Patterson v. Premier Construction Co. Inc.
MEMORANDUM & ORDER denying without prejudice the Parties' 31 Joint Motion for Preliminary Certification and Class Settlement Approval. The hearing set for January 18, 2017, is hereby adjourned without rescheduling. Ordered by Judge Sandra L. Townes on 1/12/2017. (Barrett, C)
IN CLERKS OFFIC
U.S. D1STRIT O(JRT D.
* JAN 122017 *
UNITED STATES DISTRICT COURT
EASTERN ISTRICT OF NEW YORK
-- ----- -------- x
SEAN PATTERSON, on behalf of himself and
All others similarly situated,
MEMORANDUM & ORDER
15-cv-00662 (SLT) (ST)
- against PREMIER CONSTRUCTION CO. INC., and
SAEED M. ANJUM,
------------------- ---- -------x
TOWNES, United States District Judge,
Before the Court is the Parties' Joint Motion for Preliminary Certification and Class
Settlement Approval. (ECF No. 31). The motion is DENIED without prejudice to reurge in
the manner addressed below. Additionally, the hearing set for January 18, 2017, is hereby
ADJOURNED without rescheduling.
FACTUAL AND PROCEDURAL BACKGROUND
Putative Class Plaintiff Sean Patterson initiated this action on February 10, 2015, alleging
FLSA, NYLL, and related city law violations against his employer, Premier Construction.' (See
ECF No. 1). He primarily alleges that he and others similarly situated regularly worked eight
hours a day for six days a week but never received overtime pay (1
regular pay) for their sixth
1 Roughly a month later he filed an Amended Complaint adding Saeed M. Anjum, the owner of Premier
Construction, as an additional defendant. (ECF No. 4).
On August 1, 2016, the parties participated in a mediation session conducted by the
Honorable Judge John P. DiBlasi (formerly of the Commercial Division of the N.Y. State
Supreme Court). (See ECF No. 32 at 2). At that mediation session the parties reached a
"settlement in principle of all disputed issues between the parties[,]" and later "negotiated the
specific terms of the Settlement Agreement now being put forward before the Court" without
DiBlasi's involvement. (ECF No. 33. ¶J 9-10). Those additional terms are as follows.
The entire amount—presumably the "agreement in principle" arrived at during
mediation--is nominally $290,000. This $290,000 "Settlement Fund," as it is defined in the
Settlement Agreement, is the "maximum amount that can be paid by Defendants pursuant to
th[e] Agreement." The proposed agreement allocates $150,000 of that sum to "satisfy three
Class Counsel fees not to exceed $96,666.00 (which equals
1/3 of the overall $290,000 Settlement Fund) and for which
Plaintiff's counsel will petition the Court without opposition from
Defendants (ECF No. 33-1, ¶3.2),
Claims administrator fees of $25,000 (ECF No. 33-1, ¶
$25,000 in distinct "settlement checks" and "Enhancement
Awards" to both Plaintiff Sean Patterson and Mr. Moises Rosario.
Specifically, Patterson will receive a $15,000 "settlement check" in
addition to a $5,000 "Enhancement Award." (ECF No. 33-1, ¶
3.1(A)(a)). Moises Rosario will receive a $4,000 "settlement
check" in addition to a $1,000 "Enhancement Award." (Id. ¶
Thus, more than half of what the parties term the "Settlement Fund" is allocated to expenses,
fees, and isolated payments to Plaintiff and Mr. Rosario.
The remaining $140,000 is reserved for individual class members, who will receive either
$1,000 or $2,000 dollars if they return timely and valid Claim Forms and do not opt out of the
settlement. (ECF No. 33-1, ¶ 3.1 en toto). Specifically, $1,000 will be paid to opt-in members
who worked 12 months or less, and $2,000 will be paid to those who worked more than 12
months. (ECF No. 33-1, ¶ 3.1(A)). Of course, any class members who do not specifically optout or -in will receive nothing and their claims will be permanently extinguished. Notably, this
$140,000 tranche is "reversionary," meaning that any undispersed amounts will revert to
Defendant after 150 days of any final approval of the settlement. (See ECF No. 33-1, ¶
The class action settlement approval process customarily has two stages. See FJC
Manual for Complex Litigation (4th) ("MCL"), infra. First the court preliminarily certifies the
class and approves the settlement terms, class notices, and administrative procedures proposed
by the parties. See, e.g., MCL (4th) § 21.632. Second, the court holds a final settlement hearing
to determine whether the settlement is "fair, reasonable, and adequate" and then grants or denies
final approval of the settlement and certification of the class. Fed. R. Civ. P. 23(e)(2).
The initial issue in a preliminary review is whether the proposed settlement agreement is
"fair, adequate and reasonable and not a product of collusion." Berkson v. Gogo LLC, 147 F.
Supp. 3d 123, 130 (E.D.N.Y. 2015) (Weinstein, J) (citations omitted.) As a general matter,
"[p]reliminary approval of a proposed settlement is appropriate where it is the result of serious,
informed, non-collusive ('arm's length') negotiations, where there are no grounds to doubt its
fairness and no other obvious deficiencies (such as unduly preferential treatment of class
representatives or of segments of the class, or excessive compensation for attorneys), and where
the settlement appears to fall within the range of possible approval." Cohen v. IF. Morgan
Chase & Co., 262 F.R.D. 153, 157 (E.D.N.Y. 2009) (citing, e.g., MCL § 30.41); see also In re
Traffic Executive Ass 'n—Eastern Railroads, 627 F.2d 631, 634 (2d Cir. 1980) (stating that
preliminary approval "is at most a determination that there is what might be termed 'probable
cause' to submit the proposal to class members and hold a full-scale hearing as to its fairness.")
In ascertaining whether a settlement falls "within the range of possible approval, courts will
compare the settlement amount to the relief the class could expect to recover at trial." Newberg
on Class Actions ("Newberg") § 13:15 (5th ed.) (quotation marks and citations omitted).
While court approval is required, the "judge cannot rewrite the agreement." MCL §
21.611; see also Evans v. Jeff D., 475 U.S. 717, 726-27 (1986) ("[Under] Rule 23(e)... the
power to approve or reject a settlement negotiated by the parties before trial does not authorize
the court to require the parties to accept a settlement to which they have not agreed.") Despite
this limitation, it is widely recognized that courts can condition preliminary approval without
rewriting agreements. Indeed, as the Second Circuit has explained, "a dissatisfied judge may,
with circumspection, 'edge' the parties in what [s]he believes to be the right direction" without
directly modifying the proposed settlement directly. Plummer v. Chem. Bank, 668 F.2d 654, 656
n. 1 (2d Cir. 1982) (citations omitted); but see In re Warner Commun. Sec. Litig., 798 F.2d 35 5
37 (2d. Cir. 1986) ("[I]t is not a district judge's job to dictate the terms of a class settlement.")
To that end, many courts deny preliminary approval" 'without prejudice,' providing
guidance to the parties as to the problems that concern them and giving the parties the
opportunity to amend the agreement." Newberg § 13.12 (citations omitted). As the author of the
MCL has similarly noted, "[ijt is not uncommon for the court to deny preliminary approval with
specific guidance to the parties as to the factors driving that decision and explicitly specifying
that the denial is without prejudice and is subject to being renewed in a modified proposed
settlement." MCL (4th ed. 2016) 448, Author's Comments to § 21.63); see also Romstadt v.
Apple Computer, Inc., 948 F. Supp. 701, 707 (ND. Ohio 1996) (noting that a "proposed
agreement is more readily alterable" and that "[t]he choice facing the court and parties is not
limited to the binary alternatives of approval or rejection.") While courts have denied
preliminary approval based on a finding that the proposed settlement value is outside the range
of reasonableness, "more commonly their denial is based on the settling parties' failure to furnish
the court with enough information and evidence to enable it to rationally assess the
reasonableness of the proposed consideration." Newberg § 13.12 (citations omitted); see also
MCL § 21.631 (courts should ask "counsel to provide complete and detailed information about
the factors that indicate the value of the settlement."); Custom Led, LLC v. eBay, Inc, No.
00350-JST 5 2013 WL 4552789, at *9 (N.D. Cal. Aug. 27, 2013) (denying preliminary approval
without prejudice where the parties provided "no information as to the class members' potential
range of recovery."); Galloway v. Kansas City Landsmen, LLC, No. 4:11 -1020-CV-W-DGK,
2013 WL 3336636, at *4 (W.D. Mo. July 2, 2013) (Courts should" 'insist that the parties present
evidence' that would at least enable it to make a 'ballpark valuation' before deciding whether to
approve a settlement.") (quoting Synfuel Technologies, Inc. v. DHL Express, 463 F.3d 646, 653
(7th Cir. 2006); In re Microsoft Corp. Antitrust Litig., 185 F. Supp. 2d 519, 526 (D. Md. 2002)
(denying preliminary certification where record did not disclose enough information to allow for
meaningful assessment of potential damages.)
Here, the parties have provided virtually no information regarding class members'
potential range of recovery and their proposed settlement must be denied on that basis.
Plaintiff's brief provides only conclusory statements regarding the value of each claim. Counsel
asserts, for instance that the entire $290,000 fund is "fair and reasonable" because (i) without
settlement "the Parties expect extensive additional motion practice" over decertification and
unidentified dispositive issues, (ii) trial will necessitate "extensive testimony," and (iv) the
potential for appeal. (ECF No. 32 at 14-15). The same, of course, holds true of virtually every
class action. Counsel also asserts that "[a] trial on the merits could involve significant risks to
Claimants because of the fact-intensive nature of measuring damages under the FLSA and
NYLL, and in light of the substantial defenses available to Defendants as to the measure of
damages," (id. at 16), but provides no information regarding those risks or defenses. Yet both
parties appear to have ample information with which to predict a relatively narrow range of
Indeed, the parties represent in the recitals prefacing their Settlement Agreement that they
"have engaged in and completed discovery during the course of' this litigation. (ECF No. 33-1,
¶ 1) (emphasis added). In an affidavit accompanying the instant motion, Plaintiffs counsel
attests that "[i]n preparation for the mediation session, our office spent significant time and
resources reviewing the relevant discovery, evaluating the case, and summarizing the damages of
the seventy-five putative class members." (ECF 33 at ¶ 8) (emphasis added). He also claims to
have provided the mediator with his analysis of:
(1) the potential liability if the case were to proceed;
(2) the relative strengths and weaknesses of the parties' respective positions; [and]
(3) possible exposure and litigation outcomes.
(ECF No 33, ¶ 8). Defendants likely have records of each class members' work schedule and
hours worked, considering that they are required by law to maintain them. See, e.g., 29 C.F.R.
Part 516. In short, discerning a range of damages is comparatively straightforward in this case, 2
Counsel's contention that continued litigation will lead to a "battle of experts" concerning damages "whose
outcome is impossible for the court to predict" is a red herring. (ECF No. 32 at 16). This quote is lifted from two
securities cases from the Southern District, In re RJR Nabisco Sec. Litig., 1992 WL 210138 (S. D.N. Y. Aug. 24,
1992) and In re Warner Commun. Sec. Lilig., 618 F. Supp. 735 (S.D.N.Y. Aug. 20 1985), which presented
exponentially more complex and theoretical damages issues. Here, in contrast, damages are essentially a function of
the base rate of pay and the amount of overtime allegedly worked.
and the parties have apparently already provided a detailed analysis on "the damages of the
seventy-five putative class members" to the mediator. 3
For these reasons the present Motion is DENIED without prejudice. Any future
motions for preliminary approval must evaluate a range of reasonable recoveries, drawing from
Both parties' analyses provided to the mediator.
The aforementioned summary of "the damages of the seventy-five putative class
Any and all information either party has regarding how many of the seventy-five
putative class members worked for Premier for more than one year.
An explanation of why Plaintiffs brief only mentioned the $5,000 and $1,000
"service awards" to Plaintiff and Rosario, respectively, and failed to mention the
much larger $15,000 and $4,000 "settlement checks" called for under the Settlement
Agreement. (Compare ECF No. 32 at 6 with ECF No. 33-1 at ¶3.1(A)(b)).
A justification for the $25,000 in payments to Plaintiff and Rosario and an
explanation of how those sums were reached.
To the extent counsel would argue that this settlement enjoys a presumption of reasonableness because it followed
mediation, see, e.g., 2 McLaughlin on Class Actions § 6:7 (13th ed.) ("[a] settlement reached after a supervised
mediation receives a presumption of reasonableness and the absence of collusion"), he is mistaken. It appears that
the mediator simply negotiated the overall $290,000 sum before the parties allocated less than half that sum to the
class members at large. Counsel's affidavit states that the parties reached a "settlement in principle of all disputed
issues between the parties" during mediation; they later "negotiated the specific terms of the Settlement Agreement
now being put forward before the Court" without DiBlasi's involvement. (ECF No. 33. ¶J 9-10). Those additional
terms included "the expected amounts to be paid to the participating class members" and "the manner of handling
unclaimed settlement funds[,]"(id.), which, in blunter terms, is the money simply reverting to defendants, cf in re
Payment Card Interchange Fee and Merchant Discount Antitrust Litigation, 827 F. 3d 223 (2d Cir. 2016) (reversing
approval of settlement that followed extensive mediation).
The Court also notes the following two deficiencies in the proposed settlement which, if
retained in future proposed agreements, must be addressed by brief. First, the so-called "freesailing" provision whereby the defendant agrees not to contest class counsel's fee petition is
"troubling" and unlikely to be approved alongside the reversion clause under which "unpaid...
claims will revert to the defendant." See Newberg § 13:9. Second, the proposed notice is
inadequate and misleading, and it fails to provide "the class with the best notice practicable
under the circumstances." Walter v. Hughes Commc'ns, Inc., No. 09-2136 SC, 2011 WL
2650711, at *16 (N.D. Cal. July 6, 2011). The proposed notice, on page one, states:
Defendants have agreed to a settlement fund up to the amount of
$290,000, including attorneys' fees and costs. The amount of the
fund actually paid out by Defendants shall be determined by the
number of class members who claim settlement funds. Amounts
not claimed will be retained by Defendants.
This wrongfully suggests that the amount available to the noticed class member will be
determined pro-rata "by the number of class members who claim settlement funds." While
technically true—the total sum paid by Defendants to the class will vary with the number of
claims, given the reversion clause—this statement suggests that the value of individual claims
will depend on the number of claims submitted, which is not the case. Such vague language will
no doubt deter claims, considering that the amounts available ($1,000 - $2,000) are not
mentioned until page five of the notice after much droll recitation of administrative issues and
boilerplate language. Should the next proposed settlement contain a similar scheme or
comparable claim values, the amounts available must appear prominently on the first page of
counsel's proposed notice.
Finally, the Court also notes that the parties have erred when assessing the reasonableness
of the entire $290,000 "Settlement Fund." Instead they "must assess the value of the settlement
to the class," which in its present state involves $140,000 as a source of $1,000 to $2,000
payments. RadioShack Corp., 768 F.3d 622, 629 (7th Cir. 2014). Likewise, "the reasonableness
of the agreed-upon attorneys' fees for class counsel" will be assessed against the same. Id.
Sandra L. Townes
SANDRA L. TOWNES
United States District Judge
Brooklyn, New Yor
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