Lockwood v. R&M Towing LLC ( 2020 )

1 WO 2 3 4 5 6 IN THE UNITED STATES DISTRICT COURT 7 FOR THE DISTRICT OF ARIZONA 8 Levi Lo ckwood, ) No. CV-19-04812-PHX-SPL ) 9 ) 10 Plaintiff, ) ORDER vs. ) ) 11 ) R&M Towing LLC ) 12 ) 13 Defendant. ) ) 14 ) 15 I. BACKGROUND 16 On July 25, 2019, Plaintiff filed a collective action against Defendant under the Fair 17 Labor Standards Act 29 U.S.C. §§ 201-219 (the “FLSA”) on behalf of himself and others 18 similarly situated. (Doc. 1). On May 5, 2020, this Court granted the parties Stipulation 19 Regarding Conditional FLSA Collective Certification. (Docs. 27 & 29). Before the Court 20 is the parties’ Joint Motion for Approval of Proposed FLSA Settlement. (Doc. 31). The 21 parties set forth the terms and conditions of their settlement in their Settlement Agreement 22 and Full Release and Waiver of All Claims, attached to the Joint Motion for Approval as 23 Exhibit 1 (the “Settlement Agreement”). 24 II. LEGAL STANDARD 25 This is not a traditional class action settlement subject to Rule 23 and the process of 26 preliminary approval followed by a final fairness hearing. Instead, Plaintiff brought a 27 collective action alleging violations of the FLSA by Defendant and the Court must review 28 1 the settlement agreement under the appropriate standard.1 An FLSA collective action 2 differs from a class action in that participants affirmatively choose to be bound by the 3 settlement agreement and there are no absent class members whose claims are being settled 4 because such absent class members are not bound by the case’s outcome. See, e.g., 5 Hoffman-La Roche, Inc. v. Sperling, 493 U.S. 165, 170 (1989); Maguire v. Trans World 6 Airlines, Inc., 55 F.R.D. 48, 49 (S.D.N.Y. 1972). 7 Although the Ninth Circuit Court of Appeals has not specifically addressed the 8 procedure to settle FLSA claims, district courts throughout the Ninth Circuit have followed 9 the lead of the seminal case of Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 10 (11th Cir. 1982). Juvera v. Salcido, No. CV-11-2119-PHX-LOA, 2013 WL 6628039, at 11 *7–8 (D. Ariz. 2013); see also McKeen–Chaplin v. Franklin American Mortg. Co., No. C 12 10-5243 SBA, 2012 WL 6629608, at *2 (N.D. Cal. Dec. 19, 2012). In Lynn’s, the Eleventh 13 Circuit held: 14 There are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees. 15 First, under section 216(c), the Secretary of Labor is authorized 16 to supervise payment to employees of unpaid wages owed to them. An employee who accepts such a payment supervised by 17 the Secretary thereby waives his right to bring suit for both the 18 unpaid wages and for liquidated damages, provided the employer pays in full the back wages. 19 The only other route for compromise of FLSA claims is 20 provided in the context of suits brought directly by employees 21 against their employer under section 216(b) to recover back wages for FLSA violations. When employees bring a private 22 action for back wages under the FLSA, and present to the 23 district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for 24 fairness. 25 1 It should be noted that, although this Court approved the parties’ stipulation regarding 26 conditional FLSA collective certification, no members of the purported class opted into the 27 action by the deadline (Doc. 31 at 2), and so the terms of the Settlement Agreement will bind Plaintiff only. Nonetheless, the standard for collective actions will guide this Court’s 28 analysis of whether the settlement is fair and reasonable. 1 679 F.2d at 1352–53 (footnotes omitted). When parties seek approval of a FLSA 2 settlement, a district court may approve the settlement if it reflects a “reasonable 3 compromise over issues.” Lopez v. Arizona Public Service Co., No. CV 08-1843-PHX- 4 JAT, 2010 WL 1403873, at *1 (D. Ariz. Jan. 27, 2010) (quoting Lynn’s, 679 F.2d at 1354). 5 “If the settlement reflects a reasonable compromise over issues such as FLSA coverage or 6 computation of back wages . . . the court may approve the settlement in order to promote 7 the policy of encouraging settlement of litigation.” Khanna v. Inter–Con Sec. Systems, Inc., 8 No. CIV S-09-2214 KJM GGH, 2012 WL 4465558, at *10 (E.D. Cal. Sept. 25, 2012) 9 (citation and internal quotation marks omitted). The Court should therefore approve a fair 10 and reasonable settlement if it was reached as an arm’s length resolution of contested 11 litigation to resolve a bona fide dispute under the FLSA. Lynn’s, 679 F.2d at 1352–54. 12 III. ANALYSIS 13 A. Bona Fide Dispute 14 In an FLSA collective action settlement, a bona fide dispute exists when there are 15 legitimate questions about “the existence and extent of Defendant’s FLSA liability.” 16 Ambrosino v. Home Depot. U.S.A., Inc., No. 11cv1319 L(MDD), 2014 WL 1671489, *1 17 (S.D. Cal. Apr. 28, 2014). There must be “some doubt . . . that the plaintiffs would succeed 18 on the merits through litigation of their [FLSA] claims.” Collins v. Sanderson Farms, 568 19 F.Supp.2d 714, 719–20 (E.D. La. 2008); see also Mamani v. Licetti, No. 13–CV–7002 20 (KMW)(JCF), 2014 WL 2971050, *2 (S.D.N.Y. July 2, 2014) (explaining that to 21 demonstrate a bona fide dispute under the FLSA “[t]he employer should articulate the 22 reasons for disputing the employee’s right to a minimum wage or overtime, and the 23 employee must articulate the reasons justifying his entitlement to the disputed wages” 24 (internal citation omitted) (emphasis added)). 25 Here, because this case has not progressed far, evidence of a bona fide dispute between 26 the parties lies in the initial Complaint and Answer and any exhibits attached thereto. For 27 example, in the Complaint Plaintiff asserts that he was directed by Defendant to work, and 28 did work, in excess of 40 hours per week. (Doc. 1 at 4). In support, Plaintiff provides an 1 Exemplar Schedule, which shows he was required to work from 6:00am to 6:00pm, five 2 days a week. (Doc. 1-1. Ex. D). Plaintiff further asserts that he is an employee, not an 3 independent contractor, and provides a photo of the truck he drove that bore Defendant’s 4 company logo. (Doc. 1-1. Ex. F). Defendant denies these and all substantive allegations. 5 See Doc. 10 at 2-3 (denying allegations in the Complaint regarding Plaintiff’s employment 6 status, Defendant’s policy of misclassifying employees as independent contractors, that 7 Plaintiff worked in excess of 40 hours per week, Plaintiff’s uniform, and how Plaintiff’s 8 earnings are classified on his pay stubs); see also See also Hand v. Dionex Corp., No. CV 9 06-1318-PHX-JAT, 2007 WL 3383601, at *1 (D. Ariz. Nov. 13, 2007) (finding a bona fide 10 dispute where “Defendant strongly contested liability under the FLSA; claiming the 11 Plaintiffs were exempt employees.”); McKeen-Chaplin, , 2012 WL 6629608, at *2 (“This 12 case involves disputed issues of FLSA coverage and potential liability, which constitutes a 13 bona fide dispute.”). The Court finds that a bona fide dispute exists, and it would be 14 resolved by the proposed Settlement Agreement. 15 B. Fair and Reasonable 16 Having found a bona fide dispute, a district court may approve an FLSA settlement if 17 the proposed settlement reflects “a reasonable compromise over [disputed] issues.” Lynn’s, 18 679 F.2d at 1354. “There are, however, no agreed upon factors to consider in evaluating a 19 proposed FLSA settlement.” Almodova v. City and County of Honolulu, No. 07-00378- 20 DAE-LEK, 2010 WL 1372298, at *4 (D. Haw. Mar. 31, 2010). Courts consider various 21 factors including, but not limited to, the strength of the plaintiff’s case, the amount offered 22 in settlement, and the scope of any release provision in the agreement. See id.; see also 23 Beidleman v. City of Modesto, No. 1:16-CV-01100-DAD-SKO, 2018 WL 1305713, at *3 24 (E.D. Cal. Mar. 13, 2018) (explaining the “totality of the circumstances” analysis for FLSA 25 settlements and analyzing factors). 26 Here, Plaintiff’s total recovery under the Settlement Agreement is $1,500. (Doc. 31-1 27 at 3). This number represents $238 in alleged damages (reflecting “compensation for 28 alleged unpaid overtime”), $886.78 in costs, and $375.22 in attorneys’ fees. (Doc. 31-1 1 at 3; doc. 31 at 4). These amounts represent, according to the parties, the maximum amount 2 Plaintiff would recover if Plaintiff prevailed in the lawsuit on the merits (plus related 3 expenses). (Doc. 31 at 4). The amounts were calculated based on Defendant’s sample time 4 sheets and “documents evidencing jobs Plaintiff undertook in the two weeks he was 5 engaged.” (Id.). 6 The Court finds the wages amount reasonable based on the provided evidence. While 7 some evidence of wages owed is provided, Plaintiff would have difficulty establishing the 8 exact hours he worked (seeing as the only evidence provided is a handwritten “office 9 schedule” showing general hours that Defendant allegedly required him to work). See 10 Baker v. D.A.R.A. II, Inc., No. CV-06-2887-PHX-LOA, 2008 WL 11339635, at *1 (D. 11 Ariz. Oct. 27, 2008) (finding settlement amount reasonable where “even if Defendants 12 conceded liability, Plaintiff would have faced difficulty establishing the number of hours 13 she worked”). Furthermore, Plaintiff would have difficulty rebutting Defendant’s assertion 14 that “[a]ny wages purportedly owed to Plaintiff are subject to allowable deductions or set- 15 off.” (Doc. 10 at 6); see also Beidleman, 2018 WL 1305713, at *4 (explaining that “[c]ourts 16 favor settlement where there is a significant risk that the litigation might result in a lesser 17 recovery for the class” and finding settlement reasonable because “defendant could assert 18 offsets and credits from the way that it calculated overtime, which was more favorable than 19 required by the FLSA, thus reducing plaintiffs’ recovery”). 20 Additionally, the General Release provision in the settlement is reasonable in that it 21 only releases Defendant from “all actions, claims, damages, expenses, or costs of whatever 22 nature up through the Effective Date” and defines the Effective Date as the date this Court 23 approves the settlement and dismisses the action. (Doc. 31-1, Ex. 1, at 3-4); see also Slezak 24 v. City of Palo Alto, No. 16-CV-03224-LHK, 2017 WL 2688224, at *4 (N.D. Cal. June 22, 25 2017) (“A FLSA release should not go beyond the specific FLSA claims at issue in the 26 lawsuit itself.”); Beidleman, 2018 WL 1305713, at *5 (approving FLSA settlement with a 27 release provision limited to claims “arising in, or in connection with, or out of the 28 litigation”). And a reasonable settlement at this time would benefit Plaintiff “with an immediate recovery, rather than enduring the risks, uncertainty, and delays of continued 2| litigation.” See Fontes v. Drywood Plus, Inc., No. CV-13-1901-PHX-LOA, 2013 WL 3.) 6228652, at *8 (D. Ariz. Dec. 2, 2013). 4| IV. CONCLUSION 5 The Court finds that the provided documentation illustrates that there exists a bona fide 6 | dispute between the parties regarding Plaintiffs entitlement to overtime pay. Furthermore, having reviewed the proposed Settlement Agreement, the Court finds that it reflects a fair 8 | and reasonable resolution of issues given the strength of Plaintiff's case, the scope of the release provision in the Agreement, and the amount offered in the settlement. 10 Having determined that the Settlement Agreement represents a fair and reasonable 11 | compromise of a bona fide dispute under the FLSA, 12 IT IS ORDERED: 13 1. That the parties’ Joint Motion for Approval of Proposed FLSA Settlement 14 (Doc. 31) is granted; 15 2. That this action is dismissed with prejudice, with each party to bear its own attorneys’ fees, costs, and expenses, except as expressly provided in the Settlement Agreement (Doc. 31-1, Ex. 1); and 18 3. That the Clerk of Court shall terminate this case and enter judgment 19 | accordingly. 20 Dated this 24th day of September, 2020. 21 22 Ake 23 United States District kadge 24 25 26 27 28