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Venegas v. Global Aircraft Service, Inc.

United States District Court, D. Maine

September 23, 2016

CHRISTOPHER VENEGAS, et al., Plaintiffs,
v.
GLOBAL AIRCRAFT SERVICE, INC. and LUFTHANSA TECHNIK NORTH AMERICA HOLDING CORP., Defendants.

          ORDER ON DEFENDANTS' JOINT MOTION FOR SUMMARY JUDGMENT

          NANCY TORRESEN UNITED STATES CHIEF DISTRICT JUDGE

         Before the Court is the Defendants' joint motion for summary judgment pursuant to Federal Rule of Civil Procedure 56 (ECF No. 100). For the reasons stated below, the Defendants' joint motion for summary judgment is GRANTED IN PART and DENIED IN PART.

         FACTUAL BACKGROUND

         The following facts are based on the parties' joint statement of material facts, which contains all of the parties' statements of facts and responses. At the summary judgment stage, I am obligated to view the facts in the light most favorable to the non-moving party and make all reasonable inferences in that party's favor. Johnson v. Univ. of P.R., 714 F.3d 48, 52 (1st Cir. 2013).

         The Parties

         Plaintiffs

         This class/collective action arises out of restoration work being performed on a Lockheed L-1649A Super Star airplane (the “Super Star”) at the Lewiston-Auburn Municipal Airport in Auburn, Maine. The Plaintiffs are individuals who performed work on the Super Star project.

         Defendant Lufthansa Technik North America Holding Corp.

         Defendant Lufthansa Technik North America Holding Corp. (“LTNA”) falls within the corporate structure of Deutsche Lufthansa AG (“Lufthansa”). Lufthansa “is a global aviation group with approximately 540 subsidiaries, which are organized into five primary business segments: Passenger Airline Group;[1] Logistics; Maintenance, Repair, and Overhaul (“MRO”); Catering; and IT Services.” Joint Statement of Material Facts and Resp. to Req. to Strike ¶ 1 (“JSMF”) (ECF No. 121). These business segments are referred to collectively as the “Lufthansa Group, ” and Lufthansa is the parent company of all Lufthansa Group entities. JSMF ¶¶ 1-2.

         The events leading to this litigation began in December of 2007, when the Deutsche Lufthansa Berlin-Stiftung (“DLBS”), which is managed and controlled by Lufthansa, acquired three Super Star airplanes.[2] JSMF ¶¶ 37, 39. DLBS then contracted with Lufthansa Technik AG (“LHT”) “to overhaul and restore one of the Super Stars to an airworthy condition.” JSMF ¶ 37. LHT is a wholly owned subsidiary of Lufthansa, which provides MRO services for civil aircraft. JSMF ¶ 6. LHT provides integral services to the Passenger Airline Group, which is LHT's single largest customer. JSMF ¶¶ 9-10.

         Defendant LTNA is a wholly owned and controlled subsidiary of LHT. JSMF ¶ 13. LTNA does not operate any aircraft itself. JSMF ¶ 105; Defs.' Resp. to Pls.' Statement of Material Fact ¶ 105 (“DRPSMF”). Instead, LTNA performs MRO work on “the aircraft and components used by Lufthansa German Airlines, . . . airlines that are under common control by Deutsche Lufthansa AG, and other external airlines.” JSMF ¶ 14. MRO “are functions traditionally performed by airline employees in the aircraft industry.” JSMF ¶ 53. The majority of LTNA's MRO work is performed for passenger and freight airlines through LTNA's Federal Airline Regulation Part 145 Repair Stations, which are located in Maine, California, Florida, Oklahoma, and Puerto Rico. JSMF ¶¶ 15-16.

         Defendant Global Aircraft Services, Inc.

         Defendant Global Aircraft Services, Inc. (“GAS”) is a Texas repair company that services, maintains, and repairs aircraft fuel systems. JSMF ¶ 83; Ex. 6 to Loc. Rule 56(h) Stip. Rec. ¶ 2 (“Ex. 6”) (ECF No. 122-6). Like LTNA, GAS does not operate any commercial flights. JSMF ¶ 106.

         The Super Star Project

         In September of 2009, LTNA retained GAS “to deseal, change fasteners and dome nuts, and reseal the wings of the Super Star.” JSMF ¶ 80; Ex. 6, ¶ 3. After GAS was retained, however, “it became clear that the extent of the corrosion on other portions of the aircraft required more work than GAS was able to provide.” JSMF ¶ 81. Accordingly, LTNA requested that GAS “identify and supply sheet metal contractors to perform repairs outside the fuel system.” JSMF ¶ 82. “Although GAS's ordinary business was limited to fuel systems, it agreed to use its own repair-station license and contacts in the industry to refer contractors to the Super Star project.” JSMF ¶ 83.

         The referred contractors all signed the same agreement with GAS to work as independent contractors restoring the Super Star at an hourly rate. Ex. 3 to Loc. Rule 56(h) Stip. Rec. 57:10-20; 58:6-9 (“Ex. 3”) (ECF No. 122-3). Christopher Venegas, the named Plaintiff, began working on the Super Star project in early 2013. Ex. 11 to Loc. Rule 56(h) Stip. Rec. ¶ 3 (“Ex. 11”) (ECF No. 122-11).

         The project involves the restoration of the Super Star at LTNA's Auburn, Maine Repair Station, which is located on the grounds of the Auburn-Lewiston Airport. JSMF ¶¶ 47-48. The Super Star “is being modified to meet current FAA standards for passenger safety.” JSMF ¶ 54. Accordingly, the work “is highly regulated by the FAA.” JSMF ¶ 85. While the work was initially performed through GAS's FAA Repair Station authorization, the FAA required LTNA to have its own Repair Station Certificate in 2010. JSMF ¶ 49. As the holder of an Air Agency Certificate, LTNA must comply with “the requirements of the Federal Aviation Regulations relating to the establishment of an Air Agency and Repair Station.” JSMF ¶ 51. Thus, LTNA's Director of Maintenance for the project “is responsible for the overall operation of the Repair Station[, ]” including “directing, planning, and laying out the details of inspection standards, methods, and procedures used by the repair station in complying with all applicable Federal Aviation Regulations.” JSMF ¶¶ 55-56.

         The discovery of hidden damage on the Super Star has extended the project five years past its anticipated end date. JSMF ¶ 66. The Super Star itself has not flown in at least ten years, and the restoration project has now been ongoing for seven years. JSMF ¶¶ 108, 111. The Plaintiffs in this case have worked on the Super Star project only at the Auburn-Lewiston Airport. JSMF ¶ 109. And LTNA has not performed any additional work at the Auburn-Lewiston Airport beyond working on the Super Star. JSMF ¶ 110.

         The majority of the work on the Super Star is performed by workers designated as independent contractors, although there are some LTNA employees who work on the project. See JSMF ¶ 58. For his part, Venegas “worked on fabricating parts, constructing the frame, installing various parts, and inspecting parts that would be installed on the Super Star.” JSMF ¶ 65. Although the type of sheet metal work done on the Super Star was typical of the type of work airlines perform to maintain passenger and cargo aircraft, the licensing requirements were different.[3] Workers on the Super Star project did not need an Airframe and Power Plant license, which would be required if the work were performed for an airline. Pls.' Resp. to Defs.' Statement of Material Fact ¶ 63 (“PRDSMF”); Pls.' Resp. to Defs.' Reply Statement of Material fact ¶ 116 (“PRDRSMF”). “GAS's job advertisement for ‘Aircraft Sheet Metal Contractors' states that an Airframe and Power Plant license is not required.” PRDSMF ¶ 63.

         The Super Star's Intended Use

         Lufthansa, DLBS and LSSG “are restoring the Super Star aircraft to meet current FAA-standards for passenger service.”[4] JSMF ¶ 42. “Once the full restoration is complete, the Super Star will provide paying passengers with a unique service of traveling on one of Deutsche Lufthansa AG's fleet of vintage aircraft, flying both national and international routes.” JSMF ¶ 43. Flights on the Super Star will operate as airplanes did in the 1950s-at half the speed and half the altitude of today's commercial airliners-“providing passengers with a unique perspective of the landscapes below.” JSMF ¶ 44. “The Super Star will also be presented at airshows and exhibitions.” JSMF ¶ 45. And ticket prices for flights on the Super Star “will be priced on the basis of a break-even policy to directly support the maintenance of the plane.” JSMF ¶ 46.

         The Consequences of Reclassifying the Plaintiffs as Employees

         LTNA's employees are eligible for several different programs, benefits, and plans through its parent company LHT. JSMF ¶¶ 17, 21-31. Examples of benefits include membership in different plans, such as medical, dental, life, accidental death/dismemberment, disability, and flexible spending accounts. JSMF ¶ 18. LTNA offers its employees three choices for health insurance with resulting contributions from LTNA/LHT, depending on the selected coverage. JSMF ¶¶ 19-20. After three months of employment, LTNA employees can participate in LTNA's 401(k) Plan “which provides a 2% contribution above what the employee contributes up to 7%.” JSMF ¶ 26. Employees also receive flight privileges, including reduced-fares on “Lufthansa, Star Alliance, and ZED Partners” flights. JSMF ¶ 32. “Immediate family members, companions, and a limited number of friends can accompany the LTNA employee on these trips.” JSMF ¶ 32. In all, these benefits are “estimated to increase LTNA's costs of employment on average of 30-40% above the employee's regular pay.” JSMF ¶ 33. Each contractor working on the Super Star project would be entitled to these benefits if they were classified as LTNA employees. JSMF ¶ 69.

         Given the higher costs LTNA spends on employees, reclassifying all of the workers on the Super Star project would impact the project itself and the way that LTNA conducts its business. JSMF 68.[5] It is anticipated that reclassification would make it difficult to engage a sufficient number of workers to meet the Super Star's production schedule. JSMF ¶ 71; PRDSMF ¶ 71. And because of the unexpected costs that have already been incurred in restoring the Super Star, it is “foreseeable that requiring LTNA to reclassify all workers on the project as LTNA's employees would put the completion of the Super Star project in jeopardy.” JSMF ¶ 74.[6] On the other hand, if the project is completed, ticket prices for passengers may be adjusted due to the higher costs associated with the project and the completed Super Star's ongoing maintenance. JSMF ¶ 75; PRDSMF ¶ 75.

         The “costs generated during the overhaul of the Super Star” are invoiced to DLBS and LSSG. JSMF ¶ 76. Because of DLBS and LSSG's relationship with Lufthansa, increased costs from the Super Star project could potentially be borne by all entities in the Lufthansa Group. JSMF ¶ 76.[7] There is also a chance that increased costs could be passed on to external airlines served by LTNA. JSMF ¶ 78.[8] GAS claims it would not have sent the contractors to Maine to work on the Super Star project if it had been required to classify them as employees. JSMF ¶¶ 72, 102. Plaintiffs counter that GAS had not employed any workers as independent contractors before its contract with LTNA and that GAS sent both employees and independent contractors to Maine. PRDSMF ¶¶ 72, 102.

         PROCEDURAL HISTORY

         Plaintiff Venegas filed suit in 2014 on behalf of himself and other workers on the Super Star project alleging violations of federal and Maine wage and hour laws. Compl. ¶¶ 62-69 (ECF No. 1). The crux of Venegas's claims is that GAS and LTNA (collectively, the “Defendants”) misclassified him and other workers as independent contractors, meaning they were not paid all legally-required wages. Compl. ¶¶ 63-64, 66-68. In early 2015, I conditionally certified a group of metal workers on the Super Star project as a collective action under the federal Fair Labor Standards Act. Order on Pl.'s Mot. for Conditional Certification 8-9 (ECF No. 56).

         Then, on February 4, 2016, I granted the Plaintiffs' motion for class certification with respect to their state law claims[9] and denied the Defendants' motions for collective action decertification with respect to the Plaintiffs' federal claims. Order on Pls.' Mot. for Class Certification 1 (ECF No. 126). Both of the Defendants have filed petitions for permission to appeal this Order pursuant to Federal Rule of Civil Procedure 23(f) with the United States Court of Appeals for the First Circuit. The First Circuit has not yet ruled on the petitions.[10] For purposes of this summary judgment motion only, the Defendants have assumed that the Plaintiffs are employees under both state and federal law. Joint Mot. for Summ. J. 2 n.2.

         LEGAL STANDARD

         Summary judgment is appropriate when there is no genuine dispute of material fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P. 56(a). “A dispute is genuine if the evidence about the fact is such that a reasonable jury could resolve the point in favor of the non-moving party.” Johnson, 714 F.3d at 52 (citation and quotations omitted). “A fact is material if it has potential to determine the outcome of the litigation.” Id.

         DISCUSSION

         The Plaintiffs' Complaint is twofold. In Count I, the Plaintiffs claim that the Defendants failed to pay them proper wages under 26 M.R.S.A. §§ 663, 664, 760. Compl. ¶¶ 62-64. The Defendants maintain that these state law claims are preempted by the Airline Deregulation Act (the “ADA”). 49 U.S.C. § 41713. In Count II, the Plaintiffs claim that the Defendants violated the Fair Labor Standards Act of 1938 (the “FLSA”) by failing to pay them overtime wages. 29 U.S.C. § 201; Compl. ¶¶ 65-69. The Defendants contend that they are exempt from paying overtime wages under the FLSA because they are subject to the Railway Labor Act (the “RLA”). 45 U.S.C. § 151. I address whether summary judgment is appropriate as to each claim below beginning with Count II.

         I. Railway Labor Act Exemption-Count II

         A. Overview of Railway Labor Act

         Under § 207 of the FLSA, the general rule is that an employee must be paid at a rate of one and one-half times the employee's regular pay for all hours worked in excess of 40 hours in a given workweek. 29 U.S.C. § 207. There are exceptions to the general rule, see 29 U.S.C. § 213, but “exemptions [are] ‘narrowly construed against the employers seeking to assert them, ' ” and the “burden is on the employer to prove an exemption from the FLSA's requirements.” Marzuq v. Cadete Enter., Inc., 807 F.3d 431, 438 (1st Cir. 2015) (quoting Reich v. John Alden Life Ins. Co., 126 F.3d 1, 7 (1st Cir. 1997)).

         Section § 213(b)(3) of the FLSA provides an exemption for “any employee of a carrier by air subject to the provisions of title II of the Railway Labor Act.” Accordingly, if the Defendants are carriers by air, and thus subject to the RLA, the FLSA's overtime requirements do not apply.

         The RLA “creates a special scheme to govern the labor relations of railroads and airlines because of their unique role in serving the traveling and shipping public in interstate commerce.” Verrett v. SABRE Grp., Inc., 70 F.Supp.2d 1277, 1281 (N.D. Okla. 1999). One of the purposes of the RLA is to provide mechanisms for the resolution of labor disputes. 45 U.S.C. § 151a. Parties subject to the RLA must utilize its dispute resolution processes “before resorting to self-help.” Cunningham v. Elec. Data Sys. Corp., No. 06-cv-3530-RJH, 2010 WL 1223084, at *3 (S.D.N.Y. Mar. 30, 2010) [hereinafter Cunningham II].

         Although the RLA was initially limited to railroads, it was amended in 1936 to include air carriers. The RLA applies to:

[E]very common carrier by air engaged in interstate or foreign commerce . . . and every air pilot or other person who performs any work as an employee or subordinate official of such carrier or carriers, subject to its or their continuing authority to supervise and direct the manner of rendition of his service.

45 U.S.C. § 181. The RLA defines “carrier” broadly to include the carrier itself “and any company which is directly or indirectly owned or controlled by or under common control with any carrier . . . .” 45 U.S.C. § 151, First. (emphasis added). Entities that do not operate aircraft, sometimes referred to as derivative carriers or carrier affiliates, can be subject to the RLA if they are sufficiently connected to air carriers. “When the activities of carrier affiliates are necessary to the operations of an air carrier, and a labor dispute at the affiliate could cripple airline operations, those affiliates must be subject to the RLA because such disruption is the very type of interruption to air commerce the RLA was designed to prevent.” Verrett, 70 F.Supp.2d at 1281.

         To determine whether an employer and its employees are subject to the RLA when the employer itself is not engaged in the common carriage of passengers by air, the National Mediation Board (“NMB”)[11] applies a two-part test:

First, the NMB determines whether the nature of the work is that traditionally performed by employees of rail or air carriers-the function test. Second, the NMB determines whether the employer is directly or indirectly owned or controlled by, or under common control with, a carrier or carriers-the control test.

In re Int'l Cargo Mktg. Consultants, 31 NMB 396, 406 (June 18, 2004).[12] “Both prongs must be satisfied in order for the RLA exemption to apply.” Roca v. Alphatech Aviation Servs., Inc., 960 F.Supp.2d 1368, 1372 (S.D. Fla. 2013). Accordingly, summary judgment is proper if the Defendants have produced enough undisputed evidence to satisfy both prongs of this test.

         B. ...


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