Bland v. Edward D. Jones & Co.

• Decision Date: 19 March 2019
• Docket Number: Case No. 18-cv-1832
• Citation: 375 F.Supp.3d 962
• Parties: Wayne BLAND, Danuta Durkiewicz, David Bowles and Adam Reyes, individually and on behalf of all others similarly situated, Plaintiffs, v. EDWARD D. JONES & CO., L.P. and the Jones Financial Companies, L.L.L.P., Defendants.
• Court: U.S. District Court — Northern District of Illinois

375 F.Supp.3d 962

Wayne BLAND, Danuta Durkiewicz, David Bowles and Adam Reyes, individually and on behalf of all others similarly situated, Plaintiffs,

v.EDWARD D. JONES & CO., L.P. and the Jones Financial Companies, L.L.L.P., Defendants.

Case No. 18-cv-1832

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

Signed March 19, 2019

Linda Debra Friedman, George S. Robot, Suzanne E. Bish, Stowell & Friedman, Ltd., Chicago, IL, for Plaintiffs.

James F. Bennett, Jennifer Smith Kingston, Michelle Nasser, Dowd Bennett LLP, St. Louis, MO, Brian Frederick Amery, Pro Hac Vice, Bressler, Amery & Ross, P.C., Florham Park, NJ, Carole G. Miller, Pro Hac Vice, Stuart Dewane Roberts, Bressler, Amery & Ross, P.C., Birmingham, AL, Julie B. Porter, Salvatore Prescott & Porter PLLC, Evanston, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

Robert M. Dow, Jr., United States District JudgePlaintiffs Wayne Bland, Danuta Durkiewicz, David Bowles and Adam Reyes ("Plaintiffs") filed this putative collective and class action on behalf of themselves and all those similarly situated against Defendants Edward D. Jones & Co., L.P. and The Jones Financial Companies, L.L.L.P.; alleging violations of the Fair Labor Standards Act, 29 U.S.C. § 201 et seq. (Count I) and several Illinois and Missouri statutes. Currently before the Court is Defendants' motion to dismiss [38] Plaintiffs' Amended Class and Collective Action Complaint [35]. For the reasons stated below, Defendants' motion to dismiss [38] is granted. Plaintiff Bowles's claims in Count I are dismissed with prejudice, except as to any claims that relate to the TCR Provision, which are dismissed without prejudice. Plaintiffs' recordkeeping claim in Count I is also dismissed with prejudice. The rest of Count I and Counts II–VI are dismissed without prejudice. Plaintiffs are given until April 15, 2019 to file an amended complaint consistent with this opinion. The case is set for further status on April 23, 2019 at 9:00 a.m. Finally, Defendants' request for oral argument [63] is denied as moot.

I. Background¹

Plaintiffs are all former Financial Advisors who worked for Defendants and participated in Defendants' Financial Advisor training program.² [35, ¶¶ 9–13.] Plaintiffs assert that the terms of the training program, the wages they received during the training program, and the wages they subsequently received as financial advisors violate the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201 et seq. , and a host of state laws. See generally [35]. Many of their claims concern one of the terms contained within the "Financial Advisor Employment Agreement" that Plaintiffs and the class they wish to represent were required to execute before beginning their training.³ [Id. ¶ 15.]

The contract provision in question, which the Court will refer to as the "training cost reimbursement provision" ("the TCR Provision"), states:

Upon execution of this Agreement and receipt of your can sell date from Edward Jones, you will be a financial advisor of Edward Jones. If, within three (3) years after receipt of your can sell date, your employment with Edward Jones is terminated by you or by Edward Jones, you maintain registration of your license with FINRA and accept employment with any entity as either an employee or independent contractor engaged in the sale of securities and/or insurance business, you agree to reimburse Edward Jones the reasonable cost of the training Edward Jones has provided you including, but not limited to, the cost of the selection and hiring. * * * You agree that the reimbursable amount bears a reasonable relationship to the computed damages Edward Jones would suffer from a breach by you and that Edward Jones will suffer demonstrable loss as a result of your breach. The amount you agree to reimburse Edward Jones is $ 75,000.00. There shall be no reduction in the amount of training costs owed by you in the event your employment is terminated during the first year of service as a financial advisor of Edward Jones. This obligation shall be reduced by $ 9,375.00 for each full quarter year of service beginning the thirteenth month of your employment as a financial advisor of Edward Jones. You must be employed by Edward Jones for each full quarter year in order to have your training cost obligation reduced according to the provisions of this paragraph.

[39-2, ¶ 21.] Each of the Plaintiffs also received a "Compensation Agreement," [35, ¶ 20], that provides a schedule of compensation for both their time as trainees and then as "New Financial Advisors", [39-3].

The training program comprises a 17-week "Study Calendar" period divided into two stages. [Id. ¶¶ 17–18.] During the first or "self-study" stage, trainees study for industry licensing exams using written online materials on computers loaned to them by Defendants." [Id. ¶ 18.] At the end of that stage, trainees take and must pass the FINRA Series 7 and 66 licensing exams.⁴ "Series 7 and 66 licenses are essential to the successful completion of the training program, and FA Trainees must pass the exams on their first try or be fired." [Id. ]

The second or "door knock" stage, begins with one week of on-site training in either St. Louis, Missouri or Tempe, Arizona, followed by seven weeks of knocking on doors in a designated neighborhood to obtain individuals' contact information. [Id. ¶ 19.] This stage ends with another on-site week, designated as "Evaluation/Graduation," where Defendants determine whether trainees "can sell" to prospective clients. [Id. ]

During this Study Calendar period, trainees are paid on a bi-weekly basis. [Id. ¶ 20.] The trainees also qualify as overtime eligible. [Id. ] Although Defendants expect trainees to work 45 hours during the first stage and 60 hours during the second stage, the projected bi-weekly pay does not vary between the two periods. [39-3, at 2.] Rather, Defendants adjust the hourly rate between the two periods such that individuals like Plaintiffs are paid an almost identical amount in both periods.⁵ [Id. ] This "projected gross pay" includes the overtime trainees are expected to work. [Id. ] However, Plaintiffs allege that Defendants neither track nor compensate trainees for the hours that they actually work. [35, ¶ 20.] Plaintiffs further allege that Defendants' policy and practice "knowingly discourages * * * [trainees] from accurately reporting all of the hours they work and fails to pay * * * [trainees] wages and overtime for the work they perform." [Id. ¶ 22.]

Upon achieving "can sell" status, trainees become "new financial advisors" and Defendants classify them as overtime "exempt." [35, ¶ 23; 39-3, at 2.] Financial Advisors are salaried, though the salary begins to fluctuate based on performance after four months. [39-3, at 2–3.] However, a financial advisor's salary includes a "minimum guaranteed salary" ("MGS") that does not fluctuate and is paid regardless of performance. [Id. ] What amount of a financial advisor's salary is composed of MGS "is determined by the applicable federal and state guidelines where [the advisor's] branch is located." [Id. at 3.]

As new financial advisors, individuals such as Plaintiffs solicit "door knock" contacts to become clients. [35, ¶ 23.] They receive little training during this period, which primarily constitutes "access to a Regional Trainer and wholesaler presentations by ‘preferred partner’ firms whose products the Firm pushes [new financial advisors] to sell to clients." [Id. ] However, their primary duty is to sell financial products. [Id. ] In fact, Plaintiffs allege that Defendants instructed them to "sell these financial products without regard to the clients' individual needs, financial circumstances, or investment objectives." [Id. ¶ 85.] Nor were Plaintiffs placed in job positions "whose primary duty was to perform work directly related to the management or general business operations of Edward Jones or clients * * *." [Id. ¶ 86.]

Plaintiffs worked for Defendants at various offices around the country and at various periods between January 2014 and June 2016. [Id. ¶¶ 10–13.] They each signed the Financial Advisor Employment Agreement containing the TCR Provision.⁶ [Id. ¶¶ 35, 43, 52, 61.] Each worked well over 40 hours per week, studying for the industry licensing exams, completing the training program requirements, travelling to St. Louis or Tempe for training, completing whatever tasks were assigned to them in the office, working to develop a network of potential clients, and selling financial products to clients, among other things. [Id. ¶¶ 37, 45, 54, 63.] Specifically, each alleges that he or she worked (1) more than 45 hours during the "self-study" stage, (2) more than 60 hours during the "door knock" stage, and (3) more than 40 hours a week after achieving "can sell" status. [Id. ¶¶ 38, 46, 55, 64.] Plaintiffs allege that they were never compensated for all the hours that they worked and did not receive the meaningful training and/or "lucrative career" that they were promised. [Id. ¶¶ 39–40, 47–48, 56–57, 65–66.] Instead, Plaintiffs allege that they were each constructively discharged or otherwise forced to leave, and that Defendants later demanded that they pay either all or some portion of the $ 75,000 required under the TCR Provision that exceeds the amount they were paid during their entire employment with Defendants. [Id. ¶¶ 40–41, 49–50, 58–58, 67–68.]⁷

In response to this conduct, Plaintiffs filed this purported collective and class action suit alleging multiple violations of the FLSA and various Illinois and Missouri statutes on March 13, 2018. See generally [1]. On June 12, 2018, Plaintiffs filed an amended complaint further detailing those claims. See generally [35]. On July 10, 2018, Defendants filed the instant motion to dismiss. [38.] The court now resolves the motion.

II. Standard

To survive a Rule 12(b)(6) motion to dismiss for failure to state a claim upon which relief can be granted, the complaint first must comply with ...