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Williams v. Omainsky

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

January 27, 2017

RAVEN WILLIAMS, et al., Plaintiffs,
ROBERT W. OMAINSKY, et al., Defendants.



         This matter comes before the Court on the parties' Joint Motion for Stipulated Judgment Approving the Parties' Proposed Settlement (doc. 143). In support of this Joint Motion, the parties have submitted a memorandum of law and exhibits, including a copy of the Settlement Agreement and Release of Claims, as well as the Declarations of Rachel McGinley and Daniel Arciniegas bearing on the issue of attorney's fees. (See doc. 143, Exhs. 1 & 2.) The Joint Motion is now ripe for disposition.[1]

         I. Background.

         In their Second Amended Collective Action Complaint (doc. 29), the named plaintiffs, Raven Williams, D'Andre Wilkerson, Tiffany Newburn, Danielle Powe, and Jennifer Hampton (collectively, the “Named Plaintiffs”), brought this action seeking unpaid wages under the Fair Labor Standards Act, 29 U.S.C. §§ 201 et seq. (“FLSA”). The Named Plaintiffs are current or former servers employed by defendants, Robert W. Omainsky and Fried Stewed Nude, Inc. (collectively, “Wintzell's”), at Wintzell's Oyster House restaurant locations in Downtown Mobile, West Mobile, and/or Saraland, Alabama. Although they alleged various FLSA violations, plaintiffs' primary theory of liability was that Wintzell's had violated the FLSA by operating an invalid tip pool. The FLSA generally establishes a minimum hourly wage of $7.25; however, employers may claim a “tip credit” and pay tipped employees a cash hourly wage as low as $2.13, so long as certain criteria are satisfied. One such prerequisite is that “all tips received by such employee have been retained by the employee, except that this section shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.” 29 U.S.C. § 203(m). The Named Plaintiffs' position was that the Wintzell's tip pool flunked this requirement, that the tip pool was therefore invalid, that Wintzell's could not properly rely on the “tip credit” to pay its servers less than $7.25 per hour, and that Wintzell's owes its servers the difference between minimum wage and the wage actually paid for each hour they were on the clock. Plaintiffs also asserted that Wintzell's violated the FLSA by claiming a tip credit for non-tipped work that comprised a substantial part of the servers' duties.[2]

         For its part, Wintzell's disputed plaintiffs' theory of liability and denied any defects in its tip pool or its claim of a tip credit to reduce plaintiffs' cash wages below the statutory minimum. In particular, Wintzell's maintained that the challenged participants in the tip pool were, in fact, tipped employees, and that plaintiffs did not spend substantial time performing related but non-tipped duties. As such, defendants' position was that they had fully paid plaintiffs for their work in conformity with the FLSA.

         The parties have litigated this action vigorously since its inception in March 2015. The extensive motion practice included defendants' Motion for More Definite Statement (doc. 13), defendants' Motions to Dismiss and Compel Mediation/Arbitration (docs. 60, 74), and plaintiffs' Motion for Conditional Certification and Court-Facilitated Notice (doc. 30), all of which were highly contested. In December 2015, the Court entered an Order (doc. 82) staying the claims of opt-in plaintiffs who had executed Employment Arbitration Agreements in March 2015. In January 2016, the Court entered an Order (doc. 90) conditionally certifying a class consisting of all current and former employees, including servers, of the Wintzell's restaurants located in Downtown Mobile, Saraland, and West Mobile who were paid a cash wage less than minimum wage (excluding any credit for tips retained), or for whom Wintzell's claimed a “tip credit” while requiring employees to contribute a portion of their tips to non-tipped employees, all for the period spanning November 5, 2012 through March 6, 2015. Court-facilitated notice was provided to potential opt-in plaintiffs, and a total of 37 opt-in plaintiffs (the “Opt-In Plaintiffs”), in addition to the five Named Plaintiffs, filed timely Consent to Join Forms.

         Over a period of months, the parties diligently negotiated an arm's-length settlement to resolve this action in its entirety, including all claims brought by both the Named Plaintiffs and the Opt-In Plaintiffs. They engaged in informal paper discovery, with Wintzell's producing payroll records for the litigation period documenting employee job classifications, clock-in and clock-out times, regular and overtime hours, regular and overtime rates of pay, sales and tips for each individual. Plaintiffs reviewed those records on an individual-by-individual basis, and engaged in dialogue with Wintzell's as to any perceived deficiencies or inaccuracies in those records for specific employees. The parties designed damages models based on potential litigation outcomes, and negotiated at great length. Ultimately, the parties reached a global settlement that they now request this Court to approve as fair and reasonable.

         II. Settlement Terms.

         The parties represent that the settlement upon which they have agreed “reflects a substantial portion of [plaintiffs'] alleged damages or more than Plaintiffs could expect to recover … if they were to prevail at trial.” (Doc. 143, at 1-2.) By the terms of the Settlement Agreement and Release of Claims (doc. 143, Exh. 1), defendant Fried Stewed Nude, Inc. (“FSN”) shall pay the sum of $424, 238.35 to plaintiffs in three installments over a 170-day period. That settlement amount consists of two components: damages payments and incentive payments. The damages payments total $399, 238.35, and will be paid out to the five Named Plaintiffs and the 37 Opt-In Plaintiffs in accordance with a schedule appended to the Settlement Agreement. (Doc. 143, Exh. 1 at Appendix A.)[3] The parties explain that these payments were calculated using an agreed-upon formula pursuant to which each plaintiff received “the tip credit claimed plus an equal amount in liquidated damages for 85% of the recorded hours.” (Doc. 143, at 5.)[4] The settlement amount also includes $25, 000 in incentive payments, to be allocated to the five Named Plaintiffs in the amount of $5, 000 each. The Settlement Agreement explains that “[t]hese incentive payments are meant to compensate the representatives for their participation in the mediation process as well as other services they provided the class.” (Doc. 143, Exh. 1 at 2.) The Settlement Agreement also clarifies that the incentive payments “do not diminish the amount any settlement class member would have otherwise been entitled to receive under the agreed upon formulas for settlement distribution.” (Id. at n.2.)

         In addition to the settlement amount described above, the Settlement Agreement contemplates that FSN will pay the sum of $117, 500 as plaintiffs' reasonable attorney's fees and costs. (Id. at 3.) Plaintiffs' evidence is that “the amount for Plaintiffs' attorneys' fees was agreed upon separately and without regard to the amount paid to Plaintiffs.” (McGinley Decl. (doc. 143-2), ¶ 8.) Plaintiffs also show that they have more than 450 hours in attorney time billed in the case already (plus considerable time that was not billed), more than 35 hours of other legal professional billed time, and more than $4, 000 in expenses (i.e., legal research, filing fees, postage, copies, etc.). (McGinley Decl., ¶¶ 2-3, Exhs. A & B; Arciniegas Decl., ¶¶ 9-13.) The requested attorney's fee amount is inclusive of work that is yet to be performed in implementing and finalizing the settlement, such as “informing clients of the settlement, answering questions from clients in regards to the settlement administration, and ensuring that the proceeds are timely and appropriately distributed.” (McGinley Decl., ¶ 8.)

         In exchange for the foregoing payments, both Named Plaintiffs and Opt-In Plaintiffs will release all claims they have against FSN, its affiliates, officers and the like for FLSA violations “for work performed as employees at any and all Wintzell's Oyster House locations owned and operated by FSN at any time prior to the execution of this Agreement.” (Doc. 143, Exh. 1 at 4.)

         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 ...

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