Lora Hartman v. Prospect Mortgage, LLC
Filing
14
MEMORANDUM OPINION re: 6 MOTION for Summary Judgment On All Claims by Prospect Mortgage, LLC. (See Memorandum Opinion For Details). Signed by District Judge James C. Cacheris on 1/7/14. (nhall)
IN THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA
Alexandria Division
LORA HARTMAN,
)
)
)
)
)
)
)
)
)
Plaintiff,
v.
PROSPECT MORTGAGE, LLC,
Defendant.
1:13cv1432(JCC/TRJ)
M E M O R A N D U M
O P I N I O N
This matter is before the Court on Defendant Prospect
Mortgage, LLC’s (“Defendant” or “Prospect”) Motion for Summary
Judgment.
[Dkt. 6.]
For the following reasons, the Court will
grant Defendant’s Motion for Summary Judgment and dismiss this
action with prejudice.
I.
Background
Prospect is a California corporation that offers
consumer lending products.
(Second Am. Compl. ¶ 9.)
Plaintiff
Lora Hartman (“Plaintiff”) worked as a mortgage loan officer at
Prospect from October 19, 2009, until July 14, 2010.
(Second
Am. Compl. ¶ 3; Joint Statement of Facts ¶ 3.)
In October 2010, several former mortgage loan officers
filed a collective action against Prospect under the Fair Labor
Standards Act (“FLSA”).
See Sliger v. Prospect Mortg., LLC.,
No. CIV. S–11–465 LKK/EFB, 2011 WL 3747947, at *1 (E.D. Cal.
1
Aug. 24, 2011).
Plaintiffs alleged that Prospect “misclassified
them as exempt employees under the FLSA, and therefore
improperly failed to pay them minimum wage and overtime.”
at *2.
2011.
Id.
Plaintiff opted-in to the Sliger matter on August 26,
(Second Am. Compl. ¶ 13.)
On January 23, 2013, the Sliger action decertified and
Plaintiff was removed from the case.
(Id. ¶ 19.)
Consequently,
Plaintiff filed this case against Prospect alleging analogous
violations of the FLSA. 1
Plaintiff avers that Defendant
wrongfully classified her as an exempt employee, resulting in
lost minimum wage and overtime compensation.
(Second Am. Compl.
¶¶ 23-33.)
Defendant has now moved for summary judgment.
Mot. for Summ. J. at 1.)
(Def.’s
Defendant first contends that
Plaintiff is exempt from the FLSA’s overtime and minimum wage
requirements under the statute’s “outside sales exemption,”
which provides that employers are relieved of these obligations
for employees engaged “in the capacity of outside salesman.”
(Def.’s Mem. in Support at 6 (citing 29 U.S.C. § 213 (a)(1)).)
In support of this position, Defendant points to Plaintiff’s
employment contract, which provides that her primary duty was to
1
This lawsuit was initially filed as a joint action by several former loan
officers based in Virginia. (Compl. ¶¶ 1-9.) On November 21, 2013, this
Court granted Prospect’s Motion to Sever and ordered the case to proceed as
six separate actions. Consequently, Plaintiff is the only litigant in the
above captioned case.
2
sell mortgages away from Prospect’s office.
(Id. at 7.)
Defendant has also produced testimony that Plaintiff regularly
engaged in sales work away from the workplace.
(Id. at 8-9.)
Thus, concludes Defendant, Plaintiff was properly classified as
exempt under the FLSA.
(Id.)
Defendant separately argues that Plaintiff’s FLSA
claims are barred on account of her failure to disclose them in
her 2011 bankruptcy proceeding.
17.)
(Def.’s Mem. in Support at 12-
According to Defendant, “[c]ourts within the Fourth
Circuit have explicitly held that a plaintiff’s failure to list
a claim on his or her bankruptcy schedule of assets, either
initially or through an amendment, judicially estops the
plaintiff from pursuing such undisclosed claims in a lawsuit.”
(Id. at 4.)
On December 26, 2013, Plaintiff filed an opposition.
(Pl.’s Opp’n at 1.)
First, Plaintiff disputes her
classification as an exempt employee.
According to Plaintiff,
the evidence shows that she performed the vast majority of her
work inside of Defendant’s office and “did not customarily and
regularly make outside sales to borrowers.”
(Id. at 17-18.)
Thus, surmises Plaintiff, the outside sales exemption is
inapplicable.
(Id.)
Second, Plaintiff claims that the doctrine
of judicial estoppel is unsuitable because her bankruptcy case
3
remains pending and she is in the process of disclosing her
claims to the bankruptcy court.
(Id. at 21-23.)
Defendant’s Motion for Summary Judgment is now before
the Court.
II.
Standard of Review
Summary judgment is appropriate only if the record
shows “that there is no genuine dispute as to any material fact
and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a); see also Celotex Corp. v. Catrett, 477
U.S. 317, 322–23 (1986).
The moving party always bears the
initial burden of “informing the district court of the basis for
its motion,” and identifying the matter “it believes
demonstrate[s] the absence of a genuine issue of material fact.”
Celotex, 477 U.S. at 323.
“A material fact is one ‘that might
affect the outcome of the suit under the governing law.’
A
disputed fact presents a genuine issue ‘if the evidence is such
that a reasonable jury could return a verdict for the non-moving
party.’”
Spriggs v. Diamond Auto Glass, 242 F.3d 179, 183 (4th
Cir. 2001) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S.
242, 248 (1986)).
Once the movant has met the initial burden, “the nonmoving party ‘may not rest upon mere allegation or denials of
his pleading, but must set forth specific facts showing that
there is a genuine issue for trial.’”
4
Hughes v. Bedsole, 48
F.3d 1376, 1381 (4th Cir. 1995) (quoting Anderson, 477 U.S. at
256).
This is particularly important where the opposing party
bears the burden of proof.
Hughes, 48 F.3d at 1381.
If the
evidence is merely colorable, or is not significantly probative,
summary judgment may be granted.
Anderson, 477 U.S. at 249-50.
The mere existence of a scintilla of evidence is insufficient;
there must be evidence on which the jury could reasonably find
for the non-moving party.
Id. at 252.
The judge’s inquiry,
therefore, unavoidably asks whether reasonable jurors could find
by a preponderance of the evidence that the opposing party is
entitled to a verdict.
In reviewing the record on summary judgment, the Court
“must draw any inferences in the light most favorable to the
non-movant” and “determine whether the record taken as a whole
could lead a reasonable trier of fact to find for the nonmovant.”
Brock v. Entre Computer Ctrs., Inc., 933 F.2d 1253,
1259 (4th Cir. 1991) (citations omitted).
“[A]t the summary
judgment stage the judge’s function is not himself to weigh the
evidence and determine the truth of the matter but to determine
whether there is a genuine issue for trial.”
at 249.
5
Anderson, 477 U.S.
III.
Analysis
The Court will first address Prospect’s argument
regarding the outside sales exemption because this issue is
dispositive of the instant motion.
The FLSA requires an employer to pay minimum wage and
overtime compensation to employees who work more than forty
hours per week.
See 29 U.S.C. §§ 206(a)(1), 207(a)(1).
Nevertheless, workers employed as “outsides salespersons” are
exempt from these requirements.
See 29 U.S.C. § 213(a)(1).
Such a person is defined as an employee:
(1) Whose primary duty is:
(i) making sales . . ., or
(ii) obtaining orders or contracts for
services or for the use of facilities for
which a consideration will be paid by the
client or customer; and
(2) Who is customarily and regularly engaged
away from the employer’s place or places of
business in performing such primary duty.
29 C.F.R. § 541.500(a). 2
As evident from this language, the outside sales
exemption contains two prongs.
For purposes of the primary duty
prong, the FLSA defines “sale” or “sell” to include “any sale,
2
Although federal regulations are not binding in the same way as federal
statutes, they are to be given controlling weight unless found to be
arbitrary, capricious, or contrary to the statute. See Patel v. Napolitano,
706 F.3d 370, 373 (4th Cir. 2013). In this case, neither party argues that
any of the applicable regulations are arbitrary or contrary to the FLSA’s
intent. Accordingly, the Court will give the cited regulations appropriate
deference.
6
exchange, contract to sell, consignment for sale, shipment for
sale, or other disposition.”
29 U.S.C. § 203(k).
Furthermore,
the “term ‘primary duty’ means the principal, main, major or
most important duty that the employee performs.”
541.700(a).
29 C.F.R. §
The regulations indicate that the amount of time
spent performing exempt sales work is useful, but not
dispositive, in resolving an employee’s “primary duty.”
Id.
Determining an employee’s primary duty requires consideration of
all of the facts in a specific case, “with the major emphasis on
the character of the employee’s job as a whole.”
Id.
Importantly, in resolving “the primary duty of an outside sales
employee, work performed incidental to and in conjunction with
the employee’s own outside sales or solicitations, including
incidental deliveries and collections, shall be regarded as
exempt outside sales work.”
29 C.F.R. § 541.500(b).
As for the second prong, “the phrase ‘customarily and
regularly’ means a frequency that must be greater than
occasional but which, of course, may be less than constant.”
C.F.R. § 541.701.
This includes “work normally and recurrently
performed every workweek,” but does not embrace “isolated or
one-time tasks.”
29
Id.
The phrase “away from the employer’s
place of business” is addressed in another regulation, which
provides:
7
An
outside
sales
employee
must
be
customarily and regularly engaged “away from
the employer’s place or places of business.”
The outside sales employee is an employee
who makes sales at the customer’s place of
business or, if selling door-to-door, at the
customer's home.
Outside sales does not
include sales made by mail, telephone or the
Internet unless such contact is used merely
as an adjunct to personal calls.
Thus, any
fixed site, whether home or office, used by
a salesperson as a headquarters or for
telephonic
solicitation
of
sales
is
considered one of the employer’s places of
business[.]
See 29 C.F.R. § 541.502.
A separate regulation clarifies that
“promotional work that is actually performed incidental to and
in conjunction with an employee's own outside sales or
solicitations is exempt work.”
29 C.F.R. § 541.503(a)
The Department of Labor (“DOL”) has concluded that
selling or sales related activity outside the office “one or two
hours a day, one or two times a week” is sufficient to satisfy
the second element.
See DOL Wage Hour Op. Ltr. No. FLSA2007–2
(Jan. 25, 2007). 3
Because the outside sales exemption is an affirmative
defense, the defendant bears the burden of establishing its
application.
See Speert v. Proficio Mortg. Ventures, LLC, No.
JKB–10–718, 2011 WL 2417133, at *6 (D. Md. June 11, 2011).
Moreover, because the FLSA is a remedial act, its exemptions are
3
DOL opinion letters are not binding on courts, but “constitute a body of
experience and informed judgment” that are given “substantial weight.” Flood
v. New Hanover Cnty., 125 F.3d 249, 253 (4th Cir. 1997).
8
narrowly construed.
See Arnold v. Ben Kanowsky, Inc., 361 U.S.
388, 392 (1960) (“We have held that these exemptions 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.”).
Properly synthesized, the above regulations provide
that where an employee’s primary duty is sales, the employee is
accurately classified as exempt if he or she performs such
primary duty away from a fixed site, and performs such duty,
including any incidental promotional work, on a greater than
occasional basis.
See, e.g., Olivo v. GMAC Mortg. Corp., 374 F.
Supp. 2d 545, 550-51 (E.D. Mich. 2004).
As discussed below,
Defendant points to substantial evidence in the record (mostly
from Plaintiff’s own deposition testimony) demonstrating that
Plaintiff meets this standard.
There can be little doubt that Defendant has satisfied
the first prong.
The record amply demonstrates that Plaintiff’s
primary duty was to make sales.
In both her pleadings and
deposition testimony, Plaintiff admitted that she was
responsible for selling mortgage loans.
29; Hartman Dep. 110:12-14.)
(Second Am. Compl. ¶
Plaintiff’s employment contract
also provides that her primary duty was to sell mortgages away
from Prospect’s office.
(Hartman Dep. 99:11-17.)
Furthermore,
Plaintiff’s compensation was tied solely to her volume of sales,
9
and she had significant independence in dictating her schedule.
(Id. at 198:9-11.)
This evidence compels the conclusion that
Plaintiff’s primary duty involved sales within the meaning of
the exemption.
See Olivo, 374 F. Supp. 2d at 550 (in
determining whether an employee is an outside salesperson,
“[c]ourts have considered whether the employee: (1) must solicit
new business; (2) receives sales training; (3) was hired and
denominated as a salesman; (4) was paid on a commission basis;
(5) was required to meet minimum production standards; and (6)
was subject to direct or constant supervision” (citations
omitted)); see also DOL Wage Hour Op. Ltr. No. FLSA2006–11 (Mar.
31, 2006) (concluding that mortgage loan officers who sell
mortgage loan packages fulfill the sales requirement of the
exemption).
While the record is less definitive regarding the
second prong, the Court is convinced that Plaintiff customarily
and regularly engaged in sales activities away from Prospect’s
office within the meaning of the exemption.
The phrase “customarily and regularly” is not a
majority of the time test.
See, e.g., Lint v. Nw. Mut. Life
Ins. Co., No. 09CV1373, 2010 WL 4809604, at *3 (S.D. Cal. Nov.
19, 2010) (finding that spending ten to twenty percent of the
time outside of the office engaged in sales activity is
sufficient).
“The DOL [has] likewise confirmed that selling or
10
sales related activity outside the office ‘one or two hours a
day, one or two times a week’ satisfie[s] the test for the
exemption.”
Taylor v. Waddell & Reed, Inc., No. 09cv2909, 2012
WL 10669, at *3 (S.D. Cal. Jan. 3, 2012) (citation omitted).
In this case, Plaintiff’s deposition testimony
illustrates that she engaged in sales-related activities away
from Prospect’s office on a regular basis.
Plaintiff testified
that she spent approximately twenty-five to thirty percent of
her typical week outside of the office making contacts to bring
in business.
(Hartman Dep. 18:1-17.)
Her undertakings included
attending open houses, auctions, closings, settlements, and
chamber of commerce meetings.
(Id. at 110:15-112:19.)
In
conjunction with these efforts, Plaintiff spent several hours
per month creating marketing materials.
(Id. at 168:1-15.)
Plaintiff also met with other professionals to help generate
more business.
(Id. at 112:11-19.)
Although her outside work
was not constant, it is sufficient to satisfy the exemption.
See Lint, 2010 WL 4809604, at *3.
Indeed, the DOL has concluded
that the exemption applies to mortgage officers performing
similar duties to Plaintiff.
See DOL Wage Hour Op. Ltr. No.
FLSA2006–11.
In an attempt to create an issue of material fact,
counsel contends that Plaintiff was “confused about the entire
line of questioning” when she answered that she spent twenty11
five to thirty percent of her time outside of the office making
contacts and engaging in promotional work.
(Pl.’s Opp’n at 9.)
The Court is unpersuaded by this argument.
The applicable
portions of Plaintiff’s deposition read as follows:
Q
And how much time do you think you
spent a week making contacts outside of the
office?
A
How much time I was outside the office?
Maybe 25 percent of the time, maybe 30.
Q
Twenty-Five to 30 percent - -
A
Yeah.
Q
- - of the time?
A
Uh-huh.
(Hartman Dep. 18:9-17.)
Nothing from this discourse suggests to
the Court that Plaintiff misinterpreted counsel’s questions or
gave a mistaken answer. 4
Plaintiff further argues that the exemption is
inapplicable because there is no evidence that she made a single
sale to a borrower at his or her home or place of business.
(Pl.’s Opp’n at 18.)
Plaintiff suggests that “loan officers
only qualify for the outside sales exemption when they
customarily and regularly make sales to borrowers at the
4
Plaintiff has submitted a declaration that appears to contest portions of
her earlier testimony regarding her outside sales activities. (Pl.’s Opp’n,
Ex. A.) Because this declaration is clearly self-serving, the Court finds it
insufficient to create a genuine question of material fact sufficient to
defeat summary judgment. See Nat’l Enters., Inc. v. Barnes, 201 F.3d 331,
335 (4th Cir. 2000) (finding self-serving affidavit insufficient to survive
summary judgment).
12
borrowers’ homes or places of business.”
(Id. at 17-18.)
This
narrow interpretation, however, is unsupported by any authority
and has been rejected by other district courts.
See Taylor,
2012 WL 10669, at *4 (“Because [plaintiffs] conducted
substantial incidental work and solicitations outside of the
office, it does not matter that the actual moment of sale
occurred inside the [defendant’s] office.”); see also Tracy v.
NVR, Inc., 559 F. Supp. 2d 359, 363-64 (W.D.N.Y. 2009).
The
regulations simply do not limit application of the outside sales
exemption to those employees that consummate sales at a client’s
home or place of business.
See DOL Wage Hour Op. Ltr. No.
FLSA2006–11 (“[W]hether ‘sales force’ loan officers are
‘customarily and regularly engaged away from the employer’s
place of business’ depends on the extent to which they engage in
sales or solicitations, or related activities, outside of the
employer’s place or places of business.” (emphasis added)).
Plaintiff further asks the Court to disregard her
various outside activities because she considers these actions
non-exempt “promotional work.”
(Pl.’s Opp’n at 18.)
According
to Plaintiff, “outside promotion work is only relevant to the
exemption analysis if it relates to an employee’s own outside
sales,” and here, there is no evidence tying her activities to
outside sales.
(Id.)
This argument is unpersuasive because the
exemption plainly covers outside promotional work irrespective
13
if the efforts result in actual sales.
See Taylor, 2012 WL
10669, at *4 (“[T]he exemption includes not only the sales work
itself, but also any ‘work performed incidental to and in
conjunction with the employee's own outside sales or
solicitations.’” (citing 29 C.F.R. ¶ 541.500(b) (emphasis in
original)); 29 C.F.R. § 541.503 (“Promotional work that is
actually performed incidental to and in conjunction with an
employee’s own outside sales or solicitations is exempt work.”).
As evident from this language, promotional work is exempt if it
is in conjunction with outside sales or solicitations, the
latter being applicable here.
Plaintiff’s description of her
activities outside of the office confirms that her outside time
was used to network and solicit business.
Support at 5, 9.)
(Def.’s Mem. in
Accordingly, Plaintiff’s self-labeled
promotional work is properly categorized as exempt sales
activity.
See 29 C.F.R. § 541.503; see also Wong v. HSBC Mortg.
Corp., 749 F. Supp. 2d 1009, 1013 (N.D. Cal. Sept. 29, 2010)
(“Making sales, however, is not an activity that necessarily
occurs at one time and/or in one location, but, rather, may
comprise a number of component activities.
Where some of those
component activities take place at a fixed site and others take
place outside of a fixed site, the employee is properly
classified as an outside sales employee if the activities
occurring outside of the office are critical to the sales
14
process and occur on a customary and regular basis.” (citation
and internal quotation marks omitted)).
Finally, none of the cases cited by Plaintiff convince
the Court that the exemption is unfitting here.
19.)
(Pl.’s Opp’n at
Indeed, a majority of these decisions analyze prior
regulations that differ significantly from the current
exemption.
See, e.g., McLaughlin v. Murphy, 463 F. Supp. 2d 732
(D. Md. 2005).
Having found Plaintiff’s arguments unconvincing, the
Court concludes that Defendant has established both prongs of
the outside salesperson exemption.
A review of the evidence
confirms that there are no disputed material facts that could
affect whether Plaintiff should be seen as exempt.
In other
words, no rational trier of fact could find that Plaintiff falls
outside the exemption based on the evidence presented.
Consequently, Plaintiff’s FLSA claims fail as a matter of law
and the Court will grant Defendant’s Motion for Summary Judgment
on this ground. 5
5
The Court need not address Prospect’s alternative argument regarding the
doctrine of judicial estoppel given the above holding is dispositive. See,
e.g., Kalos v. Posner, No. 1:13cv73, 2011 WL 761240, at *3 n.11 (E.D. Va.
Feb. 23, 2011) (declining to address alternative argument where previous
point was conclusive).
15
IV.
Conclusion
For the foregoing reasons, the Court will grant
Defendant’s Motion for Summary Judgment.
An appropriate Order
will issue.
January 7, 2014
Alexandria, Virginia
/s/
James C. Cacheris
UNITED STATES DISTRICT COURT JUDGE
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