HELEN G. BERRIGAN, District Judge.
By separate order, the Court has granted the motion of plaintiffs in this Fair Labor Standards Act ("FLSA") collective action, Annie Collins on behalf of herself and All Others Similarly Situated ("plaintiffs") and defendants, Sanderson Farms, Inc. (Production Division) and Sanderson Farms, Inc. (Processing Division) (collectively, "Sanderson Farms") for final approval of a settlement of this lawsuit. Rec. Doc. 278. A hearing was held on this motion on June 19, 2008. The Court issues this opinion to explain its order approving the settlement under the applicable law.
The Settlement Class and Allegations
The plaintiffs brought suit on behalf of herself and other past and present employees at the poultry processing plants of Sanderson Farms, Inc., in Mississippi, Louisiana, Texas, and Georgia, claiming that they should be compensated for time spent donning and doffing protective gear and equipment, cleaning and sanitizing, and walking to and from work stations. The named plaintiff, an hourly, non-exempt employee, alleged violations of her statutory employment right to receive pay for all compensable time and overtime worked for the defendants, under the FLSA, 29 U.S.C. § 201, et seq., and sought to represent all other similarly situated past and present employees and to have the action certified as a collective action pursuant to Section 16(b) of the FLSA, 29 U.S.C. § 216(b). The parties agreed to authorize a collection action under this section, and reached the proposed settlement affecting the processing and foods employees that don and doff protective and sanitary equipment.
The Terms of the Settlement Agreement
The Settlement Agreement setting out in greater detail the terms of the proposed settlement is entered in the record at Rec. Doc. 271 (Amended Second Stipulation of Settlement Agreement). The agreement provides a settlement fund of $3,120,000 to play claims of the class, which totals approximately 8300 employees, litigation and settlement costs, and attorney's fees. The claims fund from which the plaintiffs' claims will be paid totals $2,450,000. Attorney's fees total $770,000,
Eligible class members who have opted into the lawsuit will be paid from the claims fund according to an agreed-upon formula, which provides for the payment of $.0913 per hour for each hour worked between June 4, 2004 and August 1, 2007. Based on an average wage rate for Sanderson Farms employees of $9.13 an hour, this computes to 4.8 minutes of pay per day for donning and doffing and walking to and from work stations. See Rec. Doc. 278 at 6-7, 7 n. 3. This rate reflects the calculation of Sanderson Farms' expert of a maximum of 8 minutes per day spent donning and doffing and traveling to and from work stations prior to June 1, 2006, when new smock stations were in place at all facilities
In addition, Sanderson Farms has changed its time keeping practices by compensating its employees for time spent traveling to and from their work stations, and donning and doffing before and after their shifts, and by providing meal breaks that are free of donning and doffing activities.
II. Approval of the Settlement
A. Applicable Law
This Court must approve any settlement reached by the parties which resolves the claims in this action brought under Section 16(b) of the FLSA. The Court's role in this situation is in many ways comparable to, but in others quite distinguishable from, that of a court in a settlement of a class action brought pursuant to FED.R.CIV.P. 23, and derives from the special character of the substantive labor rights involved. Accordingly, it is appropriate to briefly discuss the rights at issue.
i. Substantive Labor Rights
The FLSA was enacted for the purpose of protecting all covered workers from substandard wages and oppressive working hours. Barrentine v. Arkansas-Best Freight System, 450 U.S. 728, 739, 101 S.Ct. 1437, 67 L.Ed.2d 641 (1981); 29 U.S.C. § 202(a). It was designed to ensure that each employee covered by the Act would receive "[a] fair day's pay for a
The Supreme Court issued two opinions in the 1940s that defined the scope of private settlement and waiver of claims under Section 16(b). In O'Neil, the Court refused to give effect to a waiver signed by employees of their right to liquidated damages under the FLSA. The Court noted that at issue were private rights that affected the public interest, and that in such circumstances such rights cannot be waived or released if such release would thwart the legislative policy the grant of the private right was designed to effectuate. 324 U.S. at 707, 65 S.Ct. 895. "No one can doubt but that to allow waiver of statutory wages by agreement would nullify the purposes of the Act." Id. It went on to conclude that the same policy considerations forbidding waiver of basic minimum and overtime wages also prohibits waiver of employees rights to liquidated damages. Id. The liquidated damages provision is not penal in nature, but rather constitutes compensation for all the damages employees (earning statutory subsistence wages) are likely to sustain when they are not paid on time. Id. at 707-08, 65 S.Ct. 895. That is, "double payment must be made in the event of delay in order to insure restoration of the worker to that minimum standard of well-being." Id. at 707, 65 S.Ct. 895.
The next year, the Court in D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 66 S.Ct. 925, 90 L.Ed. 1114 (1946), held that FLSA barred a private settlement agreement, in which employees agreed to release an employer from liquidated damages claims in return for full payment of wages arguably due and unpaid, even where there was a bona fide dispute as to whether the employees were covered by the Act. "We think the purpose of the Act, which we repeat from the O'Neil case was to secure for the lowest paid segment of the nation's workers a subsistence wage, leads to the conclusion that neither wages nor the damages for withholding them are capable of reduction by compromise of controversies over coverage." Id. at 116, 66 S.Ct. 925. The Court recognized, in essence, that the same unequal bargaining power between employers and employees that underlies the Act and its rule that private parties may not negotiate subminimum wages, would potentially be present in any private settlement of claims for such wages. See also Walton v. United Consumers Club, 786 F.2d 303, 306 (7th Cir.1986); Hohnke v. U.S., 69 Fed.Cl. 170, 175 (Fed.Cl.2005).
ii. Standard for Approval of Settlement of FLSA collective action
In a well-reasoned and oft-cited decision, the Eleventh Circuit concluded that there are two ways in which back wage claims
In order to approve a settlement proposed by an employer and employees of a suit brought under the FLSA and enter a stipulated judgment, a court must determine that the settlement is a "fair and reasonable resolution of a bona fide dispute over FLSA provisions." Lynn's Food Stores, 679 F.2d at 1355; Camp v. Progressive Corp., 2004 WL 2149079 (E.D.La. 9/23/04) (Wilkinson, J.).
The primary focus of the Court's inquiry in determining whether to approve the settlement of a FLSA collective action is not, as it would be for a Rule 23 class action, on due process concerns, see Woods v. New York Life Ins. Co., 686 F.2d 578, 579-80 (7th Cir.1982); Kinney Shoe Corp. v. Vorhes, 564 F.2d 859, 863-64 (9th Cir. 1977),
a. Bona Fide Dispute
In their joint memorandum in support of the motion for final approval, the parties assert that "as no doubt exists that this lawsuit involves a bona fide dispute over FLSA's overtime provisions, the only consideration is whether the settlement is fair and reasonable." Rec. Doc. 278 at 11. In light of the nature of the substantive rights and labor policy involved, as discussed in O'Neil and Gangi, and the special requirement of its final approval, the Court understands the necessary inquiry into whether there is indeed a "bona fide dispute" to be more robust than the parties' assertion would suggest.
In essence, the Court must ensure that the parties are not, via settlement of the plaintiffs' claims, negotiating around the clear FLSA requirements of compensation for all hours worked, minimum wages, maximum hours, and overtime. 29 U.S.C. §§ 206, 207. If no question exists that the plaintiffs are entitled under the statute to the compensation they seek (and therefore to liquidated damages, as well), then any settlement of such claims would allow the employer to negotiate around the statute's mandatory requirements. Without a bona fide dispute, no settlement could be fair and reasonable. Thus some doubt must
The parties suggest that the mere existence of an adversarial lawsuit is enough to satisfy the requirement that a "bona fide dispute" exists, and other courts appear to have treated "bona fide dispute" and "lawsuit" as essentially synonymous. See, e.g., Hitchcock, 2006 WL 3614925 at *5; Ferfort v. Denny's, Inc., 2008 WL 1881794, *2 (M.D.Fla. 4/24/2008); Hamilton v. Frito-Lay, Inc., 2007 WL 219981, *4 (M.D.Fla. 1/26/2007). However, as a logical matter, the requirement that a bona fide dispute exist could not be satisfied by the mere existence of a lawsuit, without regard for the relative equities: A lawsuit will automatically exist any time a court is reviewing a settlement, because at that stage a complaint will necessarily have been filed. The requirement, then, that a judge determine that a bona fide dispute exists would be a nullity if the parties could just "point to the fact that they are present before the court in the context of an adversarial lawsuit.
That being said, while the Court must give comprehensive consideration to all relevant factors, the settlement hearing must not be turned into a trial or a rehearsal of the trial. Brask, 2006 WL 2524212 at *2. In general, settlement is the preferred means of resolving litigation. Williams v. First Nat'l Bank, 216 U.S. 582, 595, 30 S.Ct. 441, 54 L.Ed. 625 (1910); Mid-South Towing Co. v. Har-Win, Inc., 733 F.2d 386, 391-92 (5th Cir.1984). Furthermore, on this and the factors utilized below in order to determine whether the settlement is fair and reasonable, the Court must keep in mind the "strong presumption" in favor of finding a settlement fair, Camp, 2004 WL 2149079 at *5 (citing Cotton v. Hinton, 559 F.2d 1326, 1331 (5th Cir.1977)), and remain aware, as the parties must also be, that a settlement is a compromise, a yielding of the highest hopes in exchange for certainty and resolution. Id., citing In re General Motors Corp. Pick-Up Truck Fuel Tank Prods. Liab. Litig., 55 F.3d 768, 806 (3rd Cir. 1995).
b. Fair and Reasonable
Despite significant discussion and confusion by courts about the relationship between Rule 23 and FLSA collective actions brought under § 216(b), simply put, "Rule 23 is inapplicable to proceedings under the FLSA." 5 JAMES WM. MOORE ET AL., MOORE'S FEDERAL PRACTICE ¶ 23.04 (citing cases). In order to participate in a collective action brought under 29 U.S.C. § 216(b), a potential plaintiff must affirmatively file "his consent in writing" in the court in which the action is brought in order to become a party. If a potential plaintiff (that is, one who is "similarly situated" to the original plaintiff—here, all those who fit the class definition, above) does nothing, he will not be bound by the outcome, favorable or unfavorable. See Shushan v. University of Colo., at Boulder, 132 F.R.D. 263, 264 (D.Colo.1990). This "opt in" feature creates what the Fifth Circuit has called a "fundamental irreconcilable difference" between a FLSA collective action and a class action brought pursuant to Rule 23. LaChapelle v. Owens-Illinois, 513 F.2d 286 (5th Cir.1975).
A district court has significant discretion to fashion the appropriate procedures in collective actions brought under § 216(b). In Hoffmann-La Roche, Inc. v. Sperling, 493 U.S. 165, 110 S.Ct. 482, 107 L.Ed.2d 480 (1989), the Supreme Court settled a long-standing circuit split over whether district courts could authorize or facilitate notice of a pending action under § 216(b) to other potential class members on whose behalf the collection action had been brought. In that context, the Court held that § 216(b) "must grant the [district] court the requisite procedural authority to manage the process of joining multiple parties in a manner that is orderly, sensible, and not otherwise contrary to the statutory commands of the Federal Rules of Civil Procedure." Id. at 170, 110 S.Ct. 482.
Although Rule 23 does not control FLSA collective actions, many courts have adopted many of Rule 23's procedures in such actions by analogy, in an exercise of their discretion to manage the litigation of collective actions under § 216(b). See, e.g., Brask, 2006 WL 2524212 at *2; Hitchcock v. Orange County, Fla., 2006 WL 3614925, *5 (M.D.Fla.2006).
i. Bona Fide dispute
As a result of amendments to the FLSA enacted in the Portal-to-Portal Act (enacted in 1947), travel to and from the location of an employee's "principal activity," and activities that are "preliminary or postliminary" to that principal activity are excepted from "work" and "workday." See IBP, Inc. v. Alvarez, 546 U.S. 21, 28, 126 S.Ct. 514, 163 L.Ed.2d 288 (2005); 29 U.S.C. § 254(a). In Steiner v. Mitchell, 350 U.S. 247, 76 S.Ct. 330, 100 L.Ed. 267 (1956), the Supreme Court held that the "term `principal activity or activities' [which must be compensated under the statute] ... embraces all activities which are an `integral and indispensable part of the principal activities.'" Id. at 252-53, 76 S.Ct. 330. In IBP, Inc., the Court reiterated that under Steiner, activities
Alvarez, 546 U.S. at 30, 126 S.Ct. 514 (quoting Steiner, 350 U.S. at 256, 76 S.Ct. 330).
It follows that the donning and doffing of the special protective equipment at issue in this case is most likely "integral and indispensable" to the employees' "principal activity," and that the time spent in such activities, along with the time spent after donning and before doffing such equipment walking to and from workstations, is all compensable work time under the FLSA.
However, Sanderson Farms asserts several defenses which it claims could defeat or limit the recovery by plaintiffs in this case. Although its review of the issues here raises doubts about the strength of several of the defenses suggested by the defendants, as a whole, the Court finds that there are legitimate questions over coverage under FLSA, and even more so over the computation of back wages of individual employees, such that there is a "bona fide dispute" over FLSA coverage that justifies settlement of the plaintiffs' claims.
Sanderson Farms argues that it could not be said to have been lacking in good faith for the period prior to November 9, 2005, when the Court rendered its decision in IBP, and thereafter, the defendants took prompt action to remedy any practices that could be questioned. Under 29 U.S.C. § 260, if the employer shows to the satisfaction of the court that the act or omission giving rise to the action was in good faith and that it had reasonable grounds for believing that its act or omission was not a violation' of FLSA, the court may, in its sound discretion, award no liquidated damages. In Louise Pressley v. Sanderson Farms, Inc. (Processing Division), 33 Fed.Appx. 705 (5th Cir.2002), the Fifth Circuit affirmed the decision of a district court in the Southern District of Texas ("for essentially the reasons stated by the trial court") granting the motion of Sanderson Farms for summary judgment on the grounds that time spent walking and donning, doffing, and cleaning equipment was not compensable work time under the FLSA. See Pressley v. Sanderson Farms, Inc. (Processing Division), 2001 WL 850017 (S.D.Tex. 4/23/01). Thus a good possibility exists that Sanderson Farms would show to the satisfaction of the Court that it engaged in its practices in good faith, such that the Court might exercise its discretion not to award liquidated damages for the period prior to the IBP decision.
Sanderson Farms also points to a possible de minimis defense, in that it argues "the time spent by employees donning and doffing smocks and other clothing was de minimis, four to eight minutes." Rec. Doc. 278 at 21. While this defense has been recognized by courts, see, e.g., Lindow v. United States, 738 F.2d 1057, 1061-62 (9th Cir.1984) ("As a general rule employees cannot recover for otherwise compensable time it if is de minimis"), including the Supreme Court, Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 692, 66 S.Ct. 1187, 90 L.Ed. 1515 (1946) ("When the matter at issue concerns only a few seconds or minutes of work beyond the scheduled working hours, such trifles may be disregarded. Split-second absurdities are not justified by the actualities of working conditions or by the policy of the Fair Labor Standards Act"), the tenor of the decisions invoking this doctrine appears to contemplate shorter, and less-involved, activities than those at issue here. Furthermore, application of the de minimis defense properly involves a consideration of the difficulty of measuring the time involved. "In other words, the need to compensate an employee for her work must be weighed against the cost or difficulty of providing compensation ... [w]hen providing compensation for a task imposes no additional burden on the employer, there is no justification for denying
In this Court's view, the primary defense raised by Sanderson Farms, that is, the one that raises the most legitimate questions concerning coverage under the FLSA of the time and activities in this case, and the one that has the most potential to defeat or limit the plaintiffs' recovery, is the argument that 29 U.S.C. § 203(o) applies. That section excludes from hours worked "any time spent in changing clothes or washing at the beginning or end of each workday which was excluded from measured working time by the express terms of or by custom or practice under a bona fide collective-bargaining agreement applicable to the particular employee." Sanderson Farms contends that there was a "custom and practice" at its unionized plants of not compensating employees for time spent donning and doffing clothes before and after the work shifts. Rec. Doc. 278 at 19. In a June 2002 opinion letter, and in a May 2007 letter reaffirming the 2002 letter, the Administrator of the Wage and Hour Division of the Department of Labor interpreted the term "clothes" in § 203(o) to include the protective safety equipment typically worn by meat packing employees, and to include items worn on the body for covering, protection or sanitation. Op. Ltr. Adm'r, Wage & Hour Div., FLSA2002-2 (U.S. Dep't of Labor, June 6, 2002). The May 2007 letter additionally concluded that since activities covered by § 203(o) cannot be considered "principal activities" and do not start the work day, the walking time that occurs after a § 203(o) activity is rendered not compensable unless it is otherwise preceded by a principal activity. Op.Ltr. Adm'r, Wage & Hour Div., FLSA 2007-10 (U.S. Dep't of Labor, May 14, 2007). A previous Department of Labor opinion letter from 1997, reaffirmed in January of 2001, had concluded the opposite. See Perez v. Mountaire Farms, Inc., 2008 WL 2389798, *5 (D.Md. 6/10/08).
Sanderson Farms and the plaintiffs each cite to multiple court decisions, both before and after IBP, Inc. was decided, either holding that § 203(o) is applicable to situations
The determination of the applicability of § 203(o) as invoked by Sanderson Farms presents an involved issue of administrative law, replete with contradictory DOL advisory opinions, statutory interpretation, and a fulsome circuit split.
a. Fair and Reasonable
After considering the Reed factors, 703 F.2d at 172, as modified to apply to this collective action under 29 U.S.C. § 216(b), as discussed below, the Court finds that the settlement is fair and reasonable.
(1) The existence of fraud or collusion behind the settlement.
The Court may presume that no fraud or collusion occurred between counsel, in the absence of any evidence to the contrary. Camp, 2004 WL 2149079 at *7 (citing 4 NEWBERG ON CLASS ACTIONS § 11.51 (4th ed.)). The Court finds no evidence here of any fraud or collusion. In the more than two years since this action was filed, the parties have engaged in extensive discovery, holding numerous depositions, propounding numerous discovery requests, and producing thousands of pages of documents. The parties engaged in arm's length and good faith settlement negotiations, including a mediation session before Magistrate Judge Roby. The Court finds that the Amended Second Stipulation of Settlement Agreement was the result of arm's length negotiations and that no evidence of fraud or collusion exists.
(2) The complexity, expense, and likely duration of the litigation.
(3) The stage of the proceedings and the amount of discovery completed.
The Court concludes that these two factors weigh heavily in favor of finding that
Annie Collins filed her suit approximately two years ago.
(4) The probability of plaintiffs' success on the merits.
The defendants raise several possible defenses, some discussed above, that they would raise at trial, including: collateral estoppel; the section 203(o) defense for those working under collective bargaining agreement; that they have taken remedial actions; that the time involved in the activities that underlie the plaintiffs' claims is de minimis; that the defendants provided paid break time to its employees; that the statute of limitations would apply to some or a period of the claims; and that Sanderson Farms could demonstrate that it engaged in its practices in good faith prior the IBP, Inc. v. Alvarez decision of November 9, 2005 such that the Court could in its discretion not award liquidated damages.
Plaintiffs' counsel believes their case is strong, but indicate that they are experienced and realistic about the uncertainty inherent in the jury trial, and appellate process. The Court agrees that plaintiffs' case appears the more meritorious, considering the strength and nature of their claims in light of the possible defenses.
(5) The range of possible recovery.
It appears that if the plaintiffs were to succeed outright on the merits of their claims, the defendants would be liable to them for compensation for eight minutes
(6) The opinions of class counsel, class representatives and absent class members
The parties join in requesting approval of the settlement, which was arrived at after extensive negotiation by class counsel. The Court is entitled to rely on the judgment of experienced counsel in its evaluation of the merits of a class action settlement. Cotton, 559 F.2d at 1330. However, the Court must keep in mind that a potential conflict of interest always exists between an attorney and a class. In re Employee Benefit Plans Securities Litigation, 1993 WL 330595, *5 (D.Minn.1993) (citing City of Detroit v. Grinnell Corp., 495 F.2d 448 (2nd Cir.1974)). The Court finds no evidence that plaintiffs' counsel have not worked in good faith to secure a good settlement, which, as they note "provides prompt and substantial relief to all plaintiffs" (Rec. Doc. 278 at 24), taking into account the uncertainty and risks involved in litigation of their claims in light of the strength of the claims and possible defenses.
The consideration of the "opinions of absent class members" is one that perhaps reflects the starkest difference between class actions under Rule 23 and collective actions pursuant to § 216(b), that is, the requirement that class members affirmatively give their consent to join in the latter. All the present plaintiffs to this collective action have agreed to join in this lawsuit, and be represented by the named plaintiffs' counsel.
Finally, the parties highlight that the defendants have implemented significant changes in their business practice, in that they have relocated and added more smock stations at their plants that will cut down considerably the traveling time to and from work stations, and now pay their employees for the time spent donning and doffing any gear required by Sanderson Farms which they do not permit to be taken home and for donning and doffing during lunch. To the extent these practices were altered as a result of the plaintiffs' claims, they represent a significant and affirmative result of this collective action, and such changes factor significantly in this Court's approval of the settlement.
In conclusion, the balance of the factors weighs in favor of approval of this settlement, and the Court finds that it is a fair and reasonable settlement of a bona fide dispute.
III. Reasonable Attorney's Fees
As part of its fairness determination, the Court must also determine that the proposed attorney's fees are reasonable. Camp, 2004 WL 2149079 at *18 (citing Strong v. BellSouth Telecomms., Inc., 137 F.3d 844, 849-50 (5th Cir.1998)). In this case, the Court does not have to apportion the fees among plaintiffs' counsel, as they have already agreed to divide per their private fee-sharing agreement, a procedure approved by Fifth Circuit. Longden v. Sunderman, 979 F.2d 1095, 1101 (5th Cir.1992).
The Fifth Circuit employs the lodestar method for determining the reasonableness of attorney's fees in FLSA collective actions, Heidtman v. County of El Paso, 171 F.3d 1038, 1043 (5th Cir.1999), which is calculated by multiplying the number of hours reasonably expended by an appropriate hourly rate in the community for such work. Id. The court may then decrease or enhance the lodestar based on the relative weights of twelve factors (as amended by subsequent law) set forth in Johnson v. Georgia Highway Express, Inc., 488 F.2d 714, 717-19 (5th Cir.1974), but may not adjust the lodestar award if the creation of such award already took that factor into account, which would result in impermissible double-counting. Id. The Court finds that Plaintiffs' counsel have provided sufficient proof of their lodestar hours, Rec. Doc. 278, Ex. A-3, A-7 (billing records and affidavit); in addition, defendants do not oppose the calculations. The Court finds the hourly rates charged by plaintiffs' counsel and the amount of hours worked to be reasonable based on the prevailing market rates.
Courts have endorsed the practice of using the other method of determining reasonableness of fees in class actions, percentage of recovery, to double check the fee. See In re Linerboard Antitrust Litigation, 2004 WL 1221350, *3 (E.D.Pa. 6/2/2004). Employing the percentage of recovery method as a cross-check, the $750,000 award amounts to 25% of the original settlement amount of $3,000,000, and about 24% of the amended amount of $3,120,000. The percentage of this award is lower than the caselaw would support. See, e.g., In re Harrah's Entertainment, Inc., 1998 WL 832574, *4 (E.D.La. 11/25/1998) (Clement, J.) (noting that it is not unusual for district courts in the Fifth Circuit to award percentages of approximately one third); In re Prudential-Bache Energy Income P'ships Secs. Litig., 1994 WL 150742, *1-2, 4 (E.D.La. 4/13/1994) (Livaudais, J.) (noting that awards in common fund cases have historically been computed typically in the 25% to 33% range and was intended to approximate what private counsel ordinarily would charge in a contingent fee contract, and listing awards in cases from this district). The Court finds the $750,000 attorney's fees award and $20,000 for costs as reached in the settlement in this case to be reasonable.
Several courts have implemented Rule 23 standards for approving settlements in cases involving settlements of both state law class actions and collective actions under FLSA. See, e.g., Camp, 2004 WL 2149079; Adams v. Inter-Con Security Systems, Inc., 2007 WL 3225466 (N.D.Cal.2007). The Court has no doubt that because of the relatively robust inquiry necessary under Rule 23, courts may generally be assured that such procedures will allow them to fully exercise their role in approving settlement of a collective action under § 216(b) as well, when both class action and collective action claims are present. However, as discussed throughout, the focus of the inquiry under each is different, and therefore these cases have limited usefulness in determining the appropriate standards and procedures necessary where only a FLSA collective action is present.