Wong et al v. HSBC Mortgage Corporation (USA) et al

Filing 288

ORDER GRANTING DEFENDANTS' MOTION TO DECERTIFY CONDITIONAL FLSA CLASS. The claims alleged on behalf of all plaintiffs other than the four plaintiffs named in the Second Amended Complaint are dismissed without prejudice to refiling in an appropriate court. Signed by Judge Maxine M. Chesney on September 29, 2010. (mmclc1, COURT STAFF) (Filed on 9/29/2010)

Wong et al v. HSBC Mortgage Corporation (USA) et al

Doc. 288

1 2 3 4 5 6 7 8 9 10 For the Northern District of California 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 Before the Court is defendants HSBC Mortgage Corporation (USA) and HSBC Bank USA, N.A.'s (collectively, "HSBC") Motion to Decertify Conditional FLSA Class, filed March 19, 2010. Plaintiffs have filed opposition, to which HSBC has replied. The matter came on regularly for hearing on April 23, 2010. Matthew C. Helland and Paul J. Lukas of Nichols Kaster LLP appeared on behalf of plaintiffs. George J. Tichy, Michelle R. Barrett, and Rachelle L. Wills appeared on behalf of HSBC. Having read and considered the papers filed in support of and in opposition to the motion, and the arguments of counsel, the Court rules as follows. BACKGROUND In the operative complaint, the revised Second Amended Complaint ("SAC"), filed September 9, 2008, the four named plaintiffs, each of whom was employed by HSBC as a v. HSBC MORTGAGE CORPORATION (USA), et al., Defendants. / PHILIP WONG, et al., Plaintiffs, No. C-07-2446 MMC ORDER GRANTING DEFENDANTS' MOTION TO DECERTIFY CONDITIONAL FLSA CLASS United States District Court IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF CALIFORNIA

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loan officer, allege that HSBC improperly classified them as exempt under the Federal Labor Standards Act ("FLSA"), and, consequently, violated the FLSA by failing to pay them overtime compensation. By order filed March 19, 2008, the Court granted plaintiffs' motion for an order conditionally certifying, for purposes of the FLSA, a class of persons who, as of May 7, 2004, had been employed by HSBC as loan officers within the United States. Notice of the instant action was subsequently provided to the class, and, to date, 120 class members, by filing consent forms, have joined the instant action as plaintiffs.1 DISCUSSION A plaintiff may bring an FLSA action on his behalf and on behalf of other employees "similarly situated." See 29 U.S.C. § 216(b). To certify a FLSA class action, district courts have applied a "two-step approach involving initial notice to prospective plaintiffs followed by a final evaluation whether such plaintiffs are similarly situated." See Leuthold v. Destination America, Inc., 224 F.R.D. 462, 466 (N.D. Cal. 2004).2 At the first step, the plaintiffs must "show that there is some factual basis beyond the mere averments in their complaint for the class allegations." See In re Wells Fargo Home Mortgage Overtime Pay Litig., 527 F. Supp. 2d 1053, 1071 (N.D. Cal. 2007) (internal quotation and citation omitted). "Because the court generally has a limited amount of evidence before it, the initial determination is usually made under a fairly lenient standard and typically results in conditional certification." See Leuthold, 224 F.R.D. at 467. As noted, the Court, by order filed March 19, 2010, granted plaintiffs' motion for conditional certification. At the second step, which occurs after discovery is complete, "the party opposing class certification may move to decertify the class." See id. If, at the second step, "the district court determine[s] on the basis of the complete factual record that the plaintiffs are A total of 122 consent forms were filed, including consent forms filed by named plaintiffs Leslie Shearn and Chad Barbiere. Some district courts have applied an alternative approach, specifically, "evaluating the FLSA collective action in terms of Rule 23's class certification requirements." See id. Here, the parties previously agreed, in the context of plaintiffs' motion for conditional certification, that the Court should apply the above-stated two-step approach. (See Pls.' Mot., filed December 27, 2007, at 10:23-25; Defs.' Opp., filed January 18, 2008, at 10:26.) 2
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not similarly situated," the court "may decertify the class and dismiss the opt-in plaintiffs without prejudice." See id. At the second step, the plaintiff "bears a heavier burden" than at the first step. See Morgan v. Family Dollar Stores, Inc., 551 F.3d 1233, 1261 (11th Cir. 2008). Here, fact discovery having concluded, HSBC moves for an order decertifying the class. In support of the instant motion, HSBC argues that individualized factual determinations will be necessary regarding HSBC's affirmative defense that plaintiffs are/were properly classified as "outside" salespersons and, consequently, are exempt under the FLSA. See 29 U.S.C. § 213(a)(1) (providing "maximum hour requirements" in FLSA do not apply to "any employee employed . . . in the capacity of outside salesman").3 An "outside" salesperson is an employee whose "primary duty" is "making sales" or "obtaining orders or contracts for services," and who is "customarily and regularly engaged away from the employer's place or places of business in performing such primary duty." See 29 C.F.R. § 541.500(a). The Ninth Circuit has recently recognized that "[o]ften, [the outside salesperson exemption] will militate against certification because . . . it requires a fact-intensive inquiry into each potential plaintiff's employment situation," given that "courts must . . . ask where the individual employees actually spent their time." See In re Wells Fargo Home Mortgage Overtime Pay Litig., 571 F.3d 953, 959 (9th Cir. 2009) (internal quotation and citation omitted). The Ninth Circuit has further recognized, however, that "centralized rules, to the extent they reflect the realities of the workplace, suggest a uniformity among employees that is susceptible to common proof." See id. at 958-59. For example, "[a] centralized policy requiring employees to be at their desks for 80% of their workday would change this individual issue into a common one." See id. at 959. By contrast, where a plaintiff seeking to certify a class of employees classified as outside HSBC also contends individualized factual determinations will be necessary with respect to the applicability of the "highly compensated" exemption. By order filed concurrently herewith, the Court has found plaintiffs are entitled to summary judgment on HSBC's affirmative defense that plaintiffs, or any of them, are "highly compensated" employees. Consequently, no factual determinations will be necessary with respect to such exemption. 3
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salespersons is unable to show the existence of "company-wide policies governing how employees spend their time" or "uniformity in work duties and experiences that [would] diminish the need for individualized inquiry," class certification would be inappropriate, given the need to hold "mini-trials with respect to each [class member's] actual work performance." See Vinole v. Countrywide Home Loans, Inc., 571 F.3d 935, 947 (9th Cir. 2009). The above-cited Ninth Circuit opinions concerned the question of whether claims brought on behalf of a class should be certified under Rule 23, and, in particular, whether, for purposes of Rule 23(b), individual issues predominated over issues common to the class. See id. at 939, 948 (affirming district court's decision not to certify class under Rule 23 because "individual issues predominated over common issues"); Fed. R. Civ. P. 23(b)(3) (requiring for Rule 23 certification that "questions of law or fact common to class members predominate over any questions affecting only individual members"); In Re Wells Fargo, 571 F.3d at 958-59 (vacating order certifying class under Rule 23, with directions to consider whether "potential individual issues . . . may make class treatment difficult if not impossible"). The Court nevertheless finds such opinions instructive with respect to the question of whether the instant class members are "similarly situated" for purposes of the FLSA. See Colson v. Avnet, Inc., 687 F. Supp. 2d 914, 927-28 (D. Ariz. 2009) (finding Ninth Circuit's Rule 23 cases "instructive" for purposes of determining whether putative FLSA class members were "similarly situated"); Johnson v. Big Lots Stores, Inc., 561 F. Supp. 2d 567, 572 (E.D. La. 2008) (finding appellate decision made in "context of Rule 23" provided "guidance" in resolving issues presented in FLSA action; observing, "[t[here are strong parallels between a Rule 23 collective action in that both litigation devices operate to resolve the claims of many individuals based on representative evidence"). Here, HSBC argues that it does not have a centralized rule, practice, or policy requiring loan officers to work in particular locations and/or for particular periods of time // // 4

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when performing their primary duty of selling HSBC's financial products.4 In support thereof, HSBC relies on the declaration of its Senior Vice President, David Gates, who attests as follows: As the Senior Vice President of [HSBC's] retail mortgage loan operations, I have not issued any policies, procedures, or directives regarding how retail mortgage loan officers should spend their time sourcing mortgage loan customers. In addition, I have never instructed any Divisional, Regional, or Sales Managers or Team Leaders to issue any such policies, procedures, or directives. Loan officers have discretion in determining how best to pursue mortgage loan opportunities with customers or prospects and through cultivation of referral sources. Rather, I afford broad discretion to the Divisional, Regional, and Sales Managers to conduct business and set any particular expectations they may have at the local level. (See Gates Decl. ¶ 5.) Plaintiffs offer no evidence to the contrary, and have themselves offered, albeit for other purposes, testimony from HSBC managers that no such rule, practice, or policy exists at the local level. (See, e.g., Helland Decl. Ex. 7 at 20 (testimony of manager Debra Dezego that loan officers "basically work from anywhere," including "a realtor's office or an accountant's office or a client's office . . . or their house or . . . the LPO [loan production office]," and that she does not require loan officers to "spend a certain amount of time in any of [those] given locations"); id. Ex. 19 at 115 (testimony of manager Amy Ku that she "never gave loan officers a quota saying you need to spend X percentage of your time outside of the branch and X percentage of your time inside the branch" and that "there is no percentage" of time loan officers are required to be "making sales outside of the HSBC facility or home office"); id. Ex. 23 at 29 (testimony of manager Anthony Masseria that he does not "mandate that loan officers spend a certain amount of time outside the office"); id. Ex. 27 at 27 (testimony of manager Louise Nelson that she does not have "specific requirements about how much time [loan officers] should spend away from an office"); id. Ex. 29 at 89 (testimony of manager David Peters that he "never heard of any requirement as far as percentages or anything regarding where [loan officers'] business is coming from") By prior order, the Court found the undisputed evidence demonstrates that plaintiffs' "primary duty" is selling "financial products." (See Order, filed March 19, 2008, at 11:312:12:11.) 5
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id. Ex. 30 at 31 (testimony of manager Kathleen Robinson that she does not train managers "to instruct HSBC loan officers . . . to spend a certain amount of time in a specific location"); id. Ex. 41 at 170-71 (testimony of manager Amy Young that she never gives loan officers a "specific quota or target percentage of the time they are supposed to work at the HSBC Bank branches versus at some other location").) Although plaintiffs, by separate motion, have argued they are entitled to summary judgment on the outside sales exemption, and, consequently, that no factual findings as to such exemption need be made as to any plaintiff, the Court, by order filed concurrently herewith has found said defense cannot be summarily adjudicated in favor of the class. As a result, factual findings as to the applicability of the outside sales exemption will need to be made. Concededly, the need to make such factual findings does not automatically preclude certification of a class. Here, however, as discussed above, plaintiffs have not shown the existence of a centralized rule, practice, or policy requiring loan officers to work in particular locations and/or for particular lengths of time, when performing their primary duty of selling HSBC's financial products. Nor have plaintiffs otherwise shown how resolution of the applicability of the outside sales exemption to any given class member can be determined other than by examining the particular circumstances of each such individual member's "employment situation." See In re Wells Fargo, 571 F.3d at 959. In sum, the trier of fact will be required to determine "where the individual employees actually spent their time." See id. Lastly, plaintiffs argue that decertification in this instance is contrary to the interests of judicial economy and "the FLSA's intent of allowing employees to pool their resources" because the plaintiffs who joined the instant action by filing consent forms would be required to "start new lawsuits all across the country" and thus "flood the federal court systems [with] needless duplicative lawsuits." (See Pls.' Resp. Mem., filed April 2, 2010, at 23.) As discussed above, however, plaintiffs have not shown they are similarly situated for purposes of the FLSA. Consequently, plaintiffs have not shown that separate lawsuits will, in fact, be "duplicative." To the extent plaintiffs' argument is based on costs incurred to 6

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date by the class (see Helland Decl. ¶ 46 (setting forth amount plaintiffs' counsel has expended to date)), plaintiffs cite to no authority, and the Court has located none, providing that expenditures by the class are an appropriate consideration with respect to decertification. As HSBC points out, given the two-step analysis contemplated in FLSA class actions, decertification is not even considered until after discovery is complete, i.e., until after significant funds necessarily will have been expended. Accordingly, having thoroughly reviewed the record, the Court finds plaintiffs have not met their burden to demonstrate that the 124 members of the conditionally-certified class are similarly situated within the meaning of the FLSA. CONCLUSION For the reasons stated above, HSBC's motion to decertify the conditional class is hereby GRANTED, and the claims alleged on behalf of all plaintiffs other than the four plaintiffs named in the SAC are hereby DISMISSED without prejudice to refiling in an appropriate court. IT IS SO ORDERED.

Dated: September 29, 2010

MAXINE M. CHESNEY United States District Judge

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