465 B.R. 365
Bankr. S.D.N.Y.2012Background
- This is a bankruptcy court memorandum opinion granting final approval of a WARN Act class action settlement and approving Class Counsel’s fees.
- Plaintiff Jared Pinsker filed a WARN Act class action on behalf of former Borders Group, Inc. employees and the Debtors negotiated a settlement.
- Settlement provides for class certification, a $240,000 payment to Debtors and Class Members, and a $79,000 attorneys’ fee to Class Counsel.
- Notice was mailed to Class Members with an opt-out deadline; three opted out and no objections were filed.
- The court previously preliminarily approved the settlement and set a fairness hearing, after which final approval was sought.
- The settlement releases claims by Class Members who did not opt out and includes a 5% opt-out threshold clause that could void the settlement if exceeded.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Rule 23 certification and typicality | Pinsker's class satisfies numerosity, commonality, typicality, adequacy | Borders contends common issues predominate and class is manageable | Certified for settlement purposes under Rule 23(a)-(b)(3) |
| Notice adequacy under Rule 23(c)(2)(B) | Notice adequately informed members of recovery and rights | Notice method reasonably calculated and mailed to last known addresses | Notice approved as adequate and proper under Rule 23(c)(2)(B) |
| Procedural and substantive fairness under Rule 23 and 9019 | Settlement is the product of arms-length negotiations with informed consent | Settlement risks and potential damages justify compromise given costs and uncertainties | Settlement approved as fair, reasonable, and adequate under Rule 23(e) and 9019 |
| Class Counsel’s fees under Rule 23(h) | Fees justified by hours, risk, and expertise | Fees should reflect market norms and efficiency | Fees of $79,000 (one-third) approved with lodestar cross-check supporting reasonableness |
| Iridium/Grinnell factors applicability to 9019 approval | Grinnell factors show settlement is fair and in creditors’ best interests | Bankruptcy specifics do not negate fairness considerations | Court finds settlement fair and in the best interests of the estate under Grinnell and Iridium |
Key Cases Cited
- In re WorldCom, Inc., 347 B.R. 123 (Bankr.S.D.N.Y. 2006) (two-step approach to settlement approval in bankruptcy cases)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (Supreme Court 1997) (standard for class action settlements; adequacy of representation)
- City of Detroit v. Grinnell Corp., 495 F.2d 448 (2d Cir. 1974) (factors for determining the fairness of settlements)
- Wal-Mart Stores, Inc. v. Visa U.S.A., Inc., 396 F.3d 96 (2d Cir. 2005) (factors supporting approval of class settlements; presumption of fairness)
- In re Partsearch Techs., Inc., 453 B.R. 84 (Bankr.S.D.N.Y. 2011) (court-approved WARN Act settlement precedent in this district)
- In re Iridium Operating LLC, 478 F.3d 452 (2d Cir. 2007) (settlement approval factors under Bankruptcy Rule 9019)