Jorge Garcia et al v. Freedom Mortgage Corporation et al
Filing
141
OPINION. Signed by Judge Joseph E. Irenas on 6/10/2011. (dmr)
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
JORGE GARCIA, et al.,
HONORABLE JOSEPH E. IRENAS
Plaintiffs,
CIVIL ACTION NO. 09-2668
(JEI/KMW)
v.
FREEDOM MORTGAGE CORPORATION.
OPINION
Defendant.
APPEARANCES:
WOODLEY & MCGILLIVARY
By: Gregory K. McGillivary, Douglas L. Steel and Diana J. Nobile
1101 Vermont Ave., N.W.
Suite 1000
Washington, DC 20005
and
PITTA & GIBLIN, LLP
By: Vincent M. Giblin
120 Broadway
28th Floor
New York, NY 10271
Counsel for Plaintiffs
MANDELBAUM, SALSBURG, LAZRIS & DISCENZA, P.C.
By: William H. Healey and Phillip G. Ray
155 Prospect Avenue
West Orange, NJ 07052
Counsel for Defendant
IRENAS, Senior District Judge:
This matter comes before the Court on Defendant’s Motion to
Decertify the FLSA Collective Action, Plaintiffs’ Motion for
Partial Summary Judgment and Defendant’s Motion for Partial
Summary Judgment and.
For the reasons set forth below, all of
the motions will be denied.1
I.
Plaintiffs are loan officers and loan processors that were
employed by Defendant Freedom Mortgage Corporation.
(Memorandum
in Support of Plaintiffs’ Motion For Class Certification ¶ 2)
Defendant Freedom Mortgage Company is a lender licensed as a
mortgage broker in all 50 states with more than 100 locations
throughout the United States.
(Id. at 4) Defendant’s
headquarters is located in Mount Laurel, New Jersey.
(Id.)
Plaintiffs claim that Defendant denied them proper overtime
compensation.
(Id.)
In order to generate business for its loan products,
Defendant would purchase lists of potential customers.
5).
(Id. at
Defendant used an automated dialing system to dial these
potential customers.
(Id.) When a potential customer answered
the phone, he or she would be automatically connected to a loan
officer.2
(Id.)
The loan officer would gather basic
information about the potential customer, as well as access the
potential customer’s credit report.
(Id. at 6)
All of this
information would be entered into Defendant’s computer system,
which would then indicate to the loan officer the potential
1
The Court has subject matter jurisdiction pursuant to 29
U.S.C. § 216(b), 28 U.S.C. § 1331, 28 U.S.C. § 1337 and 28 U.S.C.
§ 1367(a).
2
Loan officers employed at Defendant’s branch offices were
responsible for procuring their own potential customers.
customer’s eligibility for different loan products.
(Id.)
The
loan officer would then advise the potential customer of the loan
products for which they are eligible, as well as the available
interest rates.
(Id.)
If the potential customer was interested
in moving forward on a loan application following discussions
with the loan officer, the potential customer would be passed
along to a loan processor.
(Id.)
Loan officers were all
compensated with a commission or bonus based on the number of
closed loans for which they were responsible.
(Id.)
Those loan
officers employed in headquarters also received a salary, while
those employed in branch offices were solely compensated through
commission.
The loan processor would collect information related to the
potential customer’s compensation and tax history.
(Id.) The
loan processor would then organize the potential customer’s
application and pass it along to the underwriter, who determined
whether the potential customer would receive a loan.
(Id. at 7)
If the underwriter needed any more information in coming to his
or her decision, the loan processor would be responsible for
gathering that information.
(Id.)
Once a loan was approved, the
loan processor was also responsible for scheduling the closing
and arranging the appraisal and title work.
(Id.)
Loan
processors were all compensated with a salary and a bonus based
on the number of closed loans for which they were responsible.
(Id.)
Plaintiffs each assert that they regularly worked in excess
of 40 hours per week without receiving overtime compensation.
(Id.)
Plaintiffs filed their original Complaint on January 29,
2009, in the United States District Court for the Central
District of California against Defendant.3
The Complaint has
since been amended on numerous occasions.
Count One of the Fourth Amended Complaint asserts a
collective action under the Fair Labor Standards Act (“FLSA”), 29
U.S.C. § 201 et seq., for failure to properly pay overtime
compensation to all the plaintiffs.
Count Two asserts a class
action under the New Jersey Wage and Hour Laws (“NJWHL”),
N.J.S.A. § 34:11-56a et seq, for failure to properly pay overtime
compensation to the New Jersey Plaintiffs.
Count Three, Four and
Five, brought by those Plaintiffs that were employed by Defendant
in California, assert claims under the California Labor Code,
California Unfair Practices Act and California Unfair Competition
Laws, respectively.
The Court conditionally certified for the purposes of
collective action under FLSA a class of employees of Defendant
who served as loan officers and loan processors at any time from
3
Upon joint stipulation, this case was transferred to the
District of New Jersey on May 29th, 2009. On September 18, 2009,
the Court consolidated this case with an almost identical
complaint, Perry v. Freedom Mortgage Corp., No. 09-0856, and
designated the Garcia Plaintiffs the named lead Plaintiffs in the
case.
January 28, 2006 to November 2, 2009.
The Court approved notice
for the potential class, ordered that such notice be mailed to
potential class members, set the opt-in period for the class at
120 days, and ordered Defendant to provide contact information
for all past and present loan officers and loan processors.
Of the 230 individuals that Plaintiffs sought to certify as
a subclass of loan officers, 100 such loan officers filed opt-in
consents for the FLSA action.
(Declaration of Phillip G. Ray ¶
20) Of the 119 individuals that Plaintiffs sought to certify as a
subclass of loan processors, 20 such loan processors filed opt-in
consents for the FLSA action.
(Id. at 21)
On February 10, 2011, Defendant moved to decertify the FLSA
collective action.
On that same day, Plaintiffs and Defendant
both moved for partial summary judgment on the loan officers’
claims under the FLSA and NJWHL.4
II.
A.
Under 29 U.S.C. § 216(b), an employee who feels his or her
right to unpaid overtime compensation has been violated may bring
an action “for and in behalf of himself or themselves and other
employees similarly situated.”
4
On December 22, 2010, Plaintiffs moved to certify a class
action under Rule 23 of all current and former loan officers and
loan processors who worked at Defendant’s Mount Laurel, New
Jersey headquarters location who failed to receive proper
overtime compensation in violation of the NJWHL. As set forth in
an opinion issued by this Court on even date herewith, that
motion will be denied.
The term “similarly situated” is not defined in the FLSA.
In “the absence of guidance from the Supreme Court and Third
Circuit, district courts have developed a test consisting of two
stages of analysis” to determine if employees are similarly
situated.
Kronick v. Bebe Stores, Inc., 2008 WL 4546368 at *1
(D.N.J. 2008).
The first analysis occurs when plaintiffs move for
conditional certification of the potential class.
analysis is also called a stage one determination.
This first
During stage
one the court determines if notice should be given to potential
class members. Morisky v. Public Service Electric and Gas Co.,
111 F.Supp.2d 493, 497 (D.N.J. 2000)(quoting Thiessen v. General
Electric, 996 F.Supp. 1071, 1080 (D.Kan. 1998)).
Should
conditional certification be awarded during stage one, then
notice will be sent out to the potential class of plaintiffs.
It is possible for a class to be certified at stage one but
fail certification at stage two.
Granting a conditional
certification in stage one is not a final or permanent decision.
Once discovery is largely complete and the case is ready for
trial, the case is in stage two.
If the defendant moves to
decertify the class, a second, final determination on class
certification will be made during stage two.
The burden of proof
that must be met by the plaintiff is higher during stage two
because the court “has much more information on which to base its
decision.”
Thiessen, 996 F.Supp. at 1080;
See also Herring v.
Hewitt Assoc., Inc., 2007 WL 2121693 (D.N.J. 2007).
During this
final determination, the court decides whether the plaintiff has
shown that he or she is “similarly situated” to the potential
class.
If the court determines during the stage two
determination that the class of plaintiffs are “similarly
situated,” then the case may proceed to trial as a collective
action.
Morisky, 111 F.Supp.2d at 497.
Should the court
determine, however, that the plaintiffs are not “similarly
situated,” then the class will be decertified or split into
subclasses.
B.
“[S]ummary judgment is proper ‘if the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party
is entitled to a judgment as a matter of law.’”
Celotex Corp. v.
Catrett, 477 U.S. 317, 322 (1986) (quoting Fed. R. Civ. P.
56(c)).
In deciding a motion for summary judgment, the Court
must construe the facts and inferences in a light most favorable
to the non-moving party.
Pollock v. Am. Tel. & Tel. Long Lines,
794 F.2d 860, 864 (3d Cir. 1986).
“‘With respect to an issue on
which the non-moving party bears the burden of proof, the burden
on the moving party may be discharged by ‘showing’– that is,
pointing out to the district court – that there is an absence of
evidence to support the nonmoving party’s case.’”
Conoshenti v.
Public Serv. Elec. & Gas, 364 F.3d 135, 145-46 (3d Cir. 2004)
(quoting Celotex, 477 U.S. at 323).
The role of the Court is not
“to weigh the evidence and determine the truth of the matter, but
to determine whether there is a genuine issue for trial.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986).
III.
A.
Defendant has moved for decertification of the FLSA
collective action, or, in the alternative, decertification of the
loan officer subclass.
Defendant first argues that a collective
action “would not be fair” because the Plaintiffs are not
similarly situated.
Next, Defendant argues that the entire
collective action should be decertified because damages would be
too difficult to calculate.
Finally, Defendant argues that the
loan officer subclass should be decertified because there is a
disparity in job duties amongst the loan officers.
The Court
disagrees with each of these arguments, and will not grant
Defendant’s motion for decertification.
First, Defendant argues that Plaintiffs are not similarly
situated.
The Court finds, based on all the evidence before it,
that the Plaintiffs have presented adequate evidence to show that
the class members are similarly situated.
All Plaintiffs within
each subclass had similar job duties, responsibilities and
compensation structures.
All Plaintiffs within each subclass
were subject to the same policy and practice of Defendant to
treat such Plaintiffs as employees exempt from the overtime
requirements of the FLSA.
All Plaintiffs within each subclass
assert common claims of failure to properly pay overtime
compensation in violation of the FLSA.
Although differences
between the Plaintiffs in each subclass may exist, any such
differences are outweighed by the similarities between those
Plaintiffs.
Because the Court finds that the Plaintiffs are
similarly situated, the Court will deny Defendant’s motion to
decertify the FLSA collective action.5
Defendant next makes a conclusory argument that because
damages will be “nearly impossible” to calculate, decertification
is necessary.
this argument.
Defendant has not presented any legal basis for
In fact, it is an employer’s obligation to
maintain proper employee records.
See 29 C.F.R. 516.2.
If an
employer is found to have violated the FLSA and damages cannot be
calculated because of the unavailability of employee records,
damages can be reasonably inferred from the evidence before the
Court.
Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680,
687-688 (1946).
Therefore difficulty in calculating damages
alone is not sufficient to warrant decertification.
5
For these same reasons, the Court will deny Defendant’s
motion to decertify the loan officer subclass. While the loan
officers employed in branch offices may have been responsible for
procuring their own leads, their responsibilities and duties were
the same as loan officers employed at headquarters in all other
respects. Importantly, all loan officers were subject to the
same overtime policies and practices of Defendant.
B.
Plaintiffs and Defendant have also each moved for partial
summary judgment.
Defendant asserts that the loan officers
qualify for the administrative exemption to the FLSA and
therefore are not entitled to overtime compensation.
Plaintiffs,
in turn, assert that the loan officers are not so entitled, and
that it is clear from the evidence that Defendant failed to
properly pay the loan officers overtime compensation.
Because
there is are disputes of material fact on these issues, the Court
will deny both motions.
Under Section 7(a) of the FLSA, employees are generally
required to be paid overtime for all hours worked in excess of 40
hours per work.
Congress has empowered the Secretary of Labor to
define certain exemptions from the FLSA’s overtime requirements
by regulation, including an exemption for administrative
employees.
29 U.S.C. § 213(a).
In regulations issued pursuant
to § 213(a), the Secretary of Labor has defined an
“administrative employee” as one that is
(1) Compensated on a salary or fee basis at a
rate of not less than $455 per week. . . (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. § 541.200.6
Defendants argue that loan officers should be exempt as
administrative employees because there work was directly related
to the general business operations of Defendant and involved
discretion and independent judgment.
Plaintiffs argue that the
loan officers were essentially internal sales people, whose work
was not a part of the general business operations and did not
involve discretion or independent judgment.
Exemptions under the
FLSA are to be “narrowly construed against the employers seeking
to assert them and their application limited to those
establishments plainly and unmistakably within their terms and
spirit.”
Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392, 4 L.
Ed. 2d 393, 80 S. Ct. 453 (1960).
For the purposes of the present motions, the Court must
construe the facts and inferences in the light most favorable to
the opposing party in considering whether the loan officers are
exempt from the FLSA.
Plaintiffs have presented evidence from
which a reasonable factfinder could determine that the loan
officers were not exempt from the FLSA, and Defendant has
presented evidence from which a reasonable factfinder could
determine that the loan officers were exempt.
6
It is clear that
There is no dispute that the loan officers received
compensation greater than $455 per week.
there is a material dispute of fact concerning the application of
the administrative exemption to the loan officers.
Summary
judgment is inappropriate when such disputes of material fact
exist.
Both parties’ motions for partial summary judgment will
be denied.7
IV.
For the reasons set forth above, Plaintiffs’ Motion for
Partial Summary Judgment, Defendant’s Motion for Partial Summary
Judgment and Defendant’s Motion to Decertify the FLSA Collective
Action will be denied.8
An appropriate Order accompanies this
Opinion.
Dated: June 10, 2011
s/ Joseph E. Irenas
JOSEPH E. IRENAS, S.U.S.D.J.
7
The parties also moved for summary judgment as to the
NJWHL. Like the FLSA, The NJWHL includes an administrative
exemption to its overtime compensation requirements. N.J.A.C.
12:56-7.2. The NJWHL is patterned after the FLSA, and New Jersey
courts look to the FLSA regulations for guidance. See Marx v.
Friendly Ice Cream Corp., 380 N.J. Super 302, 309 (App.Div.
2005). Therefore eligibility for the administrative exemption
under the FLSA would also be a determination of eligibility for
the administrative exemption under the NJWHL, and the parties
motions for summary judgment on this issue will be denied.
Because the Court denied the Plaintiffs motion to certify a class
under the NJWHL, this holding only applies to the named
Plaintiffs.
8
Plaintiffs have moved for an award of liquidated damages
and a judgment that Plaintiffs are entitled to a three-year
statute of limitations. Defendant has also moved for summary
judgment on liquidated damages and the statute of limitations.
These are fact-specific inquiries best left to trial when all the
evidence will be available. For that reason, Plaintiffs’ and
Defendant’s additional motions will be denied.
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