Jury verdict rejects claim of mortgage bankers against Quicken Loans

Russ Samson Iowa Banking Law Iowa Employment and Labor Law Dickinson Law Firm Des Moines Iowa

Posted on 03/18/2011 at 02:59 PM by Russell Samson

On Thursday, March 17, 2011, the jury in Henry v. Quicken Loans, Inc., Case No. 2:04-cv-40346-SJM-MJH (E.D. Mich.), reached a unanimous verdict for the defendant, Quicken Loans.  For those not familiar with this case and there are probably very few in the financial industry who are not both this case and the issue it addresses have a long history. On March 24, 2010, the Wage and Hour Division of the United States Department of Labor issued its first ever 'Administrator's Interpretation' – No. 2010-1 – dealing with the exempt status of 'mortgage loan officers.'  Based on a lengthy analysis, the 'interpretation' concluded that employees who 'perform the typical job duties of a mortgage loan officer . . .  do not qualify as bona fide administrative employees' who are exempt under the Fair Labor Standards Act.  The agency determined instead that individuals with the duties and responsibilities described in the letter 'typically have the primary duty of making sales on behalf of their employer.'  As part of AI 2010-1, the DOL withdrew its September 8, 2006 Opinion Letter which had concluded that mortgage loan officers did qualify for the 'administrative' exemption.  According to published reports Quicken Loans changed its compensation plans for its web loan officers in May 2010, and began paying overtime pay on top of salary and commissions in accordance with the new 'interpretation.' But the Henry lawsuit began in May 2004, when Quicken Loans was sued in federal court in Detroit in a class action.  The class consisted of several hundred individuals who had worked for Quicken Loans as 'web mortgage bankers' at various times from May 2002 (two years prior to the commencement of the lawsuit) to September 2006.  During the course of the litigation, the federal court had ruled – prior to the issuance of the new interpretation – that Quicken Loans was entitled to assert the 'good faith defense' because it relied on the DOL's 2006 Opinion Letter.  Under that ruling, even if Quicken Loans had factually misclassified its MLOs, it would face no liability for that misclassification for the period on or after September 8, 2006. Following the issuance of AI 2010-1, and at the invitation of the judge in Henry, the Department of Labor filed an amicus brief  in which it asserted that its interpretation of its own 'ambiguous legislative regulations' applies prospectively only.  The judge apparently adopted that approach – retaining the limitations of May 2002 through September 8, 2006. The trial in Henry began on February 8, 2011, almost seven years after it was filed. Having heard more than a month of testimony, the jury deliberated almost three days before reaching its verdict vindicating Quicken Loans.  The case suggests two lessons for employers – whether they are in the financial sector or not. First, as the Wage and Hour Division itself reminds everyone, a job title alone doesn't establish exempt status.  The exempt or nonexempt status of any employee is determined by whether the employee's salary and duties meet the requirements of the regulations.  These are very fact-specific inquiries, and in this instance required a trial from February 8 to the middle of March.   Any generalization – even a generalization of the sort found in the DOL's latest interpretation– is dangerous.  One needs to look at what an employee is actually doing. Second, both the time commitment and the potential financial exposure for a company in an FLSA lawsuit can be very large.  A statement issued by Quicken Loans said:

We could have settled this lawsuit and avoided an expensive drawn-out legal battle, but we knew if we fought for what is right that justice would ultimately prevail.  Our hope is that today's victory inspires other job-creating companies to defend against meritless lawsuits which drain wealth and productivity from our society.

The Detroit Free Press reports that the Chairman of Quicken Loans said that his legal fees probably exceeded its 'several millions of dollars' in exposure had it lost the case.  Music to a defense attorney's ears – although 'fight and pay me' is not always the best advice one can give an employer client. The Henry case did not directly involve the 2010 Administrator's Interpretation at all.  The jury apparently determined that Quicken Loans properly classified and compensated the employees in the Henry plaintiff class because their duties and responsibilities  qualified them for the 'administrative' exemption. There will no doubt be an appeal.

The material in this blog is not intended, nor should it be construed or relied upon, as legal advice. Please consult with an attorney if specific legal information is needed.


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