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Easter v. Zions Bancorporation, N.A.

United States District Court, D. Colorado

October 16, 2019

ERIN EASTER, Plaintiff,
ZIONS BANCORPORATION, NATIONAL ASSOCIATION, d/b/a Zions Management Services Company, a national banking company, Defendant.


          Scott T. Varholak United States Magistrate Judge

         Magistrate Judge Scott T. Varholak This matter comes before the Court on Plaintiff's Motion for Summary Judgment (“Plaintiff's Motion”) [#33] and Defendant's Motion for Summary Judgment (“Defendant's Motion”) [#32] (collectively, the “Motions”). The Motions are before the Court on the parties' consent to have a United States magistrate judge conduct all proceedings in this action and to order the entry of a final judgment. [##15, 16] This Court has carefully considered the Motions and related briefing, the entire case file, and the applicable case law, and has determined that oral argument would not materially assist in the disposition of the Motions. For the following reasons, Plaintiff's Motion [#33] is GRANTED IN PART and DENIED IN PART and Defendant's Motion [#32] is GRANTED IN PART and DENIED IN PART.

         I. BACKGROUND[1]

         Plaintiff Erin Easter was employed by Defendant Zions Bancorporation, d/b/a Zions Management Services Company, from November 7, 2015 to November 12, 2017 as a Quality Control Analyst II (“QC Analyst”). [#42-1, ZSOF2] Defendant is a national bank and an employer within the meaning of the Fair Labor Standards Act (“FLSA”). [Id. at ZSOF1] Plaintiff was assigned to the Risk Management Unit within Defendant's Enterprise Mortgage Lending division. [Id. at ZSOF2]

         Plaintiff's department was responsible for reviewing the work of the loan originators, processors, underwriters, and closers. [#43-1, ESOF3] As a QC Analyst, Plaintiff performed audit and quality control functions for loan originations. [#42-1, ZSOF3] The job description for the QC Analyst position sets forth the job duties as follows:

Performs audit functions for both risk controls and regulatory Quality Control to ensure compliance and provide framework for management to examine and adjust policy and procedures. Validates standards, measures performance and determines compliance with mortgage originations, which includes trending, reporting loan defects and ensures that loans delivered to investors meet agency guidelines and sound underwriting decisions. Identifies and assesses operational risk and impact and makes recommendations for effective policies and controls to manage risk within various operational functions. Re-underwrites original credit and collateral lending decisions, identifying red flags, and determining if targeted loan selections met the terms, conditions, representation and warranties of the applicable contractual documents and underwriting guidelines relevant to the origination of the loan file(s). Additional activities include preparation of written loan summaries. Other duties as assigned.

[Id. at ZSOF8; see also #32-7]

         The parties dispute whether Plaintiff's duties differed from those set forth in the job description. [#42-1, ZSOF10] Nonetheless, the parties agree that, due to Plaintiff's expertise in the specialized area of flood insurance, Plaintiff spent most of her time reviewing individual mortgage loan files for properties located in flood zones.[2] [Id. at ZSOF30] This was the only task that she performed on a daily basis. [Id.]

         For properties located in flood zones, an underwriter would need to send the file to a QC Analyst for review before the loan could be funded. [#43-1, ESOF5] The QC Analyst would consult lengthy checklists to determine whether certain conditions were satisfied. [#42-1, ZSOF38; see also #32-13 at 21-24; #33-7] Defendant provided Plaintiff with these checklists. [#43-1, ESOF17] Plaintiff had some role in modifying the checklists, though the parties dispute the extent of that role. [Id. at ESOF18-19; #42-1, ZSOF36] There was a general pre-funding checklist that appears applicable to all mortgage loans, and a separate checklist that was specific to loans for properties located in flood zones. [#43-1, ESOF20; see also #32-13 at 21-24; #33-7]

         Some of the questions on the checklists were straightforward and easily answered. For example, the checklists asked whether the initial application was in the file, whether the initial application was signed and dated by all parties, whether the income documentation was less than 120 days old, and whether certain notices had been provided at least ten days prior to closing. [#32-13 at 21-24; #33-7] Other questions, however, appear to involve more subjective evaluations. For example, the checklists ask whether adverse credit history was “adequately explained, ” whether the income documentation was “sufficient and from acceptable sources, ” whether the appraiser “adequately described” the neighborhood and site, and whether there was “adequate evidence” of flood insurance coverage in the file prior to closing. [Id.] Plaintiff did not have any authority to deviate from the checklists. [#43-1, ESOF41]

         In reviewing flood insurance issues, Plaintiff was making determinations about “Level 3 issues, the most serious from a risk-perspective analysis.” [#42-1, ZSOF#34] Whenever there was a grey area, and Plaintiff was unsure whether her flood analysis complied with federal regulations, she would consult either higher management or the Compliance Department. [Id. at ZSOF37; #43-1, ESOF40] Plaintiff testified that she consulted the Compliance Department about once a month and consulted higher management about twice a week. [#42-1, ZSOF41-42]

         Upon completing the flood review checklist, Plaintiff would email the checklist to the loan originators and processors.[3] [#43-1, ESOF23; see also #33-2 at ¶ 7] If Plaintiff noted an error, known as an “exception, ” during her pre-funding review, she would escalate that exception to her managers and the Compliance Department. [#42-1, ZSOF20; #43-1, ESOF24; see also #33-2 at ¶¶ 7, 16] Such an exception could prevent the funding of the loan. [#43-1, ESOF6] On the other hand, if a file was approved by Plaintiff's department, the loan was typically funded and closed. [Id. at ESOF3] Despite the fact that her review could impact whether a loan was approved or funded, Plaintiff herself could neither approve a loan nor make decisions regarding whether Defendant should take on certain kinds of credit risk. [Id. at ESOF36, 38] Of her flood review work, Plaintiff spent approximately 75 percent of her time reviewing files before the loan closed. [Id. at ESOF10]

         The remaining 25 percent of Plaintiff's flood review work involved reviewing files after the loan closed. [Id.] After a loan in a flood zone closed, the Quality Control Department would review some files to ensure full compliance. [Id. at ESOF7] As she did with her pre-closing reviews, Plaintiff utilized a checklist to conduct the post-closing reviews. [#42-1, ZSOF40; see also #32-13 at 4-6] The post-closing checklist asked similar questions to the pre-closing checklists. [Compare #32-13 at 4-6, with Id. at 21-24] The post-closing checklist was promulgated by a third-party vendor, Banker's Advisory, but Plaintiff and her co-workers made some revisions to the checklist. [#42-1, ZSOF17, 40] The parties dispute whether Plaintiff's revisions were substantive or merely stylistic. [Id. at ZSOF40]

         As part of her post-funding review, Plaintiff would look for red flags, which were extreme errors. [Id. at ZSOF29; #43-1, ESOF15] One example of a red flag would be when a file closed without a pre-funding flood review. [#43-1, ESOF15] Such red flags were rare, generally occurring only a couple of times per month. [Id.]

         In addition to directly reviewing loan files, Plaintiff was also involved in the review of loan audits conducted by Banker's Advisory. [#42-1, ZSOF17] Plaintiff conducted a monthly “post-closing” review of Banker's Advisory's loan audits. [Id.] This post-closing review appears to have two primary components. First, according to Plaintiff, she and another employee would review the loan documentation presented by Banker's Advisory for any findings that Banker's Advisory would point out. [#32-4 at 61 (240:11-21)] If Plaintiff and the other employee agreed with the findings, they would not make any changes. [Id. (240:21-22)] If they disagreed, Plaintiff would tell Banker's Advisory about the disagreement and Banker's Advisory would have an opportunity to respond. [Id. at 61-62 (240:22-241:3)] Second, Plaintiff would take a limited sample of the loans audited by Banker's Advisory and conduct a complete due diligence review of those loans. [#42-1, ZSOF17]

         In addition to her review of loan files, Plaintiff was also responsible for aggregating the number of exceptions and providing the monthly aggregate to management. [Id. at ZSOF21; #43-1, ESOF12] Management told Plaintiff which numbers to aggregate. [#43-1, ESOF13] Management likewise decided whether any action should be taken based upon the numbers Plaintiff provided. [Id. at ESOF14] Some of these reports would eventually go to Defendant's Board of Directors. [#42-1, ZSOF21; see also #32-4 at 47 (195:2-6)] The results of the reports would be used to guide bank policy for Sarbanes-Oxley compliance. [#42-1, ZSOF44] Nonetheless, Defendant is unaware of any specific policy changes that resulted solely from Plaintiff's actions. [#43-1, ESOF34]

         As a QC Analyst, Plaintiff earned an annual salary of between $70, 000 and $72, 000. [#42-1, ZSOF5] Defendant classified Plaintiff's QC Analyst position as an exempt administrative position under the FLSA. [#42-1, ZSOF6] Defendant made the classification before it had hired anyone to fill the position and, as a result, Defendant primarily relied upon the QC Analyst job description in concluding that the position was an exempt administrative position. [Id. at ZSOF12; #43-1, ESOF53] Because Defendant determined that the position was exempt from FLSA's requirements, Defendant did not pay Plaintiff overtime despite knowing that Plaintiff occasionally worked more than forty hours per week. [#43-1, ESOF43-44]

         In August 2017, Plaintiff raised concerns with human resources that her position was misclassified as exempt. [#42-1, ZSOF47] Plaintiff's concerns were brought to the attention of Jonathan Hart, the human resources professional who originally classified the position as exempt. [#32-6 at 7-8 (194:20-195:5), 11-12 (204:22-205:5)] According to Mr. Hart, he “reviewed the job in . . . with the management team to make sure that the job description accurately reflected the job duties of what the quality control analysts were doing, and [he] received an answer that . . . the job description was accurate.” [Id. at 13-14 (206:22-207:2)] Following Mr. Hart's discussions, Defendant did not change Plaintiff's classification to non-exempt. [#42-1, ZSOF48]

         In May 2018, Defendant hired an outside law firm to independently review whether the QC Analyst position was properly classified as exempt. [Id. at ZSOF49; #43-1, ESOF58] This law firm did not interview Plaintiff, though it did interview three other QC Analysts regarding their job duties. [#43-1, ESOF59] While ultimately concluding that the QC Analyst position should remain exempt, the outside firm acknowledged that “the position does not so obviously exceed the requirements for the administrative exemption such that any risk of an opposite determination is entirely foreclosed.” [Id. at ESOF62; #32-14 at 3]

         During the relevant time-period, Defendant had an Employee Handbook. [#42-1, ZSOF51; see also #32-15; #36-5] Section 3-2 of the Employee Handbook described the differences between exempt and non-exempt employees. [#36-5 at 6] It explained that exempt employees do not receive overtime pay, while non-exempt employees were entitled to overtime pay for hours worked in excess of forty per week. [Id.] For non-exempt employees, the Employee Handbook provides that “all time worked will be paid when required by applicable law at the appropriate overtime rate.” [Id. at 9] The Handbook Overview section of the Employee Handbook states: “This Handbook is intended to be an outline of policies and procedures only and, except for the arbitration provisions (which do create a binding dispute resolution contract), does not create a contract of continued employment, nor does it create any enforceable contractual, equitable, or other rights.” [#32-15 at 6 (emphasis omitted)]

         On April 6, 2018, Plaintiff initiated this action in the District Court for the City and County of Denver. [#3] Defendant removed the matter to this Court on June 29, 2018. [#1] The Amended Complaint brings two causes of action: (1) violation of the FLSA for failing to pay overtime compensation, and (2) breach of contract. [#4] On June 21, 2019, Defendant moved for summary judgment [#32] and Plaintiff moved for partial summary judgment [#33]. Each side has responded to the other party's motion [##36, 37], and each side has filed a reply in support of their motions [##42, 43].

         II. ...

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