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Michael J. Davis, and All Others Similarly Situated v. J.P. Morgan Chase & Co.

October 11, 2011


The opinion of the court was delivered by: David G. Larimer United States District Judge


This action was brought by five employees of J.P. Morgan Chase & Co. ("Chase"), on behalf of a class of persons, composed generally of persons who were employed by Chase in certain capacities during a certain time period, to recover unpaid overtime wages under the Fair Labor Standards Act ("FLSA") and New York state law. On April 6, 2011, the Court issued a Decision and Order, 775 F.Supp.2d 601, familiarity with which is assumed, preliminarily approving the parties' settlement of plaintiffs' claims, conditionally certifying a class for settlement purposes, and approving a notice of the proposed settlement to be sent to class members. The Court also scheduled a fairness hearing on July 21, 2011 for the purposes of determining the fairness, adequacy, and reasonableness of the settlement, fixing the amount of attorney's fees payable to class counsel, and hearing any objections to the proposed settlement.

The Court held the fairness hearing as scheduled on July 21. Counsel for plaintiffs and defendant both appeared, as did counsel for the three class members who have filed objections to the proposed settlement ("objectors"). Having considered the submissions and arguments of both sides as well as those of the objectors, I conclude that the proposed settlement is fair and adequate, and I approve the proposed settlement.


I. Approval of Class Action Settlements: General Principles

Federal Rule of Civil Procedure 23(e)(2) provides that "the court may approve [a settlement] ... only after a hearing and on finding that the settlement ... is fair, reasonable, and adequate." Central States S.E. and S.W. Areas Health and Welfare Fund v. Merck-Medco Managed Care, L.L.C., 504 F.3d 229, 247 (2d Cir. 2007) (internal quote omitted). The Court of Appeals for the Second Circuit "ha[s] have recognized a presumption of fairness, reasonableness, and adequacy as to the settlement where 'a class settlement [is] reached in arm's-length negotiations between experienced, capable counsel after meaningful discovery.'" McReynolds v. Richards-Cantave, 588 F.3d 790, 803 (2d Cir. 2009) (quoting Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 116 (2d Cir.), cert. denied, 544 U.S. 1044 (2005). "Such a presumption is consistent with the 'strong judicial policy in favor of settlements, particularly in the class action context.'" McReynolds, 588 F.3d at 803 (quoting Wal-Mart Stores Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 116 (2d Cir. 2005)). "A court determines a settlement's fairness by looking at both the settlement's terms and the negotiating process leading to settlement." Wal-Mart, 396 F.3d at 116 (citing D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001)). In other words, the court should consider both the substantive and the procedural fairness of the settlement. McReynolds, 588 F.3d at 803-04.

With respect to procedural fairness, "a District Court reviewing a proposed settlement 'must pay close attention to the negotiating process, to ensure that the settlement resulted from arm's-length negotiations and that plaintiffs' counsel ... possessed the [necessary] experience and ability, and have engaged in the discovery, necessary to effective representation of the class's interests.'" McReynolds, 588 F.3d at 804 (quoting D'Amato, 236 F.3d at 85).

Concerning substantive fairness, the Second Circuit has instructed district courts to consider nine specific factors:

(1) the complexity, expense and likely duration of the litigation; (2) the reaction of the class to the settlement; (3) the stage of the proceedings and the amount of discovery completed; (4) the risks of establishing liability; (5) the risks of establishing damages; (6) the risks of maintaining the class action through the trial; (7) the ability of the defendants to withstand a greater judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.

McReynolds, 588 F.3d at 804 (quoting City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974), abrogated on other grounds by Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000)); accord D'Amato, 236 F.3d at 86.

In deciding whether a settlement should be approved, the court must also keep in mind that its role is circumscribed. The Court may approve or reject the settlement, but it "does not have the authority to 'delete, modify or substitute certain provisions.'" Californians for Disability Rights, Inc. v. California Dep't of Transp., No. C 06-5125, 2010 WL 2228531, at *2 (N.D.Cal. June 2, 2010) (quoting Hanlon v. Chrysler Corp., 150 F.3d 1011, 1026 (9th Cir. 1998)). If the court finds one or more provisions particularly objectionable, the court may advise the parties that it will not approve the settlement unless the offending provisions are modified or deleted, see Evans v. Jeff D., 475 U.S. 717, 726-27 (1986), but the court may not take it upon itself to rewrite the agreement, nor may it force the parties to accept settlement terms to which they have not agreed. Id. at 726; In re Agent Orange Product Liability Litigation, 821 F.2d 139, 144 (2d Cir. 1987).

The court's task, then, is simply to decide whether the settlement agreement as written is fair, reasonable, and adequate, not whether the parties or the court could conceivably have come up with a "better" agreement. See In re Consol. Litigation, No. C09-45, 2011 WL 744664, at *4 (W.D.Wash. Feb. 23, 2011) ("It is not the court's role to design a better settlement for the parties"); Evansville Greenway and Remediation Trust v. Southern Ind. Gas and Elec. Co., Inc., No. 3:07-CV-66, 2010 WL 3781565, at *1 (S.D.Ind. Sept. 20, 2010) ("It is not the court's function to determine whether the proposal is the best possible settlement that could have been obtained or one which the court itself might have fashioned") (internal quote omitted); Ball v. AMC Entertainment, Inc., 315 F.Supp.2d 120, 129 (D.D.C. 2004) ("when determining whether to approve a proposed settlement, courts must determine whether the settlement is adequate and reasonable and not whether a better settlement is conceivable") (internal quote omitted).

II. Application to this Case

After applying this analytical framework here, I conclude that the proposed settlement is both procedurally and substantively fair, and that it should be approved. First, there is no indication that the settlement agreement is the product of anything other than arm's-length negotiations, and the objectors do not appear to contend otherwise. Based on my familiarity with this action and with the attorneys, the Court also finds that plaintiffs' counsel possess the requisite experience and ability, and have engaged in sufficient discovery, to effectively represent the class's interests. McReynolds, 588 F.3d at 804.

With respect to the Grinnell factors, this is a relatively complex FLSA class action that has already been litigated for some ten years, involving thousands of class members and extensive discovery. A trial in this case would likely be lengthy and complicated as well.

The reaction of the class to the proposed settlement also favors approval of the settlement. Of the roughly 3800 individuals who were sent notice of the settlement, only eleven opted out, and just three--Cynthia Cole, Darin Takahashi, and Steve McDaniel--have objected. Although those three objectors purport to speak for California class members generally, as explained below, it is still fair to say that there has been very little negative reaction by class members to the proposed settlement.

In considering the risks of establishing liability and damages, and of maintaining the class action through the trial, it is important to keep in mind that this Court's role is not to "decide the merits of the case or resolve unsettled legal questions." Carson v. American Brands, Inc., 450 U.S. 79, 88 n.14 (1981); accord In re Veeco Instruments Inc. Securities Litigation, No. 05 MDL 01695, 2007 WL 4115809, at *8 (S.D.N.Y. Nov. 7, 2007); Cinelli v. MCS Claim Services, Inc., 236 F.R.D. 118, 121 (E.D.N.Y. 2006); Frank v. Eastman Kodak Co., 228 F.R.D. 174, 185-86 (W.D.N.Y. 2005). Since the Court cannot "foresee with absolute certainty the outcome of the case," Frank, 228 F.R.D. at 186 (internal quote omitted), "the Court need only assess the risks of litigation against the certainty of recovery under the proposed settlement." In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 459 (S.D.N.Y. 2004).

This has been a vigorously contested case, involving extensive discovery, several amended complaints, a summary judgment decision in favor of defendants by this Court, an appeal to the Second Circuit, which reversed and remanded that decision, an unsuccessful certiorari petition to the Supreme Court by defendants, and finally court-ordered mediation, which ultimately led to the settlement now before me. See 569 F.Supp.2d 327 (W.D.N.Y. 2008), rev'd, 587 F.3d 529 (2d Cir. 2009), cert. denied, ___ U.S. ___, 130 S.Ct. 2416 (2010). Again, it is unnecessary to scrutinize the merits of the parties' positions, but it is fair to say that there would have been an uncertain outcome, and significant risk on both sides, had this case gone to trial.

While defendants could presumably withstand a greater judgment, I assign relatively little weight to that factor here. It is more important to assess the judgment in light of plaintiffs' claims and the other factors that the Court has discussed. Were a defendant's ability to withstand a greater judgment a critical factor, then only the most massive settlement awards could be deemed reasonable in cases against large corporations. See Castagna v. Madison Square Garden, L.P., No. 09--cv--10211, 2011 WL 2208614, at *7 (S.D.N.Y. June 7, 2011) ("a 'defendant's ability to withstand a greater judgment, standing alone, does not suggest that the settlement is unfair'") (quoting Frank v. Eastman Kodak Co., 228 F.R.D. 174, 186 (W.D.N.Y. 2005)) (additional internal quote omitted).

The final Grinnell factors are the range of reasonableness of the settlement fund in light of the best possible recovery, and in relation to a possible recovery in light of all the attendant risks of litigation. The settlement fund here totals $42 million, one third of which, $14 million, is to be paid out as class counsel's attorney's fees, leaving $28 million for the class members. Despite that substantial settlement, the objectors here have argued that the parties have failed to make any showing of what the settled claims would be worth if the case proceeded to trial.

In considering this factor, it is important to bear in mind that it will often be difficult if not impossible to calculate with any precision or accuracy what the best possible, or likely, recovery would be at trial. Numerous factors and contingencies may enter into that equation, preventing it from being reduced to a simple formula. See In re Metlife Demutualization Litig., 689 F.Supp.2d 297, 340 (E.D.N.Y. 2010) ("The determination of a reasonable settlement is not susceptible of a mathematical equation yielding a particular sum but turns on whether ...

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