571 F.3d 953 (9th Cir. 2009), 08-15355, In re Wells Fargo Home Mortg. Overtime Pay Litigation

Docket Nº:08-15355.
Citation:571 F.3d 953
Opinion Judge:MILLS, District Judge:
Party Name:In re WELLS FARGO HOME MORTGAGE OVERTIME PAY LITIGATION. v. Wells Fargo Home Mortgage, Defendant-Appellant. Jason Mevorah, Genaro Perez, and Perry Derrick, Plaintiffs-Appellees,
Attorney:Lindbergh Porter, Jr., Littler Mendelson, P.C., San Francisco, CA, for the defendant-appellant. Arthur W. Lazear (briefed), Hoffman & Lazear, Oakland, CA; Kevin J. McInerney (argued), McInerney & Jones, Reno, NV, for the plaintiffs-appellees. Raymond A. Cardozo, Reed Smith, LLP, San Francisco, CA...
Judge Panel:Before: BARRY G. SILVERMAN and CONSUELO M. CALLAHAN, Circuit Judges, and RICHARD MILLS, District Judge.[*]
Case Date:July 07, 2009
Court:United States Courts of Appeals, Court of Appeals for the Ninth Circuit
 
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571 F.3d 953 (9th Cir. 2009)

In re WELLS FARGO HOME MORTGAGE OVERTIME PAY LITIGATION.

Jason Mevorah, Genaro Perez, and Perry Derrick, Plaintiffs-Appellees,

v.

Wells Fargo Home Mortgage, Defendant-Appellant.

No. 08-15355.

United States Court of Appeals, Ninth Circuit.

July 7, 2009

         Argued and Submitted Feb. 5, 2009.

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[Copyrighted Material Omitted]

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         Lindbergh Porter, Jr., Littler Mendelson, P.C., San Francisco, CA, for the defendant-appellant.

          Arthur W. Lazear (briefed), Hoffman & Lazear, Oakland, CA; Kevin J. McInerney (argued), McInerney & Jones, Reno, NV, for the plaintiffs-appellees.

          Raymond A. Cardozo, Reed Smith, LLP, San Francisco, CA, Piper Hoffman, Otten & Golden, LLP, New York, NY, for the amici.

         Appeal from the United States District Court for the Northern District of California, Marilyn Hall Patel, District Judge, Presiding. D.C. No. CV-06-01770-MHP.

          Before: BARRY G. SILVERMAN and CONSUELO M. CALLAHAN, Circuit Judges, and RICHARD MILLS, District Judge.[*]

          MILLS, District Judge:

         This interlocutory appeal challenges a district court order certifying a group of California plaintiffs as a class.1

         The dispute is whether the court abused its discretion in finding that the predominance requirement of Federal Rule of Civil Procedure 23(b)(3) was satisfied, based-in large part-on an employer's internal policy of treating its employees as exempt from overtime laws.

         While such uniform exemption policies are relevant to the Rule 23(b)(3) analysis, we hold that it is an abuse of discretion to rely on such policies to the near exclusion of other relevant factors touching on predominance.

         I.

         The plaintiffs (" California plaintiffs" ) are current and former home mortgage consultants (" HMCs" ) who were employed by Wells Fargo Home Mortgage (" Wells Fargo" ) in California. Since 2001, there have been some 5000 such HMCs.

         HMCs are charged with marketing and selling mortgages. Previously, they were compensated solely through a type of sales commission. In 2005, Wells Fargo changed the commission system to include a minimum, non-recoverable draw against commissions.

         During the class period, Wells Fargo neither paid overtime nor tracked the hours of the HMCs. Rather, it treated nearly all of its HMCs as exempt from state and federal overtime requirements. Believing this exemption decision was contrary to law, several groups of plaintiffs brought putative class actions for violations of state labor and overtime laws. They also asserted that Wells Fargo engaged in unfair and unlawful business practices in violation of California's Unfair Competition Law (" UCL" ), Cal. Bus. & Prof.Code § 17200 et seq. , by violating various parts of the Fair Labor Standards Act (" FLSA" ), 29 U.S.C. § 201 et seq. These cases, as well as those filed by non-California plaintiffs, were consolidated in the Northern District of California by the Judicial Panel on Multidistrict Litigation.

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          II.

         The California plaintiffs sought class certification. In opposition, Wells Fargo argued that individual issues predominated and that class treatment was not superior. In particular, Wells Fargo pointed to a number of exemptions under the FLSA (applicable through the UCL) and California labor law that would require individualized inquiries.

         In an order dated October 17, 2007, the district court carefully reviewed each exemption identified by Wells Fargo and found that individual inquiries would be necessary with respect to five exemptions: the federal outside sales exemption, 29 U.S.C. § 213(a)(1); California's outside sales exemption, Cal. Lab.Code § 1171; California's commissioned sales exemption, 8 Cal.Code Regs. § 11040(3)(D); California's administrative exemption, 8 Cal.Code Regs. § 11040(1)(A)(2); and the federal highly compensated employee exemption, 29 C.F.R. § 541.601. These inquiries, the court found, would require an analysis of the job experiences of the individual employees, including the amount of time worked by each HMC, how they spend their time, where they primarily work, and their levels of compensation.

         In contrast, the court found that common issues arose only with respect to two exemptions: whether Wells Fargo qualifies as a " retail or service establishment" for purposes of a federal exemption for commissioned sales, 29 U.S.C. § 207, and whether the employees earned...

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