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MEVORAH v. WELLS FARGO HOME MORTGAGE

November 17, 2005.

JASON MEVORAH, Petitioner,
v.
WELLS FARGO HOME MORTGAGE, INC., a division of WELLS FARGO BANK, NATIONAL ASSOCIATION, and DOES 1 through 50, inclusive, Defendants.



The opinion of the court was delivered by: MARILYN PATEL, District Judge

MEMORANDUM & ORDER Re: Motion to Correct

Plaintiff Jason Mevorah has brought the present action on behalf of all persons employed by defendant Wells Fargo Home Mortgage, Inc. as home mortgage consultants ("HMCs"), HMC trainees, and any similar positions responsible for originating home mortgage or personal loans to consumers within California from February 10, 2001 to the date of judgment after trial (the "class period"). Plaintiff alleges that defendant's characterization of HMCs as exempt from overtime is incorrect, and that he and other potential class members are entitled to overtime pay under the Fair Labor Standards Act ("FLSA") and California law. Now before the court is plaintiff's motion to correct alleged misrepresentations made by defendant. Having considered the parties' submissions and arguments, the court enters the following memorandum and order.

BACKGROUND

  This action was filed in the San Francisco Superior Court on February 10, 2005, and removed to this court by defendant on March 22, 2005. Plaintiff seeks to certify a class pursuant to Federal Rule of Civil Procedure 23; however, no motions regarding certification have been filed and a class has not been certified.*fn1 Plaintiff worked as a HMC for defendant, where he was paid on a commission basis and classified as exempt from overtime. Joint CMS at 2. Plaintiff argues that he and other potential class members — other HMCs, HMC trainees, and any similar positions responsible for originating home mortgage or personal loans to consumers within California during the class period — are not exempt from the overtime requirements under the FLSA and California law. Id. Plaintiff seeks restitution for unpaid overtime wages, damages, and penalties, for himself and for the potential class members. Id.

  Plaintiff moves this court to issue a notice to all potential class members correcting certain alleged misrepresentations that defendant has made to prospective class members. Plaintiff alleges that defendant, through counsel, has contacted members of the potential class and has made false and misleading statements regarding this action and its potential impact. Pl.'s Motion at 10. Plaintiff further alleges that defendant has asked members of the potential class to sign declarations regarding the nature of their duties as HMCs and their compensation preferences, and that these declarations as drafted by defendant are inaccurate and omit critical facts. Id. In support of these allegations, plaintiff submitted the declaration of Caroline Urso, a former HMC. See Urso Decl. Ms. Urso states that in July 2005, while she was still employed by defendant, she was contacted by its counsel regarding this action. Id. ¶ 3. She states that she was led to believe that if the action were successful HMCs would no longer be paid by commission, but instead would be paid on an hourly basis. Based on this representation, she states that she agreed to an interview to support the maintenance of her position on a commission basis. Id. She was informed that the interview would serve as the basis for a declaration. See Id. Ms. Urso further states that she was not informed by defendant's counsel that if the action were successful she might be eligible to recover overtime pay, that her declaration could be used against the interests of the potential class (including herself), that declining to be interviewed would not impact her job, or that she should seek the advice of counsel. Id. ¶ 4. A few days after her conversation with counsel, Ms. Urso received a draft declaration which she declined to sign because she "felt that [counsel] had manipulated my words by leaving out significant statements and using only the words that benefitted his argument" and that it was not "the complete truth." Id. ¶ 6. Defendant filed its opposition to plaintiff's motion on October 17, 2005. Defendant admits that it contacted HMCs including Ms. Urso, but asserts that it did so as part of its own internal discovery to collect information about how the HMCs perform their jobs. Def.'s Opp. at 1, 6. Defendant asserts that it engaged in no misconduct in interviewing the HMCs. Id. at 11. Defendant maintains that it made no untrue statements about the potential impact of this action; its counsel did not tell Ms. Urso that the action sought to change the position from commissioned to hourly pay, but rather that it sought to change the position "to become eligible for overtime rather than the present exempt commission-based structure." Id. at 8. Defendant also states that the draft declaration prepared for Ms. Urso represented a fair and accurate representation of what she told counsel during their telephone interview. Id. In support of these assertions, defendant filed the declaration of Michael P. Wallock, an attorney who interviewed Ms. Urso and other HMCs. See Wallock Decl. Mr. Wallock attests to the above, and additionally states that he informed Ms. Urso that she was under no obligation to be interviewed by defendant's attorneys, and that there would be no reprisals should she decline. Id. ¶ 3. Mr. Wallock also states that he emphasized, both in his conversation with Ms. Urso and in the cover memo accompanying the draft declaration he sent to Ms. Urso, that she should review the declaration for accuracy before signing it, and contact him to make any corrections. Id. ¶ 4. He further states that "when an interviewee has asked to make changes or corrections to his or her declaration, we have always made them." Id. ¶ 4.

  On October 24, 2005 plaintiff replied to defendant's opposition, arguing that by obtaining declarations, which may be used as evidence in court, defendant has done far more than engage in internal discovery. Pl.'s Reply at 1. Plaintiff also raises two new arguments in its reply. First, plaintiff claims that defendant has violated Federal Rule of Civil Procedure 26 by failing to reveal the existence of any declarations in its disclosures.*fn2 Id. Second, plaintiff claims that defendant has violated California Rule of Professional Conduct 3-600 by failing to reveal to the HMCs it contacts, who are all potential class members, that "the organization's interests are or may become adverse to those of the constituent(s) with whom the member is dealing" and that any information communicated to defendant may be "used in the organization's interest" if defendant "becomes adverse to the constituent." Cal. R. Prof. Conduct 3-600; see Pl.'s Reply at 1. On October 28, 2005, defendant filed a motion for leave to file a sur-reply. The court requested that defendant address Rule 26 and Rule of Professional Conduct 3-600 at oral argument, which took place on November 9, 2005.

  Plaintiff argues that the court should issue a notice to all potential class members advising them of several things: (1) that a class action has been filed seeking overtime compensation for HMCs; (2) that the dispute between plaintiff and defendant centers on whether HMCs are "inside" sales employees entitled to overtime payment or "outside" sales employees exempt from overtime requirements; (3) that if plaintiff prevails, defendant can continue to pay its HMCs on a commission basis, but will be additionally required to make overtime payments; (4) that if plaintiff prevails, members of the class will be awarded back overtime pay; (5) that all potential class members have to right to speak, or to refuse to speak, to anyone, including defendant or its counsel, without fear of reprisal; (6) that if potential class members should choose to speak with defendant or its counsel, they have the right to refuse to sign any written statement, but if they do sign they should be sure it is complete and accurate; (7) that potential class members have the right to seek their own counsel; and (8) that potential class members may, but are not required to, contact plaintiff's counsel. Pl.'s Motion at 16-17, 19. Defendant, in opposition, argues that plaintiff's motion for a corrective notice should be denied because defendant's actions were proper under law. Def.'s Opp. at 9. The appropriate action, according to defendant, would be for plaintiff to depose the declarants of any declarations defendant should later submit to the court. Id.

  LEGAL STANDARD

  The United States Supreme Court has observed that
[c]lass actions serve an important function in our system of civil justice. They present, however, opportunities for abuse as well as problems for courts and counsel in the management of cases. Because of the potential for abuse, a district court has both the duty and the broad authority to exercise control over a class action and to enter appropriate orders governing the conduct of counsel and parties. But this discretion is not unlimited, and indeed is bounded by the relevant provisions of the Federal Rules. Gulf Oil Co. v. Bernard, 452 U.S. 89, 99-100 (1981). The foundation for the court's duty and broad authority is found in Rule 23(d) of the Federal Rules of Civil Procedure, which provides, as relevant to the instant action, that the court may make appropriate orders "requiring, for the protection of the members of the class or otherwise for the fair conduct of the action, that notice be given . . . to some or all of the members of any step in the action," and "imposing conditions on the representative parties." Fed.R.Civ.Pro. 23(d).
DISCUSSION

  The motions currently before the court concern pre-certification communications by defendant to potential class members. Pre-certification communications to potential class members by both parties are generally permitted, and also considered to constitute constitutionally protected speech. See e.g. Gulf Oil Co., 452 U.S. at 101; Parks v. Eastwood Ins. Services, Inc., 235 F. Supp. 2d 1082, 1084 (C.D. Cal. 2002); Atari, Inc. v. Superior Court of Santa Clara County, 166 Cal. App. 3d 867, 871 (1985). As such, any limitations on pre-certification communications between parties and potential class members should be "based on a clear record and specific findings that reflect a weighing of the need for a limitation and the potential interference with the rights of the parties." Gulf Oil Co., 452 U.S. at 101.

  Courts have limited pre-certification communications with potential class members after misleading, coercive, or improper communications were made. See Parks, 235 F. Supp. 2d at 1084; Belt v. Emcare Inc., 299 F. Supp. 2d 664, 667 (E.D. Tex. 2003). For example, this court has restricted a defendant's ability to communicate with potential class members following the defendant's publication of a notice that, in relevant part, failed to disclose the pendency or scope of the class action and may have caused confusion among potential class members regarding their rights. See Pollar v. Judson Steel Corp., Civil No. 82-6833 MHP, 1984 WL 161273 (N.D. Cal. Feb. 3, 1984) (Patel, J.). Likewise, a district court in Texas has restricted a defendant's ability to communicate with potential class members where defendant sent a letter to potential class members that the court determined had "mischaracterized the suit [seeking overtime wages for nurse practitioners and physician's assistants] as an attack on the absent class members' status as `professionals' in the workplace," mischaracterized the damages, and was coercive because "the absent class member and the defendant are involved in an ongoing business relationship . . . as employer-employee." See Belt, 299 F. Supp. 2d at 668.

  In the instant case, defendant, through its counsel, has contacted by telephone an unknown number of its employee HMCs who are potential class members. Defendant told these HMCs that the telephone calls were in connection with this action, which defendant described as seeking to have "HMC positions changed to become eligible for overtime rather than the present exempt commission-based structure," with the possible effects including "a system of time-monitoring, payment of overtime, as well as some lunch period regulation." Wallock Decl. ¶ 5. For the HMCs who agreed to be interviewed, defendant has conducted telephone interviews and prepared declarations for the HMCs to sign. See id. ¶¶ 3-4.

  These circumstances are not unlike those in the Belt case, where the court found the defendant's statements to improperly characterize the lawsuit "as an attack on the absent class members' status as `professionals' in the workplace." See Belt, 299 F. Supp. 2d at 667 n. 4, 668. Here, defendant's verbal explanation of this action as seeking to have "HMC positions changed to become eligible for overtime rather than the present exempt commission-based structure" with the possible effects including "a system of time-monitoring, payment of overtime, as well as some lunch period regulation" (see Wallock Decl. at ¶ 5) could easily give a potential class member the mistaken impression that "if the lawsuit were successful, [HMC positions] would be paid on an hourly basis instead of by commission." Urso Decl. at ¶ 3. Indeed, that is precisely the impression Ms. Urso states she was given. See id. The court therefore finds that defendant's statements to potential class members were misleading.

  Defendant's statements also have a "heightened potential for coercion because where the absent class member and the defendant are involved in an ongoing business relationship, such as employer-employee, any communications are more likely to be coercive." Belt, 299 F. Supp. 2d at 668. Ms. Urso states that if she had not already been looking for another job she "would have felt forced to sign the declaration in order to continue her employment" with defendant. Defendant states that it told Ms. Urso and other HMCs it interviewed that they would "neither receive any benefit from participating in the interview nor receive any detriment by not participating." Def.'s Opp. at 7. Accepting ...


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