313 F.R.D. 117
D. Colo.2016Background
- Plaintiff filed a hybrid FLSA collective and Colorado MWO Rule 23 class action alleging unpaid overtime, unlawful rounding of hours, and improper employer-mandated uniform charges for employees at two restaurant locations between June 17, 2011 and July 20, 2014.
- Parties negotiated a settlement under which Defendants fund a reversionary Settlement Fund of $178,928.84 plus administration costs and employer payroll taxes; class members share allocations listed in an exhibit; half of each award is wages (W-2) and half is liquidated damages (1099).
- The settlement provides a $7,500 service award to the named plaintiff and requests attorney fees of 33% of the Settlement Fund ($59,046.52). Any unclaimed funds revert to Defendants.
- The parties seek preliminary approval of a settlement-only certification of a combined opt-in FLSA collective and an opt-out Rule 23 class (177 putative members by payroll records).
- The court held a preliminary fairness review, found the litigation adversarial and the parties well represented, concluded the settlement appears fair and reasonable, preliminarily certified the hybrid class/collective, and scheduled a hearing to finalize notice and claim forms.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a settlement-only hybrid class/collective may be preliminarily certified | Settlement is a fair, efficient way to resolve common wage/hour claims for the putative class | Settlement is permissible; combining procedures is efficient and avoids duplicative litigation | Court preliminarily certified the combined FLSA collective and Rule 23 class for settlement purposes (class of all employees at two restaurants during specified period) |
| Whether the settlement is a fair and reasonable resolution of bona fide FLSA and state-law disputes | Settlement reflects full recovery of alleged overtime/rounding damages and is product of adversarial negotiations | Defendants maintain bona fide defenses and negotiate to limit further exposure; settlement avoids protracted litigation | Court found bona fide dispute, arms-length negotiations, experienced counsel, and that the settlement appears fair and reasonable for preliminary approval |
| Validity of reversionary fund (unclaimed funds revert to Defendants) and effect on FLSA policy | Plaintiffs agreed to reversionary structure as part of allocation and distribution plan | Defendants favor reversion to avoid perpetual liability; emphasize administrative efficiency | Court preliminarily approved the reversionary fund but required clearer notice and claim forms explaining differences between federal and state claims to address potential problems with releasing FLSA claims |
| Whether non–opt-in Rule 23 class members can be bound as to FLSA claims via the settlement release | Pliego seeks to bind class members who don’t opt out of Rule 23 settlement; notes res judicata will apply to those who do not timely exclude | Defendants rely on Rule 23 release to obtain finality and avoid future suits | Court accepted that normal res judicata principles can bind non–opt-out Rule 23 members but required notice revisions to clarify the release of federal (FLSA) claims and scheduled hearing to finalize forms |
Key Cases Cited
- Brooklyn Savings Bank v. O’Neil, 324 U.S. 697 (1945) (describing FLSA’s protective purpose for low-paid workers)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) (settlement-only class certification requires Rule 23 prerequisites though not trial-manageability inquiry)
- Hoffmann-La Roche Inc. v. Sperling, 493 U.S. 165 (1989) (FLSA collective action opt-in principles)
- Lynn’s Food Stores v. United States, 679 F.2d 1350 (11th Cir. 1982) (standard for approving FLSA settlements—must resolve bona fide dispute and be fair and reasonable)
- Wal‑Mart Stores, Inc. v. Dukes, 564 U.S. 338 (2011) (commonality standard for class certification)
- Rutter & Wilbanks Corp. v. Shell Oil Co., 314 F.3d 1180 (10th Cir. 2002) (factors for evaluating fairness of class settlements)
- Staton v. Boeing, 327 F.3d 938 (9th Cir. 2003) (standards for incentive/service awards in class actions)
- Prof’l Real Estate Investors, Inc. v. Columbia Pictures Indus., 508 U.S. 49 (1993) (definition and standard for objective sham litigation)