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Moholt v. Dooney & Bourke, Inc.

United States District Court, D. Oregon

November 19, 2014

RON MOHOLT, Plaintiff,
DOONEY & BOURKE, INC., Defendant

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[Copyrighted Material Omitted]

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For Plaintiff: Judy Danelle Snyder, LAW OFFICES OF JUDY SNYDER, Portland, OR; Grant Yoakum, GRANT YOAKUM ATTORNEY AT LAW, Lake Oswego, OR.

For Defendant: Scott G. Seidman and Colin Love-Geiger, TONKON TORP LLP, Portland, OR; Thomas J. McAndrew, THOMAS J. MCANDREW & ASSOCIATES, Providence, Rhode Island.

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Michael H. Simon, United States District Judge.

Defendant, Dooney & Bourke, Inc. (" Defendant" or " Dooney" ), moves for summary judgment against all claims asserted by Plaintiff, Ron Moholt (" Plaintiff or " Moholt" ). For the following reasons, Dooney's motion for summary judgment is granted in part and denied in part.


A party is entitled to summary judgment if the " movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The moving party has the burden of establishing the absence of a genuine dispute of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The court must view the evidence in the light most favorable to the non-movant and draw all reasonable inferences in the non-movant's favor. Clicks Billiards Inc. v. Sixshooters Inc., 251 F.3d 1252, 1257 (9th Cir. 2001). Although " [credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . ruling on a motion for summary judgment," the " mere existence of a scintilla of evidence in support of the plaintiff's position [is] insufficient . . . ." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). " Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

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475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (citation and quotation marks omitted).


Dooney is a Connecticut-based company that designs, manufactures, and sells high-end handbags and other merchandise. Moholt is an Oregon resident who worked selling handbags and other merchandise for Dooney. In approximately November 2000, Dooney hired Moholt, classifying him as an independent contractor and paying him solely on a commission basis. Dooney terminated its relationship with Moholt in March 2012. There was no written agreement between Moholt and Dooney that defined Moholt's position or his commission structure. Moholt's relationship with Dooney was terminable " at will" by either party.

Moholt served as a non-exclusive sales representative for Dooney in its Pacific Northwest region. Moholt sold Dooney's fashion handbags and related merchandise to accounts in his assigned geographic territory, which initially included such department store chains as Nordstrom, Meier & Frank, and Bon Marché . Moholt earned net commissions for each year in the following amounts: $5,136 for the partial year 2000; $70,171 in 2001; $76,660 in 2002; $125,493 in 2003; $293,828 in 2004; $220,375 in 2005; $337,665 in 2006; $217,683 in 2007; $125,208 in 2008; $89,137 in 2009; $32,369 in 2010; $62,369 in 2011; and $41,571 for the partial year 2012. A " net commission" is a commission after adjustment for any sales with " chargebacks." A chargeback typically would result when a customer returned to Dooney a portion of the product shipped to that customer and Dooney accepted that return. Shipments net of accepted returns are referred to as " net shipments."

During Moholt's tenure, Dooney made a portion of its sales through persons, such as Moholt, whom Dooney classified as independent contractors. During the period covered by Moholt's lawsuit, Dooney also had employees who performed sales responsibilities for Dooney's accounts. These employees worked out of Dooney's corporate headquarters in Connecticut and performed other non-sales functions.

The actual sales work that the Dooney employees performed differed little, if any, from the work performed by the sales representatives who were characterized as independent contractors. The place of performance and the method of compensation, however, differed. During Moholt's tenure, Dooney compensated sales representatives who were characterized as independent contractors solely through a net commission on shipments to the customers' locations (known as " doors" ) located in the independent contractor's geographic territories, generally at a five percent commission rate, but sometimes lower. For example, if an independent sales representative was classified as a " sub-representative" on a particular customer's account, he or she would receive only a two percent commission on net shipments made into his or her territory, and the other three percent commission would be paid to the primary independent sales representative for that particular account.

With regard to Dooney's employees who serviced retail accounts, Dooney typically compensated those employees with only a one percent commission rate on net shipments, while also paying those employees a base salary and certain benefits. With only two exceptions, the individuals who were characterized as sales employees worked at Dooney's headquarters and used Dooney-provided equipment.

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During his tenure with Dooney, Moholt worked some of the time out of his home office in Oregon, for which he took a personal tax deduction. Moholt typically got up at 6:00 a.m. and began work on his home office computer in his pajamas and robe. Moholt decided when to work from home and when to travel, such as whether and when to visit store locations or customer buying offices, or to meet with prospective new customers. Moholt's work-related travel included: (1) attending meetings with customers that Moholt personally arranged; (2) attending meetings with Dooney's management and staff at times and locations set by Dooney; (3) attending " Market Week" in New York City several times each year, during which Moholt and other sales representatives would also travel to Dooney's headquarters in Connecticut to meet with Dooney's management and staff; and (4) attending or presenting seminars scheduled with key accounts. Moholt scheduled his own time off for vacation and personal days. Dooney set no formal sales quotas for Moholt. Dooney did not provide performance reviews either for independent sales representatives (like Moholt) or for any employees who performed sales functions. Dooney issued Internal Revenue Service (" IRS" ) W-2 forms to the people whom it classified as employees and issued IRS 1099 forms to the people, like Moholt, whom it classified as independent contractors.

During Market Week in New York, which occurred about four or five times each year, Dooney would preview the collections for each fashion season, first to the sales representatives and then to the customers. Market Week is an industry-wide activity at scheduled times each year when buyers from Macy's, Nordstrom, Dillard's, and other similar retailers travel to New York for prearranged presentations by Dooney and Dooney's competitors. On Monday of a given Market Week, Dooney would show its new handbag collections to the sales representatives at Dooney's corporate headquarters in Connecticut. Moholt contends that attendance on these days was mandatory, and for purposes of summary judgment Dooney does not dispute Moholt's contention. On Tuesday through Thursday of a given Market Week, Dooney's sales representatives would show the collections to the buyers from their respective territories, at spaces arranged by Dooney in New York City. On Friday of a given Market Week, some of the sales representatives would be invited to reconvene in Dooney's headquarters in Connecticut to discuss the buyers' reactions to different collections and colors, so that Dooney could prepare a sales forecast and begin to schedule manufacturing. Moholt, however, was never invited to these Friday meetings. Instead, Moholt completed his sales forecasts while in New York City, before returning to Oregon.

During one Market Week several years ago, Dooney's President, Peter Dooney, communicated to the sales representatives that they were to dress in appropriate business attire for that Market Week. Peter Dooney used words such as " crisp and clean" or " black and white" to describe this requirement. Moholt always dressed appropriately for whatever function he was attending. Moholt was responsible for showing Dooney's merchandise to the buyers in his territory; for obtaining commitments from these buyers on styles, volumes, and delivery schedules; for negotiating with customers to extend delivery windows when products could not be shipped within the original schedule; for monitoring inventory at his " doors" and obtaining reorders; and for providing any follow-up services the customers required.

Moholt and the other non-exclusive, independent sales representatives were allowed

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to represent other products, and some did so. Moholt represented a hosiery line from another manufacturer early in his tenure with Dooney, but that ended in or before 2002. Because of acquisitions, consolidations, and business failures, as well as changes in how manufacturers now do sales, most, if not all, of Dooney's non-exclusive, independent sales representatives currently represent only Dooney.

Moholt paid all of his own expenses during his tenure with Dooney. Moholt's expenses included mileage, hotel, and meal expenses for travel, and home office expenses, such as a computer that Dooney required Moholt to purchase, as well as other office supplies. Moholt also employed at his own expense as many as five independent contractors who worked for Moholt as merchandisers. Moholt's merchandisers visited the " doors" in Moholt's assigned territory to set up displays and check stock for reorders. Moholt paid his merchandisers and issued IRS 1099 forms to them. In addition, Moholt paid employment taxes, local business taxes, and the employer's side of social security taxes both for himself and for the independent contractors (the merchandisers) who worked for him.

Dooney required all independent sales representatives to purchase the same type of computer, which Dooney configured with proprietary software that allowed the sales representatives to access Dooney's databases. During his tenure, Moholt was told he would not be reimbursed for the cost of this computer. In fact, Moholt never submitted any claim for reimbursement for any of his expenses, and no reimbursement was ever paid to Moholt by Dooney.

For every year that Moholt was a Dooney sales representative, he filed a personal IRS 1040 tax return form, including Schedule C, Profit and Loss. This was a change in Moholt's tax status from when he was classified as an employee for another company before joining Dooney in 2000. After becoming affiliated with Dooney in November 2000, Moholt deducted all of his business expenses " off the top," rather than as miscellaneous itemized deductions on Schedule A, which would have limited his deductions to amounts greater than two percent of his adjusted gross income. Moholt used the same accountant during his tenure with Dooney that he used before beginning his affiliation with Dooney. After Moholt began working for Dooney, Moholt's accountant filed Moholt's tax returns showing Moholt's income as being received from a sole proprietorship, rather than as wages. Moholt's accountant did this because Moholt received an IRS form 1099 from Dooney showing miscellaneous income, rather than a W-2 form showing wages and because Moholt was responsible for all of his own expenses, including paying the merchandisers whom Moholt hired as independent contractors to work for him.

Dooney's independent sales representatives, including Moholt, regularly recruited new accounts for Dooney, which retained the final authority for deciding whether to approve a new account. Dooney set the wholesale prices for its products, and sales representatives had no authority to negotiate a different price for any customer. Dooney also had sole authority for authorizing a credit to a customer. When Dooney authorized a credit, a chargeback would result in the sales representative losing his or her commission to the extent of the chargeback.

All of Moholt's electronic communications with the Dooney accounts that he served were done using his personally owned cell phone and computer, unless he was in the Dooney showroom in New York City or in Dooney's corporate headquarters

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in Connecticut. Dooney provided a voicemail box and email address for Moholt on Dooney's central server to allow customers the convenience of leaving messages for Moholt in a dedicated location. Moholt accessed his voicemail and email using his own cell phone or computer. Dooney also provided its sales representatives with Dooney-branded badges for their merchandisers to wear when visiting customer stores.

Dooney developed a set of best practices based on what some of the most successful sales representatives were doing. Among these best practices was a schedule for how often merchandisers should visit individual stores to ensure that displays were properly set up and to check on inventory for reordering, based on the volume of Dooney sales each store generated (the greater the volume, the more frequent the visits). Under these best practices, Dooney paid Moholt a bonus to be given to the merchandisers he employed if they fulfilled the standards established by Dooney.

Nordstrom has long been one of Dooney's most important customers because of the influence it exerts in fashion retailing. Nordstrom was one of the major Dooney accounts that Moholt serviced. As with several larger national and regional customers of Dooney's, Nordstrom was a " shared account" that was serviced by more than one person affiliated with Dooney. Moholt was responsible for the Nordstrom " doors" in the Pacific Northwest and Hawaii. Bill Tripodi, also classified by Dooney as an independent contractor, was the sales representative responsible for the Nordstrom " doors" in California and Arizona. During Moholt's tenure, Dooney generally paid Moholt a five percent commission on net shipments to the Nordstrom " doors" located in his territory, and Dooney paid Tripodi a five percent commission on net shipments to the Nordstrom " doors" in Tripodi's territory.

The Nordstrom Rack, Inc. (" Nordstrom Rack" or the " Rack" ) is Nordstrom's " discount arm." For many years, Nordstrom urged Dooney to sell to the Nordstrom Rack. And for many years, Dooney resisted because it was more profitable for Dooney to sell its discounted merchandise through Dooney's own retail outlet stores. In 2009, however, Dooney began selling to the Nordstrom Rack. The Nordstrom Rack became a " house account" for one of Dooney's employees. That employee asked Moholt to provide support service for shipments made to the Nordstrom Rack stores located in Moholt's territory, which Moholt did for three selling seasons, from spring 2009 to fall 2010. In this lawsuit, Moholt seeks one half of his regular commission rate, or two and one-half percent, on net shipments that Dooney made to the Nordstrom Rack in Moholt's territory during this period. This amount totals $33,130.68. Moholt's first month of claimed " Nordstrom Rack commissions" is February 2009, and Moholt seeks $2,147.60 for net shipments by Dooney to the Nordstrom Rack made that month, based on a commission rate of two and one-half percent.

During Moholt's tenure, Dooney sold to discounters Marshalls, T.J. Maxx, and Stein Mart, in addition to the Nordstrom Rack. In most instances, Dooney did not pay commissions on sales to discounters, but it did pay a reduced commission of two and one-half percent to Bob Goodwyn, also classified by Dooney as an independent contractor, on sales made to Stein Mart for a period of time after Goodwyn brought in the Stein Mart account.

No one at Dooney ever told Moholt that he would be paid commissions at two and one-half percent, or at any other rate, on shipments to the Nordstrom Rack in his territory. Moholt says that he did not

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know that he would not receive Nordstrom Rack-related commissions until the second month of his servicing the Nordstrom Rack, March 2009. Moholt continued to service the Nordstrom Rack account, however, because he believed it was a condition of his ability to retain the Nordstrom account, for which he did receive commissions.

After Dooney ended its relationship with Moholt in 2012, Bill Tripodi became the Nordstrom account independent sales representative for the entire United States. In spring 2013, Dooney restructured its system of paying Nordstrom commissions. As part of this restructuring, Dooney began paying Tripodi a commission of one percent on net shipments to the Nordstrom Rack nationally. Bob Goodwyn and another Dooney sales representative also began to receive commissions on sales to the Nordstrom Rack. Dooney made this change retroactive to January 1, 2013.

Moholt contends that he should have been classified as an employee for the period January 1, 2007 through March 2012.[2] Based on this contention, Moholt seeks $198,828 in " expense" reimbursements. The parties agree for purposes of summary judgment that, if Moholt had been an employee, he would have been reimbursed certain expenses or received certain benefits. He also would have been paid a lower sales commission by Dooney.


A. Moholt's First Claim for Relief (Unpaid Wages)

1. Wage Claim -- Part One (" Additional Nordstrom Commissions" )

Moholt titles his First Claim for Relief " Unpaid Wages." Moholt then divides that claim into two parts. For his " Wage Claim -- Part One," Moholt contends that he is entitled to be paid commissions for sales activities involving certain shipments of Dooney product to Nordstrom, Inc. during the period January 2007 through March 2012. Although Dooney paid Moholt commissions for sales activities related to many shipments of Dooney product to Nordstrom, Inc. during this period, Moholt contends that he was entitled to certain additional Nordstrom commissions. The parties refer to this contention as Moholt's claim for " Additional Nordstrom Commissions." After Dooney moved for summary judgment, Moholt conceded that summary judgment is appropriate against his claim for Additional Nordstrom Commissions. ...

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