Lepage Bakeries' parent company challenges 'class action' ruling
Flowers Foods Inc., the owner of Lepage Bakeries in Lewiston, filed an appeal this week seeking to overturn a federal court’s ruling that its North Carolina distributors can file a class-action suit challenging the company’s classification of them as “independent contractors.”
The appeal represents the next stage in a high-stakes court battle over whether its North Carolina drivers are independent contractors or employees — a legal question that could have national implications.
“We intend to vigorously defend our position,” Paul Baltzer, managing director of media relations and HR communications for Flowers Foods, wrote in an email to Mainebiz. “As background, most of Flowers' fresh bakery foods are sold direct to retail and foodservice customers through a network of independent distributors who own their own businesses and have the rights to sell certain brands of our products within their respective territories. Our independent distributors are important business partners. We treat them fairly and do our best to address their concerns. We've had an independent distributor program since the 1980s.”
The March 24 decision by the U.S. District Court for the Western District of North Carolina has been characterized by a Minnesota attorney representing the North Carolina workers as a “significant ruling” that could be applied to Flowers Foods’ independent contractors in other states since the company uses the same distribution model throughout its network of regional bakeries and distribution centers in 36 states across the eastern and southern United States.
Baltzer disputed the opposing lawyer’s assertion that the North Carolina ruling could pave the way for “hundreds of distributors” who deliver Flowers Foods products in other states to file similar claims under state and federal laws on a class-wide basis without having to bear all the costs and risks associated with individual litigation.
“This ruling applies only to distributors contracted with one subsidiary in the state of North Carolina, and it is a procedural ruling only,” he wrote.
In the appeal filed April 7 at the Fourth Circuit U.S. Court of Appeals in Richmond, Va., Flowers Foods’ attorneys criticized the North Carolina ruling, arguing that the judge “relied on scant record evidence, summarily dismissing and failing to rigorously analyze the legal significance of the extensive record evidence establishing significant differences in actual practice.”
“Even taking into account the District Court’s considerable discretion, its order granting class certification contains substantial weaknesses, is manifestly erroneous and constitutes an abuse of discretion,” the company’s petition states. “Prompt appeal is appropriate given the nature and status of the underlying litigation … and would resolve fundamental, unsettled issues of law.”
In their closing arguments seeking approval of their appeal request, Flowers Foods’ attorneys acknowledge the high stakes if the North Carolina case is allowed to proceed as a class-action lawsuit for a little more than 200 distributors the company now classifies as independent contractors instead of as employees.
“Class action lawsuits challenging independent contractor status are on the rise,” the lawyers wrote. “[T]he potential exposure to defendants if classes are certified is enormous, creating incentives to settle even non-meritorious cases, particularly given the uncertain legal standard. Resolving this unsettled legal question is thus of significant importance and would resolve an unsettled question of law.”
Shawn J. Wanta, an attorney and partner with Minneapolis-based Baillon Thome Jozwiak & Wanta LLP, which successfully represented the North Carolina workers in their effort to gain legal standing as a class, reiterated his earlier remarks that the case could pave the way for similar claims by Flowers Foods’ distributors being filed in other states under state and federal laws on a class-wide basis without having to bear all the costs and risks associated with individual litigation.
“It is instructive as to what other courts may do if faced with the same legal questions,” Wanta wrote in an email to Mainebiz on Wednesday afternoon.
Flowers Foods (NYSE: FLO), based in Thomasville, Ga., reported $3.75 billion in sales in 2014. In May 2012 it purchased Lepage Bakeries for $370 million in cash and stock, noting in a company press release that Lepage had 550 “experienced team members” and would help expand Flowers Foods’ market from 64% to 70% of the U.S. population.
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