Johnson v. Helion Technologies, Inc.

          MEMORANDUM OPINION

          Deborah K. Chasanow United States District Judge

         Presently pending in this employment collective action is the joint motion for approval of acceptance of offer of judgment and entry of judgment filed by Defendant Helion Technologies, Inc., and Plaintiff Tyler Johnson. (ECF No. 45). The issues have been briefed, and the court now rules, no hearing being deemed necessary. Local Rule 105.6. For the following reasons, the motion will be denied without prejudice.

         I. Background

         Plaintiffs, Tyler Johnson and James Phelan, filed a complaint on behalf of themselves and those that are similarly situated on October 23, 2018. (ECF No. 1). The complaint alleges that Defendant “improperly classified them as exempt employees and/or failed to pay them overtime wages in violation of the” Fair Labor Standards Act (“FLSA”), 29 U.S.C. § 201 et seq.; the Maryland Wage and Hour Law (“MWHL”), Md.Code Ann., Lab. & Empl. § 3-401, et seq.; and the Maryland Wage Payment and Collection Law (“MWPCL”), Md. Code, Lab. & Emp. § 3-501 et seq. (ECF No. 45-1, at 2).

         On August 12, 2019, Defendant's counsel sent Plaintiff Johnson's counsel an Offer of Judgment. (ECF No. 45-1, at 2). The offer proposed “to allow judgment to be entered against Defendant, and in favor of Plaintiff Johnson, in the total amount of $31, 500.00, inclusive of attorneys['] fees and costs, $5, 250.00 of which shall be wages, $5, 250 of which shall be liquidated damages, and $21, 000 of which shall be attorneys['] fees[.]” (ECF No. 45-2, at 1). Plaintiff Johnson, through counsel, accepted the offer on the same day. (ECF No. 45-1, at 2). Plaintiff Johnson's acceptance “indicate[d] that it is conditioned on [Defendant] dismissing with prejudice the action which [Defendant] has initiated against [Plaintiff Johnson] in the Circuit Court for Baltimore County, Helion Technologies, Inc. v. Johnson, No. 03-C-18-012051 (the ‘State Court Action'), and [Defendant] has agreed to that condition.”^[1] (Id.)

         II. Analysis

         Judge Hazel outlined the proper interplay between the FLSA and Rule 68 in Banegas v. Gen. Lawn Serv. Corp., No. 13-cv-3728-GJH, 2014 WL 12740666, at *1 (D.Md. July 17, 2014):

Federal Rule of Civil Procedure 68(a) instructs the court to enter judgment after receiving an accepted offer of judgment. However, the [FLSA] . . . does not permit settlement or compromise except with (1) supervision by the Secretary of Labor or (2) a judicial finding that the settlement reflects “a reasonable compromise of disputed issues” rather than “a mere waiver of statutory rights brought about by an employer's overreaching.” Lynn's Food Stores, Inc. v. U.S., 679 F.2d 1350, 1354 (11^th Cir. 1982); see also Lopez v. NTI, LLC, 748 F.Supp.2d 471 (D.Md. 2010) (explaining that courts assess FLSA settlements for reasonableness). Accordingly, the FLSA modifies Rule 68(a) such that in claims filed under the FLSA, the court will enter judgment when presented with an offer and acceptance only after the court is satisfied that the settlement is a reasonable compromise.

         Although the United States Court of Appeals for the Fourth Circuit has not directly addressed the factors to be considered in deciding whether to approve such settlements, district courts in this circuit typically employ the considerations set forth by the United States Court of Appeals for the Eleventh Circuit in Lynn's Food Stores. See, e.g., Duprey v. Scotts Co. LLC, 30 F.Supp.3d 404, 407-08 (D.Md. 2014); Lopez, 748 F.Supp.2d at 478. An FLSA settlement generally should be approved if it reflects “a fair and reasonable resolution of a bona fide dispute over FLSA provisions.” Lynn's Food Stores, 679 F.2d at 1355. Thus, as a first step, the bona fides of the parties' dispute must be examined to determine if there are FLSA issues that are “actually in dispute.” Id. at 1354. Then, as a second step, the terms of the proposed settlement agreement must be assessed for fairness and reasonableness, which requires weighing a number of factors, including:

(1) the extent of discovery that has taken place; (2) the stage of the proceedings, including the complexity, expense and likely duration of the litigation; (3) the absence of fraud or collusion in the settlement; (4) the experience of counsel who have represented the plaintiffs; (5) the opinions of counsel . . .; and (6) the probability of plaintiffs' success on the merits and the amount of the settlement in relation to the potential recovery.

Hackett v. ADF Rest. Investments, 259 F.Supp.3d 360, 365 (D.Md. 2016) (quoting Saman v. LBDP, Inc., No. 12-cv-1083-DKC, 2013 WL 2949047, at *3 (D.Md. June 13, 2013)); see also Duprey, 30 F.Supp.3d at 408, 409. Finally, where a proposed settlement of FLSA claims includes a provision regarding attorneys' fees, the reasonableness of the award must also “be independently assessed, regardless of whether there is any suggestion that a ‘conflict of interest taints the amount the wronged employee recovers under a settlement agreement.'” Lane v. Ko-Me, LLC, No. 10-cv-2261-DKC, 2011 WL 3880427, at *3 (Aug. 31, 2011) (citation omitted).

         A. Bona Fide Dispute

         “In deciding whether a bona fide dispute exists as to a defendant's liability under the FLSA, courts examine the pleadings in the case, along with the representations and recitals in the proposed [ ] agreement.” Duprey, 30 F.Supp.3d at 408. Here, there is a bona fide dispute. Plaintiff Johnson “initiated this action because he believed that [Defendant] owed him overtime compensation for ten to thirty hours of overtime each week.” (ECF No. 45-1, at 4). Defendant “reviewed its internal records and determined that. . . it did not owe [Plaintiff Johnson] any overtime compensation ...