaintiffs Mark Fochtman, Michael Spears,

Andrew Daniel, Fabian Aguilar, and Sloan Simms are designated as. Class

Representatives.

IT IS FURTHER ORDERED that the following attorneys are designated as Class

Counsel: Jerry D. Garner, John Holleman, and Timothy A. Steadman.

IT IS FURTHER ORDERED that no later than February 28, 2019, Class Counsel

must submit a motion for approval of a proposed plan of notice and proposed notice

14

forms, in accordance with Rule 23(c)(2)(B). According to the Rule, the proposed notice

should be “the best notice that is practicable under the circumstances” and should “clearly

and concisely state in plain, easily understood language’ all the information set forth at

subsection (c)(2)(B)(i)-(vii).

IT IS SO ORDERED on this day of January, 2019.

SN

TWIQFHYL. BROOKS

/OMITED’ FS DISTRICT JUDGE

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IS