{"id":131,"date":"2022-10-14T08:54:54","date_gmt":"2022-10-14T12:54:54","guid":{"rendered":"https:\/\/blogs.duanemorris.com\/classactiondefense\/?p=131"},"modified":"2023-06-07T10:37:26","modified_gmt":"2023-06-07T14:37:26","slug":"alabama-federal-court-affirms-13-million-default-judgement-against-employer-in-a-wage-hour-collective-action-for-discovery-failures","status":"publish","type":"post","link":"https:\/\/blogs.duanemorris.com\/classactiondefense\/2022\/10\/14\/alabama-federal-court-affirms-13-million-default-judgement-against-employer-in-a-wage-hour-collective-action-for-discovery-failures\/","title":{"rendered":"Alabama Federal Court Affirms $13 Million Default Judgement Against Employer In A Wage & Hour Collective Action For Discovery Failures"},"content":{"rendered":"

\"\"<\/a><\/em>By: Gerald L. Maatman Jr., Jennifer A. Riley, and Aaron A. Bauer<\/strong><\/p>\n

Duane Morris Takeaways \u2013<\/em><\/strong> In Hornady v. Outokumpu Stainless USA,<\/em> No. 1:18-CV-317 (S.D. Ala. Oct. 4, 2022), the U.S. District Court for the Southern District of Alabama upheld its sanction of a default judgement against the defendant on all of the Fair Labor Standards Act claims brought by a collective action of current and former employees. In affirming<\/a>\u00a0a default judgment of approximately $13 million, the Court cited the employer\u2019s repeated failure to produce pay records, time records and incentive plan data during discovery.\u00a0 Such a catastrophic outcome demonstrates the importance of reliable and honest client communication and responsible and reasonable conduct at all stages of discovery in complex employment-related litigation.<\/p>\n

Background Of The Case<\/strong><\/p>\n

In 2018, Plaintiff William Hornady filed a collective action against his former employer Outokumpu Stainless (\u201cOTK\u201d) alleging violations of the Fair Labor Standards Act (\u201cFLSA\u201d) for overtime and timekeeping record violations.\u00a0 The case proceeded to discovery, and on November 18, 2021, things quickly unraveled for OTK when the Court found that the company had \u201cacted in pervasive bad faith throughout the discovery process of this entire case\u2026\u201d\u00a0 Id<\/em>. at 3.\u00a0 As a result, the Court sanctioned OTK by entering non-final default judgement against the company, thereby holding it liable for all of plaintiffs\u2019 FLSA claims.\u00a0 Id.<\/em> at 6-7.\u00a0 Earlier this year, OTK challenged this ruling by filing a motion to reconsider the order granting default judgement.<\/p>\n

The Court\u2019s Ruling Denying Reconsideration Of The Default Judgement<\/strong><\/p>\n

In seeking reconsideration of the decision to grant default judgement, OTK urged the Court to apply the \u201cgood cause\u201d standard of review, under Rule 55 of the Federal Rules of Civil Procedure, which allows courts to evaluate many different factors such as willfulness, prejudice, and whether the defaulting party might have a meritorious defense for purposes of determining whether to reconsider an order of a default judgement.\u00a0 Id.<\/em> at 7.\u00a0 However, the Court declined to apply this \u201cgood cause\u201d standard. Instead, it to use the stricter standard of Rule 54, which allows courts to reconsider interlocutory decisions if there is \u201cevidence of an intervening change in the controlling law, the availability of new evidence, or the need to correct clear error or manifest injustice.\u201d\u00a0 Id.<\/em> at 12.<\/p>\n

Given OTK\u2019s failure to introduce newly available evidence disputing the Court\u2019s previous finding that defense counsel had failed to meet its \u201cdiscovery obligations,\u201d the Court rejected OTK\u2019s argument that the Court had abused its discretion by improperly imposing \u201cdeath penalty\u201d sanctions in the form of default judgement.\u00a0 Id.<\/em> at 14.\u00a0 Specifically, the Court noted that it had ordered OTK to produce pay, time, and incentive plan records on \u201ctwelve (12) separate occasions spanning almost three years.\u201d\u00a0 Id. <\/em>at 17-18.\u00a0 When OTK finally did produce pay records, they were incomplete, and did not even include rate of pay data.\u00a0 Id.\u00a0 The Court also noted that the Magistrate Judge assigned to the case had originally recommended lesser sanctions against OTK.\u00a0 However, while a ruling on this lesser sanction was pending, the Court opined that OTK \u201cengaged in additional sanction-worthy behavior\u201d during discovery.\u00a0 Id.<\/em> at 15.<\/p>\n

OTK attempted to shift the blame for these discovery shortcomings to its payroll software provider and former outside counsel for the case.\u00a0 OTK argued that it could not have produced the formula used to calculate the regular rate of pay (\u201cRROP\u201d) for its employees, as the Court had ordered, because this formula came from the proprietary software of ADP, which OTK would have had to obtain through a subpoena.\u00a0 Id.<\/em> at 23-24.\u00a0 In reality, the Court observed that it had previously ordered OTK to subpoena ADP for this data in 2020, a year before the entry of default judgement.\u00a0 Id. <\/em>at 24.\u00a0 For this reason, OTK could no longer argue that the requirement to subpoena ADP was newly available evidence that might allow the Court to reconsider its sanctions order.\u00a0 Moreover, the Court noted that OTK\u2019s failure to produce the RROP data had not been its \u201cprimary failing\u201d because OTK also failed to produce hourly pay rates.\u00a0 Id. <\/em>at 25.<\/p>\n

The Court also rejected OTK\u2019s contention that its failures during the discovery process should be attributed to its former outside counsel in the case.\u00a0 Id.<\/em> at 27-28.\u00a0 In support of this position, OTK submitted emails of its former counsel that purported to show that it had been \u201ckept in the dark\u2026 as to what was actually occurring\u201d in discovery. \u00a0Id.\u00a0 <\/em>However, the Court found that these emails could only \u201cprovide insight into a fraction of the circumstances\u201d leading to the default judgement.\u00a0 Id.<\/em> at 29.\u00a0 Regardless of whether these emails provided a legitimate excuse for all of OTK\u2019s failures during the discovery process, the Court determined that the emails did not constitute newly available evidence, as OTK had failed to submit them to the Court when it was first facing default judgement sanctions.\u00a0 Id. <\/em>at 30.\u00a0 Given this record, the Court placed the blame squarely on OTK for failing to \u201cproduce accurate and complete time and pay records.\u201d<\/p>\n

Implications for Employers<\/strong><\/p>\n

The $13 million sanction of a default judgment in the case is an eye-opener for any litigant. The Hornady<\/em> decision demonstrates that employers who fail to actively engage and communicate with their outside counsel on a regular basis do so at their own peril.\u00a0 To avoid such a disastrous outcome, clients should always expect and demand regular and truthful case status updates, especially in class and collective actions where the stakes can be so high.<\/p>\n","protected":false},"excerpt":{"rendered":"

By: Gerald L. Maatman Jr., Jennifer A. Riley, and Aaron A. Bauer Duane Morris Takeaways \u2013 In Hornady v. Outokumpu Stainless USA, No. 1:18-CV-317 (S.D. Ala. Oct. 4, 2022), the U.S. District Court for the Southern District of Alabama upheld its sanction of a default judgement against the defendant on all of the Fair Labor … <\/p>\n

Continue reading “Alabama Federal Court Affirms $13 Million Default Judgement Against Employer In A Wage & Hour Collective Action For Discovery Failures”<\/span><\/a><\/p>\n","protected":false},"author":583,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[42],"tags":[],"ppma_author":[30,7,9],"class_list":["post-131","post","type-post","status-publish","format-standard","hentry","category-wage-hour-litigation"],"authors":[{"term_id":30,"user_id":583,"is_guest":0,"slug":"classactiondefense","display_name":"Class Action Defense","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2020\/10\/dmlogo.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""},{"term_id":7,"user_id":575,"is_guest":0,"slug":"gmaatman","display_name":"Gerald L. Maatman, Jr.","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2022\/09\/maatmangerald-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""},{"term_id":9,"user_id":576,"is_guest":0,"slug":"jariley","display_name":"Jennifer A. Riley","avatar_url":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-content\/uploads\/sites\/56\/2023\/08\/rileyjennifer-100x100.jpg","0":null,"1":"","2":"","3":"","4":"","5":"","6":"","7":"","8":""}],"_links":{"self":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/131","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/users\/583"}],"replies":[{"embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/comments?post=131"}],"version-history":[{"count":0,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/posts\/131\/revisions"}],"wp:attachment":[{"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/media?parent=131"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/categories?post=131"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/tags?post=131"},{"taxonomy":"author","embeddable":true,"href":"https:\/\/blogs.duanemorris.com\/classactiondefense\/wp-json\/wp\/v2\/ppma_author?post=131"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}