Free Motion for Partial Summary Judgment - District Court of Colorado - Colorado

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

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UNITED STATES DISTRICT COURT DISTRICT OF COLORADO CASE NO. 03-cv-02485 MSK-PAC Camille Melonakis-Kurz, individually and on behalf of other similarly situated employees, Plaintiffs, v. Heartland Home Finance, Inc., Defendant.

AMENDED MOTION AND FACTS IN SUPPORT OF PLAINTIFFS' AMENDED MOTION FOR SUMMARY JUDGMENT ______________________________________________________________________________

COME NOW Plaintiff Camille Melonakis-Kurz individually and on behalf of other similarly situated employees, who move for summary judgment on the claims in the Complaint pursuant to Fed. R. Civ. P. 56. INTRODUCTION Plaintiffs are 956 loan officers who worked for Defendant Heartland Home Finance ("Defendant") at its approximately 67 branch offices in 31 states.1 These loan officers brought this action to recover the overtime compensation that Defendant failed to pay them. Although overwhelming evidence will be presented at trial showing that loan officers worked overtime hours, Defendant never paid any loan officer any overtime compensation.

1

Fisher Aff. at ¶ 2.

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By way of this motion for partial summary judgment, Plaintiffs are asking for this Court to rule in their favor on the following issues that can be determined as a matter of law on the undisputed facts: a. Plaintiffs are not subject to the administrative exemption and are therefore eligible for overtime compensation; b. Because Defendant willfully violated the law when it failed to pay its loan officers for their overtime hours worked, a three year statute of limitations applies; and c. Because Defendant cannot prove it acted in good faith and that it had reasonable grounds for believing that its actions did not violate the FLSA, full liquidated damages apply. STATEMENT OF UNDISPUTED FACTS 1. Defendant's Business of Selling Mortgages. Defendant is in the business of selling consumer mortgages.2 Defendant employs

approximately 300 loan officers, who sell loans, in its approximately 49 branch locations throughout the United States.3 Defendant maintains two corporate offices.4 The sales operation is headquartered in Cleveland, Ohio, and the administrative headquarters is located in Downers Grove, Illinois.5 The loan officers work within the "sales" operation and not the administrative operation.6

2 3

Ex. 1 at 7. Id. at 14; Ex. 5 at 15. 4 Ex. 1 at 13, 27. 5 Id. at 13-14, 27. 6 Id. at 14-15, 20, 21. 2

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2.

The Loan Officers' Job Was to Sell Loans. The loan officers' job duties are the same nationwide.7 The loan officers' primary duty8

is to sell loans for Defendant subject to Defendant's strict guidelines and procedures.9 Defendant's job description for all loan officers is as follows: The Employee agrees to actively engage in the origination and sale of mortgage loans to the general public and to assist in the processing of each loan application he originates. The Employee agrees to refer mortgage applications exclusively to the Company and not into enter (sic) any such agreement with any other mortgage broker during the term of this agreement. The Employee further agrees to maintain current records of all applications in compliance with Real Estate Settlement Procedures Act ("RESPA') and R.C.O., to maintain loan files in compliance with policies and procedures set forth by the Company (all forms to be completed and in stacking order, approval or denial letters sent, etc.), to follow all policies and procedures set forth by the Company, and not make any representations or commitments on behalf of the Company, and at all times, to uphold the good name and reputation of the Company.10 According to Defendant's owner Donald Flynn ("Flynn"), and Defendant's "The Basics" document detailing the process for selling a loan, the process is as follows: a) The loan officer telemarkets potential customers ("leads") who appear on lead sheets provided by Defendant;11 The loan officer asks the potential customer standardized questions to complete a 1003 application for a mortgage;12 The branch manager or support staff then pulls the customer's credit score from Defendant's computer system;13

b)

c)

Ex. 1 at 36-37. As a general rule, "primary duty" means the major part, or over 50 percent, of the employee's time. 29 C.F.R. § 541.103 (2003). 9 Ex. 1. at 38; Ex. 10; see also Ex. 18; Ex. 26, Benson at 13. 10 Ex. 1 at 36; Ex. 10 (emphasis added). 11 Ex. 1 at 38-40; Ex. 14 at ¶ 1. Defendant provides loan officers with scripts for these calls. Ex. 15. 12 Ex. 1 at 44, 53; Ex. 14 at ¶ 2. The loan offers transfer the handwritten information on the 1003 into a computerized application. Ex. 1 at 45. 13 Ex. 1 at 45-46; Ex. 14 at ¶ 3.
8

7

3

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d)

Using their training provided by Defendant, the loan officer discusses with the customer their loan needs in order to sell them a loan product;14 After seeking their manager's review, the loan officer sends the information to Defendant for "preapproval;"15 The loan officer asks the customer to send in standardized documents;16 The loan officer also contacts an approved appraiser in the area to obtain an appraisal of the property;17 The loan package is then sent to the loan processor and then to Defendant's underwriting department for final approval or denial of the loan;18 and If approved by underwriting, the loan officer (or processor on occasion) schedules the closing with the title company and the loan officer will at times attend the closing to answer a question if one arises.19

e)

f) g)

h)

i)

All loan officers receive orientation and perform these sales duties under the direction of their "sales manager"20 as dictated by Defendant's "training manual" and "employee handbook."21 In addition Flynn testified that loan officers have to follow their managers'

instructions on a day-to-day basis to achieve their individual goals set by Defendant.22 These production goals are very important to Defendant, as Defendant's entire business is selling mortgages.23 Defendant encourages production by the loan officers by comparing their sales to

14 15

Id. at 40, 43-44; Ex. 14 at ¶ 2. Ex. 1 at 55-57. 16 Ex. 14 at ¶ 6. 17 Id. at ¶ 4. 18 Ex. 1 at 59; Ex. 14 at ¶ 6. 19 Ex. 14 at ¶ 6. 20 See Ex. 1 at 14-15. 21 Id. at 40-41, 62-63. According to Flynn, the training manual was created to "increase sales and production." Id. at 42. 22 Ex. 1. at 37-38, 41-42. 23 See id. at 7. 4

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the sales of other loan officers nationwide.24 Defendant also requires that loan officer hit certain minimum production goals or risk termination.25 3. Loan Officer Compensation. All loan officers nationwide are paid under the same compensation plan.26 The decision on how to pay loan officers was made by Defendant's executive management team, and branch managers have no authority to pay loan officers differently.27 a. Prior to July 2002 Loan Officers Were Paid Solely Commissions.

Prior to July 2002, Defendant did not pay loan officers a salary, and only paid them commissions on loans they closed.28 During pay periods where loan officers did not close any loans, they did not receive any compensation.29 b. After July 2002 Loan Officers Were Paid a Draw Against Future Commissions and Kept Timesheets.

In response to audits by the Department of Labor, Defendant had to change the manner in which it compensated its loan officers.30 On July 31, 2002, it reclassified its loan officers as nonexempt overtime eligible employees, and required that they keep timesheets.31 It also started paying them a $500 per pay period draw against future commissions.32 This draw against

24 25

Id. at 70-71. Id. at 76; Ex. 16; Ex. 23, Heath at 24, 27, Notaro at 29-30. 26 Ex. 1 at 63-66. 27 Id. at 85. 28 Ex. 2 at 14-15. 29 Id. at 15. 30 Ex. 3 at 6-8. 31 Ex. 3 at 8-9; Ex.1 at 78; Ex. 2 at 11; Ex. 17. The timesheets were primarily kept to "increase [loan officers'] production." Ex. 1 at 86. 32 Ex. 2 at 15-16, 21. 5

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commissions was paid bi-monthly through 24 checks per year.33 The draw was not guaranteed, as reflected by Defendant's practice of "docking" or reducing it for various unexplained reasons.34 With respect to the timesheets, Defendant's branch managers were required every pay period to fax them to corporate payroll for processing.35 Flynn was responsible for reviewing the timesheets.36 Defendant stated that during this timeframe, loan officers were eligible to receive overtime pay at a rate of time and one half for hours worked over forty per week.37 Even so, Defendant claims that no loan officer has ever recorded any overtime hours and therefore no loan officer has ever received overtime pay.38 4. Defendant Willfully Violated the Law By Failing to Pay Overtime Compensation. a. Volumes of Timesheets Show Overtime Hours Worked.

Although volumes of loan officer timesheets submitted to Defendant's corporate office show overtime hours worked, Defendant ignored these timesheets and never paid any overtime compensation to its loan officers.39 b. Defendant Was Aware Loan Officers Were Working Overtime Hours Because It Required and Observed It.

Members of Defendant's management team testified that their loan officers either worked or may have worked overtime hours.40 In addition, managers testified that they were instructed

33 34

Ex. 2 at 26. See Ex. 12; Ex. 13. 35 Ex. 1 at 83. 36 Ex. 4 at 9-10. 37 Ex. 2 at 11; Ex. 6 at 18. 38 Ex. 1 at 78, 87; Ex. 2 at 12. 39 Ex. 1 at 78, 87; Ex. 2 at 12; Ex. 6 at 16-17; Ex. 7. 40 See Ex. 19. 6

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by Defendant that loan officers would not be paid for their overtime hours worked.41 Finally, Defendant required its loan officers to work whatever hours were necessary to hit their sales production goals or risk termination.42 b. Loan Officers Repeatedly Complained to Their Superiors About Defendant's Failure to Compensate Them For Overtime Hours Worked.

In response to Defendant's requirement that loan officers work overtime hours without overtime compensation, many loan officers complained to their superiors about the unlawful practice.43 policy.44 c. Defendant Maintained a Nationwide Practice of Instructing its Loan Officers to Falsify Their Timesheets. Several managers responded to these inquiries by stating it was simply company

Defendant also had a practice of falsifying loan officers' timesheets so that they would not reflect overtime hours worked.45 Again, when loan officers questioned management about this unlawful practice, they were told it was company policy.46 Managers testified that they were told by upper management, including Defendant's owner Flynn, that loan officers could only record forty hours per week on their timesheet even if they worked more.47

41

Ex. 24 . Others stated that they were never informed by Defendant that loan officers were to be paid overtime compensation if they worked overtime hours. Ex. 26. 42 See Exs. 11; 16. 43 Ex. 9. 44 See Id. 45 See Exs. 8; 24; 25. 46 See Ex. 9. 47 See Ex. 24. 7

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d.

Defendant Has Been Investigated and Found Liable for Overtime and Minimum Wage Violations.

Between June 2002 and late 2004, the Department of Labor conducted three investigations into Defendant's overtime and minimum wage practices, and found it to be in violation of the FLSA.48 In June 2002, the Department of Labor specifically found that

Defendant's loan officers should have been classified as non-exempt.49 As mentioned previously, even after these investigations, Defendant continued to violate the law. Moreover, even though Defendant was alerted through these investigations and its own timesheets that it was in violation of the FLSA it never reviewed any of its records at any of its branch offices other than those investigated to pay its loan officers properly for their hours worked.50 Respectfully submitted, Dated: 01/27/06 NICHOLS KASTER & ANDERSON, PLLP

s/Michele R. Fisher Donald H. Nichols, MN Bar No. 78918 Paul J. Lukas, MN Bar No. 22084X Michele R. Fisher, MN Bar No. 303069 Jill M. Novak, MN Bar No. 343456 4600 IDS Center 80 South 8th Street Minneapolis, MN 55402 Telephone (612) 256-3200 Fax (612) 215-6870 ATTORNEYS FOR PLAINTIFFS

48 49

Ex. 3 at 6-8, 10-12; Ex. 1 at 88-107. Ex. 3 at 5-6. 50 Ex. 5 at 10-11; Ex. 2 at 61. 8

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UNITED STATES DISTRICT COURT DISTRICT OF COLORADO CERTIFICATE OF SERVICE

I hereby certify that on January 27, 2006, I caused the following document(s): Amended Motion and Facts in Support of Plaintiffs' Amended Motion for Summary Judgment; Legal Analysis in Support of Plaintiffs' Amended Motion for Summary Judgment (Oral Argument Requested); Affidavit of Michele R. Fisher, with Exhibits 1 through 26; and Proposed Order to be filed electronically with the Clerk of Court through ECF, and that ECF will send an enotice of the electronic filing to the following: David J. Carr [email protected] [email protected], [email protected]

Michele Renee Fisher Sarah M. Fleegel

[email protected] [email protected], [email protected]

Sean Robert Gallagher Beth Hatfield Eileen P. Huff Paul J. Lukas

[email protected] [email protected] [email protected], [email protected] [email protected], [email protected]

Donald Harold Nichols Jill Marie Novak Steven F. Pockrass

[email protected] [email protected], [email protected] [email protected],

Elizabeth T. L. Raymond Rachhana T. Srey

[email protected], [email protected]

Margaret D. Wielenberg [email protected], [email protected]; [email protected]

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Notice will be sent by U.S. Mail to the following: Kerry S. Martin Ice Miller One American Square Box 82001 Indianapolis, IN 46282-0002 Dated: January 27, 2006 NICHOLS KASTER & ANDERSON, PLLP

s/Amy B. Johnson Amy B. Johnson 4600 IDS Center 80 South 8th Street Minneapolis MN 55402 Telephone (612) 256-3215