Court Opinion

ID: 466
Source: CourtListenerOpinion
Date Created: 2010-03-23 00:30:04+00
Date Added: 2024-06-11T08:01:34.054363
License: Public Domain

In the

United States Court of Appeals
              For the Seventh Circuit

No. 09-1902

T AMMY S CHMIDT,
                                              Plaintiff-Appellant,
                               v.

E AGLE W ASTE & R ECYCLING, INC.,
                                             Defendant-Appellee.

            Appeal from the United States District Court
               for the Western District of Wisconsin.
       No. 3:08-cv-00230-bbc—Barbara B. Crabb, Chief Judge.

    A RGUED D ECEMBER 2, 2009—D ECIDED M ARCH 22, 2010

 Before P OSNER, F LAUM, and SYKES, Circuit Judges.
  F LAUM, Circuit Judge. The plaintiff, Tammy Schmidt,
brought this action for monetary relief under the Fair
Labor Standards Act (“FLSA”), alleging that she was not
paid overtime due under the Act. The defendant, Eagle
Waste and Recycling, Inc. (“Eagle”), moved for sum-
mary judgment, arguing that Schmidt was exempt from
the act because she was either an “outside salesperson” or
a combination of an “outside salesperson” and an “admin-
2                                                 No. 09-1902

istrative employee.” Taking Eagle’s proposed findings
of fact as true because Schmidt failed to contest them in
the manner prescribed by the local rules, the district
court granted summary judgment for the defendant.
Schmidt appeals, arguing that the district court errone-
ously denied her an opportunity to cure the defects in her
response brief, failed to “liberally construe” the FLSA, and
incorrectly applied the “outside salesperson” and “combi-
nation” exemptions to the FLSA. We affirm.

                      I. Background 1
  Eagle, a corporation located in Eagle River, Wisconsin,
is in the business of waste removal from residential and
commercial properties. Alan Albee is the president of
Eagle and has been since its founding on July 1, 2005.
Albee hired Schmidt on September 12, 2005. According
to Eagle, Schmidt was hired as a sales representative
and adopted the title of “account representative” with
Albee’s permission. Schmidt reported to Albee, her
sole supervisor.
  Schmidt’s duties included contacting potential commer-
cial customers at their places of business and convincing
them to use Eagle’s waste disposal and recycling services.
She was responsible for bringing in new customers, and

1
   This summary of the undisputed facts comes mainly from
the district court’s opinion, which is in turn largely based on
Eagle’s proposed findings of undisputed fact. We address
Schmidt’s argument that this summary unfairly deems those
findings admitted in Part II of this opinion.
No. 09-1902                                            3

maintaining and increasing the business of existing
customers. Schmidt spent some time in the office on
approximately half of her workdays. On those days,
she was in the office between one and four hours.
Schmidt spent four to eight hours a day outside the
office making sales calls to current and potential cus-
tomers. Schmidt would schedule in-person sales calls in
the mornings and afternoons so that she could meet
with these customers on the way to and from the office.
She controlled the amount of time she spent on these
calls. She was also authorized to negotiate prices with
customers. For her efforts, she was paid a commission
on sales in addition to her base salary.
  Schmidt also had promotional and marketing duties. She
conferred frequently with Albee to determine new loca-
tions and businesses to target. Schmidt would then
develop a marketing campaign that Albee would review.
Schmidt spent time in and out of the office promoting
Eagle. For example, she attended weekly chamber of
commerce meetings and social functions, where she
distributed business cards and flyers, talked to area
business people, and sold services Eagle offered. Schmidt
spent approximately five or six hours a week promoting
Eagle outside the office, including two to four hours a
week at chamber of commerce meetings. She spent
another ten hours a week working on promotional and
marketing efforts at the office.
  Finally, Schmidt was responsible for customer service
and maintaining the customer database. She made in-
person visits to resolve any service problems her cus-
4                                              No. 09-1902

tomers had, ranging from confusion with neighbors’
containers to billing and accounting. Her database
tracked current customers, prospects, and lost customers.
She used the database to collect money owed by her
customers, sometimes adjusting bills if a customer had
a complaint or concern. These collections formed the
basis of her commission payments.
  Occasionally, other employees consulted Schmidt when
Albee was out of the office. For example, if a customer
complained about service, Schmidt would decide
whether to give the customer a credit on the next bill. If
a vehicle needed to be repaired, Schmidt would some-
times authorize the ordering of replacement parts with-
out consulting Albee.
  When she was hired in September 2005, Schmidt’s
base salary was $384.62 a week plus commission. Begin-
ning January 1, 2006, she received a base salary of $461.54
a week plus commission. She received $26,319.75 in
commissions during her time as an employee of Eagle,
which ended on December 31, 2007.
  Schmidt brought this action in state court on April 4,
2008. Eagle removed the case to federal court and an-
swered the complaint on April 23, 2008. On May 15, 2008,
Magistrate Judge Stephen Crocker held a pretrial confer-
ence in which he set deadlines for discovery and a trial
date. Notice of these deadlines was sent to both parties
along with a copy of the procedures for briefing sum-
mary judgment motions. Following depositions of
Schmidt and Albee, Eagle filed its motion for summary
judgment on November 13, 2008. Schmidt filed her brief
No. 09-1902                                              5

in opposition to Eagle’s motion on December 4, 2008,
before the deadline of December 15, 2008. That same day,
she filed a sworn affidavit making various statements
in support of her response. Eagle filed its reply on Decem-
ber 12, 2008, raising Schmidt’s failure to respond to its
proposed findings of fact in accordance with the local
rule and asking that Schmidt’s affidavit be stricken
because it contradicted her deposition testimony. On
December 26, 2008, Schmidt filed a motion for leave to
file a sur-reply brief and to modify her responses to
Eagle’s proposed findings of fact. The brief and proposed
findings of fact she sought to file were not included
with the motion.
  On February 25, 2009, the district court entered an
order denying Schmidt’s motion for leave to file a sur-
reply brief and correct her proposed findings of facts. The
same order granted summary judgment to Eagle.
Schmidt now appeals.

                       II. Analysis
  At the outset, we must address Schmidt’s argument
that the district court erred when it deemed Eagle’s
proposed findings of fact admitted and refused to
consider additional facts alleged by Schmidt. The district
court did so because Schmidt failed to follow the local
rule for making and opposing proposed findings of fact
for summary judgment, which required her to respond
to the defendant’s proposed findings paragraph by para-
graph and put her own proposed findings into separate
numbered paragraphs. Instead, Schmidt included only a
6                                                No. 09-1902

“statement of facts” of the sort that might be found in an
appellate brief. While this statement of facts did contain
some pinpoint citations, it did not directly respond to
Eagle’s proposed findings and lumped several distinct
factual assertions together in each paragraph.
  We have routinely held that a district court may
strictly enforce compliance with its local rules regarding
summary judgment motions. See, e.g., Patterson v. Indiana
Newspapers Inc., 589 F.3d 357, 360 (7th Cir. 2009). Indeed,
we have previously upheld a district court’s decision
to enforce compliance with the precise local rule at issue
here. See Hedrich v. Bd. of Regents of Univ. of Wis. Sys., 274
F.3d 1174, 1177 (7th Cir. 2001). In Hedrich, as here, the
nonmoving party did include some citations to the
record but failed to follow the requirement that specific
factual allegations be made or contested in numbered
paragraphs. Id. at 1178. Similarly, as in Hedrich, a
separate reminder of the local rule accompanied notices
sent to the parties. Id. Schmidt’s reliance on a pair of
Supreme Court cases addressing pleading standards,
Swierkiewicz v. Sorema N.A., 543 U.S. 506 (2002) and Conley
v. Gibson, 355 U.S. 41 (1957), is misplaced. Not only has
Conley been abrogated by Bell Atlantic v. Twombly, 550
U.S. 554, 560-63 (2007), but the issue of notice pleading is
fundamentally different from compliance with the local
rule at issue here. The local rule serves an important
function by ensuring that the proposed findings of fact
are in a form that permits the district court to analyze
the admissible evidence supporting particular factual
propositions and determine precisely what facts, if any,
are material and disputed. See Hedrich, 274 F.3d at 1178.
No. 09-1902                                                        7

This is not a hyper-technical rule that turns “pleading
[into] a game of skill in which one misstep by counsel
may be decisive of the outcome,” Conley, 355 U.S. at 48.
Rather, the rule provides district courts with the means
to resolve motions for summary judgment on the merits.
Here, even after Schmidt was informed of the deficiencies
in her response brief, she waited two weeks before
asking for leave to correct her proposed findings of fact
and did not tender a corrected version with her motion.
The district court concluded that Schmidt had not given
an adequate explanation for her disregard of the local
rules or her delay in attempting to cure the error. Schmidt
has not explained why those findings were erroneous.
Consequently, the district court did not abuse its discre-
tion when it denied Schmidt the opportunity to amend
her response brief and proposed findings of fact.2 We
therefore proceed, as the district court did, on the
findings of fact proposed by Eagle.
  Next, we address Schmidt’s argument that she was not
an “outside salesperson” as defined in the FLSA regula-

2
  Schmidt also sought leave to file a sur-reply on the “sham
affidavit rule,” which Eagle had raised in its reply brief to
attack an affidavit filed by Schmidt along with her response
brief. The district court denied Schmidt leave to file a sur-reply
and instead decided the summary judgment motion without
reference to Eagle’s sham affidavit rule argument. Because
this was the only new argument raised in Eagle’s reply brief
and the district court did not rely on it, the district court did not
abuse its discretion when it denied Schmidt’s request for
leave to file a sur-reply.
8                                               No. 09-1902

tions. The Secretary of Labor defines an “outside sales-
person” as an employee (1) whose “primary duty” consists
of “making sales” or “obtaining orders or contracts for
services” and (2) who is “customarily and regularly
engaged away from the employer’s place or places of
business in performing such primary duty.” 29 C.F.R.
§ 541.500 (2009). An employee’s “primary duty” is the
“principal, main, major, or most important duty that the
employee performs.” Id. § 541.700. Time spent per-
forming exempt work is useful, but not dispositive,
in determining an employee’s primary duty. Id. The
burden is on the employer to prove that an employee
is exempt under FLSA, see Piscione v. Ernst & Young LLP,
171 F.3d 527, 533 (7th Cir. 1999), and such exemptions
are to be narrowly construed against the employer
seeking the exemption. See Yi v. Sterling Collision Centers,
Inc., 480 F.3d 505 (7th Cir. 2007).
  While Schmidt argues that the district court failed to
“liberally construe” FLSA in her favor, the district court
identified the correct legal standard and applied it to the
facts before the court. The undisputed facts show that
Schmidt’s primary duty was outside sales. On average,
Schmidt spent four to eight hours a day outside the
office making in-person sales calls. She visited the office
on only about half of her workdays. At the office, much
of her work furthered her efforts to make sales. She
maintained a database of her customers, which formed
the basis of her collections and commission payments.
This sort of work relates directly to her outside sales
work and is thus exempt itself. See 29 C.F.R. § 541.703
No. 09-1902                                              9

(2009). She also spent about ten hours a week developing
marketing plans and doing other promotional work
inside the office, and five to six hours a week promoting
Eagle outside of the office. Other than Albee, Eagle’s
president, who made some sales directly, there do not
appear to have been any other Eagle employees directly
involved in sales work. Most of the fruits of Schmidt’s
promotional work were therefore realized through her
own sales. Thus, this promotional work also counts as
exempt outside sales work. See id. § 541.503(a) (promo-
tional work is exempt if it is “incidental to and in con-
junction with an employee’s own outside sales or solici-
tations” but non-exempt if it “is incidental to sales
made, or to be made, by someone else”).
  We also agree with the district court that even if
Schmidt did not qualify for the outside salesperson ex-
emption on its own, she would fall within the “combina-
tion exemption” to the FLSA. Employees “who perform
a combination of exempt duties as set forth in the regula-
tions in this part for . . . administrative [and] outside
sales . . . employees may qualify for exemption.” 29 C.F.R.
§ 541.708 (2009). Eagle argues that to the extent Schmidt
performed duties unrelated to outside sales, these were
largely exempt “administrative” duties. See id. § 541.200.
  Before we proceed to the merits of Eagle’s argument,
however, we must address Schmidt’s claim that Eagle
has waived any reliance on the combination exemption.
Schmidt argues that the combination exemption is an
affirmative defense that should have been raised in
10                                              No. 09-1902

Eagle’s answer.3 She also argues that, in response to a
request to admit, Eagle admitted that Schmidt was not
an administrative employee. Schmidt made these argu-
ments, which she frames as an issue of “estoppel,” to the
district court on summary judgment, but the district
court did not mention waiver or estoppel in its opinion
granting summary judgment.
   While Fed. R. Civ. P. 8(c) directs parties to raise af-
firmative defenses in the pleadings, a delay in raising
an affirmative defense only results in waiver if the other
party is prejudiced as a result. See Curtis v. Timberlake,
436 F.3d 709, 711 (7th Cir. 2005). Eagle did not raise
the administrative or combination exemptions explicitly
in its answer. It did, however, deny that Schmidt was a
covered employee under FLSA and deny that Schmidt
was a nonexempt employee. The nature of Schmidt’s
work was the primary focus of the depositions of Albee
and Schmidt. Schmidt argues that Eagle misled her by
denying in discovery that she was an “administrator” as
defined in the FLSA regulations. But the request to
admit was itself misleading—“administrator” is defined
only as the Administrator of the Wage and Hour Divi-
sion. See 29 C.F.R. § 541.1 (2009). Although it seems un-
likely that Eagle’s counsel thought Schmidt was
asking them to admit that she was the Administrator of
the Wage and Hour Division, rather than inartfully

3
  Eagle did not raise the outside salesperson defense in its
answer, either. Schmidt, however, does not argue that Eagle
has waived that defense.
No. 09-1902                                             11

asking if Eagle intended to invoke the administrative
exemption, Eagle’s response was literally true and the
confusion, if any, stems from Schmidt’s vague request
to admit. In any event, Eagle’s consistent position that
Schmidt was an exempt employee and the course of
discovery as a whole should have put Schmidt on notice
that the administrative and combination exemptions
were at issue. Eagle raised the combination and adminis-
trative exemptions in its opening brief on summary
judgment and Schmidt argued them on the merits in her
response brief. Because Schmidt has not shown any
prejudice from Eagle’s delay in raising the administrative
and combination exemptions to FLSA, the district court
did not abuse its discretion in reaching the merits.
Curtis, 436 F.3d at 711.
  We agree with the district court that to the extent
Schmidt’s work was not related to outside sales, it was
primarily exempt administrative work. The administra-
tive employee exemption applies to any employee who is:
     (1) Compensated on a salary or fee basis at a rate
   of not less than $455 per week . . .;
     (2) Whose primary duty is the performance of office
   or non-manual work directly related to the manage-
   ment or general business operations of the employer
   or the employer’s customers; and
     (3) Whose primary duty includes the exercise of
   discretion and independent judgment with respect to
   matters of significance.
29 C.F.R. § 541.200 (2009). With the exception of her first
few months of employment, Schmidt’s base salary ex-
12                                               No. 09-1902

ceeded the $455 per week minimum.4 When Schmidt was
not actively pursuing sales, she developed advertising
and marketing plans, managed customer complaints,
administered the customer database, and dealt with
issues that would have been handled by Albee had he
been in the office, such as approving an order of parts
for broken machinery. This office work was directly
related to the management and general business opera-
tions of Eagle. See id. § 541.201 (“Work directly related
to management or general business operations includes,
but is not limited to, work in functional areas such as . . .
purchasing; procurement; advertising; marketing;
research; . . . personnel management; . . . public
relations; . . . database administration; . . . and similar
activities.”); see also Haywood v. North American Van Lines,
Inc., 121 F.3d 1066, 1067-68 (7th Cir. 1997) (finding cus-
tomer service coordinator for shipping company to be
an exempt administrative employee). While Schmidt
argues that Albee “micromanaged” her work, the undis-
puted facts show that she negotiated with customers
over price and service credits, created marketing cam-
paigns, placed advertisements, collected from accounts,
and set her own schedule. Cf. Haywood, 121 F.3d at
1072 (holding that resolving customer complaints and
disputes about billing requires the exercise of discretion

4
  The record reflects only the total of Schmidt’s commission
payments. Spread over the course of her employment, she
received an average of $225 per week in commission. Thus, even
Schmidt’s lower weekly salary of $384 exceeded the $455
minimum when combined with her commission payments.
No. 09-1902                                         13

and independent judgment). Thus, the district court did
not err by holding that even if Schmidt’s primary duty
was not outside sales, the combination of her outside
sales and administrative work exempts her from the
FLSA’s overtime requirements.

                   III. Conclusion
 We AFFIRM the district court’s grant of summary judg-
ment to Eagle.

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