Gatto v. Mortgage Specialists of Illinois, Inc.

• Decision Date: 13 March 2006
• Docket Number: No. 04 C 5216.,04 C 5216.
• Citation: 442 F.Supp.2d 529
• Parties: Paula GATTO, Plaintiff, v. MORTGAGE SPECIALISTS OF ILLINOIS, INC. and Walter J. Krajewski, Defendants.
• Court: U.S. District Court — Northern District of Illinois

442 F.Supp.2d 529

Paula GATTO, Plaintiff, v. MORTGAGE SPECIALISTS OF ILLINOIS, INC. and Walter J. Krajewski, Defendants.

No. 04 C 5216.

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

March 13, 2006.

COPYRIGHT MATERIAL OMITTED

Ronald Barry Schwartz, Stanley Eisenstein, Katz Friedman Eagle Eisenstein, Johnson & Bareck, Norbert N. Rosenthal, Norbert N. Rosenthal & Associates, Chicago, IL, for Plaintiff.

Denice A. Gierach, Attorney at Law, Naperville, IL, Ronald S. Adelman, Law Offices of Ronald S. Adelman, Chicago, IL, for Defendants.

MEMORANDUM OPINION AND ORDER

BROWN, United States Magistrate Judge.

Plaintiff Paula Gatto brought this action alleging that defendants Mortgage Specialists of Illinois, Inc. ("MSI") and Walter J. Krajewski, the President of MSI (collectively, "Defendants"), violated the Fair Labor Standards Act ("FLSA") and the Illinois Minimum Wage Act by failing to compensate Gatto at a rate of one and a half times her regular rate for alleged overtime hours worked. (First Am. Compl. ¶¶ 12, 15.) [Dkt 18.] This court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1331 and 1337 for Count I, the FLSA claim, and pursuant to 28 U.S.C. § 1367 for the supplemental state law claims. Defendants move for summary judgment on Counts I and II of the First Amended Complaint. [Dkt 21.] The parties have consented to the jurisdiction of a Magistrate Judge. [Dkt 5, 6.] For the reasons set out below, Defendants' motion for summary judgment on Counts I and II is granted. Count I is the sole claim arising under federal law, and the court declines to exercise supplemental jurisdiction over the remaining state law claims. 28 U.S.C. § 1367(c)(3). Accordingly, Counts III through VIII are dismissed without prejudice.

FACTUAL BACKGROUND¹

A. MSI's Business and Employees

MSI, an Illinois corporation, is a licensee in good standing under the Illinois Residential Mortgage License Act of 1987, 205 Ill. Comp. Stat. § 635/1, et seq. (Pl.'s LR Resp. ¶ 2.) MSI operates as a "loan broker" and provides retail "brokerage services" pursuant to the Illinois Residential Mortgage License Act. (Id. at ¶ 6.) MSI's services are available to the general public and include assisting local consumers to obtain loans secured by residential real estate in Illinois from approved lenders. (Id.) MSI's primary business is finding and closing residential mortgage loans for Illinois consumers. (Id. at ¶ 5.) This service included finding and closing loans for purchases of new and existing residences, as well as finding and closing second mortgages and home equity loans, and the refinancing of existing loans. (Id.) Specifically, MSI's services include soliciting, processing, and placing consumers' residential mortgage loans with qualified lenders who have entered into agreements with MSI. (Id. at ¶ 6.) MSI does not make, buy or sell loans, extend credit, or hold mortgages. (Id. at ¶ 9.) MSI is not a bank, a savings and loan, or any other kind of financial institution. (Id.) It is also not a finance, credit, or loan company, and does not accept consumer deposits or hold funds. (Id.)

In return for its services, MSI is paid a predetermined fee by the lender based on the terms and nature of the loan. (Id. at 116.) None of MSI's services are subcontracted, assigned or for resale. (Id.) MSI works as an independent contractor, and does not represent either the consumer-borrower or the lender. (Id. at ¶ 7.) MSI's entire annual dollar volume of sales comes from its brokerage services as an Illinois Residential Mortgage Act licensee. (Id. at ¶ 8.)

MSI employs two types of employees: Loan Processors and Loan Officers.² (Id. at ¶10, Gatto Decl. ¶ 3; Defs.' Reply, Krajewski Suppl. Decl. ¶ 3(a).) Loan Processors are clerical employees who work solely on a salary basis, handling the bulk of the paperwork and details for the office and the loans. (Pl.'s LR Resp. ¶ 10.) Loan Processors generally work no more than 40 hours per week, although they have been paid overtime compensation during periods when they worked more than 40 hours in a week. (Id. at ¶ 10; Gatto Decl. ¶ 3; Defs.' Reply, Krajewski Suppl. Decl. ¶ 3(a).)

Loan Officers are salespersons who work solely on a commission basis. (Pl.'s LR Resp. ¶¶ 10, 15.) Loan Officers receive no draw, no salary, no base pay, no hourly wages, and no overtime compensation. (Id. at ¶ 15.) They are paid commissions twice a month, and are paid only on loans that are closed with approved lenders. (Id.) Loan Officers are responsible for: (a) finding qualified consumers who desire loans by generating their own leads and prospects; (b) matching consumers' needs with offerings from MSI's approved lenders; (c) signing and delivering new loans; (d) explaining to the consumers all facets of the loans; (e) locking in acceptable terms for the consumers; (f) monitoring the processing of the loans by the lenders and MSI's clerical staff; (g) contacting consumers as necessary regarding appraisals and closing figures; and (h) timely closing the loans. (Id. at ¶ 11.) Loan Officers can maintain other employment so long as it is not with a lender or another Illinois Residential Mortgage licensee. (Pl.'s LR Resp. ¶ 14.)

B. Gatto's Employment with MSI

Gatto worked as a Loan Officer from approximately July 2002 until August 13, 2003. (Pl.'s LR Resp. ¶ 16; Gatto Decl. ¶ 3.) She was hired and fired by defendant Krajewski, who served as her supervisor during her employment. (Pl.'s LR Resp. ¶ 16.) Gatto was told that her work should be performed at the MSI office, and a desk, computer system, fax, and telephone were made available to her there. (Gatto Decl. ¶ 6; Pl.'s LR Resp. ¶ 17.) Gatto admits that Loan Officers do not have to account for or keep their time or punch a time clock. (Pl.'s LR Resp. ¶ 14.) However, she claims that she was expected to work a minimum of eight hours per day on the premises of MSI. (Id.; Gatto Decl. ¶ 4.) According to Gatto, she could either start at 8:00 a.m. and leave at 4:00 p.m. or start at 9:00 a.m. and leave at 5:00 p.m. (Pl.'s LR Resp. ¶ 14; Gatto Decl. ¶ 4.) Gatto states that she was told that if she did not abide by that procedure, her employment would be terminated. (Pl.'s LR Resp. 1121; Gatto Decl. ¶ 7.)³

C. Gatto's Pay and Time Records

Gatto's commissions totaled $183,464.90 during the approximately 13.5 months that she worked for MSI. (Pls.' LR Resp. ¶ 20; Krajewski Decl., Ex. B.) Gatto was paid commissions of not less than $2,645.39 per pay period at all times during her employment as a Loan Officer. (Pl.'s LR Resp. ¶ 20.) Gatto never submitted any list, log, or record of the hours she worked to Krajewski during her employment with MSI, or prior to the filing of this lawsuit. (Id. at ¶ 18.) Nor did Gatto ever request payment for overtime during her employment with MSI. (Id. at ¶ 19.) Prior to the filing of this lawsuit, MSI had no records indicating that Gatto worked in excess of 40 hours in any particular week. (Id. at ¶ 21.)

LEGAL STANDARD

The court may properly grant summary judgment "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). In determining whether a genuine issue of material fact exists, the court must construe all facts and draw all reasonable and justifiable inferences in favor of the non-moving party. Id. at 255, 106 S.Ct. 2505. The moving party bears the initial burden to demonstrate the absence of a genuine issue of material fact and that judgment as a matter of law should be granted in the moving party's favor. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met the initial burden, the non-moving party must designate specific facts showing that there is a genuine issue for trial. Id. at 324, 106 S.Ct. 2548. The non-moving party must support its contentions with admissible evidence and may not rest upon the mere allegations in the pleadings or conclusory statements in affidavits. Id.; see also Winskunas v. Birnbaum, 23 F.3d 1264, 1267 (7th Cir.1994) (non-moving party is required to present evidence of "evidentiary quality" (i.e., admissible documents or attested testimony, such as that found in depositions or in affidavits) demonstrating the existence of a genuine issue of material fact). "[N]either the mere existence of some alleged factual dispute between the parties' . . . nor the existence of `some metaphysical doubt as to the material facts,' is sufficient to defeat a motion for summary judgment." Chiaramonte v. Fashion Bed Group, Inc., 129 F.3d 391, 395 (7th Cir. 1997) (quoting Anderson, 477 U.S. at 247, 106 S.Ct. 2505 and Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U .S. 574, 586, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). Thus, "[t]he mere existence of a scintilla of evidence in support of the [non-moving party's] position will be insufficient; there must be evidence on which the jury could reasonably find for the [nonmoving party]." Anderson, 477 U.S. at 252, 106 S.Ct. 2505.

DISCUSSION

The FLSA states that "no employer shall employ any of his employees ... for a workweek longer than forty hours unless such employee receives compensation for his employment in excess of [forty hours] at a rate not less than one and one-half times the regular rate at which he is employed." 29 U.S.C. § 207(a)(1). Certain employees, however, are not covered by the overtime provisions. An employer has the burden of demonstrating that a particular employee is not within the ambit of the overtime provisions. Klein v. Rush-Presbyterian-Saint Luke's...