Bailes v. Lineage Logistics, LLC
MEMORANDUM AND ORDER denying without prejudice 38 Motion for Order; denying without prejudice 39 Motion for Attorney Fees. IT IS FURTHER ORDERED THAT the parties must notify the court on or before July 6, 2017 of their intention either to (1) f ile a revised settlement agreement and/or motion for final approval and supporting documentation in accordance with this Memorandum and Order; or (2) abandon settlement and proceed to litigate this dispute. Signed by District Judge Daniel D. Crabtree on 06/06/2017. (mig)
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IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF KANSAS
Individually and on Behalf of
Case No. 15-cv-02457-DDC-TJJ
LINEAGE LOGISTICS, LLC,
MEMORANDUM AND ORDER
Plaintiff Bryan Bailes brings this lawsuit for himself and putative class members alleging
that defendant Lineage Logistics, LLC violated the Fair Credit Reporting Act (“FCRA”), 15
U.S.C. §§ 1681–81x (2012). The parties met, negotiated, and agreed to a compromise. On May
9, 2016, they asked the court to approve the result of their efforts: a proposed class settlement.
Doc. 24-1. On August 19, 2016, the court denied their motion and gave the parties time to
renegotiate certain aspects of their proposed compromise. Doc. 25. The parties again met,
negotiated, and agreed to a new proposed class settlement.
On December 15, 2016, the court preliminarily approved this new proposed settlement
agreement (“Proposed Settlement”) and conditionally certified a settlement class. Doc. 32.
Almost a month later, the court approved the parties’ proposed notice and notice plan. Doc. 35.
The parties filed their Joint Motion for Order for Final Approval of Class Action Settlement on
April 19, 2017, and the same day plaintiff filed a Motion for Attorney Fees and Costs. Docs. 38,
39. The court held a fairness hearing on April 25, 2017, and is now ready to rule both motions.
Case 2:15-cv-02457-DDC-TJJ Document 41 Filed 06/06/17 Page 2 of 10
Proposed Settlement and Class Notice Details1
Once the court granted the parties’ motion for preliminary approval, the settlement
administrator, Analytics Consulting, LLC, began sending the court-approved notice to putative
class members. The parties expected the class to consist of 3,400 members, but the actual
number was slightly smaller—3,356. After the initial mailing, the settlement administrator ran a
skip trace and re-mailed notices to 694 class members. The administrator then ran a second skip
trace, and re-mailed notices to 29 class members. All told, the parties could not locate 425 of the
3,356 putative class members. So, all that left 2,931 members who received actual notice. None
of them opted out or objected.
The parties have agreed to settle the class’s claims for a total of $149,205. They propose
to distribute this sum in this fashion: attorney fees and costs of $49,237 (should the court
approve that amount); settlement administrator costs of $16,500; a $5,000 incentive award for
the named plaintiff, Bryan Bailes; and the remainder, $78,468, to be divided equally among the
2,931 class members “to whom notice was sent and not returned as undeliverable.” Doc. 28-3 at
5–6, 8. This formula would provide, if approved, each class member who received notice with
about $26.77. If finally approved, the Proposed Settlement requires the administrator to mail
settlement checks to all class members “to whom notice was sent and not returned as
undeliverable.” Id. at 8. Any checks not cashed within 120 days of issuance would pass to
Goodwill Industries International, Inc. as a cy pres beneficiary.
In addition to the monetary considerations detailed above, the parties have agreed not to
publicize the settlement. Plaintiff and all class members also have agreed to release all claims
they may have against the defendant based on plaintiff’s First Amended Complaint.
The court has recited the facts of this case at length in its previous orders, and so focuses its discussion here on the
facts necessary to determine whether to grant final approval of the Proposed Settlement. Docs. 25, 32.
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Joint Motion for Order for Final Approval of Class Action Settlement
After reviewing parties’ submissions, the court concludes that it cannot currently approve
the Proposed Settlement because the information the parties provide is insufficient to allow the
court to make the findings necessary for approval. Specifically, the parties’ joint motion never
asks the court to issue a final class certification order. And the parties did not raise or present
evidence on this issue during the April 25, 2017 fairness hearing.
As the Supreme Court explained in Amchem Products, Inc. v. Windsor, class certification
under Federal Rule of Civil Procedure 23(a)–(b) must precede settlement approval under Rule
23(e). 521 U.S. 591, 619–22 (1997); see also id. at 622 (“Federal courts, in any case, lack
authority to substitute for Rule 23’s certification criteria a standard never adopted—that if a
settlement is ‘fair,’ then certification is proper.”). Here, the court has not issued a final
certification order certifying the settlement class. It merely has certified the class conditionally
for purposes of sending notice, gathering objections, and laying a foundation for a fruitful
fairness hearing.2 It remains, then, for the parties to seek final class certification.3
Because the parties neither have moved for nor submitted information about final class
certification, the court cannot yet certify a class action under Rule 23, and so it cannot grant final
See In re Motor Fuel Temperature Sales Practices Litig., 286 F.R.D. 488, 492 (D. Kan. 2012); see also West v.
Circle K Stores, Inc., No. S-04-0438 WBS GGH, 2006 WL 1652598, at *2 (E.D. Cal. June 13, 2006) (“[I]n this first
order the court will only ‘determine[ ] whether a proposed class action settlement deserves preliminary approval’
and lay the ground work for a future fairness hearing . . . .” (quoting Nat’l Rural Telecomms. Coop. v. DIRECTV,
Inc., 221 F.R.D. 523, 525 (C.D. Cal. 2004)).
See Freebird, Inc. v. Merit Energy Co., No. 10-1154-KHV, 2013 WL 1151264, at *2 (D. Kan. Mar. 19, 2013)
(considering whether to grant final certification of the conditionally certified settlement class); In re Motor Fuel
Temperature Sales Practices Litig., No. 07-MD-1840-KHV, 2015 WL 5010048, at *1 (D. Kan. Aug. 21, 2015)
(same); In re Sulzer Hip Prosthesis & Knee Prosthesis Liab. Litig., No. 1:01-cv-9000, 2001 WL 1842315, at *3
(N.D. Ohio Oct. 20, 2001) (“The parties have jointly approached the Court, seeking only conditional certification of
this matter as a class action and preliminary approval of their proposed settlement. As the parties understand, their
motion for approval of the proposed settlement agreement, if granted, is only the first step in an extensive and
searching judicial process, which may or may not result in final approval of a settlement in this matter.”).
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approval of the Proposed Settlement. Cf. Gambrell v. Weber Carpet, Inc., No. 10-2131-KHV,
2012 WL 162403, at *3 (D. Kan. Jan. 19, 2012) (denying motion to approve FLSA collective
action because the parties did not ask the court to issue a final class certification order and did
not provide sufficient information for the court to make a final class certification decision).
The court presumes that class counsel will cure this omission and promptly file a motion
seeking final class certification (and showing why that result comports with the governing law).
But another aspect of the Proposed Settlement presents a more vexing problem.
Under Rule 23(e), any “settlement, compromise or dismissal of certified class claims”
requires court approval. Freebird, Inc. v. Merit Energy Co., No. 10-1154-KHV, 2012 WL
6085135, at *4 (D. Kan. Dec. 6, 2012). The court may approve a settlement only if it finds that
the proposed settlement “is fair, reasonable and adequate” in all respects. Id; see also Fed. R.
Civ. P. 23(e)(2). To determine whether a proposed settlement is fair, reasonable, and adequate,
the court considers four factors: (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) whether, in the
judgment of the parties, the settlement is fair and reasonable. Rutter & Wilbanks Corp. v. Shell
Oil Co., 314 F.3d 1180, 1188 (10th Cir. 2002).
At the preliminary approval stage, the court preliminarily found that the Proposed
Settlement satisfied each factor. Doc. 32. But the court explicitly deferred a final decision
pending notice to the class members and a full fairness hearing. Id. Now, with the benefit of a
fairness hearing, the court retains a concern about final approval: plaintiff’s incentive award. In
many class actions, the parties’ settlement agreement allows the named plaintiffs to seek an
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incentive award from the court. See, e.g., In re Motor Fuel Temperature Sales Practices Litig.,
271 F.R.D. 263, 293 (D. Kan. 2010) (“Here, the proposed settlement allows class representatives
to request an award of $2,500, but it does not require an incentive payment. Instead, it leaves the
[c]ourt discretion to award incentive fees if warranted.”). But the settlement proposed here
seems to require the court to award a $5,000 incentive award to plaintiff as an essential element
of the agreement. See Doc. 28-3 at 6 (providing in Joint Stipulation of Settlement that $5,000 of
the gross settlement amount “will be deducted” and paid to Mr. Bailes as an “Incentive Award”
Two characteristics of plaintiff’s proposed incentive award present substantial concerns
about the overall fairness of the Proposed Settlement. See 7B Alan Wright et al., Federal
Practice and Procedure § 1797.1 (3d ed.), Westlaw (updated Apr. 2017) (“The ability to obtain
an incentive award may create of conflict of interest between the named plaintiffs and the absent
class members under certain circumstances . . . .”). Under the settlement proposed here,
plaintiff’s total recovery is about 185 times greater than the recovery of his fellow class
members. And, plaintiff’s $5,000 incentive award represents 3.35% of the total cost of the
settlement ($5,000 vis-à-vis $149,205), and almost 6% of the $83,568 to be paid to plaintiff and
the class members. The court believes that an incentive award of this dimension threatens the
overall fairness of the Proposed Settlement. The discrepancy between plaintiff’s recovery and
the recovery of other class members alone gives the court pause.
At the fairness hearing, the court apprised counsel of its concern. Plaintiff’s counsel
responded, representing that plaintiff had served as a closely involved class representative,
calling about once every other week to check on the case’s progress. Counsel said those phone
calls lasted anywhere from 3 to 25 minutes. Even if the court could accept a generalization of
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this kind as a basis for an incentive award, it would not justify a $5,000 award. Counting the
time between the case’s filing in February 2015 and the fairness hearing in April 2017 as 110
weeks, 55 phone calls—so, one every other week—lasting 3 minutes to 25 minutes each would
compensate plaintiff for his time at a rate between, approximately, $1,818 and $218 per hour.4
The court is mindful that federal courts—including this court and the judicial officer
singing this Order—have approved incentive awards. See, e.g., Nieberding v. Barrette Outdoor
Living, Inc., 129 F. Supp. 3d 1236, 1250–52 (D. Kan. 2015) (rejecting request for incentive
award of 2% of the common fund in a settlement of Kansas Consumer Protection Act claims and
approving, instead, an award of 1%, i.e., $3,500 award in a $350,000 settlement). But our court
consistently evaluates incentive awards (or service awards, as they are sometimes termed) and
rejects them where they are disproportionate or provide excessive compensation. See, e.g., In re
Sprint Corp. ERISA Litig., 443 F. Supp. 2d 1249, 1271 (D. Kan. 2006) (reducing requested
service awards to each of four named plaintiffs from $15,000 to $5,000, even though the total
settlement exceeded $25 million, because the $5,000 award adequately compensated plaintiffs
for the 80 hours that, on average, each one named plaintiff had devoted to the lawsuit); Barbosa
v. Nat’l Beef Packing Co., LLC., No. 12-2311-KHV, 2015 WL 4920292, at *6 (D. Kan. Aug. 18,
2015) (rejecting proposed service award of $3,500 to each of two named plaintiffs where each
spent 24.1 hours and 9.6 hours respectively on the case, and instead concluding that $20 per hour
for the time plaintiffs spent on the case was a fair and reasonable service award); Bruner v.
Sprint/United Mgmt. Co., Nos. 07-2164-KHV, 08-2133-KHV, 08-2149-KHV, 2009 WL
2058762, at *11 (D. Kan. July 14, 2009) (rejecting $10,000 proposed service award to named
55 calls at three minutes each amounts to 2.75 hours. Rewarding that effort with a $5,000 payment produces an
hourly rate of more than $1,800. And, if one uses the midpoint of counsel’s “3 to 25 minutes” estimate—14
minutes—a $5,000 payment produces an hourly rate of almost $390. And even if one presumes that each one of the
calls lasted 25 minutes—the maximum of counsel’s estimate—that produces an hourly rate of about $218.
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plaintiff in an $8.7 million settlement because the plaintiff failed to provide specific details about
the amount of time she invested in the suit and awarding a $5,000 service award instead).
Neither the written submissions or oral presentations here persuades the court that
plaintiff should receive nearly 6% of the total settlement devoted to class recovery (i.e., the
class’s net recovery). Nor can the court abide an effective hourly rate of $218—much less
$1,818 per hour. A settlement agreement that requires the court to award plaintiff a $5,000
incentive award, on the facts as the court now knows them, cannot be a fair, reasonable, and
adequate one. The court would thus decline to approve a settlement including a mandatory
$5,000 incentive award for plaintiff. This does not mean the court will approve no incentive
award. So, if the parties decide to reformulate the Proposed Settlement to make any incentive
award discretionary, the court will consider granting an award that comports with the precedent
in this district.5
Motion for Attorney Fees and Costs
Next, plaintiff asks the court to approve an attorneys’ fee award of 33% of the total
settlement fund, or $49,237. Because plaintiff has failed to show that the Proposed Settlement is
Any such reduction of plaintiff’s incentive award would not require new notice to the class or a new fairness
hearing because it would, in effect, increase the class members’ recovery. See In re Integra Realty Res., Inc., 262
F.3d 1089, 1111 (10th Cir. 2001) (affirming district court’s refusal to issue a second notice where the amended
settlement agreement “merely expanded the rights of class members and gave members the right to opt out after they
saw all of the terms of the settlement” because the Circuit “s[aw] no way that the court’s failure to provide new
notice of the opt-out rights prior to accepting the settlement gave rise to a risk that unfavorable terms would be
forced upon some class members or otherwise diminish class members’ ability to bring objections before the
court”); Keepseagle v. Vilsack, 102 F. Supp. 3d 306, 313–14 (D.D.C. 2015) (considering when amended settlement
requires additional notice thoroughly and concluding that “an amendment that neither adds to the res judicata effect
of a judgment by expanding the scope of covered claims nor otherwise limits any legal right held by a class member
need not be subject to a renewed Rule 23(e) process” and noting that “an amendment requires supplemental notice
only when it “would have a material adverse effect on the rights of class members” (citations omitted)); In re Motor
Fuel Temperature Sales Practices Litig., No. 07-MD-1840-KHV, 2011 WL 4431090, at *6 (D. Kan. Sept. 22, 2011)
(“Broadly interpreted, this language [in Rule 23(e)] is sufficiently flexible to permit the Court to approve a
compromise but to determine that class notice is not required when the compromise will not result in any prejudice
to the class.” (citation and footnote omitted)); see also Knuckles v. Elliott, No. 15-10175, 2016 WL 3912816, at *6
(E.D. Mich. July 20, 2016) (granting final approval of class action settlement without requiring another round of
notice or another fairness hearing even though the parties had amended the settlement agreement after the fairness
hearing because the amended agreement did not adversely affect class members’ rights).
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fair, reasonable, and adequate, this request is premature. The court thus denies plaintiff’s Motion
for Attorney Fees and Costs without prejudice.
This does not mean that the court would reject such a fee request. But the court notes
that defendant agreed not to contest plaintiff’s request for $49,237 in attorneys’ fees and costs.
See Doc. 28-3 at 6. “When a settlement agreement is reached and [the] defendant agrees [not to]
oppose an award of attorneys’ fees from a common fund, [the] defendant has no incentive to
bargain for lower fees.” Barbosa, 2015 WL 4920292, at *9. In these circumstances, our court
“skeptically examine[s] and analyze[s] the fee and cost proposal.” Id. (citing Bruner, 2009 WL
2058762, at *10). In our Circuit, this requires the court to consider “the twelve factors originally
developed in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714 (5th Cir. 1974),”
commonly called the 12 Johnson factors. Gottlieb v. Barry, 43 F.3d 474, 482 & n.4 (10th Cir.
1994). Those 12 factors are:
(1) the time and labor required, (2) the novelty and difficulty of the questions
presented by the case, (3) the skill requisite to perform the legal service properly,
(4) the preclusion of other employment by the attorneys due to acceptance of the
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 “undesirability” of the case, (11) the nature and length of the
professional relationship with the client, and (12) awards in similar cases.
In re Sprint Corp. ERISA Litig., 443 F. Supp. 2d 1249, 1269 (D. Kan. 2006) (citation omitted).
Here, plaintiff’s counsel has submitted some information to justify his fee request but, in
response to this Memorandum and Order, the parties may decide to reformulate their motion for
final approval—or even their proposed settlement—and resubmit it. If the parties choose to
retain their current Proposed Settlement or if a reformulated proposed settlement includes
defendant’s promise not to oppose a fee award, the court will review the 12 Johnson factors with
the requisite skepticism. This approach requires more than a passing mention of the hours
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logged by each attorney and that attorney’s usual hourly rate in plaintiff’s briefing. Indeed, our
Circuit requires much more to secure fee approval.6
The court currently cannot approve the parties’ proposed settlement based on the record
and motions before it. The court thus denies the parties’ Joint Motion for Order for Final
Approval of Class Action Settlement and plaintiff’s Motion for Attorney Fees and Costs without
prejudice to refiling. Should the parties choose to revise and refile a motion for final approval,
the court will consider whether approval is warranted under the governing standard.
IT IS THEREFORE ORDERED THAT the parties’ Joint Motion for Order for Final
Approval of Class Action Settlement (Doc. 38) is denied without prejudice.
IT IS FURTHER ORDERED THAT Bryan Bailes’s Motion for Attorney Fees and
Costs (Doc. 39) is denied without prejudice.
IT IS FURTHER ORDERED THAT the parties must notify the court on or before
July 6, 2017 of their intention either to (1) file a revised settlement agreement and/or motion for
final approval and supporting documentation in accordance with this Memorandum and Order;
or (2) abandon settlement and proceed to litigate this dispute.
IT IS SO ORDERED.
See, e.g., Beard v. Teska, 31 F.3d 942, 956 (10th Cir. 1994) (“[T]he relevant market value is not the price that the
particular lawyer chosen may be paid by willing purchasers of his or her services, but rather the price that is
customarily paid in the community for services like those involved in the case at hand.”), abrogated on other
grounds by Buckhannon Bd. & Care Homes, Inc. v. W. Va. Dept. of Health & Human Res., 532 U.S. 598 (2001); id.
at 955 (“[O]n the hourly rate issue, the applicant may meet that burden by way of: ‘satisfactory evidence—in
addition to the attorney’s own affidavit—that the requested rates are in line with those prevailing in the community
for similar services by lawyers of reasonably compared skill, experience, and reputation.’” (quoting Blum v.
Stenson, 465 U.S. 886, 895 n.11 (1984))); Wilhelm v. TLC Lawn Care, Inc., No. 07-2465-KHV, 2009 WL 57133, at
*4 & n.16 (D. Kan. Jan. 8, 2009) (denying fee-award request even though plaintiffs provided affidavits from other
local attorneys, among other evidence, because plaintiffs’ own attorneys’ affidavits simply “opine[d] that the rates
which they request are fair and encourage[d] the [c]ourt to unseal cases in which they ha[d] obtained fee awards”).
Case 2:15-cv-02457-DDC-TJJ Document 41 Filed 06/06/17 Page 10 of 10
Dated this 6th day of June, 2017, at Topeka, Kansas.
s/ Daniel D. Crabtree
Daniel D. Crabtree
United States District Judge
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