Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-cand-3_05-cv-01499/USCOURTS-cand-3_05-cv-01499-4/pdf.json

Nature of Suit Code: 710
Nature of Suit: Fair Labor Standards Act
Cause of Action: 28:1331 Fed. Question: Fair Labor Standards

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United States District Court

For the Northern District of California

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UNITED STATES DISTRICT COURT

NORTHERN DISTRICT OF CALIFORNIA

ALEX MALLIN, et. al.

Plaintiffs,

 v.

NATIONAL CITY MORTGAGE INC., et

al., and DOES 1-200, inclusive,

Defendants.

 

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No. 05-1499 SC

ORDER GRANTING IN

PART PLAINTIFFS'

MOTION TO ENFORCE

ORDER AND JUDGMENT

I. INTRODUCTION

Plaintiffs, former telemarketing loan originators, brought

this action against their former employer, Defendants National

City Mortgage Inc., National City Mortgage Co., and City Bank of

Indiana ("Defendants" or "National City"), alleging that

Defendants violated the Fair Labor Standards Act, 29 U.S.C. §201

et seq. ("FLSA"), and state labor laws by improperly classifying

loan originators as "exempt" employees and failing to pay overtime

and minimum wages. See Compl., Docket No. 1. In July 2005, the

Court conditionally certified this matter as a collective action 

for the purpose of issuing notice. See Docket No. 33.

Following conditional certification, the parties participated

in mediation. The mediation was successful and the parties

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1

The Settlement Agreement is attached as Exhibit A to

Plaintiffs' Memorandum of Points and Authorities in Support of

Motion to Enforce Order and Judgment ("Pl.'s Mem."), and as Exhibit

A to the Declaration of Michelle B. Heverly in Support of

Defendants' Opposition to Plaintiffs' Motion to Enforce Order and

Judgment. See Docket Nos. 114, 120. Further citations to this

document will refer to it solely as the "Settlement Agreement." 

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subsequently moved the Court to approve a settlement agreement. 

See Docket No. 74. After a preliminary fairness hearing, the

Court approved the settlement. See Docket No. 112.

Now before the Court is Plaintiffs' Motion to Enforce Order

and Judgment. Docket No. 113. Defendants opposed the motion, and

Plaintiffs replied to that Opposition. See Docket Nos. 118, 121. 

Having considered the submissions of both parties, the Court

GRANTS IN PART Plaintiffs' motion.

II. BACKGROUND

The final terms of the parties' agreement are contained in

the Amended Stipulation of Class Action Settlement, dated April

25, 2006 (the "Settlement Agreement").1 Pursuant to the

Settlement Agreement, Defendants were to "pay no more than five

million dollars ($5,000,000)" into a settlement fund. Settlement

Agreement, § IV.A. Defendants did this on September 12, 2006. 

Heverly Decl., ¶ 5. The Claims Administrator, CPT Group

("Administrator") was then supposed to calculate the appropriate

disbursement to each member of the class and prepare a written

report documenting the calculations for counsel, who would have

ten days to review the report and comment before the Administrator

finally sent checks to the Plaintiffs. See Settlement Agreement,

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Defendants maintain that the calculations they provided the

Administrator in December 2006 were intended to be examples, not

final calculations, and that the Administrator was supposed to make

the final calculations for each class member. Heverly Decl., ¶ 6,

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§§ V.A, VIII.B, VIII.F.

The Settlement Agreement includes a complicated formula for

determining each individual class member's share of the settlement

funds. See Formula Exhibit to Settlement Agreement ("Formula"). 

Each class member was entitled to collect an "Overall Claim" which

was the sum of the "Gross Overtime Claim," sixty percent of the

"Gross Waiting Time Penalty Claim," forty percent of a "Gross

Liquidated Damages Claim," as well as other figures not material

to this stage of the dispute. See id. The Gross Waiting Time

Penalty Claim was to be determined, for eligible class members,

"by taking the average monthly adjusted hourly rate for the last

year of employment, multiplying it by 240." Id. The Gross

Liquidated Damages Claim was to be calculated by "taking the Gross

Overtime Claim . . . and multiplying that number by two (2)." Id.

The Administrator never calculated the gross payment due to

each class member for the Overall Claim. Supplemental Decl. of

Julie Green ("Green Supp. Decl."), ¶ 3. Rather, Defendants

performed the calculations to determine the gross payments and

provided that information to the Administrator, who then

calculated net payments reflecting the applicable tax

withholdings. Id.; Decl. of Julie Green ("Green Decl."), ¶ 2;

Additional Supplemental Decl. of Julie Green ("Green Add'l

Decl."), ¶ 3; Decl. of Julie Green In Support of Def.'s Opp'n

("Green Opp'n Decl."), ¶ 7.2 In January 2007, the Administrator

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Ex. B. According to the Administrator, Defense Counsel did not

provide the requisite information to complete the calculations and

instructed the Administrator not to calculate the gross payments. 

Green Add'l Decl, ¶ 3. The Court need not resolve the dispute at

this juncture. 

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sent payments to each class member based on the gross payment

figures provided by Defendants. Green Decl., ¶ 2; Green Supp.

Decl., ¶ 2; Green Add'l. Decl., ¶ 2.

Plaintiffs challenge two aspects of Defense Counsel's

calculations. First, Defense Counsel set each class member's

Gross Liquidated Damages Claim equal to that class member's Gross

Overtime Claim. Second, Defense Counsel determined each class

member's Gross Waiting Time Penalty Claim based on the last

calendar year in which the class member was employed, rather than

the last twelve months in which the class member was employed. 

The parties do not dispute that this was the method Defense

Counsel used, but rather whether this method was what the

Settlement Agreement provided for. Therefore, determination of

whether Defendants' calculations are correct turns on the

interpretation of the Settlement Agreement.

Plaintiffs also assert that, should the Court agree with

their interpretation of the Settlement Agreement, the appropriate

remedy would be for Defendants to pay any class member whose total

disbursement was reduced by the incorrect calculations the

difference between what he or she actually received and what he or

she would have received had Defendants calculated the gross

payment correctly. Defendants, while maintaining that all of

their calculations comply with the Settlement Agreement, argue

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that Plaintiffs and the Administrator are responsible for any

incorrect distribution, and that Defendants cannot be required to

pay more than the $5,000,000 total contribution set forth in the

Settlement Agreement.

III. DISCUSSION

This dispute requires the Court to interpret two provisions

of the Formula attached to the Settlement Agreement. The first

governs calculation of the Gross Liquidated Damages Claim; the

second governs calculation of the Gross Waiting Time Penalty

Claim. 

Section XI.G of the Settlement Agreement states:

This STIPULATION and the exhibits attached

hereto constitute the entire agreement between

the PARTIES concerning the subject matter

hereof. No extrinsic oral or written

representations or terms shall modify, vary or

contradict the terms of the STIPULATION.

Settlement Agreement, § XI.G. Therefore, because the Settlement

Agreement is integrated, parol evidence is only admissible if the

Settlement Agreement is in some way ambiguous. See e.g., Consol.

World Invs., Inc. v. Lido Preferred, Ltd., 11 Cal. Rptr. 2d 524,

526-27 (Ct. App. 1992). However, as Defendants note, under

California law, parties may introduce evidence to prove a latent

ambiguity in the terms of a contract. See, e.g., Pac. Gas & Elec.

Co. v. G.W. Thomas Drayage & Rigging Co., 442. P.2d 641, 644 (Cal.

1968) ("The test of admissibility of extrinsic evidence to explain

the meaning of a written instrument is not whether it appears to

the court to be plain and unambiguous on its face, but whether the

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offered evidence is relevant to prove a meaning to which the

language of the instrument is reasonably susceptible."). The

Court therefore must consider not only whether the Settlement

Agreement is ambiguous, but also whether it is "reasonably

susceptible" to the interpretations Defendants advance, and

whether the evidence Defendants offer supports their

interpretation adequately.

A. Gross Liquidated Damages

According to the Formula, the Gross Liquidated Damages Claim

for each class member is determined as follows:

5. Liquidated Damages. Only those

individuals who have "opted in" to the FLSA

Collective action within the required time

period will be entitled to Liquidated Damages. 

This claim will be calculated by taking the

GROSS OVERTIME CLAIM applicable to the three

years preceding the filing of their "opt in"

form (or being named in this lawsuit,

whichever is earlier) and multiplying that

number by two (2). The product will

constitute the GROSS LIQUIDATED DAMAGES CLAIM.

Formula, ¶ 5. Plaintiffs assert that this language is clear and

unambiguous, and that the Gross Liquidated Damages Claim should be

double the Gross Overtime Claim. Defendants assert that the

phrase "and multiplying that number by two (2)" is a typographical

error which causes the Settlement Agreement to deviate from the

parties' intent, and that the Gross Liquidated Damages Claim

should be equal to the Gross Overtime Claim, such that the total

of the two is double the Gross Overtime Claim. 

The Court agrees with Plaintiffs that the phrase "and

multiplying that number by two (2)" is clear and unambiguous on

its face. Absent a showing by Defendants of latent ambiguity and

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evidence supporting Defendants' proposed resolution of that

ambiguity, the Court will not deviate from this language. 

Defendants provide two arguments in support of their

interpretation of this provision. The Court addresses, and

dismisses, the arguments seriatim. First, Defendants argue that

the Settlement Agreement must contain a typo because its terms

deviate from the gross liquidated damages remedy established in

the FLSA. See Opp'n at 7. Where an employer willfully violates

the FLSA, the statute provides that the employer may be liable for

"the payment of wages lost and an additional equal amount as

liquidated damages." 29 U.S.C. § 216(b). Because the FLSA

provides for liquidated damages equal to the lost wages claim,

Defendants argue, the Settlement Agreement must provide the same

remedy, despite the plain meaning to the contrary. Defendants

offer no basis for this argument. Nothing in the Settlement

Agreement or the Formula ties the calculation of damages, or any

other remedy for that matter, to the provisions of the FLSA. 

There is no judgment against Defendants under the FLSA, and in the

Settlement Agreement, Defendants explicitly deny having violated

the FLSA. See Settlement Agreement, § I.D. In other words, there

is no basis for tying the remedy in this matter, as set forth in

the Settlement Agreement, to the provisions of the FLSA. 

Defendants provide no authority whatsoever which suggests that the

parties could not have negotiated a remedy which deviates from the

statute. In fact, the Formula provides a remedy which is more

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3According to the Formula, each class member is to recover the

Gross Overtime Claim plus forty percent of the Gross Liquidated

Damages Claim. A class member entitled to a Gross Overtime Claim

of $100 would receive an additional $100 of liquidated damages

under the FLSA, for a total recovery of $200. Under the plain

terms of the Settlement Agreement, the same class member would

receive $100 for his Gross Overtime Claim plus forty percent of his

Gross Liquidated Damages Claim, or $80, for a total of $180. 

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favorable to Defendants than the FLSA remedies.3

Defendants' second argument against the plain meaning of the

words in the Settlement Agreement is equally meritless. According

to Defendants, the parties never discussed a settlement in which

the Gross Liquidated Damages would be double the Gross Overtime

Claim. See Opp'n at 8. Defendants assert that in the

negotiation, the parties used sample calculations reflecting

liquidated damages equal to the Gross Overtime Claim. Even if

this were the case, Defendants provide no evidence to support it. 

Defense Counsel's declaration (which Defendants' brief does not

actually cite on this issue) states that during extensive

settlement negotiations, the parties exchanged numerous

spreadsheets with possible settlement calculations, none of which

doubled the Gross Overtime Claim. Heverly Decl., ¶ 3. These

spreadsheets might have been highly probative, had they been

offered into evidence. Counsel further insists that Defendants

would never have agreed to the provision as it stands, and that

she believes Plaintiffs and Plaintiffs' Counsel would agree if

forced to testify on that matter. Id.

If the Formula said "multiplying by three (3)" and Defendants

asserted they only intended to multiply by two, that would be a

plausible typographical error. The Court finds no typo in the

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4

Although the sworn statement of a party's counsel, as an

officer of the court, carries great weight, Defense Counsel's

declaration is internally inconsistent and unpersuasive.

For example, Counsel states that, "In preparing the sample

calculation spreadsheet, I calculated the liquidated damages based

on a doubling of the overtime amounts, as is consistent with the

law and based on my recollection of the settlement terms." Heverly

Decl., ¶ 7. This is specious. The only way Counsel's calculations

amount to a doubling is if the Court reinterprets the word "double"

to mean "equate." Defendants' entire position is that they should

not have to double the Gross Overtime Claim because the law does

not require them to do so. If Defendants wish the Court to

redefine "double" they must provide more support than their own

post-settlement usage as a basis for doing so.

Counsel also states that prior to January 2007, she had never

spoken with Julie Green, who works for the Administrator and

calculated the net payments for each Plaintiff. Supplemental Decl.

of Michelle B. Heverly, ¶ 4. However, attached to Counsel's first

declaration is an email Counsel wrote, on which Green was copied,

sent on November 17, 2006. Heverly, Decl., Ex. B.

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wording of the Gross Liquidated Damages Claim section of the

Formula. Against the unambiguous terms of an integrated contract

negotiated, reviewed, and executed by both parties, Defense

Counsel's declaration is insufficient to persuade the Court that

the determination of the Gross Liquidated Damages Claim should be

calculated in any way other than that provided by the Formula.4

 

B. Gross Waiting Time Penalty Claim

The dispute over the calculation of the Gross Waiting Time

Penalty Claim is less clear than that over the Gross Liquidated

Damages Claim. Pursuant to the Formula, the Gross Waiting Time

Penalty Claim should be calculated as follows:

4. Waiting Time Penalties. Only those

individual Settlement Class Members whose

employment was ever terminated (irrespective

of whether they were re-employed) between

April 12, 2002 and April 11, 2005 will be

entitled to Waiting Time Penalties. The

Penalties will be calculated by taking the

average monthly ADJUSTED HOURLY RATE for the

last year of employment, multiplying it by

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5

Even a dictionary is of little use in resolving this dispute. 

For example, the American College Dictionary provides thirteen

definitions of the word "year," including "a period of 365 or 366

days, divide into 12 calendar months, now reckoned as beginning

Jan. 1 and ending Dec. 31 (calendar year)" and "a space of 12

calendar months reckoned from any point." AM. COLLEGE DICTIONARY 1414

(1970) (emphasis in original).

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240. This product will constitute the GROSS

WAITING TIME PENALTY CLAIM.

Formula, ¶ 4. Plaintiffs argue that "last year of employment"

refers to the "last 12 months of employment." Pl.'s Mem. at 6. 

Defendants argue that the term refers to the "last calendar year." 

Opp'n at 9. As Defendants note, under California law, "the words

of a contract are to be understood in their ordinary and popular

sense. . . ." Cal. Civ. Code. § 1645. However, each party

asserts that its own interpretation is the plain meaning.

Here the Court is faced with a legitimate ambiguity in the

terms of the Settlement Agreement, which the parties have offered

no assistance in resolving. Neither party provides any support,

even in the form of pure rhetorical argument, for the assertion

that its interpretation is the plain and ordinary meaning. The

term is reasonably susceptible to either interpretation,5 but

neither party offered any parol evidence. Neither the Settlement

Agreement nor the Formula sheds any further light on the issue. 

The Court concludes that Plaintiffs' interpretation is most

reasonable. The appropriate phrase to define is "last year of

employment," rather than simply "year." Defendants' approach

requires the Court to read a limiting description -- "calendar" --

into the Formula without basis. A calendar year is but one type

of year. There are other types of year, such as fiscal year,

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school year, tax year, lunar year, etc. Employment is not

inherently, or even generally, associated with any specific type

of year, and certainly not with the calendar year. Where there is

no evidence or context supporting the use of a calendar year,

doing so would be as inappropriate as using any other specific

type of year. Rather, the use of "last year of employment"

suggests that the Gross Waiting Time Penalty Claim should be

calculated based on the last twelve months of the class member's

employment with Defendants.

C. Timeliness

Defendants argue that Plaintiffs' motion is untimely because

the Settlement Agreement provides for a refund of any remaining

money in the settlement account six months following the

distribution of settlement checks. Opp'n at 11. Specifically,

Section IV.C provides:

Not later than twenty (20) days following the

EFFECTIVE DATE, NATIONAL CITY shall segregate

the SETTLEMENT CONSIDERATION in an internal

earmarked account in the ADMINISTRATOR'S name

(the "SETTLEMENT ACCOUNT"). Six (6) months

following the distribution of SETTLEMENT

checks described herein in Section VIII, the

ADMINISTRATOR shall be entitled to close the

SETTLEMENT ACCOUNT and refund to NATIONAL CITY

any funds remaining therein.

Settlement Agreement, § IV.C. Defendants' argument fails for a

number of reasons. First, the Settlement Agreement only says that

the Administrator "is entitled to" close the account and return

the funds after six months, not that it "shall" do so, as

Defendants claim. Id.; see Opp'n at 11. Second, the

Administrator is only entitled to close the account and return the

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remainder to Defendants after the distribution of settlement

checks described in Section VIII. Section VIII describes the

claims procedure in detail; provisions contained in that section

address the means of calculating and distributing payments to the

Plaintiffs. It is now clear that the settlement funds were not

properly distributed. As such, the condition precedent to closing

the settlement account has not occurred, and the Administrator is

therefore not yet entitled to return the funds to Defendants. 

Even had the distribution been proper, the Administrator

would not have been entitled to close the account yet. Defendants

authorized payment of an additional $175,000 from the settlement

fund to correct deficient payments to four Plaintiffs on April 2,

2007. Heverly Decl., ¶ 12. At the very earliest, then, absent

any further dispute regarding the distribution, the Administrator

had not complied with Section VIII until April 2, and was not

entitled to close the settlement account and return the funds

until October 2. Plaintiffs timely filed the instant motion on

July 12, 2007.

D. Attorney's Fees

Each party seeks to recover its attorney's fees should it

prevail on this motion. The Settlement Agreement provides:

In the event that legal action arises out of

this STIPULATION or is necessary to enforce

any of the terms or provisions of this

STIPULATION, the prevailing party in the

action shall be entitled to recover its

reasonable attorney's fees and costs.

Settlement Agreement, § XI.J. Plaintiffs claim they have incurred

$32,061.50 in attorney's fees in pursuing this issue. Simon

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Decl., ¶¶ 7-11. To the extent that the Court has adopted their

interpretation of the Settlement Agreement and Formula, Plaintiffs

have prevailed, and are therefore entitled to recover their

attorney's fees. Defendants argue that this fee request is

unreasonable and includes work not related to this motion, the

only "legal action" for which Plaintiffs should be entitled to

recover fees. The Court disagrees. Fees for all of the work done

by Plaintiffs' Counsel in determining the deficiencies in the

settlement payments, attempting to resolve the matter without

bringing a motion, and preparing and arguing this motion are

recoverable. Had Defendants complied with the Settlement

Agreement in the first place, a motion to enforce would not have

been necessary. The Settlement Agreement authorizes the Court to

make this award. The Court therefore AWARDS Plaintiffs $32,061.50

in attorney's fees. 

 

IV. CONCLUSION

For the foregoing reasons, the Court GRANTS IN PART

Plaintiffs' Motion to Enforce Order and Judgment and ORDERS as

follows:

1. The parties are to appear for a hearing on the remaining

issues on Friday, December 14, 2007, at 10:00 a.m.

2. Prior to the December 14 hearing, the parties shall

calculate the correct award to each class member based

on the Court's interpretation of the Formula. 

3. In the event that the funds remaining in the settlement

account following the April 2, 2007, disbursement are

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insufficient to make whole any class member who was

underpaid, the parties shall be prepared to discuss at

the hearing appropriate procedures for redistribution of

the settlement funds. 

4. Defendants shall pay Plaintiffs attorney's fees in the

amount of $32,061.50.

IT IS SO ORDERED.

November 26, 2007

 

 UNITED STATES DISTRICT JUDGE

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