Loseke v. DePalma Hotel Corporation
MEMORANDUM AND ORDER - The parties' Joint Motion for Approval of Settlement Agreement (filing 35 ) is denied without prejudice. The pretrial conference set for September 16, 2014, and jury trial set to begin on September 29, 2014, are cancel led, and this case is removed from the trial docket, pending approval of the parties' settlement agreement. On or before August 25, 2014, the parties shall submit a renewed motion for approval of their settlement agreement, and supporting evi dence consistent with this order. On or before August 25, 2014, the parties shall show cause why the Court should not lift the restriction on their settlement agreement (filing 33 ) and make that document part of the public record. Absent su ch cause, the Court may lift the restriction without further notice. The Clerk of the Court shall set a case management deadline of August 26, 2014, with the following text: "Check on status of settlement agreement." Ordered by Judge John M. Gerrard. (GJG)
IN THE UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
MEMORANDUM AND ORDER
DEPALMA HOTEL CORPORATION,
This matter is before the Court on the parties' Joint Motion for
Approval of Settlement Agreement (filing 35). The Court finds that at
present, the record is insufficient for the Court to find that the settlement is
fair. The Court will, therefore, deny the parties' motion, but without prejudice
The plaintiff's complaint alleges, as relevant, that the defendant
violated the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq., by not
paying her overtime wages. Filing 1-1 at 2-3. The FLSA was enacted for the
purpose of protecting workers from substandard wages and oppressive
working hours. Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1352
(11th Cir. 1982). Recognizing that there are often great inequalities in
bargaining power between employers and employees, Congress made the
FLSA's provisions mandatory; thus, the provisions are not subject to
negotiation or bargaining between employers and employees. Id. FLSA rights
cannot be abridged by contract or otherwise waived because this would
nullify the purposes of the statute and thwart the legislative policies it was
designed to effectuate. Id.
So, there are only two ways in which back wage claims arising under
the FLSA can be settled or compromised by employees. First, under 29 U.S.C.
§ 216(c), the Secretary of Labor is authorized to supervise payment to
employees of unpaid wages owed to them. Lynn's Food, 679 F.2d at 1352-53.
Second, when employees bring a private action for back wages under the
FLSA, and present to the district court a proposed settlement, the Court may
enter a stipulated judgment after scrutinizing the settlement for fairness. Id.
The parties' present motion seeks such a stipulated judgment. See filing 35.
The Court agrees with the parties that the plaintiff's claims may be
compromised only if the Court approves the fairness of the settlement. See
Lynn's Food, 679 F.2d at 1352; see also, Nall v. Mal-Motels, Inc., 723 F.3d
1304, 1307-08 (11th Cir. 2013); Copeland v. ABB, Inc., 521 F.3d 1010, 1014
(8th Cir. 2008).
"Although Lynn's Food requires a court to scrutinize a proposed
settlement for fairness, it does not describe the factors a court should use in
doing so, and courts have struggled to apply Lynn's Food properly." Briggins
v. Elwood TRI, Inc., ___ F. Supp. 2d ___, 2014 WL 975701, at *7 (N.D. Ala.
March 11, 2014).
Factors that have been used by courts to assess the fairness of a
proposed settlement include the following: (1) whether there is a
bona fide dispute as to coverage of the FLSA or the amount of
overtime to which the employee may be entitled, (2) whether the
employee initiated the claim in a lawsuit, (3) whether the
employee is represented by counsel, (4) whether the employer
appears to be able to exercise undue leverage or influence over
the employee, (5) how close to full compensation of the employee's
claim is the proposed settlement, (6) whether the settlement
includes or excludes liquidated damages and/or the employee's
attorney's fees and expenses, and (7) whether the proposed
settlement requires the employee to release other non-FLSA
claims or places other restrictions on the employee in order to
receive FLSA compensation.
Id. Courts have also considered such factors as the extent of discovery that
has taken place; the stage of the proceedings, including the complexity,
expense and likely duration of the litigation; the extent to which the
settlement will enable the parties to avoid anticipated burdens and expenses
in establishing their respective claims and defenses; the absence of fraud or
collusion in the settlement; whether the settlement agreement is the product
of arm's-length bargaining; and the experience of counsel who have
represented the plaintiffs. See, e.g., Patel v. Barot, ___ F. Supp. 2d ___, 2014
WL 1624001, at *6 (E.D. Va. April 23, 2014); Wolinsky v. Scholastic Inc., 900
F. Supp. 2d 332, 335 (S.D.N.Y. 2012); Dail v. George A. Arab, Inc., 391 F.
Supp. 2d 1142, 1145-46 (M.D. Fla. 2005). Factors that can weigh against
approval may include the presence of other employees similarly situated to
the plaintiff, a likelihood that plaintiff's circumstance will recur, or a history
of FLSA noncompliance by the same employer or others in the same industry
or region. Wolinsky, 900 F. Supp. 2d at 336.
This list of factors is both non-exclusive and potentially overinclusive—weighing the fairness of a settlement in any given case will,
necessarily, depend on that case's unique circumstances. But in this case, the
parties' motion does not provide the Court with the information needed to
evaluate even the most basic aspects of the settlement's fairness. There is, for
instance, no way for the Court to estimate the potential value of the
plaintiff's claim. Her complaint alleges that she is entitled to compensation
for 775 hours' worth of overtime. Filing 1-1 at 3. But the Court does not know
what that allegation is based upon, nor does the Court know at what rate the
plaintiff should allegedly have been paid. The parties assert that "[b]ased on
the amount to be paid to Plaintiff, it is clear that there was no fraud or
collusion[,]" filing 35 at 3—but that depends on comparing the amount to be
paid with the amount that could have been recovered at trial, and the Court
cannot make that comparison.
The FLSA also provides for liquidated damages, see 29 U.S.C. § 216(b),
but neither the settlement agreement nor the motion break down the
settlement amount to show whether it is composed of unpaid compensation,
liquidated damages, or both. See Goldsby v. Renosol Seating, LLC, 294 F.R.D.
649, 654 (S.D. Ala. 2013). In order to determine whether the settlement is a
fair and reasonable resolution of the plaintiff's FLSA claim, the Court must
consider whether in compromising her claim, the plaintiff agreed to forego
her statutory right to liquidated damages or any of her unpaid overtime
compensation. See id. But the information before the Court is not clear on
that point. See id.1
Nor is the Court in a position to determine whether there is a bona fide
dispute as to the applicability of the FLSA or the plaintiff's right to recovery.
The parties' motion asserts that the defendant "maintains that Plaintiff . . .
was paid all wages owed and is not owed overtime compensation." Filing 35
at 3. The motion describes the settlement as a way for both sides to avoid the
risks of litigation. Filing 35 at 3-4. But for the Court's inquiry into fairness to
have any meaning, "it must do more than just take at face value the parties'
assertion that there is 'no doubt' that the lawsuit involves a bona fide dispute
over FLSA coverage." Collins v. Sanderson Farms, Inc., 568 F. Supp. 2d 714,
720 (E.D. La. 2008). If there is no actual doubt that the plaintiff would be
entitled to the compensation she sought, and therefore to liquidated damages
as well, "then any settlement of such claims would allow the employer to
The Court also notes the plaintiff's allegation that after the plaintiff's complaints to her
employer about unpaid overtime were ignored, she "took her complaint to the United States
Department of Labor" but "[u]pon doing so, [she] was terminated" by the defendant. Filing
1-1 at 2. The FLSA contains an anti-retaliation provision, 29 U.S.C. § 215(a)(3), for which
there is a broad range of available remedies, see 29 U.S.C. § 216(b). Despite her allegation,
the plaintiff does not seem to have been pursuing a retaliatory discharge claim. See filing
1-1. Nonetheless, the parties may want to address whether or not such a claim was
negotiate around the statute's mandatory requirements. Without a bona fide
dispute, no settlement could ever be fair and reasonable." Id. at 719. But the
parties have given the Court no basis at this point to evaluate the risk that
the plaintiff would be taking by proceeding forward with litigation.
To be absolutely clear, however: the Court also has no reason to believe
that the settlement agreement is unfair. The Court respects counsel for both
parties and is willing to place trust in their professional judgment. But the
Court cannot discharge its responsibility to evaluate the fairness of the
parties' settlement without adequate foundation to make an independent
judgment. In the words of the Russian proverb famously adopted by
President Reagan, the Court must "trust, but verify."
The Court also requires a firmer basis to evaluate the reasonability of
the amount set aside by the settlement agreement for attorney fees. The
parties contend that the FLSA "does not require the court to assess the
fairness of an agreed payment of attorneys' fees in settling an individual
action" filing 35 at 4, and while the Court agrees in principle, that does not
relieve the Court of an obligation to make at least some inquiry. The FLSA
permits a court to allow a "reasonable attorney's fee to be paid by the
defendant, and costs of the action[,]" 29 U.S.C. § 216(b), and many courts
have held that even in the settlement context, it remains the Court's duty to
see that a reasonable attorney fee is paid by the defendant. See, Briggins,
2014 WL 975701, at *13; Wolinsky, 900 F. Supp. 2d at 336; Zegers v.
Countrywide Mortg. Ventures, LLC, 569 F. Supp. 2d 1259, 1261 (M.D. Fla.
2008). The Court agrees that in an individual FLSA claim, where separate
amounts are set forth for the plaintiff's damages and attorney fees, the Court
has greater flexibility in exercising its discretion in determining the
reasonability of the attorney fees. See, Wolinsky, 900 F. Supp. 2d at 336; Dail,
391 F. Supp. 2d at 1146. Nonetheless, "counsel must submit evidence
providing a factual basis for the award." Wolinsky, 900 F. Supp. 2d at 336.
That is particularly the case when the fee award is based on a contingency
agreement, as appears to have been the situation here. See, Bonetti v.
Embarq Mgmt. Co., 715 F. Supp. 2d 1222, 1226, 1228 (M.D. Fla. 2009);
Zegers, 569 F. Supp. 2d at 1261. Again, the Court has no reason not to trust
counsel—but the Court needs some factual basis to make an independent
Finally, the Court notes that the settlement agreement is conditioned
on confidentiality, and that the settlement agreement itself was filed with the
Court as a restricted document. See filing 33. The Court has granted the
parties' request to restrict access to the document for the time being. Filing
34. But, the Court notes, it is extremely well established that a presumption
of public access attaches to a judicial document, and that a settlement
agreement that forms the basis of a stipulated judgment under the FLSA is a
document to which that presumption attaches. See, Briggins, 2014 WL
975701, at *11-13; Wolinsky, 900 F. Supp. 2d at 337-40; Bouzzi v. F & J Pine
Rest., Inc., 841 F. Supp. 2d 635, 639-42 (E.D.N.Y. 2012); Miles v. Ruby
Tuesday, Inc., 799 F. Supp. 2d 618, (E.D. Va. 2011); Stalnaker v. Novar Corp.,
293 F. Supp. 2d 1260, 1263-64 (M.D. Ala. 2003). An FLSA settlement cannot
be made contingent upon extraneous conditions such as a confidentiality
clause. Briggins, 2014 WL 97570, at *11. So, in order for the settlement
agreement to remain restricted, the parties must demonstrate to the Court
that their need to seal the agreement outweighs the strong presumption of
public access that attaches to such judicial documents. See Bouzzi, 841 F.
Supp. 2d at 639; see generally Miles, 799 F. Supp. 2d at 621-22 (setting forth
factors for court to consider). The fact that the settlement agreement contains
a confidentiality provision is, standing alone, an insufficient interest to
overcome the presumption of public access. See Wolinsky, 900 F. Supp. 2d at
338. If the parties are unable to make a showing of necessity, the Court must
lift the restriction on the settlement agreement (filing 33).
In sum, the Court is unable to find that the parties' settlement
agreement is fair without a greater showing than has been made to this
point. None of this is to say that such a showing need be particularly onerous.
The Court recognizes that the parties are in a better position to assess the
strengths and weaknesses of their respective cases. See Bonetti, 715 F. Supp.
2d at 1227-28. There is no requirement that a valid settlement of an FLSA
claim must take a particular form, see Rakip v. Paradise Awnings Corp. 514
Fed. Appx. 917, 919-20 (11th Cir. 2013), and approval of the settlement must
not be turned into a trial (or rehearsal of the trial), see Collins, 568 F. Supp.
2d at 720. But the Court's evaluation of the fairness of the settlement
requires more fodder than the parties have provided so far. The Court will,
therefore, deny the parties' motion to approve the settlement agreement for
now, but permit them to try again, focusing particular attention on evidence
that will show the Court: (1) the potential value of the plaintiff's claim, and
the relative strengths and weaknesses of the parties' arguments; (2) the
factual basis supporting the amounts allocated by the settlement to the
plaintiff and to her attorneys, and (3) the compelling basis, if any, for denying
the public access to the settlement agreement.
IT IS ORDERED:
The parties' Joint Motion for Approval of Settlement
Agreement (filing 35) is denied without prejudice.
The pretrial conference set for September 16, 2014, and
jury trial set to begin on September 29, 2014, are cancelled,
and this case is removed from the trial docket, pending
approval of the parties' settlement agreement.
On or before August 25, 2014, the parties shall submit a
renewed motion for approval of their settlement agreement,
and supporting evidence consistent with this order.
On or before August 25, 2014, the parties shall show cause
why the Court should not lift the restriction on their
settlement agreement (filing 33) and make that document
part of the public record. Absent such cause, the Court may
lift the restriction without further notice.
The Clerk of the Court shall set a case management
deadline of August 26, 2014, with the following text: "Check
on status of settlement agreement."
Dated this 24th day of July, 2014.
BY THE COURT:
John M. Gerrard
United States District Judge
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