Moore v. Stuart Petroleum Testers, Inc. et al
ORDER GRANTING IN PART 43 Motion for Settlement. The Court approves the Settlement Agreement in all respects except the amounts to be paid in attorney's fees. The Court REDUCES the amount requested in attorney's fees. Signed by Judge Robert Pitman. (os)
IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF TEXAS
RORY DYSON, Individually and on Behalf of
All Others Similarly Situated,
STUART PETROLEUM TESTERS, INC. and
Before the Court is the Parties’ Joint Motion for Approval of Settlement Agreement, filed
January 12, 2016 (Clerk’s Dkt. #43). After reviewing the parties' pleadings, relevant case law, as
well as the entire case file, the Court issues the following order.
Plaintiff Rory Dyson (“Dyson”) brings this action both individually and on behalf of all others
similarly situated against defendants Stuart Petroleum Testers, Inc. (“Stuart”) and Scott Yariger
asserting violations of the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq.
Plaintiff alleges Defendants provide oil and gas well monitoring services to energy
companies in multiple states including Texas, Arkansas and Louisiana. Plaintiff states he, and
other putative class members, are employed as “flow testers” whose primary duties consist of
monitoring oil and gas wells. (Plf. 1st Am. Compl. ¶¶ 16-19).
Plaintiff alleges he and other similarly situated workers were improperly classified by
Defendants as independent contractors, rather than employees, despite the fact that Defendants
wholly controlled their work. Plaintiff states, although he and other similarly situated workers
regularly worked in excess of forty hours per week, they were not paid overtime compensation as
required by the FLSA. (Id.¶¶ 20-36). Plaintiff further asserts Defendants’ conduct was undertaken
in willful, malicious and/or reckless disregard of the mandates of the FLSA. Specifically, Plaintiff
alleges Defendants set up a paper profile designed to create the impression that flow testers were
independent contractors, although in reality they were employees of Defendants. (Id.¶¶ 37-38).
Plaintiff seeks monetary damages, attorney’s fees and costs. (Id. ¶ 60).
By order dated August 27, 2015, the Court granted Plaintiff’s motion to conditionally certify
this action as a collective action under 29 U.S.C. § 216(b). The putative class is defined as:
All current and former hourly-paid workers classified as independent contractors
who performed work for Defendants associated with monitoring and maintaining oil
and gas wells throughout the United States during the three-year period before the
date the Court authorizes notice.
The Court also approved the form of, and ordered the issuance of, notice to potential class
members. In addition to Dyson, Alvin Garvey, Mike Tyree, Larry Blackwell, Jesus Espinoza, Kim
Birdwell, Chad Sowell, Kris West, and Michael Williams (collectively “Plaintiffs”) opted to join the
case. (Joint Mot. Ex. A ¶ 1).
By way of their motion, the parties state they have agreed to settle their dispute and seek
approval of their proposed Settlement Agreement, attached as Exhibit A to their motion.
II. APPLICABLE LAW
The FLSA permits suit by "one or more employees for and in behalf of himself or
themselves and other employees similarly situated" to recover unpaid minimum wages, overtime
compensation, and liquidated damages from employers who violate the statute's provisions. 29
U.S.C. § 216(b). An FLSA collective action follows an "opt-in" procedure in which "[n]o employee
shall be a party plaintiff to any such action unless he gives his consent in writing to become such
a party and such consent is filed in the court in which such action is brought." Id.
FLSA claims "may be compromised" after a court reviews and approves a settlement.
Pedigo v. Austin Rumba, Inc., 722 F. Supp. 2d 714, 736 (W.D. Tex. 2010). See Sims v. Housing
Auth. City of El Paso, 2012 WL 10862119, at *2 (W.D. Tex. Feb. 29, 2012) (same, but noting
dearth of Fifth Circuit authority on point). Courts may approve a settlement if it reflects "a
reasonable compromise over issues" that are "actually in dispute." Lynn's Food Stores, Inc. v.
United States, 679 F.2d 1350, 1354 (11th Cir. 1982). "The primary focus of the Court's inquiry in
deciding whether to approve the settlement of a FLSA collective action is not on due process
concerns as it would be for a Rule 23 class action . . . . Rather[,] the Court primarily focuses on
ensuring that an employer does not take advantage of its employees in settling their claim for
wages." Collins v. Sanderson Farms, Inc., 568 F. Supp. 2d 714, 719 (E.D. La. 2008).
Bona Fide Dispute
Courts first look to "whether there exists a bona fide dispute" under the FLSA regarding the
amount of hours worked or compensation due. Martinez v. Bohls Bearing Equip. Co., 361 F. Supp.
2d 608, 631 (W.D. Tex. 2005). Here, Plaintiffs alleged that Defendants violated the FLSA because
Defendants classified their flow tester work force as independent contractors instead of employees.
(Plf. 1st Am. Compl. ¶¶ 22, 30). Defendants denied Plaintiffs’ allegations and argued that they
properly classified the workers in question as independent contractors. (Def. 1st Am. Ans. ¶ 30).
Defendants also maintained that even if their classification was erroneous, any possible violation
was perpetrated in good faith, and was not willful, thereby limiting any possible recovery to a
two-year statute of limitations without liquidated damages. (Id. ¶¶ 61-64). The parties continue to
insist their respective positions are legally correct. (Joint Mot. at 2). There is thus a bona fide
dispute. See Martin v. Spring Break ‘83 Prod., L.L.C., 688 F.3d 247, 255-56 (5th Cir. 2012) (finding
bona fide dispute where the parties disputed "the number of hours for which [plaintiffs] are owed
their set rate of pay."). See also Sims, 2012 WL 10862119, at *6 (“The requirement of an
adversarial posture between parties to a settlement agreement operates as a guarantee that
employers cannot profit by coercing employees into waiving their rights, and then dressing that
invalid waiver of the FLSA's protections as a valid settlement of a legal claim.”).
Fair and Reasonable Resolution
Having found a bona fide dispute, the Court looks to whether the proposed settlement
agreement is fair and reasonable. "Although the class-action provisions of Federal Rule of Civil
Procedure 23 technically do not apply to collective actions under the FLSA, Rule 23(e) is similar
because it requires court approval to finalize a proposed class action settlement." Sims, 2012 WL
10862119, at *3. “Thus, the Rule 23(e) standard encompasses the 'fair and reasonable' settlement
standard of the FLSA collective action, and cases interpreting Rule 23(e) are analogous and
applicable to the instant FLSA action." Altier v. Worley Catastrophe Resp., LLC, 2012 WL 161824,
at * 14 (E.D. La. Jan. 18, 2012).
The Fifth Circuit directs courts to consider six factors in evaluating proposed settlement
agreements in class actions:
(1) whether the settlement was a product of fraud or collusion; (2) the complexity,
expense, and likely duration of the litigation; (3) the stage of the proceedings and
the amount of discovery completed; (4) the factual and legal obstacles [to]
prevailing on the merits; (5) the possible range of recovery and the certainty of
damages; and (6) the respective opinions of the participants, including class
counsel, class representative, and the absent class members.
Parker v. Anderson, 667 F.2d 1204, 1209 (5th Cir. 1982).
As to the first factor, there is no evidence before this Court of fraud or collusion. The parties
assert they have been represented by able counsel and have entered into a settlement agreement
to eliminate the risks they face in litigating their continued differences. The Court thus finds that
the first factor favors finding a fair and reasonable agreement.
As to the second factor, this case was filed less than one year ago, in April 2015. The live
complaint was not filed until June 2015. While the parties have already litigated a motion to
dismiss and a motion for conditional certification, the discovery and dispositive motion deadlines,
as well as the trial date are all forthcoming. As noted above, the parties maintain their settlement
agreement would compromise disputed claims, and avoid the risks of further litigation. The Court
thus finds that the second factor favors finding a fair and reasonable agreement.
Third, the Court evaluates settlement in light of the stage of the proceedings and the
amount of discovery completed. Although this case has not progressed beyond the preliminary
stage, the parties have engaged in motion practice, as outlined above. Nonetheless, settlement
at this stage would reduce expense as the “issues of decertification and dispositive motions [would
be] avoided because of the progress of settlement negotiations.” Collins, 568 F. Supp. 2d at 726
The third factor thus favors finding a fair and reasonable agreement.
As to the fourth factor, the Court must ask whether there are any obstacles to the merits
of the case. As noted above, the parties disagree as to both legal and factual issues in this case.
However, they do not point to any other obstacles preventing resolution of this action. The fourth
factor thus favors finding a fair and reasonable agreement.
Fifth, the Court evaluates the proposed settlement agreement against the possible range
of recovery and the certainty of damages. The parties disagree as to whether any plaintiff is
entitled to relief as Defendants contend each was properly classified as an independent contractor.
Defendants also contest the amount of damages, arguing limitations will act to limit any possible
recovery. Against these disagreements, the parties’ Settlement Agreement proposes disbursing
a total of $160,000 to Plaintiffs and their counsel within ten days of approval and execution of the
Settlement Agreement. The award received by each Plaintiff is a sum certain. (Joint Mot. Ex. A
¶ 3). Thus the fifth factor, contrasting the broad and uncertain range of potential damages and
recoveries with the definite and certain result of the proposed Settlement Agreement, favors finding
a fair and reasonable agreement.
Finally, the Court evaluates the respective opinions of the participants, including class
counsel, class representative, and the absent class members.
When reviewing settlement
agreements, courts are "entitled to rely upon the judgment of experienced counsel for the parties."
Cotton v. Hinton, 559 F. 2d 1326, 1330 (5th Cir. 1977). In this case, the parties and their counsel
agree the Settlement Agreement is a fair and reasonable compromise of the claims asserted in this
action. The parties are represented by able and experienced counsel. With regard to "absent
class members," potential plaintiffs who have not opted into suit do not waive their individual rights
as a result of the Settlement Agreement. Accordingly, the sixth factor favors finding a fair and
Applying the six factors laid out by the Fifth Circuit, the Court thus finds that the Settlement
Agreement is fair and reasonable.
The Settlement Agreement directs that Plaintiffs' counsel be paid a percentage of the total
agreed disbursement as fees for their work. Specifically, in the joint motion the parties state Dyson,
as lead plaintiff, executed a contingency fee agreement to pay counsel 40% of the gross recovery
plus litigation expenses. (Joint Mot. at 3).
"[T]o fully discharge its duty to review and approve class action settlement agreements, a
district court must assess the reasonableness of the attorneys' fees." Strong v. BellSouth
Telecomm., Inc., 137 F.3d 844, 849 (5th Cir. 1998). In doing so, the Court thus addresses two
issues. First, the propriety of determining attorney's fees as a percentage of the total award, rather
than, for instance, as a function of hours worked at an appropriate rate of pay. Second, insofar as
fees may be calculated as a percentage of the total amount of the settlement, the Court addresses
what percentage is appropriate.
As a preliminary matter, "use of a common fund to pay attorney's fees in class action
settlements is well established." Klein v. O'Neal, Inc., 705 F. Supp. 2d 632, 673 (N.D. Tex. 2010).1
Although the settlement in this case is not specifically denominated as a common fund, the Settlement
Agreement specifies a total amount to be paid by Defendants, and divides the award based on the 40% contingency fee
agreement between Dyson and counsel.
However, courts must "carefully scrutinize the attorneys' fees award in a common fund settlement
because the interests of the attorneys conflict with those of the class]." Id. Moreover, courts are
not "bound by the agreement of the parties as to the amount of attorneys' fees." Id.
Plaintiffs request that attorney's fees be calculated as a percentage of the common fund.
Specifically, they assert such fees are “reasonable and fair” and “within the normal range for
contingency fee awards." (Joint Mot. at 3). The percentage method is appropriately reviewed
under the framework set forth by the Fifth Circuit in Johnson v. Georgia Highway Express, Inc., 488
F.2d 714 (5th Cir.1974) to determine whether the fee is reasonable. Turner v. Murphy Oil USA,
Inc., 472 F. Supp. 2d 830, 860 (E.D. La. 2007) (citing Strong, 137 F.3d at 851-52 & n.5). Under
that framework, a benchmark fee is checked against twelve factors to determine the ultimate
reasonableness of the fee. See Strong, 137 F.3d at 850.
A benchmark, or lodestar, fee is generally calculated by multiplying a reasonable hourly rate
by the number of hours reported by counsel. In cases where the litigants propose a percentage
calculation for fees, although not explicitly adopted by the Fifth Circuit, district courts generally
begin by looking to the parties’ proposed percentage as the starting point to determine the
benchmark fee. Klein, 705 F. Supp. 2d at 674. In this case, the parties have suggested a
benchmark fee of 40%.
To support the fee, the parties suggest that 40% is within the normal range for contingency
fee awards in FLSA collective actions, and cite several district court decision approving a 40%
contingency fee. Though Defendants do not oppose a 40% fee and Dyson apparently agreed to
pay 40%, the Court must "carefully scrutinize the attorneys' fees award in a common fund
settlement because the interests of the attorneys conflict with those of the class." Klein, 705 F.
Supp. 2d at 673. Defendants have no incentive to police attorney's fees which are subtracted from
a fixed total award, and the Fifth Circuit has repeatedly held contingency fee agreements between
attorneys and their clients are not beyond judicial control. See Karim v. Finch Shipping Co. Ltd.,
374 F.3d 302, 309 (5th Cir. 2004) (noting federal court's "well-recognized power" to reform
contingent fee contracts).
A review of Fifth Circuit precedent suggests a benchmark fee of 30% is more appropriate
in this case. Contrasted with the parties' proffered 40%, "[t]he Manual for Complex Litigation states
that '[a]ttorney fees awarded under the percentage method are often between 25% and 30% of the
fund.'" Klein, 705 F. Supp. 2d at 675 (quoting MANUAL FOR COMPLEX LITIGATION (Fourth) § 14.121
(2010)). "The majority of common fund fee awards fall between twenty and thirty percent." In re
Harrah's Entm't, Inc., 1998 WL 832574, at *4 (E.D. La. Nov. 25, 1998). See Vela v. City of
Houston, 276 F.3d 659, 681 (5th Cir. 2001) (noting district court found 30% contingency fee “is a
reasonable rate”). Because a benchmark fee of 30% is more common and the parties have not
proffered exceptional circumstances that justify raising the benchmark and thereby reducing
Plaintiffs' recovery, this Court applies a benchmark fee of 30%.
The Court next considers the Johnson factors to determine whether a deviation from the
benchmark percentage is appropriate. In Johnson, the Fifth Circuit set out twelve factors for a
court to consider in making this determination:
(1) the time and labor required; (2) the novelty and difficulty of the questions; (3) the
skill requisite to perform the legal services properly; (4) the preclusion of other
employment by the claimant's 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 claimant or the circumstances; (8) the amount of recovery involved
and the results obtained; (9) counsel's experience, reputation, and ability; (10) the
"undesirability" of the case; (11) the nature and length of the professional
relationship with the claimant; and (12) awards in similar cases.
Johnson, 488 F.2d at 717-19.
The Court acknowledges that not every factor need necessarily be considered. In re
Combustion, Inc., 968 F. Supp. 1116, 1135 (W.D. La. 1997). However, disappointingly, the only
factor addressed in the parties’ joint motion is their assertion that the 40% contingent fee is “within
the normal range” and thus customary. The Court has addressed, and rejected, that assertion
Because the parties have failed to address anything beyond the fifth factor, the Court is left
without any information to address the first, fourth, seventh, ninth, tenth and eleventh factors. As
to the remaining factors, nothing in the parties’ pleadings has suggested any particular novelty or
difficulty to the legal issues in this case, and thus there is nothing to suggest any special skill was
required on the part of counsel.
The only remaining factor is the eighth, the amount of recovery involved and the results
obtained. In the absence of any showing by the parties, by anecdotal comparison or empirical
analysis, that the recovery attained is exceptional among similarly situated cases, the Court’s
review finds the eighth factor does not counsel in favor of an award of attorney's fees greater than
30% of Plaintiffs' recovery.
In light of the foregoing, the Court finds that a 30% attorney's fee award from the total
award of $160,000 is appropriate. Accordingly, the award to each plaintiff, set forth in Schedule
A of the Settlement Agreement, should be increased pursuant to the same calculation used to
determine those award amounts, to reflect that reduction.
The Court hereby GRANTS in PART the Parties’ Joint Motion for Approval of Settlement
Agreement (Clerk’s Dkt. #43). The Court approves the Settlement Agreement in all respects
except the amounts to be paid in attorney's fees. The Court REDUCES the amount requested in
attorney's fees in accordance with this Order.
SIGNED on February 29, 2016.
ROBERT L. PITMAN
UNITED STATES DISTRICT JUDGE
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