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Blofstein v. Michael's Family Restaurant, Inc.

United States District Court, E.D. Pennsylvania

July 19, 2019

BLOFSTEIN ET AL.
v.
MICHAEL'S FAMILY RESTAURANT, INC. ET AL.

          MEMORANDUM

          R. BARCLAY SURRICK, J.

         Presently before the Court is Plaintiffs' Unopposed Motion for Final Settlement Approval. (ECF No. 36.) For the following reasons, the Motion will be granted.

         I. BACKGROUND

         A. Factual Background of Litigation

         Michelle Blofstein and Alexis Flores (“Named Plaintiffs”) filed this class and collective action on behalf of themselves and other similarly situated restaurant servers, alleging that Defendants violated the Fair Labor Standards Act, 29 U.S.C. § 201, et seq. (“FLSA”), and the Pennsylvania Minimum Wage Act of 1968, 43 P.S. § 333.101, et seq. (“PMWA”).[1] Plaintiffs allege that Defendants permitted servers at four of their restaurants-Country Club Diner, Tiffany Diner, Warminster West Diner, and Mayfair Diner (first shift)-to work more than 40 hours per week, while maintaining a policy against logging overtime hours on the clock and maintaining an illegal tip pool. With regard to the tip pool, Plaintiffs maintain that the servers were made to pay a fixed amount from their tips to an illegal tip pool to benefit other restaurant employees (bussers and food runners), but that the money from the pool was actually used by Defendants to pay these employees' wages and not tips. Plaintiffs filed the class and collective action Complaint on December 13, 2017. (ECF No. 1.) On April 20, 2018, Plaintiffs filed an Amended Complaint, which asserts an additional claim of retaliation on behalf of Named Plaintiff Blofstein. (Am. Compl., ECF No. 16.)

         In June 2018, the parties participated in a settlement conference with Magistrate Judge Lynn A. Sitarski. Although no settlement was reached, the parties subsequently engaged in discovery aimed at permitting more informed settlement discussions in private mediation. In July 2018, the parties participated in a private mediation. Again, unable to reach a resolution, they pursued additional discovery and participated in a second full day of mediation with the same mediator in September 2018. At this mediation, the parties reached an agreement to settle Plaintiffs' claims. The Settlement Agreement was signed on November 1, 2018.

         B. Preliminary Settlement Approval

         Plaintiffs' Unopposed Motion for Preliminary Class and Collective Action Settlement Approval was granted on March 12, 2019. (ECF No. 34.) The Order was subsequently amended on March 20, 2019, to reflect a later deadline for class members to submit “opt-out requests, objection requests, and requests to withdraw consent to join.” (Am. Order, ECF No. 35.) The Court preliminarily certified two classes: the Settlement Class under the PMWA, and the Settlement Class under FLSA. The PMWA Settlement Class is defined as:

All current or former Servers who are Pennsylvania residents and who were employed at the Country Club Diner, Tiffany Diner, or Warminster West Diner from December 13, 2014 to July 5, 2018, plus all current or former Servers who are Pennsylvania residents and who were employed during the first shift at Mayfair Diner from December 13, 2014 to July 5, 2018.

(Am. Order ¶ 2.)

         The FLSA Settlement Class is defined as:

All current or former Servers employed at the Country Club Diner, Tiffany Diner, or Warminster West Diner from December 13, 2014 to July 5, 2018, plus all current or former Servers employed during the first shift at Mayfair Diner from December 13, 2014 to July 5, 2018.

(Id. ¶ 3.)

         After reviewing the settlement terms proposed by the parties, the Court determined that the Settlement Agreement “appears to be the product of serious, informed, and extensive arm's- length negotiations between the Parties and appears to be fair, adequate and reasonable to the Settlement Class so as to fall within the range of possible final approval.” (Id. ¶ 6.)

         C. Notice Period and Class Participation

         On March 29, 2019, Atticus Administration, LLC (“Atticus”) mailed notice of the proposed settlement agreement and claim forms (the “Notice Packet”) to the 424 potential class members. (Atticus Decl. ¶ 3, 4, Pls.' Stmt. Mot. Ex. C, ECF No. 36.)[2] Atticus was able to reach 378 of the 424 potential class members. (July 10, 2019 Hr'g Tr. 4, ECF No. 40.) This represents 89 percent of potential class members reached. (Id.) The remaining potential class members could not be reached. (Id.) Potential class members were notified that the deadline to submit claim forms was May 28, 2019, which was 60 days after the Notice Packets were mailed. (Atticus Decl. ¶ 5.) During this period, the claims administrator received 146 completed claim forms, which represents about 40% of the delivered Notice Packets. (July 10 Hr'g Tr. 4.) There have been no objections to, or requests for exclusion from, the proposed settlement from any proposed class members. (Id. at 5.)

         The Final Settlement Hearing was held on July 10, 2019. (Min. Entry, ECF No. 39.)

         D. The Proposed Settlement Agreement

         Under the Settlement Agreement, Defendants have agreed to pay $750, 000 to resolve the litigation. (July 10 H'rg Tr. 6.) This amount includes: (1) approximately $465, 000 to pay damages to the Settlement Class members; (2) $15, 000 as an award to be split by the Named Plaintiffs for their participation in the litigation; (3) $10, 000 to Ms. Blofstein for settlement of her retaliation claim against Defendants; (4) attorneys' fees in the amount of $250, 000; and (5) costs in the amount of $10, 000. (July 10 Hr'g Tr. 10.) Each of the 145 class members will receive a pro rata portion of the of the damages amount based on the number of work weeks that they worked during the class period, as a fraction of the total work weeks by all participating settlement class members. (Supp. Atticus Decl. ¶ 8, ECF No. 38.) The calculation is described as follows:

         Individual award = $465, 000 x Total weeks worked by participating class member Total weeks worked by all class members

         (Pls.' Stmt. Mot. 4.) Based upon this calculation, if all claim forms received were to be paid, the total payout is estimated to total $228, 034.04, which is 49% of the total $465, 000 damage fund. The highest claim is approximately $4, 000 and the lowest claim amount is approximately $22. (Supp. Atticus Decl. ¶ 8.) The average claim value to the class member is approximately $1, 600. (Id.; July 10 Hr'g Tr. 8.)

         The parties informed the Court at the Final Settlement Hearing that Defendants intend to take out a loan in order to fund this settlement. (July 10 Hr'g Tr. 7.) This is because Defendants do not have sufficient assets to handle the settlement claims. (Id.) Defendants' financial situation became relevant during negotiations of this settlement. (Id.)

         II. DISCUSSION

         Our consideration of the proposed settlement will include the following: (1) whether the proposed PMWA class action meets the requirements of Rule 23 of the Federal Rules of Civil Procedure and is entitled to final certification; (2) whether final certification of the FLSA collective action is appropriate; (3) whether the settlement proposed by the parties is fair and adequate; (4) whether the service payment awards to the Named Plaintiffs and the settlement of Ms. Blofstein's retaliation claim are fair and reasonable; and (5) whether Plaintiffs' request for attorneys' fees and costs merits approval.

         A. Class Certification of PMWA Class Under Rule 23

         Before determining whether the proposed settlement warrants approval, we must first determine whether Plaintiffs have met the elements of final certification of the PMWA class. We previously granted preliminary certification to the PMWA class to include all Pennsylvania residents who were servers at Country Club Diner, Tiffany Diner, Warminster West Diner and Mayfair Diner (first shift) from December 13, 2014 to July 5, 2018. (Am. Order ¶ 2.)

         Class certification under Rule 23 has two components. The party seeking class certification must first establish the four requirements of Rule 23(a):

(1) the class is so numerous that joinder of all members is impracticable;
(2) there are questions of law or fact common to the class;
(3) the claims or defenses of the representative parties are typical of the claims or defenses of the class; and
(4) the representative parties will fairly and adequately protect the interests of the class.

Fed. R. Civ. P. 23(a); see also In re Hydrogen Peroxide Antitrust Litig., 552 F.3d 305, 309 n.6 (3d Cir. 2008).

         “If all four requirements of Rule 23(a) are met, a class of one of three types (each with additional requirements) may be certified” under Rule 23(b). In re Hydrogen Peroxide Antitrust Litig., 552 F.3d at 309 n.6. Plaintiffs seek certification under Rule 23(b)(3), which states that “[a] class action may be maintained if Rule 23(a) is satisfied and if: (3) the court finds that the questions of law or fact common to class members predominate over any questions affecting only individual members, and that a class action is superior to other available methods for fairly and efficiently adjudicating the controversy.” Fed.R.Civ.P. 23(b)(3). These are known as the predominance and superiority factors of Rule 23(b)(3).

         The party seeking class certification “bears the burden of establishing each element of Rule 23 by a preponderance of the evidence.” Marcus v. BMW of N. Am., LLC, 687 F.3d 583, 591 (3d Cir. 2012). Certification is only proper “‘if the trial court is satisfied, after a rigorous analysis, that the prerequisites of Rule 23 are ...


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