The opinion of the court was delivered by: John Gleeson, United States District Judge
AMENDED MEMORANDUM AND ORDER
Plaintiffs, six current and former parking garage managers for the defendant, Rapid Park Holding Corporation, brought this action on behalf of themselves and other garage managers employed by the defendant, claiming that they are owed overtime pay under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 216 et seq., and New York Labor Law. Both parties now seek approval of a class settlement under 29 U.S.C. § 216(b), which has been interpreted to require that plaintiffs opt into a class action alleging FLSA violations by affirmatively notifying the court of their intention to join the lawsuit.
Under the proposed settlement agreement, Rapid Park has agreed to pay $522,741.06 into a settlement fund. The 52 garage managers eligible to join the class may each make claims against the fund for 67 percent of their net unpaid overtime wages for the period from March 9, 2004 through March 11, 2010 if they choose to accept the settlement. Within 30 days of the expiration of the opt-in period, Rapid Park is obligated to deliver to class counsel the settlement check due to each class member; class counsel will mail the checks to the class members. If eligible class members choose to reject the settlement -- to opt out of the class -- Rapid Park retains the portion of the settlement fund those eligible class members would have been entitled to had they joined the class. If fewer than 37 eligible class members accept the settlement, Rapid Park has the option to repudiate the settlement agreement.
In addition, Rapid Park has agreed to pay class counsel Abdul Hassan a fixed sum of $258,000 for fees and expenses if the settlement is executed, regardless of the number of eligible class members who accept the settlement. If all 52 eligible class members accept the settlement, the payment will constitute nearly 33.3 percent of the total paid by Rapid Park to settle the action.
In other words, Rapid Park has agreed to pay a total of up to $780,741.06, of which, assuming all of that money is paid, class counsel will receive almost 33.3 percent. Under the proposed settlement, if fewer than all eligible class members (but more than 36) opt in, (1) Rapid Park's total payout will go down, (2) each participating class member's settlement share will remain fixed, and (3) class counsel's fee as a percentage of Rapid Park's total payout will rise. As discussed below, I condition my approval of the settlement on modifications that will affect only (2) and (3), i.e., if fewer than all (but more than 36) eligible class members opt in, each participating class member's settlement share will increase and class counsel's fee will remain 33.3 percent of Rapid Park's total payout.
The Fair Labor Standards Act permits one or more employees to bring an action for unpaid wages and other relief on behalf of themselves and other employees "similarly situated" as long as each plaintiff "gives his consent in writing to become such a party and such consent is filed in the court in which the action is brought." 29 U.S.C. § 216(b); see De Asencio v. Tyson Foods, Inc., 342 F.3d 301, 306 (3d Cir. 2003)(construing § 216(b) as requiring that plaintiffs affirmatively opt in to class actions under FLSA). Plaintiffs can satisfy the requirement that the class be composed of "similarly situated" employees by making "a modest factual showing sufficient to demonstrate that they and potential plaintiffs together were victims of a common policy or plan that violated the law." Iglesias-Mendoza v. La Bell Farm, Inc., 239 F.R.D. 363, 367 (S.D.N.Y. 2007) (internal quotation marks omitted). All of the plaintiffs and potential plaintiffs here are or were garage managers for Rapid Park who were not paid overtime wages. Consequently, they are "similarly situated" for the purpose of the statute, a characterization that Rapid Park has stipulated to in the proposed settlement agreement.
Although the proposed settlement and the benefits it provides to the putative class appear generally acceptable, I find that some aspects of the settlement itself and the notice to the class warrant modification. My approval of the proposed settlement is contingent upon the assent of both parties to the modifications I describe below.
It is well established that "an attorney [who] succeeds in creating a common fund from which members of a class are compensated for a common injury" is "entitled to a reasonable fee -- set by the court -- to be taken from the fund." Goldberger v. Integrated Resources, Inc., 209 F.3d 43, 47 (2d Cir. 2000). In determining a reasonable fee, the court may properly employ either the lodestar or percentage of the recovery methods of calculation. See id. Under the first approach, the court decides the number of hours reasonably billed to the class and the appropriate hourly rate, then multiplies those figures to calculate the lodestar. See id. The court may, in its discretion, apply a multiplier to the lodestar to account for less objective factors, such as the risk of the litigation and performance of counsel. See id. Under the second approach, the court determines the appropriate fee as a percentage of the common fund, after accounting for more and less objective factors. See id. "[W]hether calculated pursuant to the lodestar or the percentage method, the fees awarded in common fund cases may not exceed what is 'reasonable' under the circumstances." Id.
Here, counsel's fee constitutes almost 33.3 percent of the common fund, assuming that all eligible class members accept the settlement. At this percentage, the size of the fee is not in itself unreasonable. It is comfortably within the range typically charged as a contingency fee by plaintiffs' lawyers, even considering that the settlement was reached three months after the action was filed and without any motion practice. See id. at 48 (noting that the lodestar method discourages early settlement). Rather, what causes me concern is that the fee remains static, and thus rises as a percentage of the common fund, to the extent eligible class members do not opt into the settlement. The rationale for deducting the class counsel's fee from the common fund is an equitable one: "It prevents unjust enrichment of those benefiting from a lawsuit without contributing to its cost." Id. at 47. That principle does not justify enforcing a fee computed on the premise that all eligible class members will accept the settlement when in fact some will likely reject the settlement and its benefits, and the class members who do accept the settlement are not recovering one hundred percent of their unpaid wages.
For this reason, I condition my approval of the settlement on the parties' agreement that class counsel will be paid 33.3 percent of the common fund -- that is, the attorney's fee should be set at 33.3 percent of the sum of (1) the total of opting-in class members' Settlement Shares, as defined in paragraph 3(a) of the proposed settlement agreement, and (2) $258,000. If the remaining 66.7 percent of the common fund exceeds the total of opting-in class members' Settlement Shares, ...