United States District Court, S.D. New York
OPINION AND ORDER
G. SCHOFIELD, District Judge
Asad Pervaiz Sheikh, Zena Dixon and Paul Huxtable,
individually and on behalf of all others similarly situated,
and Defendant Align Communications, Inc. jointly move for
preliminary approval of a class settlement under Rule
23(b)(3) of the Federal Rules of Civil Procedure, and under
the Fair Labor Standards Act (“FLSA”), 29 U.S.C.
§216(b). For the reasons discussed below, the motion is
The Proposed Settlement
case arises from Defendant's alleged failure to
compensate adequately its IT engineers in its Managed
Services Department (the “Employees”) in
violation of FLSA and either or both of the New York Labor
Law (“NYLL”), N.Y. Lab. Law § 650 et seq.,
and the New Jersey Wage and Hour Law (“NJWHL”),
N.J. Stat. § 34:11-56a et seq. On July 15, 2016,
Plaintiffs filed an unopposed motion seeking preliminary
approval of a class settlement that would resolve the case.
the terms of their Stipulation of Settlement and Release (the
“Agreement”), Defendant would pay up to $600,
000, which the parties define as the Gross Settlement
Amount. Putative Class Members are 48 Employees
who belong to (1) the NYLL Class, comprising Employees who
worked in New York at any time during the six years preceding
this lawsuit, (2) the NJWHL Class, comprising Employees who
worked in New Jersey at any time during the two years
preceding this lawsuit or (3) the FLSA Collective, comprising
Employees who worked in New York or New Jersey at any time
during the two years preceding this lawsuit.
in the NYLL Class would automatically be part of the class
unless they opt out, while employees in the NJWHL class would
not be a part of the class unless they opt in. However, both
the NYLL Class and the NJWHL Class purport to be Rule
23(b)(3) classes, which must be opt-out classes, unlike Rule
23(b)(1) and (b)(2) classes. See Fed. R. Civ. P.
23(c)(2), (e); 7B Charles Alan Wright et al., Federal
Practice and Procedure § 1807 (3d ed. 2016). The
FLSA Collective is opt-in, as contemplated by FLSA.
See 29 U.S.C. § 216(b).
current or former employees, all possible Class Members are
known, as is the amount that each Class Member would be owed
if Defendant were found liable in the case. Nevertheless,
members of the NJWHL Class and the FLSA Collective would be
entitled to participate in the settlement only if they opt
into the action and submit a claim form. In other words, the
settlement proceeds assigned to the NYLL Class will be paid
in full, while the settlement proceeds assigned to the NJWHL
Class and the FLSA Collective will be paid only to the extent
that their class members take the steps to participate.
Plaintiffs estimate that 25% of opt-in class members will
participate, and that 95% of opt-out class members will
amount payable to Class Members in settlement of their claims
is the Net Settlement Fund, which is estimated to be $344,
700. That is the remainder of the $600, 000 Gross Settlement
Amount after deducting and paying $255, 300 for
attorneys' fees and costs for Class Counsel, service
awards to the Named Plaintiffs, fees to the proposed claims
administrator and a reserve fund to cover errors and
omissions. These deductions must be submitted to the
Court for approval with the motion for final approval of the
Agreement. Any portion of the $600, 000 in excess of $390,
000 not disbursed would revert back to Defendant. Plaintiffs
estimate that approximately $182, 000 to $271, 000 of the
$600, 000 Gross Settlement Fund would be paid to Class
Members, meaning that after disbursements for attorneys'
fees and other costs above, the amount of the Gross
Settlement Fund that would revert back to Defendant would be
between $73, 700 and $162, 700.
Agreement provides that Defendant must pay at least 65%
(i.e., $390, 000) of the $600, 000 Gross Settlement Fund, but
is unclear what would happen if less than 65% of the Gross
Settlement Fund were claimed after payment of attorneys'
fees and other expenses. It states only that the amount
necessary to reach 65% would be redistributed among
Participating Class Members without providing a means of
allocating the funds among them.
Relevant Procedural Background
October 19, 2016, the Court held a hearing on Plaintiffs'
unopposed motion for preliminary approval of the settlement.
The Court identified numerous concerns, including the
reversionary nature of the Agreement, the creation of a
reserve fund that would revert back to the Defendant, the
disparate treatment of the New York and New Jersey classes
and the lack of information about the fee structure used by
the proposed claims administrator.
October 21, 2016, the Court ordered the parties to submit
additional information to better substantiate the fairness of
the settlement, including (1) a breakdown of the projected
net settlement amount and the recovery on the dollar for both
the projected net settlement amount and the guaranteed $390,
000 settlement amount, (2) a spreadsheet detailing the
anticipated distribution of the gross settlement amount, (3)
a breakdown of the number of individuals in each class, (4) a
summary of the relevant state statutes that govern whether
the settlement classes should be opt-in or opt-out, (5) the
financial terms agreed to with the proposed claims
administrator and (6) detailed information about the
participation of the three named plaintiffs in the case.
December 2, 2016, the parties submitted a letter providing
most of the information requested by the October 21, 2016,
Order. The parties did not address the financial terms agreed
to with the proposed claims administrator, but did state that