Southerland v. A Brighter Future, Inc.

Filing 28

MEMORANDUM OPINION & ORDER: ORDERED that the parties' Second Joint Motion for Approval of Settlement Agreement [Record No. 27 ] is DENIED, without prejudice. The parties may re-file for approval of the Settlement Agreement, addressing the def iciencies cited herein. Motions terminated: 27 JOINT MOTION For Court Approval of Confidential Settlement Agreement and Release and Dismissal of Case with Prejudice by A Brighter Future, Inc. filed by A Brighter Future, Inc. Signed by Judge Danny C. Reeves on 9/19/2018.(RBB)cc: COR

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF KENTUCKY
SOUTHERN DIVISION
(at London)
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BRUCE SOUTHERLAND,
Plaintiff,
V.
A BRIGHTER FUTURE, INC.,
Defendant.
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Civil Action No. 6: 17-268-DCR

MEMORANDUM OPINION
AND ORDER

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The parties have reached a proposed settlement of Plaintiff Southerland’s claims in this
matter, which arise under the Fair Labor Standards Act (“FLSA”), 28 U.S.C. § 207(a). [Record
No. 24] One matter remains, however: settlements involving FLSA claims must be approved
by the Court. See Lynn’s Food Stores v. United States, 679 F.2d 1350, 1355 (11th Cir. 1982).
The parties previously sought approval of their agreement on September 5, 2018, but that
requelst was denied because the parties had not provide sufficient information to allow the
Court to determine whether the agreement represented a fair and reasonable resolution of a
bona fide dispute. See id. at 1355. [Record Nos. 22, 26] The Court now considers the parties’
second joint motion for approval of their settlement agreement. [Record No. 27]
I.
Public policy requires that employees’ rights under the FLSA not be compromised by
settlement. Crawford v. Lexington-Fayette Urban Cnty. Gov., No. 06-299, 2008 WL 4724499
(E.D. Ky. Oct. 23, 2008). As a result, the Court must address the threshold question of whether
the parties’ proposed settlement involves bona fide dispute regarding the nature or existence
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of such rights. The plaintiff alleges that the defendant failed to compensate him as required
under FLSA for overtime worked during his employment from January 2014 through March
2017. [Record No. 1] Employees are afforded FLSA’s protections, while independent
contractors are not. See Keller v. Miri Microsystems LLC, 781 F.3d 799, 806 (6th Cir. 2015).
The Supreme Court has recognized that employers are liable to employees for overtime
wages, even if the employer puts an “independent contractor label” on the employee. Id. at
806-07 (quoting Rutherford Food Corp. v. McComb, 331 U.S. 722, 729 (1947)). The United
States Court of Appeals for the Sixth Circuit applies a common law agency test to determine
whether a hired party is an independent contractor or an employee. Shah v. Deaconess Hosp.,
355 F.3d 496, 499 (6th Cir. 2004) (citing Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318,
322 (1992)). See also Keller, 781 F.3d at 807 (citing Donovan v. Brandel, 736 F.2d 1114,
1116 (6th Cir. 1984) (describing the substantively similar “economic-reality test”).
Courts consider the following factors:
the hiring party’s right to control the manner and means by which the product is
accomplished; the skill required by the hired party; the duration of the
relationship between the parties; the hiring party’s right to assign additional
projects; the hired party’s discretion over when and how to work; the method of
payment; the hired party’s role in hiring and paying assistants; whether the work
is part of the hiring party’s regular business; and hired party’s employee
benefits; and the tax treatment of the hired party’s compensation.
Shah, 355 F.3d at 443 (citing Darden, 503 U.S. as 323-24). While the parties’ entry into an
express “independent contractor” agreement is not dispositive, it is some evidence of the
relationship that the parties intend to create. See Weary v. Cochran, 377 F.3d 522, 525-56 (6th
Cir. 2004).
Southerland maintains that he was the defendant’s employee because he consistently
worked for the defendant 75 to 80 hours per week; his job required specialized knowledge, but
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not much skill or initiative; the defendant provided the necessary materials (other than a
vehicle); he had no control over his own profit or loss, and received hourly compensation; and
supervisors exercised extensive control over his work hours and job duties. [Record No. 27,
p. 4] The defendant, on the other hand, contends that Southerland was an independent
contractor prior to January 1, 2017, because he signed an independent contractor agreement;
he could work as many or as few hours as he desired; he was not restricted from providing
services to other companies; and he had no supervisor during the relevant period. Id. at 5.
No one factor is determinative. It is notable, however, that with respect to the core
issue of control, Southerland argues that the defendant exercised significant control over his
job duties, while the defendant maintains that Southerland did not have a direct supervisor
during the relevant period. See Werner v. Bell Family Med. Ctr., Inc., 529 F. App’x 541 (6th
Cir. 2013) (acknowledging that right to control manner and means of work is a key
consideration).

And despite the parties’ express agreement that Southerland was an

independent contractor, other factors, such as the defendant’s provision of materials, suggest
that Southerland was an employee.
The parties have established sufficiently that Southerland’s true employment status is
in dispute. Thus, they have demonstrated that a bona fide dispute exists. See e.g., Ross v. Jack
Rabbit Servs., LLC, No. 3: 14-cv-44-DJH, 2016 WL 7320890, at *2 (W.D. Ky. Dec. 15, 2016).
II.
The Court also must determine whether the proposed settlement is fair. Southerland’s
Complaint seeks unpaid overtime wages from January 21, 2014, through March 13, 2017, as
well as liquidated damages. [Record No. 1, p. 3-4] His regular pay rate was $14.00 per hour,
and he contends that he is due $19,721.94 in back pay wages for the two-year period preceding
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the filing of this suit. [Record No. 27, p. 4] The defendant acknowledges that if the lawsuit
continues, and the plaintiff if successful, he could recover “approximately $36,000.00 in back
pay and liquidated damages alone.” Id. at 5.
The proposed settlement agreement awards Southerland a total of $33,000.00,
$15,999.06 of which will be payable to Southerland’s attorney. The $17,000.94 payable to
Southerland approaches the amount he originally sought for unpaid overtime wages.
Liquidated damages are available in cases of willful violations of the FLSA, which extend the
statute of limitations to three years. 29 U.S.C. §§ 216(b), 255(a). The defendant maintains
(based on the good-faith disagreement regarding Southerland’s employment status) that any
alleged violation of the FLSA was not willful.

Given the uncertainty and expense of

proceeding with litigation and the parties’ arms-length negotiations with experienced
attorneys, this amount represents a fair and complete recovery under the FLSA.
The Court also must consider the reasonableness of the agreed upon attorney’s fees.
The FLSA includes a fee-shifting provision that allows the prevailing party to recover
reasonable attorney’s fees and litigation costs. 29 U.S.C. § 216(b). Indeed, an award of
attorney’s fees under the FLSA is mandatory, but the amount of the fees lies with the discretion
of the district court. Fegley v. Higgins, 19 F.3d 1126, 1134 (6th Cir. 1994). The Court must
determine the reasonableness of the fee, even when it is negotiated as part of a settlement
agreement. Thompson v. United Stone, LLC, No. 1: 140-CV-224, 2015 WL 8677988, at *2
(E.D. Tenn. March 2, 2015) (citing Lliguichuzhca v. Cinema 60, LLC, 948 F.Supp.2d 362, 366
(S.D.N.Y. 2013)).
“A reasonable fee is one that is ‘adequate to attract competent counsel but . . . [does]
not produce windfalls to attorneys.’” Reed v. Rhodes, 179 F.3d 453, 471 (6th Cir. 1999) (citing
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Blum v. Stenson, 465 U.S. 886, 893 (1984)). The starting point for determining a reasonable
fee is the lodestar, which is the product of the number of hours billed and a reasonable hourly
rate. Gonter v. Hunt Valve Co., Inc., 510 F.3d 610, 616 (6th Cir. 2007) (citing Hensley v.
Eckerhart, 461 U.S. 424, 434 (1983)). After determining the lodestar amount, courts may
adjust the amount based on 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
other 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 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.
Paschal v. Flagstar Bank, 297 F.3d 431 (6th Cir. 2002) (quoting Blanchard v. Bergeron, 489
U.S. 87, 91 n.5 (1989)).

Despite the consideration of these factors, there is a strong

presumption that the lodestar amount represents a reasonable fee. Adcock-Ladd v. Sec’y of the
Treasury, 227 F.3d 3430349-50 (6th Cir. 2000).
Counsel reports that her firm incurred costs and expenses of $1,121.56, reducing the
attorney fee to $14,877.50. [See Record No. 27, p. 7] Divided by the 52.2 hours counsel
reports to have spent working on this matter, the resulting rate is $285.00 per hour. See id.
However, this Court must determine whether the party seeking the award has sufficiently
documented its claim. See Reed, 179 F.3d at 472. “Where the documentation is inadequate .
. . the district court would do violence to its judicial obligations were it to accept the amounts
claimed at their face value.” United Slate, Local 307 v. G&M Roofing and Sheet Metal, Co.,
Inc., 732 F.2d 495 (6th Cir. 1984).

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Counsel for the plaintiff has not provided any documentation in support of the request
for fees and costs, nor has she provided any information regarding the “reasonable hourly rate”
for an attorney of her experience and area of practice. The Court recognizes that the parties
have agreed to the amount of attorney’s fees and costs outlined as in the proposed Settlement
Agreement. However, the Court has a duty to independently examine such fee agreements to
ensure fairness to the plaintiff. See Adock-Ladd, 227 F.3d at 349.
Accordingly, it is hereby
ORDERED that the parties’ Second Joint Motion for Approval of Settlement
Agreement [Record No. 27] is DENIED, without prejudice. The parties may re-file for
approval of the Settlement Agreement, addressing the deficiencies cited herein.
Dated: September 19, 2018.

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