Waterstone Mortgage Corporation
This overtime and minimum wage case was filed in the U.S. District Court for the Eastern District of Wisconsin on behalf of former and current mortgage Loan Originators (LOs) who challenge Waterstone Mortgage Corporation’s shockingly dishonest pay practices. Beginning in 2010, the company promised its LOs that it would pay them FLSA minimum wages and overtime. But rather than pay LOs what it promised, the company only recorded up to forty hours per week on their time records even while it knew that Loan Originators work long hours. Plaintiff Herrington filed suit against Waterstone in 2011 and she sought to bring the case to obtain relief for all LOs she believed were cheated by Waterstone’s failure to abide by the employment agreement it drafted.
Rather than admit it had shorted its workers by failing to pay them the minimum wage, failing to pay them time and one-half overtime wages, and failing to reimburse their business expenses, Waterstone hid behind a forced arbitration clause which its lawyers at Offitt Kurman had suggested be inserted into the employment agreements. Rather than admit it owed ALL its workers the pay it had promised them, WMC entered into scorched earth litigation strategies – all designed to avoid its written promise.
Waterstone repeatedly demanded that its workers sue it one at a time – rather than collectively. U.S. District Judge Barbara Crabb (based on the US National Labor Relations Board’s D.R. Horton decision) ruled that Waterstone’s class action waiver, contained in its arbitration clause, was unlawful and could not be enforced. She then sent the case to AAA arbitration, in accordance with Supreme Court precedent insisting that arbitration clauses drafted by companies demanding that workers give up their right to go to court had to be followed. A long period of AAA arbitration followed – a period marked by what Arbitrator Pratt called Waterstone’s lawyers’ “scorched earth” strategy. Indeed, Arbitrator Pratt sanctioned Waterstone repeatedly. Whenever the Arbitrator ruled against it, Waterstone simply ignored its own arbitration clause and raced back into Court.
Along the way, the arbitrator ruled that the case could proceed collectively, that WMC couldn’t force LOs out of the AAA arbitration by demanding that they sign other clauses, and ultimately, that 175 Los were entitled to $10,586,770 in back pay, fees and costs. In his partial final award on liability, Judge Pratt even called Waterstone’s President’s testimony, and the testimony of its Senior Vice President, “incredible.” Plaintiffs had won. But rather than pay what it promised and what the Arbitrator ordered, WMC appealed to the District Court. Judge Crabb then affirmed the arbitrator’s decision – the one that Waterstone had itself demanded. Again, rather than pay what it promised, what the Arbitrator held it owed, and what the District Judge had affirmed, Waterstone appealed to the Seventh Circuit. After the briefs were filed, the Supreme Court ruled that class waivers were enforceable in arbitration and sent the case back to the District Court. Then Judge Crabb vacated the decision and 7 years of legal proceedings – not on the merits of Plaintiffs’ claims.
Interestingly, Waterstone filed a malpractice action in District Court against its former attorneys, Ari Karen and others at Offitt Kurman, claiming that they committed legal malpractice by 1) telling Waterstone it should put its promise of minimum wage and overtime into the employment agreement, 2) drafting various ineffective arbitration clauses with invalid class and arbitration waivers, 3) counseling it to allow LOs to go to court in its revised agreements, 4) causing sanctions to be issued against Waterstone for following Offitt Kurman’s advice in the arbitration, 5) counseling it not to settle, 6) counseling it not to change its employment agreement after the litigation started, and 7) having a conflict of interest in representing Waterstone in litigation over the very agreement it wrongly drafted.
GSD believes that the 7-year course of litigation in this case shows several important lessons:
- Forced arbitration – where workers can be made to sign away their right to go to court even when they are cheated by an unscrupulous employer and where the Supreme Court has allowed companies to demand that workers give up their right to join in a class action – is an unconscionable usurpation of the people’s power to remedy abuses committed against them.
- Forced arbitration with class action waivers leads to companies violating the law. Why comply with the law, when a forced arbitration agreement makes it difficult for people to sue for violations? Indeed, class waivers cause entire industries to view the labor laws as irrelevant.
- The idea that arbitration is quicker than Court is false and is a masquerade for corporations to maximize profits at the expense of working people.
WHAT HAPPENS NOW? Waterstone has gotten the procedural remedy it asked the court to give it. However, instead of one simple proceeding with limited liability, these various cases will be heard in at least three separate forums. So far, Plaintiffs have filed approximately 80 separate individual arbitrations that will be handled before a wide group of AAA and JAMS Arbitrators. Plaintiffs will simply ask each of these individual arbitrators to rule – just as Arbitrator Pratt did before – that Waterstone must live up to the promise to pay FLSA minimum wages for all hours worked and overtime at the rate of time and one-half for all hours worked over forty. And, for the many workers who Waterstone had sign agreements permitting them to go to Court, Plaintiffs have filed a new federal court complaint in the Eastern District of Wisconsin – raising the same claims as the previous case – that Waterstone has cheated its Loan Originators out of the very pay it promised them when they were hired.
There are many, many Loan Originators and former Loan Originators who Waterstone promised minimum wage and overtime, but who it never paid what it promised. For the many workers who Waterstone has failed to pay what it admits it promised – please contact paralegals Monica Ayres or Julia Friday at Getman Sweeney Dunn, to see which of the cases you may fit into, and to discuss whether you might wish to join an existing case or bring your own case against Waterstone.
Together we will help ensure that companies, such as Waterstone, admit it when they break the law and that they pay the people they cheat. Waterstone’s LOs originate over a billion dollars of mortgages each year, helping WMC’s parent company – Waterstone Financial – earn over $100 million in revenues last year. Waterstone Financial has close to $2 billion in assets and WMC had more than 70 offices in 23 states. GSD and all the LO plaintiffs look forward to helping Waterstone and other large companies decide to do the right thing by paying the workers who make it rich the money it promised them and help them abide by the law.
A NEW FEDERAL COURT ACTION IS FILED AGAINST WATERSTONE - Posted May 8, 2019
Plaintiffs have filed a new federal court complaint in the Eastern District of Wisconsin – raising the same claims as the previous case – that Waterstone has cheated its Loan Originators out of the very pay it promised them when they were hired. The case is filed as a class and collective action, on behalf of those LOs who, by virtue of the particular employment agreement that Waterstone drafted for them – are allowed to go to court rather than being sent to forced arbitration.
7TH CIRCUIT VACATES TRIAL COURT’S AFFIRMANCE- Posted November 21, 2018
On January 10, 2018, weeks after Judge Crabb affirmed the arbitration award, Waterstone filed its notice of appeal with the Seventh Circuit Court of Appeals. Waterstone claimed that Judge Crabb erred in 2012 when she ruled that loan officers “must be allowed to join other employees” in the arbitration, when the arbitration agreement stated that LOs’ claims must be arbitrated on an individual basis. Waterstone asked the Seventh Circuit to reverse Judge Crabb’s 2012 decision and reverse her final judgment enforcing the arbitration award.
During the course of the appeal, the US Supreme Court was hearing a case on a similar issue. On May 21, 2018, the Supreme Court ruled that employers may require prospective employees to waive their right to participate in class actions as a condition of employment, reversing the previous decision of the Seventh Circuit prohibiting class action waivers. The Supreme Court reversed the Circuit and overruled the National Labor Relations Board (NLRB) which had ruled in In re D.R.Horton that such waivers violated the National Labor Relation Act’s prohibition on “yellow dog” contracts by which employers seek to prevent workers from engaging in “concerted activity” as a condition of taking a job. District Judge Crabb had previously ruled in this case that Waterstone’s class action waiver was invalid because she was obliged to give deference to the NLRB’s (now overruled) decision.
On October 22, 2018, the 7th Circuit vacated the District Court’s affirmance of the arbitral award in this case and remanded for the District Court to consider the “gateway” issue of whether the arbitration agreement in the case permits class, collective or joinder of actions. On November 6th, Plaintiffs moved the 7th Circuit to clarify that one of the gateway issues for the District Court to consider includes whether Waterstone waived its argument that the District Court should consider the issue instead of the Arbitrator. Click here to review the motion for reconsideration. On November 20th, the Circuit denied Plaintiffs’ petition for rehearing and rehearing en banc.
The case now proceeds to the District Court, for District Judge Crabb to determine whether the Arbitrator’s decision permitting the case to be heard on a collective action basis was correct.
ARBITRATION AWARD CONFIRMED – Posted December 6, 2017
On December 4, Judge Crabb confirmed the arbitration award, granting damages to 175 loan originators who opted into the case. The damages and attorney fees total over $10.5 million. Waterstone has 30 days from the judgment to either file a notice of appeal or pay.
This ruling is a tremendous result for the LOs who have opted in.
Loan officers who worked for Waterstone but did not opt into the Herrington case can join the new case against Waterstone, Werner v. Waterstone.
ARBITRATOR PRATT ISSUES FINAL AWARD – POSTED JULY 7, 2017
Waterstone Loan Originators won a $10,586,770.00 victory! On July 5, 2017, Arbitrator Pratt issued a Final Award in this case. He awarded the 175 Loan Originator Claimants $7,267,919 in unpaid minimum wages, unpaid overtime wages, and liquidated damages. Click here to read the final award.
In addition, Arbitrator Pratt awarded Getman Sweeney Dunn full attorneys’ fees, a multiplier enhancement of 20%, and costs for a total of $3,298,851. Arbitrator Pratt stated:
“Throughout, Claimants’ attorneys have performed ably, efficiently, and ethically, displaying admirable expertise, professionalism, and diligence in representing their many clients.”
In addition, the Named Claimant was awarded an incentive fee of $20,000 for bringing the case and representing the other 174 LOs throughout the litigation. Click here to read Arbitrator Pratt’s Decision and Partial Final Award on Attorney’s Fees and Costs.
If you worked for Waterstone as a Loan Originator within the last three years and you may have claims for unpaid minimum wages, overtime wages, and unreimbursed business expenses. Contact Getman Sweeney Dunn to learn about your rights. The call is confidential and free.
ARBITRATOR PRATT FINDS WATERSTONE OWES LOs OVERTIME AND MINIMUM WAGE – POSTED MAY 16, 2017
Following a two week trial held in October and December 2016, Arbitrator George C. Pratt has ruled that 174 of Loan Originator Claimants, those who worked after August 2010 (on contracts which called not just for commissions), are entitled to minimum wage and overtime payment. Click here to read Arbitrator Pratt’s Partial Final Award. During the trial, Waterstone stipulated that LOs worked 52.5 hours per week and bore unreimbursed expenses on behalf of Waterstone of $100 per week for the period August 2010 to the present. The Arbitrator also found:
1. Waterstone has waived and is estopped from asserting the “outside sales exemption” defense to Claimants’ FLSA claims.
2. Claimants’ claims under Wisconsin law are dismissed.
3. Claimant’s claims under contract law are dismissed.
4. Claimants’ damages under the FLSA shall be determined in the manner and under the principles described above in this Partial Final Award.
5. Waterstone’s contractual clawback process does not apply.
6. Claimants are entitled to an additional amount of attorneys’ fees and costs to be paid by Waterstone in an amount yet to be set by the Arbitrator.
In reaching this decision, Arbitrator Pratt ruled that:
“Waterstone’s President Egenhoefer and its Senior Vice President Allen acknowledged in their depositions that its minimum-wage-plus -overtime compensation system was adopted in order to comply with federal (i.e. FLSA) and state wage requirements. At the hearing, however, they both told a story that the change from commission-only was solely so that they could use a new computerized compensation program. I found their hearing testimony on this point to be incredible.
In making the change, Waterstone was obviously following the advice of counsel in how to comply with governmental requirements. It established the much-disliked time-reporting system in order to legally comply with the minimum wage and overtime regulations of the FLSA and state laws. Then it tolerated or told or its branch managers to arrange that the LOs would not report more than 40 hours. In this way, Waterstone complied in form with FLSA’s overtime requirement, but in practice it sought to avoid having to make the overtime payments that otherwise would have been made.
In practical effect, Waterstone represented to its LOs, not that they were exempt from coverage under the FLSA as it now claims, but that they were non-exempt and that it was providing for them the protections of the FLSA. It is true, as Waterstone repeatedly emphasizes, that most of the LOs either were ignorant of or did not care about the protections and benefits of the FLSA. They regarded their work as commission-based, and they viewed the payments for hours worked as a draw against the commissions they hoped to earn. The issue, however, is not how the LOs thought about their compensation or what they signed on to in the agreements prepared and required by Waterstone. The FLSA is a collection of rules established to fix the minimum compensation to be paid to employees and to do so apart from what the parties might think, understand, or agree to. The FLSA thus overrides both the employers’ and the employees’ understandings to the extent that their mutual arrangements in actual practice fail to satisfy the minimum standards laid down by the statute.”
For further information about the impact of the decision, please contact Getman, Sweeney & Dunn.
WATERSTONE HELD IN CONTEMPT – POSTED MAY 5, 2015
In February 2015, Claimants learned that in or about March 2014, Waterstone’s President and CEO had circulated a prohibited letter to current LOs, telling them they were required to sign new agreements concerning how to bring any claims against Waterstone, such as by going to arbitration or court. The letter advised LOs that signing the agreement would affect their ability to participate in this case. Since Arbitrator George C. Pratt previously found that the letter was misleading and coercive, and since Waterstone had been previously sanctioned for sending essentially this same letter, and since the terms of the letter suggested LOs could not join this case, Claimants moved to hold Waterstone in Contempt. On March 25, 2015 Arbitrator Pratt ruled that the emailing of Egenhoefer’s letter was a contempt of the prior order. Arbitrator Pratt ordered Egenhoefer to send a corrective letter and directed that Getman Sweeney send LOs who had not opted into this case and were sent the prohibited Egenhoefer letter a new notice and that they be given a new opportunity to join this case. LOs who received the prohibited Egenhoefer letter and did not previously join this case have until June 18, 2015 to mail, email, or fax a completed, consent to sue form in order to join this case. LOs who now join the case will not be required to sit for discovery, such as producing documents or sitting for deposition.
WATERSTONE ADDRESS ERRORS REQUIRE REMAILING NOTICE – Posted June 26, 2104
Because Waterstone had made errors in approximately one-third of the addresses, many LOs did not receive the Notice informing them about their opportunity to join this overtime and minimum wage case. Arbitrator Pratt addressed concerns about the address errors in his June 18, 2014 Ruling and ordered us to remail the Notice to LOs whose corrected addresses had been discovered.
LOs who receive a re-mailed Notice may file a Consent to Sue form up until August 25th if they wish to join. If any class members do not receive notice of the case through these address errors, they may (through Getman Sweeney or on their own) later make an application to join the case, up until the time the case is tried to Arbitrator Pratt.
If you have any questions about the case or have questions about whether to participate you may call Monica Ayres at Getman Sweeney (845) 255-9370 to discuss any concerns you may have. All calls are privileged and confidential.
Arbitrator Pratt Directs Notice To LOs – Posted May 2, 2014
On March 4, 2014, Arbitrator Pratt issued a ruling that this case would proceed as a “collective action.” A collective action means that individuals who wish to have their overtime and minimum wage claims heard as part of the case, must file a “Consent to Sue” form or their claims will not be considered. LOs who file the Consent to Sue form agree to representation by Named Claimant Pamela Herrington and attorneys Getman & Sweeney. LOs may also obtain their own counsel independently and file their own individual lawsuits if they wish.
On April 23, 2014, Arbitrator Pratt issued a ruling which directed that a Notice be issued advising Waterstone Loan Originators who worked for Waterstone at any point between November 28, 2008 and the present, of their rights about participating in the case. The Notice also contains a Consent to Sue form for LOs who wish to join the case and be represented by Getman Sweeney. LOs may file a Consent to Sue form up until July 6, 2014 if they wish to join.
Getman Sweeney will mail and email the Notice and Consent to Sue to LOs, whose names and addresses will be supplied by Waterstone. Individuals who have questions about the case or have questions about whether to participate may call Monica Ayres at Getman Sweeney (845) 255-9370 to discuss any concerns they may have. All calls are privileged and confidential.
NLRB Hearing Re-Scheduled for August 1st- Posted 7/12/12
The NLRB is proceeding forward against Waterstone, claiming that Waterstone’s arbitration agreement illegally waives class and collective actions and that this clause must be deleted from the employment agreement. Waterstone claims that it did not require employees to sign the employment agreement as a condition of employment and that such signing was purely voluntary. It also contends that the NLRB’s D.R. Horton decision is wrongly decided. Any loan officers with contrary information should contact Getman Sweeney. The hearing will be conducted by NLRB Administrative Law Judge Paul Bogas at the NLRB’s regional office in Milwaukee, WI on 8/1/12 at 9 am. Getman Sweeney will also be representing the charging party at the hearing.
Court Requests Additional Briefing – Posted 3/9/12
The Court requested additional briefing from both sides on the issue of whether the Court has jurisdiction to consider the illegality of the class action waiver provision in the arbitration agreement. The National Labor Relations Board recently held that class and collective action waivers are unlawful. The question is whether only the NLRB can reach this question or whether the Court may apply the NLRB’s ruling. Plaintiffs filed a thorough brief explaining why the Court must consider whether the arbitration clause is illegal and pointing out that the NLRB has directed Courts to consider such illegality. Click here to review the Plaintiffs’ brief filed today. Waterstone also filed a brief in support of its position that the Court cannot consider the question. Click here to review Waterstone’s brief. The matter will now be considered by the Court.
Plaintiffs Move Court To Compel Discovery – Posted 2/23/12
Plaintiffs have asked the Court to compel Waterstone to participate in discovery concerning the appropriateness of this case for class certification. Click here to review Plaintiffs’ Motion.The Court had previously set a deadline of June 1st for Plaintiffs’ class certification motion. Waterstone refuses to answer discovery claiming that its motion to dismiss is reason why it should not comply. The Court however previously refused to stay discovery in this case. Within an hour after Plaintiffs’ motion, Defendants asked the Court to issue a stay of discovery. Click here to review Defendant’s Motion to Stay. The disputes will now be briefed by both sides.
Herrington Charges Waterstone With Violating National Labor Relations Act (NLRA) – Posted 1/13/12
Plaintiff Herrington filed a “charge” against Waterstone Mortgage Corporation. The charge is based on a recent decision of the National Labor Relations Board known as D.R. Horton, which held that a company may not require employees to go to arbitration and waive their right to proceed by class or collective action. The NLRB found this type of clause (which Waterstone placed in paragraph 13 of its employment agreement) to violate the NLRA, which protects employees’ ability to engage in “concerted activity.” Herrington had given Waterstone a chance to voluntarily remove the unlawful clause from its agreement, but Waterstone refused, prompting the charge, which was filed with Region 30 of the National Labor Relations Board. The Board will now investigate to determine whether it will take measures against Waterstone for the clause. If any employees have been contacted by Waterstone management concerning this case or the arbitration clause, please call Getman Sweeney to review the situation.
On January 19, 2012, U.S. Magistrate Judge Stephen L. Crocker issued a scheduling order in this case. Click here to review the scheduling order.
The Arbitration Clause In WMC’s Employment Agreement – Posted 1-25-12
WMC refuses to withdraw the arbitration clause containing an unlawful class and collective action waiver. Getman Sweeney has prepared a short video concerning the unlawful arbitration clause contained in WMC’s employment agreement.
Motions Made and Answered
Defendant Waterstone has moved to dismiss the case to send the case to arbitration. Waterstone claims that the arbitration clause of the contract (paragraph 13) requires arbitration on an individual by individual basis. Plaintiffs believe this argument is frivolous for numerous reasons. Click here to review Plaintiffs’ brief in opposition to Waterstone’s Motion to Dismiss. On the same day that Plaintiffs filed their motion in opposition to arbitration, the National Labor Relations Board ruled that class and collective action waivers, as is contained in the Waterstone employment agreement, constitute an unfair labor practice. Click here to review the NLRB’s decision in the D.R. Horton case. In light of the fact that the arbitration clause with class and collective action waiver constitutes a clear violation of federal law, Plaintiffs are asking Waterstone to withdraw its motion to dismiss, demanding that Waterstone remove the offending clause from the employment agreement, and demanding that Waterstone take further steps to notify employees that the arbitration clause is invalid.
Video Information About This Lawsuit – Posted 12/2/11
Here’s a short video prepared by Getman Sweeney about this case.
Complaint Filed – Posted 11/28/11
Plaintiffs initially served a 10 day demand on the company as called for in the employment agreement. The document which begins a lawsuit is called a “complaint.” Plaintiffs have now filed a complaint in this case with the Western District of Wisconsin. Click here to review the complaint that has been filed in court.
Answers to Common Questions – Posted 11/18/11
The complaint covers claims for overtime and minimum wage back pay under the federal Fair Labor Standards Act (“FLSA”) . The specific violations claimed are that the Defendants failed to pay minimum and overtime wages to its loan officers and made illegal deductions from their pay.
Damages sought under the FLSA include back minimum and overtime wages, an equal amount of liquidated damages, interest, and fees and costs for each violation. Damages for the state law claims include back minimum wage and overtime pay, recovery of illegal deductions, liquidated damages, interest, and fees and costs.
The FLSA provides for liquidated damages in an amount equal to the back pay owed and allows claims going back three years from when someone affirmatively joins the case by filing a Consent to Sue. You must send us a signed Consent to Sue to bring your federal wage and hour claims in this action.
Under the FLSA, you are entitled to make claims for the period extending back three years from the date your Consent To Sue Form is filed in the lawsuit. Waterstone will be entitled to argue that its violations were not willful and that its claims should only be limited to a two-year period preceding the filing of your Consent to Sue. This two or three year period is called the “statute of limitation.”
The state contract claims have different statutes of limitations.
To bring claims under the FLSA for back wages and an equal amount of liquidated damages in this action, you must affirmatively join the case by filing a Consent to Arbitrate.
No. The attorneys representing plaintiffs are Getman & Sweeney, PLLC and they are handling this case on a contingent basis and will only be paid when we win through a settlement or final judgment.
You are not part of the FLSA case until your Consent to Sue Form is returned to the plaintiffs’ attorneys and filed. If you delay in filing the , part or all of your claim may be barred by the statute of limitations.
The law prohibits retaliation for joining an overtime lawsuit. If any employee suffers retaliation, Waterstone would be liable for at least double the injury caused to the employee, and possibly much more. Notify us immediately if you think any retaliation occurs. Retaliation is rare in overtime cases, because an employer can suffer such serious penalties.
The FLSA claims in this lawsuit cover every worksite nationwide in the U.S.A. If you worked for Defendant Waterstone anywhere in the country, you can bring FLSA claims in this case.