Free Brief in Support of Motion - District Court of Colorado - Colorado

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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLORADO Civil Action No. 03-MK-2485 (pac) Camille Melonakis-Kurz, et al. Plaintiffs, v. Heartland Home Finance, Inc., Defendant. ______________________________________________________________________________ DEFENDANT'S MEMORANDUM IN SUPPORT OF MOTION TO DECERTIFY ______________________________________________________________________________ I. Introduction After seven months of intensive discovery, featuring review of thousands of pages of documents and approximately 57 depositions in three months, the facts reveal that Heartland's national policy stands as one of compliance, not non-compliance, with the Fair Labor Standards Act. Further, the fact-intensive inquiry of the status of loan officers as administratively exempt, as well as the autonomy of each branch location, and the claims and defenses as to each individual loan officer, all squarely weigh against maintaining this case as a collective action. 1 II. Facts A. Heartland Home Finance and its Loan Officers Defendant, Heartland Home Finance, Inc. ("Heartland" or "Defendant"), is a mortgage lender and broker which has employed approximately 1,570 loan officers over the last several years with (at various times) twelve to eighteen branch locations (often with multiple
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After the initial Complaint was filed, other loan officers were added as additional plaintiffs in this action. During discovery, a number of Plaintiffs were dismissed as outside the applicable statute of limitations and/or voluntarily withdrew. On February 16, 2005, Plaintiffs' counsel filed a parallel suit seeking recovery of minimum wage claims in the Northern District of Georgia federal court. McClain, et al. v. Heartland Home Finance, Inc. Civil Action No. 1:05-CV-0416-TWT. On January 3, 2006, Judge Thrash denied Plaintiffs' Motion for Conditional Certification and dismissed the lawsuit.

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autonomous branches working out of each location) in multiple states. Heartland provides first and second mortgages, in the capacity of lender, directly to consumers. (Ex. A: D. Flynn Dep. 1, pp. 6-7, ln. 1-25). At the time that this lawsuit was filed, Heartland had approximately 50 branches and was licensed in 26 states. (Complaint, ¶ 1, Doc. 1; Answer, ¶ 1, Doc. 11). Each state had different rules and requirements with regard to closing loans. (Ex. A: Rodriguez Dep., p. 58, ln. 9-11, 21-22). Each Heartland branch has one or more branch managers, and each branch manager reports to one of seven regional managers. (Ex. A: D. Flynn Dep. I, pp. 13-15, ln. 1-25). Branch managers are responsible for the operation of their branches, including human resources activities, payroll computations and training. (Id., p. 15, ln. 10-13; p. 35, ln. 18-20; pp. 40-43, ln. 3-4; pp. 56-58, ln. 20-23; pp. 64-65, ln. 16-12; Ex. A: Kopronica Dep., p. 40-41, ln. 16-6). Branch managers are also responsible for monitoring the loan officer's time on their time sheets, and informing payroll whether each loan officer is entitled to a full or partial draw. (Ex. A: Ott Dep., p. 13, ln. 1-11; p. 35, ln. 12-25). Branch managers all run their offices differently, resulting in different work hours, lunch breaks, training, and job duties among loan officers. (Ex. A: Pusey Dep., p. 34, ln. 22; p. 35, ln. 3; p. 57, ln. 7; p. 58, ln. 17; Modell Dep., p. 16, ln. 5-22; p. 17, ln. 11-23; p. 24, ln. 9-11; p. 37, ln. 14-18; Roberts Dep., p. 10, ln. 22-24; p. 35, ln. 9-21; p. 39, ln. 21-25; p. 40, ln. 8-19; Block Dep., p. 27, ln. 14-17; p. 42, ln. 1-23; p. 63, ln. 15-25; p. 64, ln. 1-9; p. 66, ln. 16-18; Sanford Dep. p. 7, ln. 3-4; p. 9, ln. 10-13; pp. 12-13, ln. 24-7; pp. 15-16, ln. 8-19; p. 49, ln. 16-18; pp. 56-57, ln. 14-7; p. 70, ln. 2-5; Berman Dep., pp. 56, ln. 23-1; p. 8, ln. 2-23, p. 56, ln. 2-8; Howard Dep., p. 20, ln. 8-10, p. 24-27, ln. 18-13; pp. 8687, ln. 20-3; pp. 97-98, ln. 10-6; p. 48, ln. 4-13; pp. 49-50, ln. 22-19; Clark Dep., pp. 23-24, ln. 19-12; p. 53, ln. 1-13; p. 54, ln. 1-21; p. 55, ln. 11-17; p. 61, ln. 17-19; p. 63, ln. 4-7; Gleason Dep., p. 32-33, ln. 21-9; Horton Dep., p. 6, ln. 21-24; p. 42, ln. 7-22; p. 47, ln. 16-19; p. 48, ln. 67; p. 54, ln. 13-25; p. 61, ln. 19-23; p. 68, ln. 15-18; Donahoo Dep., p. 41, ln. 8-11; p. 30, ln. 810; p. 31, ln. 12; p. 32, ln. 7; p. 69-70, ln. 20-4; Rodriguez Dep., p. 33, ln. 6-25; p. 35, ln. 24-25; p. 78, ln. 5-24; p. 79, ln. 2-13; Johnson Dep., p. 6, ln. 6-7; Gunn Dep., p. 6, ln. 16-18; Alawan Dep., pp. 47-48, ln. 6-3; pp. 49-50, ln. 18-3; Fleck Dep., p. 82, ln. 4-15; Accetta Dep., pp. 34-35, ln. 11-14; Kopronica Dep., pp. 24-25, ln. 20-14; Provost Dep., p. 102, ln. 19; p. 103, ln. 2).

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Loan officers provide the key link between the customers (who have normally already expressed an interest in improving their financial situation in response to telemarketing or electronic sales efforts by Heartland's sales subsidiary, Active Response Marketing, Inc., or by otherwise expressing a need for mortgage assistance), and Heartland's full range of mortgage services. (Ex. A: D. Flynn Dep. I, p. 38, ln. 2-13; p. 39, ln. 3-25; p. 40; ln. 1-10; pp. 43-44, ln. 125). Significant to this case in many respects, Heartland's loan officers provided both mortgage brokerage and lending options (through Heartland's lending division) to Heartland's customers. (Id., p. 7, ln. 1-17). Loan officers are responsible for following up on leads, presenting programs and products that would benefit the consumer, taking credit applications, and performing administrative functions necessary to get a loan to close through either mortgage brokering or lending. (Id., pp. 38-40, ln. 1-25; pp. 43-44, ln. 1-25). Although there are preferred methods for preparing leads, loan officers do not always follow those methods. (Id., p. 41, ln. 1-25; Ex. A: Cousino Dep., p. 42, ln. 7-13) ( Cousino prepared his own "printed sheet" to use with potential borrowers). Opt-in loan officers testified often about their individual expertise in how they added value to the business by their individual counseling of clients: Loan officers added value by "giving [the client] the absolute best

scenarios and letting them choose. I would coach them along and tell them what I thought was best for them, making their own decisions." (Ex. A: Kopronica Dep., p. 39, ln. 13-17). "I walked [customers] through the entire process." (Id., p. 37, ln. 19). Some of the key steps that are

involved in the loan process at Heartland include the following: 1. "Selling" a mortgage change before the customer ever talks to a loan officer. (Ex. A: Johnson Dep., p. 46, ln. 3-25; p. 50, ln. 2-13; Agostini Dep., p. 28, ln. 2-18; p. 81, ln. 19-24; Horton Dep., p. 25, ln. 3-4; p. 19, ln. 9-12; Roberts Dep., p. 30, ln. 24-25; p. 31, ln. 1-5; Berman Dep., p. 18, ln. 1-8; p. 21, ln. 17-25; p. 22, ln. 1-2; p. 35, ln. 9-25; p. 36, ln. 1-2; Ziemak Dep., p. 26, ln. 18; p. 28, ln. 8; DiBlasi Dep., p. 35, ln. 14-18; p. 34, ln. 19-20; Gunn Dep., p. 59-60, ln. 81). Unlike most other lenders, Heartland provides its loan officers with pre-screened leads who

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already have expressed an interest in improving their financial situation. A separate telemarketer usually has already spoken to the lead and has collected information for the loan officer. (Ex. A: DiBlasi Dep., pp. 50-51, ln. 22-20 (DiBlasi joined Heartland, in part, because it provided leads, unlike his prior employer); Kirkland Dep., p. 56, ln. 11-1-22 (Heartland was very good at providing leads); Rohrer Dep., pp. 47-48, ln. 10-4 (Heartland provided leads from its telemarketing subsidiary, and the telemarketer would open the door for us); Berman Dep., p. 15, ln. 9-19 (90 percent of my leads were from Heartland)). 2. Interview of the customer and analysis of the situation for a determination of goals and needs. ( Ex. A: Horton Dep., p. 23, ln. 7-8; e.g. customers may want to lower their monthly payments, consolidate debts and/or obtain cash) and numerous programs must be assessed for possible solutions. (Ex. A: Alawan Dep., p. 11, ln. 17-23; Berman Dep., p. 35, ln. 925; p. 36, ln. 1-2; Horton Dep., p. 25, ln. 8-9 ("there were literally hundreds of different possible scenarios..."); DiBlasi Dep., p. 32-33, ln. 5-7; Johnson Dep., p. 46, ln. 4-25; Alawan Dep., p. 12, ln. 1-17; Rodriguez Dep., p. 62, ln. 1-3 (Rodriguez determined the product that most benefited the customer)). 3. The loan officer selects one or more mortgage programs to recommend and discuss with the customer. (Ex. A: Horton Dep., p. 20, ln. 8-12; Agostini Dep., p. 27, ln. 5-21; p. 28, ln. 14-18; Roberts Dep., p. 30, ln. 24-25; p. 31, ln. 1-5, 22-25; p. 32, ln. 1-9; Berman Dep., p. 17, ln. 6-15; p. 35, ln. 9-25; p. 36, ln. 1-2; p. 37, ln. 1-7; Ziemak Dep., p. 80, ln. 2-9; DiBlasi Dep., p. 11, ln. 1-10; Rodriguez Dep., p. 54, ln. 14-18; p. 55, ln. 16; p. 56, ln. 7-18; p. 57, ln. 37). 4. Prior to presenting the options, the loan officer determines the interest rate, the fees and the points that he or she plans to charge the client, and locks in Heartland's revenue on the loan, all without manager approval. Loan officers have discretion to determine what the total fees will be and can spread those fees among different categories (such as the origination fee, processing fee, etc.). Some considerations a loan officer uses when determining fees are the size of the loan, the amount of work required for the loan, client objections, and maximizing the loan officer and Heartland's commissions. (Ex. A: Agostini Dep., p. 32, ln. 6-18; p. 73, ln. 6-14; Horton Dep., p. 24, ln. 9-15; p. 32, ln. 20-23; p. 33, ln. 2-4; p. 34, ln. 17-24; Roberts Dep., p. 108, ln. 13-25; p. 110, ln. 4-23; p. 111, ln. 16-25; Berman Dep., p. 42, ln. 6-9; p. 46, ln. 2-16; p. 52, ln. 13-25; p. 53, ln. 1-16; p. 90, ln. 21-25; p. 91, ln. 1-17; DiBlasi Dep., p. 18, ln. 11-20; p. 54, ln. 5-20; Johnson Dep., p. 50, ln. 14-20; Roberts Dep., p. 111, ln. 25; p. 112, ln. 1-2; Berman Dep., p. 42, ln. 6-9; p. 43, ln. 4-5; Gunn Dep., p. 60, ln. 17-25; Sweet Dep., p. 96, ln. 4-10; p. 99, ln. 12-15). 5. Assessing brokering v. lending options. (i.e., using lenders other than Heartland's lending subsidiary for the loan constituted an important part of what Heartland's loan officers did for the customers.) ( Ex. A: Kopronica Dep., p. 35-36, ln. 21-13; p. 46, ln. 4-7; p. 56, ln. 2-11); Roberts Dep., p. 96, ln. 10-17; Berman Dep., p. 48, ln. 12-13; Horton Dep., p. 26, ln. 18-24; Agostini Dep., p. 109, ln. 1-6; DiBlasi Dep., p. 17, ln. 11-25; Sweet Dep., p. 42, ln. 18-25; p. 43, ln. 1-15; Reynolds Dep., p. 87, ln. 21-23; p. 91, ln. 17-25; p. 92, ln. 1-4; Sanford Dep., p. 31-32, ln. 25-7; LeGree Dep., pp. 57-59; ln. 9-25). All of these steps call upon independent judgment and discretion.

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B. Heartland's National Policy of FLSA Compliance 1. Heartland's Theory Heartland believes that its loan officers, who exercise independent judgment and discretion, are administratively exempt under the Fair Labor Standards Act ("FLSA"). Moreover, Heartland management believes its loan officers routinely worked 40 hours or less, each week. Nonetheless, in an overabundance of caution, and in conjunction with the closing of a DOL audit in Fairborn (Dayton), Ohio, Heartland instituted a policy in July of 2002 which paid loan officers a guarantee of $500.00 per semi-monthly pay period (against commissions earned), and which ordered branch managers to work loan officers up to, but no more than, 40 hours per week. (Ex. A: D. Flynn Dep. II2, p. 16, ln. 1-25).3 In July 2002, Heartland also instituted a time sheet policy in which the loan officers would record their hours, including time that they left the office on non-company business, and initial each day's entry. (Ex. A: Beck Dep., pp. 8-9, ln. 24-4). Heartland communicated the policy through a conference call with regional managers, then by individual contact with branch managers, and finally to the loan officers. (Id., p. 9, ln. 7-9). Heartland made it clear to the loan officers that it did not want them working beyond 40 hours per week. (Id., p. 9, ln. 11-13).
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Don Flynn provided two depositions to Plaintiffs; accordingly, they are marked: "Dep. I" and "Dep. II". The investigation of the Fairborn (Dayton), Ohio branch ended on June 24, 2002, and covered the period from January 1, 2000, to December 31, 2001. (Ex. A: Beck Dep., p. 5, ln.18-23; p.7, ln.2-9. DOL found only limited minimum wage issues, and no overtime violations. (Ex. A: D. Flynn Dep. I, p. 94-95, ln. 12-17)
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Subsequent to the changes Heartland made in July 2002, the DOL concluded two other investigations. An investigation in Aurora, Colorado concluded in September, 2003. (Ex. A: Beck Dep., p. 11, ln. 23-25). The Aurora, Colorado investigation covered the time period from July 14, 2001, to July 19, 2003. Again, the DOL found some limited minimum wage issues in Aurora, but raised no issue of overtime (Id., p. 12, ln.6-24). Rather than dispute those claims Heartland paid the loan officers the amounts worked out with the DOL. (Ex. B: Beck Letter to DOL). The DOL also conducted an investigation in St. Louis, Missouri, which concluded in mid-September, 2003. (Ex. A: Beck Dep., p. 13, ln. 4-9). The St. Louis investigation covered the time period from June 1, 2001, to June 1, 2003, (Ex. C: DOL St. Louis Report) which again straddled in time the policy change to the $500 draw. (Ex. A: Beck, p. 14, ln. 2-11). Although the DOL and Heartland resolved the minimum wage and overtime issues arising prior to July 2002, the DOL also advised Heartland that the new $500 draw policy satisfied and complied with the FLSA

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2. Heartland's Employee Handbook and Employment Contract Heartland's published policy, which is in the Employee Handbook, calls for full compliance with the FLSA. (Ex. D: DEF 1078-79; Ex. A: Melonakis-Kurz Dep., p. 106, ln. 810). It states that non-exempt employees are entitled to overtime when they have worked in excess of 40 hours per week. The post-2002 loan officer employment contracts call for

compliance with all policies and procedures of Heartland "which relate to verification of hours worked and pre-approved overtime hours." (emphasis in original) (Ex. E: Heartland post-2002 Employment Contract, p.4, ¶ 6(e) DEF 00525; Ex. A: Melonakis-Kurz Dep., pp. 103-05, ln. 817; Agostini Dep., p. 53, ln. 3-7; Roberts Dep., p. 50, ln. 1-11; Provost Dep., p. 77, ln. 1 to p.78, ln. 20). 3. Heartland's Documentation and Practices a. Forty Hours Per Week In his deposition, Heartland Executive Vice President Donald Flynn explained how Heartland branch managers were expected to keep time sheets for all loan officers "to make sure that the loan officers get up to 40 working hours in a week," and that it was also used "as a tool to make sure they don't work over 40 hours in a week." (Ex. A: D. Flynn Dep. I, pp. 10-11, ln. 23-6; pp. 79-80, ln. 8-25). This testimony was confirmed by former branch manager Eric Jarold, who testified that Flynn would just say "full-time, 40 hours per week." Jarold (correctly) understood that "to mean that they were not to work over 40 hours in a week." (Ex. A: Jarold Dep., p. 12, ln. 20-21). This is also reflected in memoranda that went out to regional managers and branch managers from headquarters. (Ex. F: DEF 15167--loan officers are to work 40 hours; Ex. G: DEF 0001-Agenda with reference to 40 hours) Multiple witnesses confirmed the

wage standards, and raised no other complaint. (Id., pp. 14-16, ln. 15-18) DOL never indicated any ongoing or systematic problem with Heartland's overtime policies. (Ex. A: D. Flynn Dep. I, p.91, ln 5-7; p. 95, ln. 14-17).

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40 hour limitation. (Ex. A: Modell Dep., p. 16, ln. 5-22, p. 17, ln. 11-23; p. 24-9-11; p. 37, ln. 14-18; Roberts Dep., p. 35, ln. 17-21; Drew Dep. p. 48, ln. 22-25; Sanford Dep. p. 7, ln. 3-4; p. 9, ln.10-13; p. 49, ln.16-18; p. 12, ln. 24 to p. 13, ln. 7; p. 47, ln.17-24; p. 70, ln. 2-5 ("make sure you fill in your time that you were here and don't work over 40 hours."); p. 56, ln. 14-21; p. 56, ln. 24 to p. 57, ln. 7; Block Dep., p. 60, ln. 1-20; Alawan Dep., p. 33, ln. 19-20). Some managers failed to follow the time sheet procedure. Possibly, some overtime occurred as the result of rogue managers efforts or neglect. Yet, the evidence fails to present a national policy of FLSA non-compliance. b. Plaintiffs' Suspect Declarations 1. Reynolds, Artis, and Kopronica

In Plaintiffs' Brief in Support of Conditional Certification, and understandably underscored by this Court in granting conditional certification, opposing counsel placed great emphasis on the alleged claims that "upper management" supposedly told loan officers "to falsify time sheets to reflect that loan officers worked only forty hours per week, even if they worked more than 40 hours" and "to revise time sheets that were not in compliance with that directive." (Memorandum Opinion and Order Regarding Motion for Class Certification--June 27, 2005-- Doc. 273, p. 5; Recommendation of Magistrate Judge ­March 3, 2005, p. 6--citing the Declarations Under Oath of Bradley Reynolds, Ellamay Artis, and Daniel Kopronica, Doc. 252). Plaintiffs' reliance on these Declarations warrants special scrutiny. Depositions of these three plaintiffs, cited by the Court, for example, revealed the following testimony under oath: Bradley Reynolds testified that the only "upper management" person with whom he discussed the time sheets was Regional Manager Bob Janda and what Janda consistently said was: "They wanted 40 hours worked." (Ex. A: Reynolds Dep., p. 20, ln. 18-20; p. 51, ln. 16-24).

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The requirement was that loan officers work goal was 40 hours, unless the loan officer was meeting our performance goals, in which case, the loan officer could work fewer than 40 hours per week. (Id., p. 33, ln. 1-10). He also testified Janda said that time sheets were to reflect 40 hours of work, but Reynolds never warned Janda that timesheets were not being filled out accurately (Id., p. 33, ln. 15-22) ("It wasn't my job.") Instead, Reynolds testified that he took it on his own to revise timesheets, both downward and upward, to show at least forty hours of work by each of his loan officers, each week. (Id., p. 41, ln. 8 -15). ("It went both ways. You know some of them would have to add hours to get to the 40.") Reynolds testified the time sheets were accurate about 50% of the time. (Id., p. 40, ln. 3-4). Reynolds stated under oath that his deposition testimony provided the most complete explanation of his Declaration testimony. (Id., p. 51-52, ln. 20-6; p. 55, ln. 25). Janda, no longer affiliated with Heartland in any manner, adamantly and repeatedly testified that his instructions were for loan officers to work only 40 hours, and that they were to record no more than 40 hours, because that was the extent to which they were supposed to work each week. (Ex. A: Janda Dep., p. 16, ln. 13-15; p. 30, ln. 18-24). Ellamay Artis admitted that her Declaration contained inaccuracies regarding the dates of her employment and her position. (Ex. A: Artis Dep., p. 126-28, ln. 18-3). In addition to the inaccuracies in her Declaration, Artis's creditability is further compromised by the testimony of Block, a former Grand Rapids manager with nothing to gain or lose in this lawsuit. Block testified that Artis was not an honest person, and he provided specific examples of his experiences with her dishonesty. (Ex. A: Block Dep., p. 61-62, ln. 24-20). Daniel K opronica admitted that he left Heartland in March 2002, months before the implementation of the time sheet policy, and that he possessed absolutely no basis for testifying about any aspect of Heartland's time sheet policy, including the thoughts or actions of "upper

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management." (Ex. A: Kopronica Dep., pp. 5-6, ln. 25-3; p. 23, ln. 11-13; p. 54, ln. 5-11). He also testified that he left in anger over Heartland's brokerage policies and went into competition against Heartland in violation of his non-compete obligations. (Id., pp. 34-35, ln. 14-22). Thus, his Declaration appears to be nothing but an example of signing whatever was placed in front of him. 2. Other Declarants

That some of the Opt-ins themselves are not sure what they meant by their own Declaration testimony calls into question the veracity of all of the Declarations. For example, Opt-in David Sandifer testified that he had never seen his declaration before, that he had no idea how his signature got on the document and that it contained false allegations regarding overtime. (Ex. A: Sandifer Dep., p. 55-56, ln. 7-11; p. 57, ln. 9, 11-18).5 The poor record of veracity actually tested by depositions casts a pall over the entire 200+ declarations compiled by opposing counsel's office.6 Former Heartland Loan Officer Alexandra Cummings stated: "I originally signed up for this lawsuit against HHF because different people said 'go ahead' and 'you have nothing to lose.'

When asked what he meant by certain specific Declaration testimony about timesheets, Opt-in Rodriguez could only "assume" a response, and he was not sure to what timesheets he refers in his own Declaration. (Ex. A: Rodriguez Dep., p. 85, ln. 15-22; p. 90, ln. 8-14). Rodriguez testified that he reviewed but did not draft his Declaration and that he had no opportunity to make changes to "this one," which he signed Nov, 17, 2004. (Id., p. 81, ln. 21-24). When questioned about the new, not-yet-produced declaration, his counsel objected based on privilege, instructed Rodriguez not to answer, and said Heartland's counsel would get the new declaration once it was finished. (Id., p. 82-84, ln. 5-10). Several of the Opt-ins made representations in their declarations and depositions as to how they completed timesheets, but could not explain themselves when shown copies of their actual timesheets, which contradicted their testimony. (Ex. A: Agostini Dep., p. 6, ln. 21-25; p. 11, ln. 8-14; pp. 6869, ln. 13-3; pp. 135-36, ln. 25-9; pp. 137-142, ln. 3- 11; pp. 145-46, ln. 18-12; pp. 147-48, ln. 6-25; Ex. I; Ex. A: Luttke Dep., p. 11, ln. 1-4; p. 52, ln. 12-15; p. 71, ln. 7-13; p. 73, ln. 6-13; pp. 74-75, ln. 18-5; Ex. J; Ex. A: Dinkel Dep., p. 13, ln. 1-5; p. 19, ln. 1-19; p. 20, ln. 1-24; p. 23, ln. 7-9; p. 53, ln. 1-3; Ex. K).
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Indeed, the aggressive quality of Plaintiffs' counsel's search for litigation fodder may have inadvertently undermined the search for truth. Deponents testified to receiving as many as eight contacts from plaintiffs' counsel seeking their participation in the lawsuit. For example, Eric Jarold testified he received two or three letters, and as many as five phone calls, soliciting his participation. (Ex. A: Jarold Dep., p. 45, ln. 5-17; Sandford Dep., p. 52, ln. 12-15).

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(Ex. H: Affirmation Under Oath of Alexandra Cummings, ¶3).

Cummings confessed she

worked no overtime and opted out in October of 2004. (Id., ¶¶ 4-5). Megan Bradley stated: "I originally signed up for the above-captioned lawsuit against HHF in July 2004 because I was upset about the changes in management, the changes in expectations, and my earnings going down, all of which I described above, and I initially thought, Why not see what I can get out of the lawsuit?" (Ex. L: Affidavit of Megan Bradley, ¶ 14). Bradley also confessed: "While I was employed at HHF, no loan officers at my branch worked any overtime hours. (emphasis added). In other words, none of the loan officers employed by HHF at my branch with whom I worked actually worked more that forty hours during any week of their employment by HHF." (Id., ¶ 6). Eric Jarold worked as a loan officer, and later, as a branch manager in the Middleburg Heights/Cleveland office from 1998 to May of 2004. When confronted with claims that loan officers worked overtime hours, he stated that he believed the loan officers were making up the claims. (Ex. A: Jarold Dep., p. 9 ln. 16-23). Jarold went on to state that while he misunderstood how time sheets were to be filled out (only 40 hours recorded), it was clearly communicated by top management that loan officers were to work no more than 40 hours per week: "Q (by Michele Fisher): Did you have the understanding that your loan officers should work over 40 hours? A: No. The job can get done in less than 40 hours." (Id., p. 11, ln. 9-12). III. Legal Analysis A. Overview

At the second step of the inquiry, plaintiffs' burden is much higher than at the stage of conditional certification. Thiessen v. General Electric Capital Corp., 267 F.3d 1095, 1102-03 (10th Cir. 2001). Applying a post-discovery standard, the court makes a factual determination on

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the similarly situated issue question, looking to specific factual similarities or differences and manageability concerns. During this second stage analysis, a court reviews several factors, including: (1) disparate factual and employment settings of the individual plaintiffs; (2) the various defenses available to defendant which appear available to be individual to each plaintiff; and (3) fairness and procedural considerations. Thiessen, 267 F.3d at 1103. While the seven month time frame for nationwide discovery from the time of the court's ruling on conditional certification to the deadline for decertification limited discovery for both sides7, a "core sampling" of Plaintiffs' case reveals that: (1) no national policy of FLSA noncompliance exists regarding Heartland; (2) the loan officers are not "similarly situated" as required for a collective action as to job duties, dates of employment, location, and defenses, and this is of particular importance given the context of an issue of exempt status under the FLSA. Each of these bases independently renders continued treatment of this matter as a collective action untenable. B. Absence of National Policy of Non-Compliance.

It remains well established that for a collective action to be viable, plaintiff must prove the existence of a national policy of non-compliance. England v. New Century Financial

Corporation, 370 F. Supp. 2d 504 (M.D. La. 2005). In assessing whether there is an allegedly unlawful common policy or scheme, courts consider written company policies, and whether the alleged scheme is implemented on a centralized or decentralized basis. Ray v. Motel 6, 1996 WL 938231 at *3 (D.Minn.) (copy attached as Ex. M); Harper v. Lovett's Buffet, Inc., 185 F.R.D. 358, 363 (M.D. Ala. 1999) (evidence did not show that potential collective action members were victims of a single decision, policy or plan). In the England case, involving another mortgage
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Heartland noticed 51 Plaintiff depositions on September 15, 2005. Ultimately, only approximately 20 of those individuals had appeared for depositions by January 31, 2006. Heartland produced all deponents it controlled.

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loan company pitted against the same opposing counsel, Nichols, Kaster, & Anderson, the District Court denied even conditional certification due to the absence of a national policy of non-compliance with the FLSA, or to put it another way, the absence of a nationwide illegal policy. England, 370 F. Supp. 2d at 511. The court stated: Plaintiffs have submitted affidavits of some of the plaintiffs. The Court finds that this evidence is insufficient to establish the existence of a nationwide illegal policy as required under the law. In fact, this evidence supports the Court's conclusion that these alleged claims are based on local policies of various managers located at different sites. There is simply no evidence of a national policy that would support a collective action under the facts of this case. Id.; accord Campbell v. Amanda Co., 2001 WL 34152094 (N.D. Iowa 2001)(denying certification because evidence of "a common policy or plan to discriminate " was lacking)(Copy attached as Ex. R). Just so in the instant case. Plaintiffs' counsel presents anecdotal evidence of possible rogue managers, and vague written references to "long hours," "late nights," or "weekends," and "more than eight hour days," (all of which may still occur with only 40 hours worked in a week), but no nationwide illegal policy in violation of the FLSA. In fact, since at least July of 2002, an explicit policy of compliance with the FLSA exists, as evidenced by the employee handbook, employment contract, memos, and testimony of not just current Heartland management, but also loan officers, and former Heartland employees with nothing to gain from "shading" their testimony. This simple reason alone warrants de-certification, just as it did in the England case. C. Absence of Status of Similarly-Situated Status in Context of FLSA Exemption Issue

Unquestionably, Plaintiffs must prove "similarly situated" status to obtain certification. Smith v. Heartland Automotive Services, Inc., ___F. Supp. 2d.____, 2005 WL 3388138 (D. Minn. 2005) (no relation to Heartland); (copy attached as Ex. N); Sheffield v. Orius Corp., 211 F.R.D. 411 (D. Ore. 2002) (numerous factual differences among the putative class members

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precluded conditional certification of a nationwide class); Ray, 1996 WL 938231 (lack of commonality of damages); St. Leger v. A.C. Nielsen Company, 123 F.R.D. 567 (N.D. Ill. 1988) (plaintiff worked drastically different hours than other putative class members). The recent case of Smith v. Heartland Automotive Services, Inc., ___F. Supp. 2d.____, 2005 WL 3388138 (D. Minn. 2005), again featuring Nichols, Kaster, & Anderson as plaintiffs' counsel, illustrates well the merit in granting decertification. Here, the court assessed the circumstances under which a nationwide company, such as the instant Heartland, should be subjected to a collective action where an issue exists concerning an exemption under the FLSA. The Smith court noted that discretion and control stand as crucial factors to be considered in an FLSA exemption analysis. Id. at * 7. While Smith specifically dealt with the executive exemption, as opposed to the administrative or retail exemption, nothing indicates that these analyses rest as any less fact sensitive. Indeed, substantial facts and case law indicate that the administrative exemption will need to be assessed with respect to every plaintiff in this case, and that minute individual factual dissection will be required to examine whether the exemption applies. Particularly here this stands true, as Plaintiffs testified across a broad gamut of skill levels, as to independent judgment and discretion, as well as pay levels. No doubt Plaintiffs will seek to give short shrift to this argument by citation to Casas v. Conseco Finance Corp., 2002 U.S. Dist. LEXIS 5775 (D. Minn. 2002)(Attached as Ex. O). This case found the "captive" loan officers of Conseco to be non-exempt. Yet, this decision is contrary to the trend of both other court decisions and Department of Labor Regulations and Opinion Letters, and it is factually distinguishable from the instant case. Fed. Reg. 04/23/04, 22145-46 (Ex. P); DOL Opinion Letter of August 26, 2005 (Ex. Q).

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In Casas, the court held that the administrative exemption did not apply to loan originators, finding that the employees were instead production employees who attained one loan at a time for the employer's customers. 2002 U.S. Dist. LEXIS 5775. The court opined that Conseco's loan originators used the employer's "pre-existing established standing operating procedures and guideline," they simply used skills in applying techniques rather than independent discretion and judgment. Id. at **30-31; compare McAllister v. Transamerica Occidental Life Ins. Co., 325 F.3d 997 (8th Cir. 2003)(that employees followed a manual did not prevent finding employees exercised independent discretion and judgment). Here, in direct contrast to the Conseco loan originators, the prior factual discussion highlights a myriad of ways in which Heartland's loan officers routinely exercised independent judgment and discretion in carrying out their jobs--testimony most often offered by Plaintiffs themselves. This took the form of interacting with customers who had already been sold on a change by telemarketers, assessing customer goals, offering multiple options, brokering to lenders other than Heartland, and acting without veto from branch managers. Thus, to the extent Casas even remains good law, these factual circumstances directly contrast with the key facts of Casas. See, also, Reyes v. Hollywood Woodwork, 360 F. Supp. 2d 1288 (S.D. Fla. 2005). The case law and facts weigh in favor of many, if not all, of Heartland's loan officers being administratively exempt. This issue directly affects the viability of a collective action. As the Smith court, following this Circuit's Theissen decision, makes clear, a fact-laden FLSA exemption analysis precludes certification of a collective action. Smith, 2005 WL 3388138 at *8. Failure to avoid this fact-intensive inquiry dooms collective treatment under §216(b). Id.

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D. Other Defenses of an Individual Nature Available to Heartland Indicate that a Failure to Decertify will lead to Significant Manageability Issues While subject to the same management expectations, the purported class members had demonstrably disparate day-to-day experiences. Those differing experiences were due to many factors, including, among other things, having different supervisors, and different levels of ability. Under these circumstances, there is no way fairly to make a representative decision about the propriety of the administrative exemption for Heartland loan officers, as well as individual defenses such as statutes of limitation, deceit ("suffer or permit"), differing contract language, and contractual choice of law. IV. Conclusion It is Plaintiffs' burden to demonstrate they are entitled to collective status. Under the strict scrutiny of the second-stage analysis, Plaintiffs simply cannot satisfy their burden. The collective action should be decertified, and the opt-in Plaintiffs dismissed. Respectfully submitted, s/ David J. Carr David J. Carr, IN Attorney No. 4241-49 Steven F. Pockrass, IN Attorney No. 18836-49 ICE MILLER LLP One American Square, Suite 3100 Indianapolis, IN 46282-0200 Phone: (317) 236-2100 Sean R. Gallagher HOGAN & HARTSON LLP CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing was sent by electronic service to counsel of record, on the 31st day of January, 2006. s/ David J. Carr Attorney for Defendant ICE MILLER LLP

INDY 1675867v.1

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