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LOs Sue First Horizon

Judge rules case can continue as collective action

February 20, 2006

Washington, D.C., correspondent for MortgageDaily.com

A federal judge has ordered that a lawsuit filed on behalf of seven loan officers who claim that First Horizon Home Loan Corp. did not pay them overtime can proceed as a nationwide collective action.

"The judge's certification means that there are more than 5,000 employees who are eligible to join the lawsuit and seek damages for unpaid overtime," said the plaintiffs' attorney George Hanson of the Kansas City law firm Stueve Siegel Hanson Woody LLP.

The lawsuit alleges that First Horizon violated state law by failing to pay earned commissions and violated federal law by failing to pay overtime wages to loan originators who worked more than 40 hours per week. The Fair Labor Standards Act requires overtime pay for all hours over 40 worked in a week. The lawsuit was filed in federal court in Kansas City, Kansas. The judge's decision only affects the plaintiffs' federal law claims, a decision has not yet been handed down on their state law claims.

First Horizon has contended in court documents that it did not have to pay overtime to its loan originators because they are exempt from federal overtime provisions under the administrative and outside sales exemptions.

Kim Cherry, a spokeswoman for First Horizon National Corporation declined to comment on the lawsuit or the judge's order, citing the company's policy of not commenting on pending litigation.

"Loan originators are clearly covered by the federal overtime laws -- both the United States Department of Labor and every federal court to take up the issue have said exactly that," Hanson declared.

According to the judge's order, First Horizon has to provide the plaintiffs with the names and current or last known addresses and telephone numbers for all current and former loan originators who have worked for the company since Oct. 14, 2001.

Overtime pay for loan officers is a topic that has received much attention in recent years. Some of the industry's largest players have faced similar complaints in the past several months. Countrywide Financial, Ameriquest Mortgage and Bank of America Mortgage have settled similar allegations. Countrywide Home Loans recently settled a similar lawsuit for a reported $30 million. Hanson said that because a larger number of eligible class members are involved, the case against First Horizon could dwarf the settlement achieved in the Countrywide lawsuit. Hanson is co-counsel in a lawsuit filed late last year by a loan originator against Wells Fargo Home Mortgage and National City Mortgage and he has a similar lawsuit pending against NovaStar Mortgage Inc. that involves more than 600 loan officers.

Hanson said that to his knowledge and based on his research no bank or mortgage lender has successfully defended itself against charges on the issue of liability for back pay.

"We are pleased with the court's ruling and expect to recover the overtime wages First Horizon failed to pay its hard-working employees. Companies, especially large financial institutions, shouldn't be allowed to increase profits by breaking the law," Hanson said.

Lisa D. Burden is a legal analyst for MortgageDaily.com and holds a law degree from the University of Maryland. She is currently a freelance journalist who previously wrote for Institutional Investor publications and the Baltimore Daily Record.

e-mail Lisa at: [email protected]

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