Mygrant v. Gulf Coast Restaurant Group, Inc.

          ORDER

          WILLIAM H. STEELE, UNITED STATES DISTRICT JUDGE.

         This FLSA action is before the Court on the parties’ joint motion to approve settlement. (Doc. 52). The Court ordered the parties to supplement their motion to address certain concerns raised by the Court, (Doc. 55), and the parties have done so. (Doc. 56).

         I. Conditional Certification.

         The Court first pointed out that, although the parties’ settlement extends beyond the named plaintiffs, they have not moved for certification of a collective action. (Doc. 55 at 3). While the parties still have not done so, it is clear from their briefing that they desire conditional certification. (Doc. 56 at 7). The Court therefore construes their supplemental memorandum as including a motion for conditional certification of the settlement class pursuant to Hipp v. Liberty National Life Insurance Co., 252 F.3d 1208, 1217-19 (11^th Cir. 2001).

         The Court next doubted that the parties had met the standard for conditional certification, particularly in that the named plaintiffs, who are tipped employees complaining of tip violations, purport to represent both tipped and non-tipped employees. (Doc. 55 at 3-4). The parties have now clarified that the defendants took a tip credit uniformly as to all employees included within the complaint and the proposed collective action, including those the plaintiffs say are not tipped employees, and that the tip credit is improper due to the defendants’ uniform practice of sharing tips with the same group of non-tipped employees. With this understanding, the Court finds that all members of the proposed collective action are similarly situated to the named plaintiffs and that the requirements for conditional certification under governing law are satisfied. Accordingly, the parties’ deemed motion for conditional certification of a collective action is granted. The following class is conditionally certified:

All current and former non-exempt employees of Defendants who worked as bartenders, servers, food expediters, food runners, and/or bussers between June 30, 2016 and June 30, 2018 at any of the following Half Shell Oyster House locations: Flowood, Hard Rock, Destin, Mobile, Hattiesburg, Biloxi, Gulfport, Spanish Fort and Lafayette.

(Doc. 53-1 at 3; Doc. 56 at 12).

         II. Final Approval of Settlement.

         The Court next questioned whether settlement could be approved prior to: (1) the sending of notice to potential opt-in plaintiffs; (2) the expiration of the post-notice deadline for opting into the collective action; and (3) an opportunity for the opt-in plaintiffs to object to the terms of the proposed settlement. (Doc. 55 at 4-5). While the parties presently seek final approval of their settlement, the cases on which they rely stand only for the proposition that preliminary approval is appropriate at the pre-notice stage. The Court considers this an appropriate procedural sequence.

         A number of sister courts have rejected efforts to obtain final settlement approval prior to the sending of notice.^[1] Their primary objections are that final approval would moot the lawsuit (precluding the sending of notice)^[2] and that a plaintiff cannot settle claims of a non-party.^[3]

         The Court perceives an additional impediment to final approval of the settlement at this stage. The Court’s responsibility is to “determin[e] that a settlement proposed by an employer and employees” is “a fair and reasonable resolution” of a bona fide FLSA dispute. Lynn’s Food Stores, Inc. v. United States, 679 F.2d 1350, 1355 (11^th Cir. 1982). There are two named plaintiffs in this action, but there are clearly many hundreds of potential opt-in plaintiffs, ^[4] and their perception of what is fair and reasonable may well differ from that of the named plaintiffs. It would be premature for the Court to definitively decide the fairness and reasonableness of the proposed settlement when well over 99% of the potential claimants have had no opportunity to identify unfair or unreasonable aspects of the settlement proposal.^[5]

         The parties insist that only they should have any say in the settlement. Unlike in the Rule 23 context, where class members can be bound to a settlement against their will, those within the scope of a collective action can remain outside the litigation with no adverse consequences; thus, they say, employees that believe the settlement is not fair and reasonable can simply elect not to participate. (Doc. 56 at 20-21).

         The question, however, is not whether the class of potential opt-in plaintiffs will be harmed by the settlement but whether they will be benefited, and benefited in a way that is fair and reasonable under the circumstances. Their voice, if they have one, should be heard before that determination is definitively made. Were settlement reached and approval sought only after expiration of the opt-in period, counsel might be in a position to represent, in compliance with Rule 11, that his clients deem the settlement fair and reasonable; because settlement of this case was reached prior to notice, no such representation is possible, and the input of opt-in plaintiffs must be obtained by different means.

         For all the foregoing reasons, the Court declines to consider final approval of the proposed settlement at this time.

         III. Preliminary Approval of Settlement.

         While some courts have refused to consider even preliminary approval of an FLSA settlement agreement prior to notice, ^[6] others (including this Court) have permitted preliminary approval, with only final approval delayed until notice and an opportunity to opt in and object to the settlement terms.^[7] The Court considers preliminary approval responsive to the concerns regarding mootness and authority without unnecessarily discouraging the very settlements that federal courts are expected to promote.

         Because approval is only preliminary, the case is not settled, and the named plaintiffs’ claims remain live. Because the case will settle, if at all, only after final approval, and because by that time the opt-in process will be complete, the named plaintiffs will not exceed their authority by settling on behalf of non-parties.

         “[W]e allow the district court to approve the settlement in order to promote the policy of encouraging settlement of litigation.” Lynn’s, 679 F.2d at 1354. In many cases, delaying preliminary approval of a proposed settlement would discourage settlement, in derogation of this policy; unable to obtain any early indication of favorable judicial disposition towards a settlement proposal, many defendants would divert to litigation issues – such as contests over conditional certification, discovery and the merits – resources that could have funded a settlement, thereby shrinking the pot if not scotching settlement entirely. The availability of preliminary approval encourages parties to vigorously explore settlement while retaining for future opt-in plaintiffs a genuine opportunity to challenge the fairness and reasonableness of a settlement they had no hand in crafting.

         The Court therefore considers whether to preliminarily approve the parties’ proposed settlement. The Court previously identified a number of questions regarding the proposed settlement and has received generally satisfactory responses.

         1. Settlement amount.

         The complaint asserts several FLSA claims, all relating to minimum wage (not overtime), with the most sweeping being that the defendants improperly took a tip credit every workweek as to every class member. The settlement formula focuses on this claim, providing a flat $2.50 to each opt-in plaintiff for each work hour recorded or paid by the defendants. The other four claims asserted in the complaint are narrower in scope, extending only to particular workweeks. Because the FLSA protects only payment of the applicable minimum wage, which cannot be recovered twice under different theories, these four claims are largely redundant with the tip credit claim. All five asserted claims appear to be problematic for the plaintiffs, factually and legally. The $2.50 per hour recovery represents about 25% of what most ...