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Kramer v. American Bank And Trust Co. N.A.

United States District Court, N.D. Illinois, Eastern Division

March 31, 2017

MARC KRAMER, KIRIL TRAJCEVSKI, and MATT NYMAN, on behalf of themselves and others similarly situated, Plaintiffs,


          JOHN Z. LEE United States District Judge.

         Plaintiffs are loan officers who have sued American Bank and Trust Co., N.A., and several of its managing officers, Sharon Wheeler, Julie Klaus, Harry S. Coin, and Dale Dollenbacher. According to Plaintiffs, Defendants have failed to pay them the legally mandated minimum wage and appropriate overtime wages, as well as commissions owed under their employment contracts. Plaintiffs have brought suit for violations of the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., the Illinois Minimum Wage Law (IMWL), 820 Ill. Comp. Stat. 105/1 et seq., and the Illinois Wage Payment and Collection Act (IWPCA), 820 Ill. Comp. Stat. 115/1 et seq., as well as for common law breach of contract, fraud by misrepresentation, and fraud by omission. Before the Court are Plaintiffs' motion for class certification pursuant to Federal Rule of Civil Procedure (“Rule”) 23(b)(3) as to the state law claims and Defendants' motion to decertify the FLSA collective action. For the reasons provided herein, the Court grants Plaintiffs' motion and denies Defendants' motion.


         American Bank and Trust Co., N.A. (“the Bank”), is a national bank with its principal place of business in Davenport, Iowa. Defendant Harry Coin was the Bank's President and Chief Executive Officer until February 2009. Defendant Sharon Wheeler was the Bank's Executive Vice President from October 2010 through October 2012. Defendant Dale Dollenbacher was the Bank's Executive Vice President and Corporate Financial Officer from July 2003 to March 2012. Defendant Julie Klaus was the Bank's Senior Vice President of Human Resources from November 2009 until May 2012.

         Plaintiffs were employed by the Bank as loan officers and were tasked with obtaining mortgage loans for the Bank's customers. Pls.' Ex. 8, Pls.' Employment Contracts (showing that individual plaintiffs were expected to perform substantially the same tasks). Loan officers worked either from home or in office spaces provided by the Bank. Pls.' Ex. 2, Allen Dep. at 25-26; Pls.' Ex. 6, Wheeler Dep. at 110. As of 2009, the Bank employed forty-seven loan officers in Illinois and eleven loan officers in Iowa. See Pls.' Reply Ex. 2, Monthly Commission Summaries, January-December 2009.

         Prior to January 2011, the Bank classified loan officers as “sales employees.” Pls.' Ex. 7, 3/23/15 Dollenbacher Dep. at 98. Based on this classification, the Bank did not pay loan officers a minimum wage or overtime wages and, instead, paid them only on a commission basis. Pls.' Ex. 2, Allen Dep. at 24-25; Pls.' Ex. 3, 2/7/12 Dollenbacher Dep. at 243-45; Pls.' Ex. 5, Klaus Dep. at 76. According to James Allen, a former bank President, the Bank did not track hours or overtime worked by its loan officers before 2011. Pls.' Ex. 2, Allen Dep. at 32. Beginning in January 2011, however, the Bank began tracking hours worked and started paying loan officers hourly wages as well as overtime wages. Pls.' Ex. 7, 3/23/15 Dollenbacher Dep. at 97. But even then the Bank, through Defendants Wheeler and Klaus and others, directed loan officers to report only forty hours per week, regardless of whether loan officers worked additional hours. Pls.' Mem. Law Opp'n Defs.' Mot. Decertify Collective Action 8-10 (citing testimony of eleven Plaintiffs). Plaintiffs allege that the Bank's failure to pay them a minimum wage and overtime wages prior to January 2011 and failure to pay them overtime during January 2011[1] were violations of the FLSA and IMWL.

         Plaintiffs also assert that Defendants violated state law when they perpetrated a “skimming scheme” in which Defendants artificially deflated loan officers' commissions in contravention of their employment contracts. Defendants had represented to all loan officers that they would be paid monthly commissions as a percent of “revenue generated” from the loans that the loan officers had originated. See Pls.' Ex. 18, Employment Agreements. But according to Theresa Mann, the Bank's former Manager of Secondary Marketing, the Bank had a company-wide policy of setting aside for itself a percentage of the revenue that was generated when a mortgage loan was sold in the secondary mortgage market (what the parties call “secondary gain”). See Pls.' Ex. 10, Mann Dep. at 33, 71-72; see also Pls.' Ex. 9, Kaye Dep. at 54, 58.. The Bank considered secondary gain to be the Bank's profit margin. See Pls.' Ex. 9, Kaye Dep. at 54, 58. Thus, a loan officer's commissions were, in fact, a percentage of the total revenue generated from his or her mortgage loans less the secondary gain. See Id. According to Plaintiffs, this practice violated the IWPCA, breached their employment contracts, and constituted fraud.


         As an initial matter, a brief overview of the elements of Plaintiffs' causes of action is necessary. Plaintiffs' IMWL claims require them to prove that Defendants failed to pay them the applicable minimum hourly wage or overtime pay for work in excess of forty hours per week. See 820 Ill. Comp. Stat. 105/4. To prevail on their IWPCA claims, Plaintiffs must establish that Defendants failed to timely and completely pay their earned wages, defined here as any compensation owed to an employee pursuant to an employment contract or agreement. See 820 Ill. Comp. Stat. 115/2.

         To prove a breach of contract claim under Iowa law, which governs the contracts at issue, the claimant must establish: “(1) the existence of a contract, (2) the terms and conditions of the contract, (3) that [the claimant] has performed all of the terms and conditions required under the contract, (4) the [opposing party's] breach of the contract in some particular way, and (5) that [the claimant has suffered damages as a result of [the opposing party's] breach.” See Royal Indem. Co. v. Factory Mut. Ins. Co., 786 N.W.2d 839, 846 (Iowa 2010); see also Pls.' Ex. 8, Pls.' Employment Contracts (stating that Iowa law governs).

         Plaintiffs also claim that Defendants committed fraud by representing to them in their employment agreements that they would receive a certain percentage of the total revenue generated from the loans that they originate, when in fact this was not the case. Plaintiffs assert two types of fraud claims. To establish a fraudulent misrepresentation claim, Plaintiffs must show: “(1) a false statement of material fact; (2) known or believed to be false by the person making it; (3) an intent to induce the plaintiff to act; (4) action by the plaintiff in justifiable reliance on the truth of the statement; and (5) damage to the plaintiff resulting from such reliance.” Thompson v. Am. Airlines Grp., Inc., 128 F.Supp.3d 1047, 1050 (N.D. Ill. 2015) (Illinois law).[2] The elements of fraud by omission are: “(1) concealment of a material fact, (2) with the intent to deceive, and (3) that the plaintiff was unaware of the concealed fact and would have acted differently had the plaintiff known of it.” Bors v. Duberstein, No. 03 C 4636, 2004 WL 1588271, at *4 (N.D. Ill. July 15, 2004) (Illinois law).

         Plaintiffs have also asserted a claim under the FLSA. “[E]mployees who institute a collective action against their employer under the terms of the [FLSA] may at the same time litigate supplemental state-law claims as a class action certified according to Federal Rule of Civil Procedure 23(b)(3).” Ervin v. OS Rest. Servs., 632 F.3d 971, 973-74 (7th Cir. 2011). “Collective actions under the FLSA are different than class actions authorized by Federal Rule of Civil Procedure 23, because in FLSA cases the plaintiff is given notice and an opportunity to opt in, rather than notice and an opportunity to opt out.Jirak v. Abbott Labs., Inc., 566 F.Supp.2d 845, 847 (N.D. Ill. 2008) (emphasis in original). This distinction aside, the Seventh Circuit has recognized the similarity between class actions certified under Rule 23 and FLSA collective actions certified under 29 U.S.C. § 216(b) (“Section 216(b)”). See Espenscheid v. DirectSat USA, LLC, 705 F.3d 770, 772 (7th Cir. 2013); Smith v. Family Video Movie Club, Inc., No. 11 C 1773, 2015 WL 1542649, at *3 (N.D. Ill. Mar. 31, 2015). Here, the Court will evaluate the appropriateness of class certification under Rule 23 and then turn to Section 216(b).

         I. Class Certification Under Rule 23

         Plaintiffs seek to certify two classes under Rule 23(b)(3). The first is an IMWL class alleging failure to pay minimum wage and overtime. It is defined as: “All loan officers employed by American Bank & Trust Company (‘AB&T') in Illinois at any point in time from December 9, 2008, through January 2011.” The second class is based on the alleged skimming scheme and is divided into two subclasses. Subclass I asserts IWPCA violations and is defined as: “All loan officers employed by AB&T in Illinois at any point in time from December 9, 2001, through January 2011.” Subclass II asserts breach of contract and fraud claims and is defined as: “All loan officers employed by AB&T at any point in time from December 9, 2006, through January 2011.”[3]

         “The class action [under Rule 23] is an exception to the usual rule that litigation is conducted by and on behalf of the individual named parties only.” Wal-Mart Stores Inc. v. Dukes, 564 U.S. 338, 350 (2011) (internal citations and quotation marks omitted). In order to justify a departure from that rule, “a class representative must be part of the class and possess the same interest and suffer the same injury as the class members.” Id. (internal quotation marks omitted). “Rule 23(a) ensures that the named plaintiffs are appropriate representatives of the class whose claims they wish to litigate.” Id.

         To be certified under Rule 23, a proposed class must satisfy each of Rule 23(a)'s four requirements: “(1) the class is so numerous that joinder of all members is impracticable; (2) there are questions of law or fact common to the class; (3) the claims or defenses of the representative parties are typical of the claims and defenses of the class; and (4) the representative parties will fairly and adequately protect the interests of the class.” Fed. R. Civ. P. 23(a).

         If Rule 23(a) is satisfied, the proposed class must fall within one of the three categories in Rule 23(b), which the Seventh Circuit has described as: “(1) a mandatory class action (either because of the risk of incompatible standards for the party opposing the class or because the risk that the class action adjudication would, as a practical matter, either dispose of the claims of nonparties or substantially impair their interests), (2) an action seeking final injunctive or declaratory relief, or (3) a case in which the common questions predominate and class treatment is superior.” Spano v. The Boeing Co., 633 F.3d 574, 583 (7th Cir. 2011).

         “Rule 23 does not set forth a mere pleading standard.” Dukes, 564 U.S. at 350. “On issues affecting class certification . . . a court may not simply assume the truth of the matters as asserted by the plaintiff.” Messner v. Northshore Univ. HealthSys., 669 F.3d 802, 811 (7th Cir. 2012). Rather, the named plaintiff bears the burden of showing that a proposed class satisfies each requirement of Rule 23 by a preponderance of the evidence. Id. “Failure to meet any one of the requirements of Rule 23 precludes certification of a class.” Harriston v. Chi. Tribune Co., 992 F.2d 697, 703 (7th Cir. 1993). Certification is proper only if “the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23(a) have been satisfied.” Dukes, 564 U.S. at 350-51. The Seventh Circuit has directed district courts to exercise “caution in class certification generally.” Thorogood v. Sears, Roebuck & Co., 547 F.3d 742, 746 (7th Cir. 2008). That said, the Court should not “turn the class certification proceedings into a dress rehearsal for the trial on the merits.” Messner, 669 F.3d at 811.

         A. Rule 23(a)'s Requirements

         1. Rule 23(a)(1): Numerosity

         Rule 23(a)(1) is satisfied where “the class is so numerous that joinder of all members is impracticable.” Fed.R.Civ.P. 23(a)(1). “[C]ommon sense assumptions can be made in order to support a finding of numerosity.” Barragan v. Evanger's Dog & Cat Food Co., Inc., 259 F.R.D. 330, 333 (N.D. Ill. 2009). A class with as few as forty members has been held to satisfy the numerosity requirement. See Swanson v. Am. Consumer Indus., Inc., 415 F.2d 1326, 1333 n.9 (7th Cir. 1969); see also Pruitt v. City of Chi., 472 F.3d 925, 926-27 (7th Cir. 2006) (“Sometimes even 40 plaintiffs would be unmanageable.”).

         Plaintiffs have submitted evidence that, in 2009 alone, the Bank employed forty-seven loan officers in Illinois. See Pls.' Reply Ex. 2, Monthly Commission Summaries, January- December 2009. This is sufficient to establish numerosity for both the IMWL and IWPCA classes. For the breach of contract and fraud classes, the number of loan officers increases because those classes also include the Bank's loan officers located in Iowa as well as Illinois. See Id. (listing an additional eleven loan officers in Iowa in 2009).

         For their part, Defendants assert that there will be an insufficient number of class members who have claims against all five Defendants because the individual Defendants worked for the Bank at different times. See Defs.' Decert. Mot., Ex. LL, Chart (listing one plaintiff who did not work with Defendants Dollenbacher or Klaus, five plaintiffs who did not work with Defendant Wheeler, and eighteen plaintiffs who did not work with Defendant Coin). But given the sheer number of loan officers working at the Bank during the relevant class periods, Defendants' isolated examples are insufficient to destroy numerosity.[4] Accordingly, the Court finds that numerosity is satisfied.

         2. Rule 23(a)(2): Commonality

         The second Rule 23 element, commonality, requires a plaintiff to demonstrate that “there are questions of law or fact common to the class.” Fed.R.Civ.P. 23(a)(2). “Commonality requires the plaintiff to demonstrate that the class members ‘have suffered the same injury, '” and not “merely that they have all suffered a violation of the same provision of law.” Dukes, 564 U.S. at 349-50 (quoting Gen. Tel. Co. of S.W. v. Falcon, 457 U.S. 147, 157 (1982)). “The class ‘claims must depend upon a common contention, ' and ‘[t]hat common contention, moreover, must be of such a nature that it is capable of classwide resolution-which means that determination of its truth or falsity will ...

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