Tammy Schmidt v. Eagle Waste & Recy ( 2010 )

  •                             In the
    United States Court of Appeals
                  For the Seventh Circuit
    No. 09-1902
                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
       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-
      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,
    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
      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,
    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
      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.