United States District Court, E.D. New York
January 16, 2015
ERNESTO BODON, KEVIN CURRY & DONNA ANNUNZIATO, individually and on behalf of other similarly situated persons, Plaintiffs,
DOMINO'S PIZZA, LLC, Defendant
For David Geronemus, Mediator, Ernesto Bodon, Plaintiff: Donald Harold Nichols, LEAD ATTORNEY, Nichols Kaster PLLP, Minneapolis, MN, USA; E. Michelle Drake, LEAD ATTORNEY, PRO HAC VICE, Paul J. Lukas, Nichols Kaster, PLLP, Minneapolis, MN, USA; George A. Hanson, LEAD ATTORNEY, PRO HAC VICE, Stueve Siegel Hanson LLP, Kansas City, MO, USA; Ilya I. Ruvinskiy, LEAD ATTORNEY, PRO HAC VICE, Weinhaus & Potashnick, St. Louis, MO, USA; Ashlea Schwarz, Stueve Siegel Hanson LLP, Kansas City, MO, USA; Mark A. Potashnick, PRO HAC VICE, Weinhaus & Potashnick, St. Louis, MO, USA.
For Kevin Curry, Plaintiff: Ashlea Schwarz, George A. Hanson, PRO HAC VICE, Stueve Siegel Hanson LLP, Kansas City, MO, USA; E. Michelle Drake, PRO HAC VICE, Donald Harold Nichols, Paul J. Lukas, Nichols Kaster PLLP, Minneapolis, MN, USA; Mark A. Potashnick, PRO HAC VICE, Ilya I. Ruvinskiy, Weinhaus & Potashnick, St. Louis, MO, USA.
For Donna Annunziato, individually and on behalf of others similarly situated, Plaintiff: George A. Hanson, PRO HAC VICE, Ashlea Schwarz, Stueve Siegel Hanson LLP, Kansas City, MO, USA; E. Michelle Drake, PRO HAC VICE, Donald Harold Nichols, Nichols Kaster PLLP, Minneapolis, MN, USA; Ilya I. Ruvinskiy, Weinhaus & Potashnick, St. Louis, MO, USA; Mark A. Potashnick, PRO HAC VICE, Weinhaus & Potashnick, St. Louis, MO, USA; Paul J. Lukas, Nichols Kaster, PLLP, Minneapolis, MN, USA.
For Domino's Pizza, LLC, Defendant: Aaron Warshaw, LEAD ATTORNEY, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., New York, NY, USA; David Simon Kurtzer-Ellenbogen, LEAD ATTORNEY, Williams and Connolly LLP, Washington, DC, USA; Anne Malinee, PRO HAC VICE, Williams & Connolly LLP, Washington, DC, USA.
REPORT AND RECOMMENDATION
ROANNE L. MANN, UNITED STATES MAGISTRATE JUDGE.
In this New York Labor Law class action, Kevin Curry and Donna Annunziato (collectively, " plaintiffs") reached an agreement with defendant Domino's Pizza, LLC (" defendant" or " Domino's") to resolve their lawsuit in its entirety on a class-wide basis. Currently pending before this Court, on referral from the Honorable Sandra L. Townes, is plaintiffs' unopposed motion seeking an order (1) granting final approval of the terms of the settlement; (2) directing distribution of the settlement proceeds in accordance with that settlement; and (3) dismissing the claims with prejudice. See Consent Motion for Settlement (Oct. 24, 2014) (" Pl. Mot."), Electronic Case Filing Docket Entry (" DE") #207. For the reasons set forth herein, the Court recommends that the District Court grant plaintiffs' motion; enter the requested order, with minor modifications as further explained below; and dismiss the claims with prejudice in accordance with the settlement.
In a prior opinion, this Court recommended that the District Court preliminarily approve the same settlement, see Bodon v. Domino's Pizza, LLC, No. 09-CV-2941 (SLT), 2014 WL 3605507 (E.D.N.Y. June 25, 2014), adopted, 2014 WL 3566076 (E.D.N.Y. July 18, 2014) (hereinafter, " R& R"); the factual background in the instant report and recommendation concerning the parties' request for final approval is drawn in large part from that prior opinion.
I. Litigation History
Plaintiffs initiated this action on July 9, 2009. See Id. at *1. They allege that, in violation of the New York Labor Law, Domino's (1) failed to provide services or allowances to employees for the laundering, cleaning, and maintenance of work uniforms; (2) made de facto deductions from employees' wages by requiring them to make certain uniform-related purchases; and (3) retained gratuities belonging to delivery drivers. See id. The first three years of the litigation involved discovery, successive rounds of motions to dismiss, and unsuccessful mediation efforts. See id.
On July 19, 2012, plaintiffs filed a motion seeking class certification under Rule 23 of the Federal Rules of Civil Procedure (" FRCP"). See Id. at *1. Judge Townes subsequently referred plaintiffs' motion for class certification to the undersigned magistrate judge for issuance of a report and recommendation. See id.
On February 6, 2014, this Court heard argument on plaintiffs' motion for class certification and conducted settlement discussions that resulted in a judicial recommendation of the key terms of a class-wide settlement. See Id. at *1. The parties accepted the Court's recommendation the following week and jointly drafted settlement papers with input from the Court. See id. Plaintiffs filed the instant motion for preliminary approval of the class settlement, along with a settlement agreement and additional exhibits, on May 16, 2014. See id. Subsequently, Judge Townes referred the motion to the undersigned magistrate judge for a report and recommendation. See id.
Following the referral, this Court reviewed the parties' settlement papers and expressed concerns about a few provisions. See Id. at *2. On June 13, 2014, plaintiffs filed an amended settlement agreement and revised notice forms. See id.
II. The Parties' Proposed Settlement
The amended settlement agreement executed by the parties provides for a monetary settlement, administered by an independent third party, to members of a settlement class including " all persons employed as a delivery driver or customer service representative ('CSR') at any Domino's-owned store in the State of New York between July 9, 2003 and March 2, 2014, " as determined by Domino's records (the " Settlement Class"). Amended Settlement Agreement (June 13, 2014) (" Agreement") ¶ ¶ 1-2, DE #186-1. Specifically, the Agreement provides that each class member who timely filed a claim shall receive:
a. Thirteen dollars ($13) per week employed for more than 30 hours in the position of delivery driver at a Domino's-owned store in the State of New York between July 9, 2003 and May 31, 2010 [relating to the gratuities claim];
b. Ten dollars ($10) per week employed for 30 or fewer hours in the position of delivery driver at a Domino's-owned store in the State of New York between July 9, 2003 and May 31, 2010 [relating to the gratuities claim];
c. Four dollars ($4) per week employed in the position of delivery driver or CSR at a Domino's-owned store in the State of New York between July 9, 2003 and December 31, 2010 [relating to the uniform-maintenance claim]; and
d. Two dollars ($2) per week employed in the position of delivery driver or CSR at a Domino's-owned store in the State of New York between July 9, 2003 and March 2, 2014 [relating to the deductions claim].
Id. ¶ 21.
Additionally, the parties agreed that Domino's would not oppose the payment of service awards to Donna Annunziato and Kevin Curry in the amount of $5, 000 each, which these individuals would collect in addition to any recovery to which they were entitled as class members. See Agreement ¶ 27. Monetary relief is available solely on a claims-made basis; to receive payment, a class member must have submitted his or her claim within a period of approximately sixty days from the mailing of notice. See id. ¶ ¶ 11, 23. Class members who failed to do so, and who did not opt out, would receive no monetary relief but would still be bound by the other terms of the settlement. See id.¶ 11.
In consideration for the settlement, class members who did not opt out would release claims related to the facts alleged or asserted in the litigation,  except that class members who neither opted out nor filed claims would retain their rights under the Fair Labor Standards Act, 29 U.S.C. § 201 et seq . See Agreement ¶ ¶ 28, 30, 35.
Members of the Settlement Class had the option to exclude themselves from the settlement by sending written notice to the settlement administrator before the court-ordered deadline, which was to be no more than sixty days after the mailing of notice to each class member. See id.¶ 8. If at least ten percent of all class members opted out of the settlement, Domino's would be entitled to void the settlement. See id.¶ 9.
III. Preliminary Approval and Fairness Hearing
Based on the foregoing, this Court recommended, inter alia, that the District Court certify the proposed class, pursuant to Rule 23(b)(3) of the FRCP, and preliminarily approve the Agreement. See generally R & R. Judge Townes adopted those recommendations and requested that the undersigned magistrate judge oversee the general administration of the Agreement, including the requisite dissemination of notice to class members.
See Bodon, 2014 WL 3566076, at *1. This Court was also directed to hold a hearing for final approval of the Agreement. See id.
As contemplated by the Agreement, the parties retained a third-party claims administrator, Kurtzman Carson Consultants, LLC (" KCC"), to disseminate notice to the 13, 173 class members in August 2014. See Declaration of Jenny Cudworth (Oct. 24, 2014) (" Cudworth Decl.") ¶ 4, DE #207-2. Among other information, the notice provided class members with instructions on how to file their claims and/or their objections to the settlement, as well as the date and location of the fairness hearing before the undersigned magistrate judge. See KCC Class Notice, DE #207-2 at 5. More than two months after KCC first disseminated notice, the parties moved, on consent, for final approval of the Agreement. See generally Pl. Mot.
On November 7, 2014, this Court held a fairness hearing pursuant to Rule 23(e)(2) of the FRCP. See Minute Order (Nov. 7, 2014) (" 11/7/14 Minute Order"), DE #214. No one appeared at the hearing to object to the terms of the settlement. See id. The Court reserved final decision on the fairness of the settlement, pending an updated status report from KCC, see id., which was subsequently provided, see Supplemental Declaration of Jenny Cudworth (Nov. 12, 2014) (" Cudworth Supp. Decl."), DE #219-1.
I. Legal Standard
" The claims, issues or defenses of a certified class may be settled, voluntarily dismissed, or compromised only with the court's approval." Fed.R.Civ.P. 23(e). Before a court may finally approve a class action settlement, it must hold a fairness hearing and ensure that the settlement is " fair, reasonable and adequate." Fed.R.Civ.P. 23(e)(2).
To evaluate whether a class settlement is fair, courts must examine both the settlement's procedural and substantive fairness. See Hayes v. Harmony Gold Mining Co., 509 F.App'x 21, 22 (2d Cir. 2013); In re Payment Card Interchange Fee & Merch. Discount Antitrust Litig., 986 F.Supp.2d 207, 221 (E.D.N.Y. 2013). In assessing procedural fairness, courts look to the negotiation process and consider, inter alia, whether the process was marred by coercion or collusion. See Payment Card Interchange Fee, 986 F.Supp.2d at 221 (citing In re Holocaust Victim Assets Litig., 105 F.Supp.2d 139, 145-46 (E.D.N.Y. 2000)). Substantive fairness is evaluated in light of the nine factors set forth in City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974), abrogated on other grounds by Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000); accord Hayes, 509 F.App'x at 22. These so-called Grinnell factors are:
(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 trial; (7) the ability of the defendant to withstand a great judgment; (8) the range of reasonableness of the settlement fund in light of the best possible recovery; and (9) the range of reasonableness of the settlement fund to a possible recovery in light of all of the attendant risks of litigation.
Payment Card Interchange Fee, 986 F.Supp.2d at 221 (citing Grinnell, 495 F.2d at 463). " All nine factors need not be satisfied; the court must look at the totality of these factors in light of the specific circumstances involved." In re Hi-Crush Partners L.P. Secs. Litig., No. 12-Civ-8557(CM), 2014 WL 7323417 at *5 (S.D.N.Y. Dec. 19, 2014) (citing In re Global Crossing Sec. & ERISA Litig., 225 F.R.D. 436, 456 (S.D.N.Y. 2004)).
Having considered the relevant factors, this Court concludes that the settlement entered into in this matter, as documented in the Agreement, is procedurally and substantively fair.
A. Procedural Fairness
The proposed settlement is the result of an arms-length negotiation that was facilitated by the undersigned magistrate judge in a lengthy mediation session that began in the early afternoon and extended well into the evening. See Minute Entry (dated Feb. 6, 2014), DE #174. After hearing on-the-record presentations regarding the strength of the parties' claims and defenses, as well as the arguments regarding class certification, the Court met separately and in confidence with each side to discuss the relative merits and weaknesses of the parties' positions. At the conclusion of the extensive settlement negotiations, the Court made a settlement proposal that it deemed to be fair and reasonable in light of the risks and exposure attendant to class action litigations. The parties were given a week to respond, in confidence, to the Court's settlement proposal. Each side independently accepted, and it is the Court's proposal that became the framework for the Agreement.
In the weeks following each side's acceptance, the Court reviewed two different drafts of the Agreement and held telephone conferences with the parties, when warranted, to discuss revisions and/or clarifications of the Agreement. Given the nature of the Court's involvement in overseeing the settlement discussions, as well as in fine-tuning the Agreement, the Court is satisfied that the negotiations were not marred by collusion or coercion or otherwise tainted.
See Payment Card Interchange Fee, 986 F.Supp.2d at 221 (" The Second Circuit has recognized that the involvement of a mediator in pre-certification settlement negotiations helps to ensure that the proceedings are free of collusion and undue pressure.") (citing D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001)); Yahraes v. Rest. Assocs. Events Corp., No. 10-CV-935 (MKB) (SMG), 2013 WL 139730, at *1 (E.D.N.Y. Jan. 10, 2013) (fact that magistrate judge presided over settlement conferences that led to settlement weighed in favor of procedural fairness). Therefore, this Court recommends that the settlement of this class action be found to be procedurally fair.
B. Substantive Fairness
The Court has weighed the requisite Grinnell factors to determine whether the Agreement in this case is substantively fair.
1. The Complexity, Expense and Likely Duration of the Litigation
To be sure, this class action -- which involves three distinct New York Labor Law claims, two types of Domino's workers and two different time periods -- is complex in nature. Moreover, considering the protracted pretrial history of the case, which was initiated almost six years ago, the Court expects that, absent the proposed settlement, the litigation would continue for a substantial period of time. For instance, if the case does not settle, this Court would need time to revisit the class certification motion papers currently pending before it and draft a report and recommendation to Judge Townes. The parties then would have an opportunity to file objections to that recommendation with Judge Townes. Judge Townes would then either affirm, reverse or modify the recommendation, and the parties could subsequently appeal her order to the Second Circuit. Indeed, it is quite possible that the case would not be trial-ready for another year.
Trial itself would be an endurance test, with extensive testimony expected from Domino's current and former managers, delivery drivers and CSRs, and, potentionally, Domino's customers. See Pl. Mot. at 7. The parties also contemplate expert testimony by marketing and advertising professionals concerning the reasonable customer's perception of delivery gratuities. See id. All of this litigation practice would only add to the substantial costs already incurred by the parties in this matter. According to plaintiffs' fee application, as of August 2014, plaintiffs' counsel had recorded $822, 128 in legal fees. See Plaintiffs' Memorandum of Law in Support of Application for an Award of Fees and Litigation Costs (Oct. 22, 2014) (" Pl. Fee Mem.") at 21, DE #204. The Court has no reason to doubt that Domino's has spent a substantial amount on its legal fees.
Thus, the first Grinnell factor weighs in favor of finding the settlement substantively fair.
2.The Reaction of the Class to the Settlement
Only one out of 13, 173 class members opted out of the settlement, and no class member objected in writing or in person at the fairness hearing. See Cudworth Decl. ¶ ¶ 15-16; 11/7/14 Minute Order. At the time of plaintiffs' motion, a total of $1, 546.916 had been claimed by 2, 311 class members, see Pl. Mot. at 7, although that total has been slightly reduced because seven class members submitted deficient claims and did not timely cure the deficiencies. See Cudworth Supp. Decl. ¶ 3. Therefore, the Court finds that the class reacted positively to the settlement.
3. The Stage of the Proceedings and the Amount of Discovery Completed
Turning to the third Grinnell factor, the Court has considered whether plaintiffs " had sufficient information on the merits of the case to enter into a settlement agreement, and whether the Court has sufficient information to evaluate such a settlement." Payment Card Interchange Fee, 986 F.Supp.2d at 224 (internal citations omitted).
Prior to settlement, the parties completed fact discovery (including numerous depositions), as well as briefed and argued multiple dispositive motions and plaintiffs' motion for class certification. Thus, there was sufficient information at the time of settlement for both the Court and the parties to evaluate the merits of the relevant claims and defenses, and, therefore, this factor favors settlement.
4. The Risks of Establishing Liability, Damages and Maintaining the Class Action through Trial
The next three Grinnell factors " concern the obstacles plaintiffs faced in pursuing a final judgment in their favor." In re Citigroup Inc. Secs. Litig., 965 F.Supp.2d 369, 382 (S.D.N.Y. 2013). Here, plaintiffs' success in having the class certified, let alone winning at trial, is far from a foregone conclusion. Domino's papers in opposition to class certification cited case law to support its contention that claims to recover delivery charges that customers may have perceived as gratuities must proceed individually due to varying circumstances and transactions. See Pl. Mot. at 9 (citing Luiken v. Domino's Pizza, LLC, 705 F.3d 370, 373-77 (8th Cir. 2013)). Plaintiffs also acknowledge that Domino's presented testimony undermining plaintiffs' claims for the costs in maintaining and cleaning their uniforms -- testimony that a jury might well find persuasive. See Pl. Mot. at 9. Thus, plaintiffs face substantial risk both as to maintaining the case as a class action and prevailing on liability and damages at trial, and these three factors favor settlement.
5. The Ability of the Defendant to Withstand a Greater Judgment
Plaintiffs' motion concedes that " Domino's is a large company with apparent ability to withstand a greater judgment." Pl. Mot. at 10. Thus, this factor does not weigh in favor of settlement.
6. The Range of Reasonableness of the Settlement Fund in Light of the Best Possible Recovery; and in Light of All the Attendant Risks of Litigation
The last two Grinnell factors require the Court to consider the reasonableness of the settlement in light of the best possible recovery and all of the risks of litigation. See Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96, 119 (2d Cir. 2005) (" [T]here is a range of reasonableness with respect to a settlement -- a range which recognizes the uncertainties of law and fact in any particular case and the concomitant risks and costs necessarily inherent in taking any litigation to completion . . . .") (quoting Newman v. Stein, 464 F.2d 689, 693 (2d Cir. 1972)). " In other words, the question for the Court is not whether the settlement represents the highest recovery possible . . . but whether it represents a reasonable one in light of the many uncertainties the class faces . . . ."
Citigroup Inc. Secs. Litig., 965 F.Supp.2d at 384.
Here, the possible maximum recovery, assuming full participation by the Settlement Class, was $4, 705, 145, not including attorneys' fees and costs. See P1. Mot. at 10. Given the risks of maintaining the class action on the gratuities claim, see infra p. 11, as well as the uncertainties of litigation in general, the Court finds that the settlement offers the Settlement Class meaningful relief and is well within the range of reasonableness.
In sum, the overwhelming majority of Grinnell factors weigh in favor of finding the settlement substantively fair.
III. The Proposed Order
To facilitate the dismissal of this action, the parties submitted a proposed final judgment and order for Judge Townes' signature (hereinafter, the " Proposed Order"). See [Proposed] Final Judgment and Order (Oct. 24, 2014) (" Proposed Order"), DE #207-1. The Court recommends that Judge Townes modify the Proposed Order as follows:
Paragraph 4's reference to " other than expressly provided in this Settlement Agreement[, ]" see Proposed Order ¶ 4 (emphasis added), should be corrected to " other than expressly provided in the Settlement Agreement."
Paragraph 5 now reads, in relevant part, " the release and related provisions set forth below in Paragraphs 28 through 30 of this Settlement Agreement . . . ." See Proposed Order ¶ 5 (emphasis added). This should be slightly modified to read, " the release and related provisions in Paragraphs 28 through 30 of the Settlement Agreement . . . ."
Finally, paragraph 7 purports to approve " the Agreed Amount of attorneys' fees and litigation costs described in Paragraph 26 of the Settlement Agreement." Proposed Order ¶ 7. Paragraph 26 of the Agreement makes clear, however, there is no " Agreed Amount" of attorneys' fees and litigation costs -- rather, that issue is the subject of pending motion practice. The Court recommends striking paragraph 7 or otherwise modifying it to reflect that the final judgment is being entered, subject to a further determination of fees and costs.
For the reasons stated above, the Court finds that the settlement in this matter is procedurally and substantively fair and thus recommends that the District Court grant final approval of the settlement and direct distribution of the settlement proceeds in accordance with the Agreement. The Court further recommends that the District Court enter the Proposed Order, with the modifications discussed above, and dismiss plaintiffs' claims with prejudice, while retaining jurisdiction over the pending fee dispute.
Any objections to the recommendations contained in this Report and Recommendation must be filed with the Honorable Sandra L. Townes on or before February 2, 2015. Failure to file objections in a timely manner may waive a right to appeal the District Court order. See 28 U.S.C. § 636(b)(1); Fed.R.Civ.P. 6(a)(1), 72(b)(2); Small v. Sec'y of Health & Human Servs., 892 F.2d 15, 16 (2d Cir. 1989).