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Taylor v. Delta-Sonic Car Wash Systems, Inc.

United States District Court, W.D. New York

January 31, 2017

ESSENCE TAYLOR AND DANIEL CASHMAN, On behalf of themselves and all employees similarly situated, Plaintiffs,


          JONATHAN W. FELDMAN, United States Magistrate Judge

         Findings of Fact

         1. On December 15, 2014, Essence Taylor and Daniel Cashman ("plaintiffs"), former employees of defendant Delta-Sonic Car Wash Systems, Inc. (hereinafter "Delta-Sonic") and Ronald Benderson (collectively, "defendants") filed a complaint alleging that defendants violated the Fair Labor Standards Act ("FLSA") and the New York Labor Law ("NYLL") . See Complaint (Docket # 1) .

         2. Delta-Sonic operates twenty-nine car wash facilities in New York, Pennsylvania and Illinois. Plaintiffs' claims against the defendants concern an employee position known as Delta Technicians. Although these employees are paid an. hourly rate that is less than minimum wage) they also are eligible to earn tips from customers of the car wash. Delta-Sonic guarantees that, after including tip income, Delta Technicians will earn an hourly rate equal to or greater than minimum wage. If weekly tip income is insufficient to equal minimum wage, Delta-Sonic provides additional pay to make up the difference.

         3. The gist of the complaint is not that the defendants failed to pay each Delta-Technician an hourly wage equal to or greater than the allocable minimum wage, but that Delta-Sonic violated federal and state wage laws by failing to give notice to employees that they would receive less than minimum wage and failing to include allowances for tips on a separate line on employees wage records. The plaintiffs also alleged that the defendants failed to compensate employees for uniform maintenance.

         4.. Plaintiffs brought their FLSA claims as a collective action under 29 U.S.C. § 216(b) and their NYLL claims as a class action under Federal Rule of Civil Procedure 23 ("Rule 23") on behalf of themselves and a putative class of Delta Technicians.

         5. Defendants answered the Complaint (Docket #7) and denied all of plaintiffs' claims. Thereafter, the parties engaged in discovery. Discovery included the exchange of documents, interrogatories and three depositions.. The defendants deposed the two named plaintiffs and the plaintiffs deposed the Vice President/Chief Financial Officer of the Delta-Sonic .

         6. On June 1, 2015, plaintiffs moved to certify a class pursuant to Rule 23 of the Federal Rules of Civil Procedure. On July 14, 2015, the. defendants responded to the class certification motion. The defendants also cross-moved for summary judgment pursuant to Rule 56 of the Federal Rules of Civil Procedure.. The motion for class certification was fully briefed. With the consent of defense counsel, plaintiffs did not file a response to the summary judgment motion. Instead, the parties decided to pursue a negotiated settlement.

         7. On October 16, 2016 the parties participated in a one-day mediation with mediator William G. Bauer, Esq. in which a complete settlement was reached. Thereafter, the parties executed a Settlement Agreement that fully and finally resolved plaintiffs' claims against the defendants. Without conceding the validity of plaintiffs' claims and without admitting . liability or any wrongful conduct, the defendants agreed to create a Settlement Fund of eight hundred thousand dollars ($800, 000) in order to resolve plaintiffs' claims. The settlement included the filing of an amended complaint that alleged state law claims on behalf of current and former Delta-Sonic employees who worked for the defendants in Illinois and Pennsylvania. According to plaintiffs' counsel, the Settlement Agreement "secured monetary relief for every single one the more than 13, 000 Class Members, based on length of employment." See Decl". of Robert L. Mull in (Docket # 71) at ¶ 26. The final Settlement Agreement was Dated: January 12, 2016. The amended complaint (Docket # 61) was filed on January 29, 2016.

         8. On January 2.9, 2016, plaintiffs filed an unopposed motion (Docket # 62) asking the Court .to preliminarily approve the proposed settlement and provisionally certify both a Rule 23 Class and an FLSA Class for settlement purposes. The motion also sought 'court approval of the notice to class materials.

         9. On February 17, 2016, the Court entered an Order (Docket # 63} preliminarily approving the settlement, certifying a settlement class, and authorizing the dissemination of notice. The parties chose a settlement administrator who provided notice to the class. The "Notice To Class of Proposed Settlement" (Docket # 62-5} informed class members of their allocated settlement amount, described their right to opt out of the action, described the process that must be followed in order to dispute their allocated settlement amount, and stated Class Counsel's intent to seek the payments of "up to $10, 000" to the two named plaintiffs "for their time and effort in bringing this lawsuit", "reasonable attorneys fees for [counsels'] efforts in litigating and settling this lawsuit" as well as "reasonable expenses in bringing this lawsuit." Id. The Court scheduled a final settlement hearing for July 8, 2016.

          10. Between February 17, 2016 and July 8, 2016, neither plaintiffs nor defendants filed any additional support for approval of the settlement or for any other relief, including attorney fees. The only document the Court received prior to the final settlement hearing was a wholly inadequate one page letter from plaintiffs' counsel requesting final approval of the settlement and the award of $320, 000 or forty percent of the settlement fund in attorney fees. Plaintiffs' letter request was never docketed. See July 8, 2016 Transcript of Proceedings (Docket # 72) (hereinafter "Transcript") at 3.

         11. On July 8, 2016, all counsel appeared for the final settlement hearing. The Court denied approval of the settlement for various reasons set forth on the record. (The Transcript of the July 8, 2016 proceedings is hereby incorporated by reference into this Decision and Order.) Suffice it to say the un-docketed "letter request" for final approval of the settlement and an award of attorney fees was grossly deficient in several respects. First, as the Court reminded counsel at the hearing, this Court acts as a fiduciary to the proposed class in evaluating the settlement. Therefore, it was incumbent on counsel to make sure that the Court was provided with sufficient information to find that the settlement was both substantively and procedurally fair and in the best interests of the class. See City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir. 1974). Although the Court gave preliminary approval to the proposed settlement, as plaintiffs' counsel acknowledged in their brief in support of that approval, "a court's review of a proposed class settlement is a two-step process" and the standard for final approval is far more rigorous than simply whether the proposed settlement is "within the range of possible approval." See Pis.'s Mem. of Law in Support of Preliminary Approval (Docket # 62-2) at 1'3 (internal quotations and citations omitted). Counsel here made absolutely no attempt to address whether the proposed settlement satisfied the Grinnell factors.

         12. As I stated during the July 8, 2016 hearing, the plaintiffs' "letter request" for the Court to simply rubberstamp their application to designate forty percent of the settlement fund to attorney fees was particularly troubling. See Transcript at 6. In their motion for preliminary approval of the settlement, plaintiffs' counsel represented to the Court that they would submit a "request for reasonable attorney fees" in their motion for final approval. See Docket # 62-2 at 6. Nothing was ever filed explaining or justifying an award of attorney fees. The failure of plaintiffs' counsel to submit any contemporaneously kept time records was especially frustrating considering well-established attorney fee application requirements in the Second Circuit. See New York State Ass'n for Retarded Children, Inc. v. Carey, 711 F.2d 113 6, 1154 (2d Cir. 1983) ("All applications for attorney's fees, whether submitted by profit-making or non-profit lawyers, for any work done after the date of this opinion should normally be disallowed unless accompanied by contemporaneous time records indicating, for each attorney, the date, the hours expended, and the nature of the work done."); see also Scott v. City of New York, 626 F.3d 130, 133 (2d Cir. 2010} (Except in the "rarest of cases" lawyers "are required to submit contemporaneous record's with their fee application."); see also Camacho v. Ess-A-Bagel, Inc., NO, 14-CV-2592, 2014 WL 6985633, at *5 (S.D.N.Y. 2014) (denying attorneys' fee application in FLSA case where counsel failed to submit time records).

         13. Other deficiencies in the application for final approval were identified by the Court during the July 8, 2016 hearing. For example, counsel sought over $5 00 0.0 0 for costs, but no costs were identified or justified by plaintiffs' counsel. The proposed settlement sought to pay. a settlement administrator $70, 000, but the only documentation from Rust Company, the proposed administrator, estimates their costs to be $59, 794, twenty percent less than what plaintiffs are seeking. Finally, although promised in plaintiffs' motion for preliminary motion for settlement approval, plaintiffs' counsel presented no. factual or legal justification for a "service award" request of $10, 000 to each of the two named plaintiffs in this action. See Transcript at 8"-.9.

         14. Despite the obvious deficiencies in the joint motion to approve the settlement, the Court denied the motion without prejudice, allowing counsel to file an actual motion for final approval of the proposed settlement. On July 19, 2016, plaintiffs' counsel filed a motion for Final Settlement Approval and Class Certification (Docket # 67} and a Motion for Attorney Fees (Docket # 70) . These two motions are currently pending before this Court.

         The Proposed Settlement

         15. The Settlement Agreement proposes to establish three settlement classes:

         (a) New York Tip Allowance Class: The agreement defines this class as "[a]ny Delta-Sonic current or former employee who work(ed) at one of Delta-Sonic's car wash centers in New York between December 15, 2008 and October 16, 2015, and, not accounting for the cash tips he or she received in a pay period, was paid a' gross (pre-tax) amount less than the applicable minimum wage rate multiplied by the number of regular ...

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