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Reinig v. RBS Citizens, N.A.

United States Court of Appeals, Third Circuit

December 31, 2018

RBS CITIZENS, N.A., Appellant

          Argued July 19, 2018

          On Appeal from the United States District Court for the Western District of Pennsylvania District Judge: Honorable Arthur J. Schwab (D.C. Civil No. 2-15-cv-01541)

          Kim M. Watterson [ARGUED] Robert J. Tyler, III Gretchen W. Root Reed Smith Thomas E. Hill Christina Tellado Holland & Knight Counsel for Appellant

          Joshua S. Boyette [ARGUED] Daniel A. Horowitz Justin L. Swidler Swartz Swidler Robert D. Soloff Soloff Law Counsel for Appellees

          Before: McKEE, VANASKIE, and RESTREPO, Circuit Judges



         This interlocutory appeal authorized by Rule 23(f) of the Federal Rules of Civil Procedure presents us with two significant questions. First, did the District Court err in certifying a class of Citizens Bank (N.A.) Mortgage Loan Officers from ten different states who bring claims alleging that they were unlawfully denied overtime pay? And second, may we exercise pendent appellate jurisdiction over the District Court's order certifying a collective action under § 216(b) of the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 216(b), an otherwise non-appealable order? We hold that the District Court's class certification decision cannot stand and that we may not consider the merits of the decision to certify a collective action under the FLSA.

         I. BACKGROUND

         Between November 2012 and April 2017, Plaintiffs, working as Mortgage Loan Officers (MLOs) at Citizens, were responsible for bringing in business by generating customer leads, completing loan applications, and building a book of business of referrals for new mortgage lending opportunities. To facilitate fulfillment of their work responsibilities, Citizens afforded MLOs considerable flexibility to determine their own working hours and where to perform their work.

         Citizens paid MLOs in three ways. First, MLOs received a base salary of $11.50 an hour. Second, some MLOs, depending on their eligibility, earned a monthly commission based on the number of loan products sold in a given month. Third, and most relevant to this appeal, MLOs were entitled to overtime pay by virtue of their "non-exempt" status under federal and state wage-and-hour laws, including the FLSA. As non-exempt employees, MLOs were entitled to 1.5 times their base wage of $11.50/hour ($17.25/hour) for each hour worked in excess of forty during a given workweek. See 29 C.F.R. § 778.107.

         On paper, the process for requesting overtime payments worked as follows: MLOs recorded their hours in a computerized timekeeping application. A typical work day included four separate entries: "the morning clock-in; a clock-out and clock-in for the lunch period; and the evening clock-out." (App. 106). MLOs were required to submit their total hours worked in a particular week by Sunday at midnight. A Producing Sales Manager-who oversaw the work of eight individual MLOs-was responsible for ensuring the accuracy and completeness of the timesheet information. Under this "Time Sheet Policy," the Producing Sales Manager was required to approve any hours the MLOs submitted by Monday at noon, i.e., the day after MLOs were required to submit their hours.

         While the Time Sheet Policy obligated MLOs to report all hours worked, including overtime, a separate but related policy governed an MLO's ability to work overtime. Specifically, each MLO's letter of employment contained a provision stating that the MLO was "required to obtain prior approval from [his or her] supervisor for any hours worked in excess of 40 hours per week." (Appellant's Br. 13) (citations omitted). If an MLO disregarded this policy by not seeking approval of overtime hours, the MLO could be subject to discipline.

         According to Plaintiffs, Citizens' on-paper overtime policy was a ruse. In reality, Plaintiffs aver, Citizens endorsed a "policy-to-violate-the-policy," i.e., the company maintained an unofficial, companywide policy of requiring MLOs to work in excess of 40 hours per week while discouraging MLOs from actually reporting those overtime hours. This practice, Plaintiffs contend, was carried out at Citizens "through a single, coordinated, overarching scheme." (Appellees' Br. 5). As outlined by Plaintiffs, the scheme consisted of the following measures:

(1) an overtime preapproval policy, whereby MLOs would be subject to discipline if they reported overtime without having it preapproved;
(2) restrictions on the amount of overtime hours that managers could approve;
(3) allowing MLOs to submit fictitious attendance records that block-reported time and did not show night or weekend work through management's violations of Citizens' attendance monitoring and timesheet approval policies; and
(4) upper-level management's tracking of overtime reported and discouragement/harassment/discipline of MLOs who reported or requested overtime.

(Id. at 7).

         In November 2015, three former MLOs-Alex Renig, Ken Gritz, and Bob Soda-filed a class action complaint alleging that Citizens, by maintaining "an unofficial policy or practice requiring MLOs to work 'off the clock[]' in excess of forty hours per week," failed to pay overtime wages in accordance with the FLSA and Pennsylvania law. (App. 101). Because this work went unreported, Plaintiffs claimed that they were not paid for their off-the-clock hours in violation of the FLSA, 29 U.S.C. § 207, and Pennsylvania's wage-and-hour law, 43 Pa. Stat. and Cons. Stat. § 260.1 et seq., and § 333.101 et seq.

         Plaintiffs moved for conditional certification of a collective action under the FLSA, [1] which the District Court granted in May 2016. The District Court then ordered Plaintiffs to serve notice to the conditional FLSA class informing them that they would have 100 days to opt in to the action. In accordance with the District Court's order, Plaintiffs sent notice to over 1, 000 current and former MLOs. Of those, 351 filed consent forms opting in to the FLSA collective action.

         After the 100-day period expired, Plaintiffs filed an amended complaint that added nine named plaintiffs to the lawsuit. In conjunction with the amended complaint, Plaintiffs filed a motion for class certification under Rule 23, seeking certification of ten distinct classes, each of which alleged claims under the laws of their respective states. Citizens responded with two separate, but related, motions: one opposing the class certification motion and the other seeking decertification of the FLSA collective action.[2]

         The parties, via stipulation, agreed to the appointment of a Special Master to address the pending motions. The Special Master recommended denying Citizens' motion for summary judgment, certifying Plaintiffs' off-the-clock claims under Rule 23(b)(2) and (b)(3), and denying Citizens' motion for decertification of the FLSA collective action. The District Court adopted the Special Master's reports and recommendations (hereinafter "SM Reports") in full. Citizens then timely filed a Rule 23(f) petition, which we granted.


         The District Court had original jurisdiction over Plaintiffs' FLSA claims under 28 U.S.C. § 1331, and supplemental jurisdiction over their state-law claims pursuant to 28 U.S.C. § 1367. Because we granted Citizens' Rule 23(f) petition, we have jurisdiction over the District Court's Rule 23 order pursuant to 28 U.S.C. § 1292(e). "We review the grant of class certification for an abuse of discretion, which occurs if the certification 'rests upon clearly erroneous finding of fact, an errant conclusion of law or an improper application of law to fact.'" In re Blood ...

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