Opinion
16-CV-3604 (SJB)
2019-08-16
Eileek LORA, Jeffrey Gomez, Sergio Moscoso, Bernardo Mendoza, Nicholas Mitrano, Kevin Manco, and Wilmer Marin Garcia, on Behalf of Themselves and All Others Similarly Situated, Plaintiffs, v. TO-RISE, LLC and Jorge Salcedo a/k/a Jorge E. Salcedo Jr., Defendants.
Amit Kumar, William Cafaro, Law Offices of William Cafaro, New York, NY, for Plaintiffs. Anthony C. Acampora, Silverman, Acampora LLP, Jericho, NY, Brian Jeffrey Shenker, Jackson Lewis P.C., Melville, NY, Irene Sinayskaya, Steven R. Yuniver, Sinayskaya Yuniver, P.C., Brooklyn, NY, for Defendants.
Amit Kumar, William Cafaro, Law Offices of William Cafaro, New York, NY, for Plaintiffs.
Anthony C. Acampora, Silverman, Acampora LLP, Jericho, NY, Brian Jeffrey Shenker, Jackson Lewis P.C., Melville, NY, Irene Sinayskaya, Steven R. Yuniver, Sinayskaya Yuniver, P.C., Brooklyn, NY, for Defendants.
ORDER GRANTING MOTION FOR PRELIMINARY APPROVAL OF CLASS SETTLEMENT
Sanket J. Bulsara, U.S.M.J.
This order grants and resolves Plaintiffs’ Motion for Preliminary Approval of Class Settlement, Provisional Certification of the Settlement Class, Appointment of Plaintiffs’ Counsel as Class Counsel, and Approval of Plaintiffs’ Proposed Notice of Settlement ("Motion for Preliminary Approval"). Three hearings were held in connection with this motion on March 19, 2019, April 11, 2019, and August 13, 2019. Defendants do not oppose the Motion.
I. Preliminary Approval of Settlement
1. The Court preliminarily approves the settlement contained in the Settlement Agreement and Release ("Settlement Agreement") between Plaintiffs and To-Rise, LLC ("To-Rise") and Jorge Salcedo a/k/a Jorge E. Salcedo Jr. ("Salcedo") (collectively "Defendants").
2. Preliminary approval, which is what Plaintiffs seek here, is the first step in the settlement process. It allows notice to issue to class and collective action members and for Class Members to respond by participating in the settlement, objecting to it, or opting out of it. After the notice period, the Court will conduct a final fairness hearing before final approval is granted and judgment is entered.
3. To grant preliminary approval of a class settlement, "the most significant factor for the district judge is the strength of plaintiffs’ case balanced against the settlement offer. Although the district judge in striking this balance should not convert the settlement hearings into a trial on the merits, he is required to explore the facts sufficiently to make an intelligent comparison between the amount of the compromise and the probable recovery." In re Traffic Exec. Ass'n-E. Railroads , 627 F.2d 631, 633 (2d Cir. 1980) (citation omitted). "[T]he granting of [preliminary approval] is not tantamount to a finding that the settlement is fair and reasonable. It is at most a determination that there is what might be termed ‘probable cause’ to submit the proposal to class members and hold a full-scale hearing as to its fairness." Id. at 634. 4. The Plaintiffs and putative class members were office workers, warehouse workers, and drivers for the Defendants. (Decl. of William Cafaro in Supp. of Mot. ("Cafaro Decl."), attached as Ex. 2 to Mot. to Certify Class, Dkt. No. 86, ¶ 3). The Plaintiffs filed this action on June 29, 2016, (Compl. dated June 29, 2016, Dkt. No. 1), alleging that they were not fully paid overtime in violation of the Fair Labor Standards Act ("FLSA") and New York Labor Law ("NYLL"); that they had not been paid for all hours they worked under 40 hours per week; that Defendants routinely made illegal deductions from their wages in violation of the NYLL; and that they did not receive proper wage notices or wage statements under the NYLL.
5. Plaintiffs filed a motion for conditional certification of a FLSA collective action, pursuant to 29 U.S.C. § 216(b), (Mot. to Certify FLSA Collective Action dated Jan 6, 2017, Dkt. No. 35); the motion was granted, (Order dated Sept. 15, 2017, Dkt. No. 44), notice was distributed, and 27 people filed consents to join the collective action.
6. The Court has reviewed the submissions made by Plaintiffs’ counsel, which include memoranda of law and declarations. (Mot. to Certify Class dated July 1, 2019, Dkt. No. 86).
7. The parties first submitted a settlement for preliminary approval, which was denied, because of the Court's concerns about various aspects of the structure of payments, which impacted the amount and timing of recovery for various plaintiff classes. (Tr. of Hr'g Held on Mar. 19, 2019 ("Mar. 19 Tr.") filed Mar. 22, 2019, Dkt. No. 83, at 22:23–24; Order dated Mar. 19, 2019 (denying motion to certify class without prejudice to renewal)). The revised settlement agreement addresses the Court's prior concerns. Specifically, the Court expressed concerns about a two-tiered settlement structure that differentiated between class and collective action members who have cooperated with the discovery process and those who have not. (Mar. 19 Tr. at 9:10–13). The Court also expressed concern about the front-loading of service awards to certain class members. (Id. at 13:13–19). These features have been eliminated from the settlement that is now being preliminarily approved.
8. The Settlement Agreement creates a Gross Settlement Fund of $627,500.00 (the "Fund"). (Agreement at § 1.20). The Settlement Agreement covers the awards of all Class Members who choose to participate and become Authorized Claimants, the cost of settlement administration, any Court-approved service payments, and any Court-approved attorney's fees and expenses. The Class is defined to include all individuals employed by To-Rise who performed work as Office Workers, Warehouse Workers, or Drivers, and any other employees whether part-time, full-time, or as a temporary employee, from June 29, 2010 through the date of execution of the Agreement. (Id. at § 1.5). Employees who return a Claim Form will be opting into the FLSA Collective Action, and will receive payment that covers both their NYLL and FLSA claims. Employees who do not return a Claim Form will not receive any payment, but will be releasing any NYLL claims, while retaining any FLSA claims, for the period covered by the Settlement Agreement. (See id. at §§ 1.34 & 1.35). Each Class Member who does not opt out of the settlement ("Authorized Claimant") will receive a proportional share of the Net Settlement Fund based on the number of weeks he or she worked for the Defendants. (Agreement at § 3.5(1)(B)). Assuming 100% participation, each Class Member will receive approximately 40% of their total claim. (Carafo Decl. ¶ 41.) The Settlement Agreement contains no reversionary component. (Id. at ¶ 42).
9. "At the preliminary approval stage of the case, ‘the district court must determine that a class action settlement is fair, adequate, and reasonable, and not a product of collusion.’ " Douglas v. Allied Universal Sec. Servs. , 371 F. Supp. 3d 78, 82 (E.D.N.Y. 2019) (quoting Joel A. v. Giuliani , 218 F.3d 132, 138 (2d Cir. 2000) ), reconsideration denied , 381 F. Supp. 3d 239 (2019) ; see Fed. R. Civ. P. 23(e)(2). Under Cheeks v. Freeport Pancake House, Inc. , 796 F.3d 199 (2d Cir. 2015), parties cannot privately settle FLSA claims with prejudice absent the approval of the district court and "must satisfy the Court that their agreement is fair and reasonable." Cortes v. New Creators, Inc. , No. 15-CV-5680, 2016 WL 3455383, at *2 (S.D.N.Y. June 20, 2016) (quotations omitted) (citing Cheeks , 796 F.3d at 200 ). The Court has conducted a fairness review of the Settlement Agreement under the factors articulated in Detroit v. Grinnell Corp. , 495 F.2d 448, 463 (2d Cir. 1974), and a preliminary evaluation of the fairness of the settlement under the standards in Cheeks , because "the meaning of the term ‘fair and reasonable’—the inquiry the Court must undertake under Rule 23(e) —is determined by the particular kind of class action being settled. This is a FLSA case, and whether the settlement is fair and reasonable under Rule 23(e) is determined by Cheeks and Wolinsky [v. Scholastic Inc. , 900 F. Supp. 2d 332 (S.D.N.Y. 2012) ]." Douglas , 371 F. Supp. 3d at 82 (collecting cases).
10. The Court is satisfied to the extent necessary for preliminary approval that the settlement is fair and reasonable. Among other reasons, this is a complex case with over 100 class and potential collective action members, where the Plaintiffs have a fair amount of litigation risk, because (1) Defendant maintained payroll and time records, and (2) Plaintiffs’ case depends in large part on the testimony of a single employee, which imperils the ability to prevail at trial should that testimony not be accorded any weight. The parties have engaged in extensive discovery and motion practice in order to vet their claims and defenses, and therefore have sufficient information to evaluate the risks of non-settlement and the advantages of settling to the proposed terms. It is also significant that there is some chance that by expending resources on further discovery and motion practice, a trial would leave Defendant without sufficient assets to satisfy a judgment. To forestall such a possibility, Defendant has agreed to a lump sum partial payment and secured the future payments by a mortgage on real property, which, absent settlement, may not be available to satisfy a judgment. Finally, assuming the best possible recovery, the claims of all class and collective members would amount to $796,897.34 (not including prejudgment interest). (Mem. of Law in Supp. of Mot., attached as Ex. 2 to Mot. to Certify Class, Dkt. No. 86, at 19). The settlement fund, which contains no reversionary feature, and before the provision of fees and service awards or costs, provides a recovery of $627,500.00. Even after subtracting a potential one-third fee recovery, costs, and service awards, each class member will be receiving approximately 40% of the value of his or her wage claims. Such a recovery is well within the percentage recovery that this Court and others have found to be sufficiently fair and reasonable, particularly in light of the potential inability to pay any judgment. See Siddiky v. Union Square Hosp. Grp., LLC , No. 15-CV-9705, 2017 WL 2198158, at *6 (S.D.N.Y. May 17, 2017) (collecting FLSA cases approving settlements where range of recovery for class members ranged from 13 to 25%); Pauta v. AJC Jewelry Contracting Corp. , No. 18-CV-6001, 2019 U.S. Dist. LEXIS 62788 (S.D.N.Y. Apr. 10, 2019) (finding 46% recovery well within range of reasonable recovery) (citing Larrea v. FPC Coffees Realty Co. , No. 15-CV-1515, 2017 WL 1857246, at *2 (S.D.N.Y. May 5, 2017) (finding recovery of 43% of the anticipated maximum recovery was fair and reasonable)). The Court has reviewed the Settlement Agreement and does not find any term that on its face suggests that the agreement was the product of improper collusion or otherwise contains provisions that are unfair to class members.
II. Conditional Certification of the Proposed Rule 23 Settlement Classes
11. As noted above, a collective action has been conditionally certified. Employees will, by virtue of returning a Claim Form, opt into the FLSA collective action. The Court is, as discussed below, separately certifying a class action for settlement purposes.
12. "Provisional settlement class certification and appointment of class counsel have several practical purposes, including avoiding the costs of litigating class status while facilitating a global settlement, ensuring notification of all class members of the terms of the proposed Settlement Agreement, and setting the date and time of the final approval hearing." See Dorn v. Eddington Sec., Inc. , No. 08-CV-10271, 2011 WL 382200, at *1 (S.D.N.Y. Jan. 21, 2011) (conditionally certifying wage and hour settlement class and granting preliminary approval of settlement).
13. Therefore, the Court certifies the following class under Fed. R. Civ. P. 23(e) for settlement purposes ("Settlement Class"):
All individuals, including Opt-in Plaintiffs, employed by To-Rise to perform work as Office Workers, Warehouse Workers, Drivers, as defined below, and any other class of employees employed by To-Rise, whether part-time, full-time or as a temporary employee from June 29, 2010 through date of full execution of the Agreement.
(Settlement Agreement § 1.5).
14. Plaintiffs meet all the requirements for class certification under Federal Rules of Civil Procedure 23(a) and 23(b)(3).
15. Plaintiffs satisfy Federal Rule of Civil Procedure 23(a)(1) because there are over 100 Rule 23 Class Members and, thus, joinder is impracticable.
16. Plaintiffs satisfy Federal Rule of Civil Procedure 23(a)(2) because the class members share common issues of fact and law, including whether Defendants failed to pay them wages in violation of state wage and hour laws.
17. Plaintiffs satisfy Federal Rule of Civil Procedure 23(a)(3) because Named Plaintiffs’ claims for overtime pay are typical of the claims of class members.
18. Plaintiffs satisfy Federal Rule of Civil Procedure 23(a)(4) because there is nothing to suggest that the representative parties will not fairly and adequately protect the interests of the class.
19. Plaintiffs also satisfy Rule 23(b)(3). Common factual allegations and a common legal theory predominate over any issues affecting only individual employees. Class adjudication of this case is superior to individual adjudication because it will conserve judicial resources and is more efficient for class members, particularly those who lack the resources to bring their claims individually. III. Appointment of Plaintiffs’ Counsel as Class Counsel
20. The Court appoints William Cafaro, Esq. of the Law Offices of William Cafaro, as Class Counsel because he meets all the requirements of Federal Rule of Civil Procedure 23(g). Mr. Carafo did substantial work identifying, investigating, and prosecuting the claims and negotiating the proposed settlement. Mr. Cafaro has previously been certified as Class Counsel and has handled other complex collective actions. See Damassia v. Duane Reade, Inc. , 250 F.R.D. 152, 165 (S.D.N.Y. 2008) (explaining that Rule 23(g) requires the court to consider "the work counsel has done in identifying or investigating potential claims in the action, ... counsel's experience in handling class actions, other complex litigation, and claims of the type asserted in the action, ... counsel's knowledge of the applicable law, and ... the resources counsel will commit to representing the class") (quotations omitted).
IV. Notice
21. The Court approves the Proposed Notice of Class Action Settlement ("Proposed Notice"), which counsel has revised and filed at Docket Entry 87, and directs its distribution to the Class.
22. A notice must provide "the best notice practicable under the circumstances, including individual notice to all members who can be identified through reasonable effort." Fed. R. Civ. P. 23(c)(2)(B).
The notice must clearly and concisely state in plain, easily understood language: (i) the nature of the action; (ii) the definition of the class certified; (iii) the class claims, issues, or defenses; (iv) that a class member may enter an appearance through an attorney if the member so desires; (v) that the court will exclude from the class any member who requests exclusion; (vi) the time and manner for requesting exclusion; and (vii) the binding effect of a class judgment on members under Rule 23(c)(3).
Id.
23. The Proposed Notice satisfies each of these requirements and adequately puts Class Members on notice of the proposed settlement. The Proposed Notice describes the terms of the settlement, informs the class about the allocation of attorney's fees, and provides specific information regarding the date, time, and place of the final approval hearing.
V. Class Action Settlement Procedure
24. The Court hereby adopts the following timeline to govern the settlement process in this case:
| September 5, 2019 | Defendants will provide the Settlement Claims Administrator and Class Counsel with the Class List. |
| October 7, 2019 | The Settlement Claims Administrator shall mail to all Class Members, via First Class United States Mail, the Court-approved Notices and Claim Forms. |
| January 7, 2020 | Bar Date: Last day for Class Members to qualify as Authorized Claimants by filing Claim Forms to participate in the Settlement. |
| January 7, 2020 | Last day for Class Members to "opt out" of the settlement. |
| January 7, 2020 | Last day for Class Members to submit written objections to the Settlement. |
| January 17, 2020 | Settlement Claims Administrator shall provide to the Parties: (a) a list of all Authorized Claimants; (b) a list of all Objectors; and (c) a list of all Class Members who timely submitted an Opt-out statement. |
| February 4, 2019 | Late Claim Bar Date: Last Day for Class Members to qualify as an Authorized Claimant possessing an untimely claim due to extraordinary factors as provided for in Section 2.3(E) of the Agreement. |
| February 5, 2019 | Settlement Claims Administrator shall provide to the Parties: (a) an updated list of all Authorized Claimants; (b) an updated list of all Objectors; and (c) an updated list of all Class Members who timely submitted an Opt-out statement. |
| April 11, 2020 | Last day for service of proposed papers in support of final settlement approval to Defendants for review and comment. |
| April 17, 2020 | Last day for filing and service of papers in support of final settlement approval with the Court. |
| May 1, 2020 at 10:00A.M. in Courtroom 324 North of the United States District Court, Eastern District of New York, Brooklyn Courthouse | Fairness hearing. |
| After fairness hearing | The Parties shall abide by the terms of the Agreement, the Claims Administrator will disburse settlement checks to the Class Members, fees, costs and expenses to Class Counsel, Service Award payments to Service Awardees, and the Claims Administrator's fee as provided in the Settlement Agreement. |