Reynolds et al v. Hologic, Inc. et al

Filing 54

ORDER granting approval of FLSA settlement. Signed by Judge Hamilton on 09/28/2012. (pjhlc2, COURT STAFF) (Filed on 9/28/2012)

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UNITED STATES DISTRICT COURT

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NORTHERN DISTRICT OF CALIFORNIA

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REYNOLDS, et al.,
Plaintiffs,

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ORDER GRANTING APPROVAL OF
FLSA SETTLEMENT

HOLOGIC, INC., et al.,
Defendants.
_______________________________/

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For the Northern District of California

United States District Court

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v.

No. C 11-0462 PJH

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Plaintiffs’ motion for approval of their proposed FLSA settlement originally came on

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for hearing before the court on July 11, 2012. At the hearing, the court raised concerns

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with the proposed 40% attorneys’ fee award to plaintiffs’ counsel, noting that the Ninth

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Circuit only deviates from a 25% benchmark award if the benchmark is shown to be

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“unreasonable under the circumstances.” See, e.g., Paul, Johnson, Alston & Hunt v.

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Graulty, 886 F.2d 268, 272-73 (9th Cir. 1989). The court also noted the unusual procedural

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posture of the case, in that the parties had not sought preliminary approval of the

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settlement before seeking final approval as the memorandum of understanding and

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settlement agreement said they would. Because of this procedural irregularity, the opt-in

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plaintiffs were required to consent to the settlement before the settlement terms had been

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finalized. As a result, the court found that those plaintiffs could not have given their

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informed consent to the terms of the settlement, and gave the parties two options; either (1)

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re-file the motion as a motion for preliminary approval of the settlement, which would allow

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all plaintiffs (including the opt-in plaintiffs) to review the terms of the agreed-upon

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settlement and to provide their informed consent; or (2) file a motion to decertify the class

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and proceed outside of the collective action context. The court denied plaintiffs’ motion

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without prejudice and gave the parties 30 days to select one of those options and file a re-

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styled motion.

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The parties chose neither option, and instead sent a joint letter to the court,

reviewed the settlement and agreed to its terms. The court held a telephonic conference

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with the parties, explaining that the consent forms had addressed concerns about the lack

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of a preliminary approval motion, but reiterating its concerns about the reasonableness of a

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40% award for attorneys’ fees. The court instructed plaintiffs’ counsel to file a

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supplemental brief justifying the upward adjustment of the 25% benchmark, or instead,

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providing authority which relieves plaintiffs from having to make a showing that the amount

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sought is reasonable. The court gave plaintiffs’ counsel one week to file the supplemental

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For the Northern District of California

attaching consent forms from each of the opt-in plaintiffs which showed that they had

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United States District Court

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brief.

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Eighteen days later, plaintiffs’ counsel filed their brief. The brief implicitly concedes

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that some justification is needed for an upward adjustment of the 25% benchmark, as

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nowhere in the brief do plaintiffs’ counsel suggest that they are relieved from having to

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make that showing. The brief attempts to justify the adjustment by contending that the

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settlement is an “excellent” result that, “in most cases, [provides] more than 100% of the

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amount the plaintiffs would have been entitled to recover under the FLSA.” See Dkt. 46 at

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2, 8-9. In support of the latter claim, the brief compares the amount that each plaintiff will

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receive under the settlement with the “potential recovery” under FLSA. And indeed, several

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plaintiffs will receive more under the settlement than she could have recovered under the

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FLSA. However, that is not the relevant comparison. As the terms of the settlement make

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clear, each plaintiff agrees to release not only any FLSA claims, but also all claims under

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“any state law regulating hours of work, wages, the payment of wages, and/or the payment

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of overtime compensation.” See Dkt. 43, Ex. C at 3. In their complaint, plaintiffs asserted a

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total of six causes of action, only one of which was under the FLSA and five of which were

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based purely on California state law. Thus, the comparison that the brief should have

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made is a comparison between plaintiffs’ actual recovery under the settlement and their

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potential recovery on all asserted claims, if the case had gone to trial. Without that
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comparison, there is no way for the court to determine whether the settlement is in fact an

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excellent result for plaintiffs.

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After plaintiffs’ counsel filed their brief, the court received a number of emails from

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named plaintiff Shella Leahy, expressing concerns with the way that the case had been

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handled by plaintiffs’ counsel. Because the emails contained privileged attorney-client

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communications, and because it would be improper for the court to engage in ex parte

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communications with a represented party, the court did not consider the emails as

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presented. However, because the emails raised a number of significant issues regarding

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the proposed settlement, including a potential misrepresentation regarding Ms. Leahy’s
salary, the court issued an order allowing Ms. Leahy to file formal objections with the court.

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For the Northern District of California

United States District Court

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Ms. Leahy sent a letter to the court on September 6, 2012, attaching payroll records that

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showed a potential discrepancy with the pay records relied upon by plaintiffs’ counsel. Ms.

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Leahy also explained that she had encountered some difficulty in receiving responses to

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her questions from her counsel.

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The court then permitted both plaintiffs’ counsel and defendants’ counsel an

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opportunity to respond to Ms. Leahy’s objections. Plaintiffs’ counsel sent a letter to the

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court on September 17, 2012, with Ms. Leahy’s payroll documents attached. Plaintiffs’

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counsel explained the salary discrepancy by pointing out that Ms. Leahy’s pay records

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included not only her salary, but also additional compensation such as paid-out accrued

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vacation time. Defendants’ counsel also filed a response, arguing that such additional

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compensation is not properly included when calculating salary for FLSA purposes, and

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further noting that the same methodology for calculating salary was used for all plaintiffs.

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The court is thus satisfied that Ms. Leahy’s salary was calculated using the same method

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as was used to calculate the other plaintiffs’ salaries.

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However, Ms. Leahy’s objections did further elucidate the issue of the quality of the

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result obtained by plaintiffs’ counsel. Together, the concerns raised by Ms. Leahy,

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combined with the deficiencies in plaintiffs’ counsel’s brief regarding attorneys’ fees as to

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the showing of the reasonableness of the amount, persuade the court that no deviation
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from the Ninth Circuit’s 25% attorneys’ fee benchmark is warranted. As a result, the court

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approves an attorneys’ fee award of 25% of the settlement fund, or $37,375 (out of the total

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settlement fund of $149,500). With that change, the proposed settlement is hereby

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APPROVED. The remaining 15% of the proposed attorneys’ fee award (i.e. $22,425) shall

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be distributed to each of the plaintiffs on a pro rata basis, as identified in plaintiffs’ brief (i.e.

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22% to Ms. Reynolds, 45% to Ms. Leahy, 11% to Ms. Shawa, 10% to Ms. Duncan, and

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12% to Ms. Lindsey).

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The parties shall file a proposed form of judgment within 7 days of the date of this
order.
IT IS SO ORDERED.

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For the Northern District of California

United States District Court

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Dated: September 28, 2012
______________________________
PHYLLIS J. HAMILTON
United States District Judge

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