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Potoski v. Wyoming Valley Health Care System

United States District Court, M.D. Pennsylvania

January 14, 2020

LYNN MARIE POTOSKI and DENISE GAITERI, on behalf of themselves and others similarly situated, Plaintiffs,


          A. Richard Caputo United States District Judge.

         Presently before me is a Joint Motion and Incorporated Memorandum of Law for Approval of the Parties' FLSA Settlement Including Attorneys' Fees, Costs and Service Awards. (Doc. 199). Because the parties have agreed to a fair and reasonable settlement to end a bona fide dispute which does not frustrate the purposes of the Fair Labor Standards Act, the Joint Motion will be granted.

         I. Background

         Plaintiffs Carmen Attanasio, [1] Lynn Marie Potoski, and Denise Gaiteri (collectively “Plaintiffs”) commenced this collective action on March 28, 2011 pursuant to the Fair Labor Standards Act (“FLSA”) on behalf of themselves and all others similarly situated. (See Doc. 1). The Complaint alleges that Wyoming Valley Health Care System and Wilkes-Barre General Hospital (collectively “Defendants”) violated FLSA by failing to pay class member employees for work performed during meal breaks and for proper uniform maintenance. (See id.).

         Following initial dismissal of the action (Doc. 23), the Plaintiffs filed an amended complaint on November 7, 2011. (Doc. 24). Over the course of the next eight years, the parties litigated and I resolved many issues surrounding this case including class notice and certification requirements (see Doc. 71, 72, 75, 111, 149) as well who could properly be considered class members (see Docs. 164, 166, 172-74, 176, 180). The Defendants moved for Summary Judgment on both claims on November 9, 2018. (See Doc. 189). This Motion was granted as to the uniform maintenance class, but denied as to the meal break class. (See Docs. 194, 195)

         The parties then indicated their intent to settle the case as to the remaining plaintiffs and claims on March 28, 2019. (See Doc. 196). Request for an in camera review of a settlement agreement was denied on September 4, 2019 (Doc. 198), and on October 9, 2019, the instant Joint Motion was filed. (See Doc. 199). The Settlement Agreement (“the Agreement”) accompanying this Joint Motion provides for a total maximum payment of $800, 000.00, inclusive of all fees and costs, in exchange for the release of claims as defined in the Agreement. (See Doc. 199-1 at ¶¶ 1.9, 3.1, 4.1- 4.3). Participating members of the class are to receive a pro-rated portion of the settlement after payment of attorney's fees, costs, and service awards. (See Doc. 199-1 at ¶¶ 3.3, 3.4). The fees and costs for counsel are $280, 000 and $32, 874 respectively, with $469, 126 to be distributed to the Plaintiffs, for an average of $3, 303.70 per class member. (Id.; see also Doc. 199 at 14). The remaining $18, 000 is for service awards to the named Plaintiffs in the amount of $6, 000 per named plaintiff as well as $6, 000 for costs to administer the settlement. (See 199-1 at ¶¶ 3.2, 3.6; see also Doc. 199 at 7). The Agreement further sets forth, inter alia, the duties of the settlement administrator, RG/2 Claims Administration LLC (“the Administrator”), the approval of the settlement, the notice to eligible settlement class members, the terms of the payment, the release of claims against the Defendants, and the confidentiality of the agreement. (See id., generally). A hearing was held on the Joint Motion on December 16, 2019 and it is ripe for review.

         II. Standard of Review

         FLSA was designed to “protect certain groups of the population from substandard wages and excessive hours which endangered the national health and well-being and the free flow of goods in interstate commerce.” Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706 (1945). Under FLSA, a collective action “may be maintained . . . by any one or more employees for and on behalf of themselves and other employees similarly situated.” 29 U.S.C. § 216(b).

         To safeguard employee rights, “a majority of courts have held that bona fide FLSA disputes may only be settled or compromised through payments made under the supervision of the Secretary of the Department of Labor or by judicial approval of a proposed settlement in an FLSA lawsuit.” Bettger v. Crossmark, Inc., 2015 WL 279754, at *3 (M.D. Pa. 2015) (citing, inter alia, Lynn's Food Stores, Inc. v. U.S. ex rel. U.S. Dep't of Labor, 679 F.2d 1350, 1354 (11th Cir.1982) (“Lynn's Food Stores”)). “While the Third Circuit Court of Appeals has not addressed whether parties can settle FLSA actions for unpaid wages without court approval, district courts within the Circuit have followed the majority position and assumed that judicial approval is necessary.” Huyett v.Murlin, 2018 WL 3155795, at *1 (M.D. Pa. 2018); see also Bettger, 2015 WL 279754, at *3 (same). A district court “may find a proposed settlement agreement resolves a bona fide dispute when it ‘reflect[s] a reasonable compromise over issues, such as FLSA coverage or computation of back wages.'” Brown v. TrueBlue, Inc., 2013 WL 5408575, at *1 (M.D. Pa. 2013) (quoting Lynn's Food Stores, 679 F.2d at 1354). “If a reviewing court is satisfied that an agreement does in fact decide a bona fide dispute, it proceeds in two phases: first, the court assesses whether the agreement is fair and reasonable to the plaintiff employee; second, it determines whether the settlement furthers or ‘impermissibly frustrates' the implementation of the FLSA in the workplace.” Bettger, 2015 WL 279754, at *4 (internal citation omitted).

         III. Discussion

         The parties contend that their proposed settlement “‘is a fair and reasonable resolution of a bona fide dispute over FLSA provisions.'” (Doc. 199 at 1-2, 8) (quoting Altnor v. Preferred Freezer Services, Inc., 197 F.Supp.3d 746, 763 (E.D. Pa. 2016)). First, the parties specifically contend that their dispute is bona fide because it involves ongoing contentiousness within the confines of FLSA, i.e., an ongoing dispute over the wages due, if any, for time worked during meal breaks. (Id. at 8-12). Second, the parties contend that the Agreement is fair and reasonable because it allows the Plaintiffs to be compensated in the face of ongoing litigation costs and legal uncertainty as to the outcome of the claims. (Id. at 12-15). The parties further contend that the service awards to the named Plaintiffs and the proposed attorney's fees and costs are reasonable. (Id. at 12-21 (citing Crevatas v. Smith Mgmt. & Consulting, LLC, 2017 WL 1078174, at *5 (M.D Pa. 2017) (holding that attorney's fees in the range of 20% to 45% of gross settlement can be reasonable); McGee v. Ann's Choice, Inc., 2014 WL 2514582, at *3 (E.D. Pa. 2014) (allowing modest “incentive awards” to name plaintiffs for performing valuable services to the class)). Finally, the parties contend that despite its confidentiality clause and release provision, the Agreement does not frustrate the purposes of FLSA because both are narrowly tailored and not overly broad. (Id. at 21-24 (citing Mabry v. Hildebrandt, 2015 WL 5025810, at *3 (E.D. Pa. 2015) (outlining scope of permissible confidentiality clauses); Kraus v. PA Fit II, LLC , 155 F.Supp.3d 516, 532-33 (E.D. Pa. 2016) (outlining scope of permissible release provisions)).

         A. Bona Fide Dispute.

         The parties contend that their settlement resolves a bona fide dispute because they actively disagree over the Plaintiffs' rights to the meal break wages and absent the Agreement, the parties will continue to contest liability. (Doc. 199 at 9-12).

         A proposed settlement resolves a bona fide dispute where its terms “reflect a reasonable compromise over issues, such as FLSA coverage or computation of back wages, that are actually in dispute.” Lynn's Food Stores, 679 F.2d at 1354. “A bona fide dispute is one that involves factual issues rather than legal issues such as the statute's coverage and applicability.” Nwogwugwu v. Spring Meadows at Lansdale, 2017 WL 2215264, at*2 (E.D. Pa. 2017); see also Creed v. Benco Dental Supply Co., 2013 WL 5276109, at *1 (M.D. Pa 2013) (same). As such, the settlement agreement must not amount “to a mere waiver of [Plaintiff's] statutory rights, ” rather it should “reflect a reasonable compromise” of disputed factual issues.” Lynn's Food ...

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