Harper v. Government Employees Insurance Company

No. 13-4479-cv
Harper v. Government Employees Insurance Company

UNITED STATES COURT OF APPEALS
FOR THE SECOND CIRCUIT

SUMMARY ORDER

RULINGS BY SUMMARY ORDER DO NOT HAVE PRECEDENTIAL EFFECT. CITATION TO A
SUMMARY ORDER FILED ON OR AFTER JANUARY 1, 2007, IS PERMITTED AND IS GOVERNED BY
FEDERAL RULE OF APPELLATE PROCEDURE 32.1 AND THIS COURT’S LOCAL RULE 32.1.1. WHEN
CITING A SUMMARY ORDER IN A DOCUMENT FILED WITH THIS COURT, A PARTY MUST CITE
EITHER THE FEDERAL APPENDIX OR AN ELECTRONIC DATABASE (WITH THE NOTATION
“SUMMARY ORDER”). A PARTY CITING A SUMMARY ORDER MUST SERVE A COPY OF IT ON ANY
PARTY NOT REPRESENTED BY COUNSEL.

At a stated term of the United States Court of Appeals for the Second Circuit, held at
the Thurgood Marshall United States Courthouse, 40 Foley Square, in the City of New York,
on the 10th day of October, two thousand fourteen.

PRESENT: BARRINGTON D. PARKER,
GERARD E. LYNCH,
SUSAN L. CARNEY,
Circuit Judges.

————————————————————————

CANDACE HARPER, individually and on behalf of all other persons similarly situated,

Plaintiff-Appellant,

and

LISA HOYT, MARK ANTHONY TURNER, ALLISON M. AKERS,

Plaintiffs,

v. No. 13-4479-cv

GOVERNMENT EMPLOYEES INSURANCE COMPANY, AKA GEICO,

Defendant-Appellee.

————————————————————————

FOR APPELLANT: SETH RICHARD LESSER, Klafter Olsen & Lesser LLP,
 Rye Brook, New York (Fran L. Rudich, Kurt Olsen, Michael
J. Palitz, Rachel Berlin, Klafter Olsen & Lesser LLP, Robert
M. Byrne, Marilyn McGoldrick, Thornton & Naumes LLP, on
the brief).

FOR APPELLEES: ERIC HEMMENDINGER, Shawe & Rosenthal LLP,
Baltimore, Maryland (Teresa D. Teare, Shawe & Rosenthal
LLP, Barry I. Levy, Kenneth A. Novikoff, Scott Green,
Rivkin Radler, LLP, on the brief).

Appeal from the United States District Court for the Eastern District of New York

(Leonard D. Wexler, Judge).

UPON DUE CONSIDERATION, IT IS HEREBY ORDERED, ADJUDGED,

AND DECREED that the judgment of the district court granting summary judgment is

VACATED and the case is REMANDED for further proceedings consistent with this

order.

Plaintiff-appellant Candace Harper, individually and on behalf of all persons

similarly situated (“appellants”), appeals an award of summary judgment in favor of the

Government Employees Insurance Company (“GEICO”), holding as a matter of law that

appellants fall within the administrative exemption to the Fair Labor Standards Act

(“FLSA”), 29 U.S.C. § 213(a). We assume the parties’ familiarity with the facts,

procedural history, and specifications of issues on appeal, which we review only as

necessary to justify our decision here.

The FLSA requires employers to pay an overtime rate of one and one-half times an

employee’s regular salary for any labor in excess of 40 hours a week. 29 U.S.C.

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§ 207(a)(1). However, the FLSA exempts several categories of employees from its

overtime requirements, including, as relevant here, “any employee employed in a bona

fide . . . administrative . . . capacity.” Id. § 213(a)(1). In a set of binding regulations, the

Secretary of Labor has defined “an employee employed in a bona fide administrative

capacity” as an employee (1) who is compensated at no less than $455 a week, (2) whose

“primary duty is the performance of office or non-manual work directly related to the

management or general business operations of the employer or the employer’s

customers,” and (3) whose “primary duty includes the exercise of discretion and

independent judgment with respect to matters of significance.” 29 C.F.R. § 541.200(a).

An employee’s work bears on the “general business operations” of her employer if she

“perform[s] work directly related to assisting with the running or servicing of the

business, as distinguished, for example,” from working in production or retail sales. Id.

§ 541.201(a). An employee exercises discretion and independent judgment if, “[i]n

general,” her work “involves the comparison and the evaluation of possible courses of

conduct, and acting or making a decision after the various possibilities have been

considered.” Id. § 541.202(a). While administrative employees may have “their

decisions and recommendations . . . reviewed at a higher level,” they generally retain

authority to make choices “free from immediate direction or supervision.” Id.

§ 541.202(c).

In addition to these broad guidelines, the Secretary’s regulations specifically

address the exempt status of insurance claims adjusters. The relevant regulation provides:

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 Insurance claims adjusters generally meet the duties
requirements for the administrative exemption, whether they
work for an insurance company or other type of company, if
their duties include activities such as interviewing insureds,
witnesses and physicians; inspecting property damage;
reviewing factual information to prepare damage estimates;
evaluating and making recommendations regarding coverage
of claims; determining liability and total value of a claim;
negotiating settlements; and making recommendations
regarding litigation.

Id. § 541.203(a). Speaking as it does in generalities, § 541.203(a) does not create a

“blanket exemption for claims adjusters.” Dep’t of Labor, Wage & Hour Div., Op. Letter

(Jan. 7, 2005), at 2. Rather, courts must still perform “a case-by-case assessment to

determine whether [a given adjuster’s] duties meet the requirement for exemption” under

§ 541.200(a). 69 Fed. Reg. 22122, at 22144 (Apr. 23, 2004); see also Roe-Midgett v. CC

Servs., Inc., 512 F.3d 865, 874 (7th Cir. 2008) (recognizing need for case-by-case

analysis).* Nor does § 541.203(a) distinguish between the administrative exemption’s

“general business operations” prong and its “discretion and independent judgment” prong

in formulating its list of presumably “administrative” insurance-related tasks. Rather, the

section stipulates that insurance claims adjusters who perform the listed tasks in a

*
Accordingly, the Department of Labor has opined that junior claims adjusters failed
to qualify as administrative employees where their level of supervision narrowly
circumscribed their discretion in processing claims. See Dep’t of Labor, Wage & Hour Div.,
Op. Letter (Aug. 26, 2005), at 5-6. Analyzing a consecutive provision in § 541.203, this
Court has also found that financial services employees – deemed to “generally meet” the
duties requirements of the administrative exemption under § 541.203(b) – did not qualify as
administrative employees where they performed such routine processing functions that they
failed to affect the employer’s general business operations. See Davis v. J.P. Morgan Chase
& Co., 587 F.3d 529, 535 (2d Cir. 2009).

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sufficiently discretionary way “generally” fulfill both “the duties requirements for the

administrative exemption.” 29 C.F.R. § 541.203(a).

In this case, appellants are a class of individuals employed as “telephone claims

representatives” (“TCRs”) at GEICO. They are responsible for processing claims brought

against GEICO’s customers for property damage or bodily injury following automobile

accidents. In 2010, appellants obtained certification for a class action seeking unpaid

overtime compensation from GEICO under the FLSA. After the close of discovery,

appellants moved for partial summary judgment on the second prong of the administrative

exemption and GEICO cross-moved for summary judgment as to all elements of the

exemption. The district court granted summary judgment to GEICO on all counts.

We review an order granting summary judgment de novo, resolving all ambiguities

and drawing all permissible factual inferences in favor of the party against whom the

judgment is sought. Doe ex rel. Doe v. Whelan, 732 F.3d 151, 155 (2d Cir. 2013).

Summary judgment is appropriate only where the movant shows that “no genuine issue of

material fact exists and that the undisputed facts entitle him to judgment as a matter of

law.” Coollick v. Hughes, 699 F.3d 211, 219 (2d Cir. 2012) (internal quotation marks

omitted). A genuine dispute of material fact exists where “the evidence, viewed in the

light most favorable to the nonmoving party, is such that a reasonable jury could decide in

that party’s favor.” Zann Kwan v. Andalex Grp. LLC, 737 F.3d 834, 843 (2d Cir. 2013)

(internal quotation marks omitted).

The record in this case raises genuine disputes of material fact regarding whether

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appellants performed a sufficient number of the tasks listed in § 541.203(a) with

sufficient discretion and independent judgment to satisfy the administrative exemption’s

duties requirements. First, we note that several of the tasks enumerated in § 541.203(a)

do not apply in this case. Unlike the traditional insurance adjusters described in

§ 541.203(a), TCRs employed at GEICO do not “inspect[] property damage.” 29 C.F.R.

§ 541.203(a). Rather, they conduct all their work from a set of cubicles inside GEICO’s

offices. Nor do they “mak[e] recommendations regarding litigation.” Id. While TCRs

may “stay firm” on an offer, effectively committing GEICO to litigate unsettled insurance

claims, the record provides no evidence that they remain involved in the ensuing

litigation.

TCRs do “interview[] insureds” and “witnesses” regarding the facts of an accident

and “review[] factual information to prepare damage estimates.” Id. But the record

features conflicting testimony regarding how closely GEICO’s supervisors monitor the

TCRs’ investigations through phone calls, instant messages, and written instructions.

Compare, e.g., Joint App’x at 82, 116, 577-78 (suggesting limited supervision), with id. at

77-78, 80, 85, 402 (suggesting extensive supervision). It also features contradictory

testimony about the extent to which GEICO engineered its claims-adjusting software,

ClaimIQ, to eliminate discretion on the part of TCRs and the extent to which the software

actually circumscribes the content, phrasing, and sequence of the TCRs’ questions.

Compare, e.g., Joint App’x at 144-46, 156-57 (suggesting intent to create mnemonic

guide); id. at 349 (suggesting deviation from ClaimIQ), with id. at 140, 211, 384

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(suggesting intent to automate inexperienced hires); id. at 325, 384 423, 429 (suggesting

strict adherence to digital prompt).

Similarly, GEICO insists that TCRs do “evaluat[e] and mak[e] recommendations

regarding the coverage of claims” and do “determin[e] liability and total value of a

claim.” 29 C.F.R. § 541.203(a). Yet they do so largely by inputting the data gathered

from their interviews into pre-defined fields in ClaimIQ, which subsequently applies its

own algorithm to calculate the range of GEICO’s financial liability. The record features

conflicting evidence regarding how closely the TCRs’ supervisors control the inputs that

TCRs type into ClaimIQ and whether TCRs retain any power to change ClaimIQ’s

recommended liabilities when they disagree with them. Compare, e.g., Joint App’x at

434, 622, 570 (suggesting TCRs’ sense of discretion in calculating liabilities), with id. at

330, 339, 560, 1153 (suggesting regular supervisor involvement in calculating input

values and limited discretion in reaching preferred liability calculations).

Finally, TCRs do “negotiat[e] settlements” with claimants and their

representatives. 29 C.F.R. § 541.203(a). Yet they do so within a limited settlement range

prescribed by ClaimIQ, from which they can depart only with the permission of their

supervisors. And the record again offers conflicting testimony regarding the extent of the

supervisors’ involvement in the TCRs’ negotiations, including whether TCRs must obtain

supervisor approval for settlements even within their authorized range and how frequently

supervisors prescribe specific negotiation strategies. Compare, e.g., Joint App’x at 108,

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348, 585 (suggesting personal discretion over negotiation discussions), with id. at 590-91,

1408, 1486 (suggesting that supervisors pre-approve settlement offers within ClaimIQ’s

range and determine negotiation tactics for individual files).

GEICO insists that the record contains no genuine disputes of material fact

because some contradictions appear within the depositions of individual witnesses.

According to GEICO, such conflicts point to the multi-layered nature of the TCRs’ jobs

more than to any factual discrepancies. Setting aside that only a fraction of the conflicts

identified above involve contradictions within the same witness’s testimony, internally

contradictory statements by a single witness who expands or elaborates on prior testimony

may be sufficient to create a genuine dispute of material fact precluding summary

judgment. See Rule v. Brine, Inc., 85 F.3d 1002, 1011 (2d Cir. 1996) (“Although a party

does not show a triable issue of fact merely by submitting an affidavit that disputes his

own prior sworn testimony, a material issue of fact may be revealed by his subsequent

sworn testimony that amplifies or explains, but does not merely contradict, his prior

testimony . . . .”) (citations omitted). Alternately, GEICO suggests that the conflicts

between testimony that TCRs exercise independent judgment and that they are subject to

strict supervision reveal merely the varying preferences of individual supervisors. It is for

a jury, however, and not for a court at summary judgment, to assess the discretionary

nature of the TCRs’ daily duties by evaluating the relative representativeness of these

divergent accounts.

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 Drawing all inferences in appellants’ favor, we find that the record could lead a

reasonable jury to conclude that, to the extent that TCRs perform the tasks enumerated in

§ 541.203(a), they do so in too circumscribed and non-discretionary a manner to fall

within that section’s vision of a presumptively “administrative” employee satisfying both

duties requirements of § 541.200(a). Consequently, we must remand the case for trial to

let a fact finder, having weighed the parties’ conflicting testimony, decide whether TCRs

satisfy § 541.203(a) by performing enough of its enumerated duties in a sufficiently

discretionary fashion.**

For the foregoing reasons, the judgment of the district court granting summary

judgment to GEICO on the FLSA’s administrative exemption is VACATED and the case

is REMANDED for further proceedings consistent with this order.

FOR THE COURT:
Catherine O’Hagan Wolfe, Clerk of Court

**
Appellants also challenge the district court’s denial of two discovery requests: one
for records of the TCRs’ conversations over GEICO’s instant-messenger system and one for
records surrounding GEICO’s implementation of ClaimIQ. A district court’s discovery
rulings are reviewed for abuse of discretion, subject to reversal only where the resulting
discovery “is so limited as to affect a party’s substantial rights.” In re Agent Orange Prod.
Liab. Litig., 517 F.3d 76, 103 (2d Cir. 2008), quoting Long Island Lighting Co. v. Barbash,
779 F.2d 793, 795 (2d Cir. 1985). Appellants’ limited briefing on this issue provides no
compelling argument that the district court abused its discretion in denying these requests.

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