Employees of a mortgage-rescue company run by a lawyer can sue him as a class under New Jersey’s wage-and-hour law.
U.S. District Judge Robert Kugler in Trenton granted partial class certification on Monday, finding the employees — salespeople for National Foreclosure Consulting Group, affiliated with Woodbury attorney Efthemios Velahos — met the requirements of numerosity and commonality.
The suit, in Troncone v. Velahos, 10-cv-2961, alleges NFC wrongly designated its salespeople as independent contractors in 2009, stopped withholding taxes and stopped paying its share of Social Security and Medicare deductions.
The salespeople were promised 25 percent of fees they brought in, but NFC failed to pay minimum wage, overtime for more than 40 hours a week, and salary and commissions, they claim.
Named plaintiff Jennifer Troncone, an NFC-commissioned sales representative from July 2009 to February 2010, claims she and 60 other representatives signed up clients, obtained mortgage and foreclosure documents, and turned over the cases to Velahos’ firm.
The suit, which also names Velahos’ wife Nancy, NFC’s managing member, says NFC advertises that it can delay or prevent mortgage foreclosures for a fixed fee of several thousand dollars.
In July 2011, Kugler granted Troncone conditional certification of a collective action under the federal Fair Labor Standards Act after finding the putative class members were similarly affected, while denying certification of a class under New Jersey Wage and Hour Law (NJWHL) claims.
He said the conflict between "opt-in" provisions of the FLSA claim and "opt-out" provisions of the NJWHL claim — based on the same conduct — would undermine congressional policy of limiting FLSA collective actions to plaintiffs who expressly opt in to a suit.
A plaintiff who seeks to join a FLSA collective action must file a consent with the court, while a putative member of a Rule 23(b)(3) action is assumed to be part of the class unless he affirmatively opts out. That conflict constitutes a compelling reason for declining to exercise supplemental jurisdiction over the state law claim, he said.
Troncone moved for reconsideration of Kugler’s rejection of the state-law claim, citing the intervening decision of the U.S. Court of Appeals for the Third Circuit in Knepper v. Rite Aid Corp., 675 F.3d 249 (2012).
Knepper held that Rule 23 state law wage-and-hour class actions (opt-outs) can exist in the same suit as FLSA collective actions (opt-ins).
In July 2012, Kugler denied the motion for reconsideration. Applying Knepper, he exercised supplemental jurisdiction over the state-law claim under the NJWHL.
But he found class certification under Rule 23 was not warranted because the plaintiff failed to meet the first requirement under that rule, numerosity.
At that point, Troncone had only identified 25 to 27 class members. In the Third Circuit, a group of 40 plaintiffs has been held to satisfy the numerosity requirement, Kugler wrote.
Troncone moved for final certification of a FLSA opt-in class and made a renewed motion for certification of a proposed Rule 23 opt-out class on the NJWHL claims.
Velahos, pro se in the case, did not file opposition briefs.
On Monday, Kugler denied final certification of the FLSA opt-in class, noting that discovery was not complete.
Under the two-stage certification process used in the Third Circuit for an FLSA collective action, final certification is granted after potential class members have been put on notice, discovery is complete and the plaintiff can demonstrate that members of the proposed collective action are similarly situated.
The court "has been supplied only with the partial fruits of discovery," he wrote.
However, Kugler certified the NJWHL claim after concluding that payroll records showing 60 sales representatives worked for NFC between January 2009 and January 2010 satisfied the numerosity requirement.
He also found the commonality, typicality and adequacy of representation requirements were met.
He also concluded that common questions of law and fact predominate over individual ones and that class action is the superior means of handling the litigation.
In addition, he noted that the relatively small amounts owed to each class member weigh in favor of a class action.
Troncone’s lawyer, Colin Page, who heads a firm in Mountain Lakes, says certification of the state-law class was “the larger issue” and “a major victory,” and he expects the federal-law class to be certified in the future.
Velahos did not return a call.