Jefferson et al v. MEC Development, LLC

Filing 31

ORDER APPROVING SETTLEMENT AGREEMENT 29 signed by District Judge Anthony W. Ishii on 10/15/2019. IT IS HEREBY ORDERED that the parties' motion to approve the second proposed settlement agreement (Doc. No. 29) is GRANTED and the second proposed settlement agreement (Doc. No. 29-3) is APPROVED. (Gonzales, V)

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UNITED STATES DISTRICT COURT

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EASTERN DISTRICT OF CALIFORNIA

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ANTONIO JEFFERSON et al.,

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Plaintiffs,
ORDER APPROVING SETTLEMENT
AGREEMENT

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v.

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MEC DEVELOPMENT, LLC,

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CASE NO. 1:17-cv-01394

(Doc. Nos. 29, 29-3)

Defendant.

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This lawsuit is about an employer that allegedly violated federal and California wage and

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hours laws by, amongst other acts and omissions, failing to pay overtime and failing to provide

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meal and rest breaks. The employer is Defendant MEC Development, LLC (“Defendant” or

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“MEC”), and the plaintiffs are three former employees of MEC: namely, Antonio Jefferson,

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Wayne Lewis, and Gregory Brown.

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Before the Court is the parties’ second joint motion for approval of a settlement agreement

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of Plaintiffs’ several claims, including a FLSA overtime claim. See Doc. No. 29-1. The Court

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will approve the settlement agreement.

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I. Background
MEC is a North Dakota limited-liability company that provided services pertaining to

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unmanned aerial systems (e.g., drones) and surveillance and video/imagery solutions. Some of

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MEC’s business operations were conducted in China Lake, California and Inyokern, California.

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At these locations, MEC employed “logisticians” who performed logistics support.

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Plaintiffs are three former employees of MEC who worked as logisticians at MEC’s China

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Lake and Inyokern locations. Plaintiffs were employed by MEC during the following time

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periods: Jefferson from May 26, 2014, through September 8, 2015; Lewis from February 10, 2014,

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through September 8, 2015; and Brown from May 12, 2014, through September 8, 2015.

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After leaving their employment at MEC, Plaintiffs filed suit against MEC in October 2017.
See Doc. No. 1. Plaintiffs alleged that MEC violated multiple federal and California wage and

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hour laws affecting Plaintiffs and a class of other similarly situated logisticians. On that basis,

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Plaintiffs pleaded seven claims for relief against MEC.

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Plaintiffs’ first claim is (1) failure to pay overtime compensation as required by the federal

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Fair Labor Standards Act (“FLSA”).1 Plaintiffs’ six other claims against MEC are based on

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California law: namely, (2) failure to pay overtime compensation; (3) failure to provide meal

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periods; (4) failure to authorize and permit rest breaks; (5) failure to pay all wages due at

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termination; (6) engaging in unfair competition; and (7) failure to comply with California’s wage

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statement laws, such as by failing to furnish Plaintiffs with accurate itemized written statements

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showing their total hours worked. See id.

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Plaintiffs pleaded their FLSA claim on behalf of themselves and a class of similarly

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situated logisticians pursuant to § 216(b) of the FLSA, which allows a plaintiff to bring an FLSA

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claim “in behalf of himself . . . and other employees similarly situated.” 29 U.S.C. § 216(b).

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Similarly, Plaintiffs pleaded their California claims pursuant to Fed. R. Civ. P. 23 on behalf of

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themselves and a class of similarly situated logisticians.

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After engaging in discovery and settlement negotiations, Plaintiffs and Defendant filed

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their first joint motion for approval of a settlement agreement. See Doc. No. 25-1. The Court

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denied that motion because the proposed settlement agreement and the parties’ briefing failed to

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demonstrate that the proposed settlement agreement was a fair and reasonable resolution of a bona

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fide dispute over FLSA provisions. See Doc. No. 28 (Court’s order denying first motion for

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approval of settlement agreement). In the Court’s order denying the motion, the Court identified

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the relevant legal standard that the parties must meet in order to obtain the Court’s approval of a

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FLSA settlement, and the Court identified several deficiencies with the parties’ first proposed

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settlement agreement and supportive briefing. See id.

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The parties then filed their second joint motion for approval of a settlement agreement,

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which is now before the Court. To date, Plaintiffs have not moved for class certification for any of

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their claims, and Plaintiffs indicate that they have abandoned their pursuit of class certification.

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The FLSA is codified at 29 U.S.C. § 201, et seq.

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II. Parties’ Second Joint Settlement Motion

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In their second joint motion for approval of a settlement agreement, the parties assert that

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they have reached a settlement agreement that, if approved by the Court, will resolve all of

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Plaintiffs’ claims. The parties state that the settlement agreement should be approved by the Court

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because the settlement agreement is fair and reasonable.

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In the settlement agreement, Defendant agrees to make the following four settlement

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payments to Plaintiffs, respectively: (1) $22,000 to Jefferson, $6,763.70 of which is for his

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California overtime claim and $15,236.30 of which is for his California rest and meal break claim;

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(2) $24,000 to Lewis, $7,749.66 of which is for his California overtime claim and $16,250.34 of

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which is for his California rest and meal break claim; (3) $21,000 to Brown, $5,164.83 of which is

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for his California overtime claim and $15,835.17 of which is for his California rest and meal break

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claim; and (4) $61,344.45 to all Plaintiffs — to be paid directly to Plaintiffs’ attorneys —

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representing the full and final settlement of all of Plaintiffs’ attorney’s fees and costs.

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The settlement agreement provides no payments to Plaintiffs for their California claims of

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failure to pay wages when due and failure to provide compliant wage statements, and this is

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because, according to the parties, the claims are barred by the statute of limitations. Similarly, the

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settlement agreement provides no payments to Plaintiffs for their FLSA overtime claim because,

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according to the parties, the claim is likely barred by the statute of limitations and, additionally,

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double recovery for both a FLSA overtime claim and a California overtime claim is generally not

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allowed.

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In consideration for the foregoing settlement payments, each Plaintiff agrees to release

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Defendant “from any and all claims . . . that he had, has, or may have against [Defendant], arising

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out of or relating to the subject matter of” the claims in this lawsuit. See Doc. No. 29-3 (parties’

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second proposed settlement agreement).

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The parties assert that the settlement agreement applies only to the claims of the three

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Plaintiffs — not to any putative class members — because Plaintiffs have abandoned their pursuit

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of class certification.

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III. Discussion

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A.

Legal standard for settlement of FLSA claim
The FLSA was enacted to protect workers from substandard wages and oppressive

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working hours. See Barrentine v. Arkansas–Best Freight System, 450 U.S. 728, 739 (1981).

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Under the FLSA, an employee’s right to a minimum wage and to overtime pay is nonwaivable.

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Id. at 740. Therefore, FLSA rights cannot be abridged or waived by contract — including a

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settlement agreement — because this would “nullify the purposes of the statute and thwart the

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legislative policies it was designed to effectuate.” Id. (internal quotations omitted).

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For these reasons, an FLSA claim may not be settled without approval of either the

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Secretary of Labor or a district court. See Seminiano v. Xyris Enter., Inc., 602 F. App’x 682, 683

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(9th Cir. 2015) (citing Nall v. Mal–Motels, Inc., 723 F.3d 1304, 1306 (11th Cir. 2013)). The

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Ninth Circuit has not established a standard for district courts to follow when evaluating a

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settlement of an FLSA claim, but federal district courts in California frequently apply the standard

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established by the Eleventh Circuit in Lynn’s Food Stores, Inc. v. U.S. By and Through U.S. Dep’t

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of Labor, 679 F.2d 1350, 1352 (11th Cir. 1982). See, e.g., Guinn v. Sugar Transp. of Nw., Inc.,

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No. 16-CV-325, 2018 WL 3435410, at *2 (E.D. Cal. July 13, 2018); Thompson v. Costco

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Wholesale Corp., No. 14-CV-2778, 2017 WL 697895, at *6 (S.D. Cal. Feb. 22, 2017).

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Pursuant to the Eleventh Circuit’s standard in Lynn’s Food Stores, Inc., the plaintiff may

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settle and release his or her FLSA claim against the employer or putative employer if the

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settlement constitutes “a fair and reasonable resolution of a bona fide dispute over FLSA

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provisions.” Lynn’s Food Stores, 679 F.2d at 1355. To determine whether the settlement reflects

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a fair and reasonable resolution of a bona fide dispute, the district court should consider and

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balance several factors: (1) the plaintiff’s range of possible recovery on the FLSA claim and the

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amount offered in settlement; (2) the strength of the FLSA claim; (3) the risk, expense,

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complexity, and likely duration of further litigation; (4) the extent of discovery completed and the

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stage of the proceedings; (5) the experience and views of counsel; (6) the presence of a

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governmental participant; (7) the reaction of the plaintiff and, if applicable, class members to the

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proposed settlement; (8) the possibility of fraud or collusion; and (9) the scope of the plaintiff’s
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release. See Kerzich v. Cty. of Tuolumne, 335 F. Supp. 3d 1179 (E.D. Cal. 2018); Seguin v. Cty.

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of Tulare, No. 16-CV-1262, 2018 WL 1919823, at *3 (E.D. Cal. Apr. 24, 2018); Slezak v. City of

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Palo Alto, No. 16-CV-3224, 2017 WL 2688224, at *3 (N.D. Cal. June 22, 2017); see also Lewis v.

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Vision Value, LLC, No. 11-CV-1055, 2012 WL 2930867, at *2 (E.D. Cal. July 18, 2012)

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(recognizing that the factors used to analyze FLSA settlements are similar to the factors used to

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determine the fairness of class action settlements under Fed. R. Civ. P. 23). If the settlement

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reflects a fair and reasonable compromise over issues that are actually in dispute, then the district

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court may approve the settlement “in order to promote the policy of encouraging settlement of

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litigation.” Lynn’s Food Stores, 679 F.2d at 1354.

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B.

Analysis of the proposed settlement agreement
The Court concludes that the parties’ second proposed settlement agreement is a fair and

reasonable resolution of a bona fide dispute over FLSA provisions. The following explains why.

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“A district court evaluates the plaintiff’s range of potential recovery to ensure that the

The proposed settlement amount and range of recovery

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settlement amount agreed to bears some reasonable relationship to the true settlement value of the

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claims. . . . [I]n comparing the amount proposed in the settlement with the amount that plaintiffs

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could have obtained at trial, the court must be satisfied that the amount left on the settlement table

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is fair and reasonable under the circumstances presented.” Selk v. Pioneers Mem’l Healthcare

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Dist., 159 F. Supp. 3d 1164, 1174 (S.D. Cal. 2016). This evaluation and comparison must be

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made in light of the strength of the plaintiff’s FLSA claim. Lynn’s Food Stores, 679 F.2d at 1354.

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Here the proposed settlement amounts are $22,000 to Jefferson, $24,000 to Lewis, and

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$21,000 to Brown. The maximum possible recovery if Plaintiffs prevailed on all of their claims

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(excluding the California timely payment claim and wage statement claim, which the parties agree

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are barred by the statute of limitations) is $42,130.99 for Jefferson, $53,209.45 for Lewis, and

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$43,090.88 for Brown. When the proposed settlement amounts are balanced against the maximum

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possible recovery and the strength of the Plaintiffs’ claims — which is a factor that is discussed

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infra — the proposed settlement amounts are fair and reasonable. Therefore, this factor weighs in

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favor of the proposed settlement agreement.
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The parties explain with evidence that Plaintiffs’ FLSA overtime claim is very weak for

Strength of FLSA claim

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two reasons. First, the claim is barred by the two-year statute of limitations that applies when

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there is no “willful” violation. Second, since there is no significant evidence of a willful violation

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by Defendant, the FLSA claim likely does not qualify for the three-year statute of limitations that

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applies when there is a “willful” violation. See Flores v. City of San Gabriel, 824 F.3d 890, 895

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(9th Cir. 2016) (“The [FLSA] has a two-year statute of limitations for claims unless the

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employer’s violation was ‘willful,’ in which case the statute of limitations is extended to three

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years.”) (citing 29 U.S.C. § 255(a)).

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The Court agrees that the FLSA claim is very weak in light of the evidence presented by
the parties. Therefore, this factor weighs in favor of the proposed settlement agreement.

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3.

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“Courts favor settlement where there is a significant risk that litigation might result in a

Risk, expense, complexity, and likely duration of further litigation

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lesser recovery for the class or no recovery at all.” Beidleman v. City of Modesto, 2018 WL

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1305713, at *4 (E.D. Cal. Mar. 13, 2018) (citations omitted). Here Plaintiffs would face a

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significant risk by proceeding to trial. This is because, as already noted, the FLSA claim is very

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weak and, additionally, there is substantial evidence that Defendant did not violate California’s

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rest and meal break laws, at least not to an extent that would provide Plaintiffs with greater

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compensation than what Plaintiffs are being provided by the proposed settlement agreement.

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Therefore, this factor weighs in favor of the proposed settlement agreement.

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4.

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“The Court should lean in favor of a settlement where evidence is presented that a

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considerable amount of discovery has been conducted because it suggests that the parties arrived

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at a compromise based on a full understanding of the legal and factual issues surrounding the

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case.” Millan v. Cascade Water Servs., Inc., 310 F.R.D. 593, 610 (E.D. Cal. 2015). Here the

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parties have conducted significant discovery, and it is largely because of this discovery that the

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parties (and the Court) are now in a position to meaningfully consider the strength of Plaintiffs’

Extent of discovery completed and the stage of the proceedings

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claims and the risks of proceeding to trial. Therefore, this factor weighs in favor of the proposed

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settlement agreement.

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5.

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Great weight is accorded to the recommendation of counsel, who are most closely

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acquainted with the facts of the underlying litigation. Id. at 612. Here lead counsel for Plaintiffs

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and Defendant, both of whom appear to be sufficiently experienced with wage and hour litigation,

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believe that the proposed settlement agreement is a fair and reasonable resolution of Plaintiffs’

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claims. Therefore, this factor weighs in favor of the proposed settlement agreement.

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6.

Experience and views of counsel

Reaction of plaintiffs

Plaintiffs appear to be pleased with the proposed settlement agreement. Therefore, this
factor weighs in favor of the proposed settlement agreement.

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7.

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“[I]t is appropriate for the court to consider the procedure by which the parties arrived at

The possibility of fraud or collusion

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their settlement to determine whether the settlement is truly the product of arm’s length

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bargaining, rather than the product of collusion or fraud.” Id. at 613. Here there does not appear

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to be any fraud or collusion underlying the proposed settlement agreement. This is because the

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parties have been represented by counsel at all relevant times; counsel negotiated the settlement

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agreement at arm’s length after conducting significant discovery; Plaintiffs are pleased with the

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proposed settlement agreement; and the resolution of the attorney’s fees payment to Plaintiffs’

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counsel, which does not appear to be unreasonable, was resolved only after the negotiation and

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resolution of the settlement payments to Plaintiffs. Therefore, this factor weighs in favor of the

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proposed settlement agreement.

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8.

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Courts review the scope of any release provision in a FLSA settlement to ensure that the

Scope of release

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plaintiffs are not pressured into forfeiting claims or waiving rights unrelated to the litigation. Selk,

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159 F. Supp. 3d at 1178. “The concern is that an expansive release of claims would effectively

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allow employers to use employee wages — wages that are guaranteed by statute — as a

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bargaining chip to extract valuable concessions from employees.” Id.; see also Seguin, 2018 WL
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1919823, at *4; Moreno v. Regions Bank, 729 F. Supp. 2d 1346, 1351 (M.D. Fla. 2010) (“An

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employee who executes a broad release effectively gambles, exchanging unknown rights for a few

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hundred or a few thousand dollars to which he is otherwise unconditionally entitled.”). For this

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reason, a “FLSA release should not go beyond the specific FLSA claims at issue in the lawsuit

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itself.” Slezak, 2017 WL 2688224, at *4. Courts are hesitant and may reject a proposed

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settlement agreement that attempts to release claims that are not directly related to the claims and

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allegations brought in the underlying lawsuit. See, e.g., Gonzalez v. CoreCivic of Tennessee,

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LLC, 2018 WL 4388425, at *10 (E.D. Cal. Sept. 13, 2018); McKeen-Chaplin, 2012 WL 6629608,

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at *5 (N.D. Cal. Dec. 19, 2012).

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Here Plaintiffs’ releases are not overly broad because they extend only to “the subject

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matter of” the claims in this lawsuit. Therefore, this factor weighs in favor of the proposed

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settlement agreement.

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9.

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The foregoing factors indicate that the parties’ proposed settlement agreement is a fair and

Balance of factors

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reasonable resolution of a bona fide dispute over FLSA provisions. Accordingly, the Court will

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approve the proposed settlement agreement.

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ORDER

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Accordingly, IT IS HEREBY ORDERED that the parties’ motion to approve the second

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proposed settlement agreement (Doc. No. 29) is GRANTED and the second proposed settlement

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agreement (Doc. No. 29-3) is APPROVED.

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IT IS SO ORDERED.
Dated: October 15, 2019
SENIOR DISTRICT JUDGE

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