Tuesday, October 21, 2014

Hot Goods and Economic Duress: Part I

    Is there a valid economic-duress objection to the US Department of Labor’s exercise of “hot goods” authority under the Fair Labor Standards Act (FLSA)? Under FLSA, 29 U.S.C. §§ 212(a), 215(a)(1), the US Department of Labor (DOL) can go to federal court to get an injunction to stop any person from shipping or selling goods produced in violation of FLSA’s wage, hour, and child labor provisions (“hot goods”).  FLSA has no express economic-duress defense to a “hot goods” injunction.  But earlier this year, in Perez v. Pan-American Berry Growers, LLC, a federal district court in Oregon granted a Rule 60(b) motion to vacate a consent judgment--- entered after DOL asserted a “hot goods” objection—on economic-duress grounds.  

 Here’s that story.  In this post, I’ll set the stage by describing the consent judgment and the political reaction to it.  In subsequent posts, I’ll discuss the court’s Rule 60(b) ruling, its reasoning, and more.  (For prior accounts in the press, see, e.g., here, here, and here, and see also this law student note.)

The Consent Judgment

Perez v. Pan-American Berry Growers, LLC, involves DOL actions against three Oregon farms that grow berries.  I’ll focus here on Pan-American Berry Growers, which operated a Salem, Oregon farm that grows blueberries.  On August 2, 2012, DOL contacted Pan-American.  Based on a DOL investigation initiated a few days earlier, DOL said that it had concluded that Pan-American had committed FLSA wage and hour violations with respect to blueberry pickers working on its farm.  On that basis, DOL faxed over a “hot goods” objection—a notice to Pan-American that its blueberries were “hot goods” and a request that it not ship those blueberries for sale.  This was DOL’s signal to Pan-American that it believed that it had enough proof of FLSA violations that it could, if necessary, go to court and persuade a judge to order a hot-goods injunction against Pan-American.  The next day, DOL contacted one of Pan-American’s downstream buyers, who agreed not to take shipment of the “hot” blueberries.  Throughout, DOL told Pan-American that it would not lift its “hot goods” objection unless Pan-American entered into a consent judgment.

On August 9, Pan-American (represented by an attorney) and DOL signed a consent judgment , under which Pan-American paid DOL about $41,778 in back wages and a $7040 penalty, as well as agreed to training plus regular audits by a third-party monitor.  After Pan-American signed, DOL told the downstream buyer that it no longer had a “hot-goods” objection to the shipment or sale of Pan-American’s berries.  On August 15, DOL filed its complaint in Perez v. Pan-American Berry Growers, LLC.  The consent judgment—now signed by both parties—was then signed by Oregon federal district court judge Michael R. Hogan on August 18 and entered on August 21, 2012.

The Farms Fight Back

    Even before the consent judgment had been entered, Pan-American, the other farm-defendants, and their allies took the fight to DOL.  In a letter, dated August 17, 2012, to then-DOL head Hilda Solis, both Oregon’s US Senators and four of its five US House Representatives expressed concern that “Oregon farmers” had told them a “narrative and supporting documentation” indicating that DOL “may have abandoned the normal due process mechanisms and remedies in favor of a significant sanction.”  They asked for “additional clarification” of DOL’s policies for issuing hot-good orders on agricultural enterprises. 

Similarly, in a letter dated August 15, 2012, the Commissioner of Oregon’s Bureau of Labor and Industries, Brad Avakian, asked DOL to stop using its hot-goods authority “to seize perishable goods on Oregon farms.”  For Avakian, the problem was this: “Seizing goods that will spoil quickly creates leverage by potentially destroying the value of the goods.  If the goods spoil, however, the incentive for the employer to correct its action is largely lost as is the ability to gain income from the goods to pay proper wages.”  He added that “the seizure of the perishable items on Oregon farms under the ‘hot goods’ provision likely violates the [Fourth and Fourteenth Amendment] rights of farmers who have yet to be found guilty of anything.”

    On February 16, 2013, Oregon State Senator Fred Girod introduced SJM 7 into the Oregon legislature.  If adopted, the Oregon legislature would thereby officially ask Congress to require DOL to “adopt standard rules and procedures” for applying the FLSA hot-goods provision “that specifically speak to full disclosure of employers’ and workers’ rights and when the application of the provision is appropriate or not.”  Among its various “whereas” clauses was one that declared that, in July and August 2012, DOL had invoked its FLSA hot-goods authority in the agricultural industry “in a way that was, on its face, coercive and extortive.”   (This bill was still in committee when the Oregon legislature adjourned in July 2013.)

    In March 2013, U.S. House Representative Kurt Schrader (D-Oregon) introduced H.R. 1387, a bill to amend FLSA to exclude “perishable agricultural commodities” from the ambit of the FLSA hot-goods provision.  That exclusion would cover “fresh fruits and fresh vegetables of every kind and character,” even if frozen or packed in ice.  Schrader, whose congressional district includes Salem, later described the bill as the result of working “closely” with the Oregon Farm Bureau—an organization that lobbies on behalf of Oregon farmers and ranchers— to “combat” DOL’s actions.

    In May 2013, the Oregon Farm Bureau—which had already spoken out against DOL’s actions in the press—sued DOL under the Freedom of Information Act.  According to the lawsuit, the Oregon Farm Bureau had filed a FOIA request on February 27, 2013, asking for specific investigative files as well as general documents containing DOL policies and procedures.  In response, it alleged, DOL asserted a FOIA exemption for active cases and otherwise did not provide any of the requested documents.  (In February 2014, the parties settled this lawsuit.)

 The Rule 60(b) Motion

    On August 15, 2013, Pan-American and another of the farm-defendants, B&G Ditchen LLC, moved to vacate the consent judgment pursuant to Federal Rule of Civil Procedure 60(b), on the ground that they had agreed to that consent judgment under duress.  Judge Hogan, the original district court judge assigned to the case, had retired in November 2012.  So, about a week later after the Rule 60(b) motion was filed, the case was reassigned to federal magistrate judge Thomas M. Coffin.

 Coming up Next: Judge Coffin agrees that the consent judgment should be vacated because of economic duress.  Plus, the political fight continues, as DOL goes before the House Agriculture Committee.

 

--Sachin Pandya

 

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