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GRACE A. HINSDALE and RONALD R. SMITH Plaintiffs
vs.
CITY OF LIBERAL KANSAS and LIBERAL HOUSING AUTHORITY Defendants.
 
Case:
CIVIL ACTION NO. 93-1201-FGT
 
Location:
UNITED STATES DISTRICT COURT FOR THE DISTRICT OF KANSAS
 
Date:
June 5, 1997, Decided
 
Attorneys:
For GRACE A HINSDALE RONALD R SMITH plaintiffs: Ray E. Simmons Wichita KS.
For LIBERAL KS CITY OF defendant: Rex A. Sharp Sharp McQueen McKinley Dreiling & Morain Liberal KS. For LIBERAL HOUSING AUTHORITY THE defendant: Alan L. Rupe Morrison & Hecker L.L.P. Wichita KS.
 
Court:
Frank G. Theis, United States District Court
 
Author:
The Hon. Justice Frank G. Theis
 

This matter is before Court on the following motions for summary judgment filed by the City of Liberal: motion for summary judgment (Doc. 199); motion for summary judgment against plaintiff Hinsdale (Doc. 201); motion for partial summary judgment on the Contract Work Standards Act claim (Doc. 202); and motion for partial summary judgment on breach of employment contract (Doc. 204). Plaintiffs are two former employees of the Liberal Housing Authority who seek to recover overtime compensation under the Fair Labor Standards Act of 1938 (FLSA) 29 U.S.C. SEC. 201 et seq. Plaintiffs also claim entitlement to overtime compensation on several other bases.

In a previous memorandum and order Court granted the City of Liberal's motion for partial summary judgment on the FLSA claims brought by both plaintiffs. Doc. 232. In the presently pending motions the City of Liberal seeks summary judgment on the plaintiffs' remaining claims.

Court is familiar with the standards governing the consideration of a motion for summary judgment. The Federal Rules of Civil Procedure provide that summary judgment is appropriate when the documentary evidence filed with the motion "show[s] that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(c). A principal purpose "of the summary judgment rule is to isolate and dispose of factually unsupported claims or defenses . . . ." Celotex Corp. v. Catrett 477 U.S. 317 323-24 91 L. Ed. 2d 265 106 S. Ct. 2548 (1986). Court's inquiry is to determine "whether there is the need for a trial -- whether in other words there are any genuine factual issues that properly can be resolved only by a finder of fact because they may reasonably be resolved in favor of either party." Anderson v. Liberty Lobby Inc. 477 U.S. 242 250 91 L. Ed. 2d 202 106 S. Ct. 2505 (1986).

The burden at the summary judgment stage is similar to the burden of proof at trial. Court must enter summary judgment "after adequate time for discovery and upon motion against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case and on which that party will bear the burden of proof at trial." Celotex 477 U.S. at 322. The moving party bears the initial burden of demonstrating the absence of a genuine issue of material fact on its claim. Rule 56 however imposes no requirement on the moving party to "support its motion with affidavits or other similar materials negating the opponent's claim." Id. at 323 (emphasis in original). Once the moving party has properly supported its motion for summary judgment the nonmoving party may not rest upon mere allegations or denials contained in the nonmoving party's pleadings but must set forth specific facts showing a genuine issue for trial relying upon the types of evidentiary materials contemplated by Rule 56. Fed. R. Civ. P. 56(e). Each party must demonstrate to Court the existence of contested facts on each claim it will have to prove at trial. Celotex 477 U.S. at 324. Court reviews the evidence on summary judgment under the substantive law and based on the evidentiary burden the party will face at trial on the particular claim. Anderson 477 U.S. at 254.

At the summary judgment stage the Court's function is not to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial. Anderson 477 U.S. at 249. Credibility determinations the weighing of the evidence and the drawing of legitimate inferences from the facts are functions of the finder of fact not the functions of the Court when ruling on a motion for summary judgment. The evidence of the nonmoving party is to be believed. All justifiable inferences are to be drawn in favor of the nonmovant. Id. at 255.

The plaintiffs claim overtime compensation pursuant to the following theories: (1) under the Fair Labor Standards Act (FLSA) 29 U.S.C. SEC. 201 et seq.; (2) under the Contract Work Hours and Safety Standards Act 40 U.S.C. SEC.327 et seq. and Part 2 of the Consolidated Annual Contributions Contract between the Liberal Housing Authority and the Department of Housing and Urban Development; and (3) under express or implied employment contract and the Kansas Wage Payment Act K.S.A. 44-313 et seq. Pretrial Order Doc. 198 pp. 12-16 (plaintiffs' contentions).

The parties have stipulated to the following facts in the pretrial order Doc. 198.

Plaintiff Grace A. Hinsdale is a resident of the State of Kansas.

Plaintiff Ronald R. Smith is a resident of the State of Oklahoma; at the time of the filing of this action Smith was a resident of Texas.

Defendant City of Liberal Kansas is a municipal corporation pursuant to the laws of the State of Kansas. It may sue and be sued under the provisions of Art. XII SEC. 5 of the Constitution of the State of Kansas and K.S.A. SEC. 12-101 et seq.

Defendant Liberal Housing Authority (LHA) is empowered to sue and be sued under Kansas law by K.S.A. SEC. 17-2340.

The Department of Housing and Urban Development (HUD) is an executive department of the United States pursuant to 42 U.S.C. SEC. 3532.

Plaintiff Hinsdale worked for the Liberal Housing Authority from September 1987 to December 1992.

Plaintiff Smith worked for the LHA from November 1988 to September 1992.

The LHA provides federally subsidized low-income housing pursuant to a Consolidated Annual Contributions Contract and amendments thereto between the Liberal Housing Authority and HUD Contract No.: KC-1027 Project File: Kans-72-1.

The LHA Board hired plaintiff Hinsdale as the Executive Director of the Liberal Housing Authority.

Hinsdale as Executive Director of the Liberal Housing Authority hired plaintiff Smith with the approval of the LHA Board.

The LHA Board terminated Hinsdale's employment.

The City of Liberal did not participate in interviewing evaluating or offering employment to either of the plaintiffs.

The City of Liberal did not participate in any way in the employment separations between either of the plaintiffs and the LHA.

The LHA Board hires the Executive Director for the Liberal Housing Authority who in turn has the authority to hire the other employees with the approval of the Board.

The City of Liberal does not participate in the interviewing evaluating or offering employment to or the firing of any of the employees who work at the LHA.

The City of Liberal does not interview applicants conduct pre-employment screenings or perform pre-employment drug testing on any employees or applicants for work at the LHA.

The City of Liberal does not supervise or control LHA employee work schedules or conditions of their employment.

The City of Liberal does not provide any of the following for LHA employees including the plaintiffs:

a. Job training;

b. Instruction on when where how or what to work on;

c. How long to work;

d. Discipline of employees or staff;

e. Office space or office amenities;

f. Wages or salaries;

g. IRS forms of any kind (W2s 1099s or other income reporting forms).

LHA employees do not report day-to-day week-to-week or month-to-month to the City of Liberal.

The City of Liberal does not control or direct in any way the day-to-day functions of the LHA.

The City of Liberal does not determine or set the rate or method of payment of any LHA employee.

The City of Liberal does not provide any funding to the LHA.

The City of Liberal does not pay the salary or wages of any LHA employee.

The LHA maintains its own employment records for its employees and keeps the same confidential.

The LHA is not a budgeted function of the City of Liberal.

The LHA employees do not report or answer to the City Manager of the City of Liberal or to the Liberal City Commission.

The LHA primarily receives funding from HUD or rents paid by tenants of the Liberal Housing Authority.

The City of Liberal does not set guidelines for the day-to-day or annual operations of the LHA.

The LHA was created pursuant to state law by the City of Liberal Ordinance No. 2630.

The LHA hires its own lawyer accountant and insurer.

The LHA does not have authority to and does not expend any City of Liberal public funds.

The Mayor of the City of Liberal with the consent of the City of Liberal's City Commission appoints each of the five members of the LHA Board to a four year term.

Pursuant to KPERS regulations the LHA pays via the City of Liberal to KPERS the employer's contribution to the KPERS retirement program for its employees.

City of Liberal's Motion for Summary Judgment (Doc. 199)

The City of Liberal (City) moves for summary judgment on all claims made by the plaintiffs. The City argues that since plaintiffs were not employees of the City of Liberal their claims against it fail as a matter of law. For the purposes of this motion the following facts are uncontroverted.

The City of Liberal operates under a City Manager plan of government pursuant to K.S.A. 12-1001 et seq. and has for over ten years.

The City Manager for the City of Liberal did not appoint engage or hire (or delegate that authority to anyone) either plaintiff Hinsdale or plaintiff Smith to work for the City of Liberal. *fn1

Except for one occasion alleged by Hinsdale no City Manager ever personally discussed work or jobs with either of the plaintiffs. *fn2

No one from the City ever told or represented to either of the plaintiffs that they were being employed by the City of Liberal to perform any service for the City of Liberal.

City employees were hired for the City of Liberal only by the City Manager.

Neither of the plaintiffs were ever paid by the City of Liberal for any work.

The plaintiffs have set forth the following statement of fact in their response. The State of Kansas has adopted a Municipal Housing Law. On March 2 1971 the governing body of the City of Liberal enacted Ordinance No. 2630 creating a housing authority for the City pursuant to the Municipal Housing Law. The LHA was created as an "agent" of the City. The City expressly authorized the

LHA to hire employees.

The City argues that before it can be held liable on any of the contract or statutory claims made by the plaintiffs the plaintiffs must first demonstrate that they are employees of the City. The City argues that as a matter of law plaintiffs are not City employees.

Plaintiffs argue that the City of Liberal is liable to plaintiffs for any judgment in this action as a "joint employer" under the FLSA and/or under Kansas agency law. In a previous memorandum and order Court ruled that the City of Liberal was not a "joint employer" of the plaintiffs for purposes of the FLSA.

Plaintiffs admit that they were employed by the LHA and not by the City of Liberal. Plaintiffs claim however that the Liberal Housing Authority is the agent of the City of Liberal pursuant to the Municipal Housing Law specifically K.S.A. 17-2340 17-2354.

The City created LHA pursuant to a Kansas statute which uses the word "agent." That statute provides:

Every municipality in addition to other powers conferred by this or any other act shall have power by proper resolution of its governing body to create as an agent of such municipality an authority to be known as the 'housing authority' of the municipality. The municipality may delegate to such authority any or all of the powers conferred on the municipality by this act and may authorize it to employ and executive director technical experts and such other officers agents and employees permanent and temporary as it may require and to delegate to one or more of its agents or employees such powers or duties as the authority may deem proper. Such housing authority shall have the power to sue and be sued.

In any suit action or proceeding involving the validity or enforcement of or relating to any contract of the authority an authority shall be conclusively deemed to have become established and authorized to transact business and exercise its powers hereunder upon proof of the adoption of the resolution herein prescribed. A copy of such resolution duly certified by the clerk shall be admissible in evidence in any suit action or proceeding.

K.S.A. 17-2340 (emphasis added).

In the definitional section "housing authority" is defined as "any agency of a municipality created pursuant to" the municipal housing law. K.S.A. 17-2339(a) (emphasis added). The statute relied upon by plaintiffs to show the existence of an agency relationship also provides that a housing authority has the power to sue and be sued as a separate entity. K.S.A. 17-2340.

In a previous memorandum and order Court assumed without deciding that LHA could be an agent of the City under K.S.A. 17-2340 for purposes of state law. The court now holds that LHA is not an agent of the City pursuant to K.S.A. 17-2340. Plaintiffs place undue emphasis on one word contained in a lengthy statute. Court reads the Municipal Housing Law as a whole as authorizing the establishment of a housing authority as a governmental agency. *fn3

Plaintiffs also rely on K.S.A. 17-2354. That section provides:

An obligee of a municipality shall have the right in addition to all other rights which may be conferred on such obligee subject only to any contractual restrictions binding upon any such obligee:

(a) By mandamus suit action or proceeding at law or in equity to compel said municipality or authority and the commissioners officers agents or employees thereof to perform each and every term provision and covenant contained in any contract of said municipality with or for the benefit of such obligee and to require the carrying out of any or all such covenants and agreements of said municipality and the fulfillment of all duties imposed by this act.

(b) By suit action or proceeding in equity to enjoin any acts or things which may be unlawful or the violation of any of the rights of such obligee of said municipality.

K.S.A. 17-2354. "Obligee" is defined as including: "any bondholder agent or trustee for any bondholder or lessor demising to a municipality property used in connection with a project or any assignee or assignees of such lessor's interest or any part thereof and the federal government when it is a party to any contract with the municipality in respect to a housing project." K.S.A. 17-2339(n). The plaintiffs in the present case are not "obligees" as defined by the Municipal Housing Law and thus derive no rights from K.S.A. 17-2354.

Finally plaintiffs also argue that the City is liable under agency principles. Specifically plaintiffs allege an actual express agency between the City and LHA.

Kansas law defines agency as an express or implied contract in which one party "confides to the other the management of some business to be transacted in the party's name or on the party's account and by which that other assumes to do the business and to render an account of it." Barbara Oil Co. v. Kansas Gas Supply Co. 250 Kan. 438 446 827 P.2d 24 (1992). In other words agency is a contract by which one party delegates to the other the authority to act on his or her behalf. Deere & Co. v. Loy 872 F. Supp. 867 871 (D. Kan. 1994).

Kansas law recognizes two types of agency actual and apparent. The authority of an actual agent may be express or implied. An express agency exists if the principal has delegated authority to the agent by words which expressly authorize the agent to do a delegable act. Mohr v. State Bank of Stanley 241 Kan. 42 45 734 P.2d 1071 (1987); Professional Lens Plan Inc. v. Polaris Leasing Corp. 238 Kan. 384 390 710 P.2d 1297 (1985).

The party asserting an agency relationship carries the burden of establishing its existence with substantial evidence that is clear and convincing. Hartman v. Great Century Ins. Co. 915 F. Supp. 250 257 (D. Kan. 1996); Loy 872 F. Supp. at 871. Clear and convincing refers to the quality of the proof not the quantum. Newell v. Krause 239 Kan. 550 557 722 P.2d 530 (1986). Evidence is clear "if it is certain unambiguous and plain to the understanding." Ortega v. IBP Inc. 255 Kan. 513 528 874 P.2d 1188 (1994). Evidence is convincing "if it is reasonable and persuasive enough to cause the trier of facts to believe it." Id.

The determination of what constitutes agency and whether there is any competent evidence reasonably tending to prove the existence of an agency relationship is a question of law. Barbara Oil Co. 250 Kan. at 446; Professional Lens Plan 238 Kan. at 390. However resolution of conflicting evidence which might establish the existence of agency is for the finder of fact. The weight to be given evidence and resolution of conflicts therein are functions of the trier of fact in determining whether there is an agency relationship. Where the existence of agency is disputed its existence or nonexistence is ordinarily a question of fact for the jury. Barbara Oil Co. 250 Kan. at 446-47.

Plaintiffs' theory of recovery against the City is based upon an actual agency with express authority to employ employees whose contracts of employment are governed by the Fair Labor Standards Act and the Contract Work Hours and Safety Standards Act. Plaintiffs' Response Doc. 223 at pp. 64-66. However plaintiffs have not come forth with sufficient evidence from which the factfinder could find that the City of Liberal expressly authorized the Liberal Housing Authority to act as its agent in the manner alleged by plaintiffs.

Plaintiffs concede that they view the City as the "deep pocket" in this case. Plaintiffs assert they will not be able to collect any judgment rendered against the LHA. The alleged inability of LHA to satisfy a money judgment is beside the point. The matters presented to Court are insufficient to create a jury question on the issue of agency.

There is no evidence of a contract of agency. The City created LHA as a governmental agency pursuant to state statute. There is no evidence that the City gave LHA the authority to act in the City's name. The City did not delegate to LHA the authority to act on the City's behalf.

There are no conflicts in the evidence which must be resolved by the trier of fact. Plaintiffs rely on the Municipal Housing Law as evidence of a common law agency relationship. That statute is insufficient as a matter of law to establish a principal/agent relationship. Accordingly the City's motion for summary judgment shall be granted.

City of Liberal's Motion for Summary Judgment against Grace Hinsdale (Doc. 201) Motion for Partial Summary Judgment on the Contract Work Standards Act Claim (Doc. 202) and Motion for Partial Summary Judgment on Breach of Employment Contract (Doc. 204)

As plaintiffs concede in their brief the only two bases for holding the City of Liberal liable are: (1) joint employer status under the Fair Labor Standards Act; or (2) the existence of a principal/agent relationship between the City and the Liberal Housing Authority. Court has previously ruled that the City was not liable as a joint employer under the FLSA. Doc. 232. In this memorandum and order Court has ruled that the City is not liable under Kansas agency law principles. Accordingly the City of Liberal is dismissed from this action. The other pending motions for summary judgment or partial summary judgment filed by the City are moot.

IT IS BY THIS COURT THEREFORE ORDERED that defendant City of Liberal's motion for summary judgment (Doc. 199) is hereby granted.

IT IS FURTHER ORDERED that defendant City of Liberal's motion for summary judgment against Grace Hinsdale (Doc. 201) is moot.

IT IS FURTHER ORDERED that defendant City of Liberal's motion for partial summary judgment on the Contract Work Standards Act claim (Doc. 202) is moot.

IT IS FURTHER ORDERED that defendant City of Liberal's motion for partial summary judgment on the breach of employment contract claim (Doc. 204) is moot.

As all claims against the defendant City of Liberal have been dismissed the City of Liberal is hereby dismissed as a party from this action.

Frank G. Theis

United States District Court

 
Notes:

*fn1 The municipal ordinance creating the Liberal Housing Authority in 1971 delegated to the housing authority the authority to hire employees. It is uncontroverted that the Liberal Housing Authority and not the City Manager of the City of Liberal hired the plaintiffs.

*fn2 In 1988 Hinsdale had been directed by the LHA Board to terminate an LHA employee. Hinsdale asserts that she sought advice from City Manager Alan Morris on the procedure and documentation to follow in terminating the employee.

*fn3 Governmental agency is defined as "A subordinate creature of federal state or local government created to carry out a governmental function or to implement a statute or statutes." Black's Law Dictionary 626 (5th ed. 1979).