Crevatas v. Smith Managemant and Consulting, LLC

Filing 37

MEMORANDUM (Order to follow as separate docket entry) re 35 Unopposed MOTION for Settlement Approval for FLSA Collective Action filed by Francis Crevatas. Signed by Honorable Malachy E Mannion on 3/22/17. (bs)

UNITED STATES DISTRICT COURT
MIDDLE DISTRICT OF PENNSYLVANIA
FRANCIS CREVATAS, et al.,

:
CIVIL ACTION NO. 3:15-2307

Plaintiffs
v.

:
:

SMITH MANAGEMENT AND
CONSULTING, LLC,

(JUDGE MANNION)

:
:

Defendant
MEMORANDUM
Plaintiff Francis Crevatas is an employee of defendant Smith
Management and Consulting, LLC, (“Smith”), an oil and gas field services
company that provides consultants to clients in Pennsylvania and other areas
who perform work on oil and gas rigs. Smith paid its consultants based on a
day-rate. Plaintiff was paid a day-rate of $350 for a full day of work for Smith.
Plaintiff alleged in this case that he and Smith’s other consultants were
scheduled for shifts lasting at least 12 hours and that they routinely worked
over 40 hours per week. Despite working overtime hours, plaintiff alleged that
Smith failed to pay the consultants overtime premium pay. Rather, Smith
simply paid the consultants their regular day-rate multiplied by the number of
days they worked during a given week. Plaintiff claims that Smith’s payment
practices have caused him and other day-rate consultants to work overtime
hours without compensation in violation of the Fair Labor Standards Act
mandates. Plaintiff has sued Smith under the Fair Labor Standards Act and
the Pennsylvania Minimum Wage Act, on behalf of himself and other day-rate

consultants. The parties now seek court approval of their settlement.

I.

BACKGROUND
Plaintiff contends that he and the other day-rate consultants for Smith

are owed overtime pay for any hours worked in excess of 40 hours per week,
as mandated by the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§201, et
seq., and the Pennsylvania Minimum Wage Act (“PMWA”), 43 P.S.
§§333.101, et seq. Plaintiff brought suit against Smith on November 30, 2015,
(Doc. 1), bringing a claim for violations of the FLSA’s overtime provision, 29
U.S.C. §207(a)(1), and a claim for violations of the PMWA’s overtime
provision, 43 P.S. §331.104(c). The FLSA claim was brought as a collective
action pursuant to 29 U.S.C. §216(b). The PMWA actions was brought as a
class action pursuant to Fed.R.Civ.P. 23. Plaintiff filed a motion for an
extension of time for the class certification deadline, (Doc. 10), and it was
granted by the court and postponed until a later date to be determined. (Doc.
13). The parties later stipulated that all individuals who, during any workweek
since November 30, 2012, were paid, in whole or in part, on a daily basis by
Smith were conditionally certified as a collective pursuant to 29 U.S.C.
§216(b). (Doc. 21). Plaintiff withdrew the Rule 23 class action claim, but the
parties acknowledged that plaintiffs who opt into the collective action join the
action for both the FLSA and PMWA claims. (Id.). The court approved of the
stipulation. (Doc. 22). In addition to the original plaintiff, 27 other day-rate
employees opted in to the collective action. As such, there are a total of 28
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plaintiffs in this case. (Doc. 35-1 at 15).
On March 1, 2017, plaintiffs filed an unopposed motion for approval of
collective action settlement, noting the concurrence of Smith’s counsel in the
motion, with a copy of the proposed settlement agreement. (Doc. 35, Doc. 351). Plaintiffs also filed their brief in support on March 1, 2017. (Doc. 36).

II.

DISCUSSION
“In 1938, Congress enacted the FLSA to protect covered workers from

substandard wages and oppressive working hours.” Friedrich v. U.S.
Computer Servs., 974 F.2d 409, 412 (3d Cir. 1992) (citing Barrentine v.
Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739 (1981). The Fair Labor
Standards Act provides that:
“Except as otherwise provided in this section, no employer shall
employ any of his employees who in any workweek is engaged in
commerce or in the production of goods for commerce, or is
employed in an enterprise engaged in commerce or in the
production of goods for commerce, for a workweek longer than
forty hours unless such employee receives compensation for his
employment in excess of the hours above specified at a rate not
less than one and one-half times the regular rate at which he is
employed.”
29 U.S.C. §207(a)(1). Thus, employers covered by the FLSA must pay
overtime compensation to employees who work for more than 40 hours a
week “unless one or another of certain exemptions applies.” Packard v.
Pittsburgh Transp. Cp., 418 F.3d 246, 250 (3d Cir. 2005).
The PMWA, like the FLSA, provides that employees shall receive
overtime wages of “not less than one and a half times” their regular wage for
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any hours worked after forty in a work week. 43 P.S. §333.104(c).
Pennsylvania courts have looked to federal law regarding the FLSA in
applying the PMWA. Baum v. Astrazeneca LP, 372 F.App’x 246, 248, n. 4 (3d
Cir. 2010) (citing Commonwealth of Pa. Dept. of Labor and Indus., Bureau of
Labor Law Compliance v. Stuber, 822 A.2d 870, 873 (Pa.Commw. 2003),
aff'd, 859 A.2d 1253 (2004) (applying “federal case law” regarding the FLSA
to a PMWA claim). The Pennsylvania courts have determined that “it is proper
to give deference to federal interpretation of a federal statute when the state
statute substantially parallels it.” (Id.).
In their brief, (Doc. 36 at 7), plaintiffs explain as follows:
Under FLSA and PMWA regulations, overtime-eligible day-rate
employees are entitled to extra half-time pay for all hours worked
over 40 per week. See 29 C.F.R. §778.112; 34 Pa. Code
§231.43(b). The extra overtime premium pay is calculated through
a three-step methodology: (1) all day-rate payments received by
an employee during the week are totaled; (2) the total payments
are then divided to determine the “regular rate” paid for the week;
and (3) for every hour worked over 40, the employee receives an
extra overtime premium payment equaling 50% of the regular
rate. See id.
Plaintiffs move for court approval of their proposed settlement
agreement as well as their proposed award of attorneys’ fees. Smith has
concurred in plaintiffs’ motion. The court will now discuss the proposed
settlement agreement and the award of attorneys’ fees and costs.
“Once employees present a proposed settlement agreement to the
district court pursuant to Section 216(b), the Court may enter a stipulated
judgment if it determines that the compromise ‘is a fair and reasonable
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resolution of a bona fide dispute over FLSA provisions.’” Brown v. TrueBlue,
Inc., 2013 WL 5408575, *1 (M.D.Pa. Sept. 25, 2013) (citing Cuttic v.
Crozer–Chester Medical Center, 868 F.Supp.2d 464, 466 (E.D.Pa. 2012); see
also Adams v. Bayview Asset Mgmt., LLC, 11 F.Supp.3d 474, 476 (E.D.Pa.
2014) (court indicated that Department of Labor supervision or court approval
are the “only two ways that FLSA claims can be settled or compromised by
employees,” “[b]ecause of the public interest in FLSA rights”).
The Third Circuit has not specifically addressed the factors which the
district court should consider when approving FLSA settlements. However,
district courts within this Circuit have followed the Eleventh Circuit’s decision
in Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1354 (11th
Cir.1982). See Kraus v. PA Fit II, 155 F.Supp.3d 516, 521 (E.D.Pa. 2016);
Brown, 2013 WL 5408575, *1 (court applied the Lynn’s Food standard). The
court stated in Lynn’s Food, “[w]hen parties present to the district court a
proposed settlement, the district court may enter a stipulated judgment if it
determines that the compromise reached ‘is a fair and reasonable resolution
of a bona fide dispute over FLSA provisions’ rather than ‘a mere waiver of
statutory rights brought about by an employer’s overreaching.’” Cuttic, 868
F.Supp.2d at 466 (quoting Lynn’s Food, 679 F.2d at 1354). A bona fide
dispute under the FLSA includes computation of back wages. See Lynn’s
Food, 679 F.2d at 1354. The court finds in the instant case that the proposed
settlement agreement resolves a bona fide dispute. See Creed v. Benco
Dental Supply Co., 2013 WL 5276109, at *1 (M.D.Pa. Sept. 17, 2013) (court
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held that a dispute was bona fide if it involves “factual issues rather than legal
issues such as the statute’s coverage and applicability.”). “When determining
whether a proposed settlement agreement merits approval, the Court must
first consider whether the agreement is fair and reasonable, and then proceed
to determine whether it furthers or frustrates the implementation of the FLSA.”
Brown, 2013 WL 5408575, *1 (citation omitted). To determine whether an
FLSA settlement agreement is fair and reasonable, “district courts have relied
on the factors set out by the Third Circuit for approving class action
settlements pursuant to Federal Rule of Civil Procedure 23.” Brown, 2013 WL
5408575, *2 (citing Girsh v. Jepson, 521 F.2d 153 (3d Cir. 1975)). The factors
specified by the Third Circuit in Girsh, 521 F.2d at 157–58, are:
(1) the complexity, expense and likely duration of the litigation; (2)
the reaction of the class to the settlement; (3) stage of the
proceedings and the amount of discovery completed; (4) risks of
establishing liability; (5) risk of establishing damages; (6) risk of
maintaining the class action through the trial; (7) ability of the
defendants to withstand a greater judgment; (8) the range of
reasonableness of the settlement fund in light of the best possible
recovery; and (9) the range of reasonableness of the settlement
fund to a possible recovery in light of all the attendant risks of
litigation.
Plaintiffs state that their proposed settlement agreement is fair and
reasonable. It provides that Smith will pay $137,500.00 in total settlement of
this action with the 28 plaintiffs receiving a total amount of $92,500.00. Since
the specific amount that each plaintiff will receive is detailed in Exhibit A
attached to the Settlement Agreement and Release, (Doc. 35-1, p. 15), the
court will not repeat the amounts herein. Originating plaintiff Crevatas will
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receive $2,500.00 as a service award. The settlement agreement also
provides that plaintiffs’ counsel will receive fees in the amount of $43,124.74
and costs in the amount of $1,875.26 from Smith. (Id., p. 8). The Settlement
Agreement contains a Release as well as a “No Press Releases” provision
which states that the parties and their counsel will not issue any press
releases, contact the press or respond to inquiries from the press regarding
this case other than describing what is available in public documents. The
Settlement Agreement and Release have been signed by the parties. Once
the court approves of the settlement agreement, the case will be dismissed
with prejudice.
In their brief in support of their motion, (Doc. 36, at 16-20), plaintiffs
address the above stated Girsh factors seriatim and state: Factor 1, “absent
settlement, this litigation would require significant additional discovery
concerning plaintiffs’ employee status and the determination of plaintiffs’ work
hours and damages”; Factor 2, all 28 plaintiffs were sent a notice specifying
the terms of the settlement, 27 of the plaintiffs did not dispute their respective
payout amounts, and one plaintiff thought his amount was too small; Factor
3, “the settlement discussions occurred after Smith provided complete payroll
data for each of the plaintiffs allowing plaintiffs’ counsel to create a detailed
damages model” and “the parties had a clear understanding of the potential
unpaid wages that were at issue had this case not resolved”; Factors 4-5,
“Smith could continue to argue that plaintiffs were not employees entitled to
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overtime premium pay” and that “even if plaintiffs were able to defeat [Smith’s]
merits defense, they still needed to prove their estimated overtime work hours
based on a just and reasonable inference”; Factor 6, this factor weighs in
favor of settlement approval since “Smith could argue that a collective trial of
this case is inappropriate because determining whether any particular plaintiff
is overtime-exempt turns on an individualized inquiry of his specific work
location and circumstances”; Factor 7, this factor favors approval of
settlement since “plaintiffs’ counsel hired its accounting firm to perform an
independent review of Smith’s internal financial records, this review confirmed
Smith’s representations throughout the litigation that it was experiencing
severe financial difficulties, [and] these difficulties make it unlikely that
plaintiffs would be able to collect a larger judgment from Smith if they were
fortunate to prevail at trial”; and Factors 8-9, “these factors favor approval
because, even after deductions for the proposed attorney’s fees/expenses
and the service award, plaintiffs’ net settlement payouts average $3,214.29
($90,000.00/ 28), representing approximately 41% of the original unpaid wage
calculation which assumes that plaintiffs worked 12 hours each day.”
Plaintiffs state that every one of the Girsh factors weigh in favor of
approval of the settlement agreement and the payments to plaintiffs. Based
on the record and the Girsh factors, all of which clearly weigh in favor of
approval, the court finds that the proposed settlement agreement is fair and
reasonable.
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Next, the court must consider whether the settlement agreement
furthers or frustrates the implementation of the FLSA in the workplace.
Section 4 of the settlement agreement contains a Release which provides that
after defendant meets its payment obligations, plaintiffs release defendant
from all legal or equitable claims arising prior to the approval date of the
Settlement

Agreement

and

alleging

unpaid

wages,

liquidated

damages/penalties, interest, attorneys’ fees and costs as well as any other
damages available under the FLSA and the PMWA as well as under any other
law. Proposed release provisions run contrary to the FLSA if they are overly
broad and the parameters of the FLSA claim waiver are unclear. Kraus, 155
F.Supp. 3d at 532. The court finds that the Settlement Agreement furthers the
implementation of the FLSA in the workplace. The court also finds that the
Release does not frustrate the implementation of the FLSA in the workplace
since it is sufficient limited in nature and, its parameters are clear since the
release for plaintiffs is limited to wage and hour claims and remains within the
scope of this lawsuit. See DiClemente v. Adams Outdoor Advertising, Inc.,
2016 WL 3654462 (M.D.Pa. July 8, 2016).
Section 6 of the settlement agreement provides that the lead plaintiff
Crevatas will receive a service award of $2,500 in addition to his settlement
share of $1557.92. Plaintiffs, (Doc. 36, p. 21), state that “[t]his award is in
recognition of Crevatas’s courage to step forward and publically challenge
Smith’s compensation practices and seek a recovery on behalf of 27 other
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plaintiffs.” The court, in its discretion, finds that the service award is
appropriate in this employment litigation in light of Crevatas’ efforts and risks
to obtain payments for 27 other consultants of Smith and, in light of the small
size of the service award compared to the total size of the common fund. See
Sullivan v. DB Investments, Inc., 667 F.3d 273, 333 n.65 (3d Cir. 2011) (“The
purpose of these payments is to compensate named plaintiffs for the services
they provided and the risks they incurred during the course of class action
litigation, and to reward the public service of contributing to the enforcement
of mandatory laws.”) (citations & quotations omitted); In re Cendant Corp.,
232 F.Supp.2d 327, 344 (D.N.J. 2002) (“Such awards are granted to reward
the public service performed by lead plaintiffs in contributing to the vitality and
enforcement of [applicable] laws”); Bredbenner v. Liberty Travel, Inc., 2011
WL 1344745, *23 (D.N.J. April 8, 2011) (“Courts have ample authority to
award incentive or ‘service’ payments to particular class members where the
individual provided a benefit to the class or incurred risks during the course
of litigation [in FLSA collective action].”). Additionally, the general release of
claims Crevatas has agreed to is broader than the limited release applicable
to the other plaintiffs.
The FLSA also provides that the court “shall, in addition to any judgment
awarded to the plaintiff ... allow a reasonable attorney’s fee to be paid by the
defendant, and costs of the action.” 29 U.S.C. §216(b). “Percentage of
recovery is the prevailing method used by courts in the Third Circuit for wage
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and hour cases.” Kraus, 155 F.Supp. 3d at 533 (citation omitted); DiClemente,
2016 WL 3654462, *4. “The percentage-of-recovery method awards a fixed
portion of the settlement fund to counsel.” Kraus, 155 F.Supp. 3d at 533
(citation omitted). “Courts have approved attorneys’ fees in FLSA [collective
and class action] settlement agreements ‘from roughly 20-45%’ of the
settlement fund.” Id. at 534. (citation omitted). The factors which the court
considers under the percentage-of-recovery method to evaluate the award of
attorneys’ fees in common fund cases are:
(1) the size of the fund created and the number of persons
benefitted; (2) the presence or absence of substantial objections
by members of the class to the settlement terms and/or fees
requested by counsel; (3) the skill and efficiency of the attorneys
involved; (4) the complexity and duration of the litigation; (5) the
risk of nonpayment; (6) the amount of time devoted to the case by
plaintiffs’ counsel; and (7) the awards in similar cases.
Gunter v. Ridgewood Energy Corp., 223 F.3d 190, 195 n. 1 (3d Cir. 2000)
(citations omitted). These factors do not have to be “applied in a formulaic
way” and, “[e]ach case is different, and in certain cases, one factor may
outweigh the rest.” Id.
In this case, plaintiffs’ costs total $1,875.26, and the attorneys’ fee
sought totals $43,124.74 which amounts to 31.36% of the total settlement
amount from which plaintiffs will receive of $92,500, (inclusive of Crevatas’
service award.) Attached to plaintiffs’ motion, are the Declarations of R.
Andrew Santillo, Esq., (Doc. 35-2), and Don J. Foty, Esq., (Doc. 35-3), who
are personally familiar with the involvement of their law firms’ respective
representation of plaintiffs in this case, namely, Winebrake & Santillo, LLC
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(“W&S”) and Kennedy Hodges, LLP (“KH”). Santillo avers that “W&S has
spent 91.7 hours [in this litigation] and incurred a total fee lodestar of
$34,003.00 when using the hourly rates described in the fee schedule
developed by Philadelphia Community Legal Services (“CLS”)” which is used
in seeking attorney’s fees in statutory fee-shifting. He then specifies the hours
worked on this case by each member of W&S and their fee based on their
hourly rate. Santillo also states that “W&S incurred a total of $1,822.56 in
costs and expenses in connection with this litigation.”(Doc. 35-2, at 7-8). Foty
avers that KH has spent 13.32 hours in this litigation and incurred a total fee
lodestar of $3,437.00 when using the hourly rates described in the fee
schedule developed by CLS. Foty also specifies the hours worked on this
case by each member of KH and their fee based on their hourly rate. Foty
further states that KH incurred a total of $52.70 in costs and expenses in
connection with this case provides details for this amount.(Doc. 35-3, at 3-4).
Based on its review of Santillo’s and Foty’s Declarations and the Gunter
factors, all of which weigh in favor of approving the proposed award, the court
in its discretion shall approve the requested attorneys’ fees of $43,124.74 and
$1,875.26 in costs as provided in the settlement agreement.

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III.

CONCLUSION
For the above reasons, plaintiffs’ unopposed motion for approval of

collective action settlement, (Doc. 35), is GRANTED. A separate order shall
issue.

s/ Malachy E. Mannion
MALACHY E. MANNION
United States District Judge

Date: March 22, 2017
O:\Mannion\shared\MEMORANDA - DJ\CIVIL MEMORANDA\2015 MEMORANDA\15-2307-01.wpd

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