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McKeen-Chaplin v. Provident Savings Bank, FSB

United States Court of Appeals, Ninth Circuit

July 5, 2017

Gina McKeen-Chaplin, individually, on behalf of others similarly situated, and on behalf of the general public, Plaintiff-Appellant,
v.
Provident Savings Bank, FSB, Defendant-Appellee.

          Argued and Submitted April 21, 2017 San Francisco, California

         Appeal from the United States District Court No. 2:12-cv-03035-GEB-AC for the Eastern District of California Garland E. Burrell, Jr., District Judge, Presiding

          Matthew C. Helland (argued) and Daniel S. Brome, Nichols Kaster LLP, San Francisco, California; for Plaintiff-Appellant.

          Michael L. Ludwig (argued), Howard M. Knee (argued), and Caitlin Sanders, Blank Rome LLP, Los Angeles, California, for Defendant-Appellee.

          Before: Sidney R. Thomas, Chief Judge, Mary H. Murguia, Circuit Judge, and Michael M. Baylson, [*] District Judge.

         SUMMARY [**]

         Labor Law

         Reversing the district court's grant of summary judgment in favor of the defendant in an action under the Fair Labor Standards Act, the panel held that mortgage underwriters were entitled to overtime compensation for hours worked in excess of forty per week.

         Applying the analysis used by the Second Circuit, rather than the Sixth Circuit, the panel held that, because the mortgage underwriters' primary job duty did not relate to their employer bank's management or general business operations, the administrative employee exemption to the Act's overtime requirements did not apply.

          OPINION

          THOMAS, Chief Judge.

         This appeal presents the question of whether a class of mortgage underwriters are entitled to overtime compensation under the Fair Labor Standards Act ("FLSA" or "the Act"), 29 U.S.C. § 201 et seq., for hours worked in excess of forty per week. We conclude that, because the mortgage underwriters' primary job duty does not relate to the bank's management or general business operations, the administrative employee exemption under 29 U.S.C. § 213(a)(1) and 29 C.F.R. § 541.200(a) does not apply, [1] and the underwriters are entitled to overtime compensation.

         I

         Provident Savings Bank ("Provident" or "the Bank") sells mortgage loans to consumers purchasing or refinancing homes and then resells those funded loans on the secondary market. Mortgage underwriters at Provident review mortgage loan applications using guidelines established by Provident and investors in the secondary market, including Fannie Mae, Freddie Mac, and the Fair Housing Administration.

         Loan transactions begin with a loan officer or broker who works with a borrower to select a particular loan product. A loan processor then runs a credit check, gathers further documentation, assembles the file for the underwriter, and runs the loan through an automated underwriting system. The automated system applies certain guidelines based on the information input and then returns a preliminary decision. From there, the file goes to a mortgage underwriter, who verifies the information put into the automated system and compares the borrower's information against the applicable guidelines, which are specific to each loan product.

         Mortgage underwriters are responsible for thoroughly analyzing complex customer loan applications and determining borrower creditworthiness in order to ultimately decide whether Provident will accept the requested loan. They may impose conditions on a loan application and refuse to approve the loan until the borrower satisfies those conditions. The decision as to whether to impose conditions is ordinarily controlled by the applicable guidelines, but the underwriters can include additional conditions. They can also suggest a "counteroffer"-which would be communicated through the loan officer-in cases where a borrower does not qualify for the loan product selected, but might qualify for a different loan. Underwriters may also request that Provident make exceptions in certain cases by approving a loan that does not satisfy the guidelines.

         After a mortgage underwriter approves a loan, it is sent to other Provident employees who finalize the loan funding. Underwriters say that whether a loan is funded ultimately depends on factors beyond the underwriter's control. Another group of Provident employees sells funded loans in the secondary market.

         On behalf of herself and a class of mortgage underwriters, Gina McKeen-Chaplin brought this action seeking overtime compensation under FSLA. The district court conditionally certified an opt-in class of current and former mortgage underwriters at Provident. Initially, the district court denied cross motions for summary judgment and set the case for trial. But later, on the parties' joint motion for reconsideration, the court concluded that the underwriters qualify for the administrative exemption, based on finding that their primary duty included "quality control" or similar activities directly related ...


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