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Foster v. Robert Brogden's Olathe Buick GMC, Inc.

United States District Court, D. Kansas

February 28, 2019

ASHLEY FOSTER, individually and on behalf of other similarly situated persons, Plaintiff,
v.
ROBERT BROGDEN'S OLATHE BUICK GMC, INC., Defendant.

          MEMORANDUM AND ORDER

          DANIEL D. CRABTREE, UNITED STATES DISTRICT JUDGE

         Plaintiff Ashley Foster, individually and on behalf of other similarly situated persons, filed this lawsuit against defendant Robert Brogden's Olathe Buick GMC, Inc. Plaintiff asserted three claims-two class-based claims and one individual claim. First, plaintiff asserted a Fair Labor Standards Act (“FLSA”) collective action claim under 29 U.S.C. § 216(b). Second, plaintiff brought a class action claim under Federal Rule of Civil Procedure 23 for violations of the Kansas Wage Payment Act (“KWPA”), Kan. Stat. Ann. §§ 44-312 to 44-327. Third, plaintiff asserted an individual claim for retaliatory discharge under the FLSA. The parties stipulated to dismissal without prejudice of plaintiff's Rule 23 KWPA claim in a Joint Motion filed February 5, 2018. Doc. 37 at 2. Also, the parties informed the court that they have resolved plaintiff's individual claim of retaliatory discharge.[1] So, only the FLSA collective action claim remains.

         The parties have agreed on a class-wide Settlement Agreement (“Agreement”) designed to resolve the remaining FLSA collective action claim. On July 31, 2018, the court-after finding several deficiencies-denied the parties' Joint Motion for Preliminary Approval of Proposed Collective Action Settlement under 29 U.S.C. § 216(b) (Doc. 37) without prejudice. Doc. 43.

         In response, the parties have filed a Joint First Supplemental Motion for Preliminary Approval of Proposed Collective Action Settlement (Doc. 48). The parties request the court enter an Order that (1) preliminarily approves the Agreement as fair and reasonable; (2) certifies the FLSA collective action class under the FLSA; (3) preliminarily approves Ms. Foster, the named plaintiff, as the class representative, including preliminary approval of an incentive award to her of $1, 200; (4) establishes procedures and schedules deadlines for persons to object to the Agreement; (5) schedules a fairness hearing for a date approximately, but not sooner than, 15 days after the deadline for submitting claims expires. For reasons explained below, the court grants the motion in part and denies the rest.

         I. Facts

         Plaintiff is defendant's former accounting and human resources employee. Plaintiff filed this lawsuit on her own behalf and all similarly situated employees-i.e., “[a]ll hourly employees subject to Defendant's automatic pay deduction protocol that deducted 30 minutes of time from the employees' daily pay record even when lunch breaks were not taken for the period from March 1-December 31, 2016.” Doc. 37 at 2. Plaintiff alleges defendant violated the FLSA by deducting 30 minutes from employees' work time each day for a lunch break, regardless of whether employees took a 30-minute break or, instead, worked through those breaks.

         In November 2017, the parties engaged in mediation, and the parties agreed in principle to settle the FLSA collective action claim. Doc. 26. And, on January 29, 2018, the parties executed their Agreement, memorializing the proposed settlement of the collective action claim. Doc. 37-1.

         Under the proposed Agreement, defendant would pay an all-inclusive, non-reversionary payment of $12, 000. The payment creates a common fund, and it would provide the settlement's proceeds for all putative class members who choose to opt-in to the deal. Thirty-five employees comprise the proposed class; but, based on exhibits calculating payments to the class, just 14 employees are entitled to payment. The calculated amount due to the putative class is $3, 042.45. Doc. 48-2 at 1. The common fund would pay all costs for class notice, notice of settlement, calculation of settlement payments, payments to the Settlement Administrator, and any other costs for settlement administration. Doc. 48-4 at 5.

         The Agreement also provides a payment procedure. Once the court approves the Agreement preliminarily, the parties will send Notices to each putative collective action plaintiff, allowing each member to opt-in to the Agreement within 21 days. To receive a payment, each opt-in plaintiff must sign a release waiving all claims asserted by plaintiff's Complaint. And, the Notice will explain the key terms of the Agreement and provide opt-in plaintiffs an opportunity to object to the Agreement. The parties then will move the court to schedule a final fairness and approval hearing. If the court approves the Agreement, the settlement administrator will distribute payments.

         On February 5, 2018, the parties filed this Agreement with the court and moved the court jointly, asking the court to approve the Agreement preliminarily. Doc. 37 at 1. The court conditionally certified the proposed class; approved the form, content, and method of notice outlined in the Agreement; and approved Roberta Ranes as settlement administrator. Doc. 43 at 5, 14-15. But, the court otherwise denied the parties' motion because they had shown neither that a bona fide dispute existed nor that the settlement was fair and equitable. Id. at 6, 9. The court also declined to approve an attorneys' fee award or a service payment award to plaintiff. Id. at 15.

         On September 14, 2018, the parties filed their Joint First Supplemental Motion for Preliminary Approval of Proposed Collective Action Settlement. Doc. 48. Having scrutinized the Agreement in light of the court's July 31 Order, the court preliminarily approves the settlement as fair and reasonable. Because the court already certified the class conditionally, it denies as moot the parties' request to certify the FLSA collective action. The court preliminarily designates Ms. Foster as class representative, but the court, for reasons explained in this Order, preliminarily denies the parties' proposed incentive payment to Ms. Foster. And, the court authorizes the parties to submit a revised Notice and Claim Form that (a) incorporates procedures for opt-in plaintiffs to object to the Agreement, and (b) ensures fairness to putative plaintiffs. Once the parties submit these revisions, the court will schedule a fairness hearing.

         II. Legal Standard

         Under the FLSA, employees may bring private actions against their employers to recover damages for unpaid minimum wages or overtime pay on their own behalf and for “other employees similarly situated.” Genesis Healthcare Corp. v. Symczyk, 569 U.S. 66, 75 (2013) (quoting 29 U.S.C. § 216(b)); Castaneda v. JBS USA, LLC, 819 F.3d 1237, 1245 (10th Cir. 2016) (quoting 29 U.S.C. § 216(b)). Generally, employees cannot waive FLSA rights, so the parties must permit the court to review the proposed settlement of those claims and determine whether the settlement is fair and reasonable. See Barbosa v. Nat'l Beef Packing Co., No. CIV.A. 12-2311-KHV, 2015 WL 4920292, at *3 (D. Kan. Aug. 18, 2015) (citing Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1353 (11th Cir. 1982)). To approve a proposed settlement, the court must find, first, that the case involves a bona fide dispute and, second, that the proposed settlement is fair and equitable to all parties concerned. Peterson v. Mortg. Sources, Corp., No. CIV.A. 08-2660-KHV, 2011 WL 3793963, at *4 (D. Kan. Aug. 25, 2011) (citing Lynn's Food Stores, 679 F.2d at 1353). Where the parties reach a settlement before the court makes a final collective action ruling, the court must make certain final class certification findings before it can approve the settlement. Id. at *5 (citations omitted).

         Here, the parties ask the court to approve their Agreement preliminarily before any collective action plaintiffs have received notice and the opportunity to opt-in to the lawsuit. This is unusual. Generally, parties provide the putative collective action plaintiffs with notice after the court conditionally certifies the class. See, e.g., Symczyk, 569 U.S. at 75 (“The sole consequence of [FLSA] conditional certification is the sending of court-approved written notice to employees[.]”); 7B Charles Alan Wright, Arthur R. Miller & Mary Kay Kane, Federal Practice and Procedure § 1807 (3d ed. 2018) (“If conditional certification is granted, notice is authorized.”). But, the court already has conditionally certified a class. Doc. 43 at 6. Instead of sending notice, the parties' current motion seeks preliminary approval of their Agreement. And, the Agreement itself includes a procedure to notify putative collective action plaintiffs after the court approves the Agreement preliminarily.

         Our court considered this issue in the context of final approval of settlement agreements before putative class members have opted-in. See Shepheard v. Aramark Unif. & Career Apparel, LLC, No. 15-7823-DDC-GEB, 2016 WL 5817074 (D. Kan. Oct. 5, 2016). There- much like here-two plaintiffs sought to represent an FLSA collective action of employees, alleging, inter alia, that the defendant employer “violated the FLSA by deducting 30 minutes from their work time every day for a meal break regardless of whether employees actually took a 30 minute meal break and even though employees instead worked during the purported meal breaks.” Shepheard, 2016 WL 5817074, at *1. The two plaintiffs and the defendant sought final approval of a settlement agreement, but the court had not yet conditionally certified the class; the putative collective action plaintiffs had not received notice; and, thus, the putative plaintiffs had yet to receive an opportunity to opt-in. Id. The court explained the problems with this approach: “(1) approving the settlement for a named plaintiff would moot the FLSA lawsuit, given the opt-in nature of the collective action, and (2) a named plaintiff has no authority to settle claims for plaintiffs who have not opted in.” Id. (collecting cases); see also Perez v. Avatar Props., Inc., No. 607-CV-792-ORL-28DAB, 2008 WL 4853642, at *4 (M.D. Fla. Nov. 6, 2008) (settling all claims “before the representative plaintiff has any indication as to exactly what [the] claims are and how many others he will actually represent” puts “the proverbial cart before the horse”). So, the court adopted the following procedure:

[T]he parties may file a motion seeking preliminary approval of their collective action settlement. Such a motion should ask the court to: (1) conditionally certify the proposed settlement class; (2) preliminarily approve the proposed settlement; and (3) approve a proposed notice to the putative class members. If the parties submit these materials and the court approves the parties' recommended procedure, it will order the parties to send the approved notice to the putative class members and establish a time period during which putative class members may opt-in to the lawsuit. When that period expires, the parties again may move for final approval of the proposed settlement, the attorney's fee award, and the service awards.

Shepheard, 2016 WL 5817074, at *3 (first citing Copeland-Stewart v. New York Life Ins. Co., No. 8:15-CV-159-T-23AEP, 2016 WL 231237, at *4 (M.D. Fla. Jan. 19, 2016); then citing Cerrato v. All. Material Handling, Inc., No. CIV. WDQ-13-2774, 2014 WL 1779823, at *2 (D. Md. Apr. 30, 2014)).

         In piecemeal fashion, the court already has approved two of the three requirements. The court conditionally certified the proposed Settlement Class in its July 31 Order.[2] Doc. 43 at 5. And, the court approved a proposed notice to putative collective action plaintiffs.[3] Id. at 14. So, the court now considers whether it should approve the Agreement preliminarily as fair and reasonable. The court approves the Agreement preliminary as fair and reasonable for reasons explained, below. But it denies the parties' request to approve other aspects of the parties' motion.

         III. Analysis

         The parties ask the court to enter an Order that does the following: (1) preliminarily approves the Agreement as fair and reasonable; (2) certifies the FLSA collective action class under the FLSA; (3) preliminarily approves Ms. Foster, the named plaintiff, as the class representative, including a preliminary approval of an incentive award to her for $1, 200; (4) establishes procedures and schedules deadlines for persons to object to the Agreement; and (5) schedules a fairness hearing for a date approximately, but not sooner than, 15 days after the deadline for submitting claims.

         A. The Proposed Settlement

         When parties settle FLSA claims, they must present the settlement to the court and it must decide whether the settlement is fair and reasonable. Tommey v. Comput. Scis. Corp., No. 11-CV-02214-EFM, 2015 WL 1623025, at *1 (D. Kan. Apr. 13, 2015); see also Gambrell v. Weber Carpet, Inc., No. 10-2131-KHV, 2012 WL 5306273, at *2 (D. Kan. Oct. 29, 2012) [“Gambrell II”] (explaining that “[w]hen employees file suit against their employer to recover back wages under the FLSA, the parties must present any proposed settlement to the district court for review and a determination whether the settlement is fair and reasonable” (citing Lynn's Food Stores, Inc., 679 F.2d at 1353)). To approve an FLSA settlement, the court must determine whether (1) the litigation involves a bona fide dispute, (2) the proposed settlement is fair and equitable to all parties, and (3) the proposed settlement contains an award of reasonable attorneys' fees. Barbosa, 2015 WL 4920292, at *5 (citing McCaffrey v. Mortg. Sources, Corp., No. CIV.A. 08-2660-KHV, 2011 WL 32436, at *2 (D. Kan. Jan. 5, 2011)); see also Hernandez v. Earth Care, Inc., No. CV 15-5091, 2016 WL 1461171, at *2 (E.D. Pa. Apr. 13, 2016) (“The purpose of having a preliminary stage is to ensure that there are no obvious deficiencies in the settlement that would preclude final approval.”) (citations omitted)).

         1. Bona Fide Dispute

         To establish a bona fide dispute, the parties should provide the following: “(1) a description of the nature of the dispute (for example, a disagreement over coverage, exemption or computation of hours worked or rate of pay); (2) a description of the employer's business and the type of work performed by the employees; (3) the employer's reasons for disputing the employees' right to a minimum wage or overtime; (4) the employees' justification for the disputed wages; and (5) if the parties dispute the computation of wages owed, each party's estimate of the number of hours worked and the applicable wage.” McCaffrey, 2011 WL 32436, at *4.

         a. A description of the ...


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