Thomas v. Port II Seafood & Oyster Bar, Inc. et al
Filing
48
ORDER granting 47 Motion to Approve Settlement Agreement. Signed by Chief Judge William H. Steele on 9/29/2016. (tgw)
IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ANDREA THOMAS,
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Plaintiff,
v.
PORT II SEAFOOD & OYSTER BAR,
INC., et al.,
Defendants.
CIVIL ACTION 16-0115-WS-N
ORDER
This matter comes before the Court on the parties’ Joint Motion to Approve Settlement
Agreement (doc. 47).
I.
Procedural History.
Plaintiff, Andrea Thomas, brought this opt-in collective action against defendants, Port II
Seafood & Oyster Bar, Inc., d/b/a Mikee’s Seafood, and Edwin Spence, Jr., alleging violations of
the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (“FLSA”). According to the well-pleaded
factual allegations of the Complaint, Thomas was employed by defendants as a server at Mikee’s
Seafood restaurant from February 2014 through June 2014. In the Complaint, Thomas alleged
that defendants violated the FLSA’s minimum wage and overtime provisions by (i) operating an
invalid tip pool that obliged tipped employees such as Thomas to share tips with ineligible, nontipped employees; (ii) requiring servers like Thomas to spend more than 20% of their time
performing non-tipped duties at the reduced minimum wage of $2.13/hour; and (iii) requiring
servers like Thomas to perform off-the-clock labor. The Complaint alleged that defendants’
violations of the FLSA were willful, and Thomas sought recovery of unpaid minimum and
overtime wages, plus liquidated damages, nominal damages, special damages, compensatory
damages, back pay, attorney’s fees and costs.
In addition to Thomas, this case includes three opt-in plaintiffs, to-wit: Cherry Marler,
Corina Woodward, and Frangelica Turner (collectively, the “Opt-In Plaintiffs”). (See docs. 4,
22.) Their claims appear identical to Thomas’s. In particular, all three Opt-In Plaintiffs maintain
that defendants violated the FLSA by requiring them to work off-the-clock until customers were
seated at their assigned tables, requiring them to spend more than 20% of their time performing
non-tipped duties at the reduced minimum wage, and requiring them to contribute a portion of
their tips to non-tipped kitchen staff in accordance with defendants’ invalid tip pool. (See doc. 7,
Exhs. C, D; doc. 47, at ¶¶ 15-23.)1
For their part, defendants deny plaintiffs’ claims. As a factual matter, defendants dispute
that Thomas or the Opt-In Plaintiffs devoted more than 20% of their time to non-tip producing
activities. Defendants further maintain that their tip pool arrangement was valid and compliant
with FLSA standards, and that only qualified employees participated in same. Defendants also
raise the additional defenses that certain of plaintiffs’ claims are barred by the applicable statute
of limitations, and that any violations were made in good faith. (Doc. 47, at 11.)2 Additionally,
all parties agree that fact-intensive questions relating to the validity of the Mikee’s Seafood tip
pool, whether any FLSA violations by defendants were willful, and whether defendants acted in
good faith would consume significant resources in this litigation, would require summary
judgment filings and ultimately a trial, and would significantly delay any recovery that plaintiffs
might ultimately be awarded.
To their credit, the parties have worked diligently following the filing of the Complaint to
explore whether early, amicable resolution of this matter is possible. Defendants produced
substantial records (including payroll summaries and pay stubs) to facilitate plaintiffs’ evaluation
of the respective claims and defenses. Furthermore, the parties contacted Magistrate Judge
Nelson in early August 2016 to request a judicial settlement conference, which she conducted on
1
With respect to opt-in plaintiff Frangelica Turner, this Court entered an Order
(doc. 36) on July 8, 2016, granting defendants’ Motion to Compel Arbitration (doc. 29) of
Turner’s claims in accordance with the terms of the Binding Arbitration Agreement she signed
on April 15, 2016. Notwithstanding the July 8 Order, the parties have agreed to settle Turner’s
claims as well as those of Thomas and the other Opt-In Plaintiffs, without prejudice to
defendants’ right to require Turner to litigate her claim via binding arbitration in the event the
settlement is not approved. (See doc. 47, at 9, n.1.)
2
It is unclear from the Joint Motion to Approve Settlement Agreement what
defendants’ position is on plaintiffs’ claims relating to off-the-clock work. The parties do state,
however, that they calculated back wages for off-the-clock labor “based on the difference of
estimated arrival times stated in each Plaintiff’s declaration and the recorded start time in
Defendants’ time punch records.” (Doc. 47, at 12.)
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August 25, 2016. (See doc. 42.) That settlement conference resulted in the successful resolution
of all claims asserted herein by both Thomas and the Opt-In Plaintiffs, conditioned on approval
by this Court. As required by applicable law, the parties followed up by submitting a detailed
Joint Motion to Approve Settlement Agreement, which is now ripe.
II.
Analysis.
A.
Statutory Requirement of Judicial Approval of FLSA Settlements.
In the overwhelming majority of civil actions brought in federal court, settlements are not
subject to judicial oversight, scrutiny or approval. However, FLSA settlements must be handled
differently. See, e.g., Moreno v. Regions Bank, 729 F. Supp.2d 1346, 1348 (M.D. Fla. 2010)
(“Settlement of an action under the FLSA stands distinctly outside the practice common to, and
accepted in, other civil actions.”). This is because “Congress made the FLSA’s provisions
mandatory; thus, the provisions are not subject to negotiation or bargaining between employers
and employees.” Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1352 (11th Cir.
1982). “Despite this general rule, an employer and an employee may settle a private FLSA suit
under the supervision of the district court” where there is a “bona fide dispute over FLSA
coverage.” Hogan v. Allstate Beverage Co., 821 F. Supp.2d 1274, 1281 (M.D. Ala. 2011). The
mechanics of such a settlement are that “[w]hen employees bring a private action for back wages
under the FLSA, and present to the district court a proposed settlement, the district court may
enter a stipulated judgment after scrutinizing the settlement for fairness.” Lynn’s Food, 679 F.2d
at 1353.
Where, as here, a district court is asked to approve an FLSA settlement between private
litigants, the court’s responsibility is to ascertain whether the parties’ negotiated resolution
comports with the statute’s terms. See, e.g., Nall v. Mal-Motels, Inc., 723 F.3d 1304, 1307-08
(11th Cir. 2013) (“[t]he purposes of the FLSA are undermined whenever an employer is allowed
to escape liability for violations of the statute”); Miles v. Ruby Tuesday, Inc., 799 F. Supp.2d
618, 622-23 (E.D. Va. 2011) (“the reason judicial approval is required for FLSA settlements is to
ensure that a settlement of an FLSA claim does not undermine the statute’s terms or purposes”).
A settlement may be approved when the court confirms that “employees have received all
uncontested wages due and that they have received a fair deal regarding any additional amount
that remains in controversy.” Hogan, 821 F. Supp.2d at 1282. Thus, the touchstone of the
inquiry is whether the proposed settlement “constitutes a fair and reasonable compromise of a
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bona fide FLSA dispute.” Crabtree v. Volkert, Inc., 2013 WL 593500, *3 (S.D. Ala. Feb. 14,
2013).
The caveat to such judicial oversight is that “[i]n reviewing FLSA settlements under
Lynn’s Food, courts should be mindful of the strong presumption in favor of finding a settlement
fair.” Parker v. Chuck Stevens Chevrolet of Atmore, Inc., 2013 WL 3818886, *2 (S.D. Ala. July
23, 2013) (citations and internal quotation marks omitted); see also Wingrove v. D.A.
Technologies, Inc., 2011 WL 7307626, *2 (N.D. Ga. Feb. 11, 2011) (recognizing “strong
presumption” that FLSA settlements are fair and reasonable). Such deference is warranted
because “the Court is generally not in as good a position as the parties to determine the
reasonableness of an FLSA settlement” and “[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 Management Co., 715 F. Supp.2d 1222, 1227 (M.D. Fla. 2009).
B.
Fairness/Reasonableness of Payments to Plaintiffs.
The Joint Motion reflects that this action does, indeed, involve a bona fide FLSA dispute.
Among other areas of divergence, there appears to be a good-faith dispute between the parties as
to whether the Mikee’s Seafood tip pool was valid, whether the kitchen staff members
participating in such tip pool were eligible to do so under FLSA standards, whether any
violations by defendants were willful, and whether defendants operated in good faith. All
information before the Court at this time supports a determination that plaintiffs’ FLSA claims
were actually, reasonably in dispute, thereby giving rise to the possibility of a Lynn’s Food
compromise settlement of those disputed claims.
Against this backdrop of litigation uncertainty, the parties negotiated a settlement to
resolve the FLSA claims of Thomas and the Opt-In Plaintiffs against defendants in their entirety.
To achieve this result, the parties calculated the total number of regular and overtime hours for
which Thomas and the Opt-In Plaintiffs had been paid at the reduced minimum wage of $2.13
per hour in reliance on the FLSA tip credit provision. The parties then multiplied those hours by
the relevant “tip differential” rate (i.e., the difference between the $7.25 minimum wage and the
$2.13 tip credit minimum wage) for regular hours, with an additional 1.5 times multiplication of
the corresponding rates for overtime hours. Through this methodology, the parties calculated the
total differential between the amounts that Thomas and the Opt-In Plaintiffs were actually paid
under defendants’ tip credit arrangement, and the amounts they would have been paid if
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plaintiffs were paid at the prevailing $7.25 minimum wage (i.e., the amounts they would have
been owed if the Mikee’s Seafood tip pool were deemed invalid, thereby depriving defendants of
eligibility for the $2.13 tip credit minimum wage). With respect to the “off-the-clock” claims,
the parties calculated additional back wages using the difference between each plaintiff’s
estimated arrival times at work and their recorded start times in defendants’ time punch records.
Those resulting figures were multiplied by $7.25 per hour.
In calculating settlement amounts for both the “tip credit” claims and the “off-the-clock”
claims, the parties utilized a two-year backpay period, and allotted a sum equal to the two-year
backpay amount for each plaintiff in the form of liquidated damages.3 Thus, the settlement was
predicated on the a “two years liquidated damages” calculation, such that the settlement amounts
represented 100 cents on the dollar that each plaintiff would have received at trial had plaintiffs
successfully proven their claims in full and defendants failed to establish a “good faith” defense,
thereby giving rise to an award of liquidated damages. Plaintiffs’ sole compromise for
settlement purposes was to forego the third year of damages, which they could have recovered at
trial only if they had proven that defendants’ violations were willful. (Doc. 47, at 13.)
Pursuant to the parties’ agreement, then, plaintiffs are being paid all monies allegedly due
to them, including 100% of their alleged unpaid wages and 100% of their alleged unpaid
liquidated damages for the FLSA two-year limitations period that attaches in the absence of
willful violations. In light of that fact, coupled with plaintiffs’ counsel’s representations that
plaintiffs have consulted with their experienced counsel, that plaintiffs fully understand the
agreement, and that plaintiffs have entered into the agreement knowingly and voluntarily, the
Court has no qualms or reservations whatsoever about accepting that portion of the settlement as
fair and reasonable to plaintiffs. After all, the settlement results in plaintiffs receiving all of the
funds they claim defendants owe them for a two-year FLSA limitations period, such that their
3
In specific terms, the agreed-upon payments for each plaintiff calculated via this
methodology are as follows: (i) to plaintiff Thomas, $2,022.72 in backpay and an additional
$2,022.72 in liquidated damages, for a total payment of $4,045.44; (ii) to opt-in plaintiff Marler,
$1,546.03 in backpay and an additional $1,546.03 in liquidated damages, for a total payment of
$3,092.06; (iii) to opt-in plaintiff Turner, $1,360.71 in backpay and an additional $1,360.71 in
liquidated damages, for a total payment of $2,721.42; and (iv) to opt-in plaintiff Woodward,
$1,584.51 in backpay and an additional $1,584.51 in liquidated damages, for a total payment of
$3,169.02. (Doc. 47, at 13.)
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FLSA claims are effectively being paid in full. The parties’ decision to limit the damages period
to two years, rather than three, is also fair and reasonable, given the disputed nature of plaintiffs’
claims, the potential that plaintiffs might have recovered nothing at trial, and the difficulties
plaintiffs would have encountered in trying to prove the willfulness of any violations so as to
unlock the third year of FLSA liability. Accordingly, the Court is satisfied that the parties’
agreed-upon settlement amount is a fair and reasonable resolution of a bona fide dispute as to
Thomas’s and the Opt-In Plaintiffs’ FLSA causes of action, for purposes of Lynn’s Food and its
progeny. Again, there are no uncontested wages remaining unpaid (because the settlement pays
all plaintiffs 100 cents on the dollar for their claimed back wages) for the two-year limitations
period, and plaintiffs are plainly receiving a fair deal as to all claims that are the subject of bona
fide controversy.
C.
Attorney’s Fees.
In addition to reviewing the fairness and reasonableness of the settlement payment to
plaintiffs, the Court must also consider the reasonableness of the negotiated attorney’s fee
component of an FLSA settlement. See, e.g., Crabtree v. Volkert, Inc., 2013 WL 593500, *7
(S.D. Ala. Feb. 14, 2013) (“a court reviewing an FLSA settlement must review the
reasonableness of counsel’s legal fees to assure both that counsel is compensated adequately and
that no conflict of interest taints the amount the wronged employee recovers under a settlement
agreement”) (citation and internal quotation marks omitted).
Here, the parties represent that they negotiated the attorney’s fee portion of the settlement
only after coming to an agreement on backpay and liquidated damages figures. (Doc. 47, at 14
(“The parties discussed attorneys’ fees and costs only after coming to an agreement that fully
compensated the Plaintiffs’ claims under the two-year statute of limitations.”).) As such, the
Court has no reason to believe that the fee portion of the settlement has been at the expense of
statutory compensation owed to plaintiffs. In other words, the proposed settlement described in
the Joint Motion is not a zero-sum game in which each settlement dollar allocated to plaintiffs’
lawyers results in a dollar of FLSA compensation being taken from plaintiffs’ pockets. Thus, the
concerns animating judicial review of the attorney’s fee portion of FLSA settlements are not
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implicated here.4 At any rate, the Court has reviewed plaintiffs’ counsel’s time records appended
to the Joint Motion as Exhibit A. Such review confirms that the proposed $18,000 payment to
plaintiffs’ counsel appears fair and reasonable under the circumstances here, in light of the costs
expended, work performed, hours spent, and hourly rates awardable, in connection with
plaintiffs’ counsel’s efforts preparing and litigating this case, studying defendants’ records,
compiling individualized damages calculations, and negotiating a favorable settlement.
In short, the Court is satisfied that the proposed attorney’s fee payment to plaintiffs’
counsel constitutes adequate, reasonable compensation and that plaintiffs’ recovery in this matter
was neither tainted nor otherwise adversely affected by the fee award negotiated by their
attorneys.
III.
Conclusion.
For all of the foregoing reasons, it is ordered that the parties’ Joint Motion to Approve
Settlement Agreement (doc. 47) is granted. The settlement of plaintiffs’ FLSA claims is
approved as fair and reasonable pursuant to the analysis required by the Eleventh Circuit in
Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir. 1982). In accordance with
the requirements of Lynn’s Food, a stipulated final judgment will be entered. See Nall, 723 F.3d
at 1308 (“The agreement between Nall and Malik was not made under the supervision of the
Secretary of Labor, so it is valid only if the district court entered a ‘stipulated judgment’
approving it.”) (emphasis added).
DONE and ORDERED this 29th day of September, 2016.
s/ WILLIAM H. STEELE
CHIEF UNITED STATES DISTRICT JUDGE
4
See, e.g., Bonetti, 715 F. Supp.2d at 1228 (deeming scrutiny of reasonableness of
attorney’s fee payment in FLSA settlement unnecessary unless “the settlement does not appear
reasonable on its face or there is reason to believe that the plaintiff’s recovery was adversely
affected by the amount of fees paid to his attorney”); Wing v. Plann B Corp., 2012 WL 4746258,
*4 (M.D. Fla. Sept. 17, 2012) (declining to assess reasonableness of attorney’s fee payment in
FLSA settlement where “Plaintiff’s claims were resolved separately and apart from the issue of
attorneys’ fees,” such that “there is no reason to believe that Plaintiff’s recovery was adversely
affected by the amount of fees and costs to be paid to Plaintiff’s counsel”).
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