United States District Court, D. Maryland
MEMORANDUM AND ORDER
J. MARK COULSON, Magistrate Judge.
This case involves wage-and-hour claims brought by Plaintiffs, on behalf of themselves and all others similarly situated, against Defendants, their former employers, who at times relevant to this action owned or operated two Denny's franchise restaurants in Westminster and Eldersburg, Maryland. Plaintiffs assert a collective action claim under the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 216(b) and class action claims under the Maryland Wage and Hour Law ("MWHL"), the Maryland Wage Payment and Collection Law ("MWPCL"), Md. Code Ann., Lab. & Empl. §§ 3-427, 3-507, and Federal Rule of Civil Procedure 23. (Am. Compl., ECF No. 39.) In support of Plaintiffs' claims, they allege that Defendants required employees to work off the clock and shaved employees' recorded hours without proper compensation, such that employees did not receive minimum wage or overtime pay. The action was initiated by Plaintiff Kristina Shaver on December 19, 2014, and Plaintiffs Marisa Furr and Ryan Lane later opted-in. (ECF No. 1, 24, 25.) On October 6, 2015, this Court conditionally certified the FLSA collective as encompassing all hourly employees of Defendants Gurdip Gill, Gills Eldersburg, Inc., and Gills Westminster, Inc., from January 18, 2013 to that date. (ECF No. 60.) On that same date, the parties reached a settlement agreement to resolve Plaintiffs' FLSA and Maryland law claims on a class-wide basis. Presently pending before the Court is the parties' Joint Motion for Preliminary Approval of the Settlement and Certification of the Settlement Class. (ECF No. 85.)
The Settlement Agreement executed by the parties requires Defendants to pay up to $300, 000.00, to be divided as follows: (1) attorney's fees and costs to Settlement Class Counsel, in an amount to be approved by the Court before the Final Fairness Hearing, but not to exceed $90, 000.00; (2) incentive awards to the Class Representatives, in the amount of $8, 500.00 to named Plaintiff Kristina Shaver, and $2, 000.00 each to opt-in Plaintiffs Marisa Furr and Ryan Lane; (3) an administration fee to the Claims Administrator in the amount of $22, 500.00 for administrating the settlement; and (4) distribution to the settlement class members of at least $175, 000.00 (exclusive of the incentive awards outlined above). The Settlement Agreement provides for the distribution to the settlement class members based on a formula which multiplies a "settlement ratio" (.08) by the applicable minimum wage ($7.25/hour) by an "enhancement multiplier" (1.25). (Settlement Agreement § 10(m), Joint Mot. Ex. E, ECF No. 85-6.)
The payment structure reflects the hybrid nature of Plaintiffs' Amended Complaint and the different procedures governing Rule 23 class actions and FLSA collective actions. The agreement anticipates that a potential settlement class member may submit a claim form by which that member will indicate that he wishes to fully participate in the settlement and release federal and state claims against Defendants. (Settlement Agreement §10(c)-(d); Claim Form, Joint Mot. Ex. B, ECF No. 85-3.) By submitting the claim form, a member both opts-in to the FLSA settlement collective and declines to opt-out of the Rule 23 state law class. In the alternative, a potential settlement class member may opt-out of the settlement by submitting an opt-out form. (Settlement Agreement § 10(e); Opt-Out Form, Joint Mot. Ex. C, ECF No. 85-4.) By submitting the opt-out form, a potential member receives no payment, is not bound by the settlement, and does not release state or federal wage-and-hour claims against Defendants. In the event that a potential class member neither opts-in to the FLSA collective by submitting the claim form, nor opts-out of the Rule 23 state law class by submitting the opt-out form, that member will receive a portion of the settlement distribution he would be entitled to under the distribution formula. (Settlement Agreement § 10(m)(E).) By virtue of his failure to opt-out of the Rule 23 state law class, a member in this category is deemed only to release his state law wage-and-hour claims against Defendants.
Approval of a Rule 23 class action settlement generally involves a two-step process. At the first stage, the terms of the proposed settlement must be reviewed in order to issue a preliminary fairness evaluation. Preliminary approval should be granted when a proposed settlement is "within the range of possible approval, " subject to further consideration after a final fairness hearing at which interested parties have had an opportunity to object. Benway v. Resource Real Estate Servs., LLC, No. 05-cv-3250-WMN, 2011 WL 1045597, at *4 (D. Md. Mar. 16, 2011) (citing Horton v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 855 F.Supp. 825, 827 (E.D. N.C. 1994)). Where a class-wide settlement is presented for approval prior to class certification, there must also be a preliminary determination that the proposed settlement class satisfies the prerequisites set forth in Federal Rule of Civil Procedure 23(a) and at least one of the subsections of Rule 23(b). Cf. Amchem Prods., Inc. v. Windsor, 521 U.S. 591, 620 (1997) (explaining that the "dominant concern" of the Rule 23 (a) and (b) safeguards - "whether a proposed class has sufficient unity so that absent members can fairly be bound by decisions of class representatives" - persists even where the case is resolved via settlement). The parties must also be directed to provide notice to the putative class members regarding the terms of the proposed settlement and the date of a final fairness hearing, where arguments and evidence may be presented in support of, and in opposition to, the settlement. See Fed.R.Civ.P. 23(e). At the second stage, following the final fairness hearing, final approval will be granted if the parties establish that a settlement is fair and adequate. See e.g. Whitaker v. Navy Fed. Credit Union, No. 09-cv-2288-RDB, 2010 WL 3928616, at *2 (D. Md. Oct. 4, 2010) (citing In re Jiffy Lube Sec. Litig., 927 F.2d 155, 158-59 (4th Cir. 1991)).
A similar process is involved when parties seek approval of a settlement agreement that purports to resolve FLSA claims on behalf of a yet-to-be-certified collective action class. First, an initial inquiry must be undertaken to determine whether the named plaintiff is similarly situated to the putative class members so that the class may be conditionally certified and so that notice may be sent to the putative class members. See e.g., Edelen v. Am. Residential Servs., LLC, No. 11-cv-2744-DKC, 2013 WL 3816986, at *2 (D. Md. Jul. 22, 2013) (explaining that the FLSA class was conditionally certified in the preliminary approval order). After putative class members have had the opportunity to object, it must be determined whether final certification of the class is warranted, and whether the settlement presents a fair and reasonable compromise of a bona fide dispute among the parties under the FLSA. See Leigh v. Bottling Grp., LLC, No. 10cv-0218-DKC, 2011 WL 1231161, at *4 (D. Md. Mar. 29, 2011); cf. Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1354 (11th Cir. 1982) (setting forth the framework for approval of FLSA settlement agreements).
Upon consideration of the parties' joint motion and a thorough review of the Settlement Agreement, and subject to further consideration at the hearing described in paragraph 11 below, it is this 25th day of April, 2016 ORDERED as follows:
1. The parties' Joint Motion for Preliminary Approval of the Settlement and Certification of the Settlement Class is GRANTED;
2. Subject to further consideration at the Final Fairness Hearing, the terms of the Settlement Agreement, attached as Exhibit E to the parties' joint motion (ECF No. 85-6), are preliminarily approved (a) as fair, reasonable, and adequate within the meaning of Federal Rule of Civil Procedure 23(e); and (b) as a fair and reasonable compromise of a bona fide dispute between the parties under the FLSA.
3. For settlement purposes only, and subject to further consideration at the Final Fairness Hearing, the following class of individuals ("the Class Members") is CONDITIONALLY CERTIFIED both (a) as a class action pursuant to Federal Rule of Civil Procedure 23(a) and 23(b)(3) ("the Rule 23 Class"); and (b) as a collective action pursuant to 29 U.S.C. § 216(b) ("the Collective Class"):
Hourly paid workers (including servers, cooks, hosts, dishwashers, and hourly supervisors) employed by Defendants at Denny's Westminster or Denny's Eldersburg between December 19, 2011 and December 19, 2014.
5. The Court preliminarily finds that the Rule 23 Class meets the prerequisites for a class action under Federal Rule of Civil Procedure 23(a) and (b)(3) insofar as:
a. The number of class members - approximately 400 - is so numerous that joinder of all members thereof is impracticable;
b. There are questions of law and fact common to the Rule 23 Class, including but not limited to the question of whether Defendants' alleged practice of requiring employees to work off the clock and shaving employees' recorded hours without proper compensation between ...