Court Opinion

ID: 992683
Source: CourtListenerOpinion
Date Created: 2013-07-03 23:56:06.457022+00
Date Added: 2024-06-11T11:05:59.635156
License: Public Domain

UNPUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

ROBERT L. GILLIAM; TOMMY
MITCHELL,
Plaintiffs-Appellees,

and

CARL L. VANN; ALBERT B. HUNTER,
JR.,                                                                 No. 96-1210
Plaintiffs,

v.

MONTGOMERY WARD & COMPANY,
INCORPORATED,
Defendant-Appellant.

Appeal from the United States District Court
for the Eastern District of Virginia, at Norfolk.
Raymond A. Jackson, District Judge.
(CA-94-1006-2)

Argued: January 27, 1997

Decided: July 31, 1997

Before HALL and MICHAEL, Circuit Judges, and
PHILLIPS, Senior Circuit Judge.

_________________________________________________________________

Vacated and remanded by unpublished opinion. Senior Judge Phillips
wrote the opinion, in which Judge Hall and Judge Michael joined.

_________________________________________________________________

COUNSEL

ARGUED: William E. Rachels, Jr., WILLCOX & SAVAGE, P.C.,
Norfolk, Virginia, for Appellant. Thomas Francis Hennessy, III,
HARDEE & HENNESSY, P.C., Chesapeake, Virginia, for Appellees.
ON BRIEF: Amy M. Levy, WILLCOX & SAVAGE, P.C., Norfolk,
Virginia, for Appellant. SuAnne L. Hardee, HARDEE & HEN-
NESSY, P.C., Chesapeake, Virginia, for Appellees.

_________________________________________________________________

Unpublished opinions are not binding precedent in this circuit. See
Local Rule 36(c).

_________________________________________________________________

OPINION

PHILLIPS, Senior Circuit Judge:

This is an appeal by Montgomery Ward from district court judg-
ments awarding compensatory and liquidated damages, attorney fees
and costs to its employee, Thomas Mitchell, on Mitchell's claim for
uncompensated overtime pay under the Fair Labor Standards Act
(FLSA), 29 U.S.C. § 207 et seq. (West Supp. 1996). Because the dis-
trict court erred in granting judgment as a matter of law to Mitchell
both as to liability and damages, we vacate and remand for a new
trial.

I

Montgomery Ward, the national retailer, operates department
stores throughout the United States. Each store has a Loss Prevention
Department (LP Department) that, as its name suggests, serves to
minimize losses of store assets and ensure the safety of store employ-
ees and customers. At the times in issue, Mitchell was a Loss Preven-
tion Manager (LP Manager) at a store in the Norfolk, Virginia area,
and in that position was in charge of the store's LP Department.

Mitchell, along with three other employees, brought this action
against Montgomery Ward, each claiming violations of§ 207(a)(1) of
the FLSA by failure to pay overtime compensation and violations of
Title VII, 42 U.S.C. §§ 2000(e) et seq., by racial discrimination in
various adverse employment decisions. As to the FLSA claims of

                    2
Mitchell's (and some other plaintiffs), Montgomery Ward raised as an
affirmative defense the administrative employee exemption provided
by 29 U.S.C. § 213(a)(1).

In the course of an ensuing jury trial, all the claims of all the parties
except Mitchell's FLSA claim were resolved in one way or another
in favor of Montgomery Ward. As to Mitchell's FLSA claim, the only
one at issue on this appeal, the proceedings took the following course.
At the conclusion of all the evidence, which was devoted primarily
to Montgomery Ward's administrative employee exemption defense,
the district court, on the parties' Rule 50(a) cross-motions for judg-
ment as a matter of law on the liability issue, denied Montgomery
Ward's motion and granted Mitchell's. Ruling that Montgomery
Ward had failed to carry its production burden on the administrative
exemption defense, the court held that as a matter of law, Mitchell
was not exempted by administrative status from the FLSA's overtime
pay protections. In response to a further motion by Mitchell, the court
then ruled that Mitchell's evidence established, as a matter of law, the
extent of his overtime work as a nonexempt employee, hence his enti-
tlement to the specific sum of $22,852.80 as overtime compensation
for that work, and entered judgment for Mitchell in that amount. And,
in response to a still further motion by Mitchell, the court entered
judgment for additional sums of $22,852.80 in liquidated damages
and $9,792 in attorney fees pursuant to 29 U.S.C.§§ 216 and 260.

Following unsuccessful motions by Montgomery Ward for recon-
sideration of its motion for judgment as a matter of law and, alterna-
tively, for a new trial as to both the liability and damages issues,
Montgomery Ward noticed this appeal. On it, Montgomery Ward
challenges the district court's denial of its motion for judgment as a
matter of law dismissing Mitchell's claim and the grant, on Mitchell's
motions, of judgment as a matter of law for compensatory damages
and, in the court's discretion for liquidated damages and attorney fees.1
_________________________________________________________________

1 Montgomery Ward also noticed appeal from the district court's ruling
in favor of another LP Manager plaintiff, Robert L. Gilliam, holding that
he, like Mitchell, was not exempt from FLSA protection under the
administrative status exemption. JA 93. In their briefs, the parties have
joined issue as to this ruling and Gilliam appears as an appellee in the

                     3
We take these in turn.

II

We first consider Montgomery Ward's challenge to the district
court's grant of judgment as a matter of law rejecting its administra-
tive exemption defense and on that basis holding it liable as a matter
of law to Mitchell for violation of the FLSA's overtime compensation
provision.

29 U.S.C. § 207(a)(1), the basis of Mitchell's claim, obligates cov-
ered employers to pay their employees time and a half compensation
for work in excess of forty hours in a work week. Montgomery
Ward's defense to Mitchell's claim invoked the provisions of
§ 213(a)(1) which exempt from § 207(a)(1)'s protection "any
employee employed in a bona fide . . . administrative . . . capacity . . .
as . . . defined . . . by regulations of the Secretary [of Labor]". Mont-
gomery Ward had the burden of proof on that affirmative defense, see
Clark v. J.M. Benson Co., 789 F.2d 282, 286 (4th Cir. 1986), and the
district court's ruling in favor of Mitchell on the liability issue was
based upon the court's determination that Montgomery Ward had
failed, as a matter of law, to carry its burden of production on the
defense. The issue for us is whether this ruling was in error, and we
conclude that it was. The evidence, construed in the light most favor-
able to Montgomery Ward, sufficed to create an issue of fact as to
Mitchell's exempt status under the applicable statutes and regulations.

We look first to the legal framework of this defense as established
by statute and regulation.
_________________________________________________________________

formal filings, but the ruling is not before us. The jury found against Gil-
liam on his FLSA claim (presumably on the basis that he did not prove
overtime work) and final judgment against him on that claim was
entered. J.A. 26. Montgomery Ward is not an aggrieved party as to that
final judgment, and may not appeal from the unfavorable interlocutory
ruling subsumed within it. 28 U.S.C. § 1291. We therefore dismiss the
noticed appeal from that ruling.

                     4
A.

What is meant by the bald statutory language, "employed in a bona
fide administrative capacity," has been fleshed out, as the FLSA con-
templates, by detailed Labor Department regulations. These provide
both a "long test" and a "short test" for determining whether an
employee falls within the "administrative capacity" exemption. See 29
C.F.R. § 541.2 (1996). Under the short test,"an employee who is
compensated . . . at a rate not less than . . . $250 per week . . . and
whose primary duty consists of [office or non-manual work directly
related to management policies or general business operations of his
employer or his employer's customers] . . . which includes work
requiring the exercise of discretion and independent judgment, [is]
deemed to [be in that exempt status]." 29 C.F.R. § 541.2(e)(1) and
(e)(2) (incorporating language of § 541.2(a)(1)). As was its right, see
29 C.F.R. § 541.214(a), Montgomery Ward sought to prove exempt
status under this short test.

The key elements of this test, "primary duty" and "the exercise of
discretion and independent judgment," have been further fleshed out
in the regulations in respects critical to the district court's challenged
ruling.

As to "primary duty," the regulations provide that "[i]n the ordinary
case it may be taken as a good rule of thumb that primary duty means
the major part, or over 50 percent, of the employee's time." 29 C.F.R.
§ 541.103 (addressing executive exception);§ 541.206(b) (applying
rule to administrative exemption). The regulations then caution that:

          Time alone, however, is not the sole test, and in situations
          where the employee does not spend over 50 percent of his
          time in managerial duties, he might nevertheless have man-
          agement as his primary duty if the other pertinent factors
          support such a conclusion. Some of the pertinent factors are
          the relative importance of the managerial duties as com-
          pared with other types of duties, the frequency with which
          the employee exercises discretionary powers, his relative
          freedom from supervision, and the relationship between his
          salary and the wages paid other employees for the kind of
          nonexempt work performed by the supervisor.

                     5
29 C.F.R. § 541.103.

As to the meaning of the term "exercise of discretion and indepen-
dent judgment," the regulations emphasize several critical points.
After noting that "[i]n one sense almost every employee is required
to use some discretion and independent judgment," 29 C.F.R.
§ 541.207(d)(1), they make the obvious point that something more
specific and important than such run-of-the-mill exercises of discre-
tion and independent judgment is intended by the term. They do this
by pointing up certain distinctions between that which is intended and
the mere "use of skill in applying techniques, procedures, or specific
standards." And relatedly, between that which is intended and the
"making [of] decisions relating to matters of little consequence." 29
C.F.R. § 541.207(b).

On the first point, the regulations emphasize that the use of discre-
tion and independent judgment in merely determining whether certain
situations fall within established categories requiring specific action
is not what is required. Making decisions on issues for which manuals
and training provide rote answers is not the required kind of discre-
tion and judgment. See 29 C.F.R. § 541.207(c)(4), (c)(5) (contrasting
the exercise of discretion and judgment in fitting situations into estab-
lished categories with exercises of judgment in making decisions for
which there "are no recognized . . . standards").

And with respect to the degree of importance of the matters
involved, the regulations emphasize that the discretion and indepen-
dent judgment they contemplate "must be real and substantial, that is,
. . . exercised with respect to matters of consequence." 29 C.F.R.
§ 541.207(d)(1). "Matters of consequence" do not include "the kinds
of decisions normally made by clerical and similar types of employ-
ees," and while they obviously would include"the kinds of decisions
normally made by persons who formulate or participate in the formu-
lation of policy within their spheres of responsibility . . . the exercise
of discretion and independent judgment at so high a level [is not
required]." 29 C.F.R. § 541.207(d)(2). Nor, to involve "matters of
consequence", need the exercise of discretion and independent judg-
ment "have a finality that goes with unlimited authority and a com-
plete absence of review;" it may instead "consist of recommendations
for action rather than the actual taking of action," and "[t]he fact that

                     6
an employee's decision . . . upon occasion [is] revised or reversed . . .
does not mean that the employee is not exercising discretion and inde-
pendent judgment" of the type contemplated. 29 C.F.R.
§ 541.207(e)(1).

These regulations, defining, in the form of the"short test," what is
meant by the statutory term "bona fide administrative capacity" pro-
vide the legal framework for assessing the sufficiency of Montgomery
Ward's evidence to establish its exemption defense or at least to
require its submission to the jury on the parties' cross motions for
judgment as a matter of law. As indicated, the district court denied
Montgomery Ward's motion and granted Mitchell's, on the basis that
the evidence was insufficient to carry Montgomery Ward's burden of
production on the defense. Reviewing those rulings de novo, see
Gairola v. Commonwealth of Virginia Dept. of Gen. Servs., 753 F.2d
1281, 1285 (4th Cir. 1985), we agree that Montgomery Ward's
motion for judgment was properly denied, but conclude that the court
erred in holding that the evidence was insufficient to require submis-
sion of the defense to the jury. Our reasons follow.

B.

The general nature of the LP Manager position held by Mitchell
was established by undisputed evidence. Under the Montgomery
Ward operational system, the LP Manager's immediate supervisor is
the store manager, though the LP Manager also reports directly to his
Zone LP Manager, who supervises Loss Prevention functions over a
wide area. For example, Mitchell's Zone Manager was responsible for
all of the stores in North Carolina, Virginia and Tennessee. As part
of his duties, the LP Manager directly supervises any Loss Prevention
Specialists (LP Specialists) who work in his store. In the stores where
LP Specialists work, they monitor the store's closed circuit television
system and apprehend shoplifters. Mitchell supervised an LP Special-
ist during the busy Christmas shopping season but otherwise operated
a one-man department. Mitchell received a salary of $22,000 annually
($423.08/week), the starting salary for LP Managers, while LP Spe-
cialists were paid a maximum of $9.00 per hour ($360/week). This
meant that the starting salary for an LP Manager was seventeen per-
cent higher than the highest wage an LP Specialist could earn.
According to Montgomery Ward's manuals, an LP Manager must

                    7
have either a college degree and six months of experience as an LP
Specialist, or a high school degree and two years of retail investiga-
tive experience. Mitchell had the required experience when he was
promoted to the LP Manager position.

Beyond this basic background respecting Mitchell's LP Manager
position, the parties' evidence differed significantly on the critical
issues of Mitchell's "primary duties" and the extent to which he "ex-
ercised discretion and independent judgment" in carrying out those
duties. Montgomery Ward presented as evidence going to both issues
the official job description for its LP Managers and testimony from
other LP Managers explaining that the position required LP Managers
to identify areas of high inventory loss, determine the need and type
of investigations necessary for suspected incidents of internal theft,
conduct audits of store departments to identify deficiencies in various
store control programs, and make recommendations on inventory
losses and disciplinary matters and on appropriate follow-up action to
ensure compliance with the store's policies. JA 257-58, 265, 314,
320.

By contrast, Mitchell's evidence characterized the LP Manager
position as one that was micromanaged by a superior and guided as
to the minute details of its function by thick manuals and binders pro-
mulgated by more senior employees. Mitchell, for example, testified
that strictly following company procedure made his job "real easy."
JA 186. And, as to whether his "primary duty" was administrative, he
testified that he spent roughly equal amounts of time performing the
duties of an LP Specialist and those of an LP Manager. His non-
administrative work included, he testified, apprehending shoplifters
and monitoring the closed-circuit television system because of limited
staff.

More specifically, Montgomery Ward presented evidence that LP
Managers such as Mitchell had the authority to initiate and conduct
investigations on all store personnel except store managers without
securing preliminary approval and to make recommendations as to
who should be terminated as a result of those investigations. It was
undisputed that Mitchell supervised LP Specialists for at least part of
the year and was at least partially responsible for training other
employees on security and safety issues. Other LP Managers testified

                    8
that the manuals and guidelines featured in Mitchell's testimony did
not offer guidance to handle every situation they confronted in dis-
charging their administrative duties. Mitchell himself testified that he
had to react to different situations in interviews depending on how the
interviewee responded to his interrogation. JA 230-31. Further, Mont-
gomery Ward presented evidence that LP Managers made recommen-
dations on safety and security issues for their stores, including how
to resolve problems of high property loss. Montgomery Ward store
managers testified that they relied on their LP Managers' recommen-
dations because they were the experts in those areas, and that the LP
Managers' decisions were important to the store's ongoing opera-
tions.

In assessing this evidence, much of it of course conflicting, the dis-
trict court found it insufficient either to establish that Mitchell's "pri-
mary duty" was administrative in nature, or that as an LP Manager he
exercised the kind of "discretion and independent judgment" contem-
plated by the relevant regulations. We think the court erred on both
elements, and that Montgomery Ward's evidence, properly assessed
on Mitchell's Rule 50 motion, sufficed to raise jury issues as to
Mitchell's exempt status.

In finding insufficient evidence on the "primary duty" element, the
district court apparently relied heavily, perhaps decisively, on the fail-
ure of raw quantitative proof of time spent on various tasks. "Defen-
dant in this case offered no evidence to establish whether at least 50%
of Mitchell's work was administrative." JA 50. This failed to take into
account Montgomery Ward's extensive evidence that, whatever the
extent of Mitchell's fill-in non-administrative work, the duties primar-
ily assigned to him as an LP Manager and for which he was on con-
tinuous call were not these non-administrative ones, but ones of
managerial, administrative character. As the regulations make plain,
the quantitative 50% "rule of thumb" is only that, and is not properly
made dispositive in and of itself. The courts have so understood its
proper function. See Reich v. Avoca Motel Corp. , 82 F.3d 238, 240-
41 (8th Cir. 1995) (upholding exemption even though motel manager
spent a significant amount of time performing nonexempt work
because he was on call to respond to management concerns); Murray
v. Stuckey's Inc., 939 F.2d 614, 618 (8th Cir. 1991) (upholding
exemption even though manager spent most of his time doing nonex-

                     9
empt work because store managers were in charge of day-to-day oper-
ations of location); Guthrie v. Lady Jane Collieries, Inc., 722 F.2d
1141, 1144-45 (3d Cir. 1984) (upholding exemption for section fore-
men even though they spent only forty-four percent of their time on
the job performing nonexempt work).

Here, Montgomery Ward presented substantial evidence that, as the
regulations contemplate may be the case, there were other factors
concerning the nature of Mitchell's position and his performance that
were more probative of the primacy of his administrative duties than
any raw time-spent factor. Mitchell, for example, conceded that his
duties required him to identify areas of property loss, recommend
strategies to combat that loss, train employees on safety and security
issues, and investigate incidents of potential in-store theft. Montgom-
ery Ward presented evidence, essentially undisputed, that such duties
are important to Montgomery Ward's operations, and more important
than an LP Specialist's shoplifting prevention responsibilities. There
was further evidence that LP Managers were relatively free from
supervision, and that store managers, operationally their superiors,
relied upon the LP Managers' expertise for security and safety issues.
Finally, it was undisputed that the starting salary for LP Managers
was seventeen percent higher than the highest wage for an LP Spe-
cialist. All of these factors lead us to conclude that there was a ques-
tion of fact as to whether Mitchell's "primary duty" as an LP Manager
was administrative. This issue, as we have observed, is one that typi-
cally "requires consideration of the factual circumstances for which
a jury is more appropriate," Clark v. J.M. Benson Co., Inc., 789 F.2d
282, 286 n.2 (4th cir. 1986), and on the evidence advanced here, that
was surely the case.

In ruling that the evidence was insufficient to support the requisite
finding that Mitchell "exercised discretion and independent judg-
ment" of the required kind, the district court again relied heavily, per-
haps decisively, on Mitchell's own testimony that his performance
was rote and book-bound. In the district court's words it was "con-
strained . . . by the policies, manuals, and standard procedures of . . .
Montgomery Ward." JA 47. Relying essentially on Mitchell's self-
serving testimony, which was directly countered by Montgomery
Ward's, the court determined that the manuals and guidelines nar-
rowly limited Mitchell's freedom of action in response to various situ-

                     10
ations and that LP Managers could not in general change company
policies but could only make recommendations. In so crediting Mitch-
ell's testimony, the court discounted the probative value of countering
evidence by Montgomery Ward that, for example, LP Managers such
as Mitchell were responsible for settling small accident claims and
had to make decisions with regard to investigations of in-store person-
nel for possible theft. JA 48-50.

By crediting Mitchell's testimony on the range of discretion and
independent judgment he possessed over flatly opposing evidence of
Montgomery Ward, the district judge seems to have overlooked that
in ruling on Mitchell's Rule 50(a) motion he must assess the evidence
in the light most favorable to Montgomery Ward. In any event, we are
satisfied that in discounting Montgomery Ward's evidence, the court
relied much too heavily on the effect of the company's manuals and
directives in constraining the discretion and independent judgment of
LP Managers such as Mitchell. On this point, the Second Circuit's
decision in Donovan v. Burger King Corp., 675 F.2d 516 (2d Cir.
1982), is instructive. There, a Burger King managerial employee con-
tended, as does Mitchell here, that his authority to act was severely
limited by extensive corporate regulations and standards that dictated
to a large extent how he managed the business. In affirming a district
court decision that the employee's duties brought him within the
administrative exemption, the court said:

          We fully recognize that the economic genius of the Burger
          King enterprise lies in providing uniform products and ser-
          vice economically in many different locations and that
          adherence by Assistant Managers to a remarkably detailed
          routine is critical to commercial success. The exercise of
          discretion, however, even where circumscribed by prior
          instruction, is as critical to that success as adherence to "the
          book." Burger King, of course, seeks to limit likely mistakes
          in judgment by issuing detailed guidelines, but judgments
          must still be made.

675 F.2d at 521-22. See also Murray v. Stuckey's, Inc., 50 F.3d 564,
569-70 (8th Cir. 1995) (rejecting argument that existence of company
policies and guidelines for store manager circumscribed discretion so
as to render him non-exempt).

                    11
For similar reasons, we conclude that the district court gave much
more weight than was proper here to the impact of Montgomery
Ward's manuals and directives in constraining the discretion and
judgment, for FLSA purposes, of its LP Managers. While their impact
surely is a relevant factor in assessing the extent of that discretion and
judgment, it as surely does not warrant the conclusion that it pre-
cludes a jury finding in Montgomery Ward's favor on this issue. On
that issue, properly assessed, there was conflicting evidence that
required its submission to the jury.

We therefore conclude that the district court erred in rejecting as
a matter of law Montgomery Ward's administrative exemption
defense and on that basis, granting judgment as a matter of law to
Mitchell on the issue of liability.2

III

Montgomery Ward also challenges the district court's entry of
judgment as a matter of law awarding Mitchell a specific amount of
compensatory damages. We believe the court did err in that respect
as well, and we will discuss the error briefly in order to avoid its repe-
tition were the damages issue to be presented again on the new trial
we will order.

The district court made its award as a matter of law on the basis
that Montgomery Ward had not directly contradicted Mitchell's
evidence--essentially his own testimony--as to the number of over-
time hours he had worked. In so ruling, the district court expressly
relied upon and applied the test for granting judgment as a matter of
law against the party with the burden of proof, citing our formulation
of that test in Gairola v. Commonwealth of Virginia Dept. of Gen.
Servs., 753 F.2d 1281 (4th Cir. 1985): "whether, without weighing the
evidence or considering the credibility of the witnesses, `there can be
but one conclusion as to the verdict that reasonable jurors could have
reached.'" Id. at 1285 (quoting Wheatley v. Gladden, 660 F.2d 1024,
_________________________________________________________________
2 By the same token, we affirm the district court's denial of Montgom-
ery Ward's motion for judgment as a matter of law based upon the
defense. The evidence required its submission to the jury over both par-
ties' cross-motions for judgment.

                     12
1027 (4th Cir. 1981)). Applying that test, the court apparently con-
cluded that because Mitchell's testimony as to his overtime hours was
not directly contradicted, though subjected to impeaching cross-
examination, reasonable jurors could indeed reach but one conclusion.
But the court then awarded not the amount required, if Mitchell's
uncontradicted testimony provided that conclusion, but an amount
considerably less that the court, apparently rejecting Mitchell's credi-
bility in part, chose as a matter of its own judgment.

This surely reflected the court's failure to apply the proper test
where, as here, the moving party, Mitchell, had the burden of proof
on the dispositive issue. In that circumstance, judgment as a matter of
law may be awarded, but only in "extreme cases." 9A Charles Allen
Wright, Arthur Miller, Federal Practice and Procedure § 2535, at
325 (2d ed. 1995). For where the Rule 50(a) movant has the burden
on an issue, his testimonial evidence, particularly his own as an inter-
ested party, is not to be assumed in ruling on the motion as is that of
a non-movant who has the burden of proof. Id. , § 2527, at 286. In this
circumstance, judgment as a matter of law could be proper only if the
jury could not reasonably fail to accept the interested party's testi-
mony. Id. Such situations can occur, but they obviously are rare, since
witness credibility (unless essentially conceded by the opponent or lit-
erally compelled as irrefutable physical fact) is classically a question
for the jury. That such a rare situation was not presented here is best
shown by the district court's failure in awarding damages to accept
Mitchell's full credibility on the issue.

This was not a case where compensatory damages in an exact
amount could properly be awarded as a matter of law on the motion
of the party having the burden to prove damages. If the compensatory
damages issue should again be presented, the district court should
proceed in light of this reminder.

IV

In view of our vacatur of the judgment for compensatory damages,
we must also vacate the district court's dependent discretionary award
of liquidated damages and attorney fees. The claims for these must be
addressed anew if again presented upon the new trial we order.

                    13
V

We therefore vacate the judgments awarding compensatory and liq-
uidated damages and attorney fees and remand for a new trial in
accordance with this opinion.

SO ORDERED

                   14