809 F.3d 111 (4th Cir. 2015), 14-2111, Calderon v. GEICO Gen. Ins. Co.

Docket Nº:14-2111, 14-2114
Citation:809 F.3d 111
Opinion Judge:TRAXLER, Chief Judge.
Party Name:SAMUEL CALDERON, individually and on behalf of other similarly situated individuals; MICHAEL HEADLEY; AARON KULSIC; KENNETH MILLER; MICHAEL CREAMER; GEORGE WOOD; ROBERT DEMARTINO; JOHN HALLIDAY; JAMES L. HANSON; THOMAS F. BRADY; DANA FERRIN; MAUREEN AYLING; CANDIDO CUBERO; THOMAS FITZGERALD; WILLIAM DOLINSKY; MARVIN HOURIGAN; DAVID MCCAMLEY; AU...
Attorney:Pratik A. Shah, AKIN GUMP STRAUSS HAUER & FELD LLP, Washington, D.C., for Appellants/Cross-Appellees. Matthew Hale Morgan, NICHOLS KASTER, PLLP, Minneapolis, Minnesota, for Appellees/Cross-Appellants. Eric Hemmendinger, SHAWE & ROSENTHAL, LLP, Baltimore, Maryland; Hyland Hunt, AKIN GUMP STRAUSS H...
Judge Panel:Before TRAXLER, Chief Judge, KING, Circuit Judge, and DAVIS, Senior Circuit Judge.
Case Date:December 23, 2015
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit
 
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809 F.3d 111 (4th Cir. 2015)

SAMUEL CALDERON, individually and on behalf of other similarly situated individuals; MICHAEL HEADLEY; AARON KULSIC; KENNETH MILLER; MICHAEL CREAMER; GEORGE WOOD; ROBERT DEMARTINO; JOHN HALLIDAY; JAMES L. HANSON; THOMAS F. BRADY; DANA FERRIN; MAUREEN AYLING; CANDIDO CUBERO; THOMAS FITZGERALD; WILLIAM DOLINSKY; MARVIN HOURIGAN; DAVID MCCAMLEY; AUGUSTUS STANSBURY, JR.; JOAN BISCHOFF; RANDALL GIBSON; VINCENT GRECO; TERESA HARTEY-ADAMETZ; THOMAS LOWE; DAVID MCENRY; JENNIFER RICCA; ANITA SINGH; BRYAN UTTERBACK; PATRICK WEISE; LEAH HAMILTON; DENNIS FULTON; EBERHARD GROSSER; JOSEPH MILES, JR.; RICKY MCCRACKEN; THOMAS STURGIS; CHRISTOPHER SULLIVAN; MICHAEL RUSSELL; RANDALL STEWART; LAVERNE HOLMES; THOMAS DAVIDSON, JR.; SHANNON BOYD; ANTHONY DEAN, JR.; FRANCISCO NOGALES; JOHN GHETTI; GERALD DEXTER; CLAUDE REIHER; STEVEN MCBRIDE; PHILLIP RONDELLO; ROBERT MERRY, Plaintiffs - Appellees,

And

MICHAEL BROWN, Plaintiff,

v.

GEICO GENERAL INSURANCE COMPANY; GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendants - Appellants,

And

GEICO CORPORATION; GEICO INDEMNITY COMPANY; GEICO CASUALTY COMPANY; DOES 1-10, Defendants.

SAMUEL CALDERON, individually and on behalf of other similarly situated individuals; MICHAEL HEADLEY; AARON KULSIC; KENNETH MILLER; MICHAEL CREAMER; GEORGE WOOD; ROBERT DEMARTINO; JOHN HALLIDAY; JAMES L. HANSON; THOMAS F. BRADY; DANA FERRIN; MAUREEN AYLING; CANDIDO CUBERO; THOMAS FITZGERALD; WILLIAM DOLINSKY; MARVIN HOURIGAN; DAVID MCCAMLEY; AUGUSTUS STANSBURY, JR.; JOAN BISCHOFF; RANDALL GIBSON; VINCENT GRECO; TERESA HARTEY-ADAMETZ; THOMAS LOWE; DAVID MCENRY; JENNIFER RICCA; ANITA SINGH; BRYAN UTTERBACK; PATRICK WEISE; LEAH HAMILTON; DENNIS FULTON; EBERHARD GROSSER; JOSEPH MILES, JR.; RICKY MCCRACKEN; THOMAS STURGIS; CHRISTOPHER SULLIVAN; MICHAEL RUSSELL; RANDALL STEWART; LAVERNE HOLMES; THOMAS DAVIDSON, JR.; SHANNON BOYD; ANTHONY DEAN, JR.; FRANCISCO NOGALES; JOHN GHETTI; GERALD DEXTER; CLAUDE REIHER; STEVEN MCBRIDE; PHILLIP RONDELLO; ROBERT MERRY, Plaintiffs - Appellants,

And

MICHAEL BROWN, Plaintiff,

v.

GEICO GENERAL INSURANCE COMPANY; GOVERNMENT EMPLOYEES INSURANCE COMPANY, Defendants - Appellees,

And

GEICO CORPORATION; GEICO INDEMNITY COMPANY; GEICO CASUALTY COMPANY; DOES 1-10, Defendants

Nos. 14-2111, 14-2114

United States Court of Appeals, Fourth Circuit

December 23, 2015

Argued October 28, 2015

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Appeals from the United States District Court for the District of Maryland, at Greenbelt. (8:10-cv-01958-RWT). Roger W. Titus, Senior District Judge.

ARGUED:

Pratik A. Shah, AKIN GUMP STRAUSS HAUER & FELD LLP, Washington, D.C., for Appellants/Cross-Appellees.

Matthew Hale Morgan, NICHOLS KASTER, PLLP, Minneapolis, Minnesota, for Appellees/Cross-Appellants.

ON BRIEF:

Eric Hemmendinger, SHAWE & ROSENTHAL, LLP, Baltimore, Maryland; Hyland Hunt, AKIN GUMP STRAUSS HAUER & FELD LLP, Washington, D.C., for Appellants/Cross-Appellees.

Timothy C. Selander, NICHOLS KASTER, PLLP, Minneapolis, Minnesota, for Appellees/Cross-Appellants.

Before TRAXLER, Chief Judge, KING, Circuit Judge, and DAVIS, Senior Circuit Judge.

OPINION

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TRAXLER, Chief Judge.

Government Employees Insurance Company and GEICO General Insurance Company (together, " GEICO" ) appeal a district court order granting judgment against them in an action asserting denial of overtime pay under the Fair Labor Standards Act (" FLSA" ), see 29 U.S.C. § § 201 et seq., and the New York labor law (" NYLL" ), see N.Y. Lab. Law § § 650 et seq.; N.Y. Comp. Codes R. & Regs. tit. 12, § 142-2.2. The plaintiffs cross-appeal several rulings relating to the remedy awarded. We reverse the denial of prejudgment interest and remand for a prejudgment interest award. Otherwise, we affirm.

I.

GEICO is in the business of providing insurance for its customers. The plaintiffs in this matter are security investigators (the " Investigators" ) who currently work, or previously worked, for GEICO. The Investigators work in GEICO's Claims Department primarily investigating claims that are suspected of being fraudulent. The FLSA requires that employers pay overtime for each hour their employees work in excess of 40 per week, but it exempts " any employee employed in a bona fide executive, administrative, or professional capacity." 29 U.S.C. § 213(a)(1). GEICO has long classified its Investigators as exempt from the FLSA's overtime pay protections.1 This case primarily concerns whether that classification is correct.

Viewing the facts concerning the classification in the light most favorable to GEICO, as we must, 2 the record reveals the following.

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GEICO has employees called Claims Adjusters who work in the Claims Department and whose primary job it is to adjust insurance claims by investigating, assessing, and resolving them. The Claims Adjusters decide how much, if anything, GEICO will pay on a claim, and they negotiate any settlements.

The Investigators work in GEICO's Special Investigations Unit (" SIU" ), which is part of GEICO's Claims Department. The Investigators report to Supervisors, who in turn report to Managers, who in turn report to the Assistant Vice-President of Claims. The SIU attempts to identify claims that are fraudulent and that GEICO therefore does not have to pay.3 An Investigator generally becomes involved in a claim when other Claims Department personnel refer the claim to him on suspicion that it is fraudulent, although there are limited circumstances under which the Investigators initiate investigations themselves. The Investigators' primary responsibility is to investigate whether such claims are fraudulent, which occupies about 90% of their time.

GEICO has procedures that govern an Investigator's handling of a claim that has been referred to him, which require:

1. A thorough investigation of the referral.

2. Identification and interviews of potential witnesses who may provide information on the accuracy of the claim and/or application. 3. Utilizing industry recognized databases as deemed necessary in conducting investigations. 4. Preservation of documents and other evidence. 5. Writing a concise and complete summary of the investigation, including the investigators['] findings regarding the suspected insurance fraud and the basis for their findings.

Calderon v. GEICO Gen. Ins. Co., 917 F.Supp.2d 428, 432 (D. Md. 2012) (internal quotation marks omitted).

GEICO requires Investigators when they receive a claim referral to begin their work by creating a plan of action regarding what steps must be taken in order to investigate the particular claim. The Investigator then enters this plan of action into the SIU Case Management System (" SICM" ).

An investigation might entail steps such as interviewing witnesses, taking photographs, and reviewing property damage. Some interviews may take the form of face-to-face questioning wherein the witness is under oath. Such interviews serve the purpose of obtaining information, providing the insured an opportunity to provide explanation or further substantiation for his claim. They also allow the Investigator to evaluate the credibility of the witness and to preserve the witness's testimony. Although GEICO has procedures governing how Investigators conduct investigations, Investigators still must use their judgment to determine exactly how

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to conduct their investigations and what inferences to draw from the evidence they uncover, including determining the credibility of insureds or other witnesses.

Investigators must submit an initial report within 10 days of receiving a claim referral and then submit interim reports every 20 days during the investigation. With regard to both interim and final reports, most Investigators - all but about 40 or 50 out of 250 - are required to submit their reports to their Supervisor for review before the reports are submitted through the SICM. This allows the Supervisor to " provide any input he may feel appropriate because of his expertise" and to ensure that the reports comply with format requirements. J.A. 1372.

GEICO does not permit speculation in its reports and it requires that Investigators substantiate any conclusions in their reports with facts and evidence. However, Claims Adjusters generally do not review reports once they are finalized. Instead, they generally base their decisions regarding whether to pay claims on oral reports or summaries of the reports that the Investigators provide to them.

In addition to conducting investigations, finding facts, and reporting their findings, Investigators also spend a small percentage of their time performing other duties. They sometimes educate adjusters about fraud, often utilizing their experiences from the field. Also, when an Investigator is preparing to end his work on a case, he has discretion to refer the claim to the National Insurance Crime Bureau or other state agencies if he has found significant indications of fraud. And finally, when an investigation reveals a problem with the policyholder, Investigators also may choose to refer a case to GEICO's underwriting department so that the insured's rates may be adjusted when his policy comes up for review.

GEICO has long classified its Investigators as exempt under the FLSA. In 2004, two events prompted GEICO to revisit the issue. First, a federal district court ruled that GEICO had misclassified its auto damage adjusters as exempt. See Robinson-Smith v. GEICO, 323 F.Supp.2d 12 (D.D.C. 2004). Second, the Labor Department issued new regulations concerning the administrative exemption. See...

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