Wells Fargo Wins Dismissal of Overtime Claims

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By Jon Steingart

Oct. 14 — Wells Fargo home mortgage consultants who were part of an overtime settlement under California law can't be part of a similar settlement reached under federal law in Texas, a federal appeals court ruled ( Richardson v. Wells Fargo Bank, N.A , 5th Cir., No. 15-20711, 10/14/16 ).

The California settlement released Wells Fargo Bank from “from any and all applicable state and federal law wage-and-hour claims,” Judge Carolyn Dineen King wrote Oct. 14 for the U.S. Court of Appeals for the Fifth Circuit. The mortgage consultants who were covered by that settlement were barred from engaging in the Fair Labor Standards Act lawsuit in Texas, she said.

A class under California wage-and-hour law includes workers who meet the class’s definition and don’t opt out. By contrast, workers are excluded from a collective action under the federal Fair Labor Standards Act unless they opt in.

King rejected the mortgage consultants’ argument that California workers who didn’t receive a cut of the settlement because they didn’t file claim forms weren’t covered by the settlement’s release of claims. A settlement retains its preclusive effect even for class members who don’t receive a distribution, the judge said.

Judges Jerry E. Smith and Gregg J. Costa joined the opinion.

Overlap Among California, Texas Lawsuits

In both lawsuits, mortgage consultants said they should have received overtime pay when they worked more than 40 hours in a week. There was overlap among the two lawsuits so that some mortgage consultants could have been part of both.

The Texas lawsuit included mortgage consultants at Wells Fargo and Wachovia and named both banks as defendants. The litigation didn’t change appreciably when the banks merged in 2008.

Parties to a settlement can structure it so that it bars later claims that weren’t part of the earlier dispute, King said. Although the California lawsuit didn’t involve a claim under federal law, this is why the settlement was able to preclude mortgage consultants who were bound by it from the FLSA claim in Texas.

A number of issues are on appeal in the California case, including a motion to vacate the judgment. King didn’t comment on whether vacating the California judgment would nullify preclusion in Texas.

The mortgage consultants’ attorney declined to comment Oct. 14. A Wells Fargo spokesman told Bloomberg BNA the company agrees with the Fifth Circuit's ruling and believes the settlements fairly compensated the litigants.

Rhonda H. Wills of the Wills Law Firm PLLC in Houston, and Paul Yetter, Reagan Simpson and Christian J. Ward of Yetter Coleman LLP in Houston represented the mortgage consultants. Littler Mendelson PC attorneys Lindbergh Porter Jr. in San Francisco, Daniel Thieme in Seattle and David Jordan in Houston represented the banks.

To contact the reporter on this story: Jon Steingart in Washington at jsteingart@bna.com

To contact the editor responsible for this story: Peggy Aulino at maulino@bna.com

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