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Kapolka v. Anchor Drilling Fluids, USA, LLC

United States District Court, W.D. Pennsylvania

October 22, 2019

CHAD KAPOLKA AND BRETT TURRENTINE, Individually and on behalf of all Others Similarly Situated, Plaintiffs,
v.
ANCHOR DRILLING FLUIDS USA, LLC and Q'MAX AMERICA, INC. Defendants.

          OPINION

          J. Nicholas Ranjan, United States District Judge.

         Before the Court is Plaintiffs' Amended Motion to Approve Collective Action Settlement, [ECF 50], requesting that the Court approve the parties' agreement to settle Plaintiffs' claims under the Fair Labor Standards Act (“FLSA”). [ECF 50]. The parties have revised their proposed settlement agreement to address concerns raised by the Court in its September 3, 2019, order. [ECF 49].[1] After careful consideration, the Court will approve the amended agreement.

         I. Discussion & Analysis

         “Because of the public interest in FLSA rights, there are only two ways that FLSA claims can be settled or compromised by employees[.]” Adams v. Bayview Asset Mgmt., LLC, 11 F.Supp.3d 474, 476 (E.D. Pa. 2014). The first is a compromise supervised by the Department of Labor under 29 U.S.C. § 216(c). Id. The second is a “district court-approved compromise” under 29 U.S.C. § 216(b). Id. This case falls into the latter bucket, and Plaintiffs request the Court's approval of the proposed settlement agreement attached to their motion as Exhibit 1. [ECF 50-1].

         “When parties present to the district court a proposed [FLSA] settlement, the district court may enter a stipulated judgment if it determines that the compromise reached is a fair and reasonable resolution of a bona fide dispute over FLSA provisions rather than a mere waiver of statutory rights brought about by an employer's overreaching.” Cuttic v. Crozer-Chester Med. Ctr., 868 F.Supp.2d 464, 466 (E.D. Pa. 2012) (internal quotation marks omitted); see also Vargas v. Gen. Nutrition Centers, Inc., No. 2:10-cv-867, 2015 WL 4155449, at *1 (W.D. Pa. Mar. 20, 2015) (same). The FLSA's provisions “are mandatory and not subject to negotiation and bargaining between employers and employees because allowing waiver by employees or releases of employers would nullify the purposes of the act.” Deitz v. Budget Renovations & Roofing, Inc., No. 4:12-CV-0718, 2013 WL 2338496, at *2 (M.D. Pa. May 29, 2013); see Lynn's Food Stores, Inc. v. United States Dept. of Labor, 679 F.2d 1350, 1352 (11th Cir. 1982) (“Recognizing that there are often great inequalities in bargaining power between employers and employees, Congress made the FLSA's provisions mandatory[.]”).

         Thus, “if the Court determines that the settlement concerns a ‘bona fide dispute,' it will conduct a two-part fairness inquiry to ensure that (1) the settlement is fair and reasonable for the employee(s), and (2) the agreement furthers the FLSA's implementation in the workplace.” Howard v. Philadelphia Hous. Auth., 197 F.Supp.3d 773, 777 (E.D. Pa. 2016). When the proposed settlement results from arm's length negotiation between competent counsel, the Court begins with a “strong presumption in favor of finding [the] settlement fair[.]” Crabtree v. Volkert, Inc., No. CIV.A. 11-0529-WS-B, 2013 WL 593500, at *3 (S.D. Ala. Feb. 14, 2013).

         Here, the parties have agreed to settle Plaintiffs' claims in exchange for Defendants' payment of $1, 105, 000.00. [ECF 50; ECF 50-1]. From this gross settlement fund, counsel seeks to deduct $386, 750.00 in attorneys' fees, $6, 727.70 in costs and expenses, [2] up to $7, 000.00 in settlement administrative costs, and $5, 000.00 “service” or “enhancement” payments to each of the two named plaintiffs. After applying these deductions, the result is a net settlement award of $694, 522.30. This net award will be distributed among opt-in class members on a pro rata basis, dependent on an analysis of the number of weeks of overtime pay at issue for each class member.

         For the following reasons, the Court is persuaded that this agreement represents a fair and reasonable settlement of a bona fide FLSA dispute, and that the proposed resolution will further the aim of implementing the FLSA in the workplace.

         A. Bona Fide Dispute

         First, the Court must determine whether the proposed settlement would resolve a “bona fide” dispute under the FLSA. In this context, “[a] dispute is ‘bona fide' where it involves factual issues rather than legal issues such as the statute's coverage and applicability.” Kraus v. PA Fit II, LLC, 155 F.Supp.3d 516, 530 (E.D. Pa. 2016) (internal quotation marks omitted). As a result, the Court needs to “consider the substantive allegations and determine whether factual issues, specific to these parties, are actually in dispute.” Deitz, No. 4:12-CV-0718, 2013 WL 2338496, at *3. “In essence, for a bona fide dispute to exist, the dispute must fall within the contours of the FLSA and there must be evidence of the defendant's intent to reject or actual rejection of that claim when it is presented.” Kraus, 155 F.Supp.3d at 530.

         Plaintiffs have alleged that Defendants misclassified them, along with the other putative class members, as independent contractors, and wrongfully denied them overtime compensation on that basis. [ECF 1 at ¶¶ 3-8; 26-53]. These allegations “fall within the contours of the FLSA.” Kraus, 155 F.Supp.3d at 530; see 29 U.S.C. § 207.

         The record also contains clear “evidence of the defendant's intent to reject or actual rejection” of Plaintiffs' claims. Id. Defendants have, in fact, filed an answer denying many of Plaintiffs' key factual allegations. [ECF 11 at ¶¶ 3-8; 26-53]. Additionally, Plaintiffs' counsel has submitted an affidavit stating that Defendants “disagreed vehemently with many of the assertions in the [c]omplaint, ” and that Defendants “repeatedly argued that [they] did not employ Plaintiff, ” but that “if [they] did, Plaintiff was exempt from the FLSA's requirements because of the executive, administrative, professional, and/or highly compensated employee exceptions.” [ECF 50-2 at ¶¶ 15]. Counsel also states that Defendants “argued [Plaintiffs'] damages should be sharply limited because [Defendants] acted in conformity with near uniform industry practice, without complaint, for years.” [ECF 50-2 at ¶ 26].

         As a result, the record establishes that resolution of many of the relevant legal issues would turn on the underlying, disputed facts surrounding, at a minimum, (i) Plaintiffs' employment; (ii) Defendants' pay practices; (iii) Defendants' state of mind, i.e., Defendants' good or bad faith in establishing the challenged pay practices, and; (iv) industry custom. The Court therefore finds that the proposed settlement resolves a “bona fide” dispute of “factual issues rather than legal issues.” Kraus, 155 F.Supp.3d at 530.

         B. Fair & Reasonable Settlement

         Next, the Court must assess whether the proposed settlement is fair and reasonable. In most cases, this standard is not exacting. Indeed, “[i]f the parties are represented by competent counsel in an adversary context, the settlement they reach will, almost by definition, be reasonable.” Bonetti v. Embarq Mgmt. Co., 715 F.Supp.2d 1222, 1227 (M.D. Fla. 2009); see Lliguichuzhca v. Cinema 60, LLC, 948 F.Supp.2d 362, 366 (S.D.N.Y. 2013) (“[C]ourts typically regard the adversarial nature of a litigated FLSA case to be an adequate indicator of the fairness of the settlement.”). Only “[r]arely will the Court be in a position to competently declare that such a settlement is ‘unreasonable.'” Bonetti, 715 F.Supp.2d at 1227; see also Austin v. Pennsylvania Dep't of Corr., 876 F.Supp. 1437, 1472 (E.D. Pa. 1995) (“In determining the fairness of a proposed settlement, the Court should attribute significant weight to the belief of experienced counsel that settlement is in the best interests of the class.”).

         Here, both parties are represented by experienced counsel who frequently litigate and settle FLSA and other employment law claims in both state and federal court. [ECF 50-2 at ¶¶ 5-9, 13-14; ECF 52 at ¶¶ 6-7]. Additionally, the parties employed an experienced mediator to assist them in negotiating their settlement and reached their initial agreement to settle through the mediation process. [ECF 50-2 at ¶ 20].[3] The Court thus begins with a strong presumption that the settlement counsel have forged through extensive, adversarial negotiation is reasonable.

         Even so, the Court has to review the details of the proposed agreement to ensure that it is fair. In analyzing proposed FLSA settlements, “district courts have relied on the factors set out by the Third Circuit for approving class action settlements pursuant to Federal Rule of Civil Procedure 23.” Brown v. TrueBlue, Inc., No. 1:10-CV-00514, 2013 WL 5408575, at *2 (M.D. Pa. Sept. 25, 2013). But “unlike its role in Rule 23 actions to serve as caretaker and protect absent class members, the court in FLSA class actions serves as gatekeeper to ensure that the parties are not negotiating around the clear FLSA requirements via settlement.” Acevedo v. Brightview Landscapes, LLC, No. CV 3:13-2529, 2017 WL 4354809, at *13 (M.D. Pa. Oct. 2, 2017) (internal quotation marks omitted); see Bredbenner v. Liberty Travel, Inc., No. CIV.A. 09-1248 MF, 2011 WL 1344745, at *18 (D.N.J. Apr. 8, 2011) (“Unlike a traditional class action under Rule 23, potential class members in an FLSA collective action must affirmatively opt-in to be bound by the judgment. … Their failure to do so does not prevent them from bringing their own suit at a later date.”).

         Thus, while the factors used to evaluate Rule 23 class action settlements provide a framework for the Court's analysis, rigid application of those factors is neither required nor appropriate in the FLSA context. See Deitz, No. 4:12-CV-0718, 2013 WL 2338496, at *5 (“Although courts have utilized Fed. R. Civ. P. 23 in evaluating the fairness of a proposed settlement under FLSA collective action suits, the Rule does not control such actions and the Court may use its discretion in fashioning appropriate standards for approving settlement of actions brought under 29 U.S.C. § 216(b).”).

         As set forth by the Third Circuit in Girsh v. Jepson, the Rule 23 factors are

1) the complexity, expense, and likely duration of litigation;
2) the reaction of the class to the settlement;
3) the stage of proceedings and amount of discovery completed;
4) the risks of establishing liability;
5) the risks of establishing damages;
6) the risk of maintaining the class through trial;
7) the ability of the defendants to withstand a greater judgment;
8) the range of reasonableness of the settlement fund in light of the best possible recovery; and 9) the range of reasonableness of the settlement fund to a possible recovery in light of the attendant risks of litigation.

Girsh v. Jepson, 521 F.2d 153, 157 (3d Cir. 1975).

         Here, the Court has considered and weighed each of the Girsh factors, and determined that they favor approving the parties' settlement agreement.

         1. Complexity, Expense, and Likely Duration.

         The first Girsh factor asks the Court to evaluate the complexity, expense, and likely duration of litigation. Generally, “[c]ases requiring great expenditures of time, money, and other resources on behalf of the parties and the court” are “good candidates for settlement.” Deitz, No. 4:12-cv-0718, 2013 WL 2338496, at *5. As a result, the greater the apparent complexity and likely expense associated with litigating a case to its conclusion, the more likely it is that the Court will find a proposed settlement to be fair to employees and the public. See In re Prudential Ins. Co. Am. Sales Practice Litig. Agent Actions, 148 F.3d 283, 318 (3d Cir. 1998).

         This case is not all that complex when compared to other class or collective actions, but neither is it uniquely straightforward. Moreover, while the parties have already completed some informal discovery, Plaintiffs assert, and the Court does not doubt, that “both sides would require substantial additional discovery including a high number of costly depositions in order to place this case in a trial posture.” [ECF 50 at p. 7]; c.f. Craig v. Rite Aid Corp., No. 4:08-CV-2317, 2013 WL 84928, at *9 (M.D. Pa. Jan. 7, 2013) (“With respect to the likely duration of this litigation, counsel for the parties aver, and we have no reason to doubt, that even the most procedurally advanced of these consolidated cases would require additional and substantial discovery in order to place the case in a trial posture.”).

         Thus, because settlement of this case would conserve substantial time, expense, and judicial resources, the Court finds that the first Girsh factor favors approving the parties' agreement.

         2. Reaction of Class to Settlement.

         The second Girsh factor asks whether any members of the “class” have objected or otherwise reacted to the proposed settlement. But this factor is “not directly applicable” in the context of an FLSA collective action, where the settlement class will consist of voluntary opt-in plaintiffs, “all of whom wish to settle this matter in accordance with the terms of the proposed settlement agreement.” Deitz, No. 4:12-CV-0718, 2013 WL 2338496, at *6.

         In any event, Plaintiffs represent that there have been no objections to the proposed settlement. [ECF 50 at p. 10]. As the docket reflects, no objections been filed with the Court either. For that reason, if the second Girsh factor applies at all, the Court finds that it favors approval of the settlement.

         3. Stage of Proceedings & Amount of Discovery Completed.

         The third Girsh factor requires the Court to examine the stage of proceedings and amount of discovery completed before settlement, to determine whether the parties have an “adequate appreciation of the merits of the case before negotiating.” In re Prudential Ins. Co., 148 F.3d at 319. This requirement ensures that there is “no risk that self-interested counsel is seeking a resolution of the claims on terms that are most beneficial to counsel alone without regard for the interests of the parties.” Deitz, No. 4:12-CV-0718, 2013 WL 2338496, at *6.

         Plaintiffs represent that the parties engaged in significant, informal discovery ahead of mediation to help them value the claim. Of particular note, Defendants “provided substantial compensation data, pay policies/practices, and personal information” which, when “coupled with the class members' general work schedules, ” allowed counsel to “formulate a detailed assessment of the potential damages for the entire class.” [ECF 50-2 at ¶ 17]. While the parties did not engage in formal discovery, such as ...


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