Opinion ID: 799454
Heading Depth: 2
Heading Rank: 2

Heading: Procedural Histories

Text: Susan Schaefer-LaRose originally filed this action on November 14, 2006, in the Northern District of New York. Lilly moved to transfer the case to the Southern District of Indiana under 28 U.S.C. § 1404(a), and, after transfer was granted, moved for summary judgment. The district court granted Lilly's motion for summary judgment; it concluded that the position of pharmaceutical sales representative was within both the outside sales exemption and the administrative exemption to the FLSA. Beginning with the outside sales exemption, the district court took a pragmatic approach, emphasizing the structure and realities of the pharmaceutical industry. Specifically, the court acknowledged that [o]nly the nature of the heavily regulated pharmaceutical industry prevented Ms. Schaefer-LaRose from going beyond receiving non-binding commitments from the physicians on whom she made calls in her sales territory to consummating final sales to them.  Schaefer-LaRose v. Eli Lilly & Co., 663 F.Supp.2d 674, 686 (S.D.Ind.2009) (emphasis added). The court pointed to the undisputed fact that Ms. Schaefer-LaRose was clearly hired as a Lilly sales representative, not simply to educate and inform physicians about Lilly pharmaceuticals, but to generate sales of those products. Id. The district court rejected Ms. Schaefer-LaRose's argument that her work was not within the outside sales exemption because she actually did not consummate sales, but rather engaged in promotion work which resulted in sales made by a third party. The court distinguished Ms. Schaefer-LaRose's work from traditional promotion work, explaining that she did not merely `grease the skids' in preparing the way for a second wave of Lilly employees who later would visit those same physicians and close the actual sales. Id. at 687. Rather, when her efforts succeeded later on in terms of the issuance of a prescription by a physician to a patient who purchases the medication, Ms. Schaefer[-]LaRose personally received salary benefits for those prescriptions as part of her compensation package. Id. Taking note of the indicia-of-sales factors in the regulations, the court concluded that all of Ms. Schaefer-LaRose's ancillary duties, which included preparing and reviewing reports, distributing drug samples to physicians, and allocating funds for programs, were in direct support of her sales efforts to secure commitments from physicians to prescribe Lilly pharmaceuticals. Additionally, the court noted that Ms. Schaefer-LaRose was compensated, in large part, based upon the number of prescriptions written within her territory. The court therefore concluded that sales representatives indeed make sale[s] within the meaning of section 3(k) of the FLSA, 29 U.S.C. § 203(k). The court then turned to whether, as a pharmaceutical sales representative, Ms. Schaefer-LaRose qualified as an exempt administrative employee. After setting forth the three-pronged test of the regulation, the court focused on the second prong: whether the employee engages in office or non-manual work directly related to management or general business operations. Once again adopting a pragmatic approach, the court concluded that Ms. Schaefer-LaRose's marketing and promotion work was clearly distinct from the company's production of pharmaceuticals, and, as such, satisfied the requirement raised by the production/administration distinction described in 29 C.F.R. § 541.201(a). The court then rejected Ms. Schaefer-LaRose's argument that, because her work was focused on a limited group of doctors, it was not directly related to the management or general business operations of the company. The court pointed out that [t]he success of Lilly's business depends in significant part on whether consumers purchase pharmaceuticals produced by Lilly, and therefore the success of its sales representatives is critical to Lilly's business. Schaefer-LaRose, 663 F.Supp.2d at 690. The court therefore concluded that, due to the nature of the business, the activities of each individual sales representative have a substantial impact on Lilly's business operations and bottom line. Id. at 691. Having determined that Ms. Schaefer-LaRose satisfied the second prong of the administrative employee test, the court turned to the third prong of that exemption: whether the employee exercises discretion and independent judgment with respect to matters of significance. The court rejected Ms. Schaefer-LaRose's characterization of the record as demonstrat[ing] that she had very little latitude in her job, that she was rigorously trained, closely monitored and supervised, and was subject to strict oversight and control in the performance of her duties. Id. at 691-92 (internal quotation marks omitted). In reaching its conclusion that Ms. Schaefer-LaRose exercised considerable discretion and independent judgment as part of her daily work for Lilly, the court noted that Ms. Schaefer-LaRose tailored each presentation to the specific physician, analyzed reports to evaluate her success, decided which drugs and how many to leave with each physician, and determined the most effective allocation of the meals budget. Id. at 693-94. Finally, the court explained that this exercise of discretion clearly was aimed at increasing the number of Lilly prescriptions written in her territorya matter of considerable significance to Lilly to say the least. Id. at 694. Accordingly, the district court granted Lilly's motion for summary judgment. Ms. Schaefer-LaRose sought reconsideration, which was denied on September 30, 2010. A final judgment was entered on November 12, 2010, under Federal Rule of Civil Procedure 54(b). [17]
James Jirak and Robert Pedersen brought this action in the Northern District of Illinois, and the district court conditionally certified a class. After 297 plaintiffs opted in, the district court ruled that only 78 plaintiffs had claims within the three-year limitations period. Abbott filed a motion for summary judgment against named plaintiffs Mr. Pedersen and Mr. Jirak, noting the absence of a final class certification order. The plaintiffs cross-moved for summary judgment. The district court granted the motion on liability for the plaintiffs. Jirak v. Abbott Labs., Inc., 716 F.Supp.2d 740 (N.D.Ill. 2010). In analyzing the problem before it, the district court relied heavily on an amicus brief filed by the DOL before the Second Circuit in In re Novartis Wage & Hour Litigation, 611 F.3d 141 (2d Cir.2010). In that brief, the Secretary of Labor argued that pharmaceutical sales representatives do not make sale[s] within the meaning of section 3(k) of the FLSA, 29 U.S.C. § 203(k). The Secretary noted that, although the work of the representatives bears some indicia of sales, the representatives neither sell nor take orders. Instead, `they provide information to target physicians about [the company's] drugs with the goal of persuading the physicians to prescribe those drugs to their patients.' Jirak, 716 F.Supp.2d at 745 (quoting the Secretary's Novartis amicus brief). Because the most that the representatives achieve from a given sales call is `a non-binding commitment to prescribe... when appropriate,' they `do not meet the regulation's plain and unmistakable requirement that their primary duty must be `making sales.'' Id. (quoting the Secretary's Novartis amicus brief). The Secretary viewed the representatives in Novartis as engaged in non-exempt promotional work, designed to stimulate sales generally or sales that would be consummated by others. Accepting the plaintiffs' argument that the Secretary's view was owed deference under Auer v. Robbins, 519 U.S. 452, 117 S.Ct. 905, 137 L.Ed.2d 79 (1997), the court found the Secretary's position both persuasive and consistent with its own view of the regulation and agreed that the sales work done by the representatives was described more accurately as promotion[] work. Jirak, 716 F.Supp.2d at 747. The court explicitly noted its disagreement with the decision of the district court in Schaefer-LaRose, 663 F.Supp.2d 674. It rejected the view that the work of the sales representatives represented a special category with regard to `making sales,' and further noted that courts must construe narrowly the exemptions to include those plainly and unmistakably within the statutory and regulatory framework. Jirak, 716 F.Supp.2d at 748 (quotation marks omitted). The district court then turned to the administrative exemption. It noted each of the regulatory requirements for the exemption, and then turned first to the third prong: whether the employees exercise discretion with respect to matters of significance. The court found that the employees principally applied sales skills to Abbott's established techniques and procedures rather than exercising discretion. Although noting that they had flexibility to determine how to deliver Abbott's message, they were not `free from immediate direction.' [18] Id. at 750 (quoting 29 C.F.R. § 541.202(c)). Again, the district court turned to the DOL's Novartis brief, which stated that the discretion exercised by the representatives in that case was insufficient to warrant the administrative exemption. Although not explicitly stating that it was deferring to the agency, the court found its analysis consistent with previous agency decisions. Id. at 751. Accordingly, the court entered summary judgment on liability for the plaintiffs. Prior to the damages trial, Abbott filed a Motion for Judgment as to Willfulness, contending that any FLSA classification error had not been shown to be willful. Abbott R.208. The district court agreed. It found that Abbott's interpretation of the FLSA was reasonable and that no evidence demonstrated that Abbott intentionally had misclassified the employees to avoid overtime liability. Because the statute of limitations for non-willful violations of the FLSA is two, not three years, see 29 U.S.C. § 255(a), the court's order reduced the number of eligible plaintiffs by nineteen. The parties stipulated to damages in the amount of $3.5 million, and judgment was entered for the remaining fifty-seven eligible plaintiffs.