Clark et al v. Centene Corporation et al

Filing 127

ORDER GRANTING IN PART AND DENYING IN PART Defendant Centene Company of Texas, L.P.'s 110 Motion for Summary Judgment; DENYING Defendant Centene Company of Texas, L.P.'s 111 Motion to Decertify; GRANTING IN PART AND DENYING IN PART Plaintiff's 113 Motion for Partial Summary Judgment. Signed by Judge Sam Sparks. (klw)

FILED
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
AUSTIN DIVISION

2014SEp3
CLFK

us

MtQ:5Q

DT5Ti cOlmr

OF TEX.S

KATHY CLARK, AMY ENDSLEY, SUSAN
GRIMMETT, MARGUERIETTE SCHMOLL,
and KEVIN ULRICH, on Behalf of Themselves
and All Others Similarly Situated,
Plaintiffs,
Case No. A-12-CA-174-SS
CENTENE COMPANY OF TEXAS, L.P.,
Defendant.

ORDER
BE IT REMEMBERED on this day the Court reviewed the file in the above-styled cause, and
specifically Defendant Centene Company of Texas, L.P.'s Motion for Summary Judgment [#110],

Plaintiffs Kathy Clark, Amy Endsley, Susan Grimmett, Margueriette Schmoll, and Kevin Ulrich' s
Response [#122], and Centene's Reply [#125]; Centene's Motion to Decertify [#111], Plaintiffs'
Response [#119], and Centene' s Reply [#124]; and Plaintiffs' Motion for Partial Summary Judgment
[#113], Centene's Response [#120], and Plaintiffs' Reply [#126]. Having reviewed the documents,

the governing law, and the file as a whole, the Court now enters the following opinion and orders.

Background
This is an FLSA collective action brought by a number of utilization review nurses against

their employer, Centene Company of Texas, to recover unpaid overtime wages. Utilization review
consists of reviewing medical authorization requests submitted by healthcare providers to verify
"medical necessity" and the "appropriate level of care" for insurance coverage and payment

V

purposes. Plaintiffs are nurses who primarily perform utilization review, though theirjob titles vary.

Nurses reviewing out-patient service requests are referred to as pre-certification, pre-authorization,
or prior authorization (PA) nurses. Nurses reviewing in-patient service requests are referred to as

concurrent review (CR) nurses. Nurses of both types are also more broadly referred to as Case
Managers (CM5).

Plaintiffs are all nurses, but have varying degrees of education and hold different licenses and
certifications. Among the different classifications are licensed practical nurses (LPNs), licensed

vocational nurses (LVNs), and registered nurses

(RNs).1

In Texas, an LVN must complete an

educational program approximately one-year in length and pass the NCLEX-PN licensing

examination. See 22 TEX. ADMIN. CODE § 214.9(a)(1) (LVN program of study lasts "a minimum of
1,398 clock hours: 558 hours for classroom instruction and 840 hours for clinical practice");
Id.

§ 2 17.4(a).

An RN must complete an educational program between two and four years in length

and pass the NCLEX-RN licensing examination. See

Id.

§

2 15.9(a) (RN program of study lasts "at

least the equivalent of two (2) academic years and shall not exceed four (4) calendar years");
Id.

§

217.4(a). Nurses of all types may also obtain four-year degrees (e.g., a Bachelor's of Science

in Nursing), advanced degrees, and advanced certifications, and at least some CMs employed by
Centene hold such qualifications. The baseline requirements to qualify for any CM job at Centene
are: (1) licensure as an LPN, LVN, or RN, and (2) two or three years of clinical nursing experience.

This Court previously conditionally certified a class of utilization review nurses. The total
number of plaintiffs, including the original five named plaintiffs, currently stands at thirty. Both sides

LVNs and LPNs are essentially identical roles given different names by different state regulators. In Texas,
the term LVN is used.

-2-

have now filed summary judgment motions on a handful of issues, though both motions focus
heavily on Centene's alleged FLSA exemption defenses. Centene has also moved to decertify the
class on the basis the twenty-five opt-in plaintiffs are not similarly situated to the named plaintiffs.

Analysis
I.

Motions for Summary Judgment

A.

Legal Standard
Summary judgment shall be rendered when the pleadings, the discovery and disclosure

materials on file, and any affidavits show that there is no genuine dispute as to any material fact and

that the moving party is entitled to judgment as a matter of law. FED. R. Civ. P. 56(a); Celotex Corp.
v.

Catrett, 477 U.S. 317, 323-25 (1986); Washburn

v.

Harvey, 504 F.3d 505, 508 (5th Cir. 2007).

A dispute regarding a material fact is "genuine" if the evidence is such that a reasonable jury could

return a verdict in favor of the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,248
(1986). When ruling on a motion for summary judgment, the court is required to view all inferences

drawn from the factual record in the light most favorable to the nonmoving party. Matsushita Elec.
Indus. Co.

v.

Zenith Radio, 475 U.S. 574, 587 (1986); Washburn, 504 F.3d at 508. Further, a court

"may not make credibility determinations or weigh the evidence" in ruling on a motion for summary

judgment. Reeves

v.

Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150 (2000); Anderson, 477

U.S. at 254-55.

Once the moving party has made an initial showing that there is no evidence to support the

nonmoving party's case, the party opposing the motion must come forward with competent summary

judgment evidence of the existence of a genuine fact issue. Matsushita, 475 U.S. at 586. Mere
conclusory allegations are not competent summary judgment evidence, and thus are insufficient to
-3-

defeat a motion for summary judgment Turner v. Baylor Richardson Med. Ctr., 476 F.3d 337, 343
(5th Cir. 2007). Unsubstantiated assertions, improbable inferences, and unsupported speculation are

not competent summary judgment evidence. Id. The party opposing summary judgment is required
to identify specific evidence in the record and to articulate the precise manner in which that evidence

supports his claim. Adams

v.

Travelers Indem. Co. of Conn., 465 F.3d 156, 164 (5th Cir. 2006).

Rule 56 does not impose a duty on the court to "sift through the record in search of evidence" to

support the nonmovant's opposition to the motion for summary judgment. Id. "Only disputes over
facts that might affect the outcome of the suit under the governing laws will properly preclude the
entry of summary judgment." Anderson, 477 U.S. at 248. Disputed fact issues that are "irrelevant

and unnecessary" will not be considered by a court in ruling on a summary judgment motion. Id. If

the nonmoving party fails to make a showing sufficient to establish the existence of an element

essential to its case and on which it will bear the burden of proof at trial, summary judgment must
be granted. Celotex, 477 U.S. at 322-23.
B.

Application

1.

Exemption Defenses
Several classes of employees are statutorily exempt from the FLSA' s overtime requirements.

See 29 U.S.C.

§

213 (listing exemption categories). "An employer claiming an exemption bears the

burden of proving that the exemption claimed is valid." Heidtman

v.

Cnty.

of El Paso,

171 F.3d

1038, 1042 (5th Cir. 1999). "Exemptions under the FLSA are construed narrowly against the

employer, and the employer bears the burden to establish a claimed exemption." Songer v. Dillon
Res., Inc., 618 F.3d 467, 471 (5th Cir. 2010). As the Fifth Circuit has explained, "the ultimate

decision whether the employee is exempt from the FLSA's overtime compensation provisions is a
-4-

question[] of law." Lott v. Howard Wilson Chrysler-Plymouth, Inc., 203 F.3d 326, 331 (5th Cir.
2000); see also Dalheim

v.

KDFW-TV, 918 F.2d 1220, 1226 (5th Cir. 1990) (exemption

determination, "though based on both historical fact and factual inferences, is properly characterized
as a conclusion of law")

Centene claims Plaintiffs are exempt under at least one of three exemptions: (1) the learned

professional exemption; (2) the administrative exemption; or (3) the combination exemption. The
Court addresses each in turn.

Learned Professional Exemption

a.

The FLSA exempts from its overtime requirements "any employee employed in a bona

fide.

.

.

professional capacity." 29 U.S.C.

§

213(a)(1). Department of Labor regulations further

define which employees qualif,i for this "learned professional" exemption. The regulations explain:
(a) To qualify for the learned professional exemption, an employee's primary duty
must be the performance of work requiring advanced knowledge in a field of science
or learning customarily acquired by a prolonged course of specialized intellectual
instruction. This primary duty test includes three elements:

(1) The employee must perform work requiring advanced knowledge;
(2) The advanced knowledge must be in a field of science or learning; and
(3) The advanced knowledge must be customarily acquired by a prolonged

course of specialized intellectual instruction.
29 C.F.R.

§ 541.301(a).2

2

In addition to satisfying this "primary duty test," exempt employees "must be compensated on a salary basis
at a rate of not less than $455 per week." 29 C.F.R. § 541.500(a). It is undisputed Plaintiffs meet the salary requirement.

-5-

Plaintiffs first argue their work does not require "advanced knowledge
acquired by a prolonged course of specialized instruction."

See

id.

§

.

.

.

customarily

541.30 1(a)(3). The regulations

contain a lengthy explanation of that phrase:
The phrase "customarily acquired by a prolonged course of specialized instruction"
restricts the exemption to professions where specialized academic training is a
standard prerequisite for entrance into the profession. The best prima facie evidence
that an employee meets this requirement is the possession of the appropriate
academic degree. However, the word "customarily" means that the exemption is also
available to employees in such professions who have substantially the same
knowledge level and perform substantially the same work as the degreed employees,
but who attained the advanced knowledge through a combination ofwork experience
and intellectual instruction. Thus, for example, the learned professional exemption
is available to the occasional lawyer who has not gone to law school, or the
occasional chemist who is not the possessor of a degree in chemistry. However, the
learned professional exemption is not available for occupations that customarily may
be performed with only the general knowledge acquired by an academic degree in
any field, with knowledge acquired through an apprenticeship, or with training in the
performance of routine mental, manual, mechanical or physical processes. The
learned professional exemption also does not apply to occupations in which most
employees have acquired their skill by experience rather than by advanced
specialized intellectual instruction.
Id. § 541.301(d).

Nurses also receive special attention in the regulations:
Registered nurses who are registered by the appropriate State examining board
generally meet the duties requirements for the learned professional exemption.
Licensed practical nurses and other similar health care employees, however, generally
do not qualify as exempt learned professionals because possession of a specialized
advanced academic degree is not a standard prerequisite for entry into such
occupations.
Id. § 541.301 (e)(2); see also Defining and Delimiting the Exemptions for Executive, Administrative,

Professional, Outside Sales and Computer Employees, 69 Fed. Reg. 22,122, 22,153 (Apr. 23, 2004)
(to be codified at 29 C .F .R. pt. 541) (hereinafter "Defining Exemptions") ("The Department's long-

standing position is that RNs satisfy the duties test for exempt learned professionals, but LPNs do

not. As re-emphasized by the Administrator in an October 19, 1999 Opinion Letter, 'in virtually

every case, licensed practical nurses cannot be considered exempt, bona fide, professionals."

(citation omitted)).
The regulations make clear RNs are generally considered learned professionals, while LPNs
(and, by extension, their functional equivalent in Texas, LVNs) are not. There is no dispute the CM

position at Centene requires, at a minimum, only an LVN or LPN license and two or three years of
practical experience. While RNs and nurses with more advanced degrees and certifications are also
qualified for and hired for CM jobs, the Court's focus in analyzing the availability of the learned

professional exemption is on the minimum requirements for the job. See, e.g., Young v. Cooper
Cameron Corp., 586 F.3d 201, 206 (2d Cir. 2009) ("Ifajob does not require knowledge customarily
acquired by an advanced educational degreeas for example when many employees in the position
have no more than a high school diplomathen, regardless of the duties performed, the employee
is not an exempt professional under the FLSA."); Dybach v. State of Fla. Dep 't of Corrs., 942 F.2d

1562, 1565 (11th Cir. 1991) ("[T]he determinative factor is the job requirement and not the

education in fact acquired by the employee."); see also Kadden v. VisuaLex, LLC, 910 F. Supp. 2d
523, 539-40 (S.D.N.Y. 2012) (holding graphics consultant with law degree was not an exempt

learned professional where job did not require advanced legal training).
Centene contends this educational requirement is satisfied because all CMs must have

something more than a high school diploma: they must have, at a minimum, attended some sort of
nursing school program and obtained an LVN license. But some instruction beyond the high school
level is not the same as "a prolonged course of specialized intellectual instruction." See 29 C.F.R.
§

541.301(d). The regulations expressly state the "best prima facie evidence" the educational
-7-

requirement is met "is possession of the appropriate academic degree." Id. (emphasis added). LVNs
do not necessarily hold any academic degree. The LVN program may be completed, and a license

obtained, without earning any academic degree whatsoever. The Department of Labor historically

treats LVNs as non-exempt, which is strong evidence the additional instruction LVNs receive beyond
the high school level is insufficient to qualify them for the learned professional exemption. See

Defining Exemptions, 69 Fed. Reg. at 22,153 ("LPNs and LVNs are not required to have an
advanced degree or undergo a prolonged course of study in a recognized field of science or

learning."); see also Vela v. City of Hous., 276 F.3d 659, 675 (5th Cir. 2001) (holding paramedics

and EMTs do not qualify as learned professionals because no "college degree" is required for thej ob,
and course of study requiring "880 hours of specialized training" was insufficient to meet

educational requirement).3

If nursing

school4

is insufficient standing alone, Centene argues its requirement CMs also

possess two or three years of clinical experience shows its CMs are learned professionals. Although
the regulations recognize the term "customarily" encompasses employees "who attained the

advanced knowledge through a combination of work experience and intellectual instruction," LVNs

The Department of Labor's historical treatment of LVNs and LPNs is not altered by Texas laws requiring
certain healthcare workers to be "qualified to provide the requested service." See TEX. INS. CODE § 4201.252(b).
Contrary to Centene's argument, this language does not "require[] Plaintiffs to have advanced knowledge," at least not
as the FLSA and its implementingregulations use that phrase. Def.'s Mot. Summ. J. [#110], at 4. LVNs and LPNs are
qualified to work directly with patients in a number of ways, but that has not historically made them learned
professionals.

Centene uses this generic phrase, "nursing school," to refer to the educational requirements imposed on CMs.
But, as described in more detail above, RNs and LVNs attend different educational programs, though both may be called
"nursing school." Further, some RNs may attend "nursing school" for two years and become licensed, while others may
attend "nursing school" for four years and obtain a degree. Referring to all ofthese programs as "nursing school" masks
substantial differences between the programs, and is at best a disingenuous characterization of Centene's actual job
requirements.

-8-

do not fall within this caveat. See 29 C.F.R.

§ 541.301(d).5

The regulations clarify the "customarily"

language exists to capture, for example, "the occasional lawyer who has not gone to law school." Id.

Most lawyers possess law degrees, and thus the rare practicing lawyer without such a degree exists
as an outlier of presumably equal training operating in a field traditionally occupied by learned
professionals.6

Moreover, this caveat captures only those individuals who operate "in a field of

science or learning where specialized academic training is a standard prerequisite for entrance into

the profession." Id. While medicine is such a profession, not all persons working in the medical field
are learned medical professionals. See id. ("Thus, the learned professional exemption is available

for lawyers, doctors and engineers, but not for skilled tradespersons, technicians, beauticians or

licensed practical nurses, as none ofthese occupations require specialized academic training at the
level intended by the regulations as a standard prerequisite

for entrance into the profession."

(emphasis added)). Finally, "[t]he learned professional exemption also does not apply to occupations

in which most employees have acquired their skill by experience rather than by advanced

intellectual instruction." 29 C.F.R.

§ 54 1.301(d)

(emphasis added). Because LVNs do not undergo

5Pippins v. KPMG, LLP, No. 1 3-889-CV, 2014 WL 3583899 (2d Cir. July 22, 2014), cited by Centene on this
point, is inapposite. In Pippins, the Second Circuit held KPMG's audit associates qualified for the learned professional
exemption. Id. at * 14. The Court acknowledged the plaintiffs admitted "the vast majority of Audit Associates had
accounting degrees and were eligible to take the CPA exam." Id. at * 13 (internal quotation marks omitted). The Court
therefore rejected the argument KPMG' s hiring of a single, non-degree-holding audit associate showed audit associates
as a class lacked advanced accounting knowledge. Id. at * 14. As the Second Circuit explained, "the critical inquiry is
not whether there might be a single Audit Associate who does not satisfy a specific set of academic requirements, but
whether the 'vast majority' of Audit Associates required a prolonged, specialized education to fulfill their role as
accountants." Id. Here, the evidence does not establish the "vast majority" of CMs hired by Centene received "a
prolonged, specialized education." Id To the contrary, all five of the named plaintiffs are LVNs, as are eleven of the
thirty total Plaintiffs.
6

See Defining Exemptions, 69 Fed. Reg. at 22,150 ("Characteristically, the members of the [legal] profession
are graduates of law schools, but some few oftheir fellow professionals whose status is equal to theirs, whose attainments
are the same, and whose word is the same did not enjoy that opportunity. Such persons are not barred from the

exemption.").

the kind of advanced instruction contemplated by the exemption, the advanced knowledge they bring

to the CM position is primarily a result of their clinical experience. l'he learned professional

exemption was not intended to cover such employees. See Defining Exemptions, 69 Fed. Reg. at
22,153 ("The Department further clarifies that LPNs and other similar health care employees

generally do not qualify as exempt learned professionals, regardless ofwork experience and training,

because possession of a specialized advanced academic degree is not a standardprerequisite for entry
into such occupations." (emphasis added)).

Construing the learned professional exemption strictly against Centene, as the Court is

required to do, the summary judgment record establishes Plaintiffs are not qualified for the learned
professional exemption. Plaintiffs do not satisfy the educational requirement to invoke the exemption

because it is undisputed an employee is qualified to work as a CM with only an LVN or LPN license
and two or three years of clinical experience. LVN and LPNs have historically not been treated as

exempt because the education required to obtain an LVN or LPN license does not meet the level of

education expected by the FLSA and its implementing regulations. Even though many Plaintiffs are
RNs and hold advanced degrees and certificates, the CM job does not require those advanced
qualifications. Because the CM job does not satisfy the education requirement, the Court need not

address the parties' arguments concerning the other prongs of the primary duty test. The Court
therefore DENIES Centene's motion for summary judgment and GRANTS Plaintiffs' motion for
summary judgment on this exemption defense.

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Administrative Exemption

b.

The FLSA also exempts from its overtime requirements "any employee employed in a bona
fide

.

.

administrative

.

.

.

.

capacity." 29 U.S.C.

§

213(a)(1). Like the learned professional

exemption, this administrative exemption is fleshed out in the regulations:
The term "employee employed in a bona fide administrative capacity" in section
13 (a)( 1) of the Act shall mean any employee:
(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(a). Plaintiffs again concede the salary requirement is satisfied in this case, but

contest both the second and third prongs.

The second prong requires an employee to primarily perform office work7 "directly related
to the management or general business operations of the employer or the employer's customers." Id.
§

541.200(a)(2). The regulations further define this phrase, explaining a qualifying employee "must

perform 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." Id.

§

541.201(a). This kind of 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

There is no dispute Plaintiffs' work qualifies as "office or non-manual work."

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benefits; labor relations; public relations; government relations; computer network,
internet and database administration; legal and regulatory compliance; and similar
activities.
Id. § 541.201(b).

Courts analyzing this prong of the administrative exemption test often use "the so-called

'production versus staff dichotomy." Defining Exemptions, 69 Fed. Reg. at 22,140. While perhaps
a bit archaic, this dichotomy attempts to distinguish "between those employees whose primary duty
is administering the business affairs of the enterprise from those whose primary duty is producing

the commodity or commodities, whether goods or services, that the enterprise exists to produce and

market." Daiheim

v.

KDFW-TV, 918 F.2d 1220, 1230 (5th Cir. 1990). The Department of Labor

treats this dichotomy as "illustrativebut not dispositiveof exempt status." Defining Exemptions,
69 Fed. Reg. at 22,141. Plaintiffs contend they fall on the production side
as the "worker bees"

of this divide, operating

of the company. Centene insists Plaintiffs are more like administrative staff,

not production-line workers.
The summary judgment record establishes Plaintiffs' jobs are more "production" than

"administration." While it is somewhat difficult to determine precisely what Centene' s "product"
is from the parties' truncated descriptions, Centene self-describes its business as "administering

government sponsored health insurance plans." Def.'s Mot. Summ. J. [#110], at 17. The role of the
CM in this process is to analyze claims for payment, determine whether the requested procedure is

medically necessary and appropriate, and either authorize payment or recommend denial ofpayment.
This is a core functionality of Centene's business model, and is also essentially unique to Centene's

niche industry. Plaintiffs are not accountants or compliance officers or human resource managers

whose job descriptions could encompass jobs in any number of industries.
-12-

See

29 C.F.R.

§

541.201(b). Instead, Plaintiffs are uniquely positioned to "produce" Centene' s "product"in this

case, the service of administering Medicaid claims. If Plaintiffs are administrative employees, it is

difficult to conceptualize who within the Centene organization is not an administrative employee.

Centene' s exemption argument rests primarily on a substantial number of cases and
supporting authorities holding insurance claims adjusters qualify for the exemption because they

perform "work directly related to the. . . general business operations" ofthe insurance company. See,
e.g., Cheatham

v.

Allstate Ins. Co., 465 F.3d 578, 585 (5th Cir. 2006) (holding claims adjusters'

duties "constitute Allstate's administrative operations"); 29 C.F.R.

§

541.203(a) ("Insurance claims

adjusters generally meet the duties requirements for the administrative exemption .

. .

."). These

cases are distinguishable in two ways.
First, insurance claims adjusters work for insurance companies. Those insurance companies
write and sell insurance policies. As the Fifth Circuit had noted, "[am insurance company's product
is its policies, and [claims adjusters'] duties [do] not include writing and selling insurance."

Cheatham, 465 F.3d at 585. The Fifth Circuit therefore concluded, as have courts in many other
circuits, that claims adjusting is an administrative task within the insurance company's business.
Centene is distinct because it is not an insurance company and does not sell insurance policies. The
product it produces is the service of administering Medicaid claims for the State of Texas. Plaintiffs
are directly involved in the production and provision of that service, unlike claims adjusters who

process claims made under their employers' insurance products. See Dalheim, 918 F.2d at 1230

("production" side of dichotomy includes "those whose primary duty is producing the. . . services[]
that the enterprise exists to produce and market"); see also Bratt v. Cnty. of Los Angeles, 912 F.2d
1066, 1070(9th Cir. 1990) ("The district court correctly captured the essence of [the "directly related

-13-

to management policies or general business operations"] requirement by interpreting it to mean 'the

running of a business, and not merely.

. .

the day-to-day carrying out of its affairs.")

Second, Plaintiffs' duties are largely distinct from those of an insurance claims adjuster. See

Cheatham, 465 F.3d at 585 ("[A]s insurance company adjusters, Appellants advised the
management, represented Allstate, and negotiated on Allstate's behalf; these duties are
administrative in nature."); id. at 586 (insurance adjusters' duties included "determining coverage,
conducting investigations, determining liability and assigning of fault to parties, evaluating bodily
injuries, [and] negotiating a final settlement"); see also In re Farmers Ins. Exchange, Claims

Representatives' Overtime Pay Litig., 481 F.3d 1119, 1129 (9th Cir. 2006). The Department of

Labor's regulations acknowledge insurance claims adjuster are "generally" exempt, so long as "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." 29 C.F.R. § 541.203(a).
Other than "evaluating and making recommendations regarding coverage of claims," CMs do not

perform these roles. CMs review patient information and evaluate requested services using various
industry payment guidelines. Based on the summary judgment record before the Court, CMs appear
to occupy a distinct and separate niche from that of the insurance claims adjuster. See Rieve

v.

Coventry Health Care, Inc., 870 F. Supp. 2d 856, 873 (C.D. Cal. 2012) (holding RN case manager

of workers compensation claims was not administratively exempt under state-law analogue to FLSA
because case manager's duties were "far from questions affecting management or the general
business operations of the business")

-14-

Centene also contends CMs are administratively exempt because they perform administrative
duties for Centene' s customer, the State of Texas, by analyzing claims for payment under Medicaid.
See Withrow v. Sedgwick Claims Mgmt. Serv., Inc., 841 F. Supp. 2d 972,979-80 (S.D.W. Va. 2012)

(holding plaintiff claim examiners satisfied "directly related to business operations" prong because

examiners "administered [state workers compensation] claims, rather than produced or sold a
product"); see also Roe-Midgett v. CCServs., Inc., 512 F.3d 865, 872 (7th Cir. 2008) (holding auto
insurance claims adjusters were administratively exempt even when they act as third-party claims

adjusters for employer's customers). Both Withrow and Roe-Midgett are distinguishable because

those cases involved classic insurance claims adjusters, employees who are generally accepted as

administrative employees. Thus the distinction between in-house claims adjusting and outsourced
claims adjusting was unpersuasive. See Roe-Midgett, 512 F.3d at 872 ("CCS's customers are
insurance companies in the business of selling policies, and employees who process claims against

those policies are performing an administrative function for CCS's customers (i.e., a task that

administers the policies 'produced' by the insurers)."). CMs are not identical to claims adjusters, as
discussed above. See id. at 871 ("[Claims adjusters] are at the front lines of CCS's auto claims
adjusting operation; they spend most of their time in the field and represent the 'face' of CCS to the
claimants and mechanics with whom they interact.")

Insurance claims adjusters have a special place in FLSA jurisprudence, as shown by the
prominent placement of insurance claims adjusters as the first example in the regulations of
employees who are generally administratively exempt. See 29 C.F.R.

§

54 1.203(a). This special

treatment no doubt explains many of the cases holding claims adjusters exempt. But more broadly,
the administrative exemption is designed to apply to employees "performing general administrative
-15-

work applicable to the running of any business" rather than "employees directly producing the good
or service that is the primary output of a business." Davis

v.

J.P. Morgan Chase & Co., 587 F.3d

529, 535 (2d Cir. 2009). Employees involved in carrying out the day-to-day business operations of
a company are in the latter category, not the former. See id. at 536 (collecting cases so holding); see

also Neary v. Metro. Prop. & Gas. Ins. Co., 517 F. Supp. 2d 606, 614 (D. Conn. 2007) ( 541.201(b)
lists "duties clearly related to servicing the business itself.

. . .

Such are not activities that involve

what the day-to-day business specifically sells or provides, rather these are tasks that every business
must undertake in order to function."). Because the summary judgment record establishes CMs cany
out the day-to-day business of Centene, allowing it to provide the service it charges its customers
for, the Court DENIES Centene's motion for summary judgment and GRANTS Plaintiffs' motion

for summary judgment on this exemption defense.8
c.

Combination Exemption
Centene makes a brief and conclusory alternative argument suggesting the "combination

exemption" should apply if the Court rejects its arguments on both the learned professional and
administrative exemptions. As the Fifth Circuit has explained it, the combination exemption applies
"only where (1) an employee performs more than one type of work that would be exempt except that
(2) neither type

of work alone can be termed the employee's primary duty, but (3) all of the

putatively exempt work taken together constitutes the employee's primary duty." Dalheim, 918 F.2d
at 1232. In Daiheim, the Fifth Circuit held it was not error for the district court to refuse to consider

the combination exemption because the district court had found the relevant employees "do no

8

Because the Court concludes Plaintiffs do not meet the "directly related" test, the Court need not consider
whether Plaintiffs also exercise discretion and independent judgment under the third prong of the administrative
exemption test.

-16-

exempt work." Id. "Obviously, an employer cannot tack various nonexempt duties and hope to create
an exemption." Id. Because the work constituting Plaintiffs' primary duty is not exempt under either
the learned professional or administrative exemptions, there is no combination of exempt duties to

tack together to fit within this exemption. Centene' s motion for summary judgment is DENIED on
this exemption defense.
2.

Affirmative Defenses

a.

Section 259 Good Faith Defense
"Section 10 of the Portal-to-Portal Act, 29 U.S.C.

§

259, provides an employer with a

complete defense to an FLSA proceeding when the employer has acted in good faith in conformity

with a written administrative regulation, order, ruling, administrative practice or enforcement policy

of the Secretary of Labor." Brock v. El Paso Natural Gas Co., 826 F.2d 369, 374 n.8 (5th Cir. 1987);
29 U.S.C.

§

259(a). Centene asserted the

§

259 defense in its live Amended Answer, and identified

via interrogatory answers a handful of authorities it allegedly relied upon: Texas state regulations,
29 C.F.R.

§

541.301, and Section 22i36 of the Department of Labor's Field Operations Handbook.

Plaintiffs contend there is insufficient evidence to establish Centene actually relied on any of these
authorities, and the authorities are either irrelevant or too general to justify reliance.

At trial, Centene will of course bear the burden of proving its affirmative defense of good
faith pursuant to

§

259. Centene asserted via interrogatory answer it relied on the authorities

identified above. Interrogatory answers are specifically listed among the types of competent summary

judgment evidence in Rule 56.

FED.

R. Civ. P. 56(c)(1); see also Celotex Corp., 477 U.S. at 324.

Although this is a slim reed, it is sufficient to establish, for summary judgment purposes, Centene
relied as it alleges. To Plaintiffs' second point, many of the authorities identified by Centene do not
-17-

qualify as proper materials for reliance under § 259. The FLSA regulation, and the Handbook section

containing the same language, do qualify. See Brock, 826 F.2d at 374 n.8. On this record there are
at the least factual disputes regarding the

§

259 defense, and Plaintiffs' summary judgment motion

is therefore DENIED on this ground.

b.

Section 260 Good Faith Defense

If an employer is ultimately found liable for violating the FLSA, the district court may
decline or reduce any liquidated damages award "if the court concludes that the employer acted in

'good faith' and had 'reasonable grounds' to believe that its actions complied with the FLSA."
Singer v. City of Waco, Tex., 324 F.3d 813, 822-23 (5th Cir. 2003) (quoting 29 U.S.C. § 260). "[A]n
employer faces a substantial burden of demonstrating good faith and a reasonable belief that its
actions did not violate the FLSA." Id. at 823 (internal quotation marks omitted).

Plaintiffs contend Centene is not entitled to this defense because it cannot carry its substantial
burden. centene has provided some evidence it evaluated Plaintiffs' job duties and exempt statuses,

and relied on federal regulations in making its decision. If centene is ultimately held liable, it will
be within this Court's discretion, based upon the evidence adduced at trial, to determine whether

liquidated damages are appropriate. The Court will make the determination at that time, but not
before. Plaintiffs' motion is DENIED on this ground.
c.

Waiver

If an employee agrees to settle a potential FLSA claim against his employer regarding the
number or hours worked or his rate of pay, that settlement agreement will be treated as "an
enforceable resolution of those FLSA claims" and will bar any future FLSA action over the same
issue. Martin v. Spring Break '83 Prods., L.L.C., 688 F.3d 247, 255 (5th Cir. 2012). Fourplaintiffs
-18-

apparently signed releases and accepted payments upon leaving Centene. Although Centene asserted
a waiver defense in its answer, Plaintiffs contend none of the four releases mentions a dispute over

hours or pay, or the FLSA more broadly. Centene offers no response, and the Court therefore
assumes any waiver defense is being waived. The Court GRANTS Plaintiffs' motion on this ground.
d.

Laches and Estoppel
"It is unclear whether the equitable defenses of waiver, estoppel, and laches are available

under the FLSA." Coffin v. Blessey Marine Servs., Inc., No. H- 11-0214, 2011 WL 2193378, at

*

1

(S.D. Tex. June 6, 2011). Centene has asserted laches and estoppel defenses, and Plaintiffs argue

they are entitled to summary judgment on both because neither is available under the FLSA. It is

unclear what role a laches defense would serve given the FLSA' s statute of limitations, but in any
event, Centene does not offer any argument in support of its defense. The Court presumes it waived.
With respect to estoppel, there are at least some circumstances where estoppel may be relevant in
an FLSA case. See Brumbelow v. Quality Mills, Inc., 462 F.2d 1324, 1327 (5th Cir. 1972) ("On the

narrow facts of this [FLSA] case, the court correctly granted a directed verdict on the basis that the

appellant was estopped and could not profit from her own wrong in furnishing false data to the
employer."). The Court will determine the availability and applicability of any estoppel defense
based on the evidence presented at trial. Plaintiffs' motion for summary judgment is GRANTED as
to the laches defense, but DENIED as to the estoppel defense.
3.

Willfulness
The statute of limitations for willful violations of the FLSA is three years; for all other

violations, the statute of limitations is two years. 29 U.S.C.

§

255. The willfulness standard under

the FLSA requires the plaintiff to show "the employer either knew or showed reckless disregard for

-1

the matter of whether its conduct was prohibited by the statute." McLaughlin
486 U.S. 128, 133 (1988); Mireles

v.

v.

Richiand Shoe Co.,

Frio Foods, Inc., 899 F.2d 1407, 1416 (5th Cir. 1990).

Centene argues there can be no finding of willfulness in this case, as a matter of law, because
the evidence shows: (1) Centene worked with an affiliated management company to classifyj obs as

exempt or non-exempt based onjob duties; (2) Centene consulted outside resources and worksheets
when formulating its job descriptions; and (3) a supervisor testified no nurses ever complained to

her about their exempt status. Plaintiffs argue there is evidence of willfulness, namely: (1) Centene
stated via interrogatory it does not know who classified Plaintiffs' jobs as exempt, or when; (2)
Centene relied on irrelevant materials in classifying Plaintiffs' jobs as exempt, including state law

regulations andjob description surveys for case managers with substantially different responsibilities
than Plaintiffs; and (3) Centene relied on Department of Labor regulations which expressly state
LPNs and LVNs are generally not exempt (namely, 29 C.F.R.

§

541 .301(e)(2)).

The Court concludes there are genuine factual disputes precluding summary judgment on the
willfulness issue. Based on the evidence summarized above, reasonable jurors could conclude

Centene at least acted recklessly in classifying Plaintiffs' jobs as non-exempt. Because the Court
cannot say "no reasonable juror could find" for Plaintiffs on this issue, summary judgment is
inappropriate. Jenkins v. Methodist Hosps. of Dali., Inc., 478 F.3d 255, 260 (5th Cir. 2007).
4.

Individual Plaintiff Issues
Centene argues eight individual Plaintiffs should be dismissed. The Court addresses each in

turn.

-20-

PlaintiffNorma Martinez apparently indicated to Plaintiffs' counsel she wished to withdraw
from the class. Plaintiffs' counsel communicated that desire to Centene' s counsel, and Martinez's

deposition was canceled. The Court will therefore DISMISS Martinez from the suit.
The parties agree Plaintiffs Gabriel Mendiola and Christina Vaughn should be dismissed

because their claims are time-barred even under the three-year statute of limitations. The Court
therefore GRANTS Centene's motion for summary judgment on Mendiola and Vaughn's claims.

The evidence indicates Plaintiff Rose Guaj ardo was employed as a Prior Authorization Case
Manager. Although Guajardo was apparently not a PA or CR nurse, it is unclear what exactly her

job was and whether she is a proper class member. The Court declines to grant summary judgment
on Guaj ardo' s claims at this time because the evidence of her job title at least potentially places her

within the class.
Centene contends Plaintiffs Cynthia Cantu, Cordelia Garcia, Sherri Hodsdon, and

Margueriette Schmoll' s claims are barred by the two-year statute of limitations. Because factual
disputes regarding willfulness prevent a determination of the applicable statute of limitations at this
point, Centene's motion is DENIED as to these plaintiffs.

II.

Motion to Decertify

A.

Legal Standard
The Fifth Circuit "has never set a legal standard for collective-action certification." Roussell

v.

Brinker Int'l, Inc., 441 F. App'x 222,226 (5th Cir. 2011) (unpublished) (citing Mooney v. Aramco

Servs. Co., 54 F.3d 1207, 1216 (5th Cir. 1995), overruled on other grounds by Desert Palace, Inc.
v.

Costa, 539 U.S. 90 (2003)). As a result, district courts within the Fifth Circuit must choose

-21-

between two approaches: the Lusardi two-stage approach,9 and the spurious class action approach.
Id. This Court previously agreed with the parties and held the Lusardi approach was preferable in

this case.

At the decertification stage of the Lusardi approach, the trial court's task is to determine

whether the opt-in plaintiffs are similarly situated to the named plaintiffs. Mooney, 54 F .3 d at 1214.
Three factors are relevant to this determination: "(1) the disparate factual and employment settings

of the individual plaintiffs; (2) the various defenses available to defendant which appear to be
individual to each plaintiff; and (3) fairness and procedural considerations." Roussell, 441 F. App'x
at 226 (quoting Mooney, 54 F.3d at 1213 n.7).
B.

Application
Centene argues the Plaintiffs in this case are not similarly situated, devoting pages upon

pages of briefing to identifying differences between them. At the same time, Centene moved for
summaryjudgment on multiple exemption defenses, asserting all the plaintiffs, despite their apparent
differences, are subject to the same exemptions. Having reviewed the parties' briefs and the sizeable
summary judgment record, the Court concludes Centene has adeptly identified numerous differences

between individual plaintiffs, but none so material as to prevent them from being similarly situated
to one another.
1.

Disparate Factual and Employment Settings
Centene' s first argument out of the gate suggests Plaintiffs cannot be similarly situated

because PA nurses were not able to describe the job of CR nurses and vice versa. Centene contends
the named Plaintiffs, all PA nurses, will therefore be unable to provide "representative testimony."

See Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987).

-22-

First, Centene identifies no authority prohibiting one or more CR nurse plaintiffs from testifying at
trial. Second, the ultimate issue is whether the named plaintiffs are substantially similar to the opt-in

plaintiffs, including the CR nurses. The evidence shows they are. Although CR nurses and PA nurses
acquire their information differentlyone by reviewing medical records from a remote computer,

the other reviewing medical records on-site at the

hospitalthe core job duties are similar. Both

classes of nurse must analyze medical records and patient data, compare the requested procedure to
the applicable guideline, and either approve the procedure or recommend its denial. Though they
may not know it because they did not work together, all Plaintiffs performed similar jobs.

Disagreeing with this conclusion, Centene also attempts to highlight salient differences
between Plaintiffs' jobs which render this case unsuitable for collective resolution. For example, the
Plaintiffs worked at different hospitals, in different cities, for different bosses; some worked from
home; their workloads differed; and their individual schedules differed. These are legitimate
differences, but Centene does not explain why they are material and preclude collective resolution

of this case. See Escobedo v. Dynasty Insulation, Inc., No. EP-08-CV-137-KC, 2009 WL 2382982,
at *6 (W.D. Tex. July 31, 2009) (denying motion to decertify where identified differences between

class plaintiffs did not "bear on the merits of their claims"). FLSA liability does not turn on the

geographic location of a workplace or on the identity of a direct supervisor. Yet Centene contends
such facts will inexplicably come to dominate the trial of this matter. The Court is unconvinced.

Though Centene will not admit it, Centene has already conceded the most fact-intensive
liability defenses it has in this

lawsuitthe learned professional exemption and the administrative

exemptioncan be decided as a matter of law despite the differences Centene identifies in its
decertification motion. These positions are wholly inconsistent, and substantially undercut the force
-23-

of Centene's decertification argument. See, e.g., Monroe v. FTS USA, LLC, 763 F. Supp. 2d 979,985
n.6 (W.D. Tenn. 2011) ("The Court agrees with Plaintiffs that Defendants' motion for summary

judgment is in tension with their motion to decertify since one seeks to conclude the case on a
classwide basis while the other argues that classwide adjudication is improper."); Spoerle v. Kraft

Foods Global, Inc., 253 F.R.D. 434,439 (W.D. Wise. 2008) ("[I]t is somewhat ironic that defendant
is now arguing that it is impossible to determine liability on a class wide basis. After all, it was

defendant that moved for summary judgment before almost any discovery had been conducted,

arguing that it was possible to resolve the entire case as a matter of law without regard to the
differences between the

plaintiffs.").'0

Centene's bravado in arguing Plaintiffs basically work thirty different jobs is particularly
astounding in light of Centene's specific summary judgment arguments. For example, Centene has
told the Court: (1) Plaintiffs all possess and apply advanced medical knowledge and skill; (2)
Plaintiffs all perform utilization review, a process whereby they make assessments of medical

necessity and decisions about plan coverage; (3) Plaintiffs are all required to interpret Centene

policies and guidelines; (4) Plaintiffs all make "judgment calls" as part of their utilization reviews;
(5) Plaintiffs were all audited to check their guideline-application performance against Centene' s

internal standards; (6) Plaintiffs all received similar instructions about exercising discretion and
communicating with physicians; (7) Plaintiffs all substantially affected Centene's business by either

approving claims or recommending claims for denial by a superior; (8) Plaintiffs all had "virtually

10

Centene also appears convinced the only possible outcomes in this case are judgment as a matter of law for
Centene on its exemption defenses, or trial focusing onCentene's exemption defenses. But Plaintiffs cross-moved for
summaty judgment on those defenses. The parties agree there are no factual issues, they simply disagree on the
application of law to facts. Because the Court resolves the bulk of those cross-motions in Plaintiffs' favor, the trial will
not be muddied by presentations about the applicability of defenses both parties agreed did not require a trial to resolve.

-24-

unchecked authority" to approve requests based on their applications ofthe guidelines; (9) Plaintiffs
all advised management on policies and guidelines; and (10) Plaintiffs all operated without daily

oversight. Yet despite these vast swaths of uniformity among Plaintiffs' job duties and daily

responsibilities, Centene maintains each Plaintiff's position must be analyzed individually to
determine liability and assess damages. See, e.g., Def. ' s Reply [#124], at 4 (referring generally to the
above facts as "the few common denominators between Plaintiffs"). Hogwash.
The evidence of similarity in the record is substantial. Plaintiffs were all utilization review

nurses who used some combination of three guidelines to analyze requests for medical services.
Which particular guidelines were used by which Plaintiffs, or how often, is immaterial to liability
and damages issues. All Plaintiffs could approve requests; none could deny requests, but instead

were required to recommend denials to a superior. Plaintiffs were universally classified as exempt

based not upon an individualized assessment of their specific job but by their formal job
descriptions. See Pls.' Resp. [#119-4], Ex. C (deposition of Shelly Cattoor, Director of

Compensation at Centene), at 51 (to determine exemption status, "We just look at it based on the

job description, not the employees in thejob"); id. at 48-50 (to determine exemption status, Centene
did not conduct individual interviews or consider employee's location, manager, or job schedule).
Centene used a third-party management company to make its exemption classification decisions on
a position-wide basis, and reached the same conclusion for every CM nurse, be it PA or CR, RN or
LVN, telecommuter or office worker, in Austin or Dallas or San Antonio. Plaintiffs claim they were

universally required to work overtime because of a quota system requiring Plaintiffs to maintain a
certain level of productivity. These facts tell thirty substantially similar stories, even if they are not
identical. See Plewinski v. Luby 's Inc., No. H-07-3529, 2010 WL 1610121, at *6 (S.D. Tex. Apr.21,
-25-

2010) (denying a motion to decertify a class of waiters who worked at different restaurant locations,
for different managers, and had slightly different job responsibilities).
2.

Centene's Individualized Defenses
Centene argues it has raised three categories of individualized defenses which preclude

collective treatment of the Plaintiffs in this case: (1) its exemption defenses; (2) evidence regarding

disciplinary actions and performance reviews; and (3) the statute of limitations. None of these
defenses serve as a barrier to class certification.

First, Centene should know its exemption defenses do not require individualized analysis:
its own summary judgment motion argued every Plaintiff is exempt regardless of individual

differences. Plaintiffs cross-moved for summary judgment, agreeing the undisputed facts are
sufficient to resolve the applicability of the exemption defenses. The Court, having resolved those

defenses adverse to Centene, has removed any possibility of individualized exemption defenses

dominating the trial.
Second, Centene's evidence concerning how many overtime hours each Plaintiff worked is
relevant only to damages, not liability, and therefore does not require decertification. In advancing
its argument, Centene relies solely on a single district court opinion, which it then selectively quotes

and substantively rewrites using editorial brackets. See Reyes

v. Tex.

Ezpawn, L.P., No. V-03-128,

2007 WL 101808, at * 5 (S.D. Tex. Jan. 8, 2007). Centene represents Reyes stands for the proposition

that "defenses [to damages] require individualized evidence, making it difficult for [Centene Texas]
to defend all of Plaintiffs' claims with generalized proof." Def.'s Mot. Decertify [#111], at 18-19
(quoting Reyes, 2007 WL 101808, at *5). But Reyes was not talking about "defenses to damages,"
it was addressing the individualized nature of the exemption defenses raised in that case. 2007 WL

-26-

101808, at *5 Centene's evidence of the precise number overtime hours worked goes exclusively
to damages, an issue not addressed by the Reyes court and generally found to be an insufficient basis

for decertification. See Metcalfe

v.

Revention, Inc., No. 4:10-CV-3515, 2012 WL 3930319, at *6

(S.D. Tex. Sept. 10, 2012) ("Whether individualized determinations are necessary to define the

extent of Plaintiffs' damages,

if any, does not weigh against efficiently establishing Defendants'

class-wide liability.");Maynorv. Dow Chem. Co., 671 F. Supp. 2d902, 935 (S.D. Tex. 2009) ("The
need for individual plaintiffs to establish the amount of uncompensated time does not defeat

certification.").
Third, Centene' s statute of limitations defense is easily resolved, especially because the

affected employees' dates of employment are undisputed. Once a determination of willfulness is
made, application of the appropriate two- or three-year statute to the relevant Plaintiffs will be a

straightforward task.
3.

Fairness and Procedural Considerations
Centene also argues efficiency concerns militate against collective treatment, returning once

again to its same exemption-defense arguments. As explained above, those concerns are now moot.

Proceeding collectively always poses certain logistical challenges, and this case is no different in that
regard. But the alternativemore than two dozen individual trials litigating largely the same liability
issues and

defensesis less efficient, less expedient,

and simply unnecessary.

The Court DENIES Centene's motion to decertify.

-27-

Conclusion
Accordingly,
IT IS ORDERED that Defendant Centene Company of Texas, L.P.'s Motion for

Summary Judgment [#1101 is GRANTED IN PART and DENIED IN PART, as stated in this

opinion;
IT IS FURTHER ORDERED that Centene' s Motion to Decertify [#1111 is DENIED;
IT IS FINALLY ORDERED that Plaintiffs' Motion for Partial Summary Judgment
[#113] is GRANTED IN PART and DENIED IN PART, as described in this opinion.

SIGNED this the

!day of September 2014.

UNITED STATES DIYTmCT JUDGE

174 msjs ord kkt.fnri