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Black v. Dmno, LLC

United States District Court, E.D. Louisiana

July 30, 2018

JAMES BLACK, ET AL., Plaintiffs
v.
DMNO, LLC, ET AL., Defendants

         SECTION: “E”

          ORDER AND REASONS

          SUSIE MORJGAN UNITED STATES DISTRICT JUDGE.

         Before the Court is the Parties' Joint Motion to Approve the Settlement and to Dismiss Plaintiffs Mark Gandy; Ashley Newton; David Pierce-Feith; Austin Lane; Patrice Jones; Erin Lawrence; Zachary Adams; Asaria Crittenden; Elizabeth Kuzmovich; Larry Hunt, Jr.; and Carlos Ayestas' claims with prejudice.[1] For the reasons that follow, the motion is GRANTED.

         BACKGROUND

         Plaintiffs filed this collective action, individually and on behalf of all others similarly situated, on March 31, 2016.[2] Plaintiffs allege Defendants DMNO, LLC; Doron Moshe Rebi-Chia; Itai Ben Eli; and Itamar Levy (collectively “Doris Metropolitan”) violated the Fair Labor Standards Act, 29 U.S.C. § 201 by, inter alia: (1) paying its servers $2.15 per hour instead of the national minimum wage of $7.25 per hour, claiming a tip credit, but requiring the servers to participate in a tip pool that included managers;[3] (2) failing to pay Plaintiffs one and one half times their hourly rate for the hours they work in excess of forty hours per week;[4] and (3) requiring Plaintiffs to attend mandatory Monday meetings, without paying Plaintiffs an hourly wage.[5]

         The Court certified the collective class on June 1, 2018.[6] The class includes those “employed as a server or assistant server at Doris Metropolitan, paid less than $7.25 per hour in direct cash wages (e.g., you were paid $2.13/hour), and you were required to tip out a portion of your tips to managers and/or owners/managers.”[7]

         On June 4-5, 2018, the Court held a two-day bench trial.[8] During the trial, the parties reached a stipulation with respect to: (1) Defendants' liability regarding payment for mandatory Monday meetings and to damages in the amount of $1, 124.44; (2) Defendants' liability regarding the overtime claims and to damages in the amount of $443.45; and (3) with respect to the damage calculation only, the parties stipulated that, in the event the Court find Defendants liable, Defendants would be liable for “damage amounts regarding the unpaid minimum wage claims in the amount of $87, 765.98 for a 2 year look back period and $85, 451.31 for a 3 years look back period.”[9]

         On July 20, 2018, following the trial, but before the Court's ruling, the Parties jointly moved to approve the proposed settlement agreement and dismiss Plaintiffs' remaining claims with prejudice.[10]

         STANDARD OF LAW

         The Court “must approve any settlement reached by the parties which resolves the claims in this action brought under [29 U.S.C. § 216(b)].”[11] “In order to approve a settlement proposed by an employer and employees of a suit brought under the FLSA and enter a stipulated judgment, a court must determine that the settlement is a fair and reasonable resolution of a bona fide dispute over FLSA provisions.”[12] The Court must scrutinize the proposed settlement agreement to verify that parties are not circumventing the “clear FLSA requirements” by entering into a settlement agreement.[13] When deciding whether to approve a proposed settlement, the Court must assess whether the proposed settlement is both (1) the product of a bona fide dispute over the FLSA's provisions and (2) fair and reasonable.[14]

         ANALYSIS

         I. The Settlement is the Product of a Bona Fide Dispute

         When deciding whether a bona fide dispute exists, the Court considers whether there is a “genuine dispute as to the Defendant's liability under the FLSA, ”[15] as “[w]ithout a bona fide dispute, no settlement could be fair and reasonable.”[16] This is particularly true in an “FLSA [action because its provisions] are mandatory, and not subject to negotiation and bargaining between employers and employees.”[17]

         The Court finds a bona fide dispute exists between Plaintiffs and Defendants with regard to whether Defendants violated the FLSA. Numerous matters are currently in dispute, including whether Plaintiffs were properly paid regular and overtime compensation, whether Defendants properly claimed a tip credit, and whether Defendants maintained accurate employment and payroll records. During the trial of this matter, the parties offered various witnesses and substantial evidence into the record in support of their respective positions. The Court finds this sufficient to conclude that, in this case, there was “both aggressive prosecution and strenuous defense” to prove a bona fide dispute.[18]

II. The Settlement is Fair and Reasonable

         In determining whether a negotiation is fair and reasonable under the FLSA, courts are guided by Reed v. General Motors Corporation, in which the Fifth Circuit enumerated factors to determine whether a settlement is fair in a class action under Rule 23 of the Federal Rules of Civil Procedure.[19] Courts, however, “adopt or vary these factors in their application in light of the special role of the Court in settlement of FLSA claims.”[20] There are six factors: (1) the existence of fraud or collusion behind the settlement; (2) the complexity, expense, and likely duration of the litigation; (3) the stage of the proceedings and the amount of discovery completed; (4) the probability of the plaintiffs' success on the merits; (5) the range of possible recovery; and (6) the opinions of class counsel, class representatives, and absent class members.[21]

         A. Application of the Factors

         1. The existence of fraud or collusion behind the settlement

         With respect to the “fraud or collusion” factor, there are several presumptions that guide a court's determination of whether a settlement is fair and reasonable. “[T]here is a strong presumption in favor of finding a settlement fair, ”[22] and, absent evidence to the contrary, there is a presumption that no fraud or collusion occurred between counsel.[23]In light of these presumptions, however, “it is clear that the court should not give rubber-stamp approval.”[24] The Court has found no indication of fraud or collusion. The Parties have engaged in discovery, motions practice, and negotiations to resolve this matter. The case proceeded to trial, where both sides presented witnesses and evidence. This factor indicates the settlement is fair and reasonable.

         2. The complexity, expense, and likely duration of the litigation

         The instant case has been pending for more than two years. Although the discovery period concluded on March 27, 2018, [25] and the Court heard evidence at a two-day bench trial on which the Court has not yet ruled, [26] there remain numerous unresolved issues. For example, the Court has not yet issued its findings of fact and conclusions of law with respect to whether Doris Metropolitan's practice of including managers in the tip pool violates the FLSA, and, if so, whether that violation was willful. The Court finds that the unresolved issues and the complexity of the litigation indicate the settlement is fair and reasonable.

         3. The stage of the proceedings and the amount of discovery completed

         A court will consider how much formal discovery has been completed for two reasons: (1) “extensive discovery [by the parties indicates] a good understanding of the strengths and weaknesses of their respective cases and hence that the settlement's value is based upon such adequate information, ” and (2) “full discovery demonstrates that the parties have litigated the case in an adversarial manner and . . . therefore . . . settlement is not collusive but arms-length.”[27] The lack of much formal discovery is not necessarily ...


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