Opinion
Civil Action 22-cv-00685-WB
10-18-2022
MICHAEL IVERS, Plaintiff, v. MONTGOMERY COUNTY EMERGENCY SERVICE, INC. d/b/a MONTGOMERY COUNTY MH-MR SERVICE, Defendant.
REPORT AND RECOMMENDATION
HON. RICHARD A. LLORET, U.S. Magistrate Judge.
Before me is the Joint Motion and Incorporated Memorandum of Law for Approval of the Parties' FLSA Settlement (“Joint Motion”). Doc. No. 15. The Joint Motion has been referred to me for a report and recommendation. Doc. No. 18. I recommend that the Joint Motion be granted in part and denied in part.
FACTUAL AND PROCEDURAL BACKGROUND
This action began in the Court of Common Pleas of Montgomery County on September 15, 2021. Doc. No. 1 at 4. It was removed to the United States District Court for the Eastern District of Pennsylvania (“the Eastern District of Pennsylvania”) based on federal question jurisdiction. Id. at 3. Plaintiff asserts Defendant violated the Fair Labor Standards Act (“the FLSA”) as defined under 29 U.S.C. § 201. Id. at 13. Plaintiff alleges that Defendant failed to pay overtime wages then terminated employment when Plaintiff reported the alleged failure to pay. Id. at 14. Defendant alleges Plaintiff failed to report overtime on certain timesheets, which caused non-payment, and poor performance prompted termination. Doc. No. 5 at 3-4.
Plaintiff also claims Defendant violated the Pennsylvania Whistleblower Law (“PWL”) under 43 P.S.C. § 1421, the Pennsylvania Minimum Wage Act (“PMWA”) under 43 P.S.C. § 333.101, and the Pennsylvania Wage Payment and Collection Law (“PWPCL”) under 43 P.S.C. § 260.1. Doc. No. 4 at 3.
I held a settlement conference on May 18, 2022. Doc. Nos. 11 and 12. The Parties reached a settlement amount of $27,500.00 to resolve all claims. Doc. No. 15 at 3. The Joint Motion proposes Defendant pay Plaintiff $16,299.18 for unpaid wages, liquidated damages, back pay, and compensatory damages; and $11,200.82 for Plaintiff's attorney fees and costs to counsel. Id. In exchange, Plaintiff will agree to a general release. Id. Parties now seek approval of this proposed FSLA settlement.
DISCUSSION
An FLSA settlement must either be (1) overseen by the Department of Labor or (2) approved by the district court. Solkoff v. Pennsylvania State University, 435 F.Supp.3d 646, 652 (E.D. Pa. 2020). Both public and private FLSA settlements require judicial approval. Kraus v. PA Fit II, LLC, 155 F.Supp.3d 516, 516 (E.D. Pa. 2016); but see Alcantara v. Duran Landscaping, Inc., 2022 WL 2703610 at 1 (E.D. Pa. 2022) (holding that approval is not required when settling private FLSA claims). Review must be prospective. Kraus, 155 F.Supp.3d at 529-30. The Eastern District of Pennsylvania has adopted the Eleventh Circuit's general rule for reviewing FLSA settlements. Id.; and see Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982).
Under Lynn's Food, the court must discern if the agreement resolves a bona fide dispute. If there is a bona fide dispute, then the court will determine if the settlement (1) is fair and reasonable to the employee, and (2) furthers the purpose of the FLSA. Kraus, 155 F.Supp.3d at 524-25. The Plaintiff cannot waive liquidated damages or the disputed FLSA rights. Id. at 525. Finally, any awarded attorneys' fees must reasonable. Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n. 1 (3d Cir. 2000).
A. THE SETTLEMENT RESOLVES A BONA FIDE DISPUTE.
A court must first determine if the settlement resolves a bona fide dispute. A bona fide dispute occurs when the defendant, either directly or indirectly, rejects facts prompting the FLSA claim. Kraus, 155 F.Supp.3d at 530. The Eastern District of Pennsylvania has determined that a bona fide dispute occurs when the parties present divergent facts for the number of hours worked. See e.g. Solkoff, 435 F.Supp.3d at 654.
In the Joint Motion, Parties first assert the settlement is entitled to a presumption of fairness. The reviewing court must apply an initial presumption of fairness when “(1) the settlement negotiations occurred at arm's-length; (2) there was sufficient discovery; (3) the proponents of the settlement are experienced in similar litigation; and (4) only a small fraction of the class objected.” In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 535 (3d Cir. 2004). Caselaw indicates that the presumption of fairness applies in class action litigation. See Warfarin, 391 F.3d, In re National Football League Players Concussion Injury Litig., 821 F.3d 410 (3d Cir. 2016), and Galt v. Eagleville Hospital, 310 F.Supp.3d 483 (E.D. Pa. 2018). The presumption does not apply here. If it did, then all but one element would be met. The fourth element regards a class, which is not applicable in a private FLSA claim. Since the analysis is not applicable, I begin with determining if there is a bona fide dispute.
Here, Plaintiff alleges Defendant failed to (1) pay overtime wages when Plaintiff worked through some meal breaks and (2) include differential pay in paid overtime wages. Doc. No. 8 at 8-9. The FLSA is meant to govern against this alleged conduct. See 29 U.S.C.A. § 207. Defendant has asserted factual differences: non-payment was due to Plaintiff failing to report overtime hours. Defendant has continuously rejected Plaintiff's alleged facts in the Answer (Doc. No. 5), the Joint Report of Rule 26(f) Meeting and Proposed Discovery Plan (Doc. No. 7), and the proposed Settlement Agreement (Doc. No. 15). The record indicates a bona fide dispute.
B. THE PROPOSED MONETARY SETTLEMENT IS FAIR AND REASONABLE, THE RELEASE PROVISION IS NOT.
The Eastern District of Pennsylvania is divided on what procedure to use when discerning if a settlement is fair and reasonable to the employee. Some courts review using nine factors provided in Girsh v. Jepson. 521 F.2d 153 (3rd Cir. 1975). Other courts use the Girsh factors as a guiding light, rather than a step-by-step test. See e.g. Howard v. Philadelphia Housing Authority, 197 F.Supp.3d 773, 777 n. 1 (E.D. Pa. 2016). The latter finds a fundamental policy difference between class action or collective FLSA lawsuits and private FLSA lawsuits. Girsh's nine factors aim to protect class action members or class interest from being overshadowed during settlement. Kraus, 155 F.Supp.3d at nt. 3. In a private FLSA claim, the reviewing court must omit two Girsh factors, because the two factors only apply to class actions. Id. This omission forms an analysis that is no longer a Girsh analysis. Id. I will review the proposed settlement to determine if it is fair and reasonable, but not by a step-by-step application of the Girsh factors.
The nine factors are:
(1) the complexity, expense, and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendant 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 all the attendant risks of litigation.Girsh, 521 F.2d at 157-58.
See also Short v. Qyst Inc., 2022 WL 2109191 (E.D. Pa. 2022); Kyem v. Merakey USA, et al., 2022 WL 425584 (E.D. Pa. 2022); Xu v. Gu, 2022 WL 35605 (E.D. Pa. 2022); and Brown v. United States Postal Service, 2021 WL 5083981 (E.D. Pa. 2021).
See also Solkoff, 435 F.Supp.3d __; Gravely v. Petro Choice, LLC, 2022 WL 2316174 (E.D. Pa. 2022); Munoz v. Goldberg, 2021 WL 4902334 (E.D. Pa. 2021); Howard, 197 F.Supp.3d; and Kraus, 155 F.Supp.3d. __.
A court's primary indicator for fairness is how the settlement amount compares to the damages requested. Solkoff, 435 F.Supp.3d at 654. The Settlement amount cannot be less than the amount the Plaintiff claims in FLSA damages. Id. at 654-55. This settlement would resolve multiple claims. Doc. No. 1 at 13. If a proposed settlement resolves multiple claims but does not differentiate payment for each claim, then the court must determine if the gross amount would resolve the FLSA claim. Id. at 655. The gross amount includes awarded attorneys' fees because these fees are part of the gross settlement award. Id. Secondary markers for fairness include the use of arms-length negotiations, the likelihood of success at trial, and the benefits to settling. Id. at 654.
Here, the proposed settlement amount is $27,500.00: $16,299.18 for “back wages” and $11,200.82 for “attorneys' fees and costs to Plaintiff's counsel.” Doc. No. 15 at 3. Plaintiff estimates Defendant owes $7,633 in unpaid overtime under the FLSA. Id. at 10. The settlement amount was agreed to via arm's-length negotiation. See Doc. No. 13. Both parties acknowledge that a trial would have “considerable risk,” a settlement is in their “best interest,” and the proposed settlement “provides reasonable value.” Doc. No. 15 at 9. I find this monetary amount is fair and reasonable as it is more than the estimated wages owed, was reached via arms-length negotiations, and both parties engaged in a cost-benefit analysis that promoted settlement.
Courts also look to proposed confidentiality clauses and general release clauses when determining if a settlement is fair and reasonable. Confidentiality clauses contradict the FLSA's purpose. Howard, 197 F.Supp.3d at 779-80. Release clauses that contain “any and all claims” or “including, but not limited to” language have been rejected, because such phrases are too broad and risk a waiver of statutory rights available beyond the scope of the facts before the court. Id. at 779-80.
Here, the Parties omitted a confidentiality clause to promote the FLSA's purpose. Doc. No. 15 at 11. There is a general release provision that seeks to
resolve all pending and potential issues and disputes between them, including, but not limited to: those disputes arising out of or relating to Plaintiff's meal break periods, wage calculations, separation from MCES, and all claims that Plaintiff may have against MCES and any other of the Releases (as defined in Paragraph 5), including, but in no way limited to, those differences embodied in the Lawsuit as well as any unasserted claims.Id. at 16-17 (emphasis added). Paragraph five of the proposed settlement provides that Plaintiff “unconditionally and irrevocably releases” Defendant “of and from any and all” complaints, regardless of “any nature whatsoever, asserted or unasserted, known or unknown, suspected or unsuspected, which he ever had, not has, or hereafter may have” against Defendant that would arise “at any time up through the effective date of this Agreement.” Id. at 19. Like the release in Howard, this release is too broad. The release requests relief from all possible claims that could have arisen until the settlement is effective. The proposed release goes beyond the facts leading to the FLSA claim and the Pennsylvania claims the Parties seek to resolve. To approve this release would risk barring Plaintiff from asserting any claims that would arise from facts not before the court. Therefore, the proposed language is unfair to the Plaintiff.
C. THE NEGOTIATED ATTORNEYS' FEES ARE REASONABLE.
When a proposed FLSA settlement includes an award for attorney's fees, the reviewing court is required to “articulate” the basis for the proposed award. Kraus, 155 F.Supp.3d at 534 (citing to Brown v. TrueBlue, Inc., 2013 WL 5408575, at *3 (M.D. Pa. 2013)). The Third Circuit implements the percentage-of-recovery method in wage and hour claims. Id. at 533 (citing to Keller v. TD Bank, No. 12-5054, 2014 WL 5591033, at *14 (E.D. Pa. 2014)). By using this method, the reviewing court will award a fixed portion of the settlement. Id. Reviewing courts use seven factors to determine if the proposed amount is appropriate. Id. at 533 (citing to Gunter, 223 F.3d at n. 1). One factor can outweigh the rest. Id. These factors are:
(1) the size of the fund created and the number of persons benefitted; (2) the presence or absence of substantial objections by members of the class to the settlement terms and/or fees requested by counsel; (3) the skill and efficiency of the attorneys involved; (4) the complexity and duration of the litigation; (5) the
risk of nonpayment; (6) the amount of time devoted to the case by plaintiffs' counsel; and (7) the awards in similar cases.Gunter, 223 F.3d at n. 1. Involving non-payment as a factor in the analysis allows riskier litigation to prompt higher attorneys' fees. See McGee v. Ann's Choice, 2014 WL 2514582, *5 (E.D. Pa. 2014) (citing to Chakejian v. Equifax Info. Servs., LLC, 275 F.R.D. 201, 219 (E.D.Pa.2011)). A good benchmark is to have awarded attorneys' fees make up one-third of recovery. See Altnor v. Preferred Freezer Services, Inc., 197 F.Supp.3d 746, 768-69 (enumerating that the Third Circuit routinely resolves litigation with one-third of the total settlement allotted to attorneys' fees).
Here, one person benefits from the settlement amount, because this is a private FLSA claim. Counsel efficiently negotiated a settlement in a complex case via arms-length negotiation. See McGee, 2014 WL at *5 (citing to Brumley v. Camin Cargo Control, Inc., 2012 WL 1019337 (D.N.J. 2012)) (finding that FLSA claims are complex, and arms-lengths negotiations further demonstrate complexity). The litigation has exceeded one year, the action commenced in September 2021 and the Joint Motion was dated August 31, 2022. Without settlement, the litigation has approximately one additional year left. See Doc. No. 19 (setting trial for August 21, 2023). Counsel has demonstrated a substantial amount of time and effort has been put into the litigation. The Joint Motion cites “more than 20 hours” of effort has been devoted to this matter. Doc. No. 15 at 12. The exertion includes attempting to resolve the matter pre-litigation, reviewing pay data, taking interviews, drafting various requests and motions, and participating in the settlement conference. Id.
The facts demonstrate the proposed resolution is in accordance with five of the seven Gunter factors. I note that the $11,200.82 award is 40% of the total settlement; 30% of the total settlement would be $9,075. Case law indicates that 20-45% of the total settlement is fair. See Goncalves v. AJL Construction Inc., 2022 WL 2985636, *4 (E.D. Pa. 2022). While on the high side, the percentage is not automatically disqualifying when weighed against the other factors promoting the amount to be reasonable. I find the negotiated attorney's fees are reasonable.
RECOMMENDATION
I recommend the Settlement Agreement be granted in part and denied in part. The Court should not approve the release provision as the language is overbroad and unfair to the plaintiff. The Court should approve the remainder of the proposed Settlement as there is a bona fide dispute and the remaining terms are in furtherance of the FLSA's purpose. I recommend the denial be without prejudice, so the parties may revise the release provision appropriately and file an amended motion for judicial approval of a new Settlement Agreement.