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Perez v. Davison Design & Development, Inc.

United States District Court, W.D. Pennsylvania

August 20, 2014

DAVISON DESIGN & DEVELOPMENT, INC., a corporation; and GEORGE M. DAVISON, individually and as a Corporate Officer of the aforementioned corporation, Defendants.



In this civil action, Plaintiff Thomas E. Perez, Secretary of the United States Department of Labor (hereinafter "Plaintiff" or the "Secretary"), has sued Defendants Davison Design & Development, Inc. and George M. Davison (collectively, "Davison" or "Defendants") under the Fair Labor Standards Act, 29 U.S.C. §201 et seq. ("FLSA"), for overtime premiums that are allegedly owing to some 257 of Davison's current or former sale representatives. Davison contends that it is exempt from the FLSA's overtime provision because it is a "retail or service establishment" within the meaning of 29 U.S.C. §207(i). The Secretary disputes the applicability of this exemption.[1]

Presently pending before the Court are the parties' cross-motions for summary judgment. For the reasons that follow, the parties' respective motions will be denied without prejudice to be reasserted on a more fully developed record.

I. Factual Background

Davison is a Pittsburgh-based product development company whose business consists primarily of providing research, development, and design services to aspiring inventors who seek help in realizing their ideas and presenting them to corporations and other such entities. (Defs.' Statement of Undisputed Material Fact, hereinafter "DSUMF, " ¶¶1-2, ECF No. 33; Pl.'s Statement of Undisputed Material Facts, hereinafter "PSUMF, " ¶¶ 1-3, ECF No. 46.) The company likens its services to those of internal research and development departments located at many other corporations. (PSUMF ¶5, ECF No. 46.) Davison's website states that it "help[s] people prepare and present their ideas to corporations, manufacturers, and retailers for possible licensing." (Id. at ¶ 7.)

Davison provides its product development services to aspiring inventors primarily in the form of two different service packages. (DSUMF ¶3.)[2] The first package involves pre-development and representation services. These may include activities such as reviewing whether similar products are available for sale, researching patent information related to the client's prospective product, and identifying a target corporation that would be willing to receive information about the product. (DSUMF ¶6, ECF No. 33.) Davison's second-phase service package may vary based on the client's needs but it generally includes more intensive work on developing and creating presentation materials, a product sample, a packaging sample, and other related services with the goal that the client's product can be presented to corporations and other entities that might be interested in licensing the finalized product. (DSUMF ¶8, ECF No. 33.) The specific services performed within each package vary depending on the nature and sophistication of the invention at issue and the progress that the client has already made with the underlying idea. (DSUMF ¶5.)

Davison does not guarantee its clients that their ideas will be successful, or that they will turn a profit on them. (DSUMF ¶ 16, ECF No. 33.) Rather, it simply informs them that it will make its best efforts to professionally design a sample, packaging, and presentation materials that will give the potential licensee a clear understanding of the idea.

To sell its service packages to clients, Davison currently employs approximately 150 sales representatives. (DSUMF ¶20, ECF No. 33.) These sales representatives primarily communicate with clients over the telephone. (Id. ¶21.) Clients and prospective clients also occasionally visit Davison's offices for in-person meetings with sales representatives to discuss Davison's services. (Id.)

Any individual or entity can contract for Davison's services, as the company is fully open to the general public and sells its services directly to such clients. (DSUMF ¶ 4, ECF No. 33.) In the past five years, Davison has entered into contracts for these packages with 58, 865 individual clients. (Id.) Davison draws its clients from across the country, with representatives in most, if not all of the fifty states, and across the world. (PSUMF ¶19, ECF No. 46.) Its clients include corporations as well as individuals. (Id. ¶ 20.)

II. Procedural History

The Secretary commenced this action against Davison on August 1, 2013, alleging that Davison violated the overtime and record-keeping requirements set forth in §§7, 11(c), 15(a)(2) and 15(a)(5) of the FLSA. The complaint (ECF No. 1) seeks injunctive relief and back wages.

Defendants answered the complaint (ECF No. 10) and thereafter filed motions for judgment the pleadings. (ECF Nos. 13 and 16). The first motion sought to dismiss all claims against Defendant George Davison in his personal capacity on the theory that the alleged facts failed to show he exercised significant control over the employees at issue. (ECF No. 13.) The second motion sought to dismiss all claims for alleged violations occurring prior to January 23, 2011 on statute of limitations grounds and all claims arising thereafter for failure to state a viable claim under Federal Rule of Civil Procedure 12(c). (ECF No. 16.) By Memorandum Opinion and Order entered on December 23, 2013, the Court granted the Defendants' motion to dismiss with respect to those claims arising prior to January 23, 2011 and denied the motions in all other respects. (ECF No. 29.)

Four days later, Defendants filed their pending motion for summary judgment and supporting brief (ECF Nos. 31, 32), in which they claim exemption from the FLSA's overtime requirement. Plaintiff filed his response and cross-motion on March 3, 2014. (ECF Nos. 41, 44, 45.) Defendants filed their reply brief and opposition to the Plaintiff's motion on April 7, 2014 (ECF No. 51), and Plaintiff filed his own reply on April 23, 2014 (ECF No. 57). The parties have also filed their respective appendices and concise statements ...

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