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Hayden v. Fifth Third Bank, Inc.

United States District Court, W.D. Kentucky, Louisville

March 13, 2014

LORI HAYDEN, Plaintiff,


JOHN G. HEYBURN, II, District Judge.

Plaintiff, Lori Hayden, a former Mortgage Loan Originator ("MLO") for Defendant, Fifth Third Bank ("Fifth Third"), makes two claims: (1) that Fifth Third breached her payment contract by deducting uncollected residential mortgage loan application fees as "charge-backs" from her commissions; and (2) that Fifth Third enforced an unlawful contractual provision by withholding earned commissions upon cessation of her employment. Hayden seeks to certify a class of current and former MLOs aggrieved by the same practices. Defendant has moved for summary judgment. Both matters are fully briefed. Because the Court finds that Fifth Third is entitled to summary judgment, Hayden's motion for class certification is moot.


Hayden worked for Fifth Third as an MLO in Louisville, Kentucky from March 14, 2011 until she voluntarily resigned on September 28, 2012. Fifth Third pays MLOs on a commission basis. The terms controlling when and how commissions are calculated and paid are outlined in an Incentive Compensation Plan ("ICP"), which Fifth Third updates yearly and sometimes more. Hayden's charge-back claim implicates both the 2011 and 2012 ICP as Fifth Third charged uncollected fees to Hayden in each of those years. The 2012 ICP governs whether Hayden was owed earned commissions upon the cessation of her employment in 2012. Both applicable ICPs include a section requiring employment claims to be brought within six months after termination or the precipitating event or occurrence. Both ICPs also include an Ohio choice of law provision whose applicability Hayden does not dispute.

One of Hayden's duties was to collect an application fee from prospective customers who filled out a loan application.[1] Multiple system checks ensure that such collection does not occur prior to customers' receipt of required Truth-in-Lending Act disclosures. The application fee[2] pays for costs Fifth Third incurs no matter whether the customer is ultimately approved for a loan or not, such as appraisal costs and costs of obtaining potential customers' credit reports. The prudent practice for an MLO is to collect the application fee early in the process. If not, the MLO risks having the fee charged back to them in the event the customer withdraws their application, Fifth Third ultimately declines the loan, or the loan is approved but not accepted by the customer.[3] If the MLO does not collect the required fee but Fifth Third ultimately approves the loan (and the borrower accepts it), the fee becomes part of the total settlement costs and the MLO is not assessed a charge-back.[4]

Hayden incurred nine separate charge-backs of $350.00 in 2011-2012.[5] Four of these occurred in 2011, five in 2012. Hayden does not specify the amount of commissions she alleges Fifth Third withheld after she resigned.

Hayden filed a class action complaint in federal court on December 10, 2012. Along with the contract claims described above, Hayden asserted claims under the Truth-in-Lending Act, 15 U.S.C. § 1601 et seq. Upon Defendant's motion, the Court dismissed Hayden's TILA claim for lack of standing on May 21, 2013. DN 17. The Court also considered whether Hayden's charge-back claim was contractually time-barred.[6] Reserving the question of whether Fifth Third's sixth-month limitation on employment actions was reasonable under the circumstances, the Court found the continuous violation doctrine seemingly fit the circumstances, thus tolling any statute of limitations: "[T]hough Plaintiff's claim is for breach of contract, the crux of Plaintiff's actual assertion here is that the contract contains an unlawful provision. Therefore, Fifth Third is not accused of breaching a specific contractual provision, but rather of enforcing an unlawful one." Id. at 12.

The record has developed significantly since that date and the case is now ripe for review.


Summary judgment is appropriate where "the pleadings, depositions, answers to interrogatories, and admissions on file together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." FED. R. CIV. P. 56(c). The burden is on the moving party to conclusively show no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). Once the moving party has met this burden, the nonmoving party must come forward with significant probative evidence to support her claim - the nonmovant may not rest on the pleadings. Id. at 324. To survive summary judgment, the nonmoving party "must set forth specific facts showing there is a genuine issue for trial." FED. R. CIV. P. 56(e).


The record makes clear that Hayden does not allege Fifth Third's charge-back policy is unlawful as a whole, only that the policy is unlawful when applied in a few factual circumstances. Indeed, Hayden does not cite, and the Court is unable to locate, any law prohibiting the general practice of deducting from an employee's commission fees that the employee was required - but failed - to collect. For this reason, the continuing violation doctrine does not apply. Nevertheless, certain charge-backs were assessed against Hayden's commissions within six months of her complaint, so the Court will discuss the merits of this claim.

The ICP language provides "[i]t is the responsibility of the Employee to collect any fees required for that product...." DN 29 (2011 ICP) and 29-1 (2012 ICP), at § III.H. Plaintiff argues Fifth Third breached this provision because the charge-backs it assessed were not fees "required for that product" in two senses: (1) a fee unlawfully accrued prior to providing the potential borrower the required TILA disclosures cannot be considered a "required" fee; and (2) Fifth Third's standard policy was to process an application regardless of whether the customer checked "No" indicating they did not agree to pay the non-refundable fee for pre-approval, and in such cases, the application fee is not "required for that product."

Plaintiff's first theory fails for several reasons. First, to the extent Hayden's claim seeks to vindicate any unlawful accrual of the fee, employee MLOs have no standing to assert such a claim. The Court addressed this issue at length in the Order dismissing Hayden's TILA claim. DN 17, p. 4-8. Second, the record reflects that Fifth Third never actually assessed a charge-back to Hayden before issuing customers the required disclosures. See DN 25, p. 13-14. Plaintiffs may only vindicate injuries in fact. Because Fifth Third never charged an uncollected fee to Hayden prior to issuing required ...

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