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Manley v. Midan Rest. Inc.

United States District Court, S.D. New York

March 27, 2017

EDWARD MANLEY, on behalf of himself and all others similarly situated, et al., Plaintiffs,
v.
MIDAN REST. INC. d/b/a "Moran's Chelsea, " et al., Defendants.

          OPINION AND ORDER

          HENRY PITMAN UNITED STATES MAGISTRATE JUDGE.

         I. Introduction

         Plaintiff Edward Manley, on behalf of himself and all others similarly situated, commenced this action pursuant to the Fair Labor Standards Act ("FLSA"), 29 U.S.C. §§ 201 et seq., and New York Labor Law ("NYLL") §§ 190 et seq. against defendants Midan Rest. Inc., doing business as Moran's Chelsea ("Moran's"), and Colleen Lydon to recover unpaid wages, spread-of-hours pay, unlawful deductions and penalties for failure to provide wage statements and notices. Manley commenced this action as a collective action pursuant to 29 U.S.C. § 216(b) with respect to the FLSA claims and as a class action with respect to the NYLL claims. Following the filing of the complaint, opt-in plaintiffs Jennifer Kuehn, Richard Rodriguez, Chris Hodges, Michael Chang and Benjamin Sperry consented to join the FLSA collective action.

         All parties have consented to my exercising plenary jurisdiction pursuant to 18 U.S.C. § 636(c).

         By notices of motion dated August 1, 2016 (Docket Items ("D.I.") 37, 39), plaintiffs have moved for an order: (1) certifying the final settlement class (the "Settlement Class");

         (2) approving the class action settlement and FLSA settlement and

         (3) awarding fees and costs to class counsel, a service award to plaintiff Manley and fees to the claims administrator (Memorandum of Law in Support of Plaintiffs' Motion for Final Approval of Class Action Settlement, dated Aug. 1, 2016 (D.I. 38), at 1; Memorandum of Law in Support of Plaintiffs' Motion for Approval of Attorneys' Fees, Reimbursement of Expenses, and Approval of Service Payment, dated Aug. 1, 2016 (D.I. 40) ("Pl.'s Fee Mem."), at 1).

         For the reasons set forth below, plaintiffs' motions are granted.

         II. Factual and Procedural History

         The complaint alleges that members of the FLSA collective and putative NYLL class are or were employed by defendants as "waitstaff, " which is defined as "waiters, runners, busboys, and bartenders" (Complaint, dated Mar. 12, 2014 (D.I. 2) ("Compl.") ¶¶ 13, 25, 27).[1] Plaintiffs allege that defendants: (1) failed to pay the minimum wage as a result of the improper application of the FLSA and the NYLL's tip credit allowance; (2) failed to pay overtime premium pay; (3) failed to pay spread-of-hours pay; (4) unlawfully retained portions of the waitstaff's tips for banquet work; (5) failed to reimburse waitstaff for the purchases of materials necessary to complete their work duties and (6) failed to provide waitstaff with wage statements and notices required by the New York Wage Theft Prevention Act (Compl. ¶¶ 31-117).

         At the Rule 16 Initial Conference, the parties agreed to exchange limited discovery to assist in developing their claims and defenses and in furtherance of class-wide settlement discussions (Declaration of Louis Pechman, Esq., in Support of Plaintiffs' Motion for Final Approval of Settlement, Class Certification, Approval of FLSA Settlement, Approval of Attorneys' Fees, Reimbursement of Expenses, and Approval of Service Payment, dated Aug. 1, 2016 (D.I. 41) ("Pechman Decl.") ¶¶ 10, 12). Defendants produced more than one thousand documents relating to plaintiffs' claims, including a sample of payroll summaries for all putative class members, the end-of-year pay stubs of each putative class member, banquet contracts, tip records and timekeeping records (Pechman Decl. ¶ 12). Plaintiffs also produced their own payroll records and communications relating to Moran's (Pechman Decl. ¶ 14). After reviewing defendants' records, plaintiffs' counsel performed individual damages calculations for each member of the putative class (Pechman Decl. ¶¶ 15-19).

         In June 2015, the parties engaged in an arm's-length negotiation during a thirteen-hour mediation session with mediator Ruth Raisfeld, Esq., whom plaintiffs' counsel describes as "a well-known and experienced mediator in wage and hour cases" (Pechman Decl. ¶¶ 25, 28, 30). At the mediation, following a "vigorous exchange regarding their respective claims and defenses, " the parties reached an agreement on the settlement amount and other key terms (Pechman Decl. ¶ 28). The parties thereafter negotiated the remaining terms of the settlement, which are memorialized in the Settlement Agreement (Pechman Decl. ¶ 28).

         The Settlement Agreement provides that defendants, without conceding the validity of plaintiffs' claims or admitting liability, agree to create a common settlement fund of $912, 500.-00 (Pechman Decl., Ex. 1 §§ 3.1, 4.2(A)). From the settlement fund, Manley will receive a $15, 000.00 service award, the settlement claims administrator will receive an estimated $15, 500.00 to set up and make distributions from the fund and counsel for plaintiffs will receive out-of-pocket costs and attorneys' fees, not to exceed 33 1/3 percent of the total settlement amount, subject to the Court's approval (Pechman Decl., Ex. 1 §§ 3.1, 3.2, 3.3(A) & Ex. 2 ¶ 13).[2]

         The Settlement Agreement provides that the claims administrator will allocate the remainder of the settlement proceeds on a pro rata basis as follows:

(i) compute the total calculated damages for each Participating Class Member from March 12, 2008 through June 30, 2014 based on Plaintiff's analysis of Defendants' records; (ii) divide the total calculated damages for each Participating Class Member by the total calculated damages of all Participating Class Members; (iii) multiply the amount derived in (ii) by the amount of the Net Settlement Fund to compute the Participating Class Member's total settlement amount.

         (Pechman Decl., Ex. 1 § 3.3(B)(1)(b)). Class counsel estimates that even after taking into account attorneys' fees, service awards and costs, class members will still recover approximately 85% of their back wages (Pechman Decl. ¶ 33). Forty percent of the amounts paid to class members will be reported to the Internal Revenue Service as W-2 wages and the remainder will be reported on a Form 1099 as non-wage payments for interest, liquidated damages and statutory penalties (Pechman Decl., Ex. 1 § 3.4(A)). The agreement further provides that if any class member fails to cash his or her settlement check, the check will revert to the defendants (Pechman Decl., Ex. 1 § 3.1(E)). In return for the settlement payments, each individual who does not opt out of the settlement will release defendants from all wage and hour claims that were brought or could have been brought in this action (Pechman Decl., Ex. 1 § 4.1).

         On March 30, 2016, I conditionally certified the NYLL class, appointed Pechman Law Group PLLC as class counsel, preliminarily approved the Settlement Agreement and authorized the notice of settlement (with modifications) to all putative class and collective members (Opinion and Order, dated Mar. 30, 2016 (D.I. 36) ("Preliminary Approval Order"), at 32).

         Pursuant to the Preliminary Approval Order, the claims administrator sent the approved notice to all putative class members, informing them of (1) their rights under the settlement (including the right to opt out of or object to the settlement); (2) class counsel's intention to seek one-third of the settlement fund for attorneys' fees and costs; (3) the request for a service award of $15, 000.00 to Manley; (4) the claims administrator's fees and (5) the manner in which the remainder of the fund would be distributed (Pechman Decl. ¶ 38 & Ex. A to Ex. 1). No putative class members objected to the settlement, and only one member opted out (Pechman Decl., Ex. 2 ¶¶ 11-12).

         On August 1, 2016, plaintiffs filed the pending motion for final approval. Defendants took no position with respect to the motion. I held a fairness hearing on August 15, 2016; no putative class member appeared at the hearing or made a written submission concerning the settlement.[3]

         III. Analysis

         A. Final Certification of the Settlement Class

         In the Preliminary Approval Order, familiarity with which is assumed, I concluded that the Settlement Class satisfied the requirements of numerosity, commonality, typicality, adequacy, ascertainability and maintainability under Rule 23(a) and (b)(3), and preliminarily granted conditional certification of the Settlement Class, "consisting of all individuals who worked for defendants as 'tipped employees, ' including 'servers, busser-s, and bartenders, ' between March 12, 2008 and June 30, 2014" (Preliminary Approval Order, at 9-19).

         To date, no facts have been presented to me to indicate that my preliminary determination was incorrect nor has any party claimed that my preliminary determination was erroneous. Thus, for the reasons stated in the Preliminary Approval Order, I conclude that final certification of the Settlement Class is proper.

         B. Approval of Settlement Agreement

         Pursuant to Fed.R.Civ.P. 23(e), the settlement of a class action is not effective until judicially approved. Although there is a general policy favoring settlements, the court may approve a class action settlement only if it "is fair, adequate, and reasonable, and not a product of collusion." Joel A. v. Giuliani, 218 F.3d 132, 138 (2d Cir. 2000). This requires consideration of both procedural and substantive fairness. 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."), citing D'Amato v. Deutsche Bank, 236 F.3d 78, 85 (2d Cir. 2001).

         1. Procedural Fairness

         In assessing procedural fairness, there is "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) (alteration in original), quoting Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., supra, 396 F.3d at 116.

         "In addition, courts encourage early settlement of class actions, when warranted, because early settlement allows class members to recover without unnecessary delay and allows the judicial system to focus resources elsewhere." Beckman v. KeyBank, N.A., 293 F.R.D. 467, 474 (S.D.N.Y. 2013) (Ellis, M.J.).

         Here, the parties engaged in responsible, arm's-length negotiations before and during a thirteen-hour mediation session to reach an early settlement. The parties exchanged information and documents that enabled both sides to assess plaintiffs' claims and calculate potential damages (Pechman Decl. ¶¶ 12-21). During the mediation, the parties engaged in vigorous discussions regarding their respective claims and defenses (Pechman Decl. ¶ 28). At the mediation, the parties reached an agreement on the settlement amount and several other key terms (Pechman Decl. ¶ 28). During the next few months, the parties negotiated the remaining terms of the settlement, which was executed on September 10, 2015 (Pechman Decl. ¶¶ 28, 31).

         Thus, I conclude that the settlement is procedurally fair pursuant to Rule 23(e).

         2. Substantive Fairness

         In assessing whether a settlement is substantively fair, the district court must consider the nine Grinnell 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 v. Richards-Cantave, supra, 588 F.3d at 804, quoting City of Detroit v. Grinnell Corp., 495 F.2d 448, 463 (2d Cir.1974), abrogated on other grounds, Goldberger v. Integrated Res., Inc., 209 F.3d 43 (2d Cir. 2000); accord Charron v. Wiener, 731 F.3d 241, 247 (2d Cir. 2013). All the Grinnell factors weigh in favor of final approval.

         The first Grinnell factor supports final approval because litigation through trial would be complex, expensive and long. Additional discovery would be required, including depositions of more plaintiffs, defendant Lydon and members of the Moran's management team (Pechman Decl. ¶ 76). "[P]reparation for trial would . . . seriously prolong the outcome of this suit in addition to consuming tremendous amounts of time, expenses and judicial resources." Sewell v. Bovis Lend Lease, Inc., 09 Civ. 6548 (RLE), 2012 WL 1320124 at *7 (S.D.N.Y. Apr. 16, 2012) (Ellis, M.J.). Moreover, "[l]itigating the claims of hundreds of putative class members would undoubtedly yield expensive litigation costs that can be curbed by settling the action." Sewell v. Bovis Lend Lease, Inc., supra, 2012 WL 1320124 at *7.

         The second Grinnell factor weighs in favor of final approval because the class's reaction to the settlement was very positive. The notice informed class members of their rights under the settlement and all the material terms of the settlement. No class member objected to the settlement and only one opted out; this positive response to the settlement is evidence of its fairness. See Wright v. Stern, 553 F.Supp.2d 337, 345 (S.D.N.Y. 2008) (Chin, then D.J., now Cir. J.) ("The fact that the vast majority of class members neither objected nor opted out is a strong indication that the proposed settlement is fair, reasonable, and adequate."); see also Flores v. Anjost Corp., 11 Civ. 1531 (AT), 2014 WL 321831 at *5 (S.D.N.Y. Jan. 29, 2014) (Torres, D.J.) (approving settlement where no class member objected or opted out); Beckman v. KeyBank, N.A., supra, 293 F.R.D. at 475 (concluding class reaction was positive where none objected and eight of 1, 735 members opted out); Guaman v. Ajna-Bar NYC, 12 Civ. 2987 (DF), 2013 WL 445896 at *5 (S.D.N.Y. Feb. 5, 2013) (Freeman, M.J.) (finding fairness where there were no objections or requests for exclusion).

         The third Grinnell factor also weighs in favor of final approval. When evaluating the level of discovery completed, "[t]he pertinent question is 'whether counsel had an adequate appreciation of the merits of the case before negotiating.'" Prasker v. Asia Five Eight LLC, 08 Civ. 5811 (MGC), 2010 WL 476009 at *5 (S.D.N.Y. Jan. 6, 2010) (Cedarbaum, D.J.), quoting In re Warfarin Sodium Antitrust Litig., 391 F.3d 516, 537 (3d Cir. 2004). Defendants produced more than one thousand documents relating to the claims, including samples of payroll summaries for all class members, the end-of-year pay stubs for each class member, banquet contracts, tip records and timekeeping records (Pechman Decl. ¶ 12). Plaintiffs produced their own payroll records and their communications regarding Moran's (Pechman Decl. ¶ 14). Plaintiffs' counsel conducted an extensive investigation of the claims to determine potential damages, including discussions with plaintiffs, reviewing and analyzing defendants' production and researching Moran's (Pechman Decl. ¶¶ 15-17). Moreover, the ...


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