Free Motion for Summary Judgment - District Court of Arizona - Arizona

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RYLEY CARLOCK & APPLEWHITE One North Central Avenue, Suite 1200 Phoenix, Arizona 85004-4417 Telephone: 602/258-7701 Telecopier: 602/257-9582 Charles L. Chester ­ 002571 Carolann E. Cervetti ­ 014143 John M. Fry - 020455 Attorneys for Bank of America, N.A. UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA KAYE K. HUTTON, as an individual and as representative of a class consisting of others similarly situated, v. Plaintiff, No. CV2003-2262-PHX-ROS MOTION FOR SUMMARY JUDGMENT (Assigned to the Honorable Roslyn O. Silver)

BANK OF AMERICA, N.A., Defendant

Defendant, pursuant to Rule 56 of the Federal Rules of Civil Procedure, hereby requests that this Court grant Summary Judgment in its favor and against Plaintiff and any remaining Opt-ins.1 This Motion is supported by an accompanying Statement of Facts filed pursuant to L.R.Civ. 56.1. I. Summary Judgment Is Appropriate on any 2005 Reclassification Claim. See SOF 10-11, 111-112. In April 2005, Defendant reclassified the Small Business Client Managers back to exempt. At that time, no Small Business Client Manager Opt-ins were employed. None could have suffered harm. . . .

This Motion is filed concurrently with Defendant's Motion to Decertify Collective Action. By granting that Motion or a part thereof, the instant Motion or some part would become moot as to the Opt-ins decertified.
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The same reclassification was made with respect to Premier Client Managers effective July 1, 2005. Only nine of the Premier Client Manager Opt-ins then were employed by Defendant.2 Summary judgment is appropriate regarding the Premier Client Manager Opt-ins, and Ms. Hutton as they were not employed July 1, 2005. Summary judgment also is appropriate regarding the remaining nine Premier Client Managers because the October 30, 2003 Complaint cannot possibly be construed as asserting an overtime claim based upon the 2005 reclassification. No amendment has been sought nor would one be timely or justified now. II. At All Relevant Times The Client Managers Have Been Exempt. See SOF 4, 7, 13-43, 107-110. The Fair Labor Standards Act ("FLSA") requires that an employer pay overtime to an employee "engaged in commerce or in the production of commerce" when the employee works more than forty hours in a week. 29 U.S.C. § 207(a)(1). However, an exception exists for individuals employed in a bona fide administrative capacity. 29 U.S.C. § 213(a)(1). At all times relevant to this matter, the Client Managers have been exempt administrative employees. Prior to August 23, 2004, the "short test" for the administrative exemption provided that an individual is an exempt administrative employee, if the individual is: (1) paid on a salaried basis at a rate of at least $250 per week; (2) has as a "primary duty" the performance of office or non-manual work that is directly related to management policies or the general business operations of the employer or the employer's customers; and (3) customarily and regularly exercises discretion and independent judgment. 29 C.F.R. § 541.2 (2003). Effective August 23, 2004, the requirements for exemption as an administrative employee changed. Under the current test, an employee is an exempt administrator if the employee: (1) is compensated on a salary basis of not less than $455 per week; (2)
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Stephanie Clark, Julia Cooper, Sherry DeLong, Deborah Madison, Kathleen McGrory, Diana Roggenbuck, Chairmion Simms, Valorie Staggs and Sherry Weaver.
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has as a "primary duty" the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer's customers; and (3) whose primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. 29 C.F.R. § 541.200. 3 The Client Managers clearly performed office or non-manual work. A. The Client Managers Were Paid On A Salaried Basis.

At all relevant times, the Client Managers received a guaranteed salary well over that required by the DOL regulations at any time. The Client Managers receive this compensation on a "salary basis." An

employee is paid on a salary basis if he or she "regularly receives each pay period on a weekly, or less frequent basis, a predetermined amount constituting all or part of the employee's compensation, which amount is not subject to reduction because of variations in the quality or quantity of the work performed." 29 C.F.R. § 541.602(a). Prior to the March 2002 reclassification, the compensation of the Client Managers was never reduced because of the quality or quantity of their work. With one exception the same is true thereafter.4

The Department of Labor's ("DOL") revised FLSA regulations governing the white-collar exemptions went into effect on August 23, 2004. 19 4 Tucson Premier Market Client Manager Sherry Weaver was docked for a total of 20 about 5 hours during the workweeks of October 31, 2002, November 30, 2002, December 31, 2002 and January 31, 2003. This docking occurred after the 21 reclassification, when the Client Managers did not need to be paid on a salary basis because they were receiving overtime compensation despite their exempt status under 22 the FLSA. With limited exception, this docking does not affect the salary status of the Client 23 Managers post-March 2002. When judged against the dozens of other Client Managers employed by Defendant in Arizona during the overtime eligible timeframe, the 24 deductions made from Ms. Weaver's salary were negligible. The fact that one Client Manager was inadvertently docked does not constitute sufficient evidence for a fair 25 minded juror to conclude that Defendant had a policy or practice of docking the salary of Client Managers. Accordingly, the inadvertent docking of Ms. Weavers' pay will not 26 jeopardize the exempt status of the other Client Managers. See, e.g., Moore v. Hannon Food Services, Inc., 317 F.3d 489 (5th Cir. 2003). 27 This conclusion is clarified by the new FLSA regulations which provide that in determining whether an actual practice of making deductions exists which would 28 warrant the loss of the exemption, the factors to be considered include: the number of improper deductions; the time period during which the deductions were made; the Case 2:03-cv-02262-ROS Document 282 -3 Filed 06/26/2006 Page 3 of 18

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Ms. Hutton also may assert the Client Managers were subject to docking because their Employment Agreement notes that hours may be increased or decreased at any time along with a corresponding change in wages. However, this language is not evidence of improper docking. It simply means that Defendant has the right to make lasting prospective changes in the basic hourly schedule of a Client Manager, a right that does not threaten the salary status of an exempt employee.5 B. The Client Managers' Primary Duty Relates Directly to Management Policies or General Business Operations of Defendant and Its Clients.

Under the old and new regulations, the phrase `directly related to management policies or general business operations of her employer or her employer's customers' describes work (1) relating to the administrative operations of a business as distinguished from production, or, in a retail or service establishment, sales work; and (2) that is of "substantial importance to the management or operation of the business of her employer or her employer's customers." 29 C.F.R. § 541.205(a) (2003); 29 C.F.R. § 541.201(a) (2005). 1. The Client Manager Job Is Exempt.

Relying on the job description, recruiting and training materials, and the applicable Hierarchy of Success, no fair minded juror could conclude Client Managers number of affected employees; and the number of supervisors responsible for making the deductions. 29 C.F.R. § 541.603(a). As indicated above, Ms. Weaver was the only Client Manger affected, her only supervisor during this time was Tucson Market Manager Grace Duval, and the deduction of about five hours occurred during only four pay periods. Moreover, the new regulations confirm that even if the exemption were lost with respect to Ms. Weaver, it would be lost only with respect to the workweeks where Ms. Weaver had her pay docked, and only with respect to the four other Client Managers that worked for the Ms. Duval during this timeframe, Kathleen McGrory, Stephanie B. Clark, Kirsten M. Dawson, and Margaret E. McClintic. 29 C.F.R. § 541.603(b). 5 Ms. Hutton also may contend that she might have been docked if she exceeded sick time or vacation allowances. Defendant has no such policy and neither Ms. Hutton nor any Opt-in was subject to such an alleged practice. Finally, Ms. Hutton may contend that the right to purchase additional vacation hours as part of the Bank's benefit package somehow defeats the salary test. It does not. However, since a minimum salary is paid and benefits are in addition thereto, the salary test remains satisfied. See 29 C.F.R. § 541.604 (employer can provide an exempt employee with additional compensation without losing salary basis).
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are non-exempt. Their primary duty clearly is relationship management. If the Client Manager does a good job, she will engender financial trust and confidence, thus becoming the client's trusted financial advisor. As a result, the client will choose to do business with the Client Manager and, therefore, Defendant, over its and her competition. Acquisition of Bank products and services follows. 2. As the Client Managers Performed the Job, They Were Exempt.

The evidence also demonstrates that as performed, the Client Managers actually do administrative work. Given the fact that the Client Managers are their clients' primary contact with Defendant, the administrative exemption applies. Mathews v. Professional Golfers' Ass'n., No. 00CV8093, 2001 WL 1336334 (S.D. Fla. Sept. 14, 2001) ("When a plaintiff is the primary contact with the employers' customers, . . . the exemption applies."); See, e.g., Orphanos v. Charles Indus., No. 95 C 4039, 1996 WL 437380 (N.D. Ill. July 29, 1996) (plaintiff who was often customers' sole source of advice was exempt). The primary duty of the Client Managers is to manage the relationship between their clients and Defendant. Client Managers advise and service clients, determine whether a product or service will suit an individual client's needs, develop financial strategies, and introduce clients to specific products that meet their needs. Routine tasks related to client accounts can be delegated to the PRC or assistants. Thus, Client Managers are trusted financial advisors whose duties are administrative rather than production oriented. See, e.g., Hogan v. Allstate Ins. Co., 361 F.3d 621, 627 (11th Cir. 2004) (administrative tasks include "promoting sales, advising customers, adapting [insurance] policies to customer's needs, deciding on advertising budget and techniques, . . . and delegating routine matters and sales to [] staff."). Indeed, the new regulations explicitly recognize that employees who act as the Client Managers are exempt administrators. Employees in the financial services industry generally meet the duties requirements for the administrative exemption if
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their duties include work such as collecting and analyzing information regarding the customer's income, assets, investments or debts; determining which financial products best meet the customer's needs and financial circumstances; advising the customer regarding the advantages and disadvantages of different financial products; and marketing, servicing or promoting the employer's financial products. 29 C.F.R. § 541.203(b).6 Ms. Hutton concludes that her primary duty was sales. She then notes 29 C.F.R. § 541.203(b)'s ending provisio that an employee whose primary duty is selling would not qualify for the administrative exemption. Since the evidence defeats Ms. Hutton's conclusion that her primary duty was sales, the provisio is of no benefit to her. An individual, fact intensive inquiry usually is needed to determine the job a specific employee performs. That is the basis for Defendant's Motion to Dismiss. Here,

however, based on the testimony of Ms. Hutton and the Opt-ins from whom discovery was allowed, what they actually do eliminates the need for such an inquiry. Simply because an employee makes sales does not mean the job is one of "production." Outside the retail and service industries, "production" work involves the development of the product, not the sale of the product itself. See, Reich v. John Alden Life Ins. Co., 126 F.3d 1, 9-10 (1st Cir. 1997) (deciding that "production" duties involve the development of an insurance policy, not the sale of the policy itself).7 As noted, the new regulations clarify this point as to the financial services industry, noting that while an employee whose primary duty is inside sales cannot qualify as an exempt administrative employee, many financial services employees qualify as exempt administrative employees, even if they are involved in some selling to customers. 29 C.F.R. § 541.203(b) (2005); Attachment A, 69 FR 22145 (consistent The DOL carefully noted that this is not a new test, but rather is consistent with existing case law. 69 FR 22145-46 (April 23, 2004). The relevant portion of the DOL's Preamble is Attachment A to this Memorandum. 7 Under the prior regulations, in retail and service establishments, sales work was considered "production" by some courts. See Martin v. Cooper Elec. Supply Co., 980 F.2d 896, 901 (3rd Cir. 1991). In March 2001, this conclusion was applied by the Bell court, interpreting California law, to an insurance company. This understandably prompted concern about the changing legal environment for California employers.
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with Hogan, the final Rule rejects the view that selling financial products directly to a consumer automatically precludes a finding of exempt administrative status). While Client Managers do make or guide their clients to others who make sales of selected financial products and services to their clients, selling is not their primary duty. Relationship management is their primary duty. For instance, success is

measured primarily by the clients' satisfaction and by total portfolio balance in terms of deposits, loans and investments. Given Defendant's commitment to relationship management, a Client Manager who sells a client an unnecessary product just for the sake of selling, and loses the client's trust is not satisfactorily performing the job. Similarly, a Client Manager who sells a product to someone outside her portfolio of clients gets no credit for the sale. Thus, while some Client Managers may claim (perhaps for self-serving reasons), to inappropriately over emphasize the selling aspect of their position,8 the fact remains that the Client Manager position, if performed as conceived and designed, is not about selling, but rather about relationship management. Successfully performing that duty results in the Client Manager becoming the clients' trusted financial advisor. As a result, the client chooses Defendant's products and services over those of its competitors, which have essentially the same products and services to offer. 3. The Client Managers Perform Work of Substantial Importance to Defendant.

An exempt administrator must also perform work of "substantial importance" to the management or operation of the business. 29 C.F.R. § 541.205(a) (2003). An employee's work is of "substantial importance" when she represents the company in the market; is required to be knowledgeable about the market and the needs of actual and potential customers; advises customers on company products based on their needs; and
8

It is fascinating to observe in deposition testimony the rapidity with which Ms. Hutton and the deposed Opt-ins seize upon "selling" as their primary duty, and then to observe their description of how they analyze their client's financial goals and needs, chose the right product or services, and advocate for their client in obtaining it.
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uses her knowledge of the company's products to promote and close transactions. See, e.g., Wilshin v. Allstate Ins. Co., 212 F. Supp. 2d 1360, 1378 (M.D. Ga. 2002). For example, insurance agents who promoted and sold Allstate's insurance products and advised and serviced customers and potential customers, performed tasks that were "of substantial importance." Hogan v. Allstate Ins. Co., 361 F.3d at 627. The Client Managers perform work of substantial importance to Defendant. They are the link between Defendant and some of its most affluent clients as well as those clients' advocate within Defendant. They are absolutely critical to Defendant's business success. In fact, they are Defendant in the eyes of the client. C. The Client Managers Customarily and Regularly Exercise Discretion and Independent Judgment.

Under both the old regulations and the new regulations, an employee's duties must involve the exercise of discretion and independent judgment, i.e., the comparison and evaluation of possible courses of conduct and acting or making a decision after the various possibilities have been considered. 29 C.F.R. § 541.207(a) (2003). The fact that the employee's acts are subject to review, or that the employee does not have limitless discretion does not mean the employer has not met this requirement. 29 C.F.R. § 541.202(e) (2003). The new regulations require only that the exercise of discretion and independent judgment should relate to "matters of significance." 29 C.F.R.

§ 541.202(a) (2005).9 Both the old and the new regulations simply require that an exempt administrator perform some duties which include work requiring the exercise of discretion and independent judgment. 29 C.F.R. § 2541(e)(2). See, e.g., Spinden v. G. S. Roofing Products Company, 94 F.3d 421 (8th Cir. 1996) (plant controller who only exercised discretionary duties during 10-20% of his time was an exempt administrator). . . .

The old regulations required that the employee customarily and regularly exercise discretion and independent judgment, but this somewhat more onerous burden was clearly satisfied.
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The Client Managers exercise considerably more discretion and independent judgment than the threshold requirement. For instance, Client Managers decide which clients to talk to, how to approach the client, what information should be gathered from and provided to the client, and which, if any, products or services to offer the client. See, e.g., Hogan v. Allstate Ins. Co., 210 F. Supp. 2d. 1312, 1322 (M.D. Fla. 2002), aff'd in part, vacated and remanded on other grounds, 361 F.3d 621 (11th Cir. 2004) (discretion shown by employee's matching insurance policies to each customer's specific needs and in deciding how to reach potential customers); Wilshin v. Allstate Insurance Co., 212 F. Supp. 2d 1360, 1379 (M.D. Ga. 2002) (discretion showed in part by employee's determination of products that he would recommend to customers). Client Managers also have discretion to overrule guidelines and the decisions of other associates by instructing those associates to pay checks drawn by clients on insufficient funds. They have authority to remove holds on checks placed by other associates in accordance with Defendant's rules. They can make wire transfers with no written order and initiate transactions on verbal or telephone instructions. They also exercise discretion regarding the financial terms they can offer clients on certificates of deposit, and waiver of overdraft fees and loan origination fees. They also have

discretion to appeal an underwriting turn-down of a request for credit by requesting an exception through their Market Manager. See, 29 C.F.R. § 541.202(b) (2005) ("Factors to consider in determining whether an employee exercises discretion and independent judgment with respect to matters of significance include . . . whether the employee has authority to commit the employer in matters that have significant financial impact; whether the employee has authority to waive or deviate from established policies and procedures without prior approval . . . ."). Finally, they schedule and conduct their day with little interference from their supervisors. . . . . . .

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For the foregoing reasons, no fair minded jury could conclude Ms. Hutton or any given Opt-in actually performed the Client Manager job in a non-exempt manner at any time at issue. III. Defendant Did Not Know, Nor Should It Have Known Ms. Hutton or an Opt-In Was Working Off the Clock When Overtime Eligible (If They were), Therefore Summary Judgment is Appropriate on the March, 2002 through June 30, 2005 Claims for this Additional Reason. See SOF 68-106. Summary judgment is appropriate on Ms. Hutton's post March, 2002, working off the clock claim for the additional reason that neither she nor any other Opt-in can demonstrate that a fair minded jury could conclude Defendant knew or had reason to know that she worked overtime hours which she did not record. See, e.g., Bjornson v. Daido Metal U.S.A., 12 F. Supp. 2d 837, 842 (N.D. Ill. 1998) (liability only upon actual or constructive knowledge of employer that the employee had performed unpaid overtime work); Slattery v. HCA Wesley Rehabilitation Hosp., Inc., 83 F. Supp. 2d 1224, 1230 (D. Kan. 2000) (plaintiff must show that "she actually worked overtime, that the amount of overtime was shown by justifiable and reasonable inference, and the employer had actual or constructive knowledge of the overtime."). Where the company has no reason to know of the off the clock work, there is no FLSA violation. See, e.g., McKnight v. Kimberly Clark Corp., 149 F.3d 1125, 1130 (10th Cir. 1998) (a plaintiff's failure to adequately record overtime is "fatal" to a later claim for that time if the company has no reason to be aware of it). Given Defendant's repeated efforts to ensure that Client Managers were recording all hours of work, Defendant had no reason to believe that Client Managers as a group were failing to record all their time. At the commencement of the March 2002 reclassification, meetings were held with Client Managers and Market Managers to ensure that Client Managers knew they now were required to write down all their hours worked on timesheets and knew they would be compensated for all those hours

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recorded. See, Forrester v. Roth's I.G.A. Foodliner, Inc., 646 F.2d 413, 414-15 (9th Cir. 1981). Client Managers received specific training on the requirement to record all hours of work on their timesheets. These timesheets specifically state, "I understand that I am responsible for accurately reporting all time worked including any overtime, and that my failure to do so may result in disciplinary action. I certify that the above is an accurate record of time worked during this period." This requirement also is reflected in Bank communications to the Client Managers and on Defendant's intranet. There is no evidence of any tacit or unwritten practice to encourage Client Managers to work off the clock. Ms. Hutton and the deposed Opt-ins admitted that no one told them to work off the clock. While some Market Managers may have instructed Client Managers not to work overtime hours or to limit their overtime hours to a certain number per week, without approval, none of the cases interpreting the FLSA hold that these instructions are unlawful or constitute evidence of Defendant's alleged knowledge that certain Client Managers were working off the clock. The Opt-Ins' claim that they felt pressured to work off the clock is contradicted by the fact that they admit that they regularly recorded overtime, and were paid for all time recorded. See, e.g., Bjornson, 12 F. Supp. 2d at 840-41 (requests for overtime that were "consistently-presented and always-honored" directly negated employee's allegation that he felt he could not record all overtime). For example, the Opt-ins from whom individual discovery has been obtained admit that they did report overtime, often in excess of four hours in a given workweek, and were always paid for every hour they worked. As another example, Ms. Hutton admits that although her Market Manager, Vickie Sandve, told her she should not work holidays without prior approval, she did turn in hours for holiday work and was paid for that time. The propriety of summary judgment is further evidenced by the depositions of the Opt-ins deposed. Ms. Cooper has waived any claim to overtime following the March 2002 reclassification. Ms. McClintic admits that no one ever led her to believe that she
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should not record overtime hours. Rather if she failed to record any overtime hours it was because she felt her compensation was generous enough to justify occasional overtime work. Ms. Peterson and Ms. Krebsbach admitted they were told to record overtime if they worked it. Finally, Ms. Hutton admitted that if Client Managers told the truth they would say that they were told that due to budget constraints they were not to work over four hours of overtime a week without prior approval. For these additional reasons, summary judgment is proper on the March 1, 2002 to June 30, 2005 claims of working off the clock. IV. The Standard Two Year Statute of Limitations Applies.10 See SOF 44-67 and Part II, supra. The standard two year statute of limitations applies to Ms. Hutton's FLSA claims unless Defendant "either knew or showed reckless disregard for the matter of whether its conduct was prohibited by the statute." McLaughlin v. Richland Shoe Co., 486 U.S. 128, 133 (1988) (emphasis added). Its acts are not considered willful where Defendant acted on a good-faith but incorrect assumption that it was complying with the FLSA. Id. at 135. Willfulness cannot be based on mere negligence. See id. In fact, even if Defendant "acts unreasonably, but not recklessly, in determining its legal obligations" the violation will not be considered willful. Id. at n.13. There is no evidence Defendant knew its conduct was prohibited by statute. There is insufficient evidence from which a fair minded jury could conclude that Defendant showed reckless disregard for the matter of whether the Client Managers were misclassified or were working off the clock. . . .

Defendant adopts this argument and its Statement of Facts and Defendants' Response, Parts II and III to Plaintiff's Motion to Expand Conditional Certification of the Collective Action Under the Fair Labor Standards Act, as its Response to Plaintiff's "Motion for a Final Finding of Willfulness Under the Fair Labor Standards Act," if that motion has not previously been stricken by this Court.
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Most important, Defendant has not violated the FLSA, so it could not have violated the Act willfully. No court or administrative agency has found that Client Managers or their competitors' counterparts are non-exempt. Ms. Hutton argues that a few unrelated FLSA violations found by some DOL investigators, resulting in some administrative settlements (without admission of liability) against Defendant. No DOL investigator has found a violation in either the Premier or the Small Business Banking divisions. No DOL actions have been initiated against Defendant. . There was class action litigation initiated in 1999 against Defendant under California law, challenging the exempt status of Client Managers. determination was made and the matter was settled.11 No legal opinion was given to Defendant that the Client Manager job was nonexempt. On the contrary, expert consultant Lloyd Aubry advised that the job as No judicial

designed and intended was exempt. In March, 2002, Client Managers were converted to overtime eligible.12 This was not a recognition of misclassification. It was the waiver of an exemption. Before and after the conversion Defendant's management and its legal department believed the job was exempt. Nevertheless, the conversion decisions were made for business reasons by September or October, 2001. Its implementation was delayed pending conversion to the new Exault payroll system. The decisions were business decisions in light of the legal landscape.13 In spite of the fact that Client Managers were exempt:

A class action also was filed in Washington challenging the Client Manager exemption, but that was well after the decision to convert to overtime eligible and a few weeks before the actual conversion. 12 They were often referred to thereafter as non-exempt and the payroll system treated them as such. That is why Ms. Weaver was permitted to be docked. 13 The legal landscape was painted by Jay Price, Defendant's legal counsel, based on his experience and beliefs, the talk with Mr. Aubrey, the Bell decision, and new CEO Ken Lewis' desire to avoid litigation with associates.
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1.

Wage and Hour lawsuits were becoming the suit de jour, especially in California.

2.

Especially after the Bell decision, the California law was becoming adverse to employers.

3.

Litigation involves unpredictable expense, which the new CEO, Ken Lewis, wanted to avoid.

4.

Mr. Lewis did not want Defendant to be known as the kind of employer its associates sued.

These led to the decision to convert in California, where 50% of the Client Managers resided. System consistency and continuity led to conversion in the other states, including Arizona. The contention that Client Managers were non-exempt under California law was not ignored. The class action was defended, since the Client Managers were believed exempt. Also, advice was sought from Mr. Aubry, a recognized expert. He interviewed some Client Managers, thus checking Mr. Price's and management's view that they were exempt.14 Mr. Aubry concluded the Client Manager position was exempt,

confirming their view. His concern about some Client Managers emphasizing sales too much was viewed as an issue corrected by ongoing training and recruiting. Defendant's prompt reaction to the Bell decision does not evidence willfulness. On the contrary, it evidences an effort to comply with evolving California law. Compare In Farmers Insurance Exchange Claims Representative' Overtime Pay Litigation, 300 F. Supp. 2d 1020 (D. Or. 2003). Existing law has always confirmed that the Client Manager job is exempt, and always has been under the FLSA. See Attachment A. Even if this Court were to conclude that Ms. Hutton or some Opt-in was performing in a non-exempt manner, such

Management's reliance on Mr. Price's view essentially eliminates a willfulness finding. See Service th Employees Int'l Union, Local 102 v. County of San Diego, 60 F.3d 1346, 1355-56 (9 Cir. 1994).
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a conclusion would not warrant a willfulness finding. Adams v. U.S., 350 F.3d 1216 (Fed. Cir. 2003) (no willfulness because though some agents were non-exempt, the classification was based on the position description and existing regulations). Though generally a question of fact, in this action, the evidence does not support a willfulness finding.15 V. Summary Judgment is Appropriate on the State Law Treble Damages Claim. See SOF 68-78. A. Preemption Defeats Treble Damages.

The FLSA contains a "savings clause" that allows states to establish a higher minimum wage or shorter workweek than that established by the FLSA. 29 U.S.C. § 218(a). The savings clause does not address the issue of whether states can provide remedies in excess of the FLSA for the failure to pay overtime compensation, "leaving unresolved the issue of whether a state statute that does provide such a remedy is preempted by the FLSA or saved by the savings clause." See Fair Labor Standards Preemption of State Wage Payment Remedies, Michael D. Moberly, 23 Ariz. St. L.J. 991, 993 (1991). Admittedly, in Spieth v. Adasen Distributing, Inc., 1989 WL 61187 (D. Ariz. Jan. 24, 1989), the District Court concluded that the treble damage provision of A.R.S. § 23-355, although exceeding the double damages provision of the FLSA, is not preempted by the FLSA. Also, in the more recent case of Aragon v. Bravo Harvesting, Inc., 1993 WL 432402 (D. Ariz. May 7, 1993) the District Court again examined the issue of whether the FLSA preempted a state law claim for treble damages under A.R.S. § 23-355. Although the Court ultimately concluded the state wage statute's remedial provisions do not conflict with the purposes of the FLSA, it found "this issue a very

The off the clock claims add nothing to this analysis. At most, the Market Managers discouraged working a lot of overtime, but Defendant paid for all hours recorded. See, Reich v. Newspapers of New England, 44 F.3d 1060 (1st Cir. 1995).
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close one." Id. at *5. Of paramount importance, each case involved a situation where there existed an arguable contractual right to overtime. Therefore, each case may be read to hold that where a contractual right to overtime exists under state law, it is not subject to federal preemption. Other courts which have examined the issue have determined that the FLSA does preempt state wage laws that allow for recovery under both the FLSA and a more lucrative state law provision. See Lerwill v. Inflight Motion Pictures, Inc., 343 F. Supp. 1027, 1028 (N.D. Cal. 1972) (rejecting argument that claim for unpaid overtime could be pursued in a breach of contract action arising under state law; FLSA provides the exclusive remedy for a failure to compensate an employee for overtime). Given the open nature of this question under Arizona law, the Supreme Court's analysis in Brooklyn Savings Bank v. O'Neil, 324 U.S. 697 (1945) is instructive. In

Brooklyn, an employee obtained a judgment against his employer for unpaid overtime, liquidated damages and interest under the FLSA. Id. at 714-15. The Supreme Court reversed the award of interest to the employee on the grounds that liquidated damages were available for a delay in the payment of his wages and an additional award of interest would provide the employee with double compensation for the delay ­ a result that Congress must have intended to preclude when it enacted the FLSA. Id. at 715-16. Similarly, the liquidated damages provision of the FLSA is intended to compensate employees for a delay in the payment of any overtime and the treble damages provision of Arizona law should be preempted so that Congress' intent of not providing double compensation for a delay in paying wages is not circumvented in the situation where the sole basis for the unpaid wages in the FLSA. See Aragon, supra, pp. 2, 5. B. A Good Faith Dispute Defeats Any Claim.

Further, summary judgment is appropriate on this claim as the treble damages remedy of A.R.S. § 23-355 is not applicable to good faith disputes. A wage claim seeking treble damages under A.R.S. § 23-355, is governed by A.R.S. § 12-541(3) and (5) which provide a one year statute of limitations. During the one year preceding the
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filing of the October 30, 2003 Complaint, the Client Managers were classified as overtime eligible. If they were indeed failing to record all of their overtime hours, Defendant had no knowledge of, or reason to know of, their deliberate violation of clear policy. Accordingly, any failure to pay overtime would be inadvertent and involve a good faith dispute, making the treble damages provision inapplicable to this claim. C. No Contract Gives the Right to Compensation for Unrecorded Time Worked.

Finally, A.R.S. § 23-355 is limited to remediation of violations of Chapter 2 of Title 23 of the Arizona Revised Statutes. Therefore, a plaintiff has no claim for treble damages for FLSA violations alone under § 23-355. Aragon v. Bravo Harvesting, Inc., 1993 WL 432402, pp. 2, 5 (D. Az. 1993). As a result, Ms. Hutton must prove violation of a contractual right to sustain a § 23-355 recovery. While it is true that during the time of the applicable statute of limitations, Defendant promised to compensate Client Managers for overtime worked, the promise was unequivocally accompanied by the requirement that Client Managers record all time worked. The Client Managers cannot now claim to have failed their duty to record, and in the same breath claim that Defendant remains obligated to pay overtime. Therefore, they have no contractual wage claim. VI. Conclusion. For the foregoing reasons, this Court should grant Defendant summary judgment on Plaintiff's and the remaining, if any, Opt-Ins' claims. Dated this 26th day of June, 2006. RYLEY CARLOCK & APPLEWHITE By /s/Charles L. Chester Charles L. Chester Carolann E. Cervetti John M. Fry One North Central Avenue, Suite 1200 Phoenix, Arizona 85004-4417 Attorneys for Defendants

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CERTIFICATE OF MAILING I hereby certify that on June 26th, 2006, I electronically transmitted the Bank's Motion for Summary Judgment and other attached documents to the Clerk's Office using the CM/ECF System for filing and transmittal of a Notice of Electronic Filing to the following CM/ECF registrants: Ms. Lydia A. Jones ROGERS & THEOBALD, LLP 2425 East Camelback Road Phoenix, Arizona 85016 Attorneys for Plaintiff Michael O'Connor JENNINGS, STROUSS & SALMON, P.L.C. The Collier Center, 11th Floor 201 E. Washington Street Phoenix, AZ 85004 By: /s/Bree Bellefeuille

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