HICKS v. AVERY DREI, LLC (August 17, 2011)

Chance Felling owned and operated Avery Drei, LLC, a hotel management company. In 2006, Avery Drei was constructing a hotel near Indianapolis, Indiana. Lisa Hicks began working as a security guard at the hotel construction site in July of 2006. The hotel opened in October and she became a front desk clerk. During her stint as a security guard, Felling paid her in cash. Once she became a desk clerk, she received her regular wages by check. After Hicks' employment was terminated, she brought suit against Avery and Felling. She sought overtime wages and accrued vacation pay. The case languished for several years until February of 2010, when the district court set a June 2010 trial date. In February, Hicks asked Felling and Avery to supplement certain discovery responses. The defendants failed to respond until ordered to do so by the court in May. Then, they supplemented their answers to the requests identified by Hicks and also supplemented their response to an interrogatory that asked them to identify all cash payments to Hicks. Their original response identified seven cash payments, all while Hicks was working as a security guard. Their supplemental response added six additional payments, all while Hicks was working as a desk clerk. Hicks moved to bar any evidence of the additional payments, claiming the late notice was “trial by ambush.” The district court denied the request. At trial, Judge Magnus-Stinson (S.D. Ind.) granted a directed verdict on the vacation pay claims and on the security guard part of her overtime claim. The jury returned a verdict against Hicks on the desk clerk part of her overtime claim. At Hicks' request, the court waived transcription fees relating to the overtime claim but refused to waive with respect to that portion of the record relating to the vacation pay claim. Hicks appeals.

In their opinion, Seventh Circuit Judges Cudahy (concurring in part and concurring in the judgment), Flaum, and Kanne affirmed. On appeal, Hicks challenges the directed verdict on the vacation pay claim, challenges the partial directed verdict on the security guard overtime claim, and challenges the district court's refusal to exclude the evidence of additional cash payments. The Court concluded that the vacation pay claim was frivolous. Hicks admitted that she and Felling had an agreement that she would earn vacation time only after she had worked for a year. Her contention that Indiana law requires pro-rata vacation pay from day one in the absence of a written company policy to the contrary is simply wrong. Any agreement to the contrary, which is admittedly present here, is sufficient. The Court turned to the cash payment evidence. It noted that it would normally review such a ruling for abuse of discretion. Here, however, Hicks did not provide transcripts of the argument or ruling on the motion in limine. Without a meaningful basis on which to review the ruling, the Court concluded that Hicks forfeited her challenge. It also chose not to conduct a full plain error review, since it could identify no prejudice -- no extraordinary circumstances -- no miscarriage of justice. The Court turned to the security guard overtime claim. In order to prevail, Hicks had to prove that her employer was covered by the Fair Labor Standards Act. The district court concluded that she was "engaged in commerce" while a desk clerk, and therefore covered by the Act, but was not while working as a security guard. Hicks argued that she was covered because Felling's operation of several businesses made him an "enterprise engaged in commerce" under the Act. The test for enterprise coverage is that the businesses must be engaged in related activities, under a unified operation, have a common business purpose, and engage in $500,000 of business annually. The district court found that Hicks’ proffered common business purpose -- a profit motive -- did not satisfy the Act's requirements. The Court noted that Hicks advanced a different theory on appeal. It found that argument forfeited. With respect to the profit motive argument, the Court agreed with the district court that it was not enough to amount to enterprise coverage. Finally, the Court rejected the argument that the jury should have been allowed to decide whether Felling Hotels had earnings above the $500,000 threshold because Felling testified that it was possible. Felling Hotels was not a defendant, Felling Hotels was not her employer, and Hicks presented no affirmative evidence of its gross revenue.

Judge Cudahy thought that Felling’s admission against interest that Felling Hotel could have had revenue exceeding $500,000 should have been enough to avoid the directed verdict. But since Hicks never explained how Felling Hotels being subject to the FLSA related to the defendants’ liability, he concurred in the result.