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Schmidt v. FCI Enterprises LLC

United States District Court, E.D. Virginia, Alexandria Division

November 5, 2019

ROBERT MARK SCHMIDT, ET AL., Plaintiffs,
v.
FCI ENTERPRISES LLC, ET AL., Defendants.

          MEMORANDUM OPINION AND ORDER

          Rossie D. Alston, Jr. United States District Judge

         Plaintiffs sued FCI Enterprises, LLC ("FCI") in addition to FCI's corporate officers and owners after FCI ceased operations and terminated all of its employees. Plaintiffs sought relief under two alternative theories, the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq., and the Worker Adjustment Retraining and Notification Act ("WARN Act"), 29 U.S.C. § 2101, et seq. Pursuant to the FLSA, Plaintiffs requested minimum wage for three weeks of unpaid work, and pursuant to the WARN Act, Plaintiffs requested back pay and benefits during the period of the violation. Defendants argued that neither the FLSA nor the WARN Act applied. Prior to the matter being tried by a jury, [1] the Court, under the applicable standards for reviewing motions for summary judgment, denied Defendants' motion for summary judgment. The parties proceeded to trial. After a six-day jury trial, the jury made two findings. First, the jury found in favor of all Defendants on the FLSA claim. Second, the jury found against FCI but in favor of Defendants Michael Gulino, Daniel Muse, John Bronson, Robert Knibb, and B. Hagen Saville on the WARN Act claim and awarded each Plaintiff damages.

         After careful deliberation, the Court will not disturb the jury's verdict with respect to the FLSA claim, and the Court accepts the jury's verdict regarding the WARN Act claim as a recommended verdict. Because the jury's verdict on the WARN Act claim was a fair and reasonable one, the Court adopts it as its own with the exception of awarding damages to Plaintiff Mia Frankel. Accordingly, the Court enters its verdict, but, at the request of the parties, refrains from entering judgment at this time. In support of its verdict, and adhering to Federal Rule of Civil Procedure 52, the Court sets forth its factual findings and conclusions of law below.[2]

         I. Findings of Fact

         Many of the facts are largely uncontroverted. Plaintiffs were employed by FCI, a company that provided engineering, cybersecurity, satellite communications, and information technology services to clients across the United States, including government agencies. FCI is incorporated and headquartered in Chantilly, Virginia.

         In 2016, FCI was purchased by Defendants John Bronson, Robert Knibb, and B. Hagen Saville partially with their own funds in addition to a loan from Branch Banking & Trust ("BB&T"). This loan included a two-year line of credit. The maturation date on the line of credit was July 27, 2018. Around that time, BB&T and FCI attempted to renegotiate the terms of the loan agreement. BB&T issued a short-term extension on the line of credit, extending the maturation date to October 4, 2018. As renegotiations proceeded, interactions between BB&T and FCI deteriorated and essentially became adversarial. Meanwhile, Defendant Dan Muse ("Muse"), Corporate Financial Officer of FCI, attempted to seek out alternative lenders. Due to the fiscal instability of FCI at the time, no lenders were interested in doing business with FCI. Ultimately, renegotiations with BB&T failed, and the line of credit matured on October 4, 2018. Consequently, that day, pursuant to the original lender agreement, BB&T withdrew $1.7 million from FCI's corporate bank accounts, which apparently included funds for employee payroll.

         On October 8, 2018, all FCI employees were notified via electronic mail that they were terminated effective October 5, 2018. A subsequent electronic mail message sent on October 18, 2018, elaborated that FCI ceased operations due to a failed renegotiation with BB&T and acknowledged that FCI employees were not paid for work completed from September 15 to October 5, 2018. A subset of FCI employees sued FCI, FCI's owners, as well FCI's corporate officers under two different theories of liability for violations of the FLSA and the WARN Act.

         The case was tried before a jury on October 15-18 and 21-22, 2019. Beginning their casein-chief, each of the twenty-two Plaintiffs described their work history with FCI and their final salaries. Plaintiffs' testimony revealed that they all held senior-level positions at FCI, such as Director of Operations, Director of Human Resources, Senior Analyst, and Controller, and they all earned in excess of seventy-thousand dollars annually. In discussing the structure of FCI, Plaintiffs explained that FCI operated out of one location, Chantilly, Virginia; FCIs contract administration, business development, proposal development, and human resource operations occurred there. Contract deliverables[3] were sent to the Chantilly, Virginia, location for corporate approval. Although FCI employees serviced contracts off-site, those off-site locations did not belong to FCI.

         With respect to FCI ceasing operations, the parties stipulated that the Plaintiffs were not paid for hours worked from September 15, 2018, to October 5, 2018.[4] In addition, all Plaintiffs but Mia Frankel testified that they were terminated as outlined above. The Plaintiffs also confirmed the respective hours they worked, the amount of back pay, the approximation of benefits, and the unpaid expenses they believed they were owed, as set forth in Plaintiffs' Exhibit 40. Plaintiff Michael Novitsky ("Novistky") testified that the approximation of benefits was calculated by using a multiplier of 1.3. Novitsky testified that this figure was chosen because it reflects estimated benefits listed in FCI bid proposals for contracts with clients. However, further questioning revealed that the multiplier contained more than employee benefits; the multiplier also included estimations of overhead costs and general administrative expenses. In addition, Plaintiffs testified that their 401(k) accounts were inaccessible from the date of termination until December 2018. At the conclusion of Plaintiffs' cases-in-chief, Defendants moved for judgment as a matter of law, which the Court denied in part and took under advisement in part.

         Then, Defendants began their case-in-chief. Defendant Muse detailed FCI's poor fiscal health over the past few years, describing contracts lost and declines in revenue. Muse also revealed that during renegotiations with BB&T, he met with other lenders. In addition, Muse testified, according to a Paycom report generated in March 2019, that FCI employed only approximately 88 full-time employees. Def. Ex. 2. On cross-examination, Muse recalled that he stated in a deposition that 150 employees worked at FCI, which was reflected on FCI's website. Plaintiffs' counsel read over 22 names of employees not included in that Paycom report employed by FCI six months prior to the date of termination. These names were confirmed by Muse.

         At the conclusion of Defendants' cases-in-chief, Defendants again moved for judgment as a matter of law essentially on the same grounds articulated in their motion for summary judgment, which the Court denied in part and took under advisement in part. Plaintiffs did not present rebuttal evidence. After listening to instructions and then hearing closing arguments, the jury deliberated over the course of two days and returned their verdict in favor of all Defendants on the FLSA claim, and against FCI, but in favor of Defendants Gulino, Muse, Bronson, Knibb, and Saville on the WARN Act claim. The jury awarded a specific sum of damages to each Plaintiff for FCI's WARN act violation.

         II. Conclusions of Law

         As the Plaintiffs agreed that recovering under both the FLSA and the WARN Act would be duplicative, and because the Court adopts in significant part the jury verdict on the WARN Act claim, the Court will not disturb the jury's verdict in favor of Defendants on the FLSA claim, and thus dispenses with further analysis on that claim.

         "The WARN Act was enacted in 1988 to provide notice of sudden, significant employment loss so that workers could seek alternative employment and their communities could prepare for the [ensuing] economic disruption." Meson v. GATX Technology Services Corp.,507 F.3d 803, 808 (4th Cir. 2007). Pursuant to the WARN Act, "certain employers [are required] to provide affected employees with sixty-days notice of a plant closing or 'mass layoff.'" Id. (quoting 29 U.S.C. § 2102(a)). An "affected employee" is one "who may reasonably be expected to experience an employment loss as a consequence of a proposed plant closing or mass layoff by their employer." 29 U.S.C. § 2101(a)(5). Termination is such an employment loss. 29 U.S.C. § 2101 (a)(6). The term '"employer' means any business enterprise that employees 100 or more employees, excluding part-time employees." 29 U.S.C. § 2101(a)(1)(A). To ...


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