Category Archives: Settlements

M.D.Fla.: Defendant Does Not Moot FLSA Case By Tender of Unpaid Wages/Liquidated Damages, Absent Payment of Reasonable Attorneys Fees and Costs

Klinger v. Phil Mook Enterprises

Following the recent 11th Circuit decision Dionne v. Floormasters, the blogosphere has been abuzz with articles positing that the decision gave employers the green light to engage in wholesale wage theft and take a wait and see approach with regard to paying employees their wages.  Several management-side attorneys have even gone as far as to suggest that a thieving employer could tender payment of wages/liquidated damages alone on the courthouse steps on the eve of a jury verdict and simply avoid paying mandatory fees and costs under 216(b).  Not so, holds Judge James D. Whittemore, in the first case on the issue post-Dionne.

In Klinger v. Phil Mook Enterprises, the defendants-employers attempted just this strategy.  After Klinger filed a lawsuit seeking the payment of her unpaid wages and liquidated damages, her former employers tendered what it deemed “full payment” of her unpaid wages and liquidated damages.  However, it denied liability and refused to pay reasonable attorneys fees and costs.  Instead, it filed a Motion to Dismiss, asserting that the case was now moot.  The Court rejected the defendants’ contention that the case was moot absent payment of attorneys fees and costs and denied defendants’ motion.

Significantly, the Court noted:

“Defendants’ mere tender of payment does not provide Plaintiff with all the relief she seeks and would be entitled to as a prevailing party in this action, to wit: an enforceable judgment, attorney’s fees, and costs.  Allowing Defendants to avoid responsibility for Plaintiff’s attorneys fees merely by tendering full payment after litigation has commenced would run counter to the FLSA’s goal of fully compensating the wronged employee.  See Silva v. Miller, 307 Fed. App’x 349, 351 (11th Cir. 2009)(“FLSA requires judicial review of the reasonableness of counsel’s legal fees to assure… that counsel is compensated adquately…”.  Further, Defendants’ tender effectively circumvents the requirements of Rule 68(a), Fed.R.Civ.P.”

As such, the Court denied the defendants’ motion.

Click Klinger v. Phil Mook Enterprises to read the entire Order.

DISCLAIMER:  It is not this author’s assertion that the defendants in this particular case engaged in willful wage theft.  Absent further research into the facts giving rise to the underlying claim, the author makes no representations whatsoever as to the specific facts of this case.  Instead, this post is a commentary on the procedural history of the case once filed.

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Filed under Offer of Judgment, Settlements

M.D.Tenn.: Where Employees Believed They Were Required to Sign WH-58 and/or Unaware of Private Lawsuit Regarding Same Issues, Waivers Null & Void

Woods v. RHA/Tennessee Group Homes, Inc.

This case was before the court on a variety of motions related to the plaintiffs’ request for conditional certification and for clarification as to the eligible participants in any such class.  The case arose from plaintiffs’ claims that defendants improperly automatically deducted 30 minutes for breaks that were not provided to them.  Of interest here, during the time the lawsuit was pending, the DOL was also investigating defendants regarding the same claims.  Shortly after the lawsuit was commenced, the DOL made findings and recommendations to the defendants, in which it recommended payments of backwages to certain employees that were also putative class members in the case.  As discussed here, the defendants then made such payments to the putative class members, but required that all recipients of backwage payments sign a WH-58 form (DOL waiver), which typically waives an employees claims covered by the waiver.  Subsequently, the plaintiffs sought to have the WH-58’s declared null & void and asserted that any waiver was not knowing and/or willful as would be required to enforce.  The court agreed and struck the waivers initially.  However, on reconsideration the court held that a further factual showing was necessary to determine whether the WH-58 waivers were effectual or not under the circumstances.

The court explained the following procedural/factual background relevant to the waiver issue:

“The six named plaintiffs filed this putative collective action on January 13, 2011. Coincidentally, on the same day, the Department of Labor (“DOL”) contacted the defendant and commenced an investigation regarding the Meal Break Deduction Policy. (Docket No. 80 at 25 (transcript of April 14, 2011 hearing).) The DOL was apparently following up on a complaint that it had received nearly a year earlier. (Id. at 32.) Several days later, on January 18, the defendant informed the DOL of the pending private lawsuit.

Nevertheless, the DOL proceeded with the investigation and, in early March 2011, the DOL and the defendant reached a settlement, pursuant to 29 U.S.C. § 216(c). Under the settlement, the defendant agreed to comply with the FLSA in the future and to pay a certain amount of back wages to employees who were subject to the Meal Break Deduction Policy. (See Docket No. 80 at 14.)

To distribute these payments, the defendant posted the following notice in a common area:

The following employees must come to the Administrative Building and see Michelle regarding payment for wages as agreed upon by the Stones River center and the Department of Labor on Tuesday, April 12, 2011, 8:00 am–4:00 pm.

If you have questions, see Lisa or Kamilla

(Docket No. 43, Ex. 1 at 72; Docket No. 56, Ex. 1.)  The posting contained a list of over 60 employees (see Docket No. 56, Ex. 1), including several employees who had already opted into this lawsuit (see, e.g., Docket No. 43, Ex. 1 at 56), although the defendant claims that their inclusion was an oversight. In her declaration, Human Resources Director Kamilla Wright states that she was simply “instructed to post a list of employees for whom checks were available.” (Docket No. 55 ¶ 7.)

Wright was further instructed “that when an employee came to the office to pick up their check, [she] was to have them sign the receipt for payment of back wages and then give them their check.” (Id. ¶ 9.) The declaration of Lisa Izzi, the defendant’s administrator, states that Izzi received identical instructions. (Docket No. 56 ¶ 9.) Accordingly, at the meetings with employees, each employee was given a check and DOL Form WH–58, which was titled “Receipt for Payment of Back Wages, Employment Benefits, or Other Compensation.” (Docket No. 43, Ex. 1 at 13.) The form stated:

I, [employee name], have received payment of wages, employment benefits, or other compensation due to me from Stones River Center … for the period beginning with the workweek ending [date] through the workweek ending [date.] The amount of payment I received is shown below.

This payment of wages and other compensation was calculated or approved by the Wage and Hour Division and is based on the findings of a Wage and Hour investigation. This payment is required by the Act(s) indicated below in the marked box(es):

[X] Fair Labor Standards Act 1

(Id.) Further down, in the middle of the page, the form contained the following “footnote”:

FN1NOTICE TO EMPLOYEE UNDER THE FAIR LABOR STANDARDS ACT (FLSA)—Your acceptance of this payment of wages and other compensation due under the FLSA based on the findings of the Wage and Hour Division means that you have given up the right you have to bring suit on your own behalf for the payment of such unpaid minimum wages or unpaid overtime compensation for the period of time indicated above and an equal amount in liquidated damages, plus attorney’s fees and court costs under Section 16(b) of the FLSA. Generally, a 2–year statute of limitations applies to the recovery of back wages. Do not sign this receipt unless you have actually received this payment in the amount indicated above of the wages and other compensation due you.

(Id.) Below that was an area for the employee to sign and date the form.

It appears that Wright and Izzi did not, as a matter of course, inform the employees that accepting the money and signing the WH–58 form was optional. Nor did they inform the employees that a private lawsuit covering the same alleged violations was already pending.

On April 12 and 13, 2011, a number of employees accepted the payments and signed the WH–58 forms. On April 13, the plaintiffs’ counsel learned of this and filed a motion for a temporary restraining order or preliminary injunction, seeking to prevent the defendant from communicating with opt-in plaintiffs and potential opt-in plaintiffs. (Docket No. 43.)

The court held a hearing on the plaintiffs’ motion on April 14, 2011. At that hearing, the court expressed its displeasure with the defendant’s actions, which, the court surmised, were at least partly calculated to prevent potential class members from opting in to this litigation. The court stated that it would declare the WH–58 forms (and the attendant waiver of those employees’ right to pursue private claims) to be null and void; thus, those employees would be free to opt in to this lawsuit.”

On reconsideration, the court reconsidered its prior Order on the issue.  While re-affirming that non-willful waivers would be deemed null & void, the court explained that the issue would be one for the finder of fact at trial.  After a survey of the relevant case law, the court explained:

“To constitute a waiver, the employee’s choice to waive his or her right to file private claims—that is, the employee’s agreement to accept a settlement payment—must be informed and meaningful. In Dent, the Ninth Circuit explicitly equated “valid waiver” with “meaningful agreement.” Dent, 502 F.3d at 1146. Thus, the court stated that “an employee does not waive his right under section 16(c) to bring a section 16(b) action unless he or she agrees to do so after being fully informed of the consequences.” Id. (quotation marks omitted). In Walton, the Seventh Circuit likened a valid § 216(c) waiver to a typical settlement between private parties:

When private disputes are compromised, the people memorialize their compromise in an agreement. This agreement (the accord), followed by the payment (the satisfaction), bars further litigation. Payment of money is not enough to prevent litigation…. There must also be a release.  Walton, 786 F.2d at 306. The relevant inquiry is whether the plaintiffs “meant to settle their [FLSA] claims.” Id.

Taken together, Sneed, Walton, and Dent suggest that an employee’s agreement to accept payment and waive his or her FLSA claims is invalid if the employer procured that agreement by fraud or duress. As with the settlement of any other private dispute, fraud or duress renders any “agreement” by the employee illusory. See 17A Am.Jur.2d Contracts § 214 (“One who has been fraudulently induced to enter into a contract may rescind the contract and recover the benefits that he or she has conferred on the other party.”); id. § 218 (“ ‘Duress’ is the condition where one is induced by a wrongful act or threat of another to make a contract under circumstances which deprive one of the exercise of his or her free will. Freedom of will is essential to the validity of an agreement.” (footnote omitted)).  The court finds that employees do not waive their FLSA claims, pursuant to § 216(c), if their employer has affirmatively misstated material facts regarding the waiver, withheld material facts regarding the waiver, or unduly pressured the employees into signing the waiver.

This holding does conflict with Solis v. Hotels.com Texas, Inc ., No. 3:03–CV–0618–L, 2004 U.S. Dist. LEXIS 17199 (N.D.Tex. Aug. 26, 2004), in which the district court rejected the contention that “an allegation of fraud could lead to the invalidity of a waiver under 216(c).” Id. at *6. That finding was mere dicta, however, and, regardless, this court is not bound by decisions from the Northern District of Texas.

Here, the defendant posted a sign with a list of employees’ names stating that those employees “must come to the Administrative Building and see Michelle regarding payment for wages as agreed upon by the Stones River center and the Department of Labor.” (Docket No. 43, Ex. 1 at 72 (emphasis added).) It appears that, when the employees met with the defendant’s human resources representatives, neither the representatives nor the Form WH–58 informed the employees that they could choose to not accept the payments.  On the evidence presented at the April 14 hearing and submitted thereafter, the court finds that reasonable employees could have believed that the defendant was requiring them to accept the payment.  Obviously, this calls into question the willingness of the employees’ waivers.

Additionally, it appears that the defendant never informed the employees that a collective action concerning the Meal Break Deduction Policy was already pending when the waivers were signed. The court finds that it was the defendant’s duty to do so. Section 216 exists to give employees a choice of how to remedy alleged violations of the act—by either accepting a settlement approved by the DOL or by pursing a private claim. An employer should not be allowed to short circuit that choice by foisting settlement payments on employees who are unaware that a collective action has already been filed. If employees are unaware of a pending collective action, they are not “fully informed of the consequences” of their waiver, Dent, 502 F.3d at 1146, because waiving the right to file a lawsuit in the future is materially different than waiving the right to join a lawsuit that is already pending. In the former situation, an employee who wishes to pursue a claim must undertake the potentially time-consuming and expensive process of finding and hiring an attorney; in the latter, all an employee must do is sign and return a Notice of Consent form.

Thus, the court finds that any employee of Stones River Center may void his or her § 216(c) waiver by showing either: (1) that he or she believed that the defendant was requiring him or her to accept the settlement payment and to sign the waiver; or (2) that he or she was unaware that a collective action regarding the Meal Break Deduction Policy was already pending when he or she signed the waiver. The court will vacate its April 14, 2011 Order, to the extent that the order declared all such waivers to be automatically null and void. Instead, under the above-described circumstances, the waivers are voidable at the election of the employee.  Because the validity of any particular employee’s waiver depends on questions of fact, the issue of validity as to each employee for whom this is an issue will be resolved at the summary judgment stage or at trial.”

Click Woods v. RHA/Tennessee Group Homes, Inc. to read the entire Memorandum Opinion on all the motions.

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Filed under Affirmative Defenses, Break Time, Collective Actions, Department of Labor, Pre-Certification Communications, Settlements

D.Ariz.: Employee Who Resolved His Claims For Unpaid Overtime Prior To Lawsuit Entitled To Award Of Attorney’s Fees Under § 216

McBurnie v. City of Prescott

Before the court was plaintiff’s motion for summary judgment regarding entitlement to attorneys fees following his presuit acceptance of a check that purported to resolve all of his claims for unpaid overtime wages and attorneys fees.  Noting that an empl0yee can not waive his or her rights to substantive FLSA rights absent a settlement supervised by either the DOL or a court, the court held that notwithstanding Plaintiff’s prior acceptance of payment for his unpaid overtime, he was entitled to an award of attorneys fees under the FLSA.

In November 2007, Plaintiff filed a grievance against his then supervisor, alleging that the City’s forced use of compensatory time in lieu of overtime pay violated the Fair Labor Standards Act, 29 U.S.C. § 207.  In February 2009, prior to the institution of Plaintiff’s lawsuit, the Defendant sent two checks to plaintiff-one in the amount of $26,000 for overtime compensation and the other in the amount of $5,778.32 for attorney’s fees.  The settlement letter enclosed with the two checks stated that “[b]y cashing either or both of these two checks your client is accepting these funds as resolution of any and all overtime issues; we have indicated that on each of these checks.”  Plaintiff accepted and cashed the $26,000 settlement offer, but returned the check for attorney’s fees to the City.

In August, 2009, Plaintiff filed his lawsuit.  Among other claims, he sought attorney’s fees related to the settlement of his FLSA wage claim.

Reasoning that Plaintiff was entitled to an award of attorneys fees and granting Plaintiff summary judgment with regard to same, the court explained:

“Plaintiff moves for summary judgment on Count 12, his claim for attorney’s fees under the Fair Labor Standards Act, 29 U.S.C. §§ 207 and 216 (“FLSA”). The FLSA was enacted for the purpose of protecting workers from substandard wages and oppressive working hours. Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S. 728, 739, 101 S.Ct. 1437, 1444 (1981). The Act provides that an employee shall receive overtime wages “at a rate not less than one and one-half times the regular rate at which he is employed.” 29 U .S.C. § 207(a)(1). The FLSA further provides that any employer who violates the overtime wage provision will be liable to the affected employee in the amount of unpaid overtime wages, plus an additional equal amount as liquidated damages. Id. § 216(b).

Because of the unequal bargaining power between employers and employees, Congress made the FLSA provisions mandatory. D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 116, 66 S.Ct. 925, 929 (1946) (“neither wages nor damages for withholding them are capable of reduction by compromise”). An individual may not relinquish rights under the Act, even by private agreement between the employer and employee, “because this would ‘nullify the purposes’ of the statute and thwart the legislative policies it was designed to effectuate.”   Barrentine, 450 U.S. at 740, 101 S.Ct. at 1445 (quoting Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 707, 65 S.Ct. 895, 902 (1945)).

The FLSA provides two avenues for claim resolution. Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1353-54 (11th Cir.1982). First, under section 216(c), the Secretary of Labor can supervise an employer’s voluntary payment to employees of unpaid wages. 29 U.S.C. § 216(c). An employee who accepts such supervised payment waives his right to file an action for both the unpaid wages and for liquidated damages. Id. Or, under section 216(b), an employee can bring a private action for back wages under the FLSA and can “present to the district court a proposed settlement, [and] the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.” Lynn’s Food Stores, 679 F.2d at 1353 (citing D.A. Schulte, Inc, 328 U.S. at 113 n. 8, 66 S.Ct. at 928 n. 8). Settlements that do not follow the two methods authorized by the Act are unenforceable. Hohnke v. United States, 69 Fed. Cl. 170, 178-79 (Fed.Cl.2005).

Here, we have neither an agreement supervised by the Department of Labor, nor entered as a stipulated judgment by a court. The settlement agreement regarding back wages is fully consummated and the parties do not seek court approval. Therefore, the settlement falls outside the two statutorily-prescribed avenues of FLSA claim resolution.

An award of attorney’s fees to a prevailing party in an action brought under section 216(b) is mandatory. “The court in such action shall, in addition to any judgment awarded to the plaintiff or plaintiffs, allow a reasonable attorney’s fee to be paid by the defendant, and costs of the action.” 29 U.S.C. § 216(b) (emphasis added); Christiansburg Garment Co. v. EEOC, 434 U.S. 412, 415 n. 5, 98 S.Ct. 694, 697 n. 5 (1978) (referring to § 216 of the FLSA as one of the “statutes [that] make fee awards mandatory for prevailing plaintiffs”). The payment of the attorney’s fees discharges a statutory, not a contractual, duty. Because the FLSA was intended to provide workers with the full compensation due under the law, requiring a claimant to pay attorney’s fees incurred to enforce his FLSA rights would frustrate the statute’s underlying purpose. See Maddrix v. Dize, 153 F.2d 274, 275-76 (4th Cir.1946) (stating that Congress intended that a claimant “should receive his full wages plus the penalty without incurring any expense for legal fees or costs”).

Thus, the statement in the settlement letter that “[b]y cashing either or both of these two checks your client is accepting these funds as resolution of any and all overtime issues” in unenforceable as to plaintiff’s claim for attorney’s fees under the FLSA. Plaintiff has not waived his right to attorney’s fees under the Act. We grant summary judgment in favor of plaintiff on Count 12.”

Click McBurnie v. City of Prescott to read the entire opinion.

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E.D.Tex.: Notwithstanding Settlement Agreement Stating Plaintiffs Were Not “Prevailing Party,” Plaintiffs Were Prevailing Party, Entitled To Attorneys Fees And Costs Under FLSA

Champion v. ADT Sec. Services, Inc.

The case was before the court on Plaintiffs’ motions for attorneys fees and costs, following the settlement of their FLSA claims.  The Defendant argued that Plaintiffs were not entitled to recover attorneys fees and/or costs, because the settlement agreement contained language stating that Plaintiffs were not the “prevailing party,” despite the fact that they had successfully resolved their case by settlement.

Rejecting Defendant’s argument, the court reasoned:

“The Court concludes that Plaintiffs are prevailing parties, for the purposes of the fee-shifting statute, and are thus entitled to attorney’s fees. Under the FLSA, the court may award reasonable attorney’s fees to the prevailing party. Saizan, 448 F.3d at 799. “A typical formulation is that plaintiffs may be considered prevailing parties’ for attorney’s fees purposes if they succeed on any significant issue in litigation which achieves some of the benefit the parties sought in bringing suit.” Hensley v. Eckerhart, 461 U.S. 424, 433, 103 S.Ct. 1933, 76 L.Ed.2d 40 (1983) (internal quotes omitted); see also Abner v. Kansas City S. Ry. Co., 541 F.3d 372, 379 (5th Cir.2008). The Court holds that the plaintiffs are prevailing parties for these purposes because the plaintiffs succeeded in procuring a favorable settlement. ADT initially made payments for the owed overtime to seven of the named plaintiffs that totalled $11,324.48, and the settlement obtained for those seven plaintiffs totalled $48,500.00. (See P’s Reply Br., Dkt. No. 57 at 13-14.) Thus, the plaintiffs have certainly “achiev[ed] some of the benefit the parties sought in bringing suit.” Hensley, 461 U.S. at 433. In the present case, however, Defendant ADT argues Plaintiffs are not prevailing parties for two reasons: (1) this case was resolved by settlement; and (2) the settlement agreement signed by the parties states that Plaintiffs shall not be deemed a prevailing party. For the following reasons, the Court disagrees with Defendant on both points and concludes that Plaintiffs are prevailing parties.

First, settlement does not preclude Plaintiffs from being considered prevailing parties. The Supreme Court has held that settlement agreements enforced through a consent decree may serve as the basis for an award of attorney’s fees. Maher v. Gagne, 448 U.S. 122, 129-30, 100 S.Ct. 2570, 65 L.Ed.2d 653 (1980). “Although a consent decree does not always include an admission of liability by the defendant … it nonetheless is a court-ordered change in the legal relationship between the plaintiff and the defendant.”   Buckhannon Bd. & Care Home, Inc. v. +West Virg. Dep’t of Health & Human Resources, 532 U.S. 598, 604, 121 S.Ct. 1835, 149 L.Ed.2d 855 (2001) (internal quotes omitted). In the present case, the Court entered a consent decree in the Court’s Order approving the settlement as a fair and reasonable compromise of the dispute under the FLSA. (Dkt. No. 50.) Therefore, the settlement does not limit Plaintiffs’ ability to be prevailing parties.

Second, regarding the settlement agreement signed by both parties and submitted to this Court, the agreement states in one part:

No Admission of Liability. The Parties agree and acknowledge this Agreement is the result of a compromise and shall not be construed as an admission of liability, responsibility, or wrongdoing as alleged in the Lawsuit. It is expressly understood by the Parties that [plaintiffs] shall not be deemed a “prevailing party” for any purpose, including any fee shifting statute, rule, or agreement.  (Plaintiff’s Unopposed Motion to Approve FLSA Settlement, Settlement Agreement, Dkt. No. 48, Ex. 1, ¶ E.) Defendant argues this settlement agreement, which was signed by the parties and submitted to the Court, means the plaintiffs are not prevailing parties because the settlement agreement acknowledges that they are not prevailing parties. The Court disagrees.

As an initial matter, the settlement agreement is treated as a contract and will be interpreted under Texas law.  The Texas Supreme Court has recently explained the law:

In construing [a contract], we first determine whether it is possible to enforce the contract as written, without resort to parol evidence. Deciding whether a contract is ambiguous is a question of law for the court. Coker v. Coker, 650 S.W.2d 391, 394 (Tex.1983). In construing a written contract, the primary concern of the court is to ascertain the true intentions of the parties as expressed in the instrument. R & P Enters. v. LaGuarta, Gavrel & Kirk, Inc., 596 S.W.2d 517, 518 (Tex.1980); City of Pinehurst v. Spooner Addition Water Co., 432 S.W.2d 515, 518 (Tex.1968). To achieve this objective, we must examine and consider the entire writing in an effort to harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless. Universal C.I.T. Credit Corp. v. Daniel, 150 Tex. 513, 243 S.W.2d 154, 158 (1951). No single provision taken alone will be given controlling effect; rather, all the provisions must be considered with reference to the whole instrument. Myers v. Gulf Coast Minerals Mgmt. Corp., 361 S.W.2d 193, 196 (Tex.1962); Citizens Nat’l Bank v. Tex. & P. Ry. Co., 136 Tex. 333, 150 S.W.2d 1003, 1006 (1941). A contract is unambiguous if it can be given a definite or certain legal meaning. Columbia Gas Transmission Corp. v. New Ulm Gas, Ltd., 940 S.W.2d 587, 589 (Tex.1996). On the other hand, if the contract is subject to two or more reasonable interpretations after applying the pertinent rules of construction, the contract is ambiguous, creating a fact issue on the parties’ intent. Id. J.M. Davidson, Inc. v. Webster, 128 S.W.3d 223, 229 (Tex.2003). Further, under Texas law, “[c]ourts interpreting unambiguous contracts are confined to the four corners of the document, and cannot look to extrinsic evidence to create an ambiguity.” Texas v. Am. Tobacco Co., 463 F.3d 399, 407 (5th Cir.2006). Parol evidence may only be used if the contract is first found to be ambiguous. Id.

Keeping these principles in mind, the Court concludes that the contract is unambiguous and the plaintiffs are entitled to attorney’s fees, or in other words, the settlement agreement does not prevent the plaintiffs from being considered prevailing parties. The Court recognizes that the settlement agreement states that the plaintiffs “shall not be deemed a prevailing party’ for any purpose, including any fee shifting statute, rule, or agreement.” (Plaintiff’s Unopposed Motion to Approve FLSA Settlement, Settlement Agreement, Dkt. No. 48, Ex. 1, ¶ E.) But the agreement also states:

The parties have made no agreement regarding the payment of Champion’s attorney fees, court costs and a portion of the mediation fees, beyond that provided for in Paragraph A above. Champion’s counsel intends to apply to the Court for an award of attorney’s fees, and ADT reserves the right to contest this application.(Plaintiff’s Unopposed Motion to Approve FLSA Settlement, Settlement Agreement, Dkt. No. 48, Ex. 1, ¶ B.) The Court concludes the contract is unambiguous when considering only the four corners of the document and attempting to “harmonize and give effect to all the provisions of the contract so that none will be rendered meaningless.”  The parties agreed that there was “no agreement regarding the payment of [Plaintiffs’] attorney fees.” (Plaintiff’s Unopposed Motion to Approve FLSA Settlement, Settlement Agreement, Dkt. No. 48, Ex. 1, ¶ B.)

But on the other hand, the parties agreed that the plaintiffs shall not be “deemed” a prevailing party. (Id. at ¶ E.) In harmonizing these statements together, the Court concludes that when the agreement states that the plaintiffs shall not be “deemed” a prevailing party, the parties were agreeing that whether the plaintiffs are a prevailing party is to be determined by the Court. In other words, the parties were not deeming the plaintiffs as a prevailing party. Further, the specific language stating the plaintiffs “shall not be deemed a prevailing party” is located in the section of the agreement titled “No Admission of Liability,” which confirms the parties’ intention was merely to not admit the plaintiffs were the prevailing party. (Id.) Rather, the parties were confirming that “ADT reserves the right to contest this application” of awarding attorney’s fees. (Id. at ¶ B.)

Therefore, the Court interprets the settlement agreement as unambiguously allowing the Court to determine whether the plaintiffs are the prevailing parties and entitled to attorney’s fees. The Court concludes for the abovementioned reasons that the plaintiffs are prevailing parties for the purposes of the statute and are entitled to attorney’s fees.”

Not quoted here, the court noted that there were emails between counsel prior to the settlement agreement, wherein the parties made clear that they intended the settlement agreement to resolve the issue of damages only and not the issue of attorneys’ fees or costs.

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W.D.Va.: Parties May File FLSA Settlement Agreement Under Seal For Limited Time; Good Cause Demonstrated By 800 Similar Cases Pending

Murphy v. Dolgencorp, Inc.

This case is one of many such individual plaintiff cases pending against Dolgencorp (Dollar General), following the decertification of a nationwide collective action pertaining to its alleged misclassification of its “Store Manager” position.  The case was before the court on the parties second motion seeking approval of settlements of these related cases under the Fair Labor Standards Act (FLSA).  The court had previously denied approval because of the parties’ insistence on the confidentiality of the settlement terms without showing good cause. Murphy v. Dolgencorp, Inc., No. 1:09CV00007, 2010 WL 3766946 (W.D.Va. Sept. 21, 2010).

Permitting the parties to file the settlement under seal for a limited time, the court discussed its basis for doing so, under the limited and somewhat unique circumstances of the case:

“I continue to find that I cannot approve the settlements without knowing the terms thereof, although the parties continue to ask me to do so on that basis. As an alternative, they ask me to consider the written terms either secretly, in camera, or by having them stated orally in an open, but hopefully empty, courtroom.

As I earlier elaborated, these procedures preferred by the parties do not, in my opinion, conform to my responsibilities under the FLSA or under the law generally. See id., 2010 WL 3766946, at *1.  

The parties suggest another alterative, which I eluded to in my earlier opinion, which is to file and seal the settlement agreements for a limited period of time. As good cause for such a procedure, they represent that there are approximately 800 similar cases pending against the defendant in this and other federal courts around the nation, in which all of the plaintiffs are represented by the same counsel. They contend that keeping the terms of other settlements from each of these plaintiffs is beneficial in order to allow negotiations to concentrate on the specific merits of each individual case. They represent that plaintiffs’ counsel have agreed that they will not divulge the terms of another settlement to any of their individual clients.  

It is true, as the parties assert, that the individual facts of each case are significant. Indeed, I have so ruled in denying summary judgment for the defendant in Teresa Hale’s case. Hale v. Dolgencorp, Inc., No. 1:09CV00014, 2010 WL 2595313, at *2-3 (W.D.Va. June 23, 2010) (holding that to determine if an individual store employee is exempt from overtime under the FLSA’s executive exemption requires a fact-intensive inquiry, unique to each store’s situation). The issue in each of these cases is whether the employee’s primary duty is management, which requires an analysis of various factors, including the amount of time spent by the employee in managerial duties. Id. Among the many stores operated by the defendant, those factors vary based on the circumstances of each store, as well as the preferences and circumstances of the various district managers. Id. at 4.

Under these circumstances, I find that good cause has been shown to seal the settlement agreements for a limited period of time. While the parties suggest three years, I find that two years ought to allow the parties the opportunity to negotiate settlement in most cases, and adequately balances the needs of the parties with the presumptive right of the public to access court records.

Accordingly, it is ORDERED as follows:

1. In connection with the requested approval of the settlements of these two cases, the parties must file under seal copies of the settlement agreements, together with (a) the amount of the plaintiffs’ overtime and liquidated damages claims, and (b) the amount of attorneys’ fees and expenses paid from the settlements, together with the basis for the calculation of the attorneys’ fees; and

2. The materials described above will be filed under seal, not to be unsealed earlier than two years after filing.”

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S.D.N.Y.: Court Refuses To Allow “Settlement” That Grossly Undervalued FLSA Claims To Serve As Basis For Summary Judgment

Latacela v. Cohen

This case involved an action under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201, et seq., for unpaid minimum wages and unpaid overtime wages.  The case was before the court on defendants motion for summary judgment and for judicial approval of a settlement allegedly reached by the parties.  The plaintiff opposed the defendants’ motion on the basis that he had withdrawn support for the settlement because the sum certain agreed to by the parties was based on faulty calculations by the plaintiff.  Plaintiff asserted that he had mistakenly calculated that he was owed $1,415.82 in unpaid minimum wages, rather than $14,170.  This miscalculation also affected the amount the plaintiff claimed in liquidated damages, since employees are entitled to liquidated damages (in addition to back wages) equal to the amount of unpaid wages. 29 U.S.C. § 216(b).

Denying the defendants’ motion, the court reasoned:

” ‘There are only two ways in which back wage claims arising under the FLSA can be settled or compromised by employees. First, under [29 U.S.C. § 216(c) ], the Secretary of Labor is authorized to supervise payment to employees of unpaid wages owed to them. Second [sic] when employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.’ Manning v. New York Univ., 2001 WL 963982 (S.D.N.Y. Aug. 22, 2001). Even assuming that the agreement defendant presses the Court to approve remains valid, the Court is not satisfied that it is fair. Under the agreement, the plaintiff would receive approximately $28,000 less than the amount he claims he is owed not for strategic reasons, but rather because plaintiff’s counsel made an arithmetical error. Cf. Elliot v. Allstate Investigations, Inc., 2008 WL 728648, at *2 (S.D.N.Y. Mar. 19, 2008) (approving settlement of less than half the amount plaintiff claims he was owed under the FLSA when the plaintiff could not support his claims through documentary evidence and the defendant could not pay more than the amount agreed to).

Accordingly, defendant’s motion for summary judgment is DENIED.”

Click Latacela v. Cohen to read the entire opinion.

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D.Md.: FLSA Plaintiffs Residing In Honduras May Testify At Trial Via Videoconference; Good Cause Demonstrated By Visa Issues And Cost Of Travel

Lopez v. NTI, LLC

This case was before the Court on several motions.  As discussed here, several of the plaintiffs who resided out of state and out of the country, requested that they be permitted to testify at trial via videoconference in lieu of appearing in person in court.  Granting plaintiffs motion in part and denying in part, the court held that the international plaintiffs had demonstrated the requisite good cause, because of visa issues and high cost of international travel.  However, the court denied the out of state plaintiffs’ motion for failure to demonstrate the requisite good cause.

Discussing the plaintiffs’ motion, the Court reasoned:

“Plaintiffs have moved for an order permitting certain Plaintiffs residing in Honduras, Tennessee, and Virginia to testify via “contemporaneous transmission” (Paper 70), namely videoconferencing. In support, Plaintiffs note the difficulty of securing a visa from Honduras and the substantial expense of travel. Defendants oppose, arguing that (1) the non-resident Plaintiffs need to be in the courtroom to establish their identity, (2) the use of videoconferencing would impede central credibility determinations, and (3) financial considerations weigh in favor of Defendants, not Plaintiffs.

Federal Rule of Civil Procedure 43 governs the taking of testimony at trial. That rule expressly provides for the possibility of videoconference testimony, stating that “[t]he court may, for good cause shown in compelling circumstances and upon appropriate safeguards, permit presentation of testimony in open court by contemporaneous transmission from a different location.” Fed.R.Civ.P. 43(a). Although Rule 43 provides some flexibility in accepting remote testimony, it seems obvious that remote transmission is to be the exception and not the rule. See Fed.R.Civ. P. 43 advisory committee’s note on 1996 amendments (“The importance of presenting live testimony in court cannot be forgotten. The very ceremony of trial and the presence of the factfinder may exert a powerful force for truth telling. The opportunity to judge the demeanor of a witness face-to-face is accorded great value in our tradition.”). Courts have also recognized that, even with the benefits that technology provides, substitutes for live testimony are necessarily imperfect:

Videoconference proceedings have their shortcomings. Virtual reality is rarely a substitute for actual presence and … even in an age of advancing technology, watching an event on the screen remains less than the complete equivalent of actually attending it. The immediacy of a living person is lost with video technology…. Video conferencing … is not the same as actual presence, and it is to be expected that the ability to observe demeanor, central to the fact-finding process, may be lessened in a particular case by video conferencing. This may be particularly detrimental where it is a party to the case who is participating by video conferencing, since personal impression may be a crucial factor in persuasion.  Thornton v. Snyder, 428 F.3d 690, 697 (7th Cir.2005) (quotations and citations omitted).

Despite videoconferencing’s deficiencies, courts in this circuit and elsewhere have approved or affirmed its use in the civil context. See generally Rusu v. INS, 296 F.3d 316 (4th Cir.2002) (asylum proceeding); United States v. Baker, 45 F.3d 837 (4th Cir.1995) (civil commitment hearing); Edwards v. Logan, 38 F.Supp.2d 463 (W.D.Va.1999) (civil rights action); see also In re Merck Prods. Liab. Litig., 439 F.Supp.2d 640, 642 (E.D.La.2006) (listing cases). These cases reflect a “consistent sensitivity to the utility of evolving technologies that may facilitate more efficient, convenient, and comfortable litigation practices.” 9A Wright & Miller, Federal Practice & Procedure § 2414 (3d ed.2008). And while videoconferencing has its shortcomings, it at least appears to be favorable to alternative methods, such as the submission of written deposition testimony. Sallenger v. City of Springfield, No. 03-3093, 2008 WL 2705442, at *1 (C.D.Ill. July 9, 2008).

In this case, Plaintiffs have demonstrated good cause as to those Plaintiffs residing in Honduras. The cost of international travel can provide good cause for contemporaneous transmission of testimony. See, e.g., Dagen v. CFC Grp. Holdings, No. 00 Civ. 5682, 2003 WL 22533425, at *2 (S.D.N.Y. Nov. 7, 2003). In some cases, travel cost and inconvenience have justified contemporaneous transmission even when the parties where located within the United States, in contrast to the internationally resident Honduran Plaintiffs in this case. See, e.g., Beltran-Terado v. INS, 213 F.3d 1179, 1186 (9th Cir.2000) (affirming use of telephonic testimony for hearing in California where witness was in Missouri); Scott Timber, Inc. v. United States, No. 05-708C, 2010 WL 2947090, at *1 (Fed.Cl. July 28, 2010) (approving use of videoconferencing for trial in Washington, D.C., where witness was in Oregon); Fed. Trade Comm’n v. Swedish Match N. Am., Inc., 197 F.R.D. 1, 2 (D.D.C.2000) (finding good cause for videoconferencing where witness was in Oklahoma and hearing was in Washington, D.C.). Forcing the Honduran Plaintiffs in this case to travel to the United States would impose substantial inconvenience and cost on persons with strikingly few financial resources. (Paper 76-1). When viable alternatives like videoconferencing are available, compelling individuals who make no more than $7,000 a year to travel hundreds of miles seems fundamentally unjust. And although the court sympathizes with Defendants’ claim that this litigation has already imposed substantial costs on them as well (Paper 75, at 4-5), those costs do not justify imposing needless expense on Plaintiffs.

The use of videoconferencing for the Honduran Plaintiffs will not prejudice Defendants. Each of the witnesses will testify in open court, under oath, and will face cross-examination. Even if Defendants are correct that this case presents complicated issues (Paper 75, at 3), the protections of the oath and cross-examination will provide them with the tools necessary to resolve those issues. With videoconferencing, a jury will also be able to observe the witness’ demeanor and evaluate his credibility in the same manner as traditional live testimony. Indeed, one judge who presided over two hearings using videoconferencing has concluded that “there is no practical difference between live testimony and contemporaneous video transmission.” Swedish Match, 197 F.R.D. at 2; see also Scott Timber, 2010 WL 2947090, at *1 (observing that videoconferencing does not have a “significantly adverse effect” on factfinder’s ability to make credibility determinations).

Plaintiffs’ motion is not limited to the Honduran Plaintiffs; it requests an order permitting contemporaneous transmission of testimony for all Plaintiffs “outside a 100 mile radius of this Court.” (Paper 70-2). Although Plaintiffs have shown good cause as to the Honduran Plaintiffs, good cause has not been shown as to the remaining Plaintiffs. Plaintiffs do not address the Plaintiff residing in Richmond, Virginia anywhere in the motion papers, and the court cannot discern any reason why the Richmond Plaintiff would be unable to attend. The court is also unconvinced that the financial expense of travelling from Tennessee merits videoconferencing for that witness. Therefore, Plaintiffs’ motion will be denied as to those two witnesses.

In sum, Plaintiffs have shown good cause for contemporaneous transmission of the testimony of those Plaintiffs currently residing in Honduras. Those Plaintiffs are Marvin A. Mejia, Jesus Orellana, Victor Perez, Juan Pineda Gonzalez, Josue Roberto Pineda, Nery Armando Pineda, and Oscar Pineda. The Plaintiffs have not shown good cause as to any other Plaintiff.”

Not discussed here, the Court also denied Defendants’ motion for summary judgment based upon the plaintiffs prior settlement of a portion of their claims with some of the co-defendants.

To read the entire opinion, click here.

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