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In re Montgomery

July 16, 2009

IN RE JANNEY MONTGOMERY


The opinion of the court was delivered by: Schiller, J.

MEMORANDUM

On July 20, 2006, Plaintiff Sean Farhy filed this action, which was subsequently consolidated with two other cases and, on July 17, 2007, the Class Representatives filed a Consolidated Complaint.*fn1 The Consolidated Complaint alleged that Janney Montgomery Scott, LLC ("Janney") violated the Fair Labor Standards Act of 1968, as amended, 29 U.S.C. § 201 et seq. ("FLSA"), the Pennsylvania Minimum Wage Act of 1968, as amended, 43 Pa. C.S.A. § 333.101 et seq., the Pennsylvania Wage Payment and Collection Law, 43 Pa. C.S.A. § 2601 et seq., and the Pennsylvania Administrative Code. The FLSA claims were brought as a collective action on behalf of all Securities Brokers nationwide and the Pennsylvania claims were brought as a class action on behalf of all Securities Brokers within the Commonwealth.*fn2 The parties eventually settled their differences and on February 9, 2009, the Court preliminarily certified a settlement class and collective action and granted preliminary approval of the settlement agreement. On June 30, 2009, after notice was mailed to the class and collective action members, the Court conducted a fairness hearing. The Court now grants final certification of the settlement class and collective action, approves the settlement, and awards attorneys' fees and costs.

I. BACKGROUND

A. Nature and History of the Litigation

Plaintiffs and the similarly situated Securities Brokers sold financial products on behalf of Janney and were paid primarily on a commission basis. (Consol. Compl. ¶ 10.) While Plaintiffs primarily received commission payments, they were also paid a minimum monthly salary when they did not receive commissions. (Id. ¶¶ 56.) This monthly minimum was less than the federal minimum wage. (Id.) Plaintiffs' job responsibilities also regularly required them to work more than forty hours each week. (Id. ¶ 11.) Plaintiffs allege that Janney violated the FLSA and the aforementioned Pennsylvania labor laws by misclassifying Securities Brokers as exempt from state and federal overtime laws, and, accordingly, failing to pay overtime compensation for work performed beyond the forty-hour work week. (Id. ¶¶ 14-21.) Plaintiffs sought compensatory, statutory and punitive damages, as well as costs and reasonable attorneys' fees. (Id. Prayer for Relief.)

The action involves two classes with substantially similar claims. The collective action class is composed of "[a]ll current and former Securities Brokers of Defendant who are/were engaged in, or training to be engaged in, the business of selling Financial Products, and elect to opt-in to this action pursuant to the FLSA" (hereinafter "Nationwide Collective Class"). (Id. ¶ 5.) The class action class is comprised of "[a]ll current and former Securities Brokers of Defendant in the Commonwealth of Pennsylvania who are/were engaged in, or training to be engaged in, the business of selling Financial Products" (hereinafter "PA Class"). (Id.)

On August 16, 2007, shortly after the filing of the Consolidated Complaint, Janney moved to dismiss the state law claims. The litigation was subsequently stayed on September 27, 2007, in light of settlement discussions between the parties and eventually the case was placed in administrative suspense on March 31, 2008. After the litigation was removed from suspense on May 15, 2008, Plaintiffs filed a response to the motion to dismiss. While that motion was pending, Janney filed for summary judgment on the claims of Plaintiff Haag, partial summary judgment on the claims of Plaintiff Incitti (this motion was later voluntarily dismissed), and summary judgment on the claims of Plaintiff Farhy.

The parties mediated their dispute on multiple occasions, but were unable to reach a settlement. Negotiations, however, continued between the parties and they were eventually able to reach an agreement. On November 25, 2008, this Court ordered all outstanding motions to be withdrawn and directed the parties to file, by January 7, 2009, a motion for preliminary approval of a settlement in the matter. An extension was subsequently granted, and on February 3, 2009 Plaintiffs filed an Unopposed Motion for Preliminary Approval of Joint Stipulation and Settlement Agreement. Following a hearing on February 9, 2009, the Court granted preliminary approval of the settlement agreement.

The Court preliminarily certified a settlement class consisting of "All individuals who were employed by Janney Montgomery Scott LLC and/or Parker/Hunter, Inc. (collectively "Janney"), in the position of Financial Consultant, Financial Consultant Trainee, Financial Advisor, and/or Financial Advisor Trainee, during all or part of the maximum applicable class period for the state in which the individual was employed by Janney (as set forth in Schedule 1 to the Class Notice)." (Order of Feb. 9, 2009 ¶ 3.) The Court also conditionally certified a collective action comprised of "All individuals who were employed by Janney, in the position of Financial Consultant, Financial Consultant Trainee, Financial Advisor, and/or Financial Advisor Trainee, during the period from October 1, 2005 through October 1, 2008." (Id. ¶ 4.)

Pursuant to this Order, on February 27, 2009, the claims administrator mailed the notice via first class mail to 1,310 settlement class members at their last known address. (Decl. of Gerald D. Wells [hereinafter "Wells Decl."] ¶ 28; Aff. of Stephen J. Cirami [hereinafter "Cirami Aff."] ¶¶ 5,7.) A subsequent mailing, on April 24, 2009, advised the class members of a change in the date of the Final Approval Hearing. (Wells Decl. ¶ 28; Cirami Aff. ¶ 8.) A reminder postcard was mailed on May 8, 2009 to class members who had not yet submitted either a Consent to Join Form or an Exclusion Form. (Wells Decl. ¶ 28; Cirami Aff. ¶ 9.) Ten individuals requested exclusion from the settlement and no class members objected. (Wells Decl. ¶¶ 33,34; Cirami Aff. ¶ 10.)

B. Terms of the Settlement

Under the terms of the settlement, Janney agrees, inter alia, to the following:

a) to pay $2,880,000.00 (the "Maximum Settlement Amount") plus interest earned on this amount. This amount will be used to satisfy the qualifying claims of class members, attorney's fees and costs, enhancement awards to Class Representatives, all employer payroll taxes associated with payments, and the costs of claim administration. The settlement amount is non-reversionary.

b) to not oppose Plaintiffs' Executive Committee's application for an award of attorneys' fees of $864,000, or 30% of the Settlement Amount, plus accrued interest and reimbursement of litigation costs.

c) to not oppose Plaintiffs' application for class representatives enhancement awards of $20,000.

(Mem. in Supp. of Pls.' Unopposed Mot. for Final Approval of Settlement ["Mem. in Supp. of Settlement"] at 5-6; Joint Stipulation and Settlement Agreement [hereinafter "Stipulation"].)

In exchange, Plaintiffs agree, inter alia, to dismiss the lawsuit with prejudice. Class members who fail to timely exclude themselves from the class forever relieve Janney from any and all applicable state law wage-and-hour claims related to this litigation that accrued prior to the date of the Court's final order in this matter. (Proposed Final J. and Order of Dismissal ¶ 11.) In addition, each settlement class member who submitted a fully executed Consent to Join Settlement Class Form forever releases Janney from any claim that accrued prior to the date of the Court's final order based on and/or arising under the Fair Labor Standards Act of 1938 ("FLSA"). (Id. ¶ 12.)

II. CERTIFICATION OF THE CLASS

The Court must first analyze the status of the potential class and determine whether certification is appropriate. The Court has already conditionally certified a settlement class, a step that typically occurs when a court delays formal class certification until the parties have successfully negotiated a settlement. See In re Gen. Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 786 (3d Cir. 1995). Should discussions prove fruitful and a settlement be achieved, the court will then certify the class for settlement purposes only.*fn3 Id. Should negotiations fail to produce a settlement, a defendant remains free to contest the existence of a class. Id.

A provisionally certified settlement class must still receive final district court approval in accordance with the Federal Rules of Civil Procedure. Id. at 797 ("[w]hile we approve the provisional certification of a settlement class to facilitate settlement discussions, final settlement approval depends on the finding that the class met all the requisites of Rule 23").

A. Numerosity, Commonality, Typicality, Adequacy of Representation

Class certification is governed by Rule 23 of the Federal Rules of Civil Procedure. As noted, this Court certified a "settlement only class." But this certification was necessarily provisional as the Court is required to conduct the appropriate legal analysis before a settlement class may be approved. See Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620-21 (1997); see also In re Prudential Ins. Co. of Am. Sales Practices Litig., 148 F.3d 283, 308 (3d Cir. 1998) ("[A] district court must find a class satisfies the requirements of Rule 23, regardless whether it certifies the class for trial or for settlement."); Gen. Motors, 55 F.3d at 799 ("[a]ctions certified as settlement classes must meet the same requirements under Rule 23 as litigation classes."). Four prerequisites must be met for a lawsuit to be maintained as a class action: (1) the class must be so numerous that joinder of all members is impracticable; (2) there must be questions of law or fact common to the class; (3) the claims or defenses of the representative parties must be typical of the claims or defenses of the class; and (4) the representative parties must fairly and adequately protect the interests of the class. FED. R. CIV. P. 23(a); see also In re LifeUSA Holding, Inc., 242 F.3d 136, 143 (3d Cir. 2001). The elements of this quaternary are known as numerosity, commonality, typicality, and adequacy of representation.

1. Numerosity

The first requirement for a class action is that "the class is so numerous that joinder of all members is impracticable." FED. R. CIV. P. 23(a)(1); see also Newton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 259 F.3d 154, 182 (3d Cir. 2001). While there is no precise number of putative class members that will ensure the numerosity requirement is met, a potential class exceeding forty members is generally considered sufficient. Stewart v. Abraham, 275 F.3d 220, 226-27 (3d Cir. 2001); see also Servanti v. Bucks Technical High Sch., 225 F.R.D. 159, 165 (E.D. Pa. 2004) (settlement class contained at least forty-seven potential members); 1 Newberg § 3:5 ("Certainly, when the class is very large, for example, numbering in the hundreds, joinder will be impracticable; but in most cases, the number that will, in itself, satisfy the Rule 23(a)(1) prerequisite should be much lower."). Here, there are 1,310 class members. Accordingly, the numerosity requirement is clearly satisfied.

2. Commonality

The commonality requirement is met when the named plaintiffs share "at least one question of fact or law with the grievances of the prospective class." Stewart, 275 F.3d at 227 (quoting Baby Neal v. Casey, 43 F.3d 48, 56 (3d Cir. 1994)); Godshall v. The Franklin Mint Co., Civ. A. No. 01-6539, 2004 WL 2745890, at *2 (E.D. Pa. Dec. 1, 2004) ("Generally this requirement is satisfied when the defendant has engaged in the same conduct towards members of the proposed class.").

Commonality is more easily established when plaintiffs assert an economic, as opposed to a physical, injury because few if any individual proof issues are expected to arise. In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 527 (3d Cir. 2004).

Plaintiff's Consolidated Complaint identifies numerous common questions of law and fact. (Consol. Compl. ¶¶ 42, 47.) These include, among others: whether Securities Brokers were wrongfully classified by Defendant as exempt from overtime compensation, whether Defendant failed to pay class members for all hours worked, whether class members were expected or required to work in excess of forty hours each week, and whether Defendant violated applicable wage and overtime laws. (Id.) The Complaint thus contains numerous allegations that Defendant treated the proposed class uniformly. Accordingly, the commonality requirement is satisfied.

3. Typicality

The typicality requirement examines "whether the named Plaintiff's individual circumstances are markedly different [from those of unnamed class members] or . . . the legal theory upon which the claims are based differs from that upon which the claims of the other class members will perforce be based." Eisenberg v. Gagnon, 766 F.2d 770, 786 (3d Cir. 1985) (quoting Weiss v. York Hosp., 745 F.2d 786, 809 n.36 (3d Cir. 1984)); see also Baby Neal, 43 F.3d at 57-58 (internal citations omitted). Typicality does not require that putative class members share identical claims. Warfarin, 391 F.3d at 531-32. Instead, "[t]he heart of this requirement is that the plaintiff and each member of the represented group have an interest in prevailing on similar legal claims." Seidman v. Am. Mobile Sys., Inc., 157 F.R.D. 354, 360 (E.D. Pa. 1984). When the named plaintiffs and putative class members seek to challenge the same allegedly unlawful conduct, the typicality requirement is usually satisfied even though different fact patterns may underlie the individual claims. Serventi, 225 F.R.D. at 165; see also Godshall, 2004 WL 2745890, at *2 (typicality requirement met when all class members would rely upon the same legal theory to establish liability). The named Plaintiffs' claims in this case -- that Defendant wrongly classified them as exempt from overtime and failed to compensate them for all hours worked -- are typical of those of the Class as they derive from the same factual predicates and rely upon the same legal theory.

4. Adequacy of Representation

This requirement ensures that the named plaintiffs fairly and adequately protect the interests of the class. FED. R. CIV. P. 23(a)(4). The Court must be satisfied that: (a) plaintiffs' attorneys are qualified, experienced, and generally able to conduct the litigation; and (b) the interests of the named representatives are not antagonistic to those of other ...


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