Garvey v. SM Energy Company

Filing 38

ORDER denying 36 Unopposed Motion for Order to Approve Settlement. By Judge Charlotte N. Sweeney on 11/22/2024.(cnsja, )

IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF COLORADO
Judge Charlotte N. Sweeney
Civil Action No. 1:23-cv-02508-CNS-TPO
PAUL GARVEY, individually and for others similarly situated,
Plaintiff,
v.
SM ENERGY COMPANY,
Defendant.

ORDER
Plaintiff Paul Garvey initiated this collective action lawsuit to recover unpaid
overtime wages and other damages from SM Energy Company under the Fair Labor
Standards Act (FLSA). ECF No. 1. Following settlement discussions and mediation,
Plaintiff, “on behalf of himself and on behalf of all other Opt-in Plaintiffs [] and Potential
Class Members,” submitted to the Court an Unopposed Motion to Approve Settlement.
ECF No. 36. Because, among several other deficiencies, Plaintiff provides no indication
that he provided opt-in plaintiffs with notice of the settlement and an opportunity to object,
the Court denies the present motion.
I. BACKGROUND
Plaintiff alleged that SM Energy uniformly misclassified him and other similarly
situated employees, which he defines as Day Rate Workers, as independent contractors
and paid them a flat amount for each day worked, regardless of the total number of hours
they worked in a workweek. ECF No. 21 at 2. He argues that SM Energy’s uniform “day
1

rate” pay scheme violates the FLSA by depriving the Day Rate Workers of overtime
wages at 1.5 times their regular rates for all hours worked over 40 hours. Id. SM Energy
denies that Plaintiff and other Day Rate Workers were employees of SM Energy entitled
to overtime pay. Id. at 3.
In his motion to approve the parties’ confidential settlement agreement, Plaintiff
states that the parties reached a settlement following “protracted litigation.” ECF No. 36
at 1. Although Plaintiff filed his collective action lawsuit on September 26, 2023, the public
docket does not indicate protracted litigation. For example, the parties agreed that the
deadline for filing a motion for certification shall be April 30, 2024. ECF No. 21 at 7. On
that day, Plaintiff sought a 14-day extension to move for conditional certification following
turnover of lead counsel. ECF No. 28. Plaintiff, however, chose not to move for conditional
certification. Another example is that Plaintiff has only identified two other Day Rate
Workers that consent to making a claim against SM Energy in the 14 months since filing
his lawsuit against SM Energy. See ECF Nos. 23-1 and 26-1. Beyond these two
examples, the draft settlement agreement, and a single-day mediation, there is no
evidence on the docket to indicate protracted litigation. 1
II. ANALYSIS
Plaintiff filed his FLSA claim under 29 U.S.C. § 216(b). When employees file suit
against their employer to recover back wages under the FLSA, “any proposed settlement
between the parties must be presented to the court for a determination of whether the

1 In the Motion to Approve Settlement, Plaintiff’s counsel represents that they “engaged in written discovery,

interviewed clients, engaged in discovery disputes, drafted a motion for Court-Authorized Notice (although
it was not filed), reviewed and analyzed invoices and back wages, prepared for mediation, and received
and made numerous communications.” ECF No. 36 at 9. The parties apparently have not deposed any
witnesses. See id. at 3.

2

settlement is fair and reasonable.” Faulkner v. Ensign United States Drilling Inc., No. 16CV-03137-PAB-KLM, 2020 WL 550592, at *2 (D. Colo. Feb. 4, 2020) (citing Lynn’s Food
Stores, Inc. v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982)).
The Court has identified several deficiencies in the Motion to Approve Settlement
and in the confidential settlement agreement itself and thus will not grant the motion. The
deficiencies described below are not intended to be an exhaustive evaluation of the
parties’ motion and settlement agreement. Counsel is directed to review the applicable
caselaw before reapplying for Court approval.
A.

Class Certification

As noted above, Plaintiff did not move for conditional certification (despite seeking
an extension to do so). The FLSA permits “one or more employees” who are “similarly
situated” to bring an action against their employer. 29 U.S.C. § 216(b). Courts usually
apply a two-stage approach to determining whether plaintiffs are “similarly situated” for
purposes of FLSA collective action certification. Ostrander v. Customer Eng’g Servs.,
LLC, No. 15-CV-01476-PAB-MEH, 2018 WL 1152265, at *2 (D. Colo. Mar. 5, 2018) (citing
Thiessen v. GE Capital Corp., 267 F.3d 1095, 1105 (10th Cir. 2001)). At the first stage, a
district court determines whether the plaintiffs are similarly situated for purposes of
sending notice to putative class members. Id. (citing Thiessen, 267 F.3d at 1102). Courts
us a lenient standard at this first stage, requiring only “substantial allegations that the
putative class members were together the victims of a single decision, policy, or plan.”
Thiessen, 267 F.3d at 1102 (citation omitted). At the second stage, which occurs after
discovery, the district court again evaluates whether the putative class members are
similarly situated. See id. at 1102–03. Courts employ a stricter standard at this second

3

stage, which requires consideration of several factors, including (1) the disparate factual
and employment settings of the individual plaintiffs; (2) various defenses available to the
defendant which appear to be individual to each plaintiff; and (3) fairness and procedural
considerations. Id. at 1103–05.
Some courts in this District have held that “[f]inal class certification is generally
required before a court may approve a collective action settlement.” Ostrander, No. 15CV-01476-PAB-MEH, 2018 WL 1152265, at *2 (D. Colo. Mar. 5, 2018) (citing Whittington
v. Taco Bell of Am., Inc., No. 10-cv-01884-KMT-MEH, 2013 WL 6022972, at *2 (D. Colo.
Nov. 13, 2013)); Davis v. Crilly, 292 F. Supp. 3d 1167, 1171 (D. Colo. 2018) (“Final
certification for settlement purposes requires the Court to determine whether the
settlement class members are similarly situated.” (citing Thiessen, 267 F.3d at 1105)).
Other courts in this Circuit have taken a different approach. Cazeau v. TPUSA, Inc., No.
218CV00321RJSCMR, 2020 WL 3605652, at *3 (D. Utah July 2, 2020) (finding that the
Tenth Circuit is silent on the issue and adopting the position that “final certification is not
a prerequisite to approving the Settlement Agreement”).
In the parties’ Motion to Approve Settlement, they have not moved for final
collective action certification and fail to address whether class certification is required in
this action. Again, courts in this Circuit have rejected settlement agreements for this very
reasons. Gassel v. Am. Pizza Partners, L.P., No. 14-CV-00291-PAB-NYW, 2015 WL
5244917, at *3 (D. Colo. Sept. 8, 2015) (despite conditionally certifying the collective
action, the court rejected the settlement agreement because “there is no basis for the
Court to issue a final certification ruling, which is by itself a sufficient basis for denying”
the parties’ motion); Ostrander, 2018 WL 1152265, at *2 (same); Oates v. Kinder Morgan

4

Energy Partners, L.P., No. CIV-19-1171-SLP, 2022 WL 18673322, at *2 (W.D. Okla. Jan.
18, 2022), recons. denied, No. CIV-19-1171-SLP, 2023 WL 1954661 (W.D. Okla. Jan.
25, 2023) (“Although Plaintiff previously requested conditional certification, that motion
was later withdrawn. Plaintiff does not request certification (whether conditional or final)
in the current Motion and actually argues against such a requirement. The Court does not
agree with Plaintiff that the Court can finally approve the settlement without
certification.”)2; Gambrell v. Weber Carpet, Inc., No. CIV.A. 10-2131-KHV, 2012 WL
162403, at *3 (D. Kan. Jan. 19, 2012) (“Though the Court must make a final class
certification finding before it can approve a collective action settlement, the parties here
do not ask the Court to do so. Nor do they present information regarding whether plaintiffs
are similarly situated for purposes of final collective action certification. [] On this record,
then, the Court cannot make a final determination as to whether the action should proceed
as a collective action. [] Thus, it cannot approve the proposed class action settlement.”).
B.

Notice

Section 216(b) does not require that district courts conduct fairness hearings prior
to approving collective action settlements, but at a minimum, courts generally require that
opt-in plaintiffs be given notice of any settlement and an opportunity to object. Faulkner,
2020 WL 550592, at *2; Tommey v. Comput. Scis. Corp., No. 11-CV-02214-EFM, 2015
WL 1623025, at *1 (D. Kan. Apr. 13, 2015); see also Goldsby v. Renosol Seating, LLC,
2013 WL 6535253, *10 (S.D. Ala. Dec. 13, 2013) (“[T]he majority of the courts approve a
[FLSA collective action] settlement only after notice has been provided to the opt-in

2 The Court observes that at least one of Plaintiff’s counsel was counsel of record in the Oates case, where

the district court rejected the plaintiff’s Unopposed Motion to Approve FLSA Settlement for many of the
same deficiencies the Court has identified here.

5

plaintiffs and a fairness hearing conducted, or at the least, what is required is a statement
to the Court that the opt-in plaintiffs have had notice of the settlement and an opportunity
to object.”).
Here, SM Energy has identified approximately 99 potential class members. There
is no evidence, however, that the parties have notified these individuals about this lawsuit
or provided any notice of the proposed settlement. There is also no evidence that either
of the two employees who did opt-in were given notice of the settlement and an
opportunity to object. Plaintiff instead asks the Court to first approve the settlement
agreement and then permit Plaintiff to provide notice and consent to potential class
members. ECF No. 36 at 13. Chief Judge Brimmer rejected a similar schedule in
Ostrander, where he found that “[t]he notice, which the parties contemplate will be sent
along with the settlement checks after Court approval of the parties’ agreement, presents
the settlement as a fait accompli, never informing class members of their right to object
to the settlement or challenge their individual awards. [] The Court finds that the parties’
failure to provide opt-in plaintiffs with notice of the settlement and an opportunity to object
is a sufficient basis, standing alone, to deny the present motion.” Ostrander, 2018 WL
1152265, at *2–3.
Moreover, in rejecting a similar settlement agreement in Oates, the court described
the agreement as a “premature settlement”—“(i.e., requesting approval before other
putative settlement participants have been given the chance to opt in).” Oates, 2022 WL
18673322, at *4. The court explained that the premature nature of the agreement
hampered the court’s “evaluation of the Settlement Agreement as fair and equitable and

6

further supports the Court’s decision that conditional certification and notice is required
before approving the settlement.” Id.
C.

Confidential Nature of FLSA Settlement Agreement

The parties filed their Confidential Settlement Agreement and Release under seal.
ECF No. 35. As the name implies, the settlement agreement contains an extensive
confidentiality provision. See ECF No. 35, ¶ 11.1. Confidentiality provisions generally
contravene the purpose of the FLSA. See Oates, 2022 WL 18673322, at *4; Stubrud v.
Daland Corp., No. 14-2252-JWL, 2015 WL 5093250, at *1 (D. Kan. Aug. 28,
2015) (recognizing the “broad consensus that FLSA settlement agreements should not
be kept confidential”); Galvez v. Americlean Servs. Corp., No. 1:11CV1351 JCC/TCB,
2012 WL 1715689, at *4 (E.D. Va. May 15, 2012) (“[M]any courts have rejected proposed
settlement agreements containing confidentiality provisions, finding them unenforceable
and operating in contravention of the FLSA.”); Ostrander, 2018 WL 1152265, at *5
(rejecting settlement agreement because “the parties have not demonstrated that the
specific kinds of personal information contained in the settlement documents—namely,
class members’ names, dates of employment, dates of overtime work, and individual
settlement amounts—are entitled to protection”).
D.

Proposed Attorneys’ Fee Award

Plaintiff’s counsel requests an award of $1,030,000.00, representing 40% of the
Gross Settlement Amount. ECF No. 35 at 2. Under the FLSA, the Court “shall . . . allow
[plaintiff] a reasonable attorney’s fee to be paid by the defendant, and costs of the action.”
29 U.S.C. § 216(b). Despite the mandatory language found in the statute, the Court must
use its discretion to determine whether the amount is reasonable. Davis, 292 F. Supp. 3d

7

at 1171. “In common fund cases, it is standard to use a percentage method when
calculating attorneys’ fees.” Id.
The Court cannot appropriately evaluate the proposed attorneys’ fee award at this
time. To start, the Court does not know the size of the collective class—or whether there
will be a class. Prim v. Ensign United States Drilling, Inc., No. 15-CV-02156-PAB-KMT,
2018 WL 3729515, at *2 (D. Colo. Aug. 3, 2018) (“[W]ithout knowing the size of the
settlement class, the Court cannot assess the reasonableness of the requested fee
award.”). Although SM Energy has identified approximately 99 individuals who may be
part of the class, ECF No. 35 at 2, the docket currently only reflects a class of three. And
as noted, the docket does not suggest “protracted litigation” has occurred, as Plaintiff
argues, such that an award of $1,030,000.00 is warranted at this time.
***
The Motion to Approve Settlement is denied. If the parties reapply for Court
approval of a new settlement agreement, they should, at a minimum, address the issues
discussed above. The Court, however, will permit Plaintiff to move for authorization of
notice to be sent to Day Rate Workers consistent with this opinion and the prevailing
caselaw to provide the putative plaintiffs an opportunity to opt in and object to any future
settlement agreements. See Oates, 2022 WL 18673322, at *5 (describing the notice
requirements).
III. CONCLUSION
The above-cited deficiencies preclude approval of the parties’ proposed settlement
agreement. The Court thus DENIES without prejudice Plaintiff’s Unopposed Motion to
Approve Settlement. ECF No. 36.

8

DATED this 22nd day of November 2024.
BY THE COURT:
_____________________________
Charlotte N. Sweeney
United States District Judge

9