Diaz v. Lost Dog Pizza, LLC et al

Filing 46

ORDER Granting 43 Joint Motion for Final Approval of Settlement and 44 Plaintiff's Motion for Attorneys' Fees. The partie' Settlement Agreement (ECF No. 43 -1) is APPROVED. The Clerk of the Court SHALL TERMINATE the case. The parties shall bear their own costs except as provided above. ORDERED by Judge William J. Martinez on 5/21/2019. (angar, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge William J. Martínez
Civil Action No. 17-cv-2228-WJM-NYW
VICTOR DIAZ, on his own behalf
and on behalf of all others similarly situated,
Plaintiff,
v.
LOST DOG PIZZA, LLC,
DANIEL WARREN LYNCH, and
JEFF SMOKEVITCH,
Defendant.
______________________________________________________________________
ORDER GRANTING JOINT MOTION FOR FINAL APPROVAL OF SETTLEMENT
AND PLAINTIFF’S MOTION FOR ATTORNEYS’ FEES
______________________________________________________________________
Before the Court is the parties’ Joint Motion for Final Approval of Class and
Collective Action Settlement (“Joint Motion”) and Plaintiff’s Motion for Attorney Fee (“Fee
Motion”). (ECF No. 43 & 44.) The Court held a settlement fairness hearing (“Settlement
Hearing”) on May 15, 2019. Considering the arguments raised at the Settlement Hearing
and in the Joint Motion and Fee Motion, and for the reasons set forth below, the Court
grants the Joint Motion and Fee Motion, and approves the Settlement Agreement (ECF
No. 43-1), including an incentive payment for Plaintiff Victor Diaz and reasonable
attorneys’ fees and costs.
I. BACKGROUND
On September 14, 2017, Plaintiff Victor Diaz filed this lawsuit as a putative
collective and class action against Defendant Lost Dog Pizza, LLC (d/b/a Brown Dog

Pizza), and its owners and managers, Daniel Warren Lynch and Jeff Smokevitch
(collectively, “Defendants”). (ECF No. 1.) Plaintiff, on behalf of himself and others
(“pizza workers”)—all hourly employees at Defendants’ pizzeria from 2014
onward—alleges that Defendants failed to properly compensate pizza workers for
overtime hours under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201 et seq.,
and the Colorado Minimum Wage Act (“CMWA”), Colo. Rev. Stat. §§ 8-6-101 et seq.
For example, Plaintiff alleges that he worked 107.67 hours from July 16–31, 2015, and
99.61 hours from September 5–18, 2016, and that Defendants failed to pay him
overtime as required during those periods. (ECF No. 1 ¶ 17.) He also alleges that
Defendants subjected all pizza workers to a “common policy of refusing to pay overtime
wages for hours worked beyond forty each workweek and beyond twelve each
workday.” (Id. ¶¶ 18, 29.)
On June 19, 2018, the Court certified a Rule 23 class for the CMWA claims, and
conditionally certified a collective action under the FLSA. (ECF No. 30.) The difference
between the class definition and the collective action definition is simply the respective
timeframe.1 The Rule 23 class includes employees from September 14, 2015, onward,
1

The FLSA collective action class is defined as:
All hourly employees who worked at Brown Dog Pizza on or after
September 14, 2014 and who were not paid overtime wages for
overtime hours worked.

(ECF No. 30 at 12.) The Rule 23 Class is defined as:
All hourly employees who worked at Brown Dog Pizza on or after
September 14, 2015 and who were not paid overtime wages for
overtime hours worked.
(Id.)

2

whereas the FLSA action covers pizza workers as of September 14, 2014. (Id. at 12.)
At that time, the Court approved a revised version of the proposed FLSA Notice and
Consent to Join and directed notice to potential collectiv e action members. (Id. at
10–11.) However, the Court denied, without prejudice to refiling, the parties’ proposal
to notify class members of a settlement because the full details of the proposed
settlement were not before the Court. (Id. at 11.)
Plaintiff filed a Notice of Completion of Mailing of the FLSA opt-in notices on July
2, 2018. (ECF No. 33.) According to the parties, three potential FLSA plaintif fs
returned consent to join forms. (ECF No. 43 at 2.)
After the opt-in period closed in August 2018, the parties concluded settlement
negotiations and moved for preliminary approval of a class and collective action
settlement. (ECF No. 37.) This time, the Court granted preliminary approval, ordered
notice to class members, set deadlines for opt-out forms and objections, and scheduled
the Settlement Hearing for May 15, 2019. (ECF No. 40.) On January 2, 2019,
Defendants filed a Notice of Completion of Mailing of the class settlement notice. (ECF
No. 42.)
On April 10, 2019, the parties filed the Joint Motion and Plaintiff filed the Fee
Motion. (ECF No. 43 & 44.) The Court held the Settlement Hearing on May 15, 2019.
(ECF No. 45.)
II. SETTLEMENT AGREEMENT ANALYSIS
In deciding whether to approve a settlement in class action, a court must
determine whether the settlement is “fair, reasonable, and adequate.” Fed. R. Civ.

3

P. 23(e)(2). Courts consider four factors in evaluating the settlement:
(1) whether the proposed settlement was fairly and honestly
negotiated;
(2) whether serious questions of law and fact exist, placing
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 and
expensive litigation; and
(4) the judgment of the parties that the settlement is fair and
reasonable.
Gottlieb v. Wiles, 11 F.3d 1004, 1014 (10th Cir. 1993), abrogated on other grounds by
Devlin v. Scardelletti, 536 U.S. 1 (2002). The Court may also consider the fact that no
objections were filed by any class members. In re Dun & Bradstreet Credit Servs.
Customer Litig., 130 F.R.D. 366, 372 (S.D. Ohio 1990) (“No timely objection was raised
by any Class Member to the proposed settlement, and less than 5% of all Class
Members have chosen to opt out. One untimely objection, improper in other regards,
was filed and subsequently withdrawn prior to the fairness hearing. No objection was
raised at the fairness hearing. The Court gives these factors substantial weight in
approving the proposed settlement.”).
Having thoroughly reviewed the Joint Motion and the Settlement Agreement, the
Court finds that the settlement negotiated by counsel is fair, reasonable, and adequate.
With regard to the four factors, the parties have demonstrated that the Settlement
Agreement was negotiated at arms’ length by counsel experienced in these types of
cases. The parties engaged in informal discovery, undertook a detailed review of
Defendants’ billing records, and negotiated settlements amounts for each class or
4

collective action member as well as a cy pres award for unclaimed funds.
The parties have also shown that serious questions of fact and law exist,
particularly with regard to the accuracy of the billing records and entitlement to certain
overtime wages, as well as the appropriateness of any liquidated damages under the
FLSA . These factual and legal issues weigh in favor of approving the Settlement
Agreement.
Further, the Court finds that the value of the Settlement Agreement outweighs
the possibility of recovery after protracted litigation. Courts have held that the
presumption in favor of voluntary settlement agreements
is especially strong in class actions and other complex cases
where substantial judicial resources can be conserved by
avoiding formal litigation. The strong judicial policy in favor
of class action settlement contemplates a circumscribed role
for the district courts in settlement review and approval
proceedings. This policy also ties into the strong policy
favoring the finality of judgments and the termination of
litigation. Settlement agreements are to be encouraged
because they promote the amicable resolution of disputes
and lighten the increasing load of litigation faced by the
federal courts. In addition to the conservation of judicial
resources, the parties may also gain significantly from
avoiding the costs and risks of a lengthy and complex trial.
Ehrheart v. Verizon Wireless, 609 F.3d 590, 595 (3d Cir. 2010); accord Hodge v. Signia
Marketing, Ltd., 2017 WL 5900344 (D. Colo. Nov. 30, 2017). The Settlement
Agreement provides compensation to class action and collective action members
commensurate with actual overtime worked and their legal claims under the CMWA
and/or the FLSA. Defendants will pay $178,612.75 2 into a common settlement fund to

2

The parties note that they erroneously listed $167,368.87 as the settlement payment in
their Joint Motion for Preliminary Approval (ECF No. 37 at 3). The correct figure was listed in

5

be disbursed to 88 pizza workers, with recovery ranging from $0.90 to $30,995.79.
(ECF No. 43-1 at 4, 6–8.) The common settlement fund represents 100% of actual and
liquidated damages, plus the incentive award and a lodestar calculation of attorneys’
fees. (ECF No. 44 at 1.) The Settlement Agreement provides a significant and
immediate benefit to the class, particularly given that many of the pizza workers are
low-wage earners.
Finally, both parties have represented their view that the Settlement Agreement
is fair and reasonable. The fact that no class member objects shows that the class also
considers this settlement fair and reasonable. See In re Dun & Bradstreet, 130 F.R.D.
at 372.
As set forth above, the Court finds that each of the factors weights in favor of
finding that the Settlement Agreement is fair, reasonable, and adequate. Accordingly,
the Court fully and finally approves the Settlement for purposes of Rule 23(e).
III. CY PRES AWARD
The Supreme Court has not directly addressed the propriety of cy pres awards of
unclaimed funds, but recently recognized their existence. See Frank v. Gaos, 139 S.
Ct. 1041, 1047 (2019) (Thomas, J., dissenting).3 The Tenth Circuit has recognized that
the proposed Settlement Agreement (ECF No. 37-1), which was preliminarily approved by the
Court (ECF No. 40 at 5). The parties repeat their mistake and list the $167,368.87 amount in
the Joint Motion (ECF No. 43 at 11) and the Fee Motion (ECF No. 44 at 9). However, they also
list the correct settlement payment amount in the Joint Motion (ECF No. 43 at 4 n.1) and the
Fee Motion (ECF No. 44 at 1). The parties confirmed at the Settlement Hearing that the correct
amount is $178,612.75.
3

There are two types of cy pres awards to third parties in class action settlements:
(1) unclaimed funds are directed to third-party reorganizations, and (2) all settlement funds are
directed to third-party organizations that address issues related to the underlying dispute
instead of class members. See In re Google Referrer Header Privacy Litig., 869 F.3d 737, 742

6

the cy pres doctrine in class action settlements “allows a court to distribute unclaimed or
non-distributable portions of a class action settlement fund to the ‘next best’ class of
beneficiaries,” but has not otherwise expounded on the doctrine. Tennille v. W. Union
Co., 809 F.3d 555, 560 n.2 (10th Cir. 2015) (quoting Nachshin v. AOL, LLC, 663 F.3d
1034, 1036 (9th Cir. 2011)).
Courts approving cy pres awards in the Tenth Circuit generally require the cy
pres beneficiary to be related to the nature of the plaintiff’s claims. Bailes v. Lineage
Logistics, LLC, 2016 WL 4415356, at *7 (D. Kan. Aug. 19, 2016) (internal quotation
marks omitted and alterations incorporated); see Childs v. Unified Life Ins. Co., 2012
WL 13018913, at *5 (N.D. Okla. Aug. 21, 2012). Courts also evaluate whether
beneficiaries are “carefully chosen to account for the nature of the lawsuit, the
objectives of the underlying statutes, and the interests of silent class members,
including their geographic diversity.” In re Motor Fuel Temperature Sales Practices
Litig., 286 F.R.D. 488, 504 (D. Kan. 2012). Courts reject cy pres awards when the

(9th Cir. 2017), vacated on other grounds by Frank, 139 S. Ct. at 1046. The first type is at
issue in this case. In 2018, the Supreme Court granted certiorari to determine whether the
second type of cy pres awards satisfy the requirement that a binding class settlement be fair,
reasonable, and adequate. Frank, 139 S.Ct. at 1045. In that case, the lower court approved a
$8.5 million settlement, the majority of which went to six cy pres recipients whose work would
“indirectly benefit class members,” while the remainder went to “incentive payments, attorneys’
fees, and administrative costs and fees.” Id. The settlement provided no monetary relief to the
129 million absent class members. Instead of deciding the issue, the Court remanded for the
lower court to address plaintiffs’ standing. Id. at 1046.
Justice Thomas dissented, explaining that he would reach the merits and reverse the
approval of the cy pres award. He explained: “Whatever role cy pres may permissibly play in
disposing of unclaimed or undistributable class funds, cy pres payments are not a form of relief
to the absent class members and should not be treated as such (including when calculating
attorney’s fees). And the settlement agreement here provided no other form of meaningful
relief to the class.” Id. at 1047–48. While it is unclear how the other justices would view the
two types of cy pres awards, at least one justice would disallow the second type, where the
none of the settlement funds would be distributed to absent class members.

7

parties fail to identify a proposed beneficiary, or when the beneficiary is “so unrelated to
the claims” that class members would not benefit. Better v. YRC Worldwide Inc., 2013
WL 6060952, at *6 (D. Kan. Nov. 18, 2013); Bailes, 2016 WL 4415356, at *7.
The Settlement Agreement provides that any settlement checks not negotiated
within 90 days of issuance are “Unclaimed Funds.” (ECF No. 43-1 at 8.) The Class
Administrator will forward Unclaimed Funds to the Tri County Health Network, a Section
501(c)(3) organization that advocates for labor rights of immigrant workers in Telluride,
Colorado. (ECF No. 43 at 4.) The parties represented in a submission to the Court and
at the settlement hearing that Tri County Health Network is an appropriate cy pres
recipient because of its work with Spanish-speaking immigrant communities in
Telluride, Colorado. (ECF No. 39.) The Court notes that a number of the class
members are Spanish-speaking immigrants. The Tri County Health Network recently
received a grant from the Colorado Bar Association to provide translation and
interpretation services between local lawyers and Spanish-speaking workers as part of
its mission to serve the immigrant community in Telluride, and has committed to using
funds from the cy pres award to further efforts to serve the immigrant community in
Telluride. (Id.)
The Court finds that the cy pres award directing Unclaimed Funds to the Tri
County Health Network is fair and reasonable, and the next best use of fund to provide
an indirect class benefit.
IV. INCENTIVE AWARD
When considering the appropriateness of an award for class representation, the

8

Court should consider: (1) the actions the class representative took to protect the
interests of the class; (2) the degree to which the class has benefitted from those
actions; and (3) the amount of time and effort the class representative expended in
pursuing the litigation. See Cook v. Niedert, 142 F.3d 1004, 1016 (7th Cir. 1998);
Lucken Family Ltd. P’ship, LLLP v. Ultra Res., Inc., 2010 WL 5387559, at *6 (D. Colo.
Dec. 22, 2010).
The parties propose that Mr. Diaz receive $5,000 as an incentive payment. (ECF
No. 91 at 8.) Mr. Diaz spent time and effort working on the case with counsel against his
employer over the course of a year-and-a-half of litigation. The litigation yielded
individual payouts ranging from $0.90 to $30,995.79 to a group of low-wage hourly
employees. Mr. Diaz’s commitment to the case, the personal risk of being discharged
that he undertook pursuing this litigation, and the outcome achieved warrants a significant
award in this case. See Pliego v. Los Arcos Mexican Rests., Inc., 313 F.R.D. 117 (D.
Colo. 2016) (finding a service award appropriate where an immigrant plaintiff “took a
substantial risk in coming forward with reports of Defendants’ wage and hour law
violations”); Frank v. Eastman Kodak Co., 228 F.R.D. 174, 187 (W.D.N.Y. 2005) (noting
that service awards are especially appropriate in employment litigation where “the plaintiff
is often a former or current employee of the defendant, and thus, by lending his name to
the litigation, he has, for the benefit of the class as a whole, undertaken the risk of
adverse actions by the employer or co-workers”).
The Court finds the incentive payment of $5,000 very reasonable, given Mr. Diaz’s
participation in the case and the overall recovery in this case, and thus approves the
$5,000 incentive award to Mr. Diaz.
9

V. ATTORNEYS’ FEES
When considering the appropriateness of an attorneys’ fees award, the Court
considers the “Johnson factors”: (1) the time and labor required by counsel; (2) the
novelty and difficulty of the legal question presented; (3) the skill required to represent
the class appropriately; (4) the preclusion of other employment by the attorneys due to
the acceptance of this case; (5) the customary fee; (6) whether the fee is fixed or
contingent; (7) any time limitations imposed by the client or the circumstances; (8) the
amount involved and the results obtained; (9) the experience, reputation and ability of
the attorneys, (10) the “undesireability” of the case; (11) the nature and length of the
professional relationship with the client; and (12) awards in similar cases. See Johnson
v. Ga. Highway Express, Inc., 488 F.2d 714, 717–19 (5th Cir. 1979).
In common fund cases, attorneys’ fees may be based on a percentage of the fund,
rather than lodestar. See Aragon v. Clear Water Products LLC, 2018 WL 6620724, at *4
(D. Colo. Dec. 18, 2018). A 33% fee award falls within the norm for these types of cases.
See Stuart J. Logan et al., Attorney Fee Awards in Common Fund Class Actions, 24
Class Action Rep. 167, 167 (2003) (reporting that the percentage of class recovery
consumed by attorneys fees under $10 million averages between 30.4% and 31.9%,
based on a survey of 1,120 cases); Nilson v. York Cnty., 400 F. Supp. 2d 266, 281 (D.
Me. 2005) (collecting cases and finding that the median for attorneys’ fees awards in
class action settlements was around 30%).
Plaintiff’s counsel seeks an attorneys’ fee award totaling 33% of the common
settlement fund, or $58,942.21. Counsel spent an estimated 102.65 hours on this matter

10

over the course of a year-and-a-half, time which counsel could have spent litigating other
non-contingency cases. The parties engaged in informal discovery and detailed
settlement negotiations. The Court finds that the requested amount of fees is
reasonable considering the effort expended on this case by class counsel, the risks and
difficulties inherent in this sort of litigation, the discovery undertaken, and the skill
required and dedication displayed over the litigation of this matter.
Moreover, counsel’s requested attorneys fees are reasonable given his lodestar
fees and the degree of success achieved in this case. The lodestar figure is calculated
by multiplying a reasonable hourly rate by the hours reasonably expended. Counsel
spent 102.65 hours on this case. The $300 hourly rate charged by class counsel is
very reasonable, considering the geographic market and counsel’s experience. Using
the lodestar method, the attorney’s fees in the case would amount to $30,795. Counsel
also incurred $630 in costs, which the Court finds very reasonable and appropriate, and
notes that it has rarely seen a case litigated with fewer billed costs. See Vaszlavik v.
Storage Tech. Corp., 2000 WL 1268824, at *4 (D. Colo. Mar. 9, 2000) (“[A]n attorney
who creates or preserves a common fund for the benefit of the class is entitled to
receive reimbursement of all reasonable costs incurred.”). Thus, the lodestar including
attorneys’ fees and costs would be $31,425, an amount that the Court finds reasonable
given the time and effort spent in litigating this case.
The Court also finds that the requested multiplier of 1.86 (or 86%) is appropriate
in light of the result achieved for the pizza workers. Significantly, the common fund
represents 100% of individualized damages of the pizza workers, and the pizza workers
will receive nearly 80% of the funds to which they are entitled, after accounting for
11

payment of attorneys’ fees. This is an outstanding result for the Class, and weighs very
heavily in favor of approving the amount of fees requested. See In re King Res. Co.
Sec. Litig., 420 F. Supp. 610, 630 (D. Colo. 1976) (noting that “the amount of recovery,
and end result achieved are of primary importance” when considering what constitutes
a reasonable attorney fee). The settlement was achieved relatively quickly and, in the
event that individual settlement checks are not deposited, remaining funds will not
revert to Defendants but rather go to a community organization that will further benefit
the community of which many pizza workers are a part. Given those results, the Court
finds that a 1.86 multiplier is justified. See Davis v. Crilly, 292 F. Supp. 3d 1167, 1174
(D. Colo. 2018) (finding reasonable an attorneys’ fees and costs award of 37% that
represented a 1.77 multiplier of the lodestar).
Having considered the applicable Johnson factors, the Court finds that
$58,942.21 in attorneys’ fees and costs fair and reasonable, and the Court thus grants
the Fee Motion.
VI. CONCLUSION
For the foregoing reasons, the Court ORDERS as follows:
1.

The parties’ Joint Motion for Final Approval of Class and Collective Action
Settlement (ECF No. 43) is GRANTED;

2.

Plaintiff’s Motion for Attorney Fee (ECF No. 44) is GRANTED;

3.

The parties’ Settlement Agreement (ECF No. 43-1) is APPROVED;

4.

Plaintiff Victor Diaz is AWARDED an incentive award for serving as the class
representative in the amount of $5,000;

12

5.

Plaintiff’s counsel is AWARDED attorneys’ fees and costs in the amount of
$58,942.21;

6.

No later than May 31, 2019, Defendants SHALL DEPOSIT the settlement payment
of $178,612.75 into a fund to be administered by the Class Administrator;

7.

No later than June 10, 2019, the Class Administrator shall mail settlement checks
to Plaintiff, opt-in plaintiffs, and Rule 23 class members identified in the Settlement
Agreement; a check for the incentive award to recipient Victor Diaz; and a check
for attorneys’ fees and costs to Plaintiff’s Counsel;

8.

Consistent with the Settlement Agreement, Defendants SHALL PAY all settlement
administration costs;

9.

The Court SHALL RETAIN jurisdiction over the interpretation and implementation
of the Settlement Agreement; and

10.

The Clerk of the Court SHALL TERMINATE the case. The parties shall bear their
own costs except as provided above.

Dated this 21st day of May, 2019.
BY THE COURT:

William J. Martínez
United States District Judge

13