Free Reply to Response to Motion - District Court of Colorado - Colorado

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

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 1:03-cv-02485-MSK-PAC Camille Melonakis-Kurz, individually and on behalf of other similarly situation employees, Plaintiff, v. Heartland Home Finance, Inc., Defendant. ______________________________________________________________________________ DEFENDANT HEARTLAND'S REPLY IN SUPPORT OF MOTION TO COMPEL DISCOVERY AND FOR SANCTIONS AGAINST GUNDEL ______________________________________________________________________________ Defendant, Heartland Home Finance, Inc. ("Heartland" or "Defendant"), by counsel, hereby submits its reply in support of Defendant's Motion To Compel Discovery [Doc. No. 355], and Motion for Sanctions as to Gundel [Doc. No. 356]. Defendant hereby certifies that on March 22, 2006, counsel for the parties met and conferred in good faith regarding the outstanding discovery issues. Despite this conference, a conflict of opinion remains. However, in response to the deposition testimony of Mr. Gundel that he was not primarily at fault in failing to appear for his deposition on three prior occasions, Defendant hereby withdraws its request for sanctions against him. DEFENDANT'S MOTION TO COMPEL Defendant never agreed to waive individual responses to written discovery. Nothing in the correspondence between counsel supports Plaintiffs' claim that Defendant agreed to take depositions in lieu of individual responses to Defendant's written discovery requests. Rather,

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counsel for the parties agreed to start by exchanging what were described as "core documents." (See email dated September 2, 2005, attached to Doc. 355 as Ex.E). Defendant is entitled to discovery responses from each individual plaintiff. The Court has consistently recognized that this is a collective action, with 971 individual plaintiffs, as opposed to a class action. For example, the Court stated: "Counsel for the named Plaintiff will be deemed to represent all Plaintiffs, individually." [Doc. 273, pp. 8-9, ¶ 3; emphasis added]. The Court also stated that Plaintiffs' "counsel, consistent with their professional obligations, will undoubtedly keep each Plaintiff advised of all developments and proceedings in this litigation and will obtain individual instruction from each client as to the course of this case." [Id. at p. 7; emphasis added]. The Court also stated that it "consciously deviates" from the approach of permitting this case to go forward as a representative class action. Id. Plaintiffs' counsel in this case solicited approximately 971 current and former loan officers to join this lawsuit against Heartland. Now that Plaintiffs' attorneys have obtained the large collective action that they sought, they refuse to answer individually Defendant's written discovery requests. Plaintiffs are apparently taking the position that each plaintiff should not be burdened by responding to written discovery because representative testimony is sufficient. In support of this view, Plaintiffs' counsel has directed Defendant's counsel to the following cases: Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946) (overruled on other grounds); McLaughlin v. Ho Fat Seto, 850 F.2d 586 (9th Cir. 1988); and Secretary of Labor v. DeSisto, 929 F.2d 789 (1st Cir. 1991). In Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680 (1946), the Supreme Court established a standard for FLSA plaintiffs to prove damages when the employer's records are

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inaccurate or inadequate. The Supreme Court noted that an employee who brings suit under the FLSA has the burden of proving that he performed work for which he was not properly compensated. The court held that where the employer's records are inaccurate or inadequate, an employee has carried his burden if he proves that he has in fact performed work for which he was improperly compensated and if he produces sufficient evidence to show the amount and extent of that work as a matter of just and reasonable inference. The burden then shifts to the employer to come forward with evidence of the precise amount of work performed or with evidence to negate the reasonableness of the inference to be drawn from the employee's evidence. If the employer fails to produce such evidence, the court may then award damages to the employee, even though the result is only approximate. Id. at 687-688. In McLaughlin v. Ho Fat Seto, 850 F.2d 586 (9th Cir. 1988), the Secretary of Labor brought FLSA claims against a garment factory in Los Angeles. The district court limited the Secretary to five trial witnesses who each testified that they regularly worked before the morning bell and after the quitting bell rang, and nearly every Saturday, but were not permitted to punch the factory time clock for such time. Seto presented four rebuttal witnesses who testified that working hours were between the morning bell and quitting bell, Monday through Friday. However, the district court found that their testimony was not credible, and that they failed to negate the reasonable inferences drawn from the Secretary's evidence. On appeal, the Defendant contended that the district court erred in awarding back wages to 23 non-testifying employees because the five witnesses presented by the Secretary failed to establish a pattern of FLSA violations. The Ninth Circuit disagreed and held that the Mt. Clemens Pottery standard allows district courts to award back wages under the FLSA to non-

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testifying employees based upon the fairly representative testimony of other employees. Ho Fat Seto 850 F.2d at 589. In Secretary of Labor v. DeSisto, 929 F.2d 789 (1st Cir. 1991), the Secretary of Labor brought FLSA claims on behalf of 244 employees who worked in various positions at boarding schools in two states. Following discovery, the Secretary moved for summary judgment on liability and damages, and Defendants moved for partial summary judgment on the exemption issue. After finding that some positions were exempt, and some were non-exempt, the court ordered a hearing on damages. The court limited the trial witnesses to the DOL compliance officer, and one witness for each side. The court awarded damages and both parties appealed. The First Circuit found that the testimony of one employee was inadequate to represent 244 employees holding a variety of positions at different locations. The Court noted that "there is no ratio or formula for determining the number of employee witnesses required to constitute a representative sample of employees." The adequacy of the representative testimony will be determined based on the quality and credibility of the testimony, rather than on the quantity. Id. The court concluded that the evidence was "simply inadequate to give rise to a 'just and reasonable inference' as to the amount and extent of under compensated work." Id. at 794. In Reich v. Southern Maryland Hospital, 43 F.3d 949 (4th Cir.1995), the court held that representative testimony from only 1.6% of the employee population did not support an award of $4.2 million in liquidated damages and back pay. The district court based the award on the testimony of 54 out of 3368 employees. The court stated that "although the Secretary's initial burden under Mt. Clemens is minimal, it is not non-existent." Id. at 951. In Reich v. Gateway Press, Inc., 13 F.3d 685 (3rd Cir. 1994), the court remanded the case to the district court for a determination of back wages for non-testifying employees. In Gateway,

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although the Secretary presented testimony of 22 out of 70 employees, producing identical testimony about the pattern and practice of hours worked, with one employee from each geographical group, the court was concerned with whether the representative employees accurately reflected the experiences of the other employees. Gateway, 13 F.3d at 701. While the above cases are instructive on the number of trial witnesses, they are distinguishable from the instant discovery dispute because none of the cases discussed whether Plaintiffs are obligated to respond to interrogatories or requests for production of documents. Even if that line of cases was controlling here, Plaintiffs have overstated their facts. Plaintiffs contend that nearly 60 depositions have been taken in this case. However, only 36 of the depositions were provided by Plaintiffs. (Even then, Plaintiffs seemed to be far more successful in producing Plaintiffs they wanted to depose, as opposed to Plaintiffs, such as Mr. Gundel, that Defendant wanted to depose.) Thus, only 36 out of 971 plaintiffs, or 3.7% of the plaintiffs have provided discovery in this matter. However, the current discovery dispute is not about the number of trial witnesses, it is whether Defendant is entitled to signed discovery responses from each plaintiff, and the following cases illustrate that Defendant is so entitled. In Casas v. Conseco Finance Corp. (in which the plaintiffs were represented by the same plaintiffs' attorneys as in this case), the defendants served approximately 2900 plaintiffs with written discovery. Plaintiffs provided 1302 executed answers and 1530 unexecuted answers to interrogatories. Casas v. Conseco Finance Corp., 2002 WL 246753, *1 (D.Minn. Feb.15,

2002), (attached as Exhibit A). Based on a subsequent defense motion, the court required all plaintiffs to submit executed interrogatory answers. Casas v. Conseco Finance Corp., 2002 WL 507059, *15 (D.Minn. March 31, 2002), (attached as Exhibit B.)

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In Tum v. Barber Foods, Inc., 2002 WL 47899 (D.Me. Jan. 11, 2002), (attached as Exhibit C), the court dismissed 16 plaintiffs for failing to comply with a court order directing them to respond to defendant's interrogatories. These plaintiffs contended they should not be dismissed because representative testimony should be allowed, and that the requests were cumulative, voluminous and burdensome. The court disagreed and noted: "the interrogatories were neither voluminous nor unduly burdensome under the circumstances of the case. The plaintiffs' contention that the defendant 'already has all the impeachment evidence it could use' if these eight plaintiffs are barred from testifying, ... is simply incorrect. The defendant would be entitled to demonstrate at trial that individual plaintiffs who do not testify have made claims that cannot be substantiated, in whole or in part. The use of representative testimony would not bar the use of such impeachment evidence." Tum, 2002 WL 47899 *1. In Brooks v. Farm Fresh, Inc., 759 F.Supp. 1185, 1188 (E.D. Va. 1991), vacated on other grounds, 966 F.2d 142 (4th Cir.1992), the district court compelled depositions of all 127 plaintiffs, despite plaintiffs' contention that the Defendant was not entitled to depose each opt-in plaintiff because they intended to use representative testimony at trial. In Coldiron v. Pizza Hut, Inc., 2004 U.S. Dist. LEXIS 23610, at *6-7 (C.D. Cal. Oct. 25, 2004), (attached as Exhibit D), the court granted the defendant's motion to compel individualized discovery from 306 opt-in plaintiffs. The court analogized the status of the litigation to a Rule 23 class action, explaining that discovery in a Rule 23 class action is within the courts' discretion, and in situations where "the propriety of a class action cannot be determined without discovery, it is an abuse of discretion to deny discovery." Coldiron at *6. In Kaas v. Pratt & Whitney, 1991 U.S. Dist. LEXIS 11177, at *6 (S.D. Fla. Mar. 18, 1991), (attached as Exhibit E), the court held that " meaningful discovery is essential in order to

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expedite this litigation."

The court ordered approximately 100 plaintiffs to answer

interrogatories, and stated Defendant could notice depositions of all plaintiffs after it answered discovery. Id. at *7. In Rosen v. Reckitt & Colman, Inc., 77 Fair Empl. Prac. Cas. (BNA) 370 (S.D.N.Y. 1994); 1994 U.S. Dist. LEXIS 16511, at **2-3, (attached as Exhibit F), the court held that fairness mandated that the defendant "be granted an opportunity to depose each member of this relatively small plaintiff class," consisting of 50 plaintiffs. Id. at *12. The court found that the defendant would "ultimately be entitled to depose each member of the class" in the event that the macro trial is followed by micro trials, or if plaintiffs pursued individual actions; and the defendant had a "right to obtain statistically significant evidence in support of its defense." Id. at *6. The defendant was "clearly entitled to seek anecdotal evidence that may be used to support or negate [the p]laintiffs' pattern or practice claim" (Id. at *10), and because the anecdotal evidence sought by the defendant "may be sparsely distributed among members of the plaintiff class ...[, w]ere the Court to limit [the defendant] to 10 or 20 depositions, anecdotal exculpatory information might go entirely undiscovered." Id. at *12. In Krueger v. New York Telephone Co., 163 F.R.D. 446, 451 (S.D.N.Y. 1995), the court held that defendants' desire to serve interrogatories on all 162 class members in the form of a questionnaire on individual damages was entirely appropriate. In this case, Plaintiffs claim that they have provided discovery responses from Camille Melonakis-Kurz on behalf of all plaintiffs. However, if the plaintiffs do not provide signed discovery responses in this matter, there is no guarantee that each plaintiff has reviewed the discovery requests and responses, and provided his or her own truthful answers, unless he or she was one of the 36 plaintiffs who has been deposed. This situation leaves Defendant with no way

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to tie a Plaintiff down to a particular set of facts for trial, and nothing with which to rebut the inference that the particular plaintiff worked overtime hours for which he or she was not compensated. Mt. Clemens Pottery Co., 328 U.S. at 687-688. Plaintiffs claim that Defendants do not need discovery responses because they have already produced their overtime estimate through their expert's damage calculations. However, Defendant is entitled to discovery of the underlying specific factual assertions which support their expert's damage calculations. Plaintiffs also claim that Defendants do not need discovery responses because they are in the process of producing Declarations from Plaintiffs to Defendant. Plaintiffs attach a sample declaration, 1 which adds nothing to this case. The declarations do not set forth the facts upon which each plaintiff's case is based, nor the identity of all persons who have knowledge of those facts. (See Defendant's Interrogatories No. 7, 8, 12, 13, 14, 15, and 16.) Even under the lenient standard established by Mt. Clemens Pottery, each plaintiff must establish that he has in fact performed work for which he was improperly compensated and he must produce sufficient evidence to show the amount and extent of that work "as a matter of just and reasonable inference." The burden then shifts to the employer to negate the reasonableness of the inference. Plaintiffs' proposed declarations fall far short of this standard. The recent testimony of Ron Gundel illustrates the need for individual discovery. Mr. Gundel testified under oath that he worked only "zero to five hours" of overtime in the course of his entire three years of employment with Heartland, versus the $20,000 claim asserted by
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The sample declaration consists of the following three paragraphs: (1) My name is Edward Benko. I am over the age of 18 and am competent to testify regarding the matters set forth in this Declaration. (2) I am a Plaintiff participating in the above captioned case against Defendant Heartland Home Finance, Inc. (3) During the time that I worked for Defendant as a loan officer, I worked an average of 60 per week.

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Plaintiffs' counsel. (See Affirmation Under Oath of Ron Gundel, attached as Exhibit G.) This example highlights the essential need for each plaintiff to sign a set of contention interrogatories under the penalties of perjury. Plaintiffs object to Defendant's Interrogatory No. 3, which inquires whether a plaintiff has ever been a party to another lawsuit, legal action, or administrative proceeding, whether criminal or civil in nature. "Plaintiffs object to this request because it is burdensome and seeks information irrelevant to this overtime case" and "is also harassing." The requested information is discoverable and relevant to a plaintiff's credibility. For example, pursuant to Fed.R.Evid. 609, a witness may be impeached by evidence of conviction of a crime for the purpose of attacking credibility if: (1) the witness has been convicted of a felony, if the court determines the probative value is not outweighed by its prejudicial effect; or (2) if the witness has been convicted of a crime involving dishonesty or false statement, regardless of the punishment. Regardless of whether such evidence would ultimately be admissible at trial, it is clearly discoverable. The Ho Fat Seto and DeSisto cases illustrate that the court must make credibility determinations in FLSA cases. Although responding to 971 sets of discovery requests may be a lot of work for Plaintiffs' counsel, it is not for each individual plaintiff. By having 971 individuals claiming relief,

Plaintiffs have turned this into a large case with a lot of potentially relevant information, and a lot of potential damages. Heartland cannot simply be expected to do without any discovery for all but 36 of the 971 plaintiffs. Heartland must be allowed to gather evidence with which to defend itself in this matter.

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Respectfully submitted,

/s David J. Carr David J. Carr, IN Attorney No. 4241-49 Margaret Wielenberg, IN Attorney No. 23858-49A ICE MILLER LLP One American Square, Suite 3100 Indianapolis, IN 46282-0200 Phone: (317) 236-2100 Fax: (317) 236-2219 [email protected] [email protected] Sean R. Gallagher HOGAN & HARTSON LLP 1200 Seventeenth St., Suite 1500 Denver, CO 80202 Phone:(303) 454-2415 Fax: (303) 899-7333 [email protected] CERTIFICATE OF SERVICE I hereby certify that on March 2 9, 2006, I electronically filed Defendant's Reply In Support of Motion to Compel Discovery with the Clerk of Court using the CM/ECF system which will automatically send email notification of such filing to the following attorneys of record: Donald Harold Nichols [email protected] Paul J. Lukas [email protected] Michele Renee Fisher [email protected] Sarah M. Fleegel [email protected] Jill Marie Novak [email protected] Rachhana T. Srey [email protected] /s David J. Carr Attorney for Defendant

INDY 1709488v1

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