United States District Court, N.D. Illinois, Eastern Division
MARC KRAMER, KIRIL TRAJCEVSKI, and MATT NYMAN, on behalf of themselves and others similarly situated, Plaintiffs,
AMERICAN BANK AND TRUST COMPANY, N.A., SHARON WHEELER, JULIE KLAUS, HARRY S. COIN, and DALE DOLLENBACHER, Defendants.
MEMORANDUM OPINION AND ORDER
Z. LEE United States District Judge.
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.
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
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
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 were violations of the FLSA and
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.
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.
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).
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). 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).
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).
Class Certification Under Rule 23
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.”
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
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.
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).
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.
Rule 23(a)'s Requirements
Rule 23(a)(1): Numerosity
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.”).
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
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. Accordingly, the Court finds that
numerosity is satisfied.
Rule 23(a)(2): Commonality
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 ...