Harris v. Innovative Recon Solutions, Inc.
Filing
20
REPORT AND RECOMMENDATIONS re 19 Joint Motion for Approval of Settlement. If the parties have no objection to this Report and Recommendation, they may promptly file a joint notice of no objection. Signed by Magistrate Judge Paul A. Zoss on 1/16/2014. (MDH)
UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF FLORIDA
ORLANDO DIVISION
KENDRICK HARRIS,
Plaintiff,
v.
Case No: 6:13-cv-1625-Orl-28GJK
INNOVATIVE RECON SOLUTIONS,
INC.,
Defendant.
REPORT AND RECOMMENDATION
This cause came on for consideration without oral argument on the following motion filed
herein:
MOTION:
JOINT MOTION FOR APPROVAL OF SETTLEMENT
(Doc. No. 19)
FILED:
January 14, 2014
THEREON it is RECOMMENDED that the motion be GRANTED.
I.
BACKGROUND.
On October 21, 2013, Plaintiff filed a complaint (the “Complaint”) against Defendant,
alleging violations of the overtime (Count I) and minimum wage (Count II) provisions of the Fair
Labor Standards Act (the “FLSA”). Doc. No. 1 at 5-7. The Complaint also requests declaratory
judgment (Count III) against Defendant. Doc. No. 1 at 7-9.
Defendant was served with the summons and a copy of the Complaint on October 22, 2013.
Doc. Nos. 9; 10 at ¶ 2; 10-1 at ¶ 3. On December 10, 2013, Plaintiff filed a motion requesting
entry of default against Defendant, pursuant to Rule 55(a), Federal Rules of Civil Procedure. Doc.
No. 10. On December 11, 2013, the Clerk entered default against Defendant. Doc. No. 11.
On December 23, 2013, Plaintiff filed a Motion for Entry of Default Final Judgment. Doc.
No. 12. The Motion sought judgment against Defendant for violating the overtime provisions of
the FLSA, and requested an award of $1,361.11 in unpaid overtime wages, an equal amount in
liquidated damages, and $435.00 in costs. Doc. No. 12. On December 30, 2013, the Court
entered an order denying the Motion for Entry of Default Final Judgment. Doc. No. 13.
On January 6, 2014, Defendant filed a notice of appearance. Doc. No. 14. That same
day, the parties filed a Joint Notice of Settlement. Doc. No. 17. On January 14, 2014, the parties
filed a Joint Motion for Approval of Settlement (the “Motion”) requesting the Court to approve
their settlement agreement (the “Agreement”) and to dismiss the case with prejudice. Doc. No.
19.
II.
LAW.
In Lynn’s Food Stores, Inc. v. United States Dep’t of Labor, 679 F.2d 1350 (11th Cir.
1982), the Eleventh Circuit addressed the means by which an FLSA settlement may become final
and enforceable:
[t]here are only two ways in which back wage claims arising under
the FLSA can be settled or compromised by employees. First, under
section 216(c), the Secretary of Labor is authorized to supervise
payment to employees of unpaid wages owed to them.... The only
other route for compromise of FLSA claims is provided in the
context of suits brought directly by employees against their
employer under section 216(b) to recover back wages for FLSA
violations. When employees bring a private action for back wages
under the FLSA, and present to the district court a proposed
settlement, the district court may enter a stipulated judgment after
scrutinizing the settlement for fairness.
Id. at 1352-53. Thus, unless the parties have the Secretary of Labor supervise the payment of
unpaid wages owed or obtain the Court’s approval of the settlement agreement, the parties’
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agreement is unenforceable. Id.; see also Sammons v. Sonic-North Cadillac, Inc., Case No. 6:07cv-277-Orl-19DAB, 2007 WL 2298032, at *5 (M.D. Fla. Aug. 7, 2007) (noting that settlement of
FLSA claim in arbitration proceeding is not enforceable under Lynn’s Foods because it lacked
Court approval or supervision by Secretary of Labor). Before approving an FLSA settlement, the
Court must scrutinize it to determine if it is “a fair and reasonable resolution of a bona fide
dispute.” Lynn’s Food Store, 679 F.2d at 1354-55. If the settlement reflects a reasonable
compromise over issues that are actually in dispute, the Court may approve the settlement. Id. at
1354.
In determining whether the settlement is fair and reasonable, the Court should consider the
following factors:
(1) the existence of collusion behind the settlement;
(2) the complexity, expense, and likely duration of the litigation;
(3) the stage of the proceedings and the amount of discovery
completed;
(4) the probability of plaintiff’s success on the merits;
(5) the range of possible recovery; and
(6) the opinions of counsel.
See Leverso v. SouthTrust Bank of Ala., Nat’l Assoc., 18 F.3d 1527, 1531 n.6 (11th Cir. 1994);
Hamilton v. Frito-Lay, Inc., Case No. 6:05-cv-1592-Orl-22JGG, 2007 WL 328792, at *2 (M.D.
Fla. Jan. 8, 2007). The Court should be mindful of the strong presumption in favor of finding a
settlement fair. See Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir. 1977). 1
In FLSA cases, the Eleventh Circuit has questioned the validity of contingency fee
agreements. Silva v. Miller, 307 F. App’x 349, 351 (11th Cir. 2009) (citing Skidmore v. John J.
Casale, Inc., 160 F.2d 527, 531 (2d Cir. 1947) (“We have considerable doubt as to the validity of
1
In Bonner v. City of Prichard, 661 F.2d 1206, 1209 (11th Cir. 1981) (en banc), the Eleventh Circuit adopted as
binding precedent all decisions of the former Fifth Circuit handed down prior to the close of business on September
30, 1981.
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the contingent fee agreement; for it may well be that Congress intended that an employee’s
recovery should be net . . ..”)). In Silva, the Eleventh Circuit held:
That Silva and Zidell entered into a contingency contract to establish
Zidell’s compensation if Silva prevailed on the FLSA claim is of
little moment in the context of FLSA. FLSA requires judicial review
of the reasonableness of counsel’s legal fees to assure both that
counsel is compensated adequately and that no conflict of interest
taints the amount the wronged employee recovers under a settlement
agreement. FLSA provides for reasonable attorney’s fees; the
parties cannot contract in derogation of FLSA’s provisions. See
Lynn’s Food, 679 F.2d at 1352 (“FLSA rights cannot be abridged
by contract or otherwise waived.”) (quotation and citation omitted).
To turn a blind eye to an agreed upon contingency fee in an amount
greater than the amount determined to be reasonable after judicial
scrutiny runs counter to FLSA’s provisions for compensating the
wronged employee. See United Slate, Tile & Composition Roofers
v. G & M Roofing & Sheet Metal Co., 732 F.2d 495, 504 (6th Cir.
1984) (“the determination of a reasonable fee is to be conducted by
the district court regardless of any contract between plaintiff and
plaintiff’s counsel”); see also Zegers v. Countrywide Mortg.
Ventures, LLC, 569 F.Supp.2d 1259 (M.D. Fla. 2008).
Id. at 351-52. 2 In order for the Court to determine whether the proposed settlement is reasonable,
counsel for the claimant(s) must first disclose the extent to which the FLSA claim has or will be
compromised by the deduction of attorney’s fees, costs or expenses pursuant to a contract between
the plaintiff and his or her counsel, or otherwise. Id. When a plaintiff receives less than a full
recovery, any payment (whether or not agreed to by a defendant) above a reasonable fee
improperly detracts from the plaintiff’s recovery. 3 Thus, a potential conflict can arise between
counsel and their client regarding how much of the plaintiff’s total recovery should be allocated to
2
In this circuit, “[u]npublished opinions are not considered binding precedent, but they may be cited as persuasive
authority.” 11th Cir. R. 36-2.
3
From a purely economic standpoint, a defendant is largely indifferent as to how its settlement proceeds are divided
as between a plaintiff and his or her counsel. Where a plaintiff is receiving less than full compensation, payment of
fees necessarily reduces the plaintiff’s potential recovery.
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attorney’s fees and costs. 4 It is the Court’s responsibility to ensure that any such allocation is
reasonable. See Silva, 307 F. App’x at 351-52. In doing so, the Court uses the lodestar method
for guidance. See Comstock v. Florida Metal Recycling, LLC, Case No. 08-81190-CIV, 2009 WL
1586604, at *2 (S.D. Fla. June 5, 2009). As the Court interprets the Lynn’s Foods and Silva cases,
where there is a compromise of the amount due to the plaintiff, the Court should decide the
reasonableness of the attorney’s fees provision under the parties’ settlement agreement using the
lodestar method as a guide. In such a case, any compensation for attorney’s fees beyond that
justified by the lodestar method is unreasonable unless exceptional circumstances would justify
such an award.
An alternate means of demonstrating the reasonableness of attorney fees and costs was set
forth in Bonetti v. Embarq Management Co., Case No. 6:07-cv-1335-Orl-31GJK, 2009 WL
2371407 (M.D. Fla. Aug. 4, 2009). In Bonetti, the Honorable Gregory A. Presnell held:
In sum, if the parties submit a proposed FLSA settlement that, (1)
constitutes a compromise of the plaintiff’s claims; (2) makes full and
adequate disclosure of the terms of settlement, including the factors
and reasons considered in reaching same and justifying the
compromise of the plaintiff’s claims; and (3) represents that the
plaintiff’s attorneys’ fee was agreed upon separately and without
regard to the amount paid to the plaintiff, then, unless the settlement
does not appear reasonable on its face or there is reason to believe
that the plaintiff’s recovery was adversely affected by the amount of
fees paid to his attorney, the Court will approve the settlement
without separately considering the reasonableness of the fee to be
paid to plaintiff’s counsel.
Bonetti, 2009 WL 2371407, at *5 (emphasis added). Judge Presnell maintained that if the matter
of attorney fees “[is] addressed independently and seriatim, there is no reason to assume that the
4
This potential conflict is exacerbated in cases where the defendant makes a lump sum offer which is less than full
compensation, because any allocation between fees and the client’s recovery could become somewhat arbitrary.
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lawyer’s fee has influenced the reasonableness of the plaintiff’s settlement.”
Id.
The
undersigned finds this reasoning persuasive.
III.
ANALYSIS.
A. Settlement Amount.
This case involves disputed issues of liability under the FLSA, which constitutes a bona
fide dispute. Doc. Nos. 1; 19 at 3-4. The parties are represented by independent counsel who
are obligated to vigorously represent their clients. See Doc. Nos. 19; 19-1. Initially, Plaintiff
requested $1,361.11 in unpaid overtime wages, an equal amount in liquidated damages, and
$435.00 in costs. Doc. Nos. 12; 19 at 3. According to the Motion, however, Plaintiff agreed to
compromise his claim for the following reasons: 1) the complexity, expense, and length of
continued litigation of his claims; 2) the probability of success is uncertain; and 3) the range of
possible recovery is uncertain. Doc. No. 19 at 5-6. Under the Agreement, Plaintiff, in exchange
for releasing all claims under the FLSA he may have against Defendant, has agreed to accept a
total settlement amount of $3,000.00, representing $379.00 in unpaid overtime wages, an equal
amount in liquidated damages, $1,807.00 in attorney fees, and $435.00 in costs. Doc. Nos. 19 at
¶ 3; 19-1 at 3. Upon review, it is RECOMMENDED that the Court find Plaintiff’s compromise
and the total settlement amount to be reasonable.
B. Attorney Fees and Costs.
Under the Agreement, Plaintiff’s counsel will receive $1,807.00 in attorney’s fees and
$435.00 in costs. Doc. Nos. 19 at ¶ 3; 19-1 at 3. The parties, citing Bonetti, represent that “the
fee to be paid as part of the resolution of Plaintiff’s claims was agreed upon by the parties
separately and without regard to the amount paid to Plaintiff[,]” and that “Plaintiff’s FLSA claim
was not compromised by the deduction of attorney’s fees, costs or expenses pursuant to a contract
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or otherwise.” Doc. No. 19 at 6. The settlement appears reasonable on its face, and the parties’
foregoing representation adequately establishes that the issue of attorney’s fees and costs was
agreed upon separately and without regard to the amount paid to Plaintiff. See Bonetti, 2009 WL
2371407, at *5. Accordingly, pursuant to Bonetti, it is RECOMMENDED that the Court find
the Agreement to be a fair and reasonable compromise of Plaintiffs’ FLSA claims.
IV.
CONCLUSION.
Accordingly, it is RECOMMENDED that:
1. The Motion (Doc. No. 19) be GRANTED only to the extent that the Court finds the
parties’ settlement is fair and reasonable;
2. The Court enter an order dismissing the case with prejudice; and
3. Direct the Clerk to close the case.
Failure to file written objections to the proposed findings and recommendations contained
in this report within fourteen (14) days from the date of its filing shall bar an aggrieved party from
attacking the factual findings on appeal. If the parties have no objection to this Report and
Recommendation, they may promptly file a joint notice of no objection.
Recommended in Orlando, Florida on January 16, 2014.
Copies furnished to:
Presiding District Judge
Counsel of Record
Unrepresented Party
Courtroom Deputy
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