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Warren v. Cook Sales, Inc.

United States District Court, S.D. Alabama, Southern Division

January 23, 2017

ALLISON WARREN, et al., Plaintiffs,
COOK SALES, INC., et al., Defendants.



         This matter comes before the Court on plaintiffs' Consent Motion for Final Order Approving Settlement of Collective Action and Dismissing Case (doc. 57).[1] A final fairness hearing was conducted in this matter on January 18, 2017, with all parties and potential opt-in plaintiffs being given advance written notice of the time, date and location of such hearing. No written objections to the proposed settlement were submitted in advance of the hearing, nor were any objections articulated by any party or potential opt-in plaintiff at the fairness hearing. The Consent Motion is now ripe for disposition.

         I. Procedural Background.

         Plaintiffs Allison Warren, Chester Dampier, Sherri Mullinax and Evelyn Clem (collectively, the “Named Plaintiffs”) brought this action seeking unpaid overtime compensation under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (“FLSA”), against defendants, Cook Sales, Inc. and Cook Portable Warehouses of Mississippi, LLC. The Complaint (doc. 1) alleged that plaintiffs were employed by defendants as sales representatives and/or lot managers, that they routinely worked more than 40 hours per week, and that defendants failed to pay them overtime pay of one and one-half times their regular rates of pay for hours worked in excess of 40, as required by the FLSA. Plaintiffs brought their Complaint as a putative FLSA collective action, on their own behalf and on behalf of all other similarly-situated sales representatives, pursuant to 29 U.S.C. § 216(b). On January 28, 2016, plaintiffs filed a Notice of Filing Consents to Join Suit (doc. 15) reflecting that Gladys Swain, Charlotte Smith, Amanda Mathis and Shannon Rose (collectively, the “Original Opt-In Plaintiffs”) had executed consent forms and sought to join this action as parties plaintiff.

         For its part, Cook Sales vigorously disputed plaintiffs' theory of liability and denied that the challenged compensation practices and policies were violative of the FLSA. Most notably, Cook Sales maintained that plaintiffs' claims were defeated by the retail and service establishment exemption found at Section 7(i) of the FLSA.[2] Among its other defenses and arguments against liability, Cook Sales asserted that its conduct was not willful, such that the FLSA's two-year limitations period, rather than the three-year alternative, should apply; and objected that this case was ill-suited for treatment as a collective action because the Named Plaintiffs and putative opt-ins were not similarly situated. (See doc. 9.)

         On March 9, 2016, while plaintiffs' Motion for Conditional Certification (doc. 14) was pending, the parties jointly requested that these proceedings be stayed pending the outcome of mediation. (Doc. 31.) To facilitate their negotiations, the parties entered into a Tolling Agreement (doc. 34) that would toll the running of the statute of limitations as of December 22, 2015, for the claims of sales representatives in the putative class. The Court granted the joint motion to stay via Order (doc. 33) entered on March 10, 2016. In the ensuing five months, the parties worked diligently together and with mediator Fern Singer to forge an agreement that would resolve this matter in its entirety. They have now achieved that objective, subject to judicial approval.

         To effectuate the parties' mediated settlement, the undersigned entered an Order (doc. 52) on August 25, 2016. That Order made the following rulings, among others: (i) it certified for settlement purposes a class consisting of all sales representatives employed by Cook Sales from December 22, 2012 through December 22, 2015 (the “Potential Opt-In Plaintiffs”); (ii) it approved the parties' proposed form Notice of Settlement (doc. 51, Exh. 3) and authorized distribution of that Notice to Potential Opt-In Plaintiffs; (iii) it appointed Simpluris Class Action Settlement Administration as the Settlement Claims Administrator; (iv) it prescribed specific procedures for dissemination of the Notice of Settlement to Potential Opt-In Plaintiffs, and made allowances for objections to the proposed settlement; and (v) it set this matter for a final fairness hearing on January 18, 2017.

         In their Consent Motion for Final Order Approving Settlement, plaintiffs provide a detailed evidentiary submission documenting the settlement notice and administration process that has been implemented in the wake of the August 25 Order. Plaintiffs show that the Settlement Claims Administrator processed and updated the mailing addresses received from Cook Sales for all 168 Potential Opt-In Plaintiffs, then mailed notice and claims forms to such individuals on September 23, 2016. (Francisco Decl. (doc. 59), ¶¶ 6-8.) Some 15 notices were re-mailed by the Settlement Claims Administrator either because the original notices were returned as undeliverable or the Administrator otherwise learned of an updated forwarding address for a potential opt-in plaintiff. (Id., ¶ 9.)[3] On October 24, 2016, the Settlement Claims Administrator mailed reminder notices to 123 Potential Opt-In Plaintiffs who had not responded to the initial mailing by submitting a claim form. (Id., ¶ 10.) Cook Sales notified the Settlement Claims Administrator on November 18, 2016 that it had identified three additional Potential Opt-In Plaintiffs whose names had been inadvertently omitted from the list of class members provided previously. (Id., ¶ 11.) The Settlement Claims Administrator mailed class notices to those three potential opt-ins on November 21, 2016, reciting a deadline of January 20, 2017 (i.e., the full 60-day period allowed for all other Potential Opt-In Plaintiffs) for them to file claims or object to the settlement. (Id.)[4]

         All told, the Settlement Claims Administrator received timely consent to join forms from 61 Potential Opt-In Plaintiffs, or 35.7% of the total 171 potential class members identified by Cook Sales during the settlement administration process. (Francisco Decl., ¶¶ 12, 13.)[5] To those 61 Potential Opt-In Plaintiffs who elected to join the settlement of this action, we must also add the four Named Plaintiffs and the four Original-Opt In Plaintiffs, such that the total number of plaintiffs participating in this settlement is 69, or 38.5% of the 179 individuals who were eligible to join in this litigation. (Smith Supp. Decl. (doc. 58), ¶ 4.)

         Class notice forms expressly informed Potential Opt-In Plaintiffs of their right to object to the settlement as unfair. (Francisco Decl., ¶ 5 & Exh. A.) The notice instructed Potential Opt-In Plaintiffs to mail any objections to the Settlement Claims Administrator at the address provided, with the directive that “[y]our objection must be received by the Settlement Claims Administrator by November 22, 2016.” (Id.) At no time did the Settlement Claims Administrator receive any objections to the proposed settlement. (Francisco Decl., ¶ 14; Smith Supp. Decl., ¶ 6.) Indeed, plaintiffs' counsel reports that all Potential Opt-In Plaintiffs who contacted plaintiffs' counsel during the notice and claims period “expressed support for the Settlement.” (Smith Supp. Decl., ¶ 6.) Moreover, all Potential Opt-In Plaintiffs were given written notice of the date, time and location of the fairness hearing conducted before the undersigned on January 18, 2017, as well as their right to appear; however, no Potential Opt-In Plaintiffs attended, much less articulated any objections at, that hearing.

         II. Settlement Terms.

         By the terms of the parties' Release and Settlement Agreement (doc. 51, Exh. 2), Cook Sales shall pay the sum of $495, 000.00 into a common fund, referred to as the “Gross Fund, ” to settle the claims of the Named Plaintiffs, Original Opt-In Plaintiffs, and Potential Opt-In Plaintiffs who submitted consent to join forms in a timely manner. (Id. at ¶ 4.) The parties have agreed that, subject to court approval, the Gross Fund will also be used to pay attorney's fees, litigation costs and expenses of plaintiffs' counsel in an amount not to exceed $148, 500.00, or 30% of the Gross Fund. (Id. at ¶ 4.a.)[6] The Settlement Agreement also provides that the Gross Fund will be used to furnish each of the four Named Plaintiffs and each of the four Original Opt-In Plaintiffs with a “service payment” of $5, 000, for an aggregate of $40, 000. (Id. at ¶ 4.b.)[7]And the Settlement Agreement provides that the Gross Fund will be used to pay all costs, fees and expenses of the Settlement Claims Administrator, not to exceed $15, 000. (Id. at ¶ 4.c.)

         Pursuant to the Settlement Agreement, the Gross Fund less plaintiffs' attorney's fees, costs and litigation expenses; the Settlement Claims Administrator's fees, costs and expenses; and the service payments to Named Plaintiffs and Original Opt-In Plaintiffs, is referred to as the “Net Fund.” (Id. at ¶ 4.d.) The parties have agreed that the Net Fund will be used to fund back pay and liquidated damages payments to Named Plaintiffs, Original Opt-In Plaintiffs, and the 61 Potential Opt-In Plaintiffs who timely submitted consent to join forms (the “Opt-In Plaintiffs”). Settlement payments to the Opt-In Plaintiffs will be drawn from the Net Fund in accordance with a formula based on the number of weeks each employee is reported to have worked for defendants during a designated three-year period from December 2012 through December 2015. (Id. at ¶ 8.)[8] Payments to Opt-In Plaintiffs will be allocated evenly between back pay and liquidated damages. According to the Settlement Agreement, “[t]he amounts allocated to [Opt-In Plaintiffs] pursuant to this formula shall revert to Defendants for any Potential Opt-Ins who fail to timely file a claim form.” (Id.)

         With respect to Named Plaintiffs and Original Opt-In Plaintiffs, the Settlement Agreement fixes payments from the Net Fund in the following amounts, inclusive of back pay and liquidated damages (and in lieu of the formula utilized in computing settlement payments to the 61 Opt-In Plaintiffs):

Evelyn Clem

$1, 955.53

Chester Dampier

$2, 672.56

Amanda Mathis


Sherri Mullinax

$2, 084.45

Shannon Rose


Charley Smith

$1, 770.11

Gladys Swain

$2, 361.97

Allison Warren

$2, 888.16

         Cook Sales will pay the employer's portion of all taxes due on the back pay awards to Named Plaintiffs, Original Opt-In Plaintiffs, and Opt-In Plaintiffs.

         Filings in support of the settlement confirm that plaintiffs are requesting payouts from the $495, 000 Gross Fund in the amounts of $148, 500 for attorney's fees and litigation costs, $10, 168 for settlement administration costs, and $40, 000 in service payments to the Named Plaintiffs and Original Opt-In Plaintiffs. (Francisco Decl., ¶ 13.) If all of those deductions are approved by this Court, then there would be a remaining Net Fund of $296, 332 (or $495, 000 - $148, 500 -$10, 168 - $40, 000) from which to allocate settlement payments of back pay and liquidated damages to the Named Plaintiffs, Original Opt-In Plaintiffs, and Opt-In Plaintiffs. (Smith Supp. Decl., ¶ 4; Francisco Decl., ¶ 13.) The agreed-upon fixed payments to Named Plaintiffs and Original Opt-In Plaintiffs, as enumerated supra, total $15, 553.64. Additionally, the Settlement Claims Administrator calculates the payments owed to the 61 Opt-In Plaintiffs via the agreed- upon formula as totaling $131, 405.34. (Francisco Decl., ¶ 13.)[9] Assuming the accuracy of these calculations, then, the total draw on the Net Fund for payments to Named Plaintiffs, Original Opt-In Plaintiffs, and Opt-In Plaintiffs will be $146, 958.98. That leaves an unclaimed, unallocated balance in the Net Fund of $149, 373.02 (or $296, 332 - $146, 958.98). By the terms of the Settlement Agreement, that amount will revert to defendants. In sum, of the $495, 000 gross settlement amount, the parties contemplate that $148, 500 (30%) will go to plaintiffs' attorney's fees and litigation expenses; $10, 168 (2%) will go to settlement administration costs; $40, 000 (8%) will be paid out as service payments to representative plaintiffs; $146, 958.98 (a shade below 30%) will be paid out as damages payments to plaintiffs and opt-ins; and $149, 373.02 (slightly above 30%) will revert to defendants.

         III. Analysis of Settlement.

         A. Necessity of Judicial Approval.

         In the overwhelming majority of civil actions brought in federal court, settlements are not subject to judicial scrutiny or approval. However, FLSA settlements must be handled differently. See, e.g., Moreno v. Regions Bank, 729 F.Supp.2d 1346, 1348 (M.D. Fla. 2010) (“Settlement of an action under the FLSA stands distinctly outside the practice common to, and accepted in, other civil actions.”). This is because “Congress made the FLSA's provisions mandatory; thus, the provisions are not subject to negotiation or bargaining between employers and employees.” Lynn's Food Stores, Inc. v. United States, 679 F.2d 1350, 1352 (11th Cir. 1982). “Despite this general rule, an employer and an employee may settle a private FLSA suit under the supervision of the district court” where there is a “bona fide dispute over FLSA coverage.” Hogan v. Allstate Beverage Co., 821 F.Supp.2d 1274, 1281 (M.D. Ala. 2011). The mechanics of such a settlement are that “[w]hen employees bring a private action for back wages under the FLSA, and present to the district court a proposed settlement, the district court may enter a stipulated judgment after scrutinizing the settlement for fairness.” Lynn's Food, 679 F.2d at 1353.

         Where, as here, a district court is asked to approve an FLSA settlement between private litigants, the court's responsibility is to ascertain whether the parties' negotiated resolution comports with the statute's terms. See, e.g., Nall v. Mal-Motels, Inc., 723 F.3d 1304, 1307-08 (11th Cir. 2013) (“[t]he purposes of the FLSA are undermined whenever an employer is allowed to escape liability for violations of the statute”); Miles v. Ruby Tuesday, Inc., 799 F.Supp.2d 618, 622-23 (E.D. Va. 2011) (“the reason judicial approval is required for FLSA settlements is to ensure that a settlement of an FLSA claim does not undermine the statute's terms or purposes”). A settlement may be approved when the court confirms that “employees have received all uncontested wages due and that they have received a fair deal regarding any additional amount that remains in controversy.” Hogan, 821 ...

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