DENVER (CN) – A Utah company asked a 10th Circuit panel Wednesday to reject a judge’s finding that it is a successor to Paragon Contractors, a company with numerous Department of Labor violations and ties to Mormon sect leader Warren Jeffs.
This case began when the Department of Labor fined Paragon for using 1,400 child laborers on a pecan farm from 2012 to 2013, a fine upheld by the 10th Circuit in 2018. The department also filed for contempt citing a 2007 warning against using child labor.
In May 2015, the Labor Department also fined Warren Jeffs’ brother Bishop Lyle Jeffs, who headed day-to-day operations, and Paragon $1.9 million. The brothers belong to the Fundamental Church of Jesus Christ of Latter-Day Saints, one of the largest splinter groups of the Mormon church formed after its founders were excommunicated for refusing to stop practicing polygamy.
After a federal judge ordered Paragon and its president Brian Jessop to pay the children $200,000 for their work, the company appealed to the 10th Circuit claiming the children were volunteers who picked the pecans for pleasure – not employees who expected to be paid. The court denied this argument in 2018.
Since Par 2 was formed by Paragon’s former employees, performed similar work for similar clients, and at one point shared office space, the lower court judge named it a successor in liability should Paragon fail to pay $3 million in lost wages and penalties – a lineage Par 2 says violates its right to due process.
“We learned about this when we appeared on a motion for contempt, so we argue we were improperly brought into a case that has been pending for x amount of years,” argued attorney Jeffrey Matura, with Scottsdale firm Barrett & Batura, on behalf of Par 2.
While Par 2 is not currently being held liable for Paragon’s actions, Matura worries that unless contested the assumption of successorship may have adverse impacts down the road.
Paragon attorney Rick Sutherland of Salt Lake City firm Jackson Lewis also underscored this point.
“Par 2 intervened at the last minute in an attempt to untangle themselves. The evidentiary hearing was a trial by ambush,” Sutherland said.
Sutherland’s argument prompted Obama-appointed U.S. Circuit Judge Scott Matheson Jr. to question why he was in court if he represents the suspected parent company.
“I’m here on the legal principle of co-mingling,” Sutherland explained.
Despite the two companies’ close working relationship, U.S. Circuit Judge Harris Harts – a George W. Bush appointee – acknowledged Par 2’s concerns.
“Their concern is in having to pay this judgment against Paragon. I think Par 2 has a legitimate concern in having been considered a successor,” Hartz said.
And attorneys representing the Department of Labor did little to ease that concern.
“We wouldn’t argue they’re a successor in every context,” said Erin Mohan from the Office of the Solicitor General. “But we would be able to easily prove they are a successor in the pecan case. We’re also not conceding that there wouldn’t be a proceeding against them in the future.”
But since no property has been seized, Mohan said, Par 2’s due process claim is premature.
“This is all really academic,” agreed U.S. Circuit Judge Carlos Lucero, appointed by Bill Clinton. “It seems to me if Paragon intends to pay its judgment, Par 2 has nothing to worry about it. If tomorrow proceedings are instituted to force Par 2 to pay, then you can raise all these claims in trial court and back up to us,” Lucero said.
The panel did not indicate when it will rule.
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