Prim v. Ensign United States Drilling, Inc.
ORDER denying 33 Unopposed Motion for Approval of FLSA Settlement and Stipulation of Dismissal of Lawsuit with Prejudice by Judge Philip A. Brimmer on 08/24/2017. (sphil, )
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Philip A. Brimmer
Civil Action No. 15-cv-02156-PAB-KMT
MATTHEW PRIM, individually and on behalf of all others similarly situated,
ENSIGN UNITED STATES DRILLING, INC.,
The matter before the Court is the parties’ Unopposed Motion for Approval of
FLSA Settlement and Stipulation of Dismissal of Lawsuit with Prejudice [Docket No.
33]. Plaintiff and defendant request that the Court approve their settlement of plaintiff’s
claims brought pursuant to the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et
On September 30, 2015, plaintiff filed his complaint, individually and on behalf of
all others similarly situated, alleging that defendants violated the FLSA. Docket No. 1.
Plaintiff was employed by defendant and worked in an oilfield as an hourly employee.
Id. at 2, ¶ 7. Plaintiff and other employees received bonuses as a component of their
compensation including “Safety Bonuses and/or Performance Bonuses.” Id., ¶ 8.
Defendant excluded these bonuses from calculations of plaintiff’s and other employees’
regular rate of pay, and therefore failed to pay plaintiff and the putative class members
overtime at the rate required by the FLSA. Id. at 2-3, ¶ 9.1
On February 15, 2017, plaintiff filed the instant motion seeking approval of the
settlement between the parties and dismissal of this lawsuit with prejudice. Docket
In a suit by employees against their employer to recover back wages under the
FLSA, the parties must present any proposed settlement to the district court for review
and a determination of whether the settlement agreement is fair and reasonable. See
Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982).
Requiring court approval of FLSA settlements effectuates the purpose of the statute,
which is to “protect certain groups of the population from substandard wages and
excessive hours . . . due to the unequal bargaining power as between employer and
employee.” Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 706 (1945).
A. Final Class Certification
The FLSA provides that an employee or employees may bring an action “[on]
behalf of himself or themselves and other employees similarly situated.” 29 U.S.C.
§ 216(b). Courts determine whether plaintiffs are “similarly situated” for purposes of
FLSA collective action certification in two stages. Thiessen v. GE Capital Corp., 267
F.3d 1095, 1105 (10th Cir. 2001). A court’s initial certif ication comes at the notice
stage, where courts use a fairly lenient standard to determine whether plaintiffs are
On April 1, 2016, Justin John-Stanley Bowser opted into this lawsuit. Docket
No. 19. On May 19, 2016, James Dean Pena opted into this lawsuit. Docket No. 20.
similarly situated for purposes of sending notice to putative class members. Id. at 1102.
In this case, plaintiff did not request initial certification. See Docket No. 24. After
discovery, a court makes a final class certification using a stricter standard. See
Thiessen, 267 F.3d at 1102-03. In order to approve a settlement prior to a final
collective action ruling, “the Court must make some final class certification finding.”
Whittington v. Taco Bell of Am., Inc., No. 10-cv-01884-KMT-MEH, 2013 WL 6022972,
at *2 (D. Colo. Nov. 13, 2013) (citing Peterson v. Mortgage Sources, Corp., 2011 WL
3793963, at *4 (D. Kan. Aug. 25, 2011)).
In deciding whether to certify a collective action, courts consider several factors,
including: (1) the disparate factual and employment settings of individual plaintiffs; (2)
various defenses available to defendant which appear to be individual to each plaintiff;
and (3) fairness and procedural considerations. 2 See Thiessen, 267 F.3d at 1103.
Plaintiff’s motion makes no reference to collective action certification, fails to
provide any facts demonstrating the similarities of the proposed class, and does not
discuss any of the factors the Court should consider in certifying a class. See
Thiessen, 267 F.3d at 1103 (enumerating the relevant factors for certification of an
opt-in class). Instead, plaintiff states that the parties dispute whether the class
members are similarly situated. Docket No. 33 at 8. Accordingly, on April 14, 2017, the
Court ordered plaintiff to file supplemental briefing with the Court addressing the
propriety of some final class certification. Docket No. 37.
Thiessen lists a fourth factor, i.e. whether plaintiffs made the filings required by
the ADEA before instituting suit. See Thiessen, 267 F.3d at 1103. That factor does not
apply in FLSA cases. See Kaiser v. At The Beach, Inc., 2010 WL 5114729, at *3, n.6
(N.D. Okla. Dec. 9, 2010).
On May 1, 2017, plaintiff filed supplemental briefing in support of the parties’
motion for settlement approval. Docket No. 38. In the supplement, plaintiff argues that
the Court should apply a more lenient “notice stage” standard in determining whether
certification is appropriate. Id. at 5. Plaintiff claims that some certification is
appropriate because “Ensign employed non-exempt hourly workers who it paid certain
non-discretionary bonuses to, including safety and performance bonuses.” Id.
As an initial matter, the Court disagrees that the notice stage standard should be
applied to make some final class certification determination. If this were the case, there
would be no need for the Court to consider class certification prior to approving a
settlement if an initial notice had been approved. See Whittington, 2013 WL 6022972,
at *3 (applying the Thiessen factors and discussing evidence discovered after the initial
class certification was approved). Regardless, under either the notice stage standard
or some heightened standard, plaintiff has not provided information sufficient to make
any determination as to class certification.
Plaintiff cites three items as evidence of defendant’s policy of failing to
incorporate certain non-discretionary bonuses to its employees. Docket No. 38 at 5-6.
First, plaintiff points to the opt-in forms submitted by plaintiff and two other employees.
Docket Nos. 1-1, 19, 20. The opt-in forms reference “unpaid overtime” but do not
define the bonuses at issue or discuss plaintiff’s specific claims. See id. Second,
plaintiff cites the scheduling order which provides:
Other current and former employees who Plaintiff claims are similarly
situated to him may join or opt-in and will have the same claims as
Plaintiff should the Court grant Plaintiff’s request for conditional
certification and permission to notify a Putative Class.
Docket No. 17 at 4. This section provides no description of the breadth of defendant’s
alleged policy and does not enable the Court to determ ine whether there is a class of
employees who are sufficiently similarly situated for settlement purposes. Third,
plaintiff submits time sheets from plaintiff, which show that Mr. Prim received
performance bonuses. Docket No. 38-1. It is unclear whether this is the only type of
bonus at issue in the settlement, see Docket No. 17 at 3 (discussing different types of
bonuses paid by defendant), and these time sheets do not provide any evidence that
other employees, including the other opt-in plaintiffs, received the bonuses at issue.
Plaintiff has not provided “substantial allegations that the putative class members were
together the victims of a single decision, policy or plan.” Grady v. Alpine Auto Recovery
LLC, No. 15-cv-00377-PAB-MEH, 2015 WL 3902774, at *2 (D. Colo. June 24, 2015)
(citing Thiessen, 267 F.3d at 1105).
Plaintiff states that approval is appropriate because, “[i]n their settlement, the
Parties agreed to limit the scope of the putative class to hourly employees who, based
on Ensign’s payroll records, received the bonuses at issue.” Docket No. 38. The
settlement agreement, however, has no such limitation. Instead, the agreement defines
the relevant class as “all current Opt-in Class Members and Settlement Class Members
who timely opt-in to the Settlement Class.” Docket No. 34 at 4. “Settlement class” and
“settlement class member” are defined, in turn, as “all individuals who are covered by
this settlement.” Id. at 5. Neither the terms of the settlement agreement nor the
motions submitted by the parties cogently limits the proposed settlement class.
Based on the foregoing, the Court finds that no form of class certification is
appropriate. While plaintiff’s motion should be denied on these grounds alone, the
Court addresses several other defects in plaintiff’s motion and proposed settlement in
anticipation of a renewed motion for approval of settlement.
B. The Settlement
To approve the settlement agreement, the Court must find that (1) the litigation
involves a bona fide dispute, (2) the proposed settlement is fair and equitable to all
parties concerned, and (3) the proposed settlem ent contains a reasonable award of
attorney’s fees. Lynn’s Food Stores, 679 F.2d at 1354.
1. Bona Fide Dispute
Parties requesting approval of an FLSA settlement must provide the Court with
sufficient information to determine whether a bona fide dispute exists. Dees v.
Hydradry, Inc., 706 F. Supp. 2d 1227, 1234 (M.D. Fla. 2010). T o meet this obligation,
the parties must present: (1) a description of the nature of the dispute; (2) a description
of the employer’s business and the type of work performed by the employees; (3) the
employer’s reasons for disputing the employees’ right to a minimum wage or overtime;
(4) the employees’ justification for the disputed wages; and (5) if the parties dispute the
computation of wages owed, each party’s estimate of the number of hours worked and
the applicable wage. Collins v. Sanderson Farms, Inc., 568 F. Supp. 2d 714, 718 (E.D.
La. 2008). The mere existence of an adversarial lawsuit is not enough to satisfy the
bona fide dispute requirement. Id. at 719-20.
Plaintiff states that the parties dispute whether class members received nondiscretionary bonuses that defendant excluded from its overtime calculations. Docket
No. 33 at 8. Defendant, in contrast, argues that “most, if not all, of the contested
bonuses were discretionary in nature and therefore excludable from the Class
Members’ regular rates.” Id.
The determination of the “regular rate” for overtime calculation purposes
excludes discretionary bonuses. 29 C.F.R. § 778.211. In order f or a bonus to qualify
as discretionary, “both the fact that payment is to be made and the amount of the
payment are determined at the sole discretion of the employer at or near the end of the
period and not pursuant to any prior contract, agreement, or promise causing the
employee to expect such payments regularly.” Id. The parties do not present any
description of the bonuses at issue in the case, how they were paid, or what facts
underlie the dispute between the parties.
In a similarly brief manner, plaintiff states that “[t]he Parties further disagreed on
whether Plaintiff could satisfy his burden to demonstrate that Ensign acted willfully,
which in turn affects whether Plaintiff could recover compensation for two (2) years or
three (3) years.” Docket No. 33 at 8. There is no description in the motion of the facts
in support of or in opposition to a finding that defendant’s conduct was willful.
In the absence of facts showing a bona fide dispute, the Court would be unable
to approve the parties’ proposed settlement.
2. Fair and Reasonable
To be fair and reasonable, an FLSA settlement must provide adequate
compensation to the employees and must not frustrate the FLSA policy rationales.
Courts considering both individual and collective settlements under the FLSA turn to the
factors for evaluating the fairness of a class action settlement. See, e.g., Dail v.
George A. Arab Inc., 391 F. Supp. 2d 1142, 1146 (M.D. Fla. 2005) (evaluating
individual action); Collins, 568 F. Supp. 2d at 721 (evaluating collective action). The
Tenth Circuit considers the following factors when deciding whether to approve a
class-action settlement under Fed. R. Civ. P. 23(e): (1) whether the parties fairly and
honestly negotiated the settlement; (2) whether serious questions of law and fact exist
which place the ultimate outcome of the litigation in doubt; (3) whether the value of an
immediate recovery outweighs the mere possibility of future relief after protracted
litigation; and (4) the judgment of the parties that the settlement is fair and reasonable.
Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180, 1188 (10th Cir. 2002).
The parties submit that they fairly and honestly negotiated the settlement.
Docket No. 33 at 1. However, the impact of the settlement on the class is too opaque
for the Court to find that the settlement is fair and reasonable. In order to determine
whether the value of immediate recovery outweighs a possible future recovery, the
Court must have some information about the class members’ potential recovery. See,
e.g., Lopez v. Nights of Cabiria, LLC, 96 F. Supp. 3d 170, 177 (S.D.N.Y. 2015)
(“Nowhere in the parties’ submission is there an actual, bottom-line statement of the
dollar amount that each of the named plaintiffs would receive from the proposed
settlement. This omission, coupled with the parties’ failure to specify on a
plaintiff-by-plaintiff basis the alleged numbers of hours worked and applicable wages,
leaves the Court in a position in which it cannot discharge its duty to determine whether
the settlement amount is fair and reasonable as to each of the named plaintiffs.”).
While the parties need not submit information as to each class member, the Court
cannot approve the settlement without information regarding the number of potential
class members, the average expected recovery, and the extent to which the settlement
represents a compromise of the amounts owed to plaintiffs. See Whittington, 2013 WL
6022972, at *5 (approving settlement based on an expected payment of approximately
$5,000 to each class member and comparing the settlement to other factually similar
In addition, if the Court finds that the settlement is fair and reasonable, the Court
must next determine whether the settlement agreement undermines the purpose of the
FLSA, which is to protect employees’ rights from employers who generally wield
superior bargaining power. To determine whether a settlement agreement complies
with the FLSA, courts look at the following factors: (1) presence of other similarly
situated employees; (2) a likelihood that plaintiffs’ circumstances will recur; and (3)
whether defendants had a history of non-compliance with the FLSA. Dees, 706 F.
Supp. 2d at 1244. Of particular relevance here is the requirement in the claim form that
class members must “agree to keep this matter and the settlement confidential and not
disclose it to third parties.” Docket No. 34 at 20. A conf identiality agreement is contrary
to the FLSA’s legislative purpose and “thwart[s] the informational objective of the notice
requirement by silencing the employee who has vindicated a disputed FLSA right.”
Dees, 706 F. Supp. 2d at 1242. The parties offer no reason why a confidentiality
agreement would be appropriate here.
The Court also notes that the class notice is deficient. The proposed settlement
is a fixed amount and each class member’s claims will be reduced pro rata, depending
on the number of claims filed. See Docket No. 34 at 9, ¶ 17. The proposed class
notice, however, makes no mention of this reduced distribution. See id. at 16-17.
3. Attorney’s Fees
When addressing a common fund settlement, such as the one at issue in this
case, it is appropriate to calculate an appropriate attorney ’s fee based on a percentage
of the fund, instead of using the lodestar method. See Gottlieb v. Barry, 43 F.3d 474,
482-83 (10th Cir. 1994). To determine a reasonable fee the Court must consider the
following factors: “(1) the time and labor required; (2) the novelty and difficulty of the
questions; (3) the skill requisite to perform the legal service properly; (4) the preclusion
of employment by the attorney due to acceptance of the case; (5) the customary fee;
(6) whether the fee is fixed or contingent; (7) time limitations imposed by client or the
circumstances; (8) the amount involved and the results obtained; (9) the experience,
reputation and ability of the attorneys; (10) the undesirability of the case; (11) the nature
and length of the professional relationship with the client; and (12) awards in similar
cases.” Whittington, 2013 WL 6022972, at *5 (citing Johnson v. Georgia Highway Exp.,
Inc., 488 F.2d 714, 719 (5th Cir. 1974)).
Plaintiff’s attorneys request an award of thirty-five percent of the settlement
amount, or approximately $285,250.00. Docket No. 34 at 4. T he motion to confirm the
settlement award discusses a “customary contingency fee,” but does not address any
other Johnson factors. Docket No. 33 at 11-12. The fact that a fee is customary,
standing alone, does not justify a large award of fees. Since this case was filed in
2015, there have been no dispositive motions filed in the case and, based on the
materials before the Court, it is unclear whether the parties engaged in extensive
discovery. Moreover, as noted above, the Court is also unable to determine whether
the result obtained in this case would militate in favor of a large fee award. The Court is
disinclined to award a “customary” attorney’s fee without additional information
regarding the attorneys’ conduct in this case.
For the foregoing reasons, it is
ORDERED that plaintiff’s Unopposed Motion for Approval of FLSA Settlement
and Stipulation of Dismissal of Lawsuit with Prejudice [Docket No. 33] is DENIED
DATED August 24, 2017.
BY THE COURT:
s/Philip A. Brimmer
PHILIP A. BRIMMER
United States District Judge
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