Geist v. Handke et al

Filing 59

MEMORANDUM AND ORDER denying 42 Plaintiff's Motion for Partial Summary Judgment. Signed by District Judge John W. Lungstrum on 07/19/2018. (ses)

Case 2:17-cv-02317-JWL-JPO Document 59 Filed 07/19/18 Page 1 of 14

IN THE UNITED STATES DISTRICT COURT
DISTRICT OF KANSAS
Geoffrey Geist,
Plaintiff,
v.

Case No. 17-cv-2317-JWL

Aaron Handke d/b/a
FoxPoint Trucks, LLC; and
OTRLeasing, LLC,
Defendants.

MEMORANDUM & ORDER
Plaintiff Geoffrey Geist filed this lawsuit under the Fair Labor Standards Act (“FLSA”),
29 U.S.C §§ 201 set seq., seeking to recover unpaid overtime compensation.1 In the pretrial order,
defendants contend that plaintiff was not entitled to overtime compensation under the FLSA
because plaintiff was “exempt” from the overtime provisions of the FLSA under the
administrative exemption. This matter is presently before the court on plaintiff’s motion for
partial summary judgment in which plaintiff contends that defendants cannot meet their burden
of establishing that plaintiff falls within the administrative exemption to the FLSA’s overtime
requirements. As will be explained, the motion is denied.

I.

Facts

He further alleges that defendants violated the FLSA by terminating plaintiff’s employment in
retaliation for plaintiff’s assertion of his rights under the FLSA. That claim is not implicated by
the motion pending before the court.
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The following facts are uncontroverted, stipulated in the pretrial order, or related in the
light most favorable to defendants as the nonmoving parties. Defendant OTRLeasing, LLC
(“OTR”) is a wholly owned subsidiary of defendant FoxPoint Trucks, LLC. The primary business
of OTR is to lease tractors to independent owner-operator tractor-trailer truck drivers. Plaintiff
Geoffrey Geist began his employment with OTR on March 1, 2015 as a sales representative.
Plaintiff testified that, as a sales representative, he compared completed lease applications
submitted by drivers to certain internal credit guidelines that plaintiff had been provided by OTR.
These guidelines included, by way of example, whether the applicant had an “open” bankruptcy,
whether the applicant had received a “DWI” in the last 5 years, whether the applicant had a certain
amount of money available for a down payment on a truck, and whether the applicant had a
criminal background relating to theft or financial crimes. Primarily, sales representatives were
reviewing applications for “automatic disqualifiers” such as convictions for theft.

If the

application satisfied the guidelines, then plaintiff turned the application over to Roman Fields,
OTR’s Vice President of Operations, who then determined whether to approve that application.
Plaintiff testified that, during this time frame, if he was uncertain as to whether an application
satisfied the guidelines, then Mr. Fields would make that determination. If Mr. Fields approved
an application, plaintiff would contact the applicant, notify the applicant that he or she had been
approved, and begin the process of attempting to sell a lease on a tractor from OTR’s inventory
to the applicant.
After plaintiff gained some experience, OTR permitted plaintiff to formally approve an
application that met the specific guidelines established by OTR. During this time frame, plaintiff
still forwarded applications to Mr. Fields if he was uncertain as to whether a given application
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satisfied the guidelines or if an application did not meet the guidelines but might warrant an
exception. At some point, and the record is unclear as to when this change occurred, OTR no
longer considered plaintiff a “sales representative” and, instead, considered plaintiff the “lead
underwriter” in the office. Documents maintained by OTR in the ordinary course of business
reflect that plaintiff’s title was changed to “sales rep/lead underwriter.” Sales representatives were
then submitting viable applications to plaintiff for approval. While plaintiff testified that he did
not have the authority to make any exceptions in terms of approving applications that did not fit
the credit guidelines and that Mr. Fields still made those decisions, Mr. Fields testified that
plaintiff, as the lead underwriter, was responsible for deciding in the first instance whether an
application should receive additional consideration even if it did not fit the credit guidelines.
Moreover, according to Mr. Fields, plaintiff was involved in all subsequent discussions about
whether an application warranted an exception and had input into the final approval decision.
Blake Fulton, OTR’s Chief Operations Officer, testified that plaintiff had the authority to make
his own decisions in connection with the “nuanced” underwriting process and that he had the
discretion to grant an exception for an application that did not otherwise fit the underwriting
guidelines. Similarly, Aaron Handke, OTR’s Chief Executive Officer, testified that plaintiff was
responsible for evaluating which applications might warrant an exception and which applications
did not. Mr. Handke, however, testified that plaintiff did not have the authority to make an
exception to approve an application that did not fit the guidelines; he testified that plaintiff would
have had to obtain permission from Mr. Fulton to make an exception.
Defendant’s evidence reflects that plaintiff was also responsible for helping OTR continue
to develop, modify and refine its underwriting guidelines and procedures—which changed
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frequently. According to Mr. Handke, plaintiff worked on “multiple analytics projects” relating
to developing OTR’s underwriting guidelines.
Regardless of how many hours plaintiff worked in a week, OTR paid plaintiff a fixed salary
of $73,000 per year. OTR considered plaintiff exempt from the overtime provisions of the FLSA
based on the administrative exemption to those provisions.

OTR terminated plaintiff’s

employment on March 10, 2017 after plaintiff and Mr. Fulton had a “heated disagreement” in the
workplace.
Additional facts will be provided as they relate to the specific arguments raised by the
parties in their submissions.

II.

Summary Judgment Standard
“Summary judgment is appropriate if the pleadings, depositions, other discovery materials,

and affidavits demonstrate the absence of a genuine issue of material fact and that the moving
party is entitled to judgment as a matter of law.” Water Pik, Inc. v. Med–Systems, Inc., 726 F.3d
1136, 1143 (10th Cir. 2013) (quotation omitted); see Fed. R. Civ. P. 56(a). A factual issue is
genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving
party.” Water Pik, Inc., 726 F.3d at 1143 (quotation omitted). “The nonmoving party is entitled
to all reasonable inferences from the record; but if the nonmovant bears the burden of persuasion
on a claim at trial, summary judgment may be warranted if the movant points out a lack of
evidence to support an essential element of that claim and the nonmovant cannot identify specific
facts that would create a genuine issue.” Id. at 1143-44.

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III.

The Administrative Exemption
Under the FLSA, employees are entitled to overtime pay (i.e., one and one-half times their

regular rate) for any hours worked in excess of 40 hours per week, unless they fall within one of
the various exemptions supplied by the Act. 29 U.S.C. §§ 207, 213. Among the FLSA’s
exemptions is one that exempts from the overtime requirements of § 207 “any employee employed
in a bona fide executive, administrative, or professional capacity.” 29 U.S.C. § 213(a)(1). An
employee working in a “bona fide administrative capacity” is someone:
(1)
Compensated on a salary or fee basis at a rate of not less than $455 per week
. . . exclusive of board, lodging or other facilities;
(2)
Whose primary duty is the performance of office or non-manual work
directly related to the management or general business operations of the employer
or the employer’s customers; and
(3)
Whose primary duty includes the exercise of discretion and independent
judgment with respect to matters of significance.
29 C.F.R. § 541.200(a).

An employee who satisfies all three elements falls within this

“administrative exemption.” Lutz v. Huntington Bancshares, Inc., 815 F.3d 988, 992 (6th Cir.
2016). It is the employer’s burden to prove that an employee falls “plainly and unmistakably”
within an FLSA exemption. Maestas v. Day & Zimmerman, LLC, 664 F.3d 822, 826 (10th Cir.
2012) (quotation omitted).
Plaintiff does not dispute that the first element for application of the administrative
exemption is satisfied, but he contends that the second and third elements are not applicable and
that OTR cannot prove those elements in this case.2 In analyzing those elements, the court’s task

Plaintiff contends that the court must narrowly construe the administrative exemption against
defendants in resolving the motion. But in an opinion issued one month prior to the filing of
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is to determine plaintiff’s “primary” job duty and then to determine whether that primary duty fits
within the administrative exemption. Id. at 827. An employee’s “primary duty” means “the
principal, main, major, or most important duty that the employee performs.” 29 C.F.R. §
541.700(a). The Tenth Circuit has cautioned that the primary duty analysis is a factual one. See
Maestas, 664 F.3d at 828-29. Summary judgment is proper, then, only if there is no genuine
dispute regarding plaintiff’s primary duties. Here, the record reflects numerous factual disputes
about both the nature and scope of plaintiff’s duties as well as which of plaintiff’s duties are
primary. Because those disputes are genuine and material to the core classification issue before
the court, summary judgment must be denied.

A.

Directly Related to the Management or General Business Operations
In arguing that defendant cannot satisfy the second element of the exemption, plaintiff

relies almost exclusively on 29 C.F.R. § 541.205, an interpretive regulation that utilized an
“administrative-production dichotomy” to interpret the second element of the exemption. Plaintiff
has marshaled his evidence and his argument to fit into that framework, but that regulation no
longer exists. See 29 C.F.R. § 541.200 et seq. As a result, the cases cited by plaintiff and the
arguments made by plaintiff that rely on that regulation are unhelpful and, in fact, more recent
cases have found that the administrative-production framework is of little use outside the
manufacturing or traditional production context. See Tsyn v. Wells Fargo Advisors, LLC, 2016

plaintiff’s motion, the Supreme Court rejected the narrow-construction principle as a guidepost
for interpreting the FLSA. See Encino Motorcars, LLC v. Navarro, 138 S. Ct. 1134, 1143 (2018).
In Encino, the Court held that courts “have no license to give [exemptions] anything but a fair
reading.” Id.
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WL 612926, at *15 (N.D. Cal. Feb. 16, 2016) (collecting cases); Calderon v. GEICO General Ins.
Co., 809 F.3d 111, 123-24 (4th Cir. 2015) (the administrative-production dichotomy is an
imperfect analytical tool in a service-oriented employment context); Morgan v. Zieger Health
Care Corp., 2015 WL 4040465, at *11 (E.D. Mich. June 5, 2015) (denying plaintiff’s motion for
partial summary judgment on administrative exemption where plaintiff relied on outdated
regulation, 29 C.F.R. § 541.205, and thus failed to address or distinguish relevant standards and
case law); Bollinger v. Residential Capital, LLC, 863 F. Supp. 2d 1041 (W.D. Wash. 2012) (“The
dichotomy’s focus on a traditional manufacturing line makes it ‘not terribly useful’ when applied
to service workers.”); Smith v. Bank of New York Mellon Corp., 2011 WL 836858, at *16 (W.D.
Penn. Jan. 20, 2011) (declining to address arguments based on outdated regulation and cases
relying on that regulation).
The court, then, analyzes the evidence in the record under the current regulation
interpreting the second element. That regulation, 29 C.F.R. § 541.201(a), states that an employee
meets the second element of the exemption if that employee performs work “directly related to
assisting with the running or servicing of the business, as distinguished, for example, from
working on a manufacturing production line or selling a product in a retail or service
establishment.”3 The regulation further provides examples of the type of work that is directly
related to management or general business operations, explaining that qualifying work
includes, but is not limited to, work in functional areas such as tax; finance;
accounting; budgeting; auditing; insurance; quality control; purchasing;
procurement; advertising; marketing; research; safety and health; personnel
management; human resources; employee benefits; labor relations; public relations,
Plaintiff does not dispute that he performed “office or non-manual work” for purposes of the
second element.
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government relations; computer network, internet and database administration;
legal and regulatory compliance; and similar activities.
29 C.F.R. § 541.201(b) (emphasis added). “And Labor Department comments to the applicable
regulations explain that ‘the administrative operations of the business include the work of
employees “servicing” the business, such as, for example, ‘advising the management, planning,
negotiating, representing the company, purchasing, promoting sales, and business research and
control.’” Calderon, 809 F.3d at 123 (quoting 69 Fed. Reg. at 22,138) (appropriate focus is
whether employee’s duties involve the “running of the business” as opposed to the “day-to-day
carrying out of the business’s affairs”) (citations and quotations omitted)).
Plaintiff contends that the undisputed facts demonstrate that plaintiff’s primary duty was
selling leases to truck drivers. Contrary to plaintiff’s assertion, there is ample evidence that,
viewed in the light most favorable to defendants, suggests that plaintiff’s duties included
reviewing lease applications to evaluate the creditworthiness of drivers applying for leases and, at
some point, determining whether OTR would approve or disapprove those applications. Applying
the pertinent regulations to employees performing similar “underwriting” duties, the district court
in Lutz v. Huntington Bancshares Inc., 2014 WL 2890170, at *13-14 (S.D. Ohio June 25, 2014),
held that those employees, as a matter of law, satisfied the second element of the administrative
exemption. Granting the employer’s motion for summary judgment and denying the employees’
motion for summary judgment on that issue, the district court explained:
Plaintiffs’ primary duties, as stated above, consist of reviewing loan application files
to evaluate the creditworthiness of customers applying for home loans and
determining whether the Bank will approve or disapprove the loan. Various aspects
of these duties are analogous to various aspects of the “functional” job duties set
forth in 29 C.F.R. § 541.201(b). For example, the fact that Plaintiffs can disapprove
a potential loan agreement makes their duties analogous to a quality control
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employee who prevents a defective product from being sold or a legal/regulatory
compliance professional who counsels against selling a certain product or using a
certain marketing technique. See 29 C.F.R. § 541.201(b). In each example, the
employees “service” the business (and therefore qualify for the administrative
exemption under § 541.201(a)) by looking beyond short-term sales to protecting the
company’s long-term interests.
Similarly, the fact that Plaintiffs work with loan applications that already
exist (rather than soliciting and working with the customer to create the loan
application) makes their role loosely analogous to that of an insurance claims
adjuster who makes decisions on accounts that have already been sold to consumers.
See 29 C.F.R. § 541.203(a) (listing insurance claims adjuster as an example of a
position that qualifies for the administrative exemption). In that sense, both
Plaintiffs and insurance claims adjusters provide a service that does not generate
business for their employers, but that is necessary for their employers to do business.
In other words, those employees do not perform “production” roles, but instead
perform roles that are “ancillary” to the employer’s principal production activity.
Id. at *13. The Lutz court also highlighted that the employees analyzed information regarding the
financial status of loan applicants, accepted or rejected loan packages based on the applicant’s
circumstances and occasionally suggested alternative products. Id. In light of those duties, the
court found that the employee played a “nuanced role” analogous to the hypothetical financial
services employee described in 29 C.F.R. § 541.203(b), who would qualify for the administrative
exemption if he or she performs duties “such as collecting and analyzing information regarding a
customer’s income, assets, investments or debts; determining which financial products best meet
the customer’s needs and circumstances; advising the customer regarding the advantages and
disadvantages of different financial products; and marketing, servicing, or promoting the
employer’s financial products.” Id. On appeal, the Sixth Circuit affirmed the grant of summary
judgment in favor of the employer. 815 F.3d 988, 993 (6th Cir. 2016) (“Huntington’s underwriters
perform administrative work because they assist in the running and servicing of the Bank’s

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business by making decisions about when Huntington should take on certain kinds of credit risk,
something that is ancillary to the Bank’s principal production activity of selling loans.”).
The court finds the Lutz decision helpful in light of the analogous facts presented here. At
a minimum, the evidence in the record permits an inference that plaintiff was analyzing
information about the financial status and creditworthiness of lease applicants and then advising
management on whether to approve or disapprove applications.

In addition to the points

articulated by the court in Lutz, the evidence permits an inference that plaintiff’s duties are
analogous to the hypothetical credit manager described in 29 C.F.R. § 541.703(b)(7), which
explains that an employee who “makes and administers the credit policy of the employer . . . and
makes decisions on whether to exceed credit limits would be performing work exempt under §
541.200.” This is particularly true in light of evidence that plaintiff was responsible for helping
OTR continue to develop, modify and refine its underwriting guidelines and procedures.
Plaintiff urges the court to follow Bollinger v. Residential Capital, LLC, 863 F. Supp. 2d
1041 (W.D. Wash. 2012), where the court analyzed the job duties of underwriters who, according
to plaintiff, performed duties similar to those performed by plaintiff. In that case, the court held
as a matter of law that the employees did not qualify for the administrative exemption because
they did not perform work directly related to the management or general business operations of
the employer. Id. at 1047-48. But in that case, it was apparently undisputed that the underwriters’
duties were limited to “confirming” that mortgage applications satisfied defendants’ underwriting
guidelines. See id. at 1043 (plaintiffs verified accuracy of data and reviewed application for
compliance with guidelines). Significantly, the plaintiffs in Bollinger could recommend approval
of applications that did not meet the guidelines, but the final approval decision went to another
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department. See id. at 1044. In this case, defendants have come forward with evidence that
distinguishes plaintiff’s duties from the duties examined in Bollinger, including evidence that
plaintiff had the authority to approve applications that did not meet the underwriting guidelines
and evidence that plaintiff assisted in developing and modifying OTR’s underwriting guidelines.
Bollinger, then, is not persuasive.4
In short, the record contains evidence from which a reasonable factfinder could determine
that plaintiff’s primary duty directly related to the management or general business operations of
OTR.

B.

Discretion and Independent Judgment
Plaintiff also challenges defendants’ ability to satisfy the third element of the test for

administrative exemption. To qualify for the exemption, defendant will have to show that
plaintiff’s primary duty includes “the exercise of discretion and independent judgment with
respect to matters of significance.” 29 C.F.R. § 541.200(a)(3). As explained in the pertinent
regulations, 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.” Id. § 514.202(a). In assessing whether an employee exercises
discretion and independent judgment, the court considers several factors, including:

Plaintiff also asserts that this court should follow the district court’s decision in Koehler v.
Freightquote.com, Inc., 2015 WL 4203962 (D. Kan. July 10, 2015). That decision, however, does
little to advance plaintiff’s argument that he is entitled to summary judgment. In Koehler, the
district court denied the plaintiffs’ motion for partial summary judgment on the administrative
exemption after finding factual disputes about the “primary duties” of the plaintiffs that precluded
summary judgment. Id. at **21-25.
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whether the employee has authority to formulate, affect, interpret, or implement
management policies or operating practices; whether the employee carries out major
assignments in conducting the operations of the business; whether the employee
performs work that affects business operations to a substantial degree, even if the
employee’s assignments are related to operation of a particular segment of the
business; whether the employee has authority to commit the employer in matters
that have significant financial impact; whether the employee has authority to waive
or deviate from established policies and procedures without prior approval; whether
the employee has authority to negotiate and bind the company on significant
matters; whether the employee provides consultation or expert advice to
management; whether the employee is involved in planning long- or short-term
business objectives; whether the employee investigates and resolves matters of
significance on behalf of management; and whether the employee represents the
company in handling complaints, arbitrating disputes or resolving grievances.
29 C.F.R. § 541.202(b). An employee exercising discretion and independent judgment “has
authority to make an independent choice, free from immediate direction or supervision,” although
employees whose decisions are ultimately reviewable can still exercise discretion and independent
judgment. Id. § 541.202(c).
Quite clearly, evidence exists in the record from which a reasonable factfinder could
conclude that plaintiff’s primary duty involved the exercise of discretion and independent
judgment. Again, Lutz is instructive. In Lutz, the district court noted that “[t]he fact that the Bank
even needs human underwriters—in addition to software programs—suggests that the decisions
at issue are more than just mechanical calculations.” 2014 WL 2890170, at *17. Second, the court
emphasized that while the underwriters’ authority was “heavily tempered” by the Bank’s lending
criteria, the underwriters still had authority to waive or deviate from that criteria in certain
instances. Id. at *18, aff’d, 815 F.3d at 997 (Bank’s underwriting guidelines did not prevent the
Bank’s underwriters from acting outside the parameters of those guidelines). Here, too, there is
evidence that plaintiff had the authority to grant an exception for an application that did not meet
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OTR’s underwriting guidelines. That action requires a weighing of different options to decide on
an appropriate course of conduct. There is also evidence that plaintiff’s duties directly implicate
certain factors set forth in § 514.202(b). Evidence that plaintiff helped draft and implement OTR’s
underwriting guidelines; that plaintiff had the authority to bind OTR to loan risks; and that plaintiff
had the authority to deviate from OTR’s underwriting guidelines if he deemed appropriate tends
to show that plaintiff’s primary duty required him to exercise discretion and independent
judgment. Finally, there is certainly evidence suggesting that plaintiff exercised discretion and
independent judgment on matters of significance. See Lutz, 815 F.3d at 997-98 (approval of loan
binds the Bank to that risk; denial of loan prevents applicant from acquiring credit).
Because the record contains evidence from which a reasonable factfinder could determine
that plaintiff’s primary duty included the exercise of discretion and independent judgment with
respect to matters of significance, the court denies plaintiff’s motion for summary judgment on
this issue.

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IT IS THEREFORE ORDERED BY THE COURT THAT plaintiff’s motion for partial
summary judgment (doc. 42) is denied.

IT IS SO ORDERED.

Dated this 19th day of July, 2018, at Kansas City, Kansas.

s/ John W. Lungstrum
John W. Lungstrum
United States District Judge

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