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Case 1:03-cv-02485-MSK-PAC

Document 380-3

Filed 03/29/2006

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EXHIBIT B

Case 1:03-cv-02485-MSK-PAC

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Not Reported in F.Supp.2d

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po

motion for summary judgment and denies
defendants' motion for summary judgment as to
liability. The Court also grants in part and denies in

Briefs and Other Related Documents
United States District Court, D. Minnesota. David CASAS, Troy D. Clark, Patrick Hogan, Linda 1. Souder, Wiliam M. Soule; Sheila A. Sampson, Wilis 1. Guyot, Matthew A. McDevitt, and James P. Brandt, on behalf of themselves and other past and present employees simlarly situated, Plaintiffs,
v.

part defendants' second motion for sumary
judgment to dismiss certain plaintiffs from this
action for various deficiencies in their claims.

FNI. For simplicity purposes, the Court
refers to the named-defendants collectively

as either "Conseco" or "defendants."
BACKGROUND
Conseco is a finance company engaged in the

CONSECO FINANCE CORP., Conseco Finance Servicing Corp., Conseco Finance Credit Corp., Conseco Finance Corp.-Alabama, Conseco Finance Consumer Discount Company, and ABC Corporations 1-10, Defendants.
No. Civ.OO-1512 (JRT/SRN).

March 31, 2002.
Paul 1. Lukas, Donald H. Nichols, and Michele R.
Fisher, Nichols, Kaster & Anderson, PLLP,

business of designing, creating and selling lending products, such as home improvement loans, home equity loans and manufactured and mobile home mortgages.

Plaintiffs are 2,801 past and present "loan
originators" who are or were employed in one of the

following Conseco division units: the Retail
Mortgage Services Division Lending Unit ("MSD")
Improvement Division's Direct Lending Unit ("HID

Mineapolis, MN, for plaintiffs.

Ann Huntrods, Richard G. Mark, and Scott G.
Bowman, Briggs and Morgan, Minneapolis, MN, for defendants.
MEMORANDUM OPINION AND ORDER

(approximately 2,658 plaintiffs), the Home
") (approximately 115 plaintiffs) and the

Manufactured Housing Division Direct Lending

Unit ("MHD") (approximately 59 plaintiffs). Offces in the MSD and MHD divisions are run
locally by an area manager, who in tu, report to

TUEIM, J.
*1 Plaintiffs, a group of nearly 2900 curent and
former loan originators for defendants, FNI bring
this action contending they are entitled to overtime

one of several regional managers. HID offices are managed locally by a district manager who in tu
report to Patrick McMullen, the HID Director of
Sales and Marketing.

compensation under the Fair Labor Standards Act ("

FLSA"), 29 US.C. §§ 201 et seq. This matter is before the Court on cross-motions for sumary
judgment and a third motion for sumary judgment

With mior variations, the job duties of the loan
originators employed in all three divisions are

plaintiffs from this action. At issue in the
provisions of the FLSA. For the reasons that follow,
the Court grants in part and denies in part plaintiffs'

filed by defendants seeking to dismiss certain
cross-motions for summary judgment is whether

generally the same. Loan originators use internal

leads provided to them by Conseco to make
telephone contact with potential customers. FN2

plaintiffs are exempt from the overtime pay

Using Conseco's guidelines and standard operating
procedures, loan originators tr to match the customer's needs with one of Conseco's loan

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Case 1:03-cv-02485-MSK-PAC

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Not Reported in F.Supp.2d
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(Cite as: Not Reported in F.Supp.2d)
products and obtain information to complete a loan
application, such as, income level, home ownership,

genuine issue as to any material fact and that the
moving part is entitled to a judgment as a matter of law." Fed.RCiv.P. 56. Only disputes over facts that

credit history and propert value. Loan originators
also run a series of credit reports using credit

might affect the outcome of the suit under the
governing substantive law wil properly preclude the entr of sumary judgment. Anderson v. Liberty

bureaus integrated into Conseco's computer system.
Once this is complete, the loan originator forwards the application information to a loan underwriter for

an approval decision. Loan originators have no
authority to approve a loan. If the loan is approved,

Lobby, Inc., 477 U.S. 242, 248 (1986). Summary judgment is not appropriate if the dispute about a
material fact is genuine, that is, if the evidence is

the originator prepares for the closing by gathering

such that a reasonable jur could return a verdict for
the nonmoving part. Jd . Summary judgment is to

documents from the customer, verifying information supplied by the borrower, answering questions, and

be granted only where the evidence is such that no
reasonable jur could return a verdict for the

ordering title work and appraisals. If the loan is
denied, the originator communicates the rejection to
the customer and enters it into Conseco's system.

nonmoving part. Jd.

According to affdavit testimony submitted by

defendants, loan originators could negotiate the
number of points paid by a customer which affects
the overall price of the loan and, until June 2000,

The moving part bears the burden of bringing forward sufficient evidence to establish that there are no genuine issues of material fact and that the
movant is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986).

could adjust interest rates within a floor and ceiling
range.

The nonmoving part is entitled to the benefit of all

reasonable inferences to be drawn from the
underlying facts in the record. Vette Co. v. Aetna

FN2. The duties of HID onginators differ
from the duties of originators in the MSD and MHD divisions in that HID originators
receive direct telephone calls from

Casualty & Surety Co., 612 F.2d 1076 (8th
Cir.1980). However, the nonmoving part may not

merely rest upon allegations or denials in its
pleadings, but it must set forth specific facts by

customers generated by direct mail,
television and other marketing campaigns.

affdavits or otherwise showing that there is a

*2 During the relevant time period, loan originators
were paid a base salary plus commssions.
According to the testimony of Andrew James,

genuine issue for triaL. Burst v. Adolph Coors Co., 650 F.2d 930,932 (8th Cir.198l).
II. Cross-Motions for Sumary Judgment on Liability
The parties have fied cross-motions for summary

senior vice-president of Conseco, an average annual
base pay is $25,000 a year and total compensation

ranging on average between $65,000 to $70,000 a

year.

judgment on the issue of whether Conseco violated

the FLSA by not paying its loan originators
overte compensation. The answer to this question

ANALYSIS
i. Standard of

tuns on the following issue: Were plaintiffs exempt

Review

Rule 56(c) of the Federal Rules of Civil Procedure

provides that summary judgment "shall be rendered
forthwith if the pleadings, depositions, answers to

employees under the FLSA? If yes, then Conseco is relieved from its legal obligation to pay plaintiffs overtime wages under the Act. If no, then plaintiffs are entitled to overtime pay and in turn, compels a rmding that Conseco violated the FLSA as a matter oflaw.
A. Exempt vs. Nonexempt

interrogatories, and admissions on fie, together with the affdavits, if any, show that there is no

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The FLSA establishes as a general rule that
employees must be compensated one and one-half

above-listed exemptions. The Court addresses each
of the asserted exemptions in tu.

times their regular rate of pay for each hour worked
in excess of 40 hours per week. 29 U.S.C. §

207(a)(1). FN3 This provision does not apply, however, to employees who fall within one of the exemptions set forth under the Act. In this case, Conseco argues that plaintiffs fall within one of the

FN4. As the Court wil discuss more fully
in connection with defendants' second motion for summary judgment, Conseco

argues that the FLSA claims of some
plaintiffs must be dismissed because they

following exemptions: 1) the retail or service
establishment exemption; 2) the admnistrative

fail to allege that they worked over fort
hours a week.

employee exemption; or 3) the outside salesperson
exemption. Conseco also argues that a small group

of plaintiffs who worked as lead loan originators fall under the executive exemption.

1. Retail or Service Establishment Exemption

Conseco first argues that plaintiffs are or were employed as commssioned sales employees and
FN3. 29 U.S.c. § 207(a)(1) provides, in
pertinent part:
thus fall within the retail or service establishment

exemption under 29 U.S.C. § 207(i) of the FLSA.
This section provides, in relevant part:

Except as otherwise provided in this section, no employer shall employ any of
his employees, who in any workweek is

employed in an enterprise engaged in
commerce or in the production of goods
for commerce, for a workweek longer than
fort hours unless such employee receives

No employer shall be deemed to have violated subsection (a) of this section by employing any employee of a retail or service establishment for a
workweek in excess of the applicable workweek

specified therein, if:

compensation for his employment in

excess of the hours above specified at a
rate not less than one and one-half times

excess of one and one-half times the minimum hourly rate applicable to him under section 206 of
this title; and
(2) more than half his compensation for a

(1) the regular rate of pay of such employee is in

the regular rate at which he is employed.
*3 Given the remedial nature of the FLSA,
exemptions under the Act are to be "narrowly

representative period (not less than one month)
represents commssions on goods or services.

them and their application limited to those
their terms and spirit." Arnold v.. Ben Kanowsky,
Inc., 361 u.s. 388, 392 (1960). Consistent with this

constred against the employers seeking to assert

In order to qualify for treatment under § 207(i), Conseco must first satisfy the threshold question
that it is a "retail or service establishment." To

establishments plainly and unstakably within
principle, it is the employer's burden to establish

that it is entitled to the benefit of an exemption and
excused from the general overtime payment

answer this question, a discussion of two provisions under the FLSA, 29 U.S.C. § 213(a)(2) and § 207(i) , relevant caselaw and the regulations promulgated thereunder is necessary.

provision. Mitchell v. Kentucky Finance Co., 359
u.s. 290, 291 (1959); Reich v. Newspapers of New
England, Inc., 44 F.3d 1060,1070 (1st Cir.1995).

a. Mitchell v. Kentucky Finance Co.

There is almost no dispute in this case that plaintiffs

In Mitchell v. Kentucky Finance Co., 359 U.S. 290 (1959), the United States Supreme Court expressly
held that enterprises in the financial field such as

worked more than fort hours per week during the
relevant time period FN4 or that Conseco did not

pay plaintiffs for extra time worked. The sole issue

is whether plaintiffs fall under one of the

banks, credit companies and personal loan companies do not qualify as a "retail or service establishment" within the meanig of § 213(a)(2).

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¡d. at 295. In reaching this decision, the Cour noted

service. Idaho Sheet Metal Works, Inc. v.
Wirtz, 383 U.S. 190,201-02 (1966).
b. Departent of Labor Regulations

"that the Admnistrator (of the Departent of
Labor) had previously ruled in 1942 that personal loan companies and other business entities in what may broadly be called the 'fmancial industr' were
not within the scope of the (§ 213(a)(2) ) exemption. " Id. at 757 n. 1 (citing Interpretive Bulletin No.6).

The Secretary of Labor has promulgated regulations

goveming the interpretation of "retail or service

Although Congress amended § 213(a)(2) in 1949, the Cour concluded that Congress did not intend to disrupt the Departent's earlier interpretation excluding financial companies from this exemption.
¡d. at 294. In fact, the legislative history from the

establishment." In 29 C.F.R. § 779.318, the
regulations detail some of the characteristics and

examples of a retail or service establishment: it sells

1949 amendment reaffired the Admistrator's
interpretation that § 2 13

(a)(2) does not include

enterprises in the financial industr: "Any residual
doubt on this score is dispelled by the explicit and
repeated statements of the sponsors of the

amendatory legislation and in the House and Senate Reports to the effect that 'the amendment does not exempt banks, insurance companies, building and loan associations, credit companies ... because there is no concept of retail selling or servicing in these
industries." , Id. at 295.

goods or services to the general public; serves the everyday needs of the communty; is at the very end of the stream of distribution and does not take part in the manufacturing process; and it provides the general public its services for the comfort and convenience of such public in the courts of its daily living. Id. Ilustrative of such establishments are: " (g)rocery stores, hardware stores, clothing stores,

coal dealers, furntue stores, restaurants, hotels,

watch repair establishments, barber shops and other
such local establishments." Id.; see also 29 C.F.R. §

*4 In 1961, two years after Mitchell, Congress
enacted 29 U.S.C. § 207(i), which allows "retail or
service establishments" not qualifying for the §

779.320 (partial list of establishments whose sales or service may be recognized as retail). The Secretary has also included a regulation that provides a partial list of establishments "to which the retail concept does not apply." 29 C.F.R. § 779.317. This list is highly relevant to the facts of

213(a)(2) exemption to comply with the FLSA's

this case, for included on this list is "credit
companies, including small loan and personal loan
companies and finance companies." Id.

overtime requirements by paying its commssioned
employees at a rate exceeding one and one-half

times the minimum wage for all hours worked.
Reich v. Delcorp, Inc., 3 F.3d 1181, 1184 (8th

Cir.1993). Nonetheless, Congress made clear that
the definition of "retail or service establishment"

c. Analysis

contained in § 213(a)(2) applies with equal force to
§ 207(i). Id. (citing 29 C.F.R. §§ 779.312;
779.411). FN5

Plaintiffs argue that Conseco does not qualify for
the "retail or service establishment" exception

because both the United States Supreme Court and

the Departent of Labor have specifically
determined that banks, credit and finance
13

FN5. Although § 2

(a)(2) defines the

companies lack the "retail concept" necessary to
qualify for this exemption as a matter oflaw.
Conseco contends that coverage of these plaintiffs

term "retail or service establishment" as an

establishment 75 per centum of whose
annual dollar volume of sales of goods or services (or of both) is not for resale and is recognized as retail sales or services in the particular industr, the Supreme Cour has
rejected the "industry-usage" test as the

under the FLSA is at odds with the purpose of the

FLSA. Conseco emphasizes that plaintiffs are well-compensated employees performig
sophisticated job duties and, as such, are not the

single touchstone for determning whether
a particular establishment is retail or

intended beneficiaries of the FLSA. Conseco argues further that neither Mitchell nor 29 C.F .R. § 779.317

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are controlling. According to Conseco, Mitchell is both factually and legally distinguishable from this case and regulation § 779.317 is not entitled to
judicial deference because it is arbitrary and

carres more weight than the particular
establishments at issue in either Refrigeration

School (trade schools) or Cruises Only (travel agencies). Indeed, Mitchell is cited as direct support
for the presence of financial companies on the list.

capricious. To support the latter argument Conseco
relies on two cases, Martin v. Refrigeration School,

Inc., 968 F.2d 3 (9th Cir.1992) and Reich v. Cruises

Only, Inc., No. 95-660-CIV-ORL-19, 1997 WL 1507504 (M.D.Fla.1997). In both cases, the courts
declined to defer to § 779.317 and instead applied

The Court also finds the reasoning in Reich v. Delcorp, Inc., 3 F.3d 1181 (8th Cir.1993), instrctive. The issue in that case was whether an
in-home carpet and drapery cleanig business could

the multi-factor test set forth in § 779.318 to determine whether the establishment at issue

qualify as a "retail or service establishment" under §
207(i). Id. at 1182. In that case, the post-1949

Court to follow the same reasoning here.

qualified as retail or service. Conseco urges the
Specifically, it contends that Conseco satisfies all

amendments Congress made with respect to the
treatment of laundries was crucial in the court's decision that laundries could qualify for the retail or
service establishment exemption. Id. at 1183-86.

the factors of a retail or service establishment set

forth in § 779.318 and that it ultimately meets the
requirements set forth in § 207(i).

Indeed, the court expressly stated that "if nothing
had happened since the 1949 amendments, we

would be constrained to hold that laundries cannot

*5 Upon consideration and review, the Cour
concludes that Conseco has not satisfied the
threshold question that it is a retail or service

qualify as a "retail or service establishment." Id. at

1184. Here, by contrast, Congress has done nothing

to the FLSA to alter Mitchell' s treatment of
financial institutions since that decision or the 1949 amendments. Although Conseco attempts to make something of the fact that Congress enacted § 207(i)

establishment. The holding in Mitchell that financial

companies lack the retail concept to qualify under
the exemption is clear and stil good law. Conseco,

which is undeniably a financial company, falls

in 1961, two years after Mitchell, that fact is
immaterial because Congress expressly stated that the understanding of "retail or service establishment

squarely within this holding. The argument by
Conseco that Mitchell is factually distinguishable is

unpersuasive. Conseco incorrectly states that the Kentucky Finance Company was engaged in the business of purchasing conditional sales contracts
from dealers in fuiture and appliances and thus had no contact with the individual consumer. A

" in § 213(a)(2) applies equally to § 207(i). Id. at
1184; see also 29 C.F.R. § 779.312; § 779.411.

Although the Court ultimately rejects Conseco's
argument, the Court observes that some of the

review of the Mitchell opinion plainly reveals that
the defendant was also engaged in the business of

arguments Conseco advances in favor of its position

are not without force. The Court takes particular
note of Conseco's argument that changes in the
nature and operation of the fmancial industr since
Mitchell require reconsideration of that decision.

making small personal loans. 359 U.S. at 290.
Moreover, the Supreme Court's discussion leading
to its ruling focused exclusively on the personal

loan aspect of the company's business. Id. at 291.

However, in the Court's view, these arguments are

Therefore, the defendant in Mitchell was engaged in
the same tye of business as Conseco is

best directed at Congress or the Departent of
Labor rather than this Court. Accord Bratt v.
County of Los Angeles, 912 F.2d 1066, 1071 (9th
Cir.1990). Thus, for all the foregoing reasons, the

here-lending money to individual consumers.

The Court recognizes that several courts have
voiced disapproval of regulation § 779.317.

Court concludes that the retail or service exemption
does not apply to the facts of

this case.

Refrigeration School, 968 F.2d at 6-7; Cruises Only,

1997 WL 1507504 at *3. However, given the
Supreme Court's decision in Mitchell, the inclusion
of financial companies in regulation § 779.317

2. Administrative Employee Exemption

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*6 Conseco next argues that plaintiffs were at all
relevant times exempt from the overtime
requirement under the admistrative employee

are engaged in an administrative, not a production,

capacity; 2) plaintiffs' administrative work is
substantially important to Conseco's management or operations and 3) plaintiffs exercise discretion and independent judgment in performng their duties.
a. The Admnistrative/Production Dichotomy
According to 29 C.F.R. § 541.205(b), which delineates the "administrative/production

exemption. 29 U.S.C. § 213(a)(I) ("The provisions

of ... section 207 of this title shall not apply with respect to-any employee employed in a bona fide ...

admistrative ... capacity"). The Departent of Labor has issued regulations interpreting this exemption. These regulations outline both "long"
and "short" tests of bona fide admistrative

employee status. The parties agree that the
two-prong "short test" applies in this case because
Conseco's loan originators earned more than $250 per week. 29 C.F.R. § 541.2(e)(2); § 541.214.

dichotomy," administrative work includes "work
performed by so-called white collar employees

engaged in 'servicing' a business as, for, example,

advising the management, plannng, negotiatig,

Thus, under the applicable "short test," an
employee qualifies as a bona fide administrative

representig the company, purchasing, promoting

sales, and business research and control." Id.
Conversely, employees whose primary duty FN6 is

employee if: 1) the primary duty of plaintiffs
consists of "the performance of office or nonmanual

to produce the commodity that the enterprise exists
to produce or market are engaged in "production"

work directly related to management policies or general business operations of his employer or his
employer's customers"; and 2) that such primary

duty "includes work requiring the exercise of
discretion and independent judgment." 29 C.F.R. § 541.2(a); id.(e)(2). Regulations further define the
the test as follows: 11ie phrase "directly related to management policies
first prong of

activity and are not exempt. Chicago Title Ins. Co., 853 F.Supp. at 1330; John Alden, 126 F.3d at 9 ("
non-manufactuing employees can be considered" production" employees in those instances where
their job is to generate (i.e., "produce") the very

product or service that the employer's business

offers to the public").

or general business operations of his employer or
his employer's customers" describes those tyes of

activities relating to the administrative operations of a business as distinguished from "production," or, in a retail or service establishment, "sales" work. In addition to describing the types of activities, the phrase limits the exemption to persons who perform work of substantial importance to the management
or operation of the business of his employer or his employer's customers.

FN6. Applicable regulations define an
employee's "primary duty" as "that duty which occupies the major part, or more
than fifty percent, of an employee's time."

29 C.F.R. § 41.03.

*7 Plaintiffs argue that the undisputed facts confirm that plaintiffs work in a production capacity, that is,
their priary duties are to produce the very product

29 C.F.R. § 541.205(a). Courts have interpreted this regulation as subdividing the first prong of the short
test into two subparts, specifically, that the

that Conseco exists to produce: design, create and sell loans. Plaintiffs emphasize that loan originators

did not participate in any duties relating to the
admistrative operation of the business. They had

employee must be engaged in "administrative"
rather than "production" activity and that the

no supervisory authority and they had no role in the
creation or enforcement of Conseco's policies and procedures. To the contrary, the performance of

activity be of "substantial importance" to

management or operations. Reich v. John Alden Life
Ins. Co., 126 F.3d 1, 8-9 (1st Cir.1997); Reich v.

their job required them to follow Conseco's

Chicago Title Ins. Co., 853 F.Supp. 1325, 1329

standard operating procedures and guidelines and
determne whether a customer's financial criteria
and loan needs fit within one of Conseco's existing

(D.Kan.1994). Thus, in order to qualify for this exemption, Conseco must prove that: 1) plaintiffs

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Not Reported in F.Supp.2d
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(Cite as: Not Reported in F.Supp.2d)

loan options. Their job performance was measured almost exclusively on whether or not they met a
numeric sales quota.

had some ability to deviate upward or downward

from these price quotes, pricing was largely preset
though an in-house computer which coordinates a
pricing matrx based on the customer's record of

On this record, plaintiffs argue that they are
production workers similar to plaintiffs in two other
cases, Chicago Title Ins. Co., 853 F.Supp. at 1329

purchases. Id. at 903. Also, if an item was not in
stock, the salesperson negotiated the cost to Cooper
Electrc with the manufactuer and then negotiated
the selling price to the customer. Id. Salespersons

and Martin v. Cooper Electric Supply Co., 940 F.2d 896 (3d Cir.1991). In Chicago Title, the court was asked to determe whether escrow closers fell within the admistrative exemption to the FLSA. Th

were paid on a salary basis plus incentive bonuses
based on sales performance. Id. at 902.

e facts revealed that the plaintiffs' employer,

*8 On this record, the Third Circuit agreed with the
district court's conclusion that the inside

Chicago Title, was engaged in the business of
insuring title for real propert. 853 F.Supp. at 1327. Escrow closers were responsible for managing an
escrow file from the date of deposit until closing. Id.
Specifically, the duties of escrow closers included,

salespersons were production workers and thus did not qualify for the admnistrative exemption. Id. at
903. In reaching this conclusion, the court

among other things, direct contact with customers;

quoting fees from title insurance; responding to
questions from customers; preparing the closing
documents; setting up the closing appointment; and

emphasized that Cooper Electric's primary business purose is to produce sales of electrical products. Inside salespersons did exactly that-produce sales of electrical products. Id. The Court fuer noted that
even though the salespersons could sometimes
negotiate the sales price of the products, the court

supervising the execution of closing documents. Id. They were paid by salary ranging from $20,000 to

$30,000 with the possibility of incentive bonuses amounting to as much as $10,000. Id. at 1328.
Based on these facts and review of the relevant regulations, the district cour found that the primary
duty of the escrow closers is to carr out the

found this was only an "intermttent, secondary employment responsibility." Id. at 904. Their

primary responsibility, which is the focus of the
test, is to produce sales.

Conseco, by contrast, argues that plaintiffs' work
was admnistrative. To support this argument,

day-to-day closing operations of the defendant. Id.
at 1330. Consequently, the cour concluded that

defendant relies heavily on Reich v. John Alden Life

plaintiffs worked in a production, rather than an administrative, capacity and thus were nonexempt
employees under the Act.

Ins. Co., 126 F.3d 1 (1st Cir.1997), a case
defendant argues is factually similar to the case at
bar. John Alden involved the question of whether

In Martin v. Cooper Electric, the Third Circuit was

marketing representatives or marketing specialists
fell within the admiistrative employee exemption

asked to determine whether inside salespersons worked in a production capacity and thus did not
fall within the administrative exemption of the Act.

of the FLSA. John Alden was engaged in the
insurance products. Id. at 3. Following the common

design, creation and sale of various tyes of
practice in the insurance industr, the company did
not sell its products through direct contacts with

940 F.2d 896 (3d Cir.199l). In Martin, the
employer, Cooper Electric, was a wholesaler

engaged in the business of selling electrical products. Id. at 899. The employees at issue, the
company's inside salespeople, worked an average of

customers but instead relied upon licensed

45 hours per week and spent the majority of that
time in the offce making telephone sales of

independent agents to provide its customer base. Id. Generally, an agent would recommend a variety of insurance products, including John Alden products
and those of its competitors to a prospective

electrical products or in work closely related to selling electrical products. Id. at 902. Sales were
made primarily to contractors, industral buyers and institutional organizations. Id. Although plaintiffs

end-purchaser. Id. When a customer decided to
purchase a John Alden product, the agent would act
as an intermediary between the company and the
end-purchaser. Id.

(Ç 2006 Thomson/est. No Claim to Orig. U.S. Govt. Works.

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Case 1:03-cv-02485-MSK-PAC

Document 380-3

Filed 03/29/2006

Page 9 of 1515 Page 9 of

Not Reported in F.Supp.2d

Page 8

Not Reported in F.Supp.2d, 2002 WL 507059 (D.Min.), 146 Lab.Cas. P 34,502 (Cite as: Not Reported in F.Supp.2d)

The primary duty of marketing representatives at John Alden was to cultivate this independent agent sales force and thereby ultimately increase sales of John Alden products. Id. Specifically, it was a
marketing representative's duty to keep in contact
with agents; keep the agents up to date concerning

modifying and strcturing the loan to fit a

customer's financial needs. In the Cour's view,
these duties establish that plaintiffs are primarily
involved with "the day-to-day carring out of the
business" rather than "the ruing of (the) business
" Bratt v. County of

John Alden products; make agents aware of any pricing changes; discuss with the agents how John
Alden's products might meet the particular needs of
an agent's current customer; help their agents

(itselfJ" or determining its overall course or policies. Los Angeles, 912 F.2d at 1070.

Contrary to Conseco's assertion, the Court does not

find the marketing representatives in John Alden
simlar to the loan originators here. As the court in

develop proposals for bidding on new business;
pass along articles to the agent about the company

John Alden emphasized, marketing representatives

and sometimes give small-group presentations about John Alden's products. Id. The record also revealed that, although the representatives received guidance about suggested points of emphasis during weekly training sessions, they independently decided which products to emphasize to a particular agent and which of their agents to contact on a given day. Id.
at 4. In addition to a base salary of $34,000 to

were John Alden's primary contact with the
insurance market. 126 F.3d at 10. They represented

the company by keeping the market informed of

John Alden product offerings and pricing strcture.
Id. They advised sales agents regarding which
products to market against competing products, and

how to put bid proposals together on new business.
Id. Under these facts, marketing representatives

$37,000, marketing representatives earned quarterly
performance. Id.

were engaged in "something more than routine

incentive and bonus pay based on their
On this record, the court held that "the day-to-day

selling efforts focused simply on partcular sales
transactions." Id.

By contrast, plaintiffs here are employed by
Conseco to make direct sales of loans to individual

activities of marketing representatives are more in the nature of 'representing the company' and '
promoting sales' of John Alden products, two

customers. Unlike the marketing representatives
described above, whose primary duty it is to market John Alden products to an independent sales force
of insurance agents, plaintiffs here are the sales

examples of exempt administrative work (under the
regulations)." Id. at 10. 29 C.F.R. § 541.205(b).

Conseco urges the Court to find that plaintiffs here

force. Plaintiffs' efforts are not "aimed at promoting

are engaged in the same tye of marketig and
promotig activity as the plaintiffs in John Alden.

(increasing, developing, facilitatig, and or
maintaining) customer sales generally." Id. at 10

Conseco also relies on a recent Departent of
Labor opinion issued on February 16, 2001, in
which the DOL concluded that the primary duties of
the loan offcers in that case were of an

(emphasis in original). Rather, plaintiffs are actually
selling loans directly to individual customers, one

loan at a time. Furhermore, as a review of

numerous separation notices contained in the record

administrative nature.

reveals, plaintiffs' performance was measured
largely according to their sale production. These

*9 After careful consideration, the Cour concludes
that plaintiffs are production rather than administrative employees. Conseco's primary

differences persuade the Court that plaintiffs are
primarily responsible for sales, rather than the

broader and more policy-oriented function of "
promoting sales" or "representing the company"

business purpose is to design, create and sell home
lending products. As loan originators making direct

within the meaning of the regulations.

contact with customers, it is plaintiffs' primary duty
to sell these lending products on a day-to-day basis.

For these reasons, the Court finds the facts of this
case more analogous to those in Cooper Electric and Chicago Title than John Alden. Accordingly, the Cour concludes that plaintiffs' primary duties

As is evident from a description of plaintiffs job duties, plaintiffs are responsible for soliciting,
selling and processing loans as well as identifying,

(Ç 2006 Thomson/est. No Claim to Orig. U.S. Govt. Works.

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Case 1:03-cv-02485-MSK-PAC

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Filed 03/29/2006

Page 1010 of 15 Page of 15

Not Reported in F.Supp.2d

Page 9

Not Reported in F.Supp.2d, 2002 WL 507059 (D.Min.), 146 Lab.Cas. P 34,502 (Cite as: Not Reported in F.Supp.2d)
are more in the nature of production than
that "the loan offcers in question are not exercising

administrative work.

the necessary discretion and independent judgment

within the meaning of the regulations, and would
not be exempt as admistrative employees").
b. Discretion and Independent Judgment

The Cour also finds that plaintiffs lack the
discretion and independent judgment necessary to
qualify for the exemption. According to the regulations, "the exercise of discretion and

FN7. Conseco makes much of the fact that

plaintiffs could take an application to a loan underwriter and argue that special
circumstances warranted approving a loan

independent judgment involves the comparison and the evaluation of possible courses of conduct and

acting or making a decision after the various
possibilities have been considered." 29 C.F.R. §

even though the applicant's criteria fell outside the guidelines. However, in the Court's view, this fact further supports the

conclusion that plaintiffs lacked the
discretion and independent judgment

541.207(a). The term "also implies that the person has the authority or power to make an independent
choice, free from immediate direction or supervision and with respect to matters of

necessary to qualify under this exemption.
For all the foregoing reasons, the Court concludes

significance." Id. In contrast, "an employee who

that plaintiffs are not exempt under the
admistrative employee exemption.

merely applies his knowledge in following
prescribed procedures or determining which
procedure to follow, or who determines whether

specific standards are met or whether an object falls into one or another of a number of definite grades,
classes, or other categories is not exercising

3. Outside Sales Exemption

Conseco next claims that plaintiffs are exempt from

discretion and independent judgment within the meaning of section 541.2 of the regulations."

the overtime provisions because they qualify as outside salespersons. 29 U.S.C. § 213(a)(1). The regulations define an outside salesperson as a
person (1) "who is employed for the purpose of and

*10 From the information contained in the record,
the Court finds that the decisions plaintiffs were

who is customarily and regularly engaged away
from his employer's place or places of business" in

empowered to make concerning whether to proceed
with an application, which lending product to suggest, negotiatig pricing by adding closing
points and taking other customer circumstances into

making sales; and 2) who does not devote more

than 20% of time to activities other than outside
sales. 29 C.F.R. § 541.500; Chicago Tile Ins. Co.,

account when selling the loan were all governed by
Conseco's pre-existing established standing

853 F.Supp. 1332. Work performed that is
incidental to and in conjunction with the employee's own outside sales or solicitation is also considered

operating procedures and guidelines. It is also undisputed that plaintiffs had no authority to
approve a loan absent approval of the underwriting

exempt work. 29 C.F.R. § 541.500(b); 541.03.
Inside sales, however, is nonexempt work. 29
C.F.R. § 502(a); 29 U.S.c. § 506.

departent. FN7 On this record, the Court finds
that plaintiffs were using skils in applying

techniques, procedures or specific standards of

At his deposition, Andrew James, a senior

Conseco rather than exercising the kind of
administrative exemption. The DOL opinion upon

vice-president for Conseco and Conseco's 30(b)(6)
designee, testified that loan originators generally

independent judgment and discretion within the meaning of the regulations to qualify under the
which Conseco relies reaches the same conclusion. Huntrods Aff. Exh 3, Feb. 16, 2001 Loan Officers/Exempt Status Opinion Letter (concluding

spend 80 to 90 percent of their time in the offce.
James Depo. at 23. Based on this testimony alone,

the evidence is clearly insufficient to establish that
plaintiffs qualify for this exemption. However, Conseco submitted two affdavits of Mark Quinn,

(Ç 2006 Thomson/est. No Claim to Orig. U.S. Govt. Works.

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Case 1:03-cv-02485-MSK-PAC

Document 380-3

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Page 11 of 15 Page 11 of 15

Not Reported in F.Supp.2d

Page 10

Not Reported in F.Supp.2d, 2002 WL 507059 (D.Min.), 146 Lab.Cas. P 34,502 (Cite as: Not Reported in F.Supp.2d)

another senior vice-president of Conseco, in support

4. Executive Exemption

of its motion for summary judgment. In the first affdavit, Quin testified that retail originators spent
70 percent or more of their time working outside of
their branch offce. In a second affdavit, submitted
in reply to plaintiffs' response brief, he states that

Finally, Conseco argues that a group of plaintiffs who Conseco employed as lead loan originators

satisfy the requirements of the executive employee exemption. 29 U.S.C. § 213(a)(1). According to the

loan originators spent an additional 10 to 15 percent

regulations, an executive employee is one: "1)
whose primary duty consists of the management of

of their time performig incidental duties such as

planning itineraries and writing sales reports.
Conseco thus argues that based on Quinn's affdavit

the enterprise in which he is employed or of a
customarily recognized subdivision of the

testimony, defendants have made it "plain and

unmstakable," that plaintiffs satisfy the
requirements of the outside salesperson exception.

employer's enterprise; and (2) who customarily and

regularly directs the work of two or more other
employees." 29 C.F.R. § 541.(t). FN8

For the reasons set forth below, the Court disagrees.

*11 In order to qualify for this exemption, the Court would have to completely disregard the deposition
testimony of James and fully credit the testiony of

FN8. Because plaintiffs make over $250 a
week, the "short test" is applicable.
According to affdavit testimony submitted by

Quinn in his affidavits submitted in support and in
reply to Conseco's motion for summary judgment.

Conseco in support of its motion, lead loan
originators tyically supervised a subdivision or

The Court declines to do this. The law is

well-settled in the Eighth Circuit that a part cannot avoid sumary judgment by affdavit testimony that
contradicts earlier pleading and deposition

team of four or five loan originators. Duties of lead
loan originators included training, answering questions, counseling loan originators on job

testimony. Knudsen v. United States, 254 F.3d 747, 752 (8th Cir.200l); Webb v. Garelick Mfg. Co., 94
F.3d 484, 488 (8th Cir.1996); Garnac Grain Co.,

performance and other supervisory duties. Leads
also participated in hiring decisions, participated in

performance reviews of loan originators and

Inc., v. Blackley, 932 F.2d 1563, 1568 (8th

recommended disciplinary actions when

Cir.199l). In this case, James clearly testified
during discovery that plaintiffs spend most of their
time in Conseco's offces. Conseco's suggestion that

appropriate. Generally, the supervisory job duties of

a lead originator consumed as much as 50% of that
employee's time in a given week. Finally, most

James was confused at the time of his deposition is

leads were paid a higher salary than regular loan

not supported by the record. A review of the
deposition transcript reveals that plaintiffs' counsel

originators. On this record, Conseco claims that
lead loan originators qualify under the executive

clearly defmed the time period as limited to before March 1, 2000. James Depo. at 19 (asking the deponent: "Could you describe for me, and again,

exemption. Alternatively, Conseco claims leads are exempt based on a combination of the executive

and administrative exemptions. 29 C.F.R. §
541.600(a).
*12 In response, plaintiffs point to the deposition

we wil talk before March 1 of 2000, could you describe for me in general terms what a retail originator's job duties are or were?") (emphasis
added). Additionally, James does not provide any explanation in the affdavits he submitted as part of
the summary judgment motions that he was

testimony of several lead loan originators whose
testimony conflicts with that of Conseco's affants.

According to these plaintiffs, they spent very little
time, as little as 5%, on supervisory duties.

confused at the time he answered the questions.
Garnac Grain Co., 932 F.2d at 1568. Accordingly,

Plaintiffs further minimized the significance of the

the Cour simply cannot credit the conflcting
testimony of Quinn and Conseco falls well short of satisfying its burden that plaintiffs qualify for the
outside salesperson exemption.

additional duties they took on, stating that aside from answering questions "from time to time" and collecting information for managers, their duties continued to be the same as all other loan

(Ç 2006 Thomson/est. No Claim to Orig. u.s. Govt. Works.

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Case 1:03-cv-02485-MSK-PAC

Document 380-3

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Page 1212 of 15 Page of 15

Not Reported in F.Supp.2d
Not Reported in F.Supp.2d, 2002 WL 507059 (D.Minn.), 146 Lab.Cas. P 34,502

Page 11

(Cite as: Not Reported in F.Supp.2d)
originators. Given the conficting testimony concerning the activities of the lead loan

in the mortgage services division and who fied his
consent form on June 22, 2000, the statutory period
begins on June 22, 1998 or June 22, 1997,

originators, particularly as to the time actually spent

conductig duties which might qualify for the executive exemption, the Court concludes that
issues of material fact remain to preclude summary
judgment on this issue.
III. Defendants' Second Motion for Summary Judgment for Dismissal of Certain Plaintiffs

depending on whether the two or three year
limitations period applies, and ends on March 1,
2000, the date upon which the position was

reclassified as nonexempt.

Conseco challenges the claims of certain plaintiffs

on three separate grounds: 1) plaintiffs who fall outside the statutory period because they did not
begin their employment with Conseco until after the

Conseco brings a second motion for sumary
judgment to dismiss certain plaintiffs for defects in
their claims on one or more grounds. Specifically,

March or April 2000 reclassification; 2) plaintiffs

whose claims do not fall within the applicable
two-year limtations period; and 3) plaintiffs who
fied their consent form after September 4, 2001,

plaintiffs who were not employed as loan
originators during the statutory period; who
accepted Departent of Labor settlements; who

Conseco brings this motion to dismiss all opt-in

the date Conseco claims the Magistrate Judge set as the opt-in deadline.

failed to claim to have worked any overtime; or who
fied their consent forms after the September 4,

*13 As to the first class of plaintiffs, plaintiffs concede that individuals who started working for
Conseco after the reclassification occurred do not

2001 opt-in deadline set by the Magistrate Judge.

have actionable claims for overtme wages and must be dismissed. The Cour agrees and accordingly
A. Employment During The Relevant Statutory
Time Period
dismisses the claims of those plaintiffs whose

employment commenced after the applicable March

or April 2000 reclassification date.

As a threshold matter, plaintiffs are entitled to overtime compensation only if they were employed
as loan originators during the relevant statutory

The second class of plaintiffs involves those
individuals who fall outside the two-year limitations

period. It is undisputed that the statutory period end date in this case is March 1, 2000 for MSD loan

period but who would be eligible for overtime
compensation should the Court determe that an

originators and April 1, 2000 for HID and MHD
loan originators. It was on these dates that Conseco
reclassified loan originators in all three divisions as

additional year of liability applied for a wilful violation of the Act. To date, plaintiffs have not
amended their complaint to add a claim for

nonexempt employees under the FLSA and started
paying them overtime wages.

wilfulness, but may still do so should any of the
outstanding discovery support such a claim. Given

The FLSA provides for a two-year statute of
limitations period. 29 U.S.C. § 255. However, this period can be extended for an additional year if an employer's violation of the FLSA was wilfuL. Id. The FLSA also provides that the limtations period is calculated from the time a plaintiff fies his or her respective opt-in consent form. 29 U.S.C. § 256. Consequently, each individual plaintiffs statutory
period varies depending on when a person

this status, the Cour believes the best course of action is to allow plaintiffs who fall within this

category to remain part of the action until it
becomes clear whether or not plaintiffs intend to
amend their complaint to raise a claim for

wilfulness. Should plaintiffs decide not to amend their complaint to allege wilfulness or should an amendment be made but the Court determne that
the evidence does not support such a claim and the

statutory period is limted to two years, Conseco

commenced his or her respective claim against
Conseco. For example, for a plaintiff who worked

may then renew this motion to dismiss those
plaintiffs who fall outside the two-year limitations

(Ç 2006 Thomson/est. No Claim to Orig. U.S. Govt. Works.

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Case 1:03-cv-02485-MSK-PAC

Document 380-3

Filed 03/29/2006

Page 1313 of 15 Page of 15

Not Reported in F.Supp.2d
Not Reported in F.Supp.2d, 2002 WL 507059 (D.Minn.), 146 Lab.Cas. P 34,502

Page 12

(Cite as: Not Reported in F.Supp.2d)
period.

Conseco next argues that a third class of plaintiffs who fied their consent forms after September 4,
2001 are barred and should be dismissed from this

action. Plaintiffs argue that it is not clear whether
September 4, 2001 is in fact the cour-ordered

deadline for joining this action. Plaintiffs emphasize that although the Magistrate Judge referenced this date in a fooìrote to her August 6, 2001 order, the
last time the Magistrate Judge directly addressed

*14 Plaintiffs contend that plaintiffs who entered into settlement agreements fall into two different categories: 1) those who settled their claims with Conseco prior to opting in to this litigation; and 2) those who accepted settlement agreements after opting in to this litigation. Plaintiffs do not contest the dismissal of the first group of plaintiffs. However, plaintiffs contest the dismissal of the

second group of plaintiffs on the basis that an
employee's right to pursue a private action is not

terminated upon the resolution of a Department of

this issue was on March 22, 2001. In that order, the
Magistrate Judge extended the opt-in deadline
indefinitely as a sanction for defendants' failure to

Labor action if the employee had previously fied

private litigation. Plaintiffs cite Donovan v.
University of Texas at El Paso, 643 F.2d 1201 (5th

comply with requested discovery.

Cir.198l), in support of this proposition. However,
Donovan is inapposite to the case at bar. Donovan
deals with the very narrow procedural issue of

The Court has reviewed both orders and finds that
the record is unclear on this point. Accordingly, the

Court wil remand this issue to the Magistrate Judge
for clarification of the applicable opt-in deadline

before ruling on this motion. Depending on how the
Magistrate Judge rules, Conseco may then renew necessary. this motion afterwards, if

whether DOL-fied FLSA actions are subject to the class certification requirements of Rule 23. Id. at 1203. Although the court noted in passing that the filing of a lawsuit by the DOL does not terminate
the litigation rights of a plaintiff in a previously

filed private FLSA lawsuit, that point is irelevant

B. Release of Claims

The FLSA authorizes the Secretary of the
Departent of Labor to supervise the payment of unpaid overtime compensation owing to employees

to the matter at issue here. The DOL never fied a lawsuit on behalf of plaintiffs. Furthermore, the court made this point in reference to the latter part of 29 U.S.C. § 2l6(c) ("The right provided in subsection (b) of this section to bring an action by
or on behalf of any employee to recover the liability
specified in the first sentence so such subsection

under 29 U.S.C. § 207(a). 29 U.S.c. § 2l6(c).
Section § 2l6(c) furher provides that "the

shall termnate upon the fiing of a complaint by the
Secretary in an action under this subsection in which a recovery is sought of unpaid overtime

agreement of any employee to accept such payment

shall upon payment in full constitute a waiver by
such employee of any right he may have under
subsection (b) of this section to such ... unpaid

compensation under sections 207 ...") (emphasis

added). The issue here involves the rights of
plaintiffs who entered into DOL-supervised

overtime compensation and an additional equal
amount as liquidated damages."

settlement agreements and thus deals with the first
part of § 216(c). This provision plainly states that"

After the commencement of this lawsuit, the
Departent of Labor conducted audits of Conseco's

any agreement of any employee to accept such payment shall upon payment in full constitute a
waiver by such employee of any right he may have under subsection (b)." (Emphasis added.) Thus, the

Dallas, Texas and Eagan, Minnesota offces.
Pursuant to these audits, many loan originators who

trggering event is through "payment in full," not
whether a plaintiff accepted a settlement agreement
before or after the plaintiff opted into the litigation.
Accordingly, the Court is persuaded by Conseco's

are now plaintiffs in this litigation entered into
settlement agreements for payment of overtime

wages in exchange for the release of their claims.

Conseco thus seeks to have all plaintiffs who signed release of claim waivers dismissed pursuant to such agreements.

argument that all plaintiffs who signed release of
claims in connection with the Departent of Labor

investigations and have received payment

(Ç 2006 Thomson/est. No Claim to Orig. U.S. Govt. Works.

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Case 1:03-cv-02485-MSK-PAC

Document 380-3

Filed 03/29/2006

Page 1414 of 15 Page of 15

Not Reported in F.Supp.2d

Page 13

Not Reported in F.Supp.2d, 2002 WL 507059 (D.Min.), 146 Lab.Cas. P 34,502 (Cite as: Not Reported in F.Supp.2d)

thereunder can no longer maintain an action against Conseco and are therefore dismissed. Rose v. Consolidated Elec. Distributors, Inc., 816 F.Supp.

parties, the arguments of counsel and the entire file

and proceedings herein, IT is HEREBY
ORDERED that:

489 (N.D.I11993). The Court thus grants this
portion of defendants' motion and dismisses with prejudice the claims of all plaintiffs who entered
into settlement agreements with Conseco. C. Failure to Allege Unpaid Overtime Wages
Finally, Conseco seeks to dismiss those plaintiffs

1. Plaintiffs' Motion for Summary Judgment as to Liability (Docket No. 266) is GRANTED in part

and DENIED in part. Plaintiffs' motion is
GRANTED as to liability for all non-lead loan originators. Plaintiffs' motion is DENIED with
respect to whether lead loan originators are exempt

under the executive exemption

who failed to allege that they worked more than fort hours a week durig the relevant time period
and thus have no claim for unpaid overtime wages.

2. Defendants' Motion for Summary Judgment as to Liability (Docket No. 269) is DENIED.
3. Defendants' Second Motion for Summary

29 U.S.C. § 207(a)(1). Plaintiffs agree that two

plaintiffs on Conseco's list, George Ackley and
Travis Grosdidier, did not work overtime. FN9

Judgment (Docket No. 317) is GRANTED in part
and DENIED in part: a. Defendants' motion to dismiss those plaintiffs

However, plaintiffs contest the dismissal of the
other plaintiffs on Conseco's list because these other

plaintiffs did claim overtime in its response to
defendants' Interrogatories.

whose employment with Conseco commenced after the applicable March or April 2000 reclassification is GRANTED. The claims of all plaintiffs who fall

within this category are DISMISSED WITH
PREJUDICE. b. Defendants' motion to dismiss those plaintiffs

FN9. According to plaintiffs, these
individuals have already executed

who entered into backpay settlements and thereby
released their claims against Conseco is

withdrawal forms to that effect. A review of the docket reveals that this is correct. See Docket No. 218 (Notice of Withdrawal of

Travis Grosdidier) and Docket No. 223
(Notice of Withdrawal of

GRANTED. The claims of all plaintiffs who fall within this category are DISMISSED WITH PREJUICE.
c. Defendants' motion to dismiss those plaintiffs
who failed to allege that they worked overtime

George Ackley).

*15 While it is tre that aside from Ackley and

hours is DENIED WITHOUT PREJUDICE.

Grosdidier, plaintiffs on Conseco's list have claimed through interrogatory responses that they worked
hours over fort a week, the Court is troubled by the

Plaintiffs have until May 1, 2002 to fie executed
copies of the interrogatory responses currently

under dispute. Should plaintiffs fail to comply with
this requirement, Conseco may renew this motion.

fact that many of these responses are unsigned and thus unexecuted. To remedy this defect, the Cour orders that plaintiffs submit executed interrogatory answers to Conseco no later than May 1, 2002. For
the moment, the Court wil deny Conseco's motion,

d. Defendants' motion is DENIED in all other respects. However, defendants are permtted to
renew the motions currently denied for the reasons
stated in the opinion.
e. The issue of the applicable opt-in deadline is

but wil allow it to move for dismissal of plaintiffs

who fall within this category if plaintiffs fail to
comply with the above deadline.
ORDER
Based upon the foregoing, the submissions of the

REMANDED to the Magistrate Judge for fuher
proceedings consistent with this opinion.

D.Min.,2002.
Casas v. Conseco Finance Corp.

Not Reported in F.Supp.2d, 2002 WL 507059

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Case 1:03-cv-02485-MSK-PAC

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Page 15 15 of 15 Page of 15

Not Reported in F.Supp.2d
Not Reported in F.Supp.2d, 2002 WL 507059 (D.Minn.), 146 Lab.Cas. P 34,502

Page 14

(Cite as: Not Reported in F.Supp.2d)
(D.Minn.), 146 Lab.Cas. P 34,502 Briefs and Other Related Documents (Back to top)

. 0:00cv015l2 (Docket) (Jun. 21, 2000)
END OF DOCUMENT

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