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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.
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.
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.”
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.
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.
M.D.Fla.: Approval of Settlement Agreement Rejected, Where “Pervasive” General Release Makes Evaluation For Fairness “Elusive”
Moreno v. Regions Bank
As reported here several months ago, Judge Steven Merryday, in the Middle District of Florida rejected FLSA settlement agreements containing confidentiality provisions, as well as those containing non-disparagement agreements, in a set of well-reasoned opinions, discussing their conflict with the remedial purposes behind the Fair Labor Standards Act. Continuing his critique of what, for better or worse had largely become common practice in the resolution of FLSA cases, he has rejected a recent Motion for Approval, because the Settlement Agreement contained a “pervasive” general release of all claims known and unknown, without the exchange of any value for same, thus making an evaluation of the agreement for fairness “elusive” in his words.
The settlement agreement contained the following general release:
“In exchange for the Consideration, as set forth in Paragraph 2 . . ., Plaintiff for himself, attorneys, heirs, executors, administrators, successors and assigns hereby waives and releases, knowingly and willingly, Defendant, its heirs, executors, administrators, legal representatives, parent corporations, predecessor companies, insurers, past, present and future divisions, subsidiaries, affiliates and related companies and their successors and assigns and all past, present and future directors, officers, employees and agents of these entities, personally and as directors, officers, employees and agents, (“Released Parties”) from any and all claims of any nature whatsoever Plaintiff has arising out of his employment with Defendant, known or unknown, including but not limited to, any claims Plaintiff may have under federal, state or local employment, labor, or anti-discrimination laws, statutes and case and law and specifically claims including, but not limited to, any claims or allegations contained in or relating to the Lawsuit, arising under the federal Age Discrimination in Employment Act, The Older Worker Benefit Protections Act, the Civil Rights Acts of 1866 and 1964, as amended, the Americans with Disabilities Act, the Employment Retirement Income Security Act of 1974 (“ERISA”), the Family and Medical Leave Act, the Rehabilitation Act of 1973, the Fair Labor Standards Act, the Labor-Management Relations Act, the Equal Pay Act and the Worker Adjustment Restraining and Notification Act, the Florida Civil Rights Act, the Florida AIDS Act, the Florida Equal Pay Law, the Florida Wage Discrimination Law, the Florida Law Prohibiting Discrimination on the Basis of Sickle Cell Trait, the Florida Constitution, Florida common law and any and all other applicable state, federal, county or local ordinances, statutes or regulations, including claims for attorneys’ fees. Furthermore, if any charge of discrimination is brought on Plaintiff’s behalf, Plaintiff dismisses any claim to any benefits as a result of such charge. Plaintiff agrees that he will not apply for any positions with any of the Released Parties at any rime. Plaintiff has been fully compensated for his claims under the Fair Labor Standards Act. Plaintiff also represents and certifies that he has received full payment for all hours worked while employed by Defendant, including overtime hours, bonuses and vacation pay, and has received all benefits and leaves available or requested under the Family Medical Leave Act. Finally, Plaintiff has not suffered any workplace injuries while working for Defendant.”
Holding that such a “pervasive” general release in an FLSA compromise is, as a matter of law, unfair to the Plaintiff-employee, the Court reasoned:
“In the typical settled case, the parties (especially the defendant) design for a complete disengagement from each other, and a comprehensive settlement coupled with a general release usually accomplishes the intended effect. The district judge often remains unaware of the terms of the compromise, and the post-settlement dismissal of the action implies neither approval nor disapproval of any aspect of the parties’ settlement agreement. In these cases, the reciprocal, general release remains an accepted and common litigation practice. Although this disengagement almost uniformly accompanies the settlement of the typical civil action, settlement of an FLSA action requires judicial approval. A pervasive release in an FLSA settlement introduces a troubling imponderable into the calculus of fairness and full compensation.
In nearly every case, the pervasive release confers no benefit on the employer because the employee has no other claim. In the typical case, the release is valueless—the employer receives nothing of monetary value, and the employee relinquishes nothing of monetary value. The general release is usually an instrument to ensure peace of mind to the employer’s otherwise worried mind. In the occasional case, however, an unknown claim accrues to the employee. For example, suppose an employee of a widget factory sues the employer for unpaid wages, the parties settle for $500.00, and the employee agrees to a pervasive release. Years later, the employee discovers that a chemical used to manufacture widgets has caused serious injury. In this instance, the employee’s release of the unknown claim (if effective) both confers an undeserved and disproportionate benefit on the employer and effects an unanticipated, devastating, and unfair deprivation on the employee. The release absolves the employer of an ominous contingent liability in exchange for $500.00 (which, in any event, the employer unconditionally owed to the employee).
An employee who executes a broad release effectively gambles, exchanging unknown rights for a few hundred or a few thousand dollars to which he is otherwise unconditionally entitled. In effect, the employer requests a pervasive release in order to transfer to the employee the risk of extinguishing an unknown claim. In the language of Hydradry, a pervasive release is a “side deal”4 in which the employer extracts a gratuitous (although usually valueless) release of all claims in exchange for money unconditionally owed to the employee. (If an employee signs a pervasive release as part of a “side deal” and later discovers a valuable but released claim, the employee perhaps looks for compensation from the attorney who advise the employee to grant the release.) Although inconsequential in the typical civil case (for which settlement requires no judicial review), an employer is not entitled to use an FLSA claim (a matter arising from the employer’s failing to comply with the FLSA) to leverage a release from liability unconnected to the FLSA.
Lynn’s Food’s imposition of the duty to scrutinize an FLSA compromise necessarily implies the court’s duty to scrutinize the claims and the defenses presented by the pleadings. An employee seeking to vindicate his FLSA rights often desperately needs his wages, and both the employee and the employer want promptly to resolve the matter. In a claim for unpaid wages, each party estimates the number of hours worked and the plaintiff’s wage (i.e., establishes a range of recovery), and the court evaluates the relative strength of the parties’ legal argument asserted in the particular case. However, in an FLSA action, neither party typically attempts to value the claims not asserted by the pleadings but within the scope of a pervasive release—that is, those “known and unknown,” or “past, present, and future,” or “statutory or common law,” or other claims included among the boiler plate, but encompassing, terms unfailingly folded into the typical general release.6 Absent some knowledge of the value of the released claims, the fairness of the compromise remains indeterminate. See, e.g., Alba Conte & Herbert B. Newberg, Newberg on Class Actions § 12:15, at 313 (4th ed. 2002) (“Of course, in order independently and objectively to evaluate the adequacy of the entire settlement . . ., the court must possess sufficient evidence or information to weigh the strengths and weaknesses of the additional . . . claims.”).
In sum, a pervasive release in an FLSA settlement confers an uncompensated, unevaluated, and unfair benefit on the employer. In the typical case, no unknown claim accrues to the employee and the pervasive release effects no change to the legal relationship of the parties. In other words, in the typical case, the pervasive release is superfluous and can be stricken without objection from either the employee or the employer. In the occasional case, an unknown claim accrues to the employee and the employer receives a release from a contingent liability in exchange for a modest payment of wages unconditionally owed to the employee. The employer who obtains a pervasive release receives either nothing (if no claim accrues) or a windfall at the expense of the unlucky employee. In either instance, the employee bears the risk of loss, and the employer always wins—a result that is inequitable and unfair in the
circumstance. The employer’s attempt to “play with house money” fails judicial scrutiny.
Lynn’s Food requires more than a “rubber stamp” of an FLSA compromise; the district court must assure the “fairness” of the proposed compromise. Although the parties’ desire for complete “disengagement” is understandable, a pervasive release in settlement of an FLSA action is both unfair and incapable of valuation. A compromise of an FLSA claim that contains a pervasive release of unknown claims fails judicial scrutiny.”
Click here to read the entire Moreno v Regions Bank opinion.
Today’s Boston Globe reports that:
“Beth Israel Deaconess Medical Center and other CareGroup Inc. affiliates have agreed to settle a class-action lawsuit against the hospital chain that alleges workers were not paid for working through lunch breaks or beyond their scheduled shifts. The settlement, if given court approval, will cover as many as 9,000 current and former CareGroup employees.
CareGroup Inc. and its affiliates — Beth Israel, Beth Israel Deaconess-Needham, Mount Auburn Hospital, and New England Baptist Hospital — will pay up to $8.5 million. The settlement will include payments to cover back wages. CareGroup and its affiliates deny any wrongdoing.”
To read the entire story, click here.
Reuters is reporting that Wal-Mart has agreed to pay up to $86 Million to settle a class-action lawsuit accusing it of failing to pay vacation, overtime and other wages to thousands of former workers in California.
According to Reuters, “[a]bout 232,000 people will share in the settlement, which was disclosed on Tuesday in a federal court filing.
It requires a minimum payout of $43 million, and “far exceeds other recent settlements” involving Wal-Mart, the filing shows. The accord requires court approval.”
To read the entire story click here.
W.D.Va.: Motion For Approval Of Settlement Agreement Denied, In Part, Because Of Impermissible Confidentiality Language
Poulin v. General Dynamics Shared Resources, Inc.
In a continuing trend, the Court, on the parties’ Joint Motion for approval of settlement, denied same, in part, due to the inclusion of confidentiality language in the proposed settlement agreement. Initially, the Court denied the Motion due to the parties failure to lay out the basis for Plaintiff’s attorney’s fees. However, the Court went on to add an alternative ground for its denial, citing to recent case law, as discussed here:
“Finally, the Settlement Agreement, as presently drafted, contains a confidentiality agreement. This, in pertinent part, provides that “Plaintiff agrees that he shall not disclose the fact of, and/or the terms and conditions of this Settlement Agreement and General Release except that Plaintiff may state that the Poulin action has been dismissed and may disclose the terms and conditions of this Settlement Agreement” under limited enumerated circumstances. Under the Settlement Agreement, “Plaintiff further agrees and acknowledges that confidentiality is a material term of this Agreement and any breach of the confidentiality provisions herein will be considered a material breach of the terms of this Agreement and he will be required to reimburse Defendant for any and all compensation and benefits paid to him or for his benefit under the terms of this Agreement.” Settlement Agreement and General Release, ¶ 13. Further, it provides that the Settlement Agreement, “as executed by the Parties, will be filed under seal.” Id. at ¶ 5.
The Court cannot approve these terms of the Settlement Agreement. The provision that “confidentiality is a material term of [the] Agreement” is in conflict with the Court’s opinions dated March 26, 2010 (docket no. 20) and April 23, 2010 (docket no. 23), which held that the parties had not identified significant interests to outweigh the public interest in access to judicial records, and required the proposed Settlement Agreement be made publicly available on the docket. Furthermore, a confidentiality provision in an FLSA settlement agreement undermines the purposes of the Act, for the same reasons that compelled the Court to deny the parties’ motion to seal their Settlement Agreement. See e.g., Valdez v. T.A.S. O. Prop., Inc., No. 8:09-cv-2250, 2010 WL 1730700, at *1 (M .D.Fla. Apr. 28, 2010); Dees v. Hydradry, Inc., — F.Supp.2d —-, 2010 WL 1539813, at *9 (M.D.Fla.2010) (“A confidentiality provision in an FLSA settlement agreement both contravenes the legislative purpose of the FLSA and undermines the Department of Labor’s regulatory effort to notify employees of their FLSA rights.”). Finally, the confidentiality provisions are likely unenforceable in light of the public filing of the Settlement Agreement. See e.g., Head v. v. & L Services III, Inc., No. 6:08-cv-917, 2009 WL 3582133, at *3 (M.D.Fla. Oct. 27, 2009) (noting that “the settlement agreements contain terms that this Court would not approve, such as the confidentiality provisions, which are partially unenforceable in light of the public filing of the agreements”). The Court cannot approve of a settlement agreement which includes these terms.”
It appears that the public policy grounds behind disallowing confidential settlement agreements in FLSA cases is beginning to pick up speed.
M.D.Fla.: Approval Of Confidential Settlement In FLSA Case Rejected; Confidentiality Frustrates Remedial Purposes Of The FLSA
Dees v. Hydradry, Inc.
This case was before the Court on the parties’ Joint Stipulation of Dismissal. Although, the Court noted that, “a private settlement and stipulation for dismissal ends the typical case without judicial intervention, the Eleventh Circuit requires the district court to review the settlement of an FLSA claim. See Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350 (11th Cir.1982).”
As part of a lengthy discussion of the remedial purposes behind the FLSA, the history of the FLSA and the applicable case law regarding waiver and settlements, and the role of the Court in the settlement process, the Court reasoned that no such resolutions of FLSA cases should involve confidentiality provisions, because such provisions contravene the public policy behind the FLSA’s implementation.
“ii. A Confidentiality Provision Contravenes FLSA Policy
Because of worry that settling with one employee will encourage other employees to assert FLSA rights, the employer may seek to maintain the confidentiality of the settlement agreement. But a confidentiality provision furthers resolution of no bona fide dispute between the parties; rather, compelled silence unreasonably frustrates implementation of the “private-public” rights granted by the FLSA and thwarts Congress’s intent to ensure widespread compliance with the statute. To further Congress’s intent, the Department of Labor requires the employer of an employee covered by the FLSA to display conspicuously in the workplace a detailed notice of the employee’s FLSA rights. By including a confidentiality provision, the employer thwarts the informational objective of the notice requirement by silencing the employee who has vindicated a disputed FLSA right.
Furthermore, Section 15(a)(3) of the FLSA proscribes an employer’s retaliating against an employee for asserting rights under the FLSA. If an employee covered by a confidentiality agreement discusses the FLSA with fellow employees or otherwise asserts FLSA rights, the employer might sue the employee for breach of contract. The employer’s most proximate damages from the employee’s breach are the unpaid FLSA wages due other employees who learned of their FLSA rights from the employee who breached the confidentiality agreement. A confidentiality agreement, if enforced, (1) empowers an employer to retaliate against an employee for exercising FLSA rights, (2) effects a judicial confiscation of the employee’s right to be free from retaliation for asserting FLSA rights, and (3) transfers to the wronged employee a duty to pay his fellow employees for the FLSA wages unlawfully withheld by the employer. This unseemly prospect vividly displays the inherent impropriety of a confidentiality agreement in settlement of an FLSA dispute.
A confidentiality provision in an FLSA settlement agreement both contravenes the legislative purpose of the FLSA and undermines the Department of Labor’s regulatory effort to notify employees of their FLSA rights. “The statute was a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered the national health and efficiency and as a result the free movement of goods in interstate commerce.” Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 706-07 (1945). The district court should reject as unreasonable a compromise that contains a confidentiality provision, which is unenforceable and operates in contravention of the FLSA.”
Later in the opinion the Court discussed the issue of confidentiality in greater detail, reasoning that beyond evaluating a settlement for “reasonableness,” the Court has other functions when reviewing FLSA settlements, specifically to ensure that such settlements and records of same are available for public review:
“B. External Factors: Does the Compromise, Although Reasonable, Otherwise Frustrate Implementation of the FLSA
In evaluating a compromise, the district court should also consider an array of “external” or contextual factors pertinent to the statutory purpose of the FLSA. Compromise of a retrospective dispute may be permissible if, for example, the FLSA issue in a case is unresolvably close on the facts or the law or some extraordinary circumstance (say, a suddenly disabled claimant or an employer in liquidation) commends a speedy or certain resolution. On the other hand, several factors may commend rejecting a proposed compromise, including the presence of other employees situated similarly to the claimant, a likelihood that the claimant’s circumstance will recur, a history of FLSA non-compliance by the same employer or others in the same industry or geographic region, or the requirement for a mature record and a pointed determination of the governing factual or legal issue to further the development of the law either in general or in an industry or in a workplace. In all instances, the district court should faithfully execute the congressional mandate for “minimum wages, promptly paid … for the lowest paid segment of the nation’s workers.” D.A. Schulte v. Gangi, 328 U .S. 108, 116 (1946).
IV. The Effect of Judicial Review: “Confidential” FLSA Settlement Agreements and Public Access to Court Records
“Parties who settle a legal dispute rather than pressing it to resolution by the court often do so, in part anyway, because they do not want the terms of the resolution to be made public.” Jessup v. Luther, 277 F.3d 926, 928 (7th Cir.2002). See generally Laurie Kratzky Dore, Secrecy by Consent: The Use and Limits of Confidentiality in the Pursuit of Settlement, 74 Notre Dame L.Rev. 283 (1999). In an FLSA action, the employer worries that compromise with an employee who has vindicated a valuable FLSA right will inform and encourage other employees, who will vindicate their FLSA rights (or who will wrongly, but expensively for the employer, conclude that additional wages are due). Although perhaps both uncomfortable and expensive to an employer, vindication of FLSA rights throughout the workplace is precisely the object Congress chose to preserve and foster through the FLSA.
In the typical settled case, the district judge remains unaware of the terms of compromise, and the parties enforce the settlement agreement, if necessary, only through a separate action. The parties maintain the confidentiality of their compromise by submitting a stipulation for dismissal under Rule 41, Federal Rules of Civil Procedure. In an FLSA case, however, Lynn’s Food requires the parties to obtain judicial approval of the compromise. Forced to submit the agreement to the court after filing a motion for approval, the parties often seek to preserve the confidentiality of the compromise either by moving to submit the agreement under seal or by requesting an “in camera review” of the agreement.
In the typical FLSA case, however, neither attempt to conceal the compromise comports with the public’s right of access to a judicial proceeding, which right is “an essential component of our system of justice [and] instrumental in securing the integrity of the process.” Chicago Tribune Co. v. Bridgestone/Firestone, Inc., 263 F.3d 1304, 1311 (11th Cir.2001). The judge’s “approving” a settlement constitutes a “public act,” and the public “has an interest in knowing what terms of settlement a federal judge would approve.” Jessup, 277 F.3d at 929. As an active component of the judge’s decision, the settlement agreement is presumptively a public record. See Brown v. Advantage Eng’g, Inc., 960 F.2d 1013, 1016 (11th Cir.1992) (“Once a matter is brought before a court for resolution, it is no longer solely the parties’ case, but also the public’s case.”); Bank of Am. Nat’l Trust & Sav. Ass’n v. Hotel Rittenhouse Assocs., 800 F.2d 339, 343 (3d Cir.1986) (“[T]he common law presumption of access applies to motions filed in court proceedings and to the settlement agreement … filed and submitted to the district court for approval.”). The public enjoys the right both to attend a trial or hearing and to inspect and copy a judicial record.
The presumption that the record of a judicial proceeding remains public “is surely most strong when the ‘right at issue is of a ‘private-public character,’ as the Supreme Court has described employee rights under the FLSA.” Stalnaker, 293 F.Supp.2d at 1264 (quoting Brooklyn Savings Bank v. O’Neil, 324 U.S. 697, 708 (1945)). Sealing an FLSA settlement agreement between an employer and employee, reviewing the agreement in camera, or reviewing the agreement at a hearing without the agreement’s appearing in the record (in any event precluding other employees’ and the public’s access to, and knowledge of, the agreement) thwarts Congress’s intent both to advance employees’ awareness of their FLSA rights and to ensure pervasive implementation of the FLSA in the workplace.
Furthermore, before sealing a document, the district court must identify and articulate “an overriding interest based on findings that [a seal] is essential to preserve higher values and is narrowly tailored to serve that interest. The interest is to be articulated along with findings specific enough that a reviewing court can determine whether the [sealing] order was properly entered.” Press-Enterprise Co. v. Superior Court of California, 464 U.S. 501, 510 (1984). Preventing the employee’s co-workers or the public from discovering the existence or value of their FLSA rights is an objective unworthy of implementation by a judicial seal, which is warranted only under “extraordinary circumstances” typically absent in an FLSA case. Absent an “overriding interest” in the preservation of some “higher value,” the court should not abide the parties’ request for a seal
The parties’ stipulation to seal the agreement (and the absence of a third-party objection to sealing the compromise agreement) fails to justify a seal. In Citizens First National Bank of Princeton v. Cincinnati Insurance Co., 178 F.3d 943, 944-45 (7th Cir.1999), Judge Posner states:
The parties to a lawsuit are not the only people who have a legitimate interest in the record compiled in a legal proceeding…. [T]he public at large pays for the courts and therefore has an interest in what goes on at all stages of a judicial proceeding. That interest does not always trump the property and privacy interests of the litigants, but it can be overridden only if the latter interests predominate in the particular case, that is, only if there is good cause for sealing a part or the whole of the record in that case. The determination of good cause cannot be elided by allowing the parties to seal whatever they want, for then the interest in publicity will go unprotected unless the media are interested in the case and move to unseal. The judge is the primary representative of the public interest in the judicial process and is duty-bound therefore to review any request to seal the record (or part of it). He may not rubber stamp a stipulation to seal the record. See also Wilson v. American Motors Corp., 759 F.2d 1568, 1571 (11th Cir.1985) (“[I]t is the rights of the public, an absent third party, which are preserved by prohibiting closure of public records….”).
Reviewing an FLSA settlement agreement under seal conflicts with the public’s access to judicial records, frustrates appellate review of a judge’s decision to approve (or reject) an FLSA compromise, contravenes congressional policy encouraging widespread compliance with the FLSA, and furthers no judicially cognizable interest of the parties. A proper consideration of the intent of Congress and the public’s interest in judicial transparency permits only one method to obtain judicial review of a compromise of an FLSA claim. The parties must file the settlement agreement in the public docket. See Stalnaker, 293 F.Supp. at 1262-64; see also Hanson v. Wells Fargo Bank, No. 08-80182-CIV, 2009 WL 1490582 (S.D.Fla. May 26, 2009) (requiring the parties to submit an unsealed copy of their settlement agreement).
To ensure that “all our able-bodied working men and women [receive] a fair day’s pay for a fair day’s work,” the FLSA requires a covered employer to pay each employee a minimum wage and overtime. To combat the typically unequal bargaining power between employer and employee, Congress prohibits a private agreement altering FLSA rights. An employee entitled to FLSA wages may compromise his claim only under the supervision of either the Department of Labor or the district court.
If presented in an FLSA action with a notice of settlement, a stipulation for dismissal, an offer of judgment, or the like, the judicial approval required by Lynn’s Food and the public’s right of access to a judicial proceeding compel the parties to file their agreement in the public docket of the district court. As an initial matter, the district court must determine whether the employee purports to compromise an FLSA right. If judicial scrutiny confirms that the parties’ settlement involves no compromise, the district court should approve the settlement and dismiss the case (if the employer has paid) or enter judgment for the employee (if the employer has not paid). If the parties’ proposed resolution requires the employee to compromise an FLSA right, the district court must scrutinize the compromise for “fairness.”
An employee’s right to a minimum wage and overtime is unconditional, and the district court should countenance the creation of no condition, whether confidentiality or any other construct, that offends the purpose of the FLSA. An employer is obligated unconditionally to pay a minimum wage and overtime to the complainant and his fellow employees; the district court should not become complicit in any scheme or mechanism designed to confine or frustrate every employee’s knowledge and realization of FLSA rights. Accordingly, the district court evaluating an FLSA compromise should examine first the “internal” fairness of the compromise, including the existence of a bona fide dispute and the absence of a prospective waiver, confidentiality agreement, or other provision antithetical to the FLSA. If the proposed compromise is fair and reasonable to the employee, the court should consider whether any other external factor, such as the need to resolve definitively an issue affecting similarly situated employees, recommends rejecting the compromise. If the compromise is fair and reasonable to the employee and furthers the implementation of FLSA rights in the workplace, the court should approve the compromise.
For the reasons stated in this order, the parties’ stipulation of dismissal is rejected.”
Needless to say, it will be interesting to see if other court’s follow the Court’s reasoning.
EDITOR’S NOTE: Less than a week after this opinion, Judge Merryday, who authored the opinion, went a step further in another case, holding that settlement agreements in FLSA cases that prohibit an employee from disparaging his or her employer are equally inappropriate. See McGowan v. CSPS Hotel, Inc., 8:09-cv-02311-SDM-MAP (M.D.Fla. Apr.29, 2010).
W.D.Mich.: FLSA Permits Successful Plaintiff To Recover Costs Which Are ‘Normally Charged To A Fee-paying Client’ In Addition To Those Enumerated In § 1920
Carlson v. Leprino Foods Co.
This case was before the Court on both parties’ objections to the Report and Recommendation (R&R) issued by the Magistrate Judge regarding an award of fees and costs following the settlement of a collective action. Of note, the Plaintiffs objected to the R&R issued by the Magistrate Judge, because the Magistrate cut over $2,000 in miscellaneous costs Plaintiffs requested. The Court extensively discussed the award of the attorneys fees to the prevailing Plaintiffs and, as discussed here, reinstated the miscellaneous costs, opining that a prevailing Plaintiff in an FLSA case is entitled to recover those types of costs ‘normally charged to a fee-paying client,’ in addition to those enumerated in § 1920.
Specifically, discussing the award of costs, the Court reasoned:
“Finally, Plaintiffs object that the Magistrate Judge should not have deducted $2,343.45 in miscellaneous expenses from the total award of costs. (Pls.’ Objections to Report and Recommendation of Magistrate Judge, docket # 221, at 8.) The Court agrees. The Report and Recommendation states that Plaintiffs failed to describe these miscellaneous expenses with particularity and that the expenses therefore are not recoverable. (Report and Recommendation, docket # 219, at 12.) However, Plaintiffs described the expenses with particularity in Exhibit 2 of their original fee petition. (Br. in Support of Mot. for Attorneys’ Fees and Costs, docket # 196, Ex. 2.) The miscellaneous expenses identified include, without limitation, costs for travel, supplies, web maintenance, translations, and telephone service. (Id.) These are the sort of costs which are “normally charged to a fee-paying client.” See, e.g., Renfro v. Indiana Mich. Power Co., 2007 WL 710138 at *1 (W.D.Mich., Mar.6, 2007) (overruled on other grounds, 497 F.3d 573 (6th Cir.2007) (citations omitted)); Communities for Equity v. Mich. High School Athletic Ass’n, 2008 WL 906031 at *22-23 (W.D.Mich., Mar.31, 2008). The total award for costs to Plaintiffs should include the $2,343.45 for miscellaneous expenses.”