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Carrera v. EMD Sales, Inc.

United States District Court, D. Maryland

August 20, 2019

FAUSTINO SANCHEZ CARRERA, et al., Plaintiffs
v.
EMD SALES, INC., et al., Defendants

          MEMORANDUM

          James K. Bredar, Chief Judge

         Plaintiffs Faustino Sanchez Carrera, Jesus David Muro, and Magdaleno Gervacio filed suit against Defendants E.M.D. Sales, Inc. ("EMD"), E&R Sales and Marketing Services, Inc. ("E&R"), and Elda M. Devarie, alleging a violation of the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. ("FLSA" or "the Act"), for failure to pay overtime wages. Plaintiffs seek back wages, liquidated damages, costs and reasonable attorneys' fees, and a permanent injunction to prevent Defendants from continuing to violate the FLSA. 29 U.S.C. §§ 216(b), 217. Now pending before the Court are Defendants' Motion for Summary Judgment (ECF No. 97), Plaintiffs' Cross-Motion for Partial Summary Judgment (ECF No. 104), Plaintiffs' Motion to Seal Exhibit 15 of Plaintiffs' Motion for Partial Summary Judgement (ECF No. 106), and Plaintiffs' Motion to Strike Defendants' Summary Judgment Exhibits G9, G10, Gil and G12 in their entirety and Exhibit G ¶¶ 14-17 (ECF No. 109). No. hearing is required. See Local Rule 105.6 (D. Md. 2018). For the reasons set forth below, the Defendants' Motion for Summary Judgment will be granted in part and denied in part, Plaintiffs' Cross-Motion for Partial Summary Judgment will be denied, Plaintiffs' Motion to Seal will be denied, and Plaintiffs' Motion to Strike will be granted in part and denied in part.

         I. Background

         Mr. Carrera and Mr. Gervacio are sales representatives for EMD, a company that distributes Latin American, Caribbean, and Asian food products to stores throughout the Washington metropolitan area. (Def. M.S.J. Mem. at 1, ECF No. 97-1; Pl. M.S.J. Exh. 1 ¶ 1, Exh. 7 ¶ 1, ECF. No. 104.) Mr. Muro worked as an EMD sales representative until August 2017. (Pl. M.SJ. Exh. 8 ¶ 1.) Elda Devarie is EMD's President and Chief Executive Officer. (Def. M.S.J. Exh. A at 4.) Ms. Devarie also owns E&R, a separate company which provides EMD with merchandising services once EMD delivers products to its customers. (Def. M.S.J. Mem. at 3; Pl. M.S.J. Mem. at 6, Exh. 16 at 36, ECF No. 108.) Plaintiffs allege that Defendants failed to pay them overtime wages pursuant to the FLSA. Defendants argue that Plaintiffs are subject to the FLSA's outside sales exemption, which exempts employees from overtime pay so long as their primary duty is making sales and they generally work outside of the office in furtherance of those sales. 29 C.F.R. § 541.500(a).

         Sales representatives at EMD are represented by the United Food and Commercial Works Union, Local 400 ("Union"). (Def. M.S.J. Mem. at 2, Exh. B.) As provided in the Union Agreement negotiated between the Union and Ms. Devarie, a sales representative's entire salary derives from commissions for the sale of EMD products. (Def. M.S.J. Exh. B at 12.) Sales representatives spend most of their time outside of the office visiting the stores on their route, and EMD does not track the hours sales representatives work. (Def. M.S.J. Mem. at 5, Exh. B at 12; Pl. M.S.J. Exh. 16 at 42, 45.) Twice a week, EMD holds conference calls for the sales representatives, which "are directed at specific EMD products that should be pushed by the outside sales representatives and other issues designed to help the sales representatives increase their sales of EMD products to their customers." (Def. M.S.J. Exh. G ¶ 8.) Sales representatives also attend a sales meeting at EMD every three weeks, which includes information on new EMD products and products EMD is "pushing" to stores, as well as updates on sales representatives' personal sales performance. (Id. ¶ 7.)

         EMD provides food products to independent stores as well as larger chain stores, such as Walmart and Giant Food. (See, e.g., Pl. M.S.J. Exh. 2 ¶ 4, Exh. 12.) EMD's sales representatives can try to open new accounts by pitching EMD products to independent stores, thereby adding stores to their sales route and increasing their sales. (See Pl. M.S.J. Exh. 1 ¶ 31; Def. M.S.J. Exh. C at 120:3-9.) At chain stores, by contrast, other EMD employees, including Ms. Devarie and her son, Roberto Devarie, establish the initial business relationship and negotiate floor space for EMD products at that time. (Pl. M.S.J. Exh. 1 ¶ 7. See also Pl. M.S.J. Exh. 2 ¶ 12, Exh. 3 ¶ 12.) In addition to sales representatives, EMD also employs key account managers, who negotiate prices and space allotments with EMD's chain store customers. (Pl. M.S.J. Exh. 1 ¶ 7.) Key account managers also work to convince chain stores to purchase new products from EMD in addition to those they already sell. (Id.) At chain stores, the role of the sales representative is to arrange products, stock and condition shelves, take orders for new products, and try to obtain more space for EMD on the salesfloor and thereby sell more products. (Pl. M.S.J. Exh. 1 ¶¶ 3-7, Exh. 11.)

         While it is undisputed that EMD sales representatives have unlimited ability to sell EMD products to independent stores (see Pl. M.S.J. Exh. 16 at 72), the parties dispute whether sales representatives can sell additional products or gain additional shelf space at chain stores. Chain stores rely on planograms, which are detailed maps of the products on the salesfloor, to determine what products to sell and where to place these products in the store. (See e.g., Pl. M.S.J. Ex. 2 ¶ 6 (discussing planograms at Giant Food), Exh. 12 ¶ 15 (discussing planograms at Walmart), Exh. 3 ¶ 17 (discussing planograms at Safeway).) These planograms are created at the corporate level, and store managers have little to no leeway to alter the placement or mix of products as dictated by the planogram. (See, e.g., Pl. M.S.J Ex. 2 ¶¶ 13, 15-16, Exh. 12 ¶ 15, Exh.3 ¶ 17.) Accordingly, Plaintiffs state that only in "rare" situations are sales representatives able to negotiate for more space to sell additional products at chain stores. (Pl. M.S.J. Mem. at 4; see Pl. M.S.J. Exh. 7 ¶ 7.) Instead of making their own sales at chain stores, Plaintiffs state that they are simply taking orders to restock products or refill space that was already sold by another EMD employee. (Pl. M.S.J Exh. 1 ¶¶ 4-5, Exh. 7 ¶¶ 4-5, Exh. 8 ¶¶ 4-5.) Plaintiffs explain that over the last five years they have spent at least 97% of their time servicing chain stores, and that over 96% of their total product volume ordered and stocked during this time has derived from these chain stores. (Pl. M.S.J. Exh. 1 ¶ 2, Exh. 7 ¶ 2, Exh. 8 ¶ 2, Exh. 9.) Therefore, Plaintiffs argue, their ability to secure any sales on their own is extremely limited. (Pl. M.S.J. Mem. at 3-4.)

         Defendants contest this characterization of the sales representative's job and provide declarations from other sales representatives stating that they have been successful in negotiating additional space for EMD products in chain stores. (Def. M.S.J. Exh. D at 45-49.) Juan Pablo Barreno, who has been a sales representative at EMD for twenty years, testified he spends 80% of his time on sales, and only 20% on "packing up" tasks. (Id. at 164:1-2.) He testified that building relationships with store managers has helped him to sell more EMD products. (Id. at 161-63.) Another sales representative, Mayra Palma, testified that her relationship with the grocery manager also enabled her to gain additional display space for EMD products at Giant Food. (Def. M.S.J. Exh. F at 62-64.) Mr. Barreno explained that while his ability to place more products on the shelf at chain stores is limited due to planograms, he is not limited in his ability to order additional products for the floor. He explained that while the shelves can only hold so much product, "we can create more space if we want," and "if we can create a secondary location, then we can send one case, twenty, thirty cases." (Def. M.S.J. Exh. D at 153-54.) Mr. Barreno did note, however, that over the last few years stores have started reducing the amount of "back stock" they will hold for the floor (id. at 154-55), making this more difficult.

         The crux of the parties' dispute is whether the primary duty of sales representatives is to make sales. (Def. M.S.J. Mem. at 3; Pl. M.S.J. Mem. at 3.) Plaintiffs state their primary duty is not making sales, but rather is "perform[ing] labor-intensive promotional activities which are incidental to sales made by other EMS personnel at chain stores, such as re-stocking, ordering and perform[ing] related functions, including replenishing depleted product, physically stocking product, conditioning space, and writing credits for expired or damaged product they remove." (Pl. M.S.J. Mem. at 3-4; see also Pl. M.S.J. Exh. 1 ¶ 5, Exh. 11 at 9.) Defendants state that the primary duty of sales representatives is making sales and that they are "responsible for the sale of EMD products in their assigned stores." (Def. M.S.J. Mem. at 3.)

         II. Evidentiary Issues

         Before the Court considers the merits of the parties' cross-motions for summary judgment, the Court first considers the parties' challenges to the proffered evidence.

         a. Plaintiffs' Motion to Strike

         Plaintiffs have filed a motion to strike Exhibits G9-G12 and parts of Exhibit G from Defendants' motion for summary judgment and supporting memorandum of law. (Pl. Mot. Strike, ECF No. 109.) Exhibit G9 is a spreadsheet titled "Total Sales Reps - Total Accounts," which contains the total dollar amount of sales representatives' product sales for 2015 to 2018. (ECF No. 97-18.) Exhibit G10 is a report on sales representatives' gross wages for 2015 to 2018 which contains data on sales representatives' commissions during those years. (ECF No. 97-19.) Exhibit Gil is a sales report for another sales representative, Miguel Perez, for the years 2014 to 2017. (ECF No. 97-20.) Exhibit G12 is an email from Ivan Aguilar (an EMD employee) to Elda Devarie and Carmen Perez (another EMD employee) containing what is purportedly a list of new stores opened by the three Plaintiffs. (ECF No. 97-21.) Plaintiffs argue that these exhibits should be excluded under Federal Rule of Civil Procedure 37 and Federal Rule of Evidence 1006. Defendants argue that these exhibits are properly admissible business records.

         Plaintiffs also argue that Exhibit G ¶¶ 14-17, the Affidavit of Freddy Urdaneta Olivares (ECF No. 97-9), should be stricken because they contain lay opinion testimony which is not based on Mr. Urdenata's personal knowledge, in violation of Federal Rule of Evidence 701. (Pl. Mot. Strike Mem. at 8-9.) Defendants contest this characterization of Mr. Urdenata's affidavit and state that his responsibilities as EMD's Sales Director demonstrate that he has personal knowledge about the statements contained in his affidavit. (Mot. Strike Resp. at 3-4, ECF No. 110.) The Court will address each of these challenges in turn.

         1. Exhibits G9-G11

         Plaintiffs argue that Exhibits G9-G11 should be stricken because Defendants refused to provide discovery into sales and commissions made by sales representatives other than Plaintiffs during discovery, even though Plaintiffs specifically asked for this information. (Pl. Mot. Strike Mem. at 1, 3.) Rule 37(c) states: "If a party fails to provide information or identify a witness as required by Rule 26(a) or (e), the party is not allowed to use that information or witness to supply evidence on a motion, at a hearing, or at a trial, unless the failure was substantially justified or is harmless." Though Defendants argue in response that these exhibits should be admitted as business records (Mot. Strike, Resp. ¶ 11), Rule 37 contains no exception for business records.[1] Fed. R. Civ. P. 37.

         Exclusion of evidence does not require "a finding of bad faith or callous disregard of the discovery rules." S. States Rack & Fixture, Inc. v. Sherwin-Williams Co., 318 F.3d 592, 596 (4th Cir. 2003). Though district courts have "broad discretion" to decide whether a failure to disclose was substantially justified or harmless, the Fourth Circuit has held courts "should" consider five factors:

(1) the surprise to the party against whom the evidence would be offered; (2) the ability of that party to cure the surprise; (3) the extent -to which allowing the evidence would disrupt the trial; (4) the importance of the evidence; and (5) the non-disclosing party's explanation for its failure to disclose the evidence.

Id. at 597. As the parties who declined to disclose-this information during discovery, Defendants bear the burden to establish that nondisclosure was substantially justified or harmless. Wilkins v. Montgomery, 751 F.3d 214, 222 (4th Cir. 2014).

         During discovery, Plaintiffs specifically asked for documents containing information on sales representatives' commissions and sales. (Pl. Mot. Strike Mem. at 3.) Defendants argue that the information contained in Exhibits G9-11 is not a surprise because Plaintiffs "had ample opportunity to and did discover this information through the voluminous ESI discovery that occurred in this case." (Mot. Strike Resp. ¶ 3.) In support of this, Defendants cite to the affidavit of Nicholas Blackmore, attached as Exhibit 10 to Plaintiffs' cross-motion for summary judgment, (Pl. M.SJ. Exh. 10.) Mr. Blackmore explains how he made certain calculations based on "an Excel file" Defendants produced which contained data related to sales made by sales representatives from 2014 to 2015. (Id. ¶¶ 5-6.) As Plaintiffs highlight, Mr. Blackmore's affidavit refers to one document with information from 2014 to 2015. (Mot. Strike Reply at 1-2.) Defendants do not assert that any other information related to non-Plaintiff sales representatives' sales or commissions was produced during discovery, nor do they identify any documents they produced which contain such information. Instead, Defendants argue that Plaintiffs could have deposed other sales representatives on these topics. (Mot. Strike Resp. ¶ 10.) Not only did Plaintiffs not have access to the data in question during the depositions, but discovery had also been "effectively limit[ed] ... to the Plaintiffs only" and Defendants affirmatively redacted information about other sales representatives' sales from the documents they did provide during discovery. (Mot. Strike Reply at 3, Ex. B, Ex. C, Ex. D; Order, ECF No. 3 8.) The Court therefore finds that the factor of surprise argues in favor of exclusion of these exhibits.

         Defendants do not address any of the remaining factors. Defendants have not offered any explanation for their failure to disclose this information prior to the close of discovery and the filing of summary judgment motions, which argues strongly in favor of exclusion. Nor have Defendants addressed the ability of Plaintiffs to cure the surprise, which Plaintiffs assert would require re-opening discovery and further delaying adjudication of this case. (Pl. Mot. Strike Mem. at 4). Defendants also failed to address the disruption to the trial schedule that would result from permitting such evidence to be introduced at this point. While there is no trial scheduled at this time, Defendants did not produce this information until they filed their opening summary judgment motion. Potentially re-opening discovery and allowing supplemental briefing would likely delay the trial in this matter, but since there is no trial date set this factor only leans slightly in favor of exclusion. See e.g., Jones v. Chapman, Civ. No. ELH-14-2627, 2017 WL 2266221, at *6-7 (D. Md. May 24, 2017) (finding no abuse of discretion in striking an expert report produced seven months before trial but only two weeks before summary judgment motions); MCI Commc'ns Servs., Inc. v. Am. Infrastructure-MD, Inc., Civ. No. GLR-11-3767, 2013 WL 4086401, at *9 (D. Md. Aug. 12, 2013) (finding this factor was "split" between the two parties when information was first produced "in the midst of competing cross-motions for partial summary judgment" but no trial date had been set). Lastly, Defendants fail to address the relative importance of the evidence at issue. Based on the Court's review of the record, the Court does not find that these exhibits are dispositive or would alter its conclusions. Other admissible exhibits contain general information on sales representatives' sales and commissions, which are sufficient to inform the court that sales representatives' commissions vary based on the products they sell. (See, e.g., Def. M.S.J. Exh. B at 12.)

         Defendants have failed to address most of the factors that courts consider in determining whether to exclude evidence. Accordingly, the Court finds that Defendants have failed to meet their burden to demonstrate Exhibits G9-11 should not be excluded under Rule 37.[2] Because Defendants have not shown their failure to produce this information during discovery was substantially justified or harmless, the Court will grant Plaintiffs' motion to strike Exhibits G9-G11 to Defendants' motion for summary judgment.

         2. Exhibit G12

         Exhibit G12 is an email from EMD employee Ivan Aguilar to Elda Devarie and another EMD employee. Mr. Aguilar's email contains several charts with data about new accounts opened by the three Plaintiffs. Mr. Aguilar writes, "Below you will find all the stores that were open in Retalix for each sales rep." (Def. M.S. J. Exh. G12 at 1.) Defendants do not provide a certification from Mr. Aguilar. Instead, Defendants rely on a supplemental affidavit from EMD's Sales Director, Mr. Urdaneta, to certify this document. (Mot. Strike Resp. at 3, Exh. H.) In his supplemental affidavit, Mr. Urdaneta states that "[Mr.] Aguilar specifically references that the information was obtained through 'Retalix' which is a software application that EMD uses to manage its data base [sic]. Information in EMD's data base, like the information in Aguilar's e-mail to Ms. Devarie, and the e-mail is kept in the ordinary course of business and is accurate and reliable as a business record." (Id. Exh. H ¶ 6.)

         Plaintiffs argue that Exhibit G12 should be stricken because it is an unauthenticated, unsworn statement. (Pl. Mot. Strike Mem. at 6, 8.) However, exhibits need not be in admissible form to be considered at summary judgment, provided they could be put in admissible form. Fed.R.Civ.P. 56(c)(2); Kurland v. ACE Am. Ins. Co., Civ. No. JKB-15-2668, 2017 WL 354254, at *3 n.2 (D. Md. Jan. 23, 2017). Here, Plaintiffs do not allege that Exhibit G12 could not be made admissible by trial, nor do Defendants provide any information suggesting they would be unable to properly authenticate this information. Because nothing suggests this information could not be put in an admissible form at trial, the Court denies Plaintiffs' motion to strike Exhibit G12.[3]

         3. Exhibit G

         Plaintiffs have also asked the Court to strike four paragraphs of Freddy Urdaneta's affidavit (Def. M.S.J. Exh. G). Plaintiffs argue that these paragraphs contain lay opinion testimony which is not based on Mr. Urdaneta's personal knowledge. (Pl. Mot. Strike Mem. at 8-9.) It is well established that "summary judgment affidavits cannot be conclusory or based upon hearsay." Evans v. Techs. Applications & Serv. Co., 80 F.3d 954, 962 (4th Cir. 1996) (citations omitted). Mr. Urdaneta's affidavit "must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated." Fed.R.Civ.P. 56(c)(4).

         Mr. Urdaneta is the Sales Director and former Marketing Manager for EMD. (Def. M.S.J. Exh G ¶ 2.) In this role, he says he is "familiar with the various sales activities that EMD uses to help support its outside sales representatives sell more EMD products to independent stores and supermarket chains, cash and carry wholesalers and restaurants." (Id. ¶ 3.) Mr. Urdaneta explains he is "personally familiar with the sales efforts and performance of the Outside Sales Representatives who work at EMD," and "[t]he performance of the Outside Sales Representatives are regularly reviewed in EMD's Sales Meetings and weekly conference calls." (Mot. Strike Resp. Exh. H ¶ 3.) Mr. Urdaneta also explains, "[a]s EMD's Sales Director, on a regular basis, I review the individual sales performance of the individual Outside Sales Representatives by tracking their sales through EMD's sales records ... I can and do use information from that data base to track an individual's sales to EMD's customers." (Id. at ¶ 4.)

         This Court has held that an "affiant's personal knowledge may be based on review of files, if the testimony states facts reflected by the files and does not give 'inferences, opinions and surmises.'" Howard Acquisitions, LLC v. Giannasca New Orleans, LLC, Civ. No. WDQ-09-2651, 2010 WL 3834917, at *3 (D. Md. Sept. 28, 2010) (quoting Lee v. N.F. Invests., Inc., Civ. No. 99-426, 2000 WL 33949850, at *5 n.2 (E.D.Mo. Mar.15, 2000)). However, the Fourth Circuit has cautioned that affidavits based on the review of documents have "questionable value" where there is not "direct, personal knowledge of the underlying facts." Sutton v. Roth, 361 Fed.Appx. 543, 550 n.7 (4th Cir. 2010).

         As explained above, the Court excludes Exhibits G9-G11 from consideration under Rule 37. Accordingly, the Court will also exclude Exhibit G ¶¶ 14-16 to the extent the information within those paragraphs is based on Exhibits G9-G11 and not Mr. Urdaneta's personal knowledge. Fed.R.Civ.P. 37(c). On separate grounds, the Court also strikes Mr. Urdaneta's statement in ¶ 15: "If all of the outside sales representatives were only performing the same merchandising services, there would not be such a wide variation in the annual commissions earned by the outside sales representatives." (Def. M.S.J. Exh. G ¶ 15.) Mr. Urdaneta stated during his deposition that he does not track what component of sales representatives' sales derive from their own personal efforts versus those that derive from the efforts of other EMD employees to negotiate space or sales. (Pl. M.S.J. ...


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