Cora Bucklin et al v. American Zurich Insurance Company
Filing
155
ORDER GRANTING DEFENDANT'S MOTIONS FOR SUMMARY JUDGMENT 66 68 AND DENYING MOTION FOR CLASS CERTIFICATION 128 ; AND JUDGMENT by Judge Stephen V. Wilson, For the foregoing reasons, Defendants motions for summary judgment are GRANTED, and Plai ntiffs' subsequently filed motion for class certification is DENIED as MOOT. IT IS ORDERED AND ADJUDGED thatBurton and Bucklin take nothing, that the actions by Burton and Bucklinagainst Defendant Zurich be dismissed on the merits with prejudice and that Zurich recover its costs. 128 (MD JS-6, Case Terminated). (pj)
1
2
3
4
JS-6
5
6
7
UNITED STATES DISTRICT COURT
8
CENTRAL DISTRICT OF CALIFORNIA
9
10
11
12
CORA BUCKLIN and VIRGINIA L.
BURTON, individuals, on behalf of
themselves, and on behalf of all
persons similarly situated,
13
Plaintiffs,
14
15
16
v.
AMERICAN ZURICH INSURANCE
COMPANY, and Illinois
Corporation,
17
Defendant.
18
19
I.
22
23
24
25
26
27
28
2:11-CV-05519-SVW-MRW
ORDER GRANTING DEFENDANT'S
MOTIONS FOR SUMMARY JUDGMENT
[66][68] AND DENYING MOTION FOR
CLASS CERTIFICATION [128]; AND
JUDGMENT
INTRODUCTION
On March 21, 2011, Plaintiffs Cora Bucklin and Virginia Burton
20
21
)
)
)
)
)
)
)
)
)
)
)
)
)
)
)
(collectively, “Plaintiffs”) filed this putative class action against
Defendant Zurich American Insurance Company (“Defendant”),1 alleging
wage and hour violations under the California Labor Code and the
California Business & Professions Code.
Plaintiffs’ Second Amended
Complaint alleges four causes of action, all of which stem from
Defendant’s alleged failure to pay overtime and to provide meal and
rest breaks: (1) unfair competition in violation of Cal. Bus. & Prof.
1
Defendant was erroneously named in the Complaint as “American Zurich
Insurance Company.” (See Dkt. 66 at 1).
1
Code § 17200 et seq.; (2) failure to pay overtime compensation in
2
violation of Cal. Lab. Code §§ 510, 1194, 1198 et seq.; (3) failure to
3
provide accurate itemized statements in violation of Cal. Lab. Code §
4
226; and (4) recovery of penalties under the Private Attorney General
5
Act, Cal. Lab. Code § 2698 et seq.
6
(Dkt. 62).
Now before the Court are Defendant’s motions for summary judgment
7
against each of the named Plaintiffs based on the affirmative defense
8
that Plaintiffs were not entitled to overtime compensation or to meal
9
and rest breaks because they were properly classified as exempt
10
administrative employees.
11
class certification.
12
motions are GRANTED and Plaintiffs' motion for class certification is
13
DENIED as MOOT.
14
II.
15
Plaintiffs subsequently filed a motion for
For the reasons set forth below, Defendant’s
FACTUAL BACKGROUND
Defendant underwrites and adjusts insurance policies that cover
16
workers’ compensation.
17
Defendant’s workers’ compensation division, handling claims filed by
18
injured employees of Defendant’s clients.
19
Plaintiffs both had the title of “Claims Specialist III,” and both were
20
classified as exempt from receiving overtime wages.
21
93; Bucklin AMF ¶¶ 1, 112).2
22
April 2010, earning an annual salary ranging from $71,972 to $74,491,
23
plus annual bonuses.
Plaintiffs worked as claims adjusters in
(Burton AMF ¶¶ 89-90).
(Burton AMF ¶¶ 1,
Burton worked from November 2002 until
(Burton AMF ¶¶ 1-2).
Bucklin worked from April
24
25
26
27
28
2
For ease, “Burton SUF” and “Burton AMF” refer to Defendant’s
statement of uncontroverted facts and Burton’s statement of
additional material facts, respectively, submitted in relation to the
summary judgment motion against Burton. Meanwhile, “Bucklin SUF” and
“Bucklin AMF” refer to the statements submitted with respect to the
motion against Bucklin.
2
1
2005 until December 2010, earning between $75,762 to $78,413 each year,
2
plus annual bonuses.
3
(Bucklin AMF ¶¶ 1-2).
During their employment, Burton maintained an average case load of
4
approximately 150 to 175 claims, and Bucklin was responsible for
5
between 100 to 171 claims.
6
Plaintiffs handled their claims from inception until resolution.
7
(Id.).
8
contained in Defendant’s “Best Practices” manual and the California
9
Labor Code.
(Burton AMF ¶ 11; Bucklin AMF ¶ 12).
In doing so, Plaintiffs were required to follow the guidelines
(Burton AMF ¶¶ 101, 123-27; Bucklin AMF ¶¶ 120, 142-146;
10
Bhowmik Decl. Exs. 1-4).
11
Plaintiffs to initiate contact with the claimant, the employer, any
12
witnesses, and the medical provider.
13
13).
14
which additional facts to investigate, which other witnesses to
15
interview, and which methods to employ, including whether or not to
16
obtain recorded statements from declarants.
17
AMF ¶ 14; Bhowmik Decl. Exs. 1-4).
18
Plaintiffs assessed witnesses’ credibility and resolved conflicts in
19
the evidence, including medical opinions.
20
AMF ¶ 15).
21
For example, the Best Practices instructed
(Burton AMF ¶ 12; Bucklin AMF ¶
At the same time, Plaintiffs also made their own decisions about
(Burton AMF ¶ 13; Bucklin
In addition, it is undisputed that
(Burton AMF ¶ 14; Bucklin
Based on the facts discovered in the investigation, Plaintiffs
22
determined whether the claim was covered and set reserves estimating
23
the probable payout on the claim.
24
¶¶ 21, 27).
25
regarding the claim required the reserves to be adjusted.
26
¶ 20; Bucklin AMF ¶ 28).
27
account a variety of factors, including the length of temporary
(Burton AMF ¶¶ 15, 19; Bucklin AMF
Plaintiffs also determined whether new developments
(Burton AMF
When setting reserves, Plaintiffs took into
28
3
1
disability, the likelihood of permanent disability, and how disputes
2
about these issues would likely be resolved in settlement or at trial.
3
(Burton AMF ¶ 21; Bucklin AMF ¶ 29).
4
provided a range for the likely cost of treatment and length of
5
disability, Plaintiffs evaluated medical reports and other evidence to
6
select the appropriate figure within that range, or to determine
7
whether adjustments were necessary.
8
¶¶ 30-33).
9
Although certain resources
(Burton AMF ¶¶ 22-25; Bucklin AMF
For each claim, Plaintiffs developed a “plan of action” for moving
10
the claim toward resolution.
11
the case, identified objectives for resolving the claim and steps to
12
achieve them – including identifying the issues in the case and the
13
relevant time frames – and where appropriate, litigation strategies.
14
(Burton AMF ¶¶ 42-44; Bucklin AMF ¶ 60-62; Bhowmik Decl. Exs. 1-4).
15
is undisputed that each plan was developed by Plaintiffs without prior
16
supervisor approval.
17
as each case unfolded, Plaintiffs were responsible for flagging whether
18
any facts suggested the potential for fraud, subrogation, or
19
contribution from a third party.
20
Each plan was tailored to the facts of
(Burton AMF ¶ 45; Bucklin AMF ¶ 64).
It
Meanwhile,
(Burton AMF ¶ 28; Bucklin AMF ¶ 38).
For most of Burton’s employment, she had authority to settle
21
claims up to $75,000, set reserves up to $100,000 per claim, and
22
authorize single payments up to $75,000 and aggregate payments up to
23
$100,000 per claim.
24
Burton authorized on her claims exceeded $500,000 annually, including
25
benefits, settlements, and expenses.
26
her employment, the aggregate reserves on Burton’s claim inventory
27
typically exceeded $7 million.
(Burton AMF ¶ 54).
The aggregate payments that
During the last three years of
(Id. ¶¶ 67-68).
28
4
For most of Bucklin’s
1
employment, she had authority to settle claims up to $80,000, set
2
reserves up to $100,000, and authorize single payments up to $50,000
3
and aggregate payments up to $250,000 per claim.3
4
The aggregate payments that Bucklin authorized on her claims exceeded
5
$500,000 annually, and the aggregate reserves on her claim inventory
6
typically exceeded $10 million.
7
(Bucklin AMF ¶ 78).
(Id. ¶¶ 82-83).
When claims were litigated, Plaintiffs were responsible for
8
determining whether to retain outside counsel and which attorney to
9
hire, developing a litigation strategy with the attorney, and
10
supervising the course of litigation, including deciding whether to
11
conduct discovery and depositions or to seek expert opinions.
12
AMF ¶¶ 38-40; Bucklin AMF ¶ 53-54).
13
settlement and provided advice for conducting negotiations, Plaintiffs
14
determined when to initiate settlement discussions based on several
15
factors, including the evidence, a cost-benefit analysis, the insured
16
client’s priorities, and their caseload.
17
the appropriate settlement amount and conducted the negotiations,
18
either directly with the claimant or through retained counsel.
19
AMF ¶¶ 46-47; Bucklin AMF ¶¶ 66-67; Bhowmik Decl. Exs. 1-4, 14).
20
(Burton
Although Defendant encouraged
Plaintiffs further decided
Plaintiffs were supervised by Claims Managers.
(Burton
(Burton AMF ¶ 130;
21
Bucklin AMF ¶ 149).
22
supervisor approval, including denials of compensability, hiring a
23
private investigator, setting reserves or entering a settlement above
24
their personal authority limits, retaining an attorney when the
25
claimant was unrepresented, and referring claims to Defendant’s
Some of Plaintiffs’ decisions required prior
26
27
28
3
Bucklin’s authority limits decreased significantly – to a range of
$7,500 to $10,000 – during the last month of her employment with
Defendant. (Bucklin SUF ¶ 78).
5
1
subrogation unit.
2
supervisory approval was needed, Plaintiffs would first formulate a
3
rationale to support their analysis, and they would forward their
4
reasoning and recommendation to their respective supervisor.
5
AMF ¶ 58; Bucklin AMF ¶¶ 35, 69).
6
recommendations to hire an investigator approximately half of the time
7
and almost always approved her other recommendations, occasionally
8
requiring minor revisions or additional information before doing so.
9
(Burton AMF ¶ 59).
(Burton SUF ¶¶ 55-56; Bucklin SUF ¶¶ 35, 69).
When
(Burton
Burton’s supervisor approved her
Bucklin’s supervisor almost always approved her
10
recommendations for setting reserves or settling a claim beyond her
11
authority.
12
(1) reviewed their handling of their claims at 12, 60, and 180 day
13
intervals after a claim was assigned; (2) audited two open files and
14
two closed files each quarter for compliance with Defendant’s
15
expectations; and (3) performed other informal, periodic reviews of
16
Plaintiffs’ work, including checking to be sure that required deadlines
17
were met and that required communications were made.
18
64, 66; Burton AMF ¶¶ 141-42; Bucklin SUF ¶¶ 79, 81; Bucklin AMF ¶¶
19
160-61).
(Bucklin AMF ¶¶ 35, 69).
Plaintiffs’ supervisors also
(Burton SUF ¶¶
20
With respect to some claims, Plaintiffs were also required to
21
adhere to special handling instructions imposed by Defendant’s insured
22
clients, including seeking approval before taking certain actions on a
23
claim.
24
37; Bucklin AMF ¶¶ 140-41).
25
would submit recommendations to the insureds along with their
26
reasoning.
27
recommendations.
(Burton SUF ¶ 62; Burton AMF ¶ 121-22; Bucklin SUF ¶ 17-18, 26,
When approval was necessary, Plaintiffs
The insureds almost always accepted Plaintiffs’
(Burton AMF ¶ 63; Bucklin AMF ¶¶ 19, 26, 37).
28
6
1
2
III. LEGAL STANDARD
Rule 56(c) requires summary judgment for the moving party when the
3
evidence, viewed in the light most favorable to the nonmoving party,
4
shows that there is no genuine issue as to any material fact,
5
and that the moving party is entitled to judgment as a matter of law.
6
See Fed. R. Civ. P. 56(c); Tarin v. County of Los Angeles, 123 F.3d
7
1259, 1263 (9th Cir.1997).
8
9
The moving party bears the initial burden of establishing the
absence of a genuine issue of material fact.
See Celotex Corp. v.
10
Catrett, 477 U.S. 317, 323–24 (1986).
11
summary judgment would bear the burden of proof at trial, it must come
12
forward with evidence which would entitle it to a directed verdict if
13
the evidence went uncontroverted at trial.”
14
Co., Inc. v. Darden Rests., Inc., 213 F.3d 474, 480 (9th Cir. 2000)
15
(internal quotations and citations omitted).
16
party does not bear the burden of proof, it can satisfy its Rule 56(c)
17
burden by “‘showing’ – that is, pointing out to the district court –
18
that there is an absence of evidence to support the nonmoving party’s
19
case.”
20
fails to meet its initial burden, summary judgment must be denied and
21
the court need not consider the nonmoving party’s evidence.
22
Adickes v. S.H. Kress & Co., 398 U.S. 144, 159–60 (1970).
23
Celotex, 477 U.S. at 325.
“When the party moving for
C.A.R. Transp. Brokerage
However, if the moving
Either way, if the moving party
See
If the moving party meets its initial burden, Rule 56(e) requires
24
the nonmoving party to go beyond the pleadings and identify specific
25
facts – by affidavits or as otherwise provided in the rule – that show
26
a genuine issue for trial.
27
U.S. 242, 248 (1986).
See Anderson v. Liberty Lobby, Inc., 477
An issue is genuine only “if the evidence is
28
7
1
such that a reasonable jury could return a verdict for the nonmoving
2
party.”
3
data cannot defeat summary judgment.”
4
Corp., 331 F.3d 1074, 1078 (9th Cir. 2003).
5
has “refused to find a genuine issue where the only evidence presented
6
is uncorroborated and self-serving testimony.”
7
Island Air, Inc., 281 F.3d 1054, 1061 (9th Cir. 2002) (internal
8
quotation marks omitted).
9
IV.
10
Id. at 248.
“Conclusory allegations unsupported by factual
Rivera v. Nat’l R.R. Passenger
Thus, the Ninth Circuit
Villiarimo v. Aloha
DISCUSSION
The parties agree that Plaintiffs’ claims must fail if Plaintiffs
11
were exempt from the overtime and break requirements under California
12
law.
13
burden of proving Plaintiffs were properly classified as exempt
14
workers.
15
1999).
16
Defendant has met this burden and is entitled to summary judgment.
(See Burton Opp. at 22; Bucklin Opp. at 22).
Defendant bears the
Ramirez v. Yosemite Water Co., Inc., 978 P.2d 2, 8 (Cal.
For the reasons set forth below, the Court concludes that
17
A.
18
California Industrial Welfare Commission (“IWC”) Wage Order 4-2001
19
applied at all relevant times to Plaintiffs’ employment with Defendant.
Administrative Exemption4
20
21
22
23
24
25
26
27
28
4
In considering whether Plaintiffs are administratively exempt, the
Court rejects the testimony of Plaintiffs’ retained expert, David
Pilcher, for two reasons. First, Plaintiffs did not disclose Pilcher
pursuant to Rule 26. (Decker Supp. Decl. ¶ 3). “If a party fails to
provide information or identify a witness as required by Rule 26(a)
or (e), the party is not allowed to use that information or witness
to supply evidence on a motion, at a hearing, or at a trial, unless
the failure was substantially justified or harmless.” Fed. R. Civ.
P. 37. Plaintiffs have not explained their failure to disclose
Pilcher, and their failure has prejudiced Defendants, who have not
been able to depose Pilcher. Second, Pilcher’s declaration is not
signed under penalty of perjury. Therefore, it is ineligible for
consideration pursuant to Fed. R. Civ. P. 56(e).
8
1
See California Wage Order 4-2001, codified as 8 Cal. Code Regs.
2
§ 11040; Harris v. Super. Ct. (Harris I), 266 P.3d 953, 956 n.1 (Cal.
3
2011) (analyzing exempt treatment of claims adjusters employed after
4
October 1, 2000 under Wage Order 4-2001).5
5
“persons employed in administrative . . . capacities” exempt from
6
California’s overtime and meal and rest period requirements.
7
Code Regs. §§ 11040.1.(A)(2), 11040.3, 11040.11, 11040.12.
8
9
Wage Order 4-2001 made
8 Cal.
Employees fall within the administrative exemption from these laws
if: (1) their duties and responsibilities involve the performance of
10
office or non-manual work “directly related” to the management policies
11
or general business operations of their employer or their employer’s
12
customers; (2) they “customarily and regularly exercise discretion and
13
independent judgment;” (3) they “perform under only general supervision
14
work along specialized or technical lines requiring special training,
15
experience, or knowledge;” (4) they are “primarily engaged” in duties
16
meeting the test of exemption; and (5) they earn a monthly salary at
17
least two times the state minimum wage for full-time employment.
18
Cal. Code Regs. § 11040.1.(A)(2).
19
exemption extends to “all work that is directly and closely related to
20
exempt work and work which is properly viewed as a means for carrying
21
out exempt functions.”
8
Further, the administrative
Id. § 1.(A)(2)(f).
22
Additionally, Wage Order 4-2001 states that “[t]he activities
23
constituting exempt work and non-exempt work shall be construed in the
24
same manner as such terms are construed in the following regulations
25
26
27
28
5
California Labor Code § 510 requires that employees be paid
overtime for any work in excess of eight hours per day or in excess
of forty hours in one week. Section 515 of the Labor Code authorizes
the Industrial Welfare Commission (“IWC”) to establish exemptions
from this overtime requirement for certain employees.
9
1
under the Fair Labor Standards Act effective as of the date of this
2
order:
3
541.215.”
4
the [labor] statute is understood in light of the wage order, the wage
5
order is construed in light of the incorporated federal regulations.”
6
Harris I, 266 P.3d at 958.6
7
plaintiffs’ work as claims adjusters is encompassed” by the
8
administrative exemption as construed in accordance with the relevant
9
statute, wage orders, and federal regulations.
10
29 C.F.R. Sections 541.201-205, 541.207-208, 541.210, and
Id.
In other words, in applying Wage Order 4–2001, “just as
Thus, the “precise question here is whether
Id. at 958.
Here, Plaintiffs do not dispute that their duties involved office
11
or non-manual work, 8 Cal. Code Regs. § 11040.1.(A)(2)(a)(I), or that
12
they earned more than twice the state minimum wage for full time
13
employment, id. § 11040.1.(A)(2)(g).
14
4).
15
administrative exemption.
16
element, whether Plaintiffs’ work was “directly related” to the
17
management policies or general business operations of Defendant.
(Burton AMF ¶ 4; Bucklin AMF ¶
Rather, the dispute centers around the remaining elements of the
18
1.
The Court therefore turns to the first
“Directly Related” Requirement
19
In Harris I, the California Supreme Court clarified that the
20
phrase “directly related” was defined by the incorporated federal
21
regulation located at 29 C.F.R. § 541.205 (2000).7
To be “directly
22
6
23
24
25
26
27
28
With respect to the Wage Order 4-2001, the IWC separately issued a
statement indicating that it “deems only those federal regulations
specifically cited in its wage orders, and in effect at the time of
promulgation of these wage orders, to apply in defining exempt duties
under California law.” Harris I, 266 P.3d at 180 (emphasis added).
7
Title 29 C.F.R. § 541.205 (2000) states, in pertinent part:
(a)
The phrase “directly related to management policies or
general business operations of his employer or his
employer’s customers” describes those types of activities
10
1
related” to management policies or general business operations, the
2
court explained, an employee’s work must be both “qualitatively
3
administrative” and “quantitatively . . . of substantial importance to
4
the management or operations of the business.”
5
959.
6
“courts must consider the particular facts before them and apply the
7
language of the statutes and wage orders at issue.”
8
this in mind, the Court examines the qualitative and quantitative
9
factors separately below.
Harris I, 266 P.3d at
The administrative exemption inquiry is fact-specific, and thus
Id. at 965.
10
11
relating to the administrative operations of a business as
distinguished from “production” or, in a retail or service
establishment, “sales” work. In addition to describing the
types of activities, the phrase limits the exemption to
persons who perform work of substantial importance to the
management or operation of the business of his employer or
his employer's customers.
12
13
14
15
16
(b)
The administrative operations of the business include the
work performed by so-called white-collar employees engaged
in “servicing” a business as, for, example, advising the
management, planning, negotiating, representing the
company, purchasing, promoting sales, and business research
and control. An employee performing such work is engaged in
activities relating to the administrative operations of the
business notwithstanding that he is employed as an
administrative assistant to an executive in the production
department of the business.
(c)
As used to describe work of substantial importance to the
management or operation of the business, the phrase
“directly related to management policies or general
business operations” is not limited to persons who
participate in the formulation of management policies or in
the operation of the business as a whole. Employees whose
work is “directly related” to management policies or to
general business operations include those work affects
policy or whose responsibility it is to execute or carry it
out. The phrase also includes a wide variety of persons who
either carry out major assignments in conducting the
operations of the business, or whose work affects business
operations to a substantial degree, even though their
assignments are tasks related to the operation of a
particular segment of the business.
17
18
19
20
21
22
23
24
25
26
27
28
11
With
1
i.
Qualitative Component
2
The qualitative prong asks whether an employee’s duties constitute
3
“those types of activities relating to the administrative operations of
4
a business as distinguished from ‘production’ or, in a retail or
5
service establishment, ‘sales’ work.”
6
“administrative operations of a business” may “include work done by
7
‘white collar’ employees engaged in servicing a business.
8
servicing may include, as potentially relevant here, advising
9
management, planning, negotiating, and representing the company.”
10
11
29 C.F.R. § 541.205(a).
The
Such
Harris I, 266 P.3d at 960 (citing 29 C.F.R. § 205(b) (2000)).
Several courts have held that the duties of claims adjusters such
12
as Plaintiffs constitute “servicing” a business because they involve
13
evaluating claims and representing Defendant in negotiating and
14
settling claims.
15
1040, 1047 (C.D. Cal. 2002), the court reasoned that “an employee who
16
negotiates with clients and settles damage claims on behalf of an
17
employer engages in duties consistent with the servicing of a business”
18
under 29 C.F.R. 541.205(b) (2000).
19
adjuster met the qualitative test because she (1) “regularly and
20
continually represented [the insurer] during negotiations with
21
attorneys and claimants,” (2) “had absolute authority to settle within
22
her limits, which included approximately ten percent of her cases,” and
23
(3) “regularly advised management regarding claims handling and related
24
matters.”
25
Allstate Ins. Co., 465 F.3d 578, 585 (5th Cir. 2006) (holding that
26
under section 541.205(b), claims adjusters’ duties were “administrative
27
in nature” because they “advised the management, represented [the
In Palacio v. Progressive Ins. Co., 244 F. Supp. 2d
Thus, the court held that a claims
Palacio, 244 F. Supp. at 1047.
28
12
See also Cheatham v.
1
insurer], and negotiated on [the insurer’s] behalf”)8; Jastremski v.
2
Safeco Ins. Co., 243 F. Supp. 2d 743, 751 (N.D. Ohio 2003) (reasoning
3
that claims representative’s duties were administrative in nature where
4
he “advised management of his findings on insurance claims, planned how
5
to handle insurance claims, and negotiated binding settlements with
6
claimants while representing the company”).
7
Given the analogous facts in this case, the Court concludes that
8
Plaintiffs’ duties satisfy the qualitative prong of the “directly
9
related” test.
Here, as in the cases above, Plaintiffs “serviced”
10
Defendant’s business by “advising management, planning, negotiating,
11
and representing the company.”
12
uncontroverted facts establish that Plaintiffs (1) planned the
13
processing of their claims; (2) represented Defendant in investigating
14
claims, determining coverage, and setting reserves; (3) managed
15
litigation and negotiated settlements on behalf of Defendant; and (4)
16
where necessary, made recommendations to their supervisors (which
17
frequently were accepted).
18
58-59; Bucklin AMF ¶¶ 13, 35, 53-54, 60-61, 66, 78, 69).
19
foregoing tasks were directly related in a qualitative sense to the
20
administrative operations of Defendant’s business.
Harris I, 266 P.3d at 960.
The
(Burton AMF ¶¶ 12, 38-40, 42-43, 46, 54,
Thus, the
21
Plaintiffs object on three grounds, none of which are availing.
22
First, Plaintiffs protest that Defendant’s reading of “servicing” is
23
overly broad because it would exempt any employee who represents his or
24
her employer.
(Burton Opp. at 16).
As a cautionary example,
25
26
27
28
8
Plaintiffs object that Cheatham is inapposite because it interpreted
the 2004 version of 29 C.F.R. § 541.205(b), instead of the 2000
version at issue here. Cheatham remains instructive, however,
because the text of the 2004 version is identical to the 2000
version.
13
1
Plaintiffs cite Rieve v. Coventry Health Care, Inc., 870 F. Supp. 2d
2
856 (C.D. Cal. 2012), in which the defendant argued that its employee,
3
a nurse case manager, was exempt because she “represented” the company
4
when she interacted with the public.
5
the nurse case manager was not exempt by virtue of the fact that she
6
“attempted to provide her employer with a positive public image.”
7
The court reasoned that “a cashier at a fast food restaurant represents
8
his employer, as a bank teller represents his bank,” yet the
9
regulations are clear that such employees are not exempt.
10
11
Id. at 873.
The court held that
Id.
Id. (citing
29 C.F.R. § 541.205(c)(1) (stating that bank tellers are not exempt)).
Rieve is distinguishable, however, because Plaintiffs’ work is
12
significantly different from the role of a fast food cashier or a bank
13
teller, or even the nurse case manager found to be non-exempt in Rieve.
14
In that case, the court emphasized that even though the nurse could
15
“make recommendations and advise patients, . . . ultimately the
16
decisions about patient care are made by the physician and the claims
17
adjustors. . . . Defendants have presented no evidence that Plaintiff
18
can take affirmative action that would bind anyone other than herself.”
19
870 F. Supp. 2d at 874-75.
20
Plaintiffs had the authority to make certain binding, affirmative
21
decisions on behalf of Defendant without obtaining supervisory
22
approval, including setting reserves and negotiating settlements within
23
their personal authority limits, issuing payments, and making
24
litigation decisions.
25
“servicing” Defendant’s business.
26
27
Here, by contrast, it is undisputed that
Therefore, Plaintiffs genuinely engaged in
Second, Plaintiffs argue that Palacio, Jastremski, and Cheatham
are unworthy of reliance inasmuch as they rely on the argument that
28
14
1
claims adjusters are exempt because they do not “produce” their
2
employers’ product—i.e., insurance policies—but rather provide
3
ancillary services.
4
improperly rely on the “administrative/production dichotomy,” an
5
approach Plaintiffs assert was “condemned” in Harris I.
6
misunderstand Harris I.
7
that the administrative/production worker dichotomy . . . can never be
8
used as an analytical tool.
9
improperly applied the administrative/production worker dichotomy as a
In short, Plaintiffs contend that these cases
Plaintiffs
Harris I expressly stated: “We do not hold
We merely hold that the Court of Appeal
10
dispositive test.”
11
that the above-cited cases employ the administrative/production
12
dichotomy as an analytical tool to evaluate whether the claims
13
adjusters’ work was “directly related” to administrative operations,
14
they did not rely on this logic exclusively.
15
examined whether the adjusters’ duties “serviced” their employers’
16
businesses within the meaning of section 541.205(b).
17
F. Supp. 2d at 1046-47; Jastremski, 243 F. Supp. 2d at 751; Cheatham,
18
465 F.3d at 585.
19
claim.
266 P.3d at 965 (emphasis added).
While it is true
Rather, the cases also
See Palacio, 244
Thus, the cases did not err in the way Plaintiffs
20
Third, Plaintiffs urge the Court to follow the reasoning of the
21
California Court of Appeals in Harris v. Superior Court (Harris II),
22
144 Cal. Rptr. 3d 289, 306 (Ct. App. 2012), which was decided on remand
23
from the California Supreme Court’s decision in Harris I.
24
II, as here, the plaintiffs were insurance claims adjusters who planned
25
the claims process, represented and bound the insurer in negotiating
26
settlements, and advised management about potential subrogation or
27
fraud issues.
Id. at 299.
In Harris
Nonetheless, the state appellate court
28
15
1
concluded that the plaintiffs’ duties did not satisfy the qualitative
2
prong because none of their work was “carried on at the level of
3
management policy or general operations,” but rather was part of the
4
“day-to-day operation of Employers’ business.”
5
rejected the argument that plaintiffs “serviced” the insurer’s business
6
by representing the company, negotiating on its behalf, and planning
7
the claims process.
8
some forms of representation, negotiation, and planning constitute
9
“servicing,” some do not.
Id. at 299-300.
Id. at 298.
The court
The court reasoned that although
It concluded that “[b]ecause Employers make
10
no attempt to specify where the line should be drawn, let alone to show
11
that Adjusters’ work falls on the proper side, their argument fails.”
12
Id. at 301.
13
This Court declines to follow Harris II for three reasons.
First,
14
the Harris II court invented its own test to determine whether the
15
claims adjusters’ activities were administrative in character.
16
Specifically, the court required that claims adjusters’ activities
17
occur “at the level of management policy or general operations” to
18
qualify as administratively exempt.
19
however, is a “judicially created” gloss that was invalidated in Harris
20
I on the ground that it failed to give full effect to the governing
21
federal regulations.
22
teaches, “Federal Regulations former part 541.205(a), (b), and (c) must
23
be read together in order to apply the ‘directly related’ test and
24
properly determine whether the work at issue satisfies the
25
administrative exemption.”
26
that the phrase “directly related to management policies or general
27
business operations of his employer” describes those activities
Id. at 298.
That articulation,
Harris I, 266 P.3d at 963-64.
Id. at 964.
28
16
As Harris I
Section 541.205(a) provides
1
“relating to the administrative operations of a business.”
2
section 541.205(b) explains that the phrase “administrative operations
3
of a business” includes work performed by “employees engaged in
4
‘servicing’ a business as, for example, advising the management,
5
planning, negotiating, [and] representing the company . . . .”
6
in this text suggests that the activities must occur at the level of
7
management or general operations.
8
unmistakably clear that the phrase “‘directly related to management
9
policies or general business operations’ is not limited to persons who
In turn,
Nothing
Indeed, section 541.205(c) makes it
10
participate in the formulation of management policies or in the
11
operation of the business as a whole.”
12
(emphasis added).
13
the contrived requirement in Harris II that an employee must work “at
14
the level of management policy or general operations” to satisfy the
15
qualitative prong of the “directly related” standard.9
29 C.F.R. § 541.205(c)
Read together, these regulations lend no support to
16
Second, and in any event, the decision in Harris II was
17
depublished by the California Supreme Court, which means it has no
18
precedential value among California courts and, perhaps more
19
importantly, suggests that the California Supreme Court would not adopt
20
21
22
23
24
25
26
27
28
9
Harris II attempts to blunt the force of section 541.205(c) by
arguing that it only applies to the quantitative prong of the
“directly related” test – i.e., whether the adjuster’s work is of
“substantial importance” to business operations. Nonetheless, Harris
I instructs that the regulations must “be read as a whole” and as
such, “interpretations are to be avoided if they render part of an
enactment nugatory.” 266 P.3d at 964. Here, adopting Harris II’s
invented “policy level” test would render pointless the caveat in
section 541.205(c) that work need not occur at the policy level to
meet the quantitative prong. Stated differently, if the only
activities that could satisfy the “directly related” test were
limited to those that occur at the policy level, such a reading in
effect would render meaningless the caveat in section 541.205(c).
17
1
its reasoning.
2
all forms of representation, negotiation, and planning constitute
3
“servicing” a business is unhelpful, since defining which types of
4
representation, negotiation, and planning constitute “servicing” is a
5
question of law for the courts to elucidate.10
6
described earlier, the Court concludes that Plaintiffs have satisfied
7
the qualitative prong of the “directly related” test because their
8
activities as claims adjusters serviced the business operations of
9
Defendant.
10
Third, the Harris II court’s facile refrain that not
ii.
11
Here, for the reasons
Quantitative Component
The quantitative prong holds that an administrative employee’s
12
duties are “directly related” to management policies or general
13
business operations only if they are of “substantial importance to the
14
management or operation of the business of his employer or his
15
employer’s customers.”
16
959.
17
formulation of management policies or in the operation of the business
18
as a whole.”
19
(stating that section 541.205(c) governs the quantitative component).
20
Rather, employees whose work is “of substantial importance” to the
29 C.F.R. § 541.205(a); Harris I, 266 P.3d at
To satisfy this test, an employee need not “participate in the
29 C.F.R. 541.205(c); see also Harris I, 266 P.3d at 960
21
22
23
24
25
26
27
28
10
To bolster its point, the Harris II court compares the claims
adjusters to legal secretaries. The court explained that although a
legal secretary might “negotiate” with couriers about filing
documents, or “advise” a partner that a filing should not be
“planned” for a certain day, such work is not “directly related to
management policies or general business operations.” Id. True
enough, but the court’s logic is in fact an application of the
quantitative prong of the “directly related” test, which requires
that the work performed be of “substantial importance” to the
management or operation of the business. Here, the Court concludes
that the adjusters’ work was both administrative in nature and
substantially important to its business operations.
18
1
management or operations of a business also includes those whose “work
2
affects policy or whose responsibility it is to execute or carry it
3
out.
4
carry out major assignments in conducting the operations of the
5
business, or whose work affects business operations to a substantial
6
degree, even though their assignments are tasks related to the
7
operation of a particular segment of the business.”
8
§ 541.205(c).
9
“claim agents and adjusters” as an example of the kind of employee who
10
11
The phrase also includes a wide variety of persons who either
29 C.F.R.
Instructively, the regulation specifically identifies
meets the quantitative component.
29 C.F.R. § 541.205(c)(5).
Here, Plaintiffs’ work substantially affected Defendant’s business
12
with respect to the setting of reserves and settlements.
13
undisputed that Plaintiffs had independent authority to set reserves up
14
to $100,000 per claim, and thus handled claims with aggregate reserves
15
of $7-10 million.
16
Defendant or its insureds were required to set aside funds to satisfy
17
these reserves, which funds were then unavailable for other purposes.
18
(Burton AMF ¶¶ 68-69; Bucklin AMF ¶¶ 83-84).
19
Plaintiffs’ decisions regarding the reserve amount carried consequences
20
for Defendant’s business: setting reserves too low could cause
21
Defendant to violate regulatory requirements, while setting reserves
22
too high could deprive Defendant or its clients of funds needed for
23
other purposes.
24
it is uncontroverted that Plaintiffs had independent authority to
25
settle claims up to $75,000-$80,000 and to authorize single payments up
26
to $50,000-75,000.
27
authorized on their claims—for benefits, expenses, and settlements—
First, it is
(Burton AMF ¶¶ 54, 67-68; Bucklin AMF ¶¶ 78, 82-83).
It is undisputed that
(Burton AMF ¶¶ 70-71; Bucklin AMF ¶¶ 85-86).
Second,
As a result, the aggregate payments that Plaintiffs
28
19
1
exceeded $500,000 annually.
2
83).11
3
authority limits, Plaintiffs furnished recommendations to their
4
supervisors, which were generally accepted.
5
Bucklin AMF ¶¶ 35, 69).
6
Plaintiffs’ contributions affected Defendant’s business to a
7
substantial degree.
8
work “of substantial importance” even when adjusting or settling
9
relatively smaller claims.
(Burton AMF ¶¶ 67-68; Bucklin AMF ¶¶ 82-
Moreover, when a proposed settlement exceeded their personal
(Burton AMF ¶¶ 58-59;
Thus, the uncontroverted facts illustrate that
Indeed, courts have held that adjusters perform
See Roe-Midgett v. CC Servs., Inc., 512
10
F.3d 865, 871 (7th Cir. 2008) (large percentage of claims under
11
$10,000); Jastremski, 243 F. Supp. 2d at 746, 755 (adjuster had
12
authority to determine coverage, set reserves, and settle claims up to
13
$15,000).12
14
*
15
*
*
In sum, the Court concludes that Plaintiffs’ work was “directly
16
related” to the management policies or general business operations of
17
Defendant.
18
necessary to the Court’s analysis, two additional authorities bolster
19
the Court’s conclusion.
20
insurance claims adjusters who perform substantially the same
21
duties as Plaintiffs are administratively exempt.
8 Cal. Code Regs. § 11040(1)(A)(2).
Though not strictly
First, the Ninth Circuit has recognized that
See In re Farmers
22
23
11
24
25
26
27
28
So great was Burton’s influence that one of Defendant’s clients
expressed that it would only maintain its policy with Defendant if
Burton were assigned to handle claims under the policy. (Burton SUF
¶ 73).
12
Accordingly, the fact that Bucklin's payment authority limits
decreased during her last month of employment does not vitiate the
substantial importance of her work, which also included setting
reserves and managing litigation.
20
1
Ins. Exchange, Claims Representatives’ Overtime Pay Litigation, 481
2
F.3d 1119, 1129 (9th Cir. 2007).
3
on a new regulation published by the Department of Labor in April 2004,
4
which states:
5
6
7
8
9
10
In Farmers, the Ninth Circuit relied
Insurance claims adjusters generally meet the duties
requirements for the administrative exemption,
whether they work for an insurance company or other
type of company, if their duties include activities
such
as
interviewing
insureds,
witnesses
and
physicians; inspecting property damage; reviewing
factual information to prepare damage estimates;
evaluating and making recommendations regarding
coverage of claims; determining liability and total
value of a claim; negotiating settlements; and making
recommendations regarding litigation.
11
29 C.F.R. § 541.203(a).
12
court’s factual findings “almost track word for word the language of
13
§ 541.203.”
14
that the plaintiffs’ duties included determining whether the policy
15
covered the loss, recommending a reserve after estimating the
16
employer’s exposure according to state law, interviewing the insured
17
and assessing witness credibility, advising the employer regarding
18
fraud or subrogation, negotiating settlements, seeking authority from
19
supervisors when settlement recommendations exceeded the adjustors’
20
authority (which was granted more than 75 percent of the time), and
21
communicating with litigation counsel.
22
within section 541.203(a), the Ninth Circuit concluded that the claims
23
adjusters were exempt from the FLSA.
24
The Ninth Circuit noted that the district
481 F.3d at 1129.
In particular, the district court found
Id.
Because these duties fell
Id.
Plaintiffs contend that Farmers is inapplicable here because the
25
Court may rely only on those existing federal regulations cited in Wage
26
Order 4-2001, not later revisions such as above-cited section 541.203.
27
On one hand, it is true that “[t]he IWC Statement issued in connection
28
21
1
with Wage Order 4–2001 clearly states that ‘only those federal
2
regulations specifically cited in its wage orders, and in effect at the
3
time of promulgation’ shall be applied in defining exempt duties under
4
California law.”
5
also recognized that Farmers remains “instructive because the
6
regulations enacted by the United States Department of Labor after Wage
7
Order 4-2001 were intended to be consistent with the old regulations.”
8
Id. at 964 n.8.
9
that the new regulation ‘is consistent with existing section
Harris I, 266 P.3d at 965.
Nevertheless, Harris I
Thus, “when the DOL promulgated § 541.203, it said
10
541.205(c)(5).’”
11
22122, 22144 (April 23, 2004)).
12
noted, specifically enumerates claims adjusters as an example of
13
employees who satisfy the quantitative test.
14
and 541.205(c) are congruous, it stands to reason that any employee who
15
meets the criteria of section 541.203 also satisfies the quantitative
16
prong under former section 541.205(c).
17
performed all the duties described in section 541.203, they also
18
satisfy the quantitative component under former section 541.205(c).
19
Farmers, 481 F.3d at 1128 (quoting 69 Fed. Reg.
Section 541.205(c)(5), as already
Because sections 541.203
Thus, because Plaintiffs
Second, even if Farmers does not apply, the Court, in interpreting
20
federal regulations, “must give deference to the Department of Labor’s
21
interpretation of its own regulations through, for example, Opinion
22
Letters.”
23
Administrator of the Wage and Hour Division issued an opinion letter
24
that applied former 29 C.F.R. § 541.205 to conclude that insurance
25
claims adjusters perform work that meets the “directly related” test
26
and is therefore administrative in character.
Farmers, 481 F.3d at 1129.
27
28
22
On November 19, 2002, the
DOL Wage & Hour Div. Op.
1
Ltr. (Nov. 19, 2002), Daily Lab. Rep. (BNA), Nov. 20, 2002.13
2
letter observed that “Wage and Hour has long recognized that claims
3
adjusters typically perform work that is administrative in nature.”
4
Id. at 2.
5
DOL letter substantially mirrored the duties of Plaintiffs:
6
The
Notably, the duties of the claims adjusters at issue in the
They are responsible for planning the processing of
a claim from the beginning to the end, whether it is
easily and quickly resolved or whether it proceeds to
litigation. They represent the company and advise the
management throughout the process of gathering the
evidence, assessing credibility, reviewing the
insurance policy, determining whether there is
coverage, evaluating liability, making a decision on
whether and how much to pay on the claim,
establishing a reserve for the case, making a
recommendation on claims above their established
authority, and collaborating with the company’s
counsel if the case results in litigation. They also
negotiate on behalf of the company with the claimant,
whether the claimant is a policyholder or a
third-party claimant. Because these duties involve
servicing the insurance company in the same manner
that claims adjusters traditionally have done so, as
is reflected in the regulatory reference to claims
adjusters,
we
find
that
their
duties
are
administrative in nature.
7
8
9
10
11
12
13
14
15
16
17
Id.
18
position with respect to claims adjusters has been consistent over the
19
years and that its reasoning was persuasive.
20
Court follows Farmers in concluding that the Opinion Letter is
21
persuasive authority that is entitled to deference.
22
Harris County, 529 U.S. 576, 587 (2000) (“[I]nterpretations . . . such
23
as opinion letters are entitled to respect . . . to the extent that
24
those interpretations have the power to persuade.” (internal quotations
The Ninth Circuit in Farmers acknowledged that the DOL’s foregoing
481 F.3d at 1119.
This
See Christensen v.
25
26
27
28
13
Available at:
http://www.dol.gov/whd/opinion/FLSA/2002/2002_11_19_11_FLSA.pdf. The
FLSA grants the Secretary of Labor broad authority to “define and
delimit” the scope of the exemption for executive, administrative,
and professional employees. 29 U.S.C. § 213(a)(1).
23
1
and citation omitted)).
2
held that the duties of claims adjusters such as Plaintiffs are
3
administrative in nature pursuant to the then-applicable federal
4
regulations, bolsters the Court’s conclusion that Plaintiffs satisfy
5
the “directly related” element of Wage Order 4-2001.
6
2.
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
That the promulgating agency has consistently
Customarily and Regularly Exercised Discretion and
Independent Judgment
The Court next examines whether Plaintiffs customarily and
regularly exercised discretion and independent judgment.
The “exercise
of discretion and independent judgment involves the comparison and the
evaluation of possible courses of conduct and acting or making a
decision after the various possibilities have been considered.”
C.F.R. § 541.207(a) (2000).
29
The phrase “implies that the person has
the authority or power to make an independent choice, free from
immediate direction or supervision and with respect to matters of
significance.”
Id.
In Cheatham, the Fifth Circuit affirmed the district court’s
decision holding that a group of claims adjusters satisfied section
541.207(a) where they “exercised discretion in determining coverage,
conducting investigations, determining liability and assigning
percentages of fault to parties, evaluating bodily injuries,
negotiating a final settlement, setting and adjusting reserves based
upon a preliminary evaluation of the case, investigating issues that
relate to coverage and determining the steps necessary to complete a
coverage investigation, and determining whether coverage should be
approved or denied.”
465 F.3d at 586.
Although the adjusters had to
seek approval in certain situations, the court ruled that their
“recommendations for action” still involved discretion and judgment
24
1
because they were expected to make a recommendation based on their
2
experience and knowledge of the case and to explain their reasons for
3
recommendation.
4
Occidental Life Ins. Co., 325 F.3d 997, 1001 (8th Cir. 2003) (claims
5
adjuster exercised discretion and independent judgment in directing
6
claim investigations, deciding whether to pursue fraudulent claims,
7
approving contestable claims up to $150,000 and inconstestable claims
8
up to $250,000, disbursing payments up to $50,000, and applying
9
contract and insurance law to facts); Roe-Midgett, 512 F.3d at 873-75
Id. at 585-86.
Accord McAllister v. Transamerica
10
(auto claims adjusters exercised discretion and independent judgment in
11
distinguishing covered damage from fraudulent or preexisting damage,
12
deciding what parts to replace instead of repair, negotiating cost of
13
repairs with body shops, and settling claims up to $12,000 personal
14
authority limit without supervision).
15
There is ample uncontroverted evidence that Plaintiffs routinely
16
used their discretion and independent judgment to make choices that
17
impacted “matters of significance.”
18
Plaintiffs decided whether to interview witnesses or gather facts
19
beyond the required minimum, assessed witnesses’ credibility, and
20
resolved conflicts in the evidence.
21
¶¶ 14-15).
22
of the relevant law to the facts of the case.
23
Bucklin AMF ¶ 22).
24
decide whether any facts pointed to the possibility of fraud,
25
subrogation, or contribution from a third party, and if so, whether to
26
refer the claim to Defendant’s fraud, subrogation, or underwriting
27
units.
In investigating claims,
(Burton AMF ¶¶ 13-14; Bucklin AMF
In determining coverage, Plaintiffs applied their knowledge
(Burton AMF ¶ 16;
In addition, for each claim, Plaintiffs had to
(Burton AMF ¶¶ 28-29; Bucklin AMF ¶¶ 38-39).
28
25
Plaintiffs also
1
had independent authority to authorize payments of temporary disability
2
benefits which required verifying the applicant’s income, determining
3
when the claimant become disabled, and obtaining medical evidence that
4
the applicant was fit for work again.
5
51).
6
(Burton AMF ¶ 36; Bucklin AMF ¶
Next, Plaintiffs had unfettered authority to set reserves up to
7
$100,000 based on their estimate of the probable payout on the claim.
8
(Burton AMF ¶ 19; Bucklin AMF ¶ 27).
9
Plaintiffs weighed a number of factors, including cost of treatment,
10
length of temporary disability, likelihood of permanent disability,
11
prior injuries, and how claims would likely unfold at settlement or
12
trial.
13
In calculating reserves,
(Burton AMF ¶ 21; Bucklin AMF ¶ 29).
Approximately 80 percent of the claims Burton handled, and 50-60
14
percent of the claims Bucklin handled were eventually litigated.
15
(Burton AMF ¶ 37; Bucklin AMF ¶ 52).
16
Plaintiffs decided whether to retain an outside attorney and if so
17
whom, developed a litigation strategy with the attorney, and supervised
18
the litigation.
19
whether to conduct discovery, to depose the claimant, to seek expert
20
opinions, to conduct settlement negotiations, or to take a case to
21
trial.
22
of the foregoing actions without first obtaining the Plaintiffs’
23
authorization.
24
Plaintiffs later decided that settlement was appropriate based on their
25
evaluation of the costs and benefits of going forward, they calculated
26
the appropriate settlement amount and negotiated the settlement,
27
provided it was within their respective personal authority limits of
When claims were litigated,
In overseeing the litigation, Plaintiffs decided
Indeed, the attorneys defending these claims could not take any
(Burton AMF ¶¶ 38-40; Bucklin AMF ¶¶ 53-54).
28
26
If
1
$75,000 (Burton) and $80,000 (Bucklin).
2
¶¶ 66-68).
3
Plaintiffs submitted a recommendation explaining their rationale to
4
their supervisors; these recommended settlements were almost always
5
approved.
6
Plaintiffs also independently resolved the claims of lien holders by
7
choosing either to settle the claims, which entailed valuing the claims
8
and determining the settlement amount, or by taking the lien claims to
9
trial.
10
(Burton AMF ¶¶ 46, 54; Bucklin
If the settlement amount exceeded their authority limit,
(Burton AMF ¶¶ 58-59; Bucklin AMF ¶ 69).
Finally,
(Burton AMF ¶¶ 49-51; Bucklin AMF ¶¶ 71-73).
Undeterred by the foregoing evidence, Plaintiffs insist that they
11
did not exercise discretion or independent judgment because (1) their
12
actions were “severely restricted” by procedures set forth in
13
Defendant’s Best Practices, Defendant’s pre-formatted macros, the
14
insured’s special handling instructions, and the California Labor Code;
15
and (2) they were closely supervised to ensure that they were adhering
16
to those standards.
17
Upon closer scrutiny, however, the cited procedures and purported
18
oversight were not so exhaustive as to obviate the need to exercise
19
discretion and judgment regarding significant matters.14
20
i.
21
22
(Burton Opp. at 20-21; Bucklin Opp. at 20-21).
Best Practices
Plaintiffs argue that Defendant’s Best Practices provided “wellestablished techniques and procedures within closely prescribed limits
23
24
25
26
27
28
14
The Court only considers evidence specifically identified in
Plaintiffs’ opposition papers. “A party opposing summary judgment
must direct our attention to specific, triable facts.” S. Cal. Gas
Co. v. City of Santa Ana, 336 F.3d 885, 889 (9th Cir. 2003) (emphasis
added); see also Forsberg v. Pac. Northwest Bell Tel. Co., 840 F.2d
1409, 1418 (9th Cir. 1988) (“The district judge is not required to
comb the record to find some reason to deny a motion for summary
judgment.”).
27
1
that Plaintiff[s] [were] required to use to determine the correct
2
response to any inquiry or set of circumstances.”
3
Bucklin AMF ¶ 126).
4
prescribed” as Plaintiffs portray them to be.
5
the Best Practices set deadlines for when Plaintiffs needed to take
6
action (i.e., make initial contacts, determine coverage, document a
7
compensability decision, set reserves, send Acknowledgment and Closing
8
notices, and refer files to attorneys), these deadlines did not nullify
9
the need for Plaintiffs to exercise discretion and judgment in making
(Burton AMF ¶ 107;
These limits, however, were not as “closely
For example, although
10
these decisions.
11
127, 129, 132-34, 138).
12
the Best Practices manual highlights certain “triggers” for denial of
13
coverage, and requires claims adjusters to notify certain individuals
14
in the event of such denial.
15
131-32).
16
faced with a case not involving a clear-cut denial, Plaintiffs needed
17
to exercise their judgment at every subsequent step, including
18
coverage, reserves, settlement, and litigation.
19
(Burton AMF ¶¶ 108, 110, 113-15, 119; Bucklin AMF ¶¶
In addition, Plaintiffs seize on the fact that
(Burton AMF ¶¶ 111-12; Bucklin AMF ¶¶
However, none of this evidence alters the fact that, when
On the contrary, the Best Practices manual explicitly envisions
20
that Plaintiffs would exercise judgment in completing their tasks.
21
example, the section of “Initial Contacts” states that “[i]f the Claim
22
Professional determines that employee contact is not necessary, the
23
rationale for this decision must be documented in Z-Notes.”
24
Decl, Ex. 3 at 10).
25
advises that the “Claim Professionals need to use their best judgment
26
as to whether a recorded statement is needed from the employer’s
27
supervisor/foreman,” as well as from other witnesses.
For
(Bhowmik
Similarly, the chapter on “Information Gathering”
28
28
(Id. at 12-13).
1
Further, the document states that “[a]t each stage of the case, the
2
Claim Professional must continually reevaluate whether the time is
3
right for settlement of those cases that can and should be settled.”
4
(Id. at 23).
5
that “[t]he Claim Professional has the ultimate responsibility for the
6
maintenance and control of all litigation activities.”
7
In short, the Best Practices manual does not controvert, but rather
8
reinforces the substantial evidence that Plaintiffs exercised
9
discretion and judgment on matters of significance.
10
And when settlement is not an option, the manual provides
ii.
11
(Id. at 24).
Preformatted Macros
As additional evidence that their actions were severely
12
restricted, Plaintiffs argue that they were obligated to answer
13
questions generated by “preformatted macros” during the handling of a
14
claim.
15
several stock questions that guided four specific avenues of
16
Plaintiffs’ investigation: initial contacts (5-6 questions);
17
confirmation of coverage (5 questions)15; benefits notices (4
18
questions)16; and subrogation potential (3 questions)17.
19
¶ 109; Bucklin AMF ¶ 128).
(Burton Opp. at 6; Bucklin Opp. at 6).
These macros generated
(See Burton AMF
20
21
22
23
24
15
The five questions concern whether the date of injury was within
the policy period, the location is listed on the policy, there was a
review of endorsements on the policy, the state listed is covered,
and claimant is verified to be an employee of the insured. (Klicker
Depo. at 16-17).
16
25
26
27
28
The four questions concern the first day of disability, the average
weekly wage, the temporary disability rate, and the date on which the
check would be issued. (Klicker Depo. at 19).
17
The three questions concern whether there is subrogation potential,
who the responsible party is, and whether to make a referral to
subrogation department. (Klicker Depo. at 21).
29
1
As an initial matter, Plaintiffs’ own evidence shows that these
2
macros left significant room for independent judgment.
3
in his deposition, Bucklin’s supervisor, Alberto Rodriguez, described
4
the “initial contacts” macro as “a set of questions or a set of items
5
that they need to cover, but . . . it’s just a guideline.”
6
Decl. Ex. 7 at 36).
7
that is involved, then they [the claims adjusters] need to free form
8
exactly how their investigation goes or added questions that need to be
9
addressed.”
For instance,
(Bhowmik
He explained that “depending on the type of injury
(Id.) (emphasis added).
Further, Burton’s supervisor,
10
Patrick Klicker, attested that the initial contact macro contained only
11
“five to six questions.”
12
the “subrogation” questions, Rodriguez explained that “it’s a couple of
13
questions.
14
referred to the recovery unit?
15
in there for the subrogation folks to look at.”
16
at 43).18
17
macros indicate that Plaintiffs were required to exercise independent
18
judgment and discretion in their investigation—to “free form”—depending
19
on the facts of the specific claim, and to independently evaluate such
20
issues as subrogation potential, for which the preformatted questions
21
were limited in number and lacking in specificity.
22
own evidence shows that these preformatted macros did not overcome the
23
need for Plaintiffs to exercise judgment and discretion.
24
25
(Bhowmik Decl. Ex. 8 at 20).
One, is there a subrogation potential?
With respect to
And, two, was it
And the adjuster will free form notes
(Bhowmik Decl. Ex. 7
Plaintiffs’ supervisors’ discussion of the preformatted
Thus, Plaintiffs’
Moreover, and in any event, the preformatted macros were
essentially glorified checklists that reminded Plaintiff to ascertain
26
27
28
18
Klicker gave a similar description of the subrogation questions.
(Bhowmik Decl. Ex. 8 at 21).
30
1
certain facts with respect to four limited subject areas: initial
2
contacts, confirmation of coverage, disability benefits, and
3
subrogation.
4
not—predetermine how Plaintiffs should analyze the facts to make
5
significant decisions such as determining coverage, setting reserves,
6
negotiating settlement, or supervising litigation.
7
macros did not eliminate the need for judgment and discretion.
8
9
As such, these macros did not—indeed, could
Accordingly, these
The Court’s conclusion comports with the Ninth Circuit’s decision
in Farmers.
There, the court concluded that auto claims adjusters were
10
administratively exempt even though the employer provided them with
11
“written guidelines and training materials to aid them in the claims
12
handling process” that included some mandatory procedures and some
13
recommendations.
14
conclusion even though the claims adjusters used computer software to
15
help estimate damage or loss.
16
“while software exists for estimating the value of totaled vehicles, an
17
automobile damage adjuster ‘must use good judgment’ in deciding whether
18
it is the ‘best tool’ for a total loss.”
19
concluded that “the use of computer software to estimate claims does
20
not eliminate the need for discretion and judgment any more than does
21
resort to other reference works or to the opinions of appraisers and
22
other experts.”
23
(rejecting argument that adjusters “are limited in their ability to
24
negotiate by having to adhere to computer software,” and holding that
25
consulting manuals or guidelines “does not preclude their exercise of
26
discretion and independent judgment”)).
27
Plaintiffs answered a few computer-generated questions in four limited
481 F.3d at 1125.
Further, the court reached this
Id. at 1130-31.
Id.
The court reasoned that
Accordingly, the Court
Id. at 1130-31 (citing Cheatham, 465 F.3d at 585
28
31
Similarly here, the fact that
1
subjects does not alter the fact that Plaintiffs made significant
2
independent decisions in other respects, including determining
3
coverage, setting reserves, negotiating settlement, and stewarding
4
litigation.
5
6
iii. Special Handling Instructions
Plaintiffs next argue that their conduct was constrained by the
7
insured’s special handling instructions.
8
AMF ¶ 140).
9
Defendant’s Quick Reference Guide, which states that “[a]dherence to
(Burton AMF ¶ 121; Bucklin
The only evidence cited in support of this contention is
10
all Special Handling Instructions must be timely, with compliance
11
documented in Z-Notes and/or the file.”
12
This vague assertion is wholly insufficient to controvert the
13
overwhelming evidence that Plaintiffs exercised discretion and judgment
14
in handling claims.
15
needed an insured’s approval before taking action, Plaintiffs would
16
submit reasoned recommendations to the insured, and the insured almost
17
always accepted Plaintiffs’ recommendation.
18
Bucklin AMF ¶¶ 19, 26, 37).
19
20
iv.
(Bhowmik Decl., Ex. 11 at 3).
Moreover, it is undisputed that when Plaintiffs
(Burton AMF ¶¶ 61-63;
Accordingly, this argument fails.
California Labor Code
Plaintiffs contend that the California Labor Code also restricted
21
their activities.
22
deadlines and generally require that a denial of coverage must be based
23
on a medical, legal, or factual basis, none of this evidence
24
controverts the fact that Plaintiffs were required to apply California
25
labor law to the specific facts of each case to resolve their claims.
26
Plaintiffs have presented no evidence that their task of applying the
27
law to the facts was devoid of independent judgment or discretion.
While it is true that the labor laws mandate certain
28
32
1
Therefore, this argument fails.
2
v.
3
Supervision
Finally, Plaintiffs argue that they did not exercise independent
4
judgment because their work was never “free from immediate direction or
5
supervision.”
6
explain, however, that the term “discretion and independent judgment”
7
does not necessarily imply that an employee’s decisions “must have a
8
finality that goes with unlimited authority and a complete absence of
9
review.”
29 C.F.R. § 541.207(a) (2000).
29 C.F.R. § 541.207(e)(1) (2000).
Federal regulations
“The decisions made as a
10
result of the exercise of discretion and independent judgment may
11
consist of recommendations for action rather than the actual taking of
12
action.
13
and that upon occasion the decisions are revised or reversed after
14
review does not mean that the employee is not exercising discretion and
15
independent judgment . . . .”
16
The fact that an employee’s decision may be subject to review
Id.
Although Plaintiffs have adduced evidence that their supervisors
17
exerted some oversight over their tasks, it did not eliminate the
18
substantial independence Plaintiffs otherwise enjoyed.
19
certain decisions required prior supervisory approval, including
20
denials of claims, hiring a private investigator, setting reserves or
21
entering a settlement above personal authority limits, and referring
22
claims to the subrogation or fraud units.
23
135, 145; Bucklin AMF ¶¶ 35, 43, 69, 153, 155, 163).
24
is undisputed that even where such decisions required pre-approval,
25
Plaintiffs were expected to offer a reasoned recommendation for the
26
action, which was accepted the vast majority of the time.
27
¶¶ 58-63; Bucklin AMF ¶¶ 25-26, 35-36, 69).
28
33
To be sure,
(Burton AMF ¶¶ 55-59, 134,
Nonetheless, it
(Burton AMF
These recommendations show
1
that Plaintiffs exercised discretion and independent judgment.
2
C.F.R. §541.207(e)(1).
3
do not negate the myriad other decisions over which Plaintiffs enjoyed
4
absolute authority, including granting coverage, setting reserves or
5
negotiating settlements within their personal authority limits,
6
managing litigation, and resolving lien claims.
7
evidence fails to create a triable issue that Plaintiffs did not
8
exercise independent judgment.
9
29
Moreover, the decisions requiring pre-approval
Thus, the foregoing
Plaintiffs next argue that they lacked independent discretion
10
because their supervisors periodically monitored and audited
11
Plaintiffs’ work.
12
60-day, and 180-day reviews to ensure that Plaintiffs had completed
13
certain tasks in a timely manner and to review Plaintiffs’ answers to
14
the preformatted macro questions.
15
AMF ¶¶ 157-59, 161).
16
ensure that Plaintiffs were completing specific tasks to move the claim
17
process along.
18
Supervisors also generated reports monitoring Plaintiffs’ productivity.
19
(Burton AMF ¶ 147; Bucklin AMF ¶ 165).
20
supervisors were concerned with whether Plaintiffs were following
21
protocols and documenting their reasons for each decision, not with
22
dissecting the substantive decisions made.
23
Klicker Decl. ¶ 17).
24
they “typically limited [their] reviews to no more than 10 minutes,
25
which did not allow [them] to review all of the evidence relevant to
26
each claim or to evaluate whether [they] agreed with all of the
27
determinations [Plaintiffs] had made based on that evidence.”
For instance, supervisors performed 12-day, 30-day,
(Burton AMF ¶¶ 138-40, 143; Bucklin
Additionally, supervisors entered “diaries” to
(Burton AMF ¶¶ 141-42; Bucklin AMF ¶¶ 160-61).
For the most part, however, the
(Rodriguez Decl. ¶ 18;
Indeed, Plaintiffs’ supervisors testified that
28
34
1
(Rodriguez Decl. ¶ 18; Klicker Decl. ¶ 17).
2
supervisors checked the adequacy of the reserves set and any subsequent
3
calculation of benefits, this does not alter the fact that Plaintiffs
4
had to exercise discretion and judgment in calculating those figures in
5
the first place.
6
that Plaintiffs lacked discretion.
7
Further, although the
These periodic reviews, therefore, do not suggest
Moreover, while it is true that supervisors performed quarterly
8
audits to assess how well Plaintiffs adhered to Defendant’s Best
9
Practices, such evidence carries minimal weight for two reasons.
10
First, as already discussed, the Best Practices themselves delegate
11
authority to adjusters to exercise judgment in handling claims.
12
the mere fact that supervisors reviewed whether adjusters were
13
“adhering” to Best Practices does not change the fact that adjusters
14
exercised discretion and judgment.
15
audits were both infrequent and limited in scope.
16
audited four files per quarter— two on open claims and two on closed
17
claims—even though Plaintiffs each carried more than 100 cases at any
18
given time.
19
that any of these audits resulted in a reversal of Plaintiffs’
20
recommendations.
21
triable issue of fact that Plaintiffs did not exercise discretion and
22
independent judgment.
23
24
Thus,
Second, it is undisputed that these
(Burton AMF ¶ 66; Bucklin AMF ¶ 81).
Supervisors only
There is no hint
Therefore, this evidence is insufficient to create a
*
*
*
To summarize, the Court concludes that Plaintiffs exercised
25
discretion and independent judgment in the course of investigating
26
claims, setting reserves, determining coverage, handling temporarily
27
disability payments, resolving liens, identifying potential for fraud
28
35
1
or subrogation, negotiating settlement, and managing litigation.
2
Further, it is undisputed that Plaintiffs spent at least 40 percent of
3
their work week performing the foregoing duties.
4
Bucklin AMF ¶ 87).
5
regularly” threshold, which means “greater than occasional” but may be
6
“less than constant.”
7
Court concludes that there is no genuine dispute of material fact and
8
that Defendant has proven that Plaintiffs “customarily and regularly”
9
exercised discretion and independent judgment within the meaning of
10
Wage Order 4-2001.
11
3.
12
13
(Burton AMF ¶ 74;
This suffices to meet the “customarily and
29 C.F.R. § 541.207(g) (2000).
Accordingly, the
See 8 Cal. Code Regs. § 11040(1)(A)(2)(b).19
Remaining Elements
The two remaining components of the administrative exemption test
are that the employee must perform “under only general supervision work
14
15
19
16
17
18
19
20
21
22
23
24
25
26
27
28
After the close of briefing, Plaintiffs cited a new case to support
its contention that Plaintiffs are not administratively exempt. See
Gentile v. Keenan & Assocs., No. BC471005 (Los Angeles Super. Ct. May
28, 2013). Leaving aside for the moment that Gentile is an
unpublished, non-binding opinion, the case also lacks persuasive
force because it is distinguishable. First, the court erroneously
applied the same invented standard in Harris II that work must
“operate[] on the policy level” to be administrative in character.
(Dkt. 134 at 13). With respect to the quantitative prong, the court
detected a factual dispute about whether plaintiff had any final
authority to settle claims and set reserves. (Id. at 14). Here, by
contrast, it is undisputed that Plaintiffs had absolute authority to
settle claims and set reserves up to their personal authority limits,
and provided reasoned recommendations where the requested amounts
exceeded the limits. Second, the court found a triable issue whether
the claims adjusters exercised discretion and independent judgment,
citing (1) the absence of evidence that they had discretion to
determine coverage, conduct investigations, determine liabilities,
and negotiate and authorize settlements; and (2) the contrary
evidence that the adjusters needed pre-approval to accomplish any of
the foregoing tasks. (Id. at 15). Here, however, the uncontroverted
facts prove that Plaintiffs performed such functions without prior
approval. For all these reasons, Gentile does not compel a different
conclusion in this case.
36
1
along specialized or technical lines requiring special training,
2
experience, or knowledge,” and must be “primarily engaged in duties
3
that meet the test of the exemption.”
4
11040(1)(A)(2)(d), (f).
5
8 Cal. Code Regs. §§
The first element is clearly satisfied.
For the same reasons
6
discussed in Subsection IV(A)(2)(v), Plaintiffs were subject to
7
“general supervision” that did not curtail the need for Plaintiffs to
8
exercise discretion and judgment.
9
that they were subject to overriding supervision, they cannot and do
Moreover, given Plaintiffs’ position
10
not now dispute that they were, at a minimum, subject to general
11
supervision.
12
Nor do Plaintiffs take issue with the fact that their work
13
required special training, experience, and knowledge.
14
seventeen years of prior experience before becoming employed by
15
Defendant, she completed the required thirty hours of continuing
16
education in claims handling every two years, and she obtained a “self-
17
insured certificate” from the State of California.
18
7).
19
than twenty years of workers’ compensation claims adjustment
20
experience, completed the required continuing education in claims
21
handling, and held a certification in claims adjusting from the
22
Insurance Educational Association.
23
description for Plaintiffs’ position, Claims Specialist III, required,
24
among other qualifications, “in-depth knowledge of the insurance
25
industry, claims, and the insurance legal and regulatory environment.”
26
(Burton AMF ¶ 8; Bucklin AMF ¶ 8).
27
relied on their experience and knowledge in making decisions related to
Burton had
(Burton SUF ¶¶ 5-
When Bucklin began her employment with Defendant, she had more
(Bucklin SUF ¶¶ 5-7).
The job
It is undisputed that Plaintiffs
28
37
1
adjusting claims.
2
22 (“Plaintiff agrees that her position requires the exercise of skills
3
and knowledge.”); Bucklin Opp. at 22 (same)).
4
demonstrated beyond dispute that they worked “under only general
5
supervision work along specialized or technical lines requiring special
6
training, experience, or knowledge.”
7
(Burton AMF ¶ 10; Bucklin AMF ¶ 23); (Burton Opp. at
Thus, Plaintiffs have
Next, Plaintiffs do not point to sufficient facts to dispute that
8
they were “primarily” engaged in exempt duties, which means more than
9
one-half of their work time.
See Cal. Lab. Code § 515(e); 8 Cal. Code
10
Regs. § 11040(2)(N).
11
includes “all work that is directly and closely related to exempt work
12
and work which is properly viewed as a means for carrying out exempt
13
functions.”
14
concedes that she spent more than half of her work week engaged in
15
exempt activities described above, including conducting investigations,
16
determining coverage and compensability, identifying subrogation
17
opportunities, setting reserves, obtaining medical evidence, managing
18
litigation, and negotiating settlements, among other similar duties.
19
(Bucklin AMF ¶ 87).
20
requirement.
21
For purposes of this calculation, exempt work
8 Cal. Code Regs. § 11040(1)(A)(2)(f).
Here, Bucklin
Thus Bucklin satisfies the “primarily engaged”
Burton agrees that she devoted 40 percent of her work week to the
22
same exempt duties.
23
Burton devoted the other 60 percent of the work week to directly
24
related tasks, including inputting the reserves she had determined into
25
the computer, documenting her plan of action and developments regarding
26
the claim, summarizing deposition testimony, handling correspondence,
27
reviewing medical and legal bills for payment, and preparing
(Burton AMF ¶ 74).
28
38
Further, it is undisputed that
1
correspondence to claimants to inform them of the status of their
2
claims and her decisions.
3
categorized as “work that is directly and closely related to exempt
4
work and work which is properly viewed as a means for carrying out
5
exempt functions,” to which the administrative exemption also applies.
6
8 Cal. Code Regs. § 11040(1)(A)(2)(f).
7
the “primarily engaged” prong.
8
9
(Id. ¶ 75).
These tasks are properly
Burton therefore also satisfies
For the foregoing reasons, there is no triable issue that
precludes the entry of summary judgment.
In reviewing the undisputed
10
facts, the Court concludes that Plaintiffs’ duties satisfy each of the
11
requirements for administrative exemption under Wage Order 4-2001, and
12
therefore Defendant properly classified Plaintiffs as exempt.
13
B.
14
Plaintiffs do not dispute that their claims for overtime, meal and
15
rest breaks, accurate wage statements, and wage penalties are dependent
16
on their being classified as non-exempt under Wage Order 4-2001.
17
Because Plaintiffs were properly classified as administratively exempt,
18
these claims fail as a matter of law and the Court need not address
19
them further.
20
//
21
//
22
//
23
//
24
//
25
//
26
//
27
//
Remaining Claims
28
39
1
V.
CONCLUSION
2
For the foregoing reasons, Defendant’s motions for summary
3
judgment are GRANTED, and Plaintiffs' subsequently filed motion for
4
class certification is DENIED as MOOT.
5
Burton and Bucklin take nothing, that the actions by Burton and Bucklin
6
against Defendant Zurich be dismissed on the merits with prejudice and
7
that Zurich recover its costs.
IT IS ORDERED AND ADJUDGED that
8
9
IT IS SO ORDERED.
10
11
12
DATED: June 19, 2013
13
STEPHEN V. WILSON
14
UNITED STATES DISTRICT JUDGE
15
16
17
18
19
20
21
22
23
24
25
26
27
28
40
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?