"Chase Arbitration Bid Fails In Appraiser OT Action"

Law360, March 14, 2011 

By Samuel Howard

A California federal judge Friday rejected JPMorgan Chase Bank NA's bid to arbitrate or stay a putative class action alleging the banking giant misclassified its home appraisers as exempt from overtime pay. 

Judge Saundra Brown Armstrong of the U.S. District Court for the Northern District of California faulted Chase's handling of the case and said the parties' patchy arguments regarding the arbitration of the wage-and-hour claims prevents compelling an out-of-court resolution.

The plaintiffs contend Chase misclassified its appraisers as salaried employees and failed to pay them overtime in violation of the Fair Labor Standards Act and California labor law. Chase reclassified the appraisers as hourly employees in July or August, but failed to give them back pay for overtime hours worked during their years as salaried employees, the suit says.

While Chase sought arbitration before the Financial Industry Regulatory Authority — without first conferring with the plaintiffs — and the plaintiffs subsequently consented to arbitrate the dispute at JAMS, the plaintiffs' employment contracts stipulate other fora for addressing employment-related claims, according to the opinion.

The arbitration agreement only requires the employee to present claims before either the National Association of Securities Dealers Inc. or the New York Stock Exchange Inc., yet Chase appears to suggest, without supporting argument, that the court should substitute FINRA as the successor to those entities, according to the opinion.

"Defendants' failure to meet and confer with opposing counsel has resulted in piecemeal and inchoate briefing of issues critical to this court's ability to make an informed decision on the pending issues and requests," Judge Armstrong said. "The court therefore denies defendant's motion to compel arbitration, without prejudice."

The court likewise noted the incompleteness of the plaintiffs' argument in favor of a JAMS proceeding.

As an alternative to arbitration, Chase sought to stay the action pending the U.S. Supreme Court's ruling in AT&T Mobility LLC v. Concepcion, which addresses similar misclassification allegations.

Judge Armstrong, however, concluded Chase improperly advanced its arguments in reply to the complaint and otherwise "deprive[d] plaintiffs of the opportunity to address arguments that the defendant should have made in its moving papers."

The plaintiffs estimate the proposed class could number in the thousands and are seeking overtime pay going back three years, plus interest and attorneys' fees.

Earlier in March, two former Chase workers filed another nationwide putative class action claiming Chase does not record all the hours its nonexempt retail bank employees work.

A spokesman for Chase declined to comment on the ruling.

The plaintiffs in the current matter are represented by Bryan Schwartz Law's Hillary Baker and Bryan Schwartz.

Chase is represented by Morgan Lewis & Bockius LLP's Carrie Gonell, Eric Meckley and Jennifer Lockhart.

The case is Adlao et al. v. JPMorgan Chase & Co. et al., case number 4:10-cv-04508, in the U.S. District Court for the Northern District of California.