United States District Court, S.D. New York
FERNANDO RAMIREZ, Individually, On Behalf of All Others Similarly Situated and as Class Representative, Plaintiff,
RICOH AMERICAS CORPORATION, Defendant. RICOH AMERICAS CORPORATION, Counter Claimant,
FERNANDO RAMIREZ, Counter Defendant.
MEMORANDUM AND ORDER
KEVIN NATHANIEL FOX, Magistrate Judge.
On December 23, 2013, Fernando Ramirez, formerly employed by Ricoh Americas Corporation as a technician, commenced this action for unpaid wages and overtime compensation, pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201-219, and New York Labor Law ("NYLL"), Article 19 §§ 650-665. The parties consented to jurisdiction by a magistrate judge, pursuant to 28 U.S.C. § 636(c) and Rule 73 of the Federal Rules of Civil Procedure. Before the Court is the plaintiff's motion, for an order: (i) "granting preliminary approval of the Joint Stipulation of Class Settlement and Release Between plaintiff and defendant (Settlement Agreement')"; (ii) "conditionally certifying the following settlement class under Fed.R.Civ.P. 23(a) and (b)(3) and the Fair Labor Standards Act for purposes of effectuating the settlement: All individuals who are employed or were employed in New York by Defendant or its predecessors/affiliates in a technician position between December 23, 2007 and July 24, 2014"; (iii) "appointing Lipman & Plesur, LLP as Class Counsel"; (iv) "approving plaintiff's Notice of (1) Proposed Class Settlement and (2) Final Settlement Approval Hearing"; (v) "approving plaintiff's proposed Claim Form"; (vi) "approving plaintiff's proposed Election Not to Participate in Settlement"; (vii) "approving plaintiff's Notice of Proposed Settlement"; and (viii) "granting such other and further relief as the Court deems just and proper."
The plaintiff contends that "[t]he Settlement Agreement creates a Settlement Payment of $325, 000 inclusive of court-approved Class Counsel Attorneys' Fees and Costs, the reasonable fees and expenses of the Settlement Administrator, any court-approved Class Representative Service Award, Individual Allocation payments to Claimants and Defendant's share of payroll taxes on payments to Claimants to which such taxes are applicable." The Settlement administrator will be responsible for mailing the notice materials to eligible settlement participants, calculating each claimant's individual allocation and mailing the checks. According to the plaintiff, "[t]he Settlement Agreement provides releases of claims for the Class Representative, Participating Class Members, Claimants, Class Counsel and Released Parties." The plaintiff asserts that "[t]he Settlement Class consists of all current and former employees of Defendant, IKON Office Solutions, or their affiliates or predecessors in the state of New York who have been employed in a technician position between December 23, 2007 and July 14, 2014." He maintains that "[t]he allocation formula calculates each Claimant's Individual Allocation from the Settlement Pool based on the number of weeks worked between December 23, 2007 and July 14, 2014 as a percentage of total weeks worked for all Class Members, with unclaimed amounts then reallocated to the Claimants on a pro rata basis." According to the plaintiff, his counsel "applies for one-third of the Fund as attorneys' fees, " and, "subject to Court's approval, the Class Representative will receive an additional payment of $20, 000 in recognition of the services he rendered on behalf of the class (Service Award')."
The plaintiff contends that the settlement is substantively fair because: (1) "far more discovery would be required prior to trial to establish liability and damages, including depositions of Defendant, Class Members and possibly experts, " and "[a] fact-intensive trial would be necessary and would take a great deal of time for the Court, " followed by a likely appeal, "considering the causes of action asserted and the conflicting case law in this area"; (2) the class representative supports the settlement; (3) "a significant exchange of documents and information has taken place, as well as Plaintiff's deposition"; (4) "there is a significant risk involved in proving both liability and damages, " and establishing liability and damages "would require greater and uncertain factual development and favorable outcomes at trial and on appeal, both of which are inherently uncertain and lengthy"; (5) the defendant "may contest superiority, arguing that a class action is not a superior method to resolve these claims and that a class trial would not be manageable, " and the settlement "would eliminate this risk, " and "[t]here is a risk that a class will not be certified and/or that a class could be decertified at some point"; (6) "[e]ven if Defendant could afford to pay more, such a factor is not determinative"; and (7) "[t]here is a possibility of a greater recovery but Plaintiff would have to succeed on all claims and appeals in an area of law that is less than settled."
According to the plaintiff, "the Court should certify the following Fed.R.Civ.P. 23 class for purposes of effectuating the settlement: all individuals who are employed, or formerly have been employed, by Defendant in the position of technician or a comparable position in the [s]tate of New York at any time during the period from December 23, 2007 to July 14, 2014." The plaintiff asserts: (a) "there are approximately 400 class members"; (b) the action "involves common factual and legal issues: whether Defendant failed to pay for all time worked and for overtime for time worked over 40 hours"; (c) "his claims arise from the same factual and legal circumstances that form the bases of the class members' claims"; (d) "there is no evidence that the Plaintiff's and the class members' interests are at odds"; (e) "certification is appropriate under Rule 23(b)(3)"; (f) "all class members worked for Defendant as technicians and were subjected to Defendant's wage and hour policies" which violated New York law; (g) "employing the class device here will achieve economies of scale for putative class members, conserve judicial resources, and preserve public confidence in the system by avoiding repetitive proceedings and preventing inconsistent adjudications"; and (h) "Lipman & Plesur, LLP, should be appointed as class counsel." Moreover, the proposed "Notice of (1) Proposed Class Settlement and (2) Final Settlement Approval Hearing" is appropriate, and the standards for collective action certification under the FLSA are met.
In support of his motion, the plaintiff submitted a declaration by his attorney, Lizabeth Schalet ("Schalet"). Schalet states that she graduated from the City of New York Law School and was admitted to the New York bar in 1987. She worked at the Legal Aid Society and the New York City Commissions on Human Rights before joining Lipman & Plesur, LLP, where she handles "only employment and primarily wage-hour matters." In or about 2001, Schalet became a member of the firm. Schalet contends that she has been co-counsel on several wage and hour cases that the courts certified as class and collective actions. She states that the parties "have exchanged discovery requests and responses, exchanged data regarding payroll history, employment, hours and weeks worked of Class Members, and testimony was provided in a deposition." According to Schalet, counsel conducted "their own independent investigation and evaluation with numerous interviews with putative Class Members." Schalet explains that the settlement "is the result of lengthy, arms-length negotiations between the Parties." She contends that the class representative provided factual information and documents to counsel, sat for a deposition and assisted counsel in preparing for the settlement. Schalet states that the parties signed the settlement agreement and release, on or after July 28, 2014. Attached to Schalet's declaration is Exhibit A, "Joint Stipulation of Class Settlement and Release, " accompanied by: (1) Exhibit A, "[Proposed] Order Granting Preliminary Approval of Settlement"; (2) Exhibit B, "Notice of (1) Proposed Class Settlement and (2) Final Settlement Approval Hearing"; (3) Exhibit C, "Claim Form"; (4) Exhibit D, "Election Not To Participate in Settlement"; (5) Exhibit E, "Notice of Proposed Settlement"; and (6) Exhibit F, "[Proposed] Order (1) Confirming Certification of Class and Collective Action for Settlement Purposes; (2) Granting Final Approval of Class and Collective Action Settlement; and (3) Entering Final Judgment."
District courts have discretion in approving class settlements under Rule 23(e) and they "must carefully scrutinize the settlement to ensure its fairness, adequacy and reasonableness." D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001). "When a settlement is negotiated prior to class certification, as is the case here, it is subject to a higher degree of scrutiny in assessing its fairness. The District Court determines a settlement's fairness by examining the negotiating process leading up to the settlement as well as the settlement's substantive terms." Id. In reviewing the settlement terms, courts consider the following 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; [and] (9) the range of reasonableness of the settlement fund to a possible recovery in light of all the attendant risks of litigation.
City of Detroit v. Grinnell, 495 F.2d 448, 463 (2d Cir. 1974) (internal citations omitted), abrogated on other grounds by Goldberger v. Integrated Resources, Inc., 209 F.3d 43 (2d Cir. 2000)).
Additionally, courts must ensure that the settlement is a "result of arm's-length negotiations and that plaintiffs' counsel have possessed the experience and ability, and have engaged in the discovery, necessary to effective representation of the class's interests." Weinberger v. Kendrick, 698 F.2d 61, 74 (2d Cir. 1982).
Application of Legal Standard
Procedural Fairness: The Negotiation Process
The plaintiff is represented by counsel who claims experience in obtaining certification of wage and hour class and collective actions. However, the information provided to the Court about the settlement negotiation process in this action is scant. Although counsel contends that the settlement "is the result of lengthy" negotiations between the parties, that contention is refuted by the record. The action was commenced on December 23, 2013, and was settled on or after July 28, 2014. Thus, the action was settled within a relatively short time period: seven months. The plaintiff contends that "a significant exchange of documents and information has taken place" and he obtained "a large number of payroll documents, time records and other information as well as policies, " without providing any detail about the extent of the exchange. The plaintiff was deposed, and he "interviewed workers to determine their hours worked, their wages, and other relevant information." No information is provided about the nature and extent of the plaintiff's "assisting counsel in preparation for the settlement." Notwithstanding the scarcity of information about the negotiation process, the plaintiff was represented by counsel who has experience in wage and hour cases that courts have certified as class and collective actions in the past, certain investigation and discovery activities occurred and the settlement agreement was negotiated by the represented parties. Thus, it appears that the negotiation process was procedurally fair.
Substantive Fairness: The Grinnell Factors and the Proposed Settlement Agreement
(1) Complexity, Expense and Likely Duration of the Litigation
The plaintiff contends that "far more discovery would be required prior to trial to establish liability and damages, including depositions of Defendant, Class Members and possibly experts, " trial would "take a great deal of time for the Court, " and appeal is likely considering "the conflicting case law in this area." The plaintiff does not identify how much more discovery would be required prior to trial, except that additional depositions would be needed, how many class members would need to be deposed and what "experts" would "possibly" be required in an action, such as this one, consisting solely of three claims: (1) "Violation of the Overtime Provisions of the FLSA"; (2) violation of the New York Minimum Wage Act": and (3) "Violation of the Overtime Provisions of the New York Labor Law." Moreover, the plaintiff does not identify "the conflicting case law in this area, " or what the anticipated expense and likely duration of the litigation might be, in the absence of the settlement agreement.
This is a simple action claiming damages pursuant to well-settled federal and state law governing minimum wage and overtime compensation claims. The plaintiff failed to show that the instant litigation would be complex, expensive and time-consuming. Thus, this factor does not militate in favor of granting the plaintiff's motion.
(2) Reaction of the Class to the Settlement
Although the named plaintiff contends that he supports the settlement agreement, no evidence is provided that any putative class member supports the settlement. The plaintiff failed to identify any effort he made to obtain any putative class member's reaction to the proposed settlement agreement.
"A class representative is a fiduciary to the class. If class representatives expect routinely to receive special awards in addition to their share of the recovery, they may be tempted to accept suboptimal settlements at the expense of the class members whose interests they are appointed to guard." Wesley v. Spear, Leeds & Kellogg, 711 F.Supp. 713, 720 (E.D.N.Y. 1989). The fact that the plaintiff requests $20, 000, or 5.71% of the settlement fund, as his service award, and there is absent from the motion record any evidence of the reaction of putative class members to the settlement, are of concern to the Court. The Court finds that this factor does not militate in favor of granting the plaintiff's motion.
(3) Stage of the Proceedings and the Amount of Discovery Completed
The plaintiff contends that "a significant exchange of documents and information has taken place" and the plaintiff obtained "a large number of payroll documents, time records and other information as well as policies. However, no detail is provided by the plaintiff about the amount of documents and information exchanged, the frequency of the exchanges and the period of time during which documents and information were exchanged. A conclusory contention that the plaintiff obtained "a large number" of documents is not sufficient to show that significant discovery took place. No specifics are provided by the plaintiff about the sources from which the plaintiff obtained the documents and information, the form and content of those documents and the information, or the quantity of the documents and information obtained. Also lacking is any detail about the number of "workers" the plaintiff interviewed to determine the hours they worked and their wages. The Court notes that, during the short period of approximately seven months between the filing of the complaint and the settlement of this action, only one deposition was taken and an unidentified amount of other discovery activities occurred. Accordingly, this factor does not militate in favor of granting the plaintiff's motion.
(4 & 5) Risks of Establishing Liability and Damages
The plaintiff contends that: (i) "there is significant risk involved in proving both liability and damages"; and (ii) establishing liability and damages "would require greater and uncertain factual development and favorable outcomes at trial and on appeal, both of which are inherently uncertain and lengthy." However, the plaintiff identifies neither the nature of the "significant risk" he references nor its extent. Conclusory allegations of risks without specification of any risk ...