Charbonneau v. Mortgage Lenders of America, LLC
Filing
213
MEMORANDUM AND ORDER denying 190 Motion to Exclude and Strike Plaintiffs' Expert Witness. Signed by District Judge Holly L. Teeter on 1/11/2021. (md)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
BEAU CHARBONNEAU, on behalf of himself
and others similarly situated,
Plaintiff,
Case No. 2:18-cv-02062-HLT-ADM
v.
MORTGAGE LENDERS OF AMERICA
L.L.C., et al.,
Defendants.
MEMORANDUM AND ORDER
Plaintiff Beau Charbonneau brings this putative collective action, on behalf of himself and
all others similarly situated (“Plaintiffs”), under the Fair Labor Standards Act (“FLSA”) against
Defendants Mortgage Lenders of America, L.L.C. (“MLOA”), Philip Kneibert, and Bradley Ives.
Before the Court is Defendants’ motion to exclude and strike Plaintiffs’ expert witness. Doc. 190.
Because Dr. Krueger’s testimony is reliable and relevant, the Court denies Defendants’ motion.
I.
BACKGROUND
MLOA is a mortgage-lending company that employs over 300 lending professionals at its
office in Overland Park, Kansas. MLOA employed Plaintiffs as Team Leads and Loan Officers.
MLOA classified all Team Leads as exempt from the FLSA’s overtime requirements and did not
have Team Leads clock in or out for work or record their work hours. MLOA classified all Loan
Officers as non-exempt employees subject to the FLSA’s overtime requirements. Loan Officers
clocked in and out for work using physical time clocks in MLOA’s office, but Plaintiffs allege that
MLOA failed to pay Loan Officers for off-the-clock work it directed and expected them to perform
outside the office.
Plaintiffs disclosed the only expert in this case, economist Kurt Krueger, Ph.D. (“Dr.
Krueger”). Plaintiffs retained Dr. Krueger to prepare an opinion regarding Plaintiffs’ unpaid
overtime earnings. Defendants did not designate a rebuttal expert. Dr. Krueger’s initial report was
timely disclosed on March 18, 2020. Dr. Krueger based his calculations on daily timeclock
readings and payroll data showing commissions earned and hours worked.
Plaintiffs’ compensation was primarily based on commissions from loans produced. Dr.
Krueger opined that Plaintiffs’ regular rate of pay is equal to total commissions earned over a given
pay period divided by hours worked during the same period. Plaintiffs’ overtime rate of pay is
equal to each Plaintiff’s regular rate of pay plus a fifty percent overtime premium. Total weekly
overtime pay was calculated to be equal to the overtime rate of pay multiplied by overtime hours.
Dr. Krueger initially did not have all the data for the entire time period. There was no timepunch data for Team Leads because MLOA did not record their work hours, and Plaintiffs allege
MLOA failed to record Loan Officers’ time for work performed outside the office. There were
also instances where the pay data showed that a Loan Officer was paid during a month even though
there were no time punches. Additionally, MLOA initially did not produce any time-punch data
for the third quarter of 2017 (“2017 Q3 data”).
Accordingly, Dr. Krueger made certain assumptions in his initial report. Because Team
Leads’ time was not recorded, Dr. Krueger assumed every Team Lead worked at least 40 hours
per week and worked up to 20 hours of overtime each week. When the pay data showed that a
Loan Officer was paid during a month but there were no time punches, Dr. Krueger assumed the
Loan Officer worked at least 40 hours. And Dr. Krueger applied a 1.12 multiplier (to account for
the missing 2017 Q3 data, which was approximately 12% of the relevant time) to the total damages
generated from the weeks with data.
2
MLOA produced the missing 2017 Q3 data on August 13. Dr. Krueger then produced his
supplemental report on September 21. He stated in his supplement that “[s]ince the amount of
missing data has been significantly decreased, in this report I was able to make ‘pin-point’ Plaintiff
specific estimates of missing time records using the average weekly hours worked by each Plaintiff
during their non-missing payroll periods.” Doc. 194-2 at 2. The supplemental report also included
sub-calculations (Tables 1A and 2A) to reflect alternate damages periods stemming from a dispute
between the parties about the applicable statute of limitations.1
II.
LEGAL STANDARD
Opinions based on scientific, technical, or specialized knowledge are governed by Federal
Rule of Evidence 702. Rule 702 states that a witness qualified as an expert by knowledge, skill,
experience, training, or education may offer opinion testimony if:
(a) the expert’s scientific, technical, or other specialized knowledge
will help the trier of fact to understand the evidence or to determine
a fact in issue;
(b) the testimony is based on sufficient facts or data;
(c) the testimony is the product of reliable principles and methods;
and
(d) the expert has reliably applied the principles and methods to the
facts of the case.
Fed. R. Evid. 702.
Rule 702 imposes upon the district court a “gatekeeping obligation” to ensure that expert
testimony is both relevant and reliable. Daubert v. Merrell Dow Pharm., Inc., 509 U.S. 579, 589
(1993); Kumho Tire Co., Ltd. v. Carmichael, 526 U.S. 137, 147 (1999). A court’s gatekeeping
1
The parties have an ongoing disagreement about the damages period applicable to all post-certification claims. The
Pretrial Order indicates that Plaintiffs intend to file a motion to equitably toll the applicable statute of limitations
from the date of the Court’s conditional certification order. Doc. 185 at 20. To date, no motion has been filed.
3
function, however, does not replace the traditional adversary system and the role of the jury. Cohen
v. Lockwood, 2004 WL 763961, at *2 (D. Kan. 2004). Where there are questions related to the
bases and sources of an expert’s opinion, these issues go to the weight to be assigned to that
opinion—rather than admissibility—and are for the trier of fact to determine. Id.
The Tenth Circuit employs a two-part test to determine admissibility. Conroy v. Vilsack,
707 F.3d 1163, 1168 (10th Cir. 2013). First, the court determines whether the expert is qualified
by knowledge, skill, experience, training, or education to render an opinion. Id. Second, the court
“must satisfy itself that the proposed expert testimony is both reliable and relevant, in that it will
assist the trier of fact.” Id.
III.
ANALYSIS
Defendants move to exclude Plaintiffs’ expert, Dr. Krueger, and strike his opinions under
Rule 702 and Daubert as unreliable and not based on sufficient facts or data.2 Specifically,
Defendants argue that: (1) Dr. Krueger’s methodology in calculating overtime rate of pay using
gross commissions is at odds with the actual method by which Plaintiffs’ commissions were
determined; (2) his report speculates about the number of hours each Plaintiff worked; (3) he
ignored instances when Loan Officers had already been paid for overtime hours; (4) he failed to
account for back wages and other compensation paid to 80 Plaintiffs as part of a Department of
Labor (“DOL”) settlement; and (5) he overestimates Plaintiffs’ damages by failing to account for
the varying statutes of limitation that should be applied to each Plaintiff. Because the Court finds
that Dr. Krueger’s opinions are reliable and relevant, the Court denies Defendants’ motion.
2
Defendants do not challenge Dr. Krueger’s qualifications. The Court has reviewed his background and is satisfied
he is qualified to render his opinion.
4
A.
Dr. Krueger’s methodology to calculate overtime is reliable because he used
the same formula MLOA used to calculate overtime.
Defendants are principally concerned with Dr. Krueger’s methodology for determining
Plaintiffs’ commissions. Plaintiffs were not paid an hourly rate and were instead compensated on
a commission basis. As a result, their regular rate of pay—and thus the amount of overtime
compensation they were entitled to—varied from week to week based upon their hours worked
and their commissions.3 Dr. Krueger calculated Plaintiffs’ regular rate of pay using gross
commissions over a given pay period divided by hours worked during the same period. He then
calculated overtime rate of pay as equal to each Plaintiff’s regular rate of pay plus a fifty percent
overtime premium. Total overtime pay was then equal to the overtime rate of pay multiplied by
overtime hours. Dr. Krueger’s methodology can be summarized by the following formula: (Gross
Earned Commissions / Total Hours) * Overtime Hours * 50%.
But Defendants argue that Plaintiffs’ gross commission income does not represent the
commission amount actually paid to Plaintiffs. This is because Plaintiffs’ compensation
agreements provide:
Commission Compensation is not earned until all deductions are
made for Hourly Wage, shortages for uncollected fees, and
uncollected costs for credit reports, pursuant to the formula for
calculating commissions.
Doc. 145-7. Thus, Defendants argue, a commission is not earned until deductions agreed to by the
parties for uncollected fees and costs are made. Accordingly, Dr. Krueger’s formula should have
used net commissions (the amount left after subtracting debits for uncollected fees and costs from
3
See 29 C.F.R. 778.107 (“The general overtime pay standard in section 7(a) requires that overtime must be
compensated at a rate not less than one and one-half times the regular rate at which the employee is actually
employed.”); 29 C.F.R. 778.109 (“[T]he regular hourly rate of pay of an employee is determined by dividing his
total renumeration . . . in any workweek by the total number of hours worked by him in that workweek for which
such compensation was paid.”); 29 C.F.R. 778.117 (explaining that commissions “are payments for hours worked
and must be included in the hourly rate”).
5
gross commissions) to calculate Plaintiffs’ overtime rate of pay. Defendants assert that by using
gross commissions, Dr. Krueger improperly inflated the damages projections.
But Defendants’ argument fails to account for the fact that Dr. Krueger used the exact same
formula MLOA used in calculating overtime. In their Response, Plaintiffs attached a sampling of
commission statements for eight Loan Officers. As an example, Casey Phillips’s commission
spreadsheet displays the following information:
Earned
Commission
Previously
Billed
2,454.70
(915.17)
Less
Hourly
Wages
Less
Commission
Appraisals,
Due
Credit
Reports
EPO/EPD
(920.17)
(185.51)
433.27
Overtime
Due
Total
Earnings
52.19
485.46
The commission spreadsheet also contains the following “OT Hours Calculation”:
Total Hrs Worked
127
Total OT Hours
OT Hours Calculation
5.40
52.19
(Earned Comm / Total Hrs) * OT Hrs * 50%
Doc. 194-10 at 1.
While MLOA’s “OT Hours Calculation” does not specify whether MLOA used gross or
net commissions, it is apparent that MLOA calculated overtime using gross commissions. As set
forth above, Mr. Phillips’s gross commission for the pay period was $2,454.70, while his net
commission was $433.27. It can be determined that MLOA applied its overtime formula using
gross commission because: (2,454.07 / 127) * 5.40 * .5 = 52.19. This amount ($52.19) is precisely
the amount of overtime MLOA paid Mr. Phillips during the pay period. The same formula was
used in the other commission statements cited by Plaintiffs.
6
Thus, in practice, MLOA calculated Loan Officers’ overtime pay using gross commissions,
not net commissions.4 Dr. Krueger used the exact same formula and methodology. Thus, it is
disingenuous for Defendants to now argue that “Dr. Krueger’s methodology is at odds with the
actual method by which the Plaintiffs’ commissions were determined, and hence does not ‘fit’ the
facts of this case.” Doc. 191 at 6. The actual method used by MLOA to calculate overtime, as
demonstrated above, was to use gross commissions. Dr. Krueger did precisely that. His
methodology is therefore reliable and relevant.
B.
Dr. Krueger’s assumption about hours worked per week is reasonable.
Defendants argue that Dr. Krueger unreasonably assumed that every Plaintiff worked at
least 40 hours per week and up to 20 hours of overtime each week. But it is not true that Dr.
Krueger made this assumption for every Plaintiff. This assumption was only universally made with
respect to the Team Leads because MLOA did not maintain time-punch data for Team Leads.
While Dr. Krueger’s chosen method of calculating damages for the Team Leads may be imperfect,
it is not impermissible. See Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687-88 (1946);
Scalia v. Paragon Contractors Corp., 957 F.3d 1156, 1164 (10th Cir. 2020) (“Mt. Clemens seeks
to prevent an employer from benefitting from its failure to keep records.”). To the extent Dr.
Krueger’s methodology may overestimate actual damages on this point,5 this is a matter for cross-
4
In the Reply, Defendants assert that Dr. Krueger should not have ignored the commission agreements’ contractual
terms because the commission agreements define Plaintiffs’ entitlement to wages, “as the Court recently ruled
when it entered summary judgment . . . .” Doc. 202 at 8. In the referenced Order, the Court granted summary
judgment on Plaintiff Charbonneau’s breach of contract claim for improper deductions. Doc. 172 at 9-14. The
Court’s ruling was based, in part, on language in the commission agreements that contemplated and authorized
MLOA to make “adjustments” or “deductions” from Plaintiff’s commissions for uncollected fees and costs. Id. at
11-12. The Court did not rule that the commission agreements determine how Plaintiffs’ regular rate of pay or
overtime pay must be calculated, or whether gross or net commissions must be used.
5
For example, Dr. Krueger’s methodology fails to account for the fact that most of the individual Team Leads likely
took a vacation in one or more weeks during the year, and thereby were not entitled to some amount of overtime
for every single week.
7
examination—not disqualification. See, e.g., McKesson Info. Sols. LLC v. Trizetto Grp., Inc., 2006
WL 5207233, at *1 (D. Del. 2006) (denying Daubert motion and stating that while the expert
“appears to have used facts that ratchet up the damages figure to an extreme, that is fodder for
cross examination, not for a Daubert analysis”).
With regards to the Loan Officers, Dr. Krueger used actual time-punch data in weeks where
the data was available. Dr. Krueger only assumed 40 clocked hours for Loan Officers when the
pay data showed that a Loan Officer was paid during a month but there were no time punches.
This assumption only affected 1.63% of Loan Officers’ combined workweeks.6 Thus, the
assumption has a minimal effect on overall damages and can be properly addressed as a credibility
argument on cross-examination. Accordingly, Dr. Krueger’s assumptions are not disqualifying.
See State Farm Fire & Cas. Co. v. Bell, 30 F. Supp. 3d 1085, 1107 (D. Kan. 2014) (denying
Daubert motion and noting that “defendant’s concerns about the underlying assumptions of [the
expert’s] opinion are better challenged through cross-examination than in determining the
admissibility of expert testimony”).
C.
Dr. Krueger’s opinion adequately addresses overtime previously paid.
Defendants next argue that Dr. Krueger failed to account for overtime hours that MLOA
paid. Defendants complain that Dr. Krueger’s initial report considered any hour worked over 40
to be a “damage hour”—even in situations where overtime was actually paid and recorded as “retro
overtime” in MLOA’s pay records. However, as Defendants concede, Dr. Krueger supplemented
his report before his deposition and accounted for all retro overtime purportedly paid for all
Plaintiffs. The fact that Dr. Krueger’s report does not specifically state that this amount should be
6
Because MLOA initially failed to produce 2017 Q3 data, Dr. Krueger originally applied a 1.12 multiplier to the
total damages calculation to account for the approximately 12% missing weeks of data. However, following
MLOA’s production of the 2017 Q3 data, Dr. Krueger was able to largely eliminate the 40-hour assumption for
Loan Officers along with the 1.12 multiplier in his supplemental report.
8
subtracted from his total damage calculations is of no consequence. Defendants are free to address
this issue on cross-examination and argue that an offset should be made for overtime hours already
paid. Cf. Gray v. Perry, 2019 WL 2992007, at *19 (C.D. Cal. 2019) (rejecting Daubert challenge
to expert’s opinion regarding profits when expert failed to subtract defendant’s costs from revenue
as the purported flaw goes to weight of expert’s testimony and can be addressed on crossexamination).
D.
Dr. Krueger’s opinion is not required to account for Defendants’ waiver
defense.
Defendants argue that Dr. Krueger’s opinion is unreliable because he failed to account for
wages already paid to some Plaintiffs as part of the DOL settlement. Defendants assert a waiver
defense because 80 Plaintiffs participated in a DOL-approved settlement for off-the-clock work
performed between May 2014 and May 2016. The signed settlements provide that “acceptance of
this payment . . . means that you have given up the right to bring a suit on your own behalf for the
payment of such” unpaid wages. Doc. 191-16. But Dr. Krueger is not required to preemptively
accept and account for Defendants’ waiver defense.
Defendants fail to cite any authority that requires Plaintiffs’ expert to preemptively account
for a defense that Defendants may assert.7 Defendants are certainly allowed to attack Dr. Krueger’s
damage calculations at trial through cross-examination and by introducing its own competing
evidence and defenses. But Dr. Krueger’s opinions are not unreliable simply because he chose not
to affirmatively account for Defendants’ waiver defense. See Anderson v. Hunte Delivery Sys.,
Inc., 2012 WL 1392918, at *4 (M.D. Ala. 2012) (“The Court finds no affirmative duty upon expert
witnesses to consider a legal doctrine that is to be raised by the Defendants as a defense.”); see
7
Defendants did not seek partial summary judgment on this issue, and the Court has not ruled one way or the other
whether there has been any waiver.
9
also Bell, 30 F. Supp. 3d at 1097 (“[A]n expert’s decision not to consider certain facts in
formulating his opinions is a matter for cross-examination, and not exclusion, because that decision
goes to the weight of the testimony, not its admissibility.”).
E.
Dr. Krueger did not ignore the statute of limitations.
Finally, Defendants argue Dr. Krueger’s assumption about the statute of limitations is
flawed as a matter of law, which renders his opinion unreliable. But Dr. Krueger did not fail to
account for the statute of limitations as Defendants assert. Dr. Krueger’s initial report used a tolled
statute of limitations from the date of the Court’s conditional certification order as an outside date
for his damages calculations. As a result, Dr. Krueger initially assumed that nearly every Plaintiff
is entitled to damages dating back to December 6, 2015. Defendants argue that the Court has not
entered a tolling order, and thus the three-year limitations period for each Plaintiff is dependent on
the date that person opted into the action. Here, most Plaintiffs filed their consents after December
6, 2018. Thus, Defendants argue, Dr. Krueger’s assumption that nearly every Plaintiff’s damages
began on December 6, 2015 improperly overstates total damages.
The Court is not persuaded. Dr. Krueger’s supplemental report addresses this issue.
Specifically, it presents total damages using both parties’ preferred damages periods. Table 1A
contains a summary of overtime damages using Plaintiffs’ theory—damages for most Plaintiffs
dating back to December 6, 2015. Doc. 194-2 at 4. Table 2A then contains a summary of overtime
damages using Defendants’ preferred damages period based on each Plaintiff’s opt-in date. Id. at
10. Defendants concede that the supplemental report adds a “second analysis,” addressing the
concern about the statute of limitations. But Defendants argue that this “second analysis” is based
on different assumptions than those present in his initial report. However, Defendants do not
identify which assumptions were different, or how the different assumptions render one or both of
10
Dr. Krueger’s alternate calculations unreliable. It appears that Dr. Krueger used the same formula
in both tables but over alternative damages periods.
Thus, Dr. Krueger did not fail to account for the statute of limitations as Defendants assert.
He specifically offered his opinion as to damages under Defendants’ preferred damages period
based on the opt-in date. His opinions are not unreliable simply because he also offered his opinion
under Plaintiffs’ tolling theory.
IV.
CONCLUSION
Accordingly, the Court finds that Dr. Krueger’s opinions are reliable and relevant.
Defendants’ objections go to the weight to be assigned to Dr. Krueger’s opinion—rather than
admissibility—and are for the trier of fact to determine. Cohen, 2004 WL 763961, at *2.
THE COURT THEREFORE ORDERS that Defendants’ Motion to Exclude and Strike
Plaintiffs’ Expert Witness (Doc. 190) is DENIED.
IT IS SO ORDERED.
Dated: January 11, 2021
/s/ Holly L. Teeter
HOLLY L. TEETER
UNITED STATES DISTRICT JUDGE
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