Free Response in Opposition to Motion - District Court of Arizona - Arizona

IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF ARIZONA IN RE ALLSTATE INSURANCE COMPANY FAIR LABOR STANDARDS LITIGATION, ) ) ) ) ) ) ) ) ) ) ) ) ) )

MDL NO. 1541 CIV-04-15-PHX-PGR PLAINTIFFS' REPLY TO DEFENDANTS' NOTICE OF SUPPLEMENTAL AUTHORITY RELEVANT TO THE PENDING MOTION FOR SUMMARY JUDGMENT

Leonard Gaglione, et al., Plaintiffs, -vsAllstate Insurance Company, et al., Defendant(s)

The defendants recently filed a Notice of Supplemental Authority claiming that the case of Cheatham, et al. v. Allstate Insurance Company (S.D. Ms. Case No. 2:02-893) is directly relevant to the motion for summary judgment pending before this court in Gaglione, et al. v. Allstate Insurance Company, et al. (N.D. Oh. Case No. 5:02CV1988). However, Cheatham is not authoritative. In Cheatham, the court never analyzed whether or not the work of an Allstate adjuster involves "the performance of office or nonmanual work directly related to management policies or general business operations of the employer or the employer's customers..." 29 C.F.R. §541.214(a). The Cheatham court's failure to analyze this portion of the administrative test came about because, inexplicably, at oral argument the plaintiffs "conceded" that their primary duties were directly related to Allstate's management policies or general business operations. Id at p. 26.

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In the instant case, plaintiffs have not conceded that their primary duties were directly related to Allstate's management policies or general business operations. (Plaintiffs' Brief in Response to Defendants' MSJ, pp. 5-11). To the contrary, plaintiffs vigorously deny that that their duties were directly related to to Allstate's management policies or general business operations. The concession the plaintiffs made in Cheatham led the Cheatham court into misapplying the "short test" contained in 29 C.F.R. §541.214(a). The short test is applicable when an employee is compensated at a rate of not less than $250.00 per week. Under the short test, an employee is exempt from the FLSA's overtime pay requirements, when an employee's "primary duty consists of either the performance of office or nonmanual work directly related to management policies or general business operations of the employer or the employer's customers, ...where the performance of such primary duty includes work requiring the exercise of discretion and independent judgment." 29 C.F.R. §541.214(a). (Emphasis added). Under the short test, an employee must exercise independent judgment and discretion while performing his/her primary duties and the primary duties must be directly related to the employer's management policies, general business operations, or the employer's customers. "The criteria provided by regulations are absolute and the employer must prove that any particular employee meets every requirement before the employee will be deprived for the protection of the Act." Mitchell v. Williams, 420 F. 2d 67/69, (Citing Wirtz v. C& P Shoe Corp., 336 F. 2d 21 (5th Cir. 1964). The court in Cheatham never analyzed whether or not the plaintiffs were exercising independent judgment and discretion while performing duties directly related

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to management policies or general business operations of the employer or the employer's customers as required by 29 C.F.R. §541.214(a). Because of the concession the plaintiffs in Cheatham made the court only analyzed whether or not an adjuster's job "includes" the exercise of independent judgment or discretion: Thus, the only question for the Court to resolve is whether the plaintiffs' duties include work requiring the exercise of discretion and independent judgment. Cheatham Op. at p. 26. This is a critical flaw in the opinion. Most employees will, at times, exercise some independent judgment and discretion in their jobs. But 29 C.F.R. §541.214(a) requires more than some exercise of independent judgment and discretion. The employee must exercise independent judgment and discretion in matters that are directly related to management policies or general business operations of the employer. The Cheatham court never determined whether or not the plaintiffs were exercising independent judgment and discretion in connection with Allstate's management policies or general business operations. The Cheatham court's analysis of the independent judgment test in, isolation, greatly limits its persuasiveness. In addition, the Cheatham court's analysis of the independent judgment test relied on "facts" that it borrowed from Jastremski v. Safeco Ins. Companies, 243 F. Supp 2d 743. (D. ND Oh. 2003), rather than from the record before it. Cheatham Op. at p. 32. In Jastremski, the record demonstrated that adjusters had independent discretion in the following matters: · · · How to investigate a claim; How to negotiate a claim; The amount to offer in settlement of a claim.

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Jastremski, 243 F. Supp 2d at 757. But the actual record in Cheatham and the record in this case are at odds with the job descriptions of the adjusters in Jastremski. Assuming arguendo that the jobs of the Allstate adjusters in this case were directly related to the management policies or general business operations of Allstate, the instant plaintiffs did not exercise independent judgment and discretion with respect to these matters. Here, the record shows that Allstate created "detailed processes" that had to be closely followed. Plaintiff's Brief in Response to MSJ at p. 12. The investigations the Gaglione plaintiffs conducted were carefully guided by "decision matrices and managerial oversight." Plaintiff's Brief in Response to MSJ at pp. 12-13. The evaluation of the amount at which a claim could be settled was determined by computers or decision tools that provided plaintiffs with a very limited range within which to negotiate a claim. Plaintiff's Brief in Response to MSJ at p. 13. The authority provided to an adjuster is overseen by an evaluation consultant or a Frontline Performance Leader, not the adjuster himself. Plaintiff's Brief in Response to MSJ at p. 14. Plaintiffs were evaluated by their superiors based on how closely they followed detailed company procedures. Plaintiff's Brief in Response to MSJ at pp. 14-15. The plaintiffs here also demonstrated that their decisions are not "free from immediate direction or supervision...with respect to matters of significance." 29 C.F.R. 541.207(a). Instead, their investigations, evaluations and negotiations are closely monitored, reviewed, tracked, observed and inspected. Plaintiff's Brief in Response to MSJ at pp. 14-15. This rigid work process system that Allstate created and forced upon its adjusters, made the adjusters' jobs analogous to the work that the adjusters were doing

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in Robinson-Smith v. GEICO, 323 F.Supp.2d 12, 22. D.C. 2004), instead of the adjuster's work described in the Jastremski case. Furthermore, the record also revealed that plaintiffs were primarily applying skills in following detailed procedures. In this case, unlike Cheatham or any of the cases the defendant has cited, there is testimony from Allstate's director of property claims, that an adjuster uses a "skill set to be effective." Plaintiff's Brief in Response to MSJ at p. 16. Under 29 C.F.R. 207(c)(1), "[a]n employee who merely applies his knowledge in following prescribed procedures or determining which procedures to follow" is applying a skill and is not exercising independent judgment and discretion. There are clearly genuine issues regarding material facts in this case. The defendants have failed to prove that the Gaglione adjusters were properly classified as administratively exempt employees, as mandated by the strict application of the administrative exemption regulations. As a result, defendants' motion for summary judgment must be denied. Respectfully submitted,

/s/ Steven M.Weiss STEVEN M.WEISS (0028984) Law Offices of Steven M. Weiss 55 Public Square, Suite 1009 Cleveland, Ohio 44113 Telephone: (216) 348-1800 Facsimile: (216) 348-1130 [email protected]

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/s/ George Sintsirmas___________ George Sintsirmas, Esq. (0032771) 6212 Coldstream Road Highland Heights, Ohio 44143 Telephone: (440) 446-1529 Facsimile: (440) 446-1530 [email protected] Attorney for Plaintiffs CERTIFICATE OF SERVICE A copy of the foregoing was sent via regular mail this 8th day of August, 2005 to: Joel E. Krischer, Esq. Attorney for Defendants Latham & Watkins, LLP 633 West Fifth Street, Suite 4000 Los Angeles, CA 90071-2007 Kelly McInerney, Esq. 18124 Wedge Parkway, Suite 503 Reno, Nevada 89511 (775) 849-3866 fax (775) 849-3811 Andrea Watters, Esq. Watters & Watters, PC 2807 East Broadway Blvd. Tucson, Arizona 85716 Hal Gillespie, Esq. Gillespie, Rozen & Watsky 3402 Oak Grove Avenue, #200 Dallas, TX 75204 /s/ Steven M. Weiss STEVEN M. WEISS

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