FINAL ORDER AND JUDGMENT APPROVING RULE 23 CLASS ACTION SETTLEMENT AND SETTLEMENT AGREEMENTS PURSUANT TO THE FLSA, AND AWARD OF ATTORNEYS' FEES, SERVICE AWARDS AND REIMBURSEMENT OF EXPENSES AND COSTS
JONATHAN W. FELDMAN, Magistrate Judge.
Findings of Fact
1. On December 15, 2014, Essence Taylor and Daniel Cashman ("plaintiffs"), former employees of defendant Delta-Sonic Car Wash Systems, Inc. (hereinafter "Delta-Sonic") and Ronald Benderson (collectively, "defendants") filed a complaint alleging that defendants violated the Fair Labor Standards Act ("FLSA") and the New York Labor Law ("NYLL").
2. Delta-Sonic operates twenty-nine car wash facilities in New York, Pennsylvania and Illinois. Plaintiffs' claims against the defendants concern an employee position known as Delta Technicians. Although these employees are paid an hourly rate that is less than minimum wage, they also are eligible to earn tips from customers of the car wash. Delta-Sonic guarantees that, after including tip income, Delta Technicians will earn an hourly rate equal to or greater than minimum wage. If weekly tip income is insufficient to equal minimum wage, Delta-Sonic provides additional pay to make up the difference.
3. The gist of the complaint is
4. Plaintiffs brought their FLSA claims as a collective action under 29 U.S.C. § 216(b) and their NYLL claims as a class action under Federal Rule of Civil Procedure 23 ("Rule 23") on behalf of themselves and a putative class of Delta Technicians.
5. Defendants answered the Complaint (Docket #7) and denied all of plaintiffs' claims. Thereafter, the parties engaged in discovery. Discovery included the exchange of documents, interrogatories and three depositions. The defendants deposed the two named plaintiffs and the plaintiffs deposed the Vice President/Chief Financial Officer of the Delta-Sonic.
6. On June 1, 2015, plaintiffs moved to certify a class pursuant to Rule 23 of the Federal Rules of Civil Procedure. On July 14, 2015, the defendants responded to the class certification motion. The defendants also cross-moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure. The motion for class certification was fully briefed. With the consent of defense counsel, plaintiffs did not file a response to the summary judgment motion. Instead, the parties decided to pursue a negotiated settlement.
7. On October 16, 2016 the parties participated in a one-day mediation with mediator William G. Bauer, Esq. in which a complete settlement was reached. Thereafter, the parties executed a Settlement Agreement that fully and finally resolved plaintiffs' claims against the defendants. Without conceding the validity of plaintiffs' claims and without admitting liability or any wrongful conduct, the defendants agreed to create a Settlement Fund of eight hundred thousand dollars ($800,000) in order to resolve plaintiffs' claims. The settlement included the filing of an amended complaint that alleged state law claims on behalf of current and former Delta-Sonic employees who worked for the defendants in Illinois and Pennsylvania. According to plaintiffs' counsel, the Settlement Agreement "secured monetary relief for every single one the more than 13,000 Class Members, based on length of employment."
8. On January 29, 2016, plaintiffs filed an unopposed motion (Docket # 62) asking the Court to preliminarily approve the proposed settlement and provisionally certify both a Rule 23 Class and an FLSA Class for settlement purposes. The motion also sought court approval of the notice to class materials.
9. On February 17, 2016, the Court entered an Order (Docket # 63) preliminarily approving the settlement, certifying a settlement class, and authorizing the dissemination of notice. The parties chose a settlement administrator who provided notice to the class. The "Notice To Class of Proposed Settlement" (Docket # 62-5) informed class members of their allocated settlement amount, described their right to opt out of the action, described the process that must be followed in order to dispute their allocated settlement amount, and stated Class Counsel's intent to seek the payments of "up to $10,000" to the two named plaintiffs "for their time and effort in bringing this lawsuit", "reasonable attorneys fees for [counsels'] efforts in litigating and settling this lawsuit" as well as "reasonable expenses in bringing this lawsuit."
10. Between February 17, 2016 and July 8, 2016, neither plaintiffs nor defendants filed any additional support for approval of the settlement or for any other relief, including attorney fees. The only document the Court received prior to the final settlement hearing was a wholly inadequate one page letter from plaintiffs' counsel requesting final approval of the settlement and the award of $320,000 or forty percent of the settlement fund in attorney fees. Plaintiffs' letter request was never docketed.
11. On July 8, 2016, all counsel appeared for the final settlement hearing. The Court denied approval of the settlement for various reasons set forth on the record. (The Transcript of the July 8, 2016 proceedings is hereby incorporated by reference into this Decision and Order.) Suffice it to say the undocketed "letter request" for final approval of the settlement and an award of attorney fees was grossly deficient in several respects. First, as the Court reminded counsel at the hearing, this Court acts as a fiduciary to the proposed class in evaluating the settlement. Therefore, it was incumbent on counsel to make sure that the Court was provided with sufficient information to find that the settlement was both substantively and procedurally fair and in the best interests of the class.
12. As I stated during the July 8, 2016 hearing, the plaintiffs' "letter request" for the Court to simply rubberstamp their application to designate forty percent of the settlement fund to attorney fees was particularly troubling.
13. Other deficiencies in the application for final approval were identified by the Court during the July 8, 2016 hearing. For example, counsel sought over $5000.00 for costs, but no costs were identified or justified by plaintiffs' counsel. The proposed settlement sought to pay a settlement administrator $70,000, but the only documentation from Rust Company, the proposed administrator, estimates their costs to be $59,794, twenty percent less than what plaintiffs are seeking. Finally, although promised in plaintiffs' motion for preliminary motion for settlement approval, plaintiffs' counsel presented no factual or legal justification for a "service award" request of $10,000 to each of the two named plaintiffs in this action.
14. Despite the obvious deficiencies in the joint motion to approve the settlement, the Court denied the motion without prejudice, allowing counsel to file an actual motion for final approval of the proposed settlement. On July 19, 2016, plaintiffs' counsel filed a motion for Final Settlement Approval and Class Certification (Docket # 67) and a Motion for Attorney Fees (Docket # 70). These two motions are currently pending before this Court.
The Proposed Settlement
15. The Settlement Agreement proposes to establish three settlement classes:
16. The payment to each class member hinges on the number of weeks the employee worked for Delta-Sonic during the six year statute of limitations period applicable to the New York class members and the three year statute of limitations period applicable to the Illinois and Pennsylvania class members.
17. The named plaintiffs (Essence Taylor and Daniel Cashman) seek service payments of $10,000.00 each. According to plaintiffs' counsel, the named plaintiffs "met extensively with Plaintiffs' Counsel, and gave lengthy depositions." Mullin Decl. (Docket # 71) ¶ 31. No further details regarding the participation of either Taylor or Cashman have been provided and no affidavit from either of them has been submitted. Plaintiffs' counsel proposes that the service payments be in addition to the shares of the funds that Taylor and Cashman would otherwise be eligible for under the terms of the Settlement Agreement.
18. The parties agreed that the settlement funds will have costs, attorneys' fees, service payments and employer taxes deducted from it, and the remaining balance will be distributed to Class Members. Under the terms of the Settlement Agreement, no claim forms will be required. It contains a cy pres provision donating uncashed checks to Women and Children's Hospital of Buffalo. The proposed Claims Administrator, the Rust Company, requests a fee of $70,000 for services rendered and to be rendered in effectuating the settlement. Mullin Decl. at ¶ 31.
19. Notice of the proposed settlement was mailed to 13,963 Class Members and approximately 349 notices remain undeliverable. The approved notice advised class members of their options and how to receive a share of any award or settlement. The approved notice also advised class members of their right to object or be excluded from the class. As of July 11, 2016, no objections had been received by the class administrator and five requests for exclusions had been received No individuals appeared at the July 8, 2016 hearing to object or otherwise participate.
20. The defendants do not oppose the plaintiffs' motion for certification or final approval of the settlement. According to plaintiffs' counsel, the defendants made the following statement with respect to the proposed settlement:
Mullin Decl., at ¶ 39.
Conclusions of Law
A. Motion for Final Certification of Class and Collective Action.
1. The Court finds that certification of the proposed class pursuant to Rule 23 of the Federal Rules of Civil Procedure is appropriate as the proposed settlement meets the requirements of Rule 23. The numerosity requirement is met because the proposed settlement class consists of over 13,000 individuals. The commonality and typicality requirements are met because there are obvious questions of law and fact common to and typical of all class members: the adequacy of the notice regarding the tip credit and the adequacy of the facilities provided to class embers to launder their uniforms. All class members have suffered the same type of injury and in that sense are unified in common factual allegations against the defendants. I find that the putative class members have been fairly and adequately represented by class counsel, both of whom have the expertise and experience to represent the class members in this action. Finally I conclude that a class action is the superior method of adjudicating this controversy because the named plaintiffs and class members lack the means to prosecute individual actions, individual lawsuits would not be economically worthwhile, no individual litigation is pending in other forums and there is no evidence that class members would have a strong interest in controlling the suit themselves. In sum, a class action is the most economic and efficient mechanism to fairly and resolve the class claims against Delta-Sonic. Therefore, plaintiffs' motion for final certification of the settlement class pursuant to Rule 23 is hereby approved. For substantially the same reasons, the Court also grants the plaintiffs' request to certify an FLSA collection action for purposes of settlement.
2. The Court next turns to the fairness of the proposed settlement. "A court determines a settlement's fairness by looking at both the settlement's terms and the negotiating process leading to settlement."
3. In the Second Circuit, courts often evaluate a settlement's substantive fairness according to the so-called "
4. Having considered the relevant
5. As to procedural fairness, the Court concludes that plaintiffs were represented by competent counsel with experience in wage and hour litigation. The Settlement Agreement appears to be the result of arms-length negotiations culminating in an agreement reached with the assistance of an experienced and respected mediator. There is no evidence of fraud or collusion infecting the settlement process or the agreement reached.
6. Therefore, considering the totality of the circumstances set forth in the record before this Court, I conclude that the agreement is both procedurally and substantively fair and reasonable.
B. Motion for Attorney Fees, Service Payments and Costs.
7. Plaintiffs' counsel has filed an application for attorney fees in the amount of 40 percent of the settlement fund or $320,000. As the fiduciary for the rights of the absent class members, I previously expressed concerns over the amount of attorney fees sought by plaintiffs' counsel in their "letter request." My review of the docket sheet suggests that although the case involved a relatively large class, the litigation was fairly straightforward, involved a relatively discrete, although unsettled, legal issue and generated limited motion practice. The complaint was filed on December 15, 2014, and the matter was settled less than a year later after a one-day mediation session. It appears that the plaintiffs only deposed one individual, a Rule 30(b)(6) representative of Delta-Sonic, and the defendants deposed only the two named plaintiffs.
8. Given my fiduciary responsibilities towards the absent class, counsel should not be surprised by the Court's scrutiny of the pending attorney fee application. Plaintiffs' motion papers emphasize the fact that their fee application is unopposed. However, the lack of opposition is really of little moment. "Often, fee applications are unopposed. Defendants have little concern for what portion of the settlement goes to plaintiffs' counsel. And unlike a securities class action, where the class likely contains sophisticated investors, most FLSA class members are not in a position to object."
9. Plaintiffs' lawyers ask the Court to award 40 percent of the settlement fund or $320,000 as reasonable attorneys' fees. While counsel seeks a percentage of the fund, they also recognize that "[e]ither percentage of [the] award or Lodestar is an appropriate method to award fees."
10. The first step in using the lodestar calculation to cross-check plaintiffs' percentage of the fund fee request is to multiply the number of hours counsel reasonably expended in litigating the case to settlement by a reasonable hourly rate lawyers in this district would charge in a similar case. This calculation produces a presumptively reasonable fee.
11. Once the presumptively reasonable fee is calculated, the Court may enhance the fee when it does not "adequately take into account a factor that may properly be considered in determining a reasonable fee."
12. Plaintiffs' counsel seek an across the board rate of $350 per hour for attorney time and $150 per hour for paralegal time. Robert Mullin, Esq. has submitted time records claiming 362 hours of out of court time and 3.83 hours of in-court time for a total of 365.83 hours. Justin Cordello, Esq. has submitted time records claiming 325.72 hours of out of court time and no in-court time for a total of 325.72 hours. Thus, the total hours claimed for attorney time at the $350 hour rate is 691.55 hours resulting in a requested award of $242,042.50. Both Cordello and Mullin claim hours for work as a paralegal. Cordello claims 1.72 hours of paralegal time and Mullin claims 30.33 hours of paralegal time, for a total of 32.05 hours, resulting in a request for $4,551.22 based on a paralegal rate of $150 per hour. Based on the time records, the total sought for attorney time and paralegal time is $246,593.72.
13. Of course, central to counsel's lodestar calculation is the $350 per hour rate they have chosen to apply to their legal services. "The reasonable hourly rate is, generally, the hourly rate employed by attorneys in the district in which the litigation is brought."
14. I find these hourly rates ($225-$250 for partner time and $75 for paralegal time) to be the appropriate rates to be applied in this FLSA case. While both Mullin and Cordello have experience in FLSA cases, neither has spent decades practicing law. Mr. Mullin was admitted to practice law in 2008 and Cordello in 2003. An hourly rate of $250 for legal services and $75 for paralegal time strikes this Court as both fair and reasonable given their years in practice and the hourly rate employed by comparable attorneys here in the Western District.
15. Applying these rates yields a total presumptively reasonable fee of $172,887.50 for attorney time and $2403.75 for paralegal time. The resulting total fee is $175,291.25.
16. Plaintiffs' counsel agreed to take this case on a contingency fee basis, an arrangement that has been held to constitute a risk not inherent in other types of billing arrangements for legal services. "The fact that counsel here worked on contingency clearly entitles them to some premium for the risk incurred."
17. The foregoing lodestar calculation does not support a percentage of the fund fee of forty percent, but would, in my view, support a cross-checked percentage of the fund fee of thirty three (33%) percent of the total settlement or $264,000. Therefore, the Court hereby grants the Attorneys' Fees Motion and awards fees in the amount of $264,000, or thirty three percent (33%) of the $800,000 Settlement Fund.
18. Class Counsel are also awarded reimbursement of litigation costs and disbursements in the amount of $5407.45. In making this award, the Court is relying on the truth and accuracy of the representations made in paragraph 33 of Mr. Mullin's July 19, 2016 Declaration (Docket # 71).
19. Counsel for plaintiffs seek court approval for payment of $10,000 "service payments" to Essence Taylor and Daniel Cashman, the named class representatives. Granting service payments or incentive awards to class representatives is within the discretion of the Court.
20. "Courts have reduced, rejected or questioned incentive awards where named plaintiffs `did not perform any extraordinary services to the class.'"
21. I realize neither Taylor nor Cashman are lawyers. Clearly the responsibility to defend and explain a service award that was negotiated as part of a Settlement Agreement falls more on counsel than the named plaintiffs. Nevertheless, the Court cannot create a factual record justifying a substantial service award out of thin air. All I can discern from the application before the Court is that on June 25, 2015 Taylor and Cashman briefly met with counsel to prepare for their deposition and on June 29, 2015 both were deposed by defense counsel. I do not see Taylor or Cashman's names in any other time records. Moreover, despite my
22. Giving Taylor and Cashman every benefit of their documented participation in this relatively brief litigation, the Court finds that a service award of $5000.00 to the Class Representatives is reasonable and justified.
23. The Court's decision to reduce the plaintiffs' proposed attorneys' fees and class representative award will necessarily increase the Net Settlement Fund, as defined in paragraph 24 of the Settlement Agreement.
24. The Court will grant the parties' request to allow $70,000 for the fees and expenses of the settlement administrator.
25. Upon the Effective Date of the Settlement Agreement, this action shall be deemed dismissed with prejudice in its entirety. The parties are to bear their own costs, except as otherwise provided in the Settlement Agreement and this Order. The Court shall retain jurisdiction over the above-captioned actions for the purpose of resolving any issues relating to the administration, implementation, or enforcement of the Settlement Agreement and this Order. The parties are to inform the Court immediately upon the occurrence of the Effective Date of the Settlement Agreement.