United States District Court, D. Maryland, Northern Division
WILLIAM D. QUARLES, JR., District Judge.
On June 18, 2009, Gamaal Robinson and others filed a class action against Empire Equity Group, Inc. ("Empire Equity") for violations of the Fair Labor Standards Act ("FLSA") and other laws. On January 14, 2011, the Court approved a settlement between the parties. When the settlement was not paid, the Plaintiffs filed a Third Amended Complaint reinstating the litigation. The Plaintiffs added 15 defendants to their Third Amended Complaint, including Daniel Jacobs, Rick Pallo and Ezra Beyman. Pending are motions for summary judgment by Jacobs, Pallo, and Beyman. No hearing is necessary. See Local Rule 105.6 (D. Md. 2011). For the following reasons, Jacobs and Pallo's motion will be granted in part and denied in part, and Beyman's motion will be granted in part and denied in part.
A. Original Litigation
1st Metropolitan Mortgage ("1st Metropolitan") is a North Carolina Corporation that provides residential real estate mortgages. ECF No. 109 ¶¶ 15, 61. In 2002, 1st Metropolitan was acquired by Empire Equity. ECF No. 183-1 at 3. From before the acquisition of 1st Metropolitan until January 2008, Ezra Beyman was the sole owner and president of Empire Equity. See ECF Nos. 181-3 at 3-5. In late 2004 to early 2005, the Ohio Department of Commerce investigated 1st Metropolitan for possible state law wage and hour violations. Id. at 7. The agency determined that no violations had occurred and that 1st Metropolitan properly classified its employees. Id. In January 2008, Beyman sold his interest in Empire Equity to Corporate Office Management Providers, Inc. ("Management Providers"). Id. at 4. On May 1, 2009, Brightgreen Home Loans ("Brightgreen") acquired Empire Equity. Id. Brightgreen was owned by Hestia Financial ("Hestia"). Id.
On June 18, 2009, Gamaal Robinson, Sean Reynolds, Lawrence Silver, Lisa M. Puerini, and Sean Spies filed a class action against Empire Equity and 1st Metropolitan alleging violations of the Fair Labor Standards Act ("FLSA") and Maryland wage and hour laws.. ECF No. 1. The complaint alleged that Empire Equity and 1st Metropolitan failed to pay their employees the minimum wage, failed to pay for overtime, and "unilaterally ceas[ed] to compensate or reduc[ed] compensation without notice" for work that had been completed. See ECF No. 109 ¶ 33.
On July 14, 2009, the named Plaintiffs moved for conditional certification of the class. ECF No. 7. On November 18, 2009, the Court conditionally approved class certification for the FLSA claims and approved notice. ECF Nos. 37-38. The Court never certified a Rule 23 class for state law claims. See id. After notice, 371 former 1st Metropolitan employees opted into the class. See ECF No. 183-1 at 2. The class consists of loan officers, loan processors, and bank managers who were employed by 1st Metropolitan from September 2001 to April 2009. Id. ¶¶ 69-73.
On January 25, 2010, the Plaintiffs filed their first amended complaint. ECF No. 56. The Plaintiffs began negotiations with Empire Equity, 1st Metropolitan, and Hestia. ECF No. 183-1 at 2. The CEO of Hestia, Patrick McGeeney, negotiated for the Defendants. See id. On September 1, 2010, the Plaintiffs filed a consent motion to file their second amended complaint,  and the parties filed a joint motion for settlement approval. As part of the settlement agreement, Empire Equity, or Hestia, agreed to pay $2, 700, 000. ECF No. 87-4 at 7. In exchange, the Plaintiffs waived all claims against the Defendants and their employees. Id. at 6. On January 14, 2011, the Court approved the settlement agreement and closed the case. ECF No. 97. The Defendants never paid the settlement amount. ECF No. 183-1 at 2.
On May 13, 2011, counsel for Empire Equity filed a motion to withdraw their appearance. ECF No. 100. On May 27, 2011, the Plaintiffs moved to reopen the case and to vacate the Court's judgment approving the settlement agreement. ECF No. 101. On July 23, 2011, the Court granted both motions and directed the Plaintiffs to file a motion for leave to file a third amended complaint. ECF No. 104. On July 29, 2011, the Plaintiffs filed a motion to amend their complaint. ECF No. 105. On August 23, 2011, the Court approved the motion, and the Plaintiffs' third amended complaint was filed. ECF Nos. 108-09.
B. Re-filing and Adding Defendants
In the third amended complaint, in addition to restating their claims against 1st Metropolitan and Empire Equity, the Plaintiffs added Hestia as a defendant. ECF No. 109. The Plaintiffs also named 15 individual defendants, arguing that these individuals were "employers" under the FLSA and state wage and hour laws. Id. Beyman, Jacobs, and Pallo were named as defendants in the third amended complaint. Id. at ¶¶ 25-26, 32. None of them was a defendant in the original action. See ECF Nos. 1; 56; 88.
a. Ezra Beyman's and Daniel Jacobs's Role in 1st Metropolitan
Beyman was the sole owner and the president of Empire Equity until January 2008, when he sold his interest to Management Providers. ECF No. 183-1 at 3-4. In 2000, Beyman hired Jacobs as branch manager for Empire in Charlotte, North Carolina. ECF No. 181-3 at 4. Four months later, Jacobs was promoted to regional manager for Empire Equity. Id. In 2002, Jacobs became the National Sales Manager. Id. After Empire Equity acquired 1st Metropolitan, Jacobs became the Division Chief Operating Officer. Id. Until January 2008, Jacobs reported directly to Beyman. Id.
Beyman and Jacobs dispute who was in charge of 1st Metropolitan after it was acquired by Empire Equity. Beyman maintains that he was "not involved in day-to-day operation or its human resources matters." ECF No. 184-1 at 4. According to Beyman, he gave Jacobs almost complete autonomy,  and Jacobs rarely asked Beyman for help. See Beyman Dep. 67:5-13, 83:10-84:7. Jacobs ran 1st Metropolitan "from A to Z." Id. at 54: 6-11. Jacobs and Beyman would have general conversations about overhead and the number of branches, but nothing "nitty-gritty." Id. at 83:10-84:7. Jacobs had the authority to set and change pay rates. Id. at 54: 12-18. Jacobs and the human resources department were responsible for compliance with the FLSA. Id. at 54.
Jacobs asserts that he reported to Beyman, and Beyman had the ultimate say in many decisions. See ECF No. 183-1 at 4, 15 ("Discovery revealed a corporate structure whereby critical operational and strategic decisions were made [by]  Beyman and his advisors...."); Jacobs Dep. 70:22-72:13. Jacobs's main contact was Ben Freed, Beyman's advisor. Jacobs Dep. 70:22-72:13. Freed was "highly involved" and would tell Jacobs "anything Beyman wanted to relay..., " Id. Freed would discuss with Jacobs whether 1st Metropolitan would "continue to call  people statutory employees, ... [whether or not they were] going to put everyone on minimum wage, " and what "exemption[s] [they would use] for outside sales people...." Id. at 71: 22-23. Jacobs asserts that compliance with the FLSA was solely the responsibility of human resources. See id. 43:19-45:7. However, Jacobs admits that he met with human resources and attorneys to discuss wage and hour issues when the Ohio Department of Commerce investigated the company. See id. Jacobs and Beyman assert that they had no knowledge of any violations of the FLSA,  they were not involved in hiring or firing loan officers or bank managers, and bank managers had autonomy in determining how loan officers were paid and how a branch was run.
In January 2008, after Beyman sold his interest, Jacobs became president of Empire Equity. ECF No. 183-1 at 4. Jacobs had an ownership interest in Management Providers. ECF No. 1843-1 at 18. As president, Jacobs was only responsible to the owner. Jacobs Dep. 21: 3-25. He hired a new head of human resources,  but asserts that bank managers continued to have authority over loan officers. On ...