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Mortgage Employment Litigation Journal

Unpaid overtime, gender discrimination and ERISA-related claims are among the employment issues being litigated by mortgage firms. Arbitration is also an issue.

In EEOC v. JP Morgan Chase, the mega-lender agreed to settle allegations by several Columbus, Ohio, mortgage consultants that they were subjected to a hostile work environment and denied lucrative sales leads and training opportunities because they are women.

The Equal Employment Opportunity Commission obtained a $1.45 million settlement on behalf of the consultants. The February 2014 agreement reportedly also includes $470,000 in punitive damages.

Aimee Doneyhue, a former mortgage consultant who worked for JPMorgan Chase & Co. in the Columbus office, alleged that she was subjected to abusive behavior by several of the New York-based company’s managers. She said she was subjected to heightened job scrutiny after she complained.

Doneyhue was terminated in May 2008.

She then filed a charge with the EEOC alleging discrimination and retaliation. The agency filed a class action lawsuit against Chase in September 2009, alleging that Chase assigned sales calls in ways that were unfair to women and that the company permitted a hostile work environment.

The EEOC obtained sanctions against Chase for failing to preserve telephone records relating to the assignment of loans to mortgage consultants. Chase also agreed to put into place an automatic call distribution system and to maintain records about the assignment of loans to mortgage consultants.

Jamie LaPlante, an attorney with the Ohio-based employment law firm of Porter Wright, wrote in the firm’s blog that employers can learn two lessons from the case. First, the method of distributing sales leads, customers, and territories should be defensible, and second, litigation holds should be promptly and effectively implemented as soon as litigation is anticipated.

On May 1, an Ohio appellate court issued a ruling in Zilbert v. Proficio Mortgage Ventures LLC.

Roger Zilbert went to work as an originator for Proficio Mortgage Ventures LLC in May 2012 and was terminated three months later.

Zilbert, who is Jewish, filed a wrongful termination lawsuit in April 2013 alleging retaliatory discrimination, religious discrimination, wrongful termination based on religious discrimination, intentional infliction of emotional distress and violation of public policy.

The mortgage company filed a motion to dismiss and/or to compel arbitration under a clause in the employment agreement that Zilbert signed. Finding the employment agreement to be valid and enforceable, the trial court granted the motion to stay the action pending arbitration.

So he appealed the decision.

The Court of Appeals of Ohio upheld the ruling, finding that the trial court had not made a mistake when it held that the arbitration agreement was enforceable. The appellate court also rejected Zilbert’s arguments that he felt had to sign the agreement to move forward with his employment and that the arbitration clause was unconscionable.

On April 29, a California appellate court issued a ruling in Saffer v. Chase. Gregory Saffer, a mortgage loan consultant, sued Washington Mutual Inc. and his former supervisor, alleging that he was constructively discharged in violation of public policy and in breach of implied and express employment contracts.

Saffer worked at WaMu from May 2007 through January 2008. When WaMu failed, Chase purchased some of its assets. Chase moved the case into arbitration and then moved to dismiss, claiming that Saffer had not exhausted his administrative remedies under the Financial Institutions Reform, Recovery and Enforcement Act of 1989.

The arbitrator dismissed the case.

After the trial court affirmed the arbitration award, Saffer appealed the order compelling binding arbitration and the order confirming the arbitration award. The court concluded that Saffer’s failure to timely comply with the mandatory administrative requirements of FIRREA created a jurisdictional bar to his claims. As a result, the court vacated the judgment and remanded the case back to the trial court with directions to dismiss against Saffer for lack of subject matter jurisdiction.

On Feb. 21, a federal trial court in Wisconsin issued a ruling in Herrington v. Waterstone. The court denied Waterstone Mortgage Corp.’s request to reopen the case and certify it for immediate appeal.

Pamela Herrington alleged in a 2011 court filing that Waterstone failed to pay its loan officers for overtime. In a 2012 order, the U.S. District Court for the Western District of Wisconsin ordered that claims would have to be resolved through arbitration because of an agreement between the parties. The court also concluded that the National Labor Relations Act gave Herrington the right to join other employees to her claims, despite a provision in the arbitration agreement to the contrary.

In a Jan. 28, 2014. opinion, the court denied the defendant’s fourth request to reopen the case since it was sent to arbitration. The defendant asked the court to reconsider the part of its decision allowing the plaintiff to open the case to others. The court noted that it would adhere to the National Labor Relations Board’s decision even though the U.S. Supreme Court or the federal appellate court might disagree.

On April 21, a federal court in New York denied Fannie Mae’s request to reconsider an earlier ruling in light of a recently decided case.

In re Fannie Mae 2008 ERISA Litigation is a lawsuit over all current and former Fannie employees who were participants in the secondary lender’s employee stock option plan from April 17, 2007, to May 14, 2010. The plaintiffs allege that the defendants breached their fiduciary duty under ERISA by failing to convert to cash Fannie Mae stock in the employee stock option plan despite the stock’s drop in price from $56.97 in April 2007 to $1.01 on May 2010.

The defendants had asked for reconsideration in light of a case — Rinehart v. Akers — recently decided by the Second Circuit. The court said reconsideration was unwarranted because the case did not create a new standard; rather, it applied the standard used in another case.

A decision in the 2009 case of Davis v. J.P. Morgan Chase & Co. is still reverberating through the industry.

In Davis, a New York federal appellate court — the highest level court to decide the issue — held that Chase’s mortgage underwriters were not exempt employees under the Fair Labor Standards Act and were required to receive overtime pay.

Under the FLSA, employers must pay employees overtime compensation for time worked in excess of 40 hours per week. The court found that the mortgage underwriters’ followed the detailed instructions of a credit guide provided to them by the bank.

The appellate decision has resulted in a flurry of cases challenging the overtime pay status of mortgage underwriters across the country.

“Mortgage underwriters are quality control people who are clearly exempt,” said Howard Knee, an attorney in the Los Angeles office of Blank Rome LLP. “They ensure that appropriate risks are taken and that risky loans are not made.”

Knee noted that lawsuits challenging the status of mortgage underwriters can involve millions of dollars.

“The risk can be significant,” he said.

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